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Shell caught again in bitumen price fixing cartel


In September 2006, the European Commission fined Shell $137m for their role in a cartel that fixed the price of bitumen. According to a report published in the Houston Chronicle, “the EU Commission said the company was an instigator, took the leadership in the cartel and was a repeat offender”. The report went on to state that “Shell’s fine was increased by 50 percent because of its involvement in previous cartels and another 50 percent for instigating and leading the cartel.” A BBC news report revealed that Shell has previously been fined by the EU Commission for price-fixing in other markets (PVC and propylene). An article in The Daily Mail stated that Shell’s fine was increased by lOpc for “obstructing the probe”. On 29 November 2006, it was reported that the European Commission was imposing “its second-largest cartel fine against Shell, Dow Chemical, ENI, Unipetrol and Trade-Stomil.” The fine was imposed for “fixing prices of synthetic rubber, used mainly in tyre production.” According to an article in The Times newspaper, “Shell’s fine, as well as ENI’s, was increased because it was a repeat offender.” All three of the featured quotations are from The Times article. According to a BBC News report, also published on 29 November 2006, Royal Dutch Shell Plc was fined 160.8 million euros. (EXTRACT from Wikipedia)

The fines apparently did not deter Shell from deliberately engaging in price fixing cartels despite all the false claims of integrity, honesty and transparency in the Shell Business Principles. Today we publish news of Shell’s participation in a further price fixing cartel…


5 MARCH 2010

A SASOL application to the Competition Commission for leniency has opened a can of worms in the oil industry. The commission said yesterday it had found that major oil companies had fixed their bitumen prices.

The commission ruled against Chevron SA; Engen; Shell SA; Total SA; Masana Petroleum Solution (BP is a shareholder in the black-owned Masana); the Southern African Bitumen Association (Sabita), a nonprofit organis ation for producers; Sasol; and Tosas, a Sasol subsidiary, which accounts for nearly all of SA’s bitumen market.

They compete in the supply of bitumen and bituminous products, which are used mainly to tar and rehabilitate roads.

Masana admitted guilt, and agreed to pay an administrative penalty of R13m as part of a settlement.

The probe may have the unintended consequence of making the oil groups wary of co-operating, which the government wants ahead of the Soccer World Cup.

The investigation started in January last year, but the commission said the companies continued to collude until December, almost a year into the investigation. Last year, the industry applied to the commission for exemption from the Competition Act to allow industry players to hold regular discussions to ensure security of supply and to co-operate to access supply from the nearest depot when stocks were running low.

The exemption will revive joint planning and co-ordination in the industry.

The commission started the bitumen investigation in January last year, after Sasol and Tosas asked for leniency.

“In its application, Sasol admitted that together with its subsidiary, Tosas, it had colluded with its competitors, and was granted conditional immunity from prosecution provided it co-operates with the commission,” it said.

The commission has asked the Competition Tribunal to impose an administrative penalty of 10% of the turnover of each of the companies, except Sasol and Tosas.

In its investigations, the commission found that the companies had engaged in collusive conduct from about 2000 until “at least” December last year.

“The respondents collectively determined and agreed on pricing principles, including a starting reference price and monthly price adjustment mechanism,” the commission said.

“This was facilitated through meetings convened by Sabita, as well as through correspondence through Sabita and direct communication between oil companies. The conduct resulted in final customers being charged prices which were not competitively determined,” the commission said.

Commissioner Shan Ramburuth said yesterday that the uncovering of the cartel was another important step in the commission’s work in addressing anticompetitive conduct affecting infrastructure development.

Engen spokeswoman Tania Landsberg said yesterday the company was aware of the investigation, and had cooperated with the commission.

“We are conducting an internal investigation in respect of our operations in the bitumen industry, and that investigation is ongoing,” Landsberg said.

Shell SA said yesterday it had also instituted its own investigation. Chairman Bonang Mohale said the company had co-operated with the commission.

Mohale said Shell had undertaken extensive training for employees in commercial roles “to ensure they understand and comply with competition laws to prevent this type of reoccurrence”.

Although the size of the bitumen and modified bitumen products market could not be immediately ascertained yesterday, these companies are well placed to benefit from the huge road construction works now under way in SA.

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