Packaging company pays R21 million price-fixing fine – no admission of liability

New Era Packaging has paid an administrative penalty of R21 million after allegations of price fixing with Mpact.

The settlement by the packaging paper company was paid without admission of liability.

Siyabulela Makunga, spokesperson of the Competition Commission of South Africa says Mpact has agreed to cooperate with the Commission after it successfully sought immunity from prosecution of the allegations it faces.

New Era and Mpact accused of price fixing

Makunga says the investigation into the first complaint started on 16 May 2016. The complaints against New Era and Mpact were for alleged price fixing, market division and collusive tendering in the market for the manufacture and supply of packaging paper.

The second investigation started on 19 April 2017. He says New Era and Mpact were this time accused of price fixing, market division and collusive tendering in the market for the collection and supply of recyclable paper material.

“Both transgressions are in contravention of Section 4(1)(b)(i), (ii) and (iii)) of the Competition Act.”

Investigations findings

When it comes to the first investigation, the Commission’s findings detailed that New Era and Mpact agreed to operate in a sensible manner when purchasing recyclable paper material. They entered into the agreement with the purpose of avoiding price wars and ensuring the base price of the loose material remains as low as possible, which amounts to price fixing.

The findings of the second investigation are similar to the first. They agreed to operate in a sensible manner to avoid price wars and ensure the base price of materials does not increase.

The total New Era settled for both complaints amounts to R21 298 478.38. While Mpact was granted immunity from prosecution in both complaints.

The Competition Act section 4(1)(b)(i), (ii) and (iii)

The Competition Commission, Section 4 of the act prohibits bad agreements between firms. The agreements can include price fixing (i); market allocation (ii); collude to bid-rig (iii).

Price fixing is explained as agreements to set prices or discounts between companies that offer the same product or services, instead of not competing with each other. This means they are controlling the market price, rather than letting the supply and demand determine it.

Market allocation is when two or more businesses agree to divide customers among themselves, instead of competing.

Colluding to bid-rig means that two or more companies work together to manipulate the bidding process.