Another settlement in the glass cartel – things fall apart and the centre cannot hold

This week the Competition Tribunal confirmed a settlement agreement between the Competition Commission and Northern Hardware and Glass. The glass company participated in a cartel to fix prices for the supply and wholesale of glass, within Gauteng, between 2000 and 2006. In terms of the settlement agreement Northern Hardware and Glass admitted that it contravened the Competition Act and confirmed that the price fixing conduct had ceased. It also agreed, among other things, to pay an administrative penalty. The Tribunal has confirmed the settlement agreements of four of the six respondents in this case, namely McCoys Glass, National Glass, Glass South Africa and now Northern Hardware and Glass.

Chris Charter, Director on the Competition practice at Cliffe Dekker Hofmeyr explains, “Cartel enforcement is often characterised by leniency applications and settlements – once the cartel is destabilised from the inside by one cartel member breaking ranks, things fall apart and the centre cannot hold (not that Yeats was writing about cartels).  

“Here, it seems certain of the six are still holding out – either pending negotiations on settlement or because they believe the conduct is defendable.  Where one or more alleged cartelists seek to defend a matter where others have already settled (and admitted liability) then things get a bit interesting.  For one thing, its gutsy to take a contrary stance in the face of alleged co-conspirators ready to give evidence against you,” says Charter. 

“On a more legalistic level, those who have entered into consent orders are technically at risk of a damages claim in a civil court.  However, if there were to be a contested case pending before the Tribunal it's conceivable that the Tribunal may ultimately find that the conduct did not amount to a cartel (despite certain firms having already admitted this to be the case in uncontested settlements).  This obviously has implications for the civil claims, which may need to be stayed pending the outcome of any contested proceedings before the competition authorities,” he says. 

Charter notes that this illustrates how the road to a damages claim based merely on settlements with the Commission is potentially challenging from both a process and evidentiary point of view.  This is something jurisdictions elsewhere are also currently wrestling with – on the one hand, the prospect of civil damages is an important deterrent and for that reason there is sense in facilitating that.  On the other hand, settlements are in their nature a compromise and prevent both sides from engaging in costly litigation on debatable issues.

“It would be a pity if the prospect of the Competition Commission securing settlements were jeopardised because of unduly harsh consequences in a civil court for those that choose to lay down their swords rather than fight to the death,” he adds.