Sasol Hit with Huge Anti-Competition Fine: South Africa's Synthetic Fuels Giant, Sasol, Together with Other International Energy Companies, Was Heavily Fined by the EU for Breaching Competition Rules. This, Says Tom Nevin, Comes in the Wake of Tighter Anti-Competitive Behaviour Policing

By Nevin, Tom | African Business, November 2008 | Go to article overview

Sasol Hit with Huge Anti-Competition Fine: South Africa's Synthetic Fuels Giant, Sasol, Together with Other International Energy Companies, Was Heavily Fined by the EU for Breaching Competition Rules. This, Says Tom Nevin, Comes in the Wake of Tighter Anti-Competitive Behaviour Policing


Nevin, Tom, African Business


Talk show hosts, comedians, journalists and other keepers of the national conscience are quick to pick up on and label current events of particular moment. And so it was that Sasol, South Africa's synthetic fuel colossus, overnight became known internationally as the leader of the "paraffin mafia".

Sasol was recently fined [euro]318m ($426m at current exchange rates) for its role as a leader of a fuel price-fixing cartel operating on the European paraffin wax market.

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The nine-member group was jointly fined [euro]906m by the EU's competition regulator with Sasol being slapped with the biggest penalty. The companies, in a cartel they called "the blue saloon group", comprised Sasol, Shell in the UK and Netherlands, Spain's Repsol, the US's ExxonMobil, Italy's ENI, German company Tudapetrol, Hansen & Rosenthal, Hungary's MOL, German company RWE and France's Total.

"ExxonMobil, MOL, Repsol, Sasol, Shell and Total also engaged in market allocation for this product and ExxonMobil, Sasol, Shell, RWE and Total also fixed prices for slack wax sold to end-customers on the German market," the EC said in its official notice of its findings.

The regulator found that they conspired to fix prices and share markets for the sale of paraffin wax. The companies accounted for 75% of the European paraffin wax market.

Describing the cartel as the "paraffin mafia", a label the media quickly latched onto, the EU's Competition Commission found that from 1992 to 2005, the producers of paraffin waxes and slack wax "operated a cartel in which they fixed prices for paraffin waxes".

The fine must be paid within three months of the ruling and is nearly 10 times the $44m operating profit made by Sasol's Hamburg-based European wax operation.

The hit on Sasol is the first on a South African company on for eignsoil and joins a procession of successful probes by South Africa's Competition Commission on local companies found culpable in price fixing and other unfair business practices. Fed up with the way big business has been pillaging the pockets of its customers, the government moved in and tightened the laws that regulate the way companies do business.

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New breed of corporate raiders

In South Africa, corporate raiders take on a whole new meaning Many don't so much target one another in the pursuit of sales and profit as they do the people who buy their brands.

While the Competition Commission has nailed offenders with massive fines - South African Airways was slapped with a penalty of $10.58m for abusing its market dominance, Tiger Brands was fined for fixing the price of bread and its sister company, pharmaceuticals manufacturer Adcock Ingram, was also fined for collusive tendering - the sentiment prevails that those companies exposed represent just the tip of a global iceberg of shady business practice.

The Sasol, affair, however, has broken all records. It is the first South African company to be nabbed on foreign soil and the amount it was fined makes the penalties imposed on other culprits seem like petty cash.

It also brought together the biggest-ever group of eminent energy-specific corporations in a far reaching price and market fixing conspiracy. The fines were meted out by Europe's antitrust watchdog the European Commission (EC) for participating in the cartel. "Sasol's fine was increased by 50% because it was the leader of the cartel," said the EC statement. "As a result Sasol will have to pay the largest fine." The Commission said the companies held regular meetings to discuss prices, allocate markets and/or customers and to exchange sensitive commercial information.

The cartel constitutes " a very serious infringement of EC Treaty antitrust rules" and in setting the fines, the Commission took into account the respective affected sales of the companies involved as well as the combined market share and the geographical scope of the cartel agreements. …

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Sasol Hit with Huge Anti-Competition Fine: South Africa's Synthetic Fuels Giant, Sasol, Together with Other International Energy Companies, Was Heavily Fined by the EU for Breaching Competition Rules. This, Says Tom Nevin, Comes in the Wake of Tighter Anti-Competitive Behaviour Policing
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