Tribunal agrees settlement terms for cycle cartel

© Peter Spirer – 123RF.com

Collusion

Melody Street 18, Pedal-On Marketing (trading as Maverick Cycles), Albatros Fishing and Cycling, and Maillot Jaune Trading have admitted to colluding with others in 2008 to set the wholesale and retail prices of bicycles and cycling equipment.

They have agreed to co-operate in the prosecution of others involved in the cartel.

Another 13 companies - including Dunkeld Cycles in Johannesburg, Bowman Cycles in Cape Town and Bester Cycles in Pretoria - have entered into a similar settlement agreement.

In a meeting, the companies had all agreed to increase their markup on bicycles to 50% from 35% and the markup on cycling accessories to 75% from 50%. Prices had been set to increase on 1 October 2008.

The companies had also agreed to stop discounting and ask wholesalers to advertise higher recommended retail prices. An anonymous source leaked the minutes of the meeting to the commission, prompting the investigation.

Ignorance is bliss

Despite proof of this far-reaching cartel, industry insiders spoken to pleaded ignorance of the existence of price-fixing in the sport.

Chairwoman of Soweto's Southsky Cycling Club Busisiwe Msimango said while prices of bicycles and accessories were steep, there were no indications of price-fixing.

"Prices differ and when you shop around you get a good price elsewhere," said Msimango.

Scott McKenzie, chairman of Sandton club Complete Cyclist, said: "We do not get a lot of cases (of price-fixing). Cyclists have options to shop around (for) competitive prices."

Chairman of Bryanston's Absolute Cycling Club David Lange said no members of the club had complained about retailers suspected of collusion or fixing prices.

Terms of the settlement agreement

Yesterday, the tribunal approved the terms of the settlement agreement. The four businesses will stop fixing prices, send all employees for training in competition law and display prominent notices at their premises detailing the disciplinary action. But there was no undertaking to pay fines.

The commission regularly imposes fines as punishment when companies admit wrongdoing and choose to settle.

It can impose a fine to the maximum of 10% of the business's turnover in the previous year.

In 2010, the Tribunal fined Pioneer Foods R195m for its involvement in a bread cartel.

The commission yesterday told the tribunal that the agreement's terms were sufficient to deter the four companies from colluding in the future.

Senior legal counsel for the commission Ngoako Moropene said the companies were small and a fine might cripple them, which was not the commission's goal.

Central Gauteng Cycling chairman Shahad Khan said he was not aware of the cartel and could not comment on it specifically, but he would be interested to know how the commission had decided the companies involved were small.

Next month, the commission will prosecute two wholesalers - Coolheat Cycle Agencies and Omnico. The two companies have opted not to settle.

It withdrew its case against Fritz Pienaar Cycles in Pretoria because the business was liquidated. No further action will be taken against former owner Fritz Pienaar, who may testify against Coolheat and Omnico.

Source: Business Day via I-Net Bridge