Roberts said SCI was enjoying higher profits on both these products than it was making on any of its other products as it was dominant in the South African market in terms of the plastic production and current rivals were not able to constrain SCI's pricing.
He testified before the Competition Tribunal in the commission's case against SCI‚ claiming it had been charging excessive prices for its products between 2004 and 2007. He said this was to the detriment of customers.
In its analysis of obtaining an economic value for the products‚ the commission compared the purified propylene prices that SCI charged Safripol‚ the only other producer of propylene in SA‚ to different measures of economic value. The commission argued that the economic value of a product must be reflective of the cost of production.
"The investigation clearly identified that domestic prices for the goods far exceeded SCI's total cost of production‚" Roberts said in an expert report compiled with several other members of the commission.
The commission found that SCI charged 61% and 44% more than the estimated average total cost of production in the period between July 2003 and June 2008 for propylene. Moreover‚ the commission found‚ the prices were on average 52% and 35% more than the basis on which SCI bought propylene from Natref‚ a joint venture between Sasol Mining and Total SA.
The commission found in its analysis that the prices for polypropylene have been on average 38% above the export price earned by SCI for exports to China between 2004 and 2007.
"The prices are not reasonably related as they are based on SCI's unilateral exercise of its market power. The prices are not related to Sasol's alternatives‚ being export prices‚ or its actual costs and are not constrained by effective competitive rivalry in the domestic market. The mark-ups over the measures of economic value are substantial‚" Roberts said in the expert report.
In his evidence in chief he said the commission and SCI differed most profoundly in terms of their conceptual approaches towards the determination of the feedstock cost of SCI and the return on investment in a determination of economic value.
The Competition Appeal Court in the excessive pricing case against ArcelorMittal found that it was critical to an inquiry to determine an economic value and the difference between the actual prices and the economic value in order to see whether there was a reasonable relation or whether the actual price was excessive.
The court said an economic value is a notional objective competitive standard - a price under "normal and sufficiently effective competition".
In its decision‚ that referred the ArcelorMittal matter back to the tribunal‚ the Competition Appeal Court found that the assessment of economic value should not take account of special advantages particular to a firm in assessing what the situation would be under conditions of effective competition.
Roberts said SCI's claims that is has a special cost advantage in the form of its feedstock propylene. However the commission did not think a case had been made as to why the advantage was special to SCI.
"Such an interpretation (that the special advantage should not be taken into account) would imply precisely those enterprises that obtained their position from apartheid policies are the firms that are immune from the excessive pricing prohibition (in the Competition Act) in so far as the special advantages must be added back in," he said.
The hearing continues.
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