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Sasol beats commission's R500m plastic fine

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Judge Dennis Davis
Judge Dennis Davis

Petrochemical giant Sasol rid itself of half a billion rand in liability this week – and has probably succeeded in squashing government’s hopes that competition courts will play a defining part in extracting developmental prices from former state-owned monopolies.

Competition authorities cannot be “price regulators” and should stop allowing economists to pretend that they are legal experts, declared Competition Appeal Court Judge President Dennis Davis.

In a harsh judgment released on Thursday, he overturned two fines totalling R534 million, which was imposed on Sasol by the Competition Tribunal last year.

The fines related to charges of “excessive pricing”, a nebulous concept tied to technical and theoretical presumptions about the “real economic value” of a product.

The Competition Commission, which brought the case, and the tribunal that judged it, came in for a drubbing from Davis.

He found that the tribunal’s decision to fine Sasol was “hard to understand” and apparently based on a very selective reading of the one other major judgment in South Africa around excessive pricing – Davis’ own 2007 dismissal of a case against ArcelorMittal SA.

The tribunal had apparently not read his earlier ArcelorMittal SA judgment properly, Davis suggested in his comments this week.

ArcelorMittal SA and Sasol are the two major former state-owned monopolies that have been in the government’s cross hairs for alleged abuse of their publicly funded dominance in the economy.

Getting both Sasol and Mittal to adopt something like a developmental pricing model has been a long-standing aspiration in South African policy circles.

When the Sasol case went to the tribunal in 2013, officials in the department of trade and industry couched it in terms of South Africa claiming its rightful advantage as a result of historically state-subsidised industries.

A scheme to directly regulate the price of propylene if the competition authorities did not impose a satisfactory remedy was being discussed, a government source said at the time.

“A great deal was made by the commission and the tribunal with regard to the origin of the appellant’s dominance, in particular the history of state support,” said Davis.

The evidence around what constituted the economic value of Sasol’s propylene was, however, found to be flimsy.

Davis laid into the testimony of the commission’s economic expert Simon Roberts, criticising his “unfortunate tendency” to “provide the tribunal with his legal expertise ... notwithstanding that he has no legal expertise”.

The judge went on to criticise the apparently constant problem of economic experts testifying on legal matters at competition hearings.

“Regrettably this court must now draw attention to the inability of the tribunal to exercise discipline over proceedings in order to ensure that economic experts provide evidence on economic questions, leaving points of legal interpretation to the tribunal and to this court,” said Davis.

Respected economists can often disagree sharply on issues, but “figures cited without any clear and reasoned justification do not constitute expert evidence”.

Davis suggested that the case could have gone the other way had there been proper expert evidence to counter Sasol’s arguments.

How it works

Sasol Chemical Industries was charged with excessive pricing of ­propylene and polypropylene – used to make hard-moulded plastic products and viewed as one of the key industrial inputs needed to expand local manufacturing.

Similar to other oil refineries, Sasol’s synthetic-fuel facilities create this feedstock for plastics as a by-product. 

Unlike normal refineries, it has no means to convert it into other products, making it useless for any other purpose than making plastic.

This “special advantage” allows Sasol to sell the stuff to its chemical subsidiary at very low prices.


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