As previously disclosed by Sasol Limited as part of its ongoing disclosures, the South African Competition Commission has been investigating the South African polymers industry. Sasol Polymers, a division of Sasol Chemical Industries Limited (“Sasol Polymers”), has now concluded a settlement agreement with the Competition Commission (“the Commission”) in relation to its existing propylene supply agreement (“the Supply Agreement”) with Safripol (Proprietary) Limited (“Safripol”). The Commission concluded that the pricing provisions of the Supply Agreement gave rise to indirect price fixing between Sasol Polymers and Safripol.

The Supply Agreement was concluded pursuant to concerns raised by Safripol in relation to the proposed merger in 1993 of Sasol Limited and AECI Limited’s monomer, polymer and certain other chemical operations. To address these concerns, the then Competition Board required a supply agreement, which would ensure Safripol’s ongoing access to propylene according to a pricing formula, which would result in market-related prices. At the time, neither party understood this pricing formula to give rise to competition law concerns. However, the Commission, in terms of the current Competition Act, found that the pricing formula, which required the exchange of pricing information amounts to indirect price fixing. This contravention is technical in nature and was not as a result of an intentional agreement to fix prices. The terms of the Supply Agreement, including the pricing formula, were prompted by the Competition Board’s requirements.

Given the uncertainty surrounding the legal position in relation to the pricing formula and the technicality of the matter, it was considered prudent to settle the matter. Sasol Polymers has therefore agreed to pay a penalty of R 111 690 000, which represents 3% of Sasol Polymers’ turnover derived from its sale of polypropylene products for its financial year ending 2009. The settlement agreement is in full and final settlement of the Commission's allegations that the pricing formula gave rise to indirect price fixing.

The settlement agreement is subject to confirmation by the Tribunal.

Norbert Behrens, general manager group strategy and planning at Sasol Limited said, "As previously indicated Sasol completed an extensive competition law compliance review in 2009. This is one of the matters outstanding and is now being brought to finality, in line with our approach to be fully compliant and resolve any competition law issues including technical ones.”

As part of its investigation into the polymer industry, the Commission has also contended that the prices at which Sasol Polymers supplies propylene and polypropylene are excessive. Sasol Polymers does not agree with the Commission's position in this regard and is contesting the Commission's allegations. Consequently, the Commission's allegations in respect of excessive pricing do not form any part of the settlement agreement concluded between the parties.

last updated: 14 Dec 2010