Tribunal queries R16m Unilever antitrust settlement

The Competition Tribunal has questioned a proposed an antitrust settlement agreement between the Competition Commission and Unilever, saying the penalty appeared to be “on the low side”.

The proposed settlement, first announced in July, includes Unilever paying a R16m penalty, without admitting guilt, for anticompetitive behaviour between 2004 and 2013.

The competition watchdog had referred the case against Unilever and the SA division of Malaysian palm oil producer Sime Darby Hudson Knight to the Tribunal in 2017 for prosecution over what it said was the possible division of markets between 2004 and 2013.

According to a commission investigation, the two companies entered into a business agreement in accordance with which they produced and supplied customers with different pack sizes of margarine and vegetable oils in an effort to sidestep the Competition Act.

Sime Darby Hudson Knight, which sells margarine and oil to catering services, settled the matter with the commission in 2016.

Seeking an order of the tribunal to validate the proposed settlement, Makgale Mohlala, who is the manager of the cartels division at the Competition Commission, said Unilever and the commission had agreed on the proposed settlement after heated debate at hearings in 2019 and lengthy delays thereafter.

“Out of the considerations we took into account when we were reaching the agreement with Unilever was that the matter has dragged for way too long, it took long to investigate, it took long to prosecute, it even took long for the judgment to be issued,” Mohlala said.

Tribunal commissioner Fiona Tregenna questioned whether the R16m was on the lower side relative to most settlement agreements, saying it appeared to be an “outlier on the low side”, noting that Sime Darby Hudson Knight settled much earlier and for a higher penalty.

Mohlala said the figure was reached after long negotiations. Unilever initially offered to pay R5m, which the commission rejected and proposed R50m.

“We thought that moving from R5m to R16m ... was not a bad figure to arrive at after those lengthy discussions,” he said.

He said the commission had to take into account numerous factors, including that the business unit in question was a small contributor to Unilever and had since been sold when making a determination.

“The business that was involved in the conduct was a small part of Unilever’s business so the fact that Unilever is making so much should not affect how the settlement is viewed,” Mohlala said. “We submit that the terms of the agreement are not shockingly inappropriate ... and we respectfully submit that this honourable tribunal confirms those terms as the order of the tribunal.”

Unilever sold its margarine and spreads business in 2018 to investment holding company Remgro. It still sells a range of hair care, hygiene, soap, body spray and toothpaste products in the country and region.

Legal representative for Unilever Lerisha Naidu said the length of time of the case, and the disposal of the business had influenced the company’s rationale in negotiating the figure.

She said the business in question had a total turnover of R101m for the year preceding the cessation of the conduct in 2011. “If one looks at the penalty relative to that year it would be 16%,” said Naidu.

The penalty for participation in a cartel is a fine of up to 10% of a firm’s annual turnover. 

“Lastly, what was taken into account in this case was also the costs incurred by Unilever in defending itself for almost over a decade in relation to this matter,” Naidu said.

The tribunal is expected to make a decision on the proposed settlement in the coming weeks.

— with Katharine Child

gumedemi@businesslive.co.za