Tuesday 31 May, the Tribunal has issued both its order and its reasons in the Omnico and Coolheat Cycle case. It has awarded an administrative penalty to Omnico of R4627412 and to Coolheat Cycles a penalty of R4250612. The Tribunal has already confirmed six consent orders by wholesalers and 11 retailers in the bicycle sector who were implicated in a price-fixing investigation by the Competition Commission.
The two wholesalers, Omnico and Coolheat, however, chose to oppose the charges and the matter was heard last year by the Tribunal.
The Commission relied for its case primarily on a meeting held on 10 September 2008 where about 200 bicycle wholesalers and retailers attended a meeting at Midrand Conference Centre in Gauteng to discuss increasing their markup on bicycles to 50% from 35%, and the markup on cycling accessories to 75% from 50%. The wholesalers would give the retailers a higher mark-up by increasing the Recommended Retail Price to consumers. Prices to consumers would be increased so that retailers could make higher margins. Prices were set to increase on 1 October 2008, as it was the beginning of the new cycling season and new bicycles and accessories were usually launched at this time and new price lists issued. Details of these discussions had been posted on an online discussion forum called The Hub and was brought to the attention of the Commission.
Evidence presented at the hearing revealed that both Omnico and Coolheat had attended the September meeting that there was agreement among wholesalers to increase the mark-up on wholesale prices for bicycles and cycling accessories in co-ordination.
In determining the penalties the Tribunal took into account some mitigating factors for Omnico. However, it found no such mitigating factors for Coolheat, who had elected not to give evidence at the Tribunal and to explain its subsequent price increases.
The other 17 companies who settled early with the Commission were not fined for the offence as they had admitted they had contravened section 4(1)(b) of the Competition Act. The Commission had withdrawn its case against one of the companies, Fritz Pienaar Cycles, because the business was liquidated.
Issued by:
Chantelle Benjamin
Communications: Competition Tribunal
Omnico’s official statement on this matter – 1 June 2016
“Four years ago the Competition Commission commenced legal proceedings against a number of wholesalers and retailers contending that they were guilty of price fixing. 17 consent orders were obtained by the Commission ( ie these parties agreed to admitting guilt) and no fine was imposed on them. Omnico and another party denied any contravention as alleged by the Commission and as such refused to consent to an order as required by the Commission. Had Omnico simply consented, that effectively would have been the end of the matter and no fine would have been imposed on them by the Commission.
The matter proceeded and the Competition Tribunal, after a lengthy and expensive legal process has ordered that Omnico contravened the Competition Act and imposed a fine.
Omnico is disappointed at the Tribunal’s decision and maintains that it was not party to any anti-competitive agreement as alleged.
In the circumstances Omnico has instructed its legal advisors to appeal the Tribunal’s decision.”
that's why retailers feel miffed when not considered by Specialised to be a dealer because that's a significantly higher mark up on the products than other brands offer. And they can't be discounted due to contractual obligations.