Illegal collusive tendering has been going on for a long time.
South Africa’s major furniture removers may have been cheating the public on a grand scale for the past half century.
In 1976 when I was a Financial Mail journalist, I probed the widespread tendering collusion in the industry. Some of the same names that featured in that exposé all those years ago have come up again in the Competition Commission’s current extensive investigation into price collusion in the industry.
It seems it never stopped. It was so rife back then that Eddie Pettitt – President of the SA Furniture Removers & Warehousemen’s Association (Safwa) from 1968-1971 – told the FM that they hadn’t been able to stop it because it was “unfortunately accepted practice” and government agencies would not help.
It was so acceptable that in November last year Peter Brauteseth, a director of Joel Transport, told the Commission’s Tribunal that in his 25 years of removal experience tender covering was “sort of normal practice”. His firm was one of the 13 highlighted in the FM more than 40 years ago.
The way the swindle works is that when transferred employees have to get quotes to have their belongings moved to their new posting, the first removal firm approached will get all the quotes needed from a friendly competitor, ensuring that theirs is the lowest, to get the job.
In my FM days the scam was known as the 3Ts, as that was the number of quotes required by state departments.
The Commission found that 3,500 relocation quotes among 69 companies were fixed between 2007 and 2012. It has the power to impose heavy fines but only came into existence in 1998. That’s one of the reasons why nothing was done earlier to stamp out this scourge.
The way it works is that transgressors, who cooperate by telling all, get a lesser penalty than those who try to bluff it out. The Tribunal then decides on the fate of the intransigent ones.
It has recently charged Cape Town-based Stuttaford Van Lines with 649 counts of collusive tendering involving numerous government departments such as SAPS, the Defence Force, the Public Prosecutor’s Office and the Secret Service. This is a new record, being the largest number of charges against a single company in the history of the Commission’s anti-cartel enforcement. It is pressing for the Tribunal to fine Stuttaford 10% of its annual turnover on each of the charges – which could put the company out of business.
The FM story showed just how long this has been going on. At my instigation Stuttaford arranged three quotes for a Johannesburg-to-Durban move. The prices given were: Stuttaford R600; Petfords R630 and Express Transport R645. For another similar move Express gave the following prices: Express R685; J.L van Nijmegen R720; and Stuttaford R725. Morkel’s price (acquired separately) for the same job was R355.
I asked Stuttaford’s Joburg regional manager Dave Bradford, who was also on Safwa’s executive committee, if there were removal companies that supplied three tenders: “I don’t know how they can do that – they’d have to be in league with other companies. What you are suggesting is a bit of cheating.”
I showed him the ones in which Stuttaford was involved and he said rival companies often phoned one another and asked for quotes after being given the volume of the goods to be moved. The documents were sent directly to the customer. He denied there was a price ring in the removal business.
Stuttaford director Mel Potgieter, responding to Noseweek’s questions, said they were unable to comment on allegations about events “that might have taken place 40 years ago”.
“Regarding the Commission’s current investigation, we have taken the matter very seriously and are cooperating. Our internal policies prohibit our employees from engaging in cover quoting,” he said
On its website, Stuttaford – founded in 1897 – promotes itself as being a goody-good company. It claims to adhere to the Anti-Bribery and Corruption Charter of the industry body FIDI-FAIM (federation of international furniture removers).
“As one of the first removal companies in Africa to get internation accreditation, we have continually lived up to our reputation as Africa’s most superior removal company,” it adds.
The corruption picture is made even worse by the fact that Crown Relocations, headed by Ian Pettey (now chairman of the PMA, previously head of Safwa), admitted to the Competition Commission to having been involved in 81 cases of cover pricing for various government departments. It was fined R840,873, the equivalent of 7% of its 2013 turnover. Pettey’s association requires members to have “a commercial reputation beyond reproach” and Stuttaford is one of them.
His company is part of the Hong Kong- based Crown Worldwide Group.
Pettey sent the following replies to Noseweek’s questions:
Q: Has your association ignored the price collusion that has been going on for many years?
A: “Various investigations were done by the previous authorities with no definitive outcome that the association should have acted upon.”
Q: Have you been asked to resign as President of the Professional Movers’ Association in view of the fact that Crown Relocations, of which you are the CEO, was fined 7% of its 2013 turnover by the Competition Commission after your firm admitted collusive tendering?
A: “No. The settlement with the Commission was done to avoid costly litigation,” said Pettey. He blamed an employee for what had happened and stated that he told the PMA’s national executive what happened and they had felt that “My personal integrity was not compromised and that appropriate steps had been taken by the Commission”.
• For a more extensive report, see Jon Abbott’s blog: https://dearjon-letter.blogspot.co.za
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