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NGK Spark Plug Co referred to Competition Tribunal for prosecution

Allegedly involved in price fixing and collusive tendering for supplies to vehicle manufacturers.
The Competition Commission is seeking an order to levy a penalty equivalent to 10% of NGK's annual turnover. Image: Shutterstock

Global vehicle spark plug manufacturer and supplier NGK Spark Plug Company and its South African subsidiary have been referred to the Competition Tribunal for prosecution for alleged contraventions of the Competition Act.

The Competition Commission, which made the referral on Wednesday (July 21), alleges that NGK Spark Plug Company Limited, together with its South African subsidiary NGK Spark Plugs SA Pty Limited, were involved in price fixing, market division and collusive tendering in respect of the supply of spark plugs to original equipment manufacturers (OEMs) in contravention of the Competition Act.

The referral follows an investigation launched by the commission in October 2014 into allegations of collusion by 63 automotive component manufacturers involving 310 separate instances of alleged collusion and 92 automotive components.

Pervasive

The large number of firms and components involved in the alleged collusion resulted in the commission inviting the implicated firms to settle the cases against them, with the commission warning that firms which elected not to settle would be referred to the tribunal for prosecution.

The commission said on Thursday that NGK is one of the firms it has been investigating for collusive conduct in the supply of automotive components.

“Spark plugs are one of the components that has been subjected to collusive behaviour by automotive components manufacturers such as NGK,” it said.

The commission said its investigation into the conduct of NGK found that, from at least 2008, NGK colluded with Denso in contravention of the Competition Act when responding to a request for quotation issued by Fuji Heavy Industries for the supply of spark plugs for the AR18 engine installed in its Subaru Impreza, Subaru Forester and Subaru Legacy vehicles sold in South Africa.

Administrative penalty

It said NGK Limited is a global player in the market for the manufacture and supply of spark plugs to OEMs and, in terms of the Competition Act, it is seeking an order from the tribunal to levy an administrative penalty equivalent to 10% of the annual turnover of either NGK Limited or NGK SA.

Japanese automotive component company Sumitomo Electric Industries (SEI) became the first company to finalise a settlement agreement flowing from this investigation by the commission when it agreed in August 2020 to pay a fine of R437 278.38 for fixing the price of automotive components and collusive tendering.

The commission’s investigation into SEI revealed that during 2003 SEI and Denso Corporation met and/or held telephone conversations to discuss and agree to set the prices in terms of which they would respond to the tender or request for quotation issued by Toyota in respect of the standard body electrical control units (ECUs) for the 2009 Toyota Prius, 2010 Toyota Verso, 2010 Toyota Auris and 2011 Toyota Yaris.

National Association of Automotive Component and Allied Manufacturers (Naacam) executive Renai Moothilal said at the time the SEI settlement shows that the competition regulations are working, which should give the authorities confidence that any measures put in place to further grow the industry can be implemented responsibly.

Hundreds of cases yet to be settled

Competition Commission spokesperson Siyabulela Makunga confirmed on Thursday that the commission has to date finalised a total of 71 cases in the automotive components sector, recorded 38 initiations linked to settlements and is yet to settle 272 cases.

Makunga said a total of R3 487 039 in fines were paid by Sumitomo, Yazaki, Mahle GmbH, Panasonic and Trad between July and September 2020 in settlement of the 71 cases.

Competition Commissioner Tembinkosi Bonakele said in 2014 when the investigation was launched that its probe into this pervasive collusive conduct joins similar investigations launched in other jurisdictions internationally.

“The commission will prioritise the investigation of cases that involve automotive components that are in vehicles assembled in and supplied to the South African market,” he said.

The commission said at the time its investigation was launched against automotive components manufacturers such as Denso Corporation, Maruyasu Industrial Company Limited, Hitachi Company Limited, Mitsubishi Electric Corporation, Tokai Rika Company Limited, NGK Spark Plug Company Limited, Mikuni Corporation, Aisin Industries Company Limited, Panasonic Corporation, Futuba Corporation and Fijistu-Ten Limited.

Components

The automotive components that were alleged to have been part of the price fixing, market division and collusive tendering included inverters, electric power steering motors and systems, glow plugs, rear sunshades, pressure regulators, pulsation dampers, purge control valves, accelerator pedal modules, power management controllers, evaporative fuel canister systems, knock sensors, spark plugs and clearance sonar systems.

These components were supplied to a number of original equipment manufacturers, including Toyota Motor Corporation, Daihatsu Motor Company, Nissan Motor Company, Isuzu Motor Limited, Fuji Heavy Industries, Honda Motor Corporation, Suzuki Motor Corporation, General Motors Corporation, Hyundai Motor Company, Yamaha Motor Corporation, Volvo Car Corporation, Mazda Motor Corporation, Mitsubishi Motor Corporations and Ford Motor Company.

The commission has secured settlement agreements with automotive component manufacturers related to other investigations into global automotive cartels.

Multinational component supplier Autoliv agreed to pay a fine of R149.96 million in 2017 related to collusive conduct by global car safety-system product manufacturers that supply airbags, seat belts and steering wheels to companies including Volkswagen, BMW, Toyota, Honda, Peugeot and Daimler AG.

Read: Record SA auto component exports in 2020 despite Covid-19

Toyoda Gosei, the Japanese manufacturer and supplier of car safety-system products, including airbags, agreed in 2018 to pay a penalty totalling R6.16 million for price fixing, dividing markets and collusive tendering in the same investigation.

Read: Construction sector collusion and bid-rigging settlement agreement in trouble

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COMMENTS   9

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I am often critical of the South African bureaucracy however, this is one of the stand out departments and I therefore fully support them.

Well done to the competition commission.

One area that they should be given access to is the governance of South African Municipalities and the national economy . Start by banning political parties for 2 years when they do not achieve at least 5% economic growth and reducing of unemployment by 2% per year.

And secondly investigate political party businesses and investment arms.

NGK — Tell them to P off and just leave this country — The mighty commission can then supply the spark plugs.

That is the correct response to corrupt business practices. Unless you are defending collusion?

Yes, because the capitalist for profit motif doesn’t care how you make/steel money and/or markets..

A society needs competent public officers to tame the “profit motif” for the benefit of all members of society over the long term.

If NGK was not cheaper than Champions or other makes the manufacturers would not have fitted them to their vehicles in the first instance Bibbie

“from at least 2008, NGK colluded with Denso in contravention of the Competition Act when responding to a request for quotation issued by Fuji Heavy Industries for the supply of spark plugs for the AR18 engine installed in its Subaru Impreza, Subaru Forester and Subaru Legacy vehicles sold in South Africa.”

That is something like 200 cars – with 4 spark plugs per car = 800 spark plugs. Hardly earth shattering volumes

How much criminal behavior is enough for you? Do you not think they were doing it elsewhere?

Jip but the mighty COMISSION must be seen to be doing something important !!!!

Far easier to determine and list those not involved in tender fixing, cartel allocating and the distribution of brown paper envelopes. This stuff has been national sport since way before most people were born.

End of comments.

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