For an international businessman who signs off his email-contact information with “I am a citizen of the world and borders do not mean a thing to me”, it was fated that borders would not mean a thing to Mosupi Masomosomo when he bid for a multi-million pula tender to supply infant formula to the Botswana government. There is little wonder that the Competition Authority now wants him to pay a fine of Ôé¼45 990 (which works out to P514 873 in today’s money) to the Competition Commission and that some of the documents harvested from his yahoo email account in connection with this case bear deux langues internationales: English and French.
During the previous year (2011), he had travelled to France and with Jonathan Gallo, a representative of Lactalis International, visited a plant where this company manufactures infant formula. The largest dairy products group in the world and the second largest food products group in France, behind Danone, Lactalis is headquartered at Choisy-le-Roi, a commune some 11 kilometres from the centre of Paris.
Masomosomo’s visit was in service of a government tender to supply this type of milk and he was trying to get his duck in a row. To no avail.
“We lost the last tender because our pricing was not competitive. The new tender is out and closes on the 4th July. This time they want 1, 500, 000 (one and half million) units of 400g tins of infant formula suitable for 0-6 months infants like Celia 1 over a period of 12 months starting in November. Can we please work together on this project like we did with Jonathan?” emailed Masomosomo, in his capacity as Managing Director of Creative Business Solutions (CBS), to Benjamin Anthoni.
Return mail from Anthoni identifies him as Chef de March├® Dom Tom” which means Chief of African Market, Overseas Departments and Territories ÔÇô “Dom Tom” is a common French acronym for “D├®partements d’outre-mer, Territoires d’outre-mer.” The entreaty in the last sentence of Masomosomo’s email message was a result of Gallo having left Lactalis and CBS’ desire to replace him with someone whom it could retain as a contact in what held the promise of blossoming into a fruitful business relationship. Within a short period of time, the two men were able to get on the same page and on June 28, 2012, Masomosomo could write: “We urgently need the following documents: letter of authorisation from the primary manufacturer, free sale certificate from country of origin [and] a letter explaining the connection between Celia and Lobebe. The last time we did the tender, Jonathan organised the documents.
I am attaching copies of the documents I collected from him last year for you to follow. Please note the following: Without these documents, we cannot participate in then tender. We need them by Monday morning. We are going to tender with four companies. This is to increase our chances of winning some or all the quantities in the tender. The tender is not given to one company. It is usually split between 3-4 companies.”
The four companies were CBS (first respondent), Rabbit Group (second respondent), Hercules and Fairbourne.
The assertion about the tender-splitting was not wide of the mark because the tender was indeed split between two companies: CBS and Rabbit Group, each getting Ôé¼919 800 (P10.2 million). The Tender Evaluation Committee of the Public Procurement and Asset Disposal Board (PPADB) recommended that the tender award be equally split between the companies.
Then the plot began to unravel. Three months after the two companies had won the tender, an informant approached the Authority and made allegations that the latter followed up on through an investigation. The findings are contained in an affidavit that has been deposed to by Goitseone Modungwa, who is the Authority’s Competition and Research Analyst. The latter found that, alongside Hercules, CBS and Rabbit Group had obtained free-sale certificates and letters of authorisation from Lactalis, with both documents being issued on the same date. Further investigations revealed that while the two companies had provided free-sale certificates and letters of authorisation from Lactalis, the milk was actually supplied by a French competitor called Nutribo Feeding Life.
“Email communication between Mr. Mosupi Masomosomo and Benjamin of Lactalis International reveals that the deal with Lactalis International fell through when the latter failed to meet the required shelf life of the infant formula; it is at that point that the respondents sought the alternative supplier aside of Lactalis International,” Modungwa says in her affidavit.
Lactalis had sent samples that Masomosomo was not too happy about. The feedback he gave Anthoni was that some of the cans “have dents and some have air inside resulting in the silver foil bulging out. The good ones are enough for three companies and so we will tender with three companies.” As a result of this development, Fairbourne fell off. Both CBS and Rabbit Group tendered at Ôé¼2.45 while Hercules tendered at Ôé¼2.75 per can. In her papers, Modungwa contends that the latter’s bid was “conveniently” priced higher than those of CBS and Rabbit Group “which amounts to cover bidding – another form of bid-rigging.”
CBS and Rabbit Group ended up being tying on account of having bid the same price and so emerged as the winners.
“Unbeknown to the Tender Evaluation Committee, the tender was being awarded, effectively, to a conspiracy,” Modungwa says.
Such conspiracy would contravene Section 25 of the Competition Act which provides that an enterprise shall not enter into a horizontal agreement with another for purposes of bid-rigging. Another section of the Act (45) says that where the Commission determines that a prohibited conduct has been committed in breach of the latter section for an agreement no longer in force, it may make an order imposing financial penalty not exceeding 10 percent of the turnover on the enterprises concerned during the breach of the prohibition. On such basis the Authority has referred the matter to the Commission asking it to order each of the two companies to pay a fine of Ôé¼45 990, representing 5 percent of turnover.
Modungwa further alleges that while Rabbit Group had been supported by a letter of authorisation from Lactalis International, the former has confirmed that “indeed it has never had any direct contact with the company or its Managing Director, Rabbie Tshosa.” The company obtained the letter of authorisation through Masomosomo, “who evidently had established communication with Lactalis International.”After winning the tender, the two companies respondents proposed new timelines when they could not meet consignment delivery dates.
Modungwa asserts that “the quantity and dates of supply are strikingly similar; the contents of the letters are a direct replica, attesting to the fact that the respondents have from the onset worked together.” She adds that “when Creative Business Solutions placed an order for the infant formula, the order included the quantities for Rabbit Group. It was a combined order for the two would-be competitors.”
