Recommendations

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COMPETITION CHALLENGES IN FOOD AND
AGRO-PROCESSING Presentation to the Portfolio
Committee on Agriculture, Fisheries and
Forestry TEMBINKOSI BONAKELE Deputy
Commissioner, Competition Commission 08 July 2009
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Background

• Regulation Agricultural marketing boards,
  co-ops
• Deregulation effects since after 1996
• closing down of boards
• market concentration
• dominant private corporations and private co-ops

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Price increases, selected food products (StatsSA)
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Bread, flour and wheat prices,
Rand per 700g brown loaf
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High food prices - contributory factors

• Availability of grains worldwide
• Unfavorable climatic conditions
• Increased demand for animal proteins
• Increasing energy and fuel costs transport
• Increasing input costs fertilizer
• Anti-competitive conduct in the agro-food chain
•  

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The agro-food chain
 

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Commissions interventions

• Prioritisation of the food value chain
• Impact on low income consumers
• A number of complaints
• Research and scoping exercises show strong
  indications of anti-competitive conduct

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Major Cases

• Retail
• Bread and milling
• Grain storage and trading
• Dairy
• Poultry
• Pelagic Fish
• Animal feed
• Fertilizer and other input sectors
• Fats and Oils

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Supermarkets

• What led to the investigation?
• Public outcry re food prices preliminary study
• Buyer Power rebates listing costs
• Long term lease agreements raising entry
  barriers
• Category Management facilitating collusion
• Information Exchange Role of market
  intelligence consultants
• Complaint from Milk Producers Organisation

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Bread investigation

• Commission tipped off of simultaneous price
  increases, initiated an investigation
• Blue Ribbon (Premier), Albany (Tiger), Sasko
  (Pioneer) Foodcorp
• Price fixing market allocation
• Progress
• Premier leniency in terms of Commissions
  Corporate Leniency Policy
• Tiger penalty of R98 784 869.90
• Foodcorp penalty of R45 406 359.82
• Pioneer defending case, June 2009
• Initiated investigation in milling

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Grain storage and trading

• Complaint received by trader against Senwes
• Abuse of dominance in the storage handling of
  grain
• Tribunal ruled exclusionary conduct sec 8(c)
• Matter is being appealed
• Other cases in grain storage under investigation

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Dairy

• Commission referred complaint -Dec 2006
• Collusion abuse of dominance by processors
  (Clover, Parmalat, Lancewood, Woodlands, Nestle,
  Milkwood)
• Appear to have regulated the markets themselves
  following governments de-regulation
• Suppressing raw milk prices, raising barriers to
  entry through exclusive arrangements
• Case is currently tied up in legal processes

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Poultry

• Commission referred case against Astral in 2008
• Abuse of dominance, especially in breeding by
  engaging in exclusionary conduct.
• Poultry industry main source of protein for
  majority
• Increasing vertical integration and concentration
• Concerns around exclusionary conduct at different
  levels (breeding broiler)
• Case is at the pleadings stage

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Fertilizer

• High levels of concentration in many inputs to
  farming, including fertilizer
• Fertilizer is the single largest input cost in
  production of crops such as maize, wheat
  competitive pricing crucial for increased food
  production
• SA makes two of the three main building
  blocks for fertilizer Nitrogen (in form of
  ammonia) and Phosphate
• Long running cartel from 1990s fixing prices
  and allocating customers and markets Sasol
  reached settlement with Commission, with penalty
  of R250mn case proceeding against Omnia and
  Kynoch/Yara
• Sasol is local monopoly in ammonia production,
  charges inland import parity prices cases
  proceeding of abuse of dominance
• Foskor is local monopoly supplier of phosphate
  rock reaching settlement with Commission

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Commission's work

• High concentration levels prevail, barriers to
  entry, poor competitive outcomes
• Need to
• undermine cartels, opportunities for new entry
• Increase agricultural production by addressing
  effects of anti-competitive conduct on costs
• Improve understanding across govt and relevant
  public institutions
• It will take time for markets to adjust

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How can you help?

• Business, labour, community, government
• Proactive action, collective responsibility
• Improve understanding
• Pressure on companies to comply
• Monitoring market conditions
• Reporting anti-competitive conduct

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Thank you! Tel [phone] Fax012 394
4294 email tembinkosib_at_compcom.co.za
TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL
Towards a fair and efficient economy for all