Commission shakes up fresh produce cartel

Thursday, March 23, 2017

Pretoria - The Competition Commission will today raid fresh produce markets on suspicions that some market agents are engaged in a concerted practice to fix the price and trading conditions for the supply of fresh produce.

“The commission has reasonable grounds to suspect that the agents entered into an agreement and/or engaged in a concerted practice to fix the price and trading conditions for the supply of freshly produced fruits and vegetables in South Africa. This conduct is alleged to be ongoing and is in contravention of the provisions of section 4(1)(b)(i) of the Competition Act,” said the commission on Thursday.

The search and seizure operation will take place at the premises located in the Tshwane Market in Pretoria and the Joburg Market in Johannesburg, Gauteng.

The search operation of nine fresh produce market agents on Thursday forms part of an investigation into cartel conduct, which was reported by the Department of Agriculture, Forestry and Fisheries.

“The agents, which serve as fresh produce market intermediaries between farmers and buyers of freshly produced fruits and vegetables in South Africa, are suspected of being involved in cartel and price fixing conduct in contravention of the Competition Act,” the commission said.

It is alleged that the agents are involved in prohibited coordinated activities aimed at undercutting the prices charged by smaller intermediaries by charging way below the market price for certain agreed periods of a trading day.

It is further alleged that the suspected agents keep their prices unsustainably low during these periods and quickly increase prices significantly as soon as the smaller agents run out of stock. Thus, certain volumes of stock of fresh produce are sold during late hours of trading with the aim to manipulate prices.

“They further make decisions regarding the actual timing of the price increases. The commission understands that the suspects … suppress competition and drive it out of the market. They, by agreement, increase prices paid for fresh produce,” it said.

The agents are also suspected of reserving certain fresh produce grades for particular buyers. It is alleged that the agents practice price discrimination based on the identity of the buyers.

“There are about 30 fresh produce market agents in the country and the significantly big ones are about six only and account for about 80% of the fresh produce intermediaries. Given the sheer size of the suspects, the suspected cartel conducts results in large proportion of freshly produced fruits and vegetables being sold at much higher prices than the average daily selling price.”

Agents’ activities

The agents’ activities mainly include selling fresh fruits and vegetables on behalf of farmers, for a commission, to buyers including wholesalers, retailers and hawkers. The commission suspects that the agents have over the years fixed the commission rate.

It is the responsibility of the fresh produce market to determine daily average prices for all types of fruits and vegetables available for sale in the market. The average price is calculated with reference to the available stock levels and the closing prices for the previous trading day.

The suspects in the matter are: Botha Roodt Group (Botha Roodt); Subtropico (Pty) Ltd (Subtropico); RSA Group (Pty) Ltd (RSA Group); Dapper Market Agents (Pty) Ltd (Dapper); DW Fresh Produce CC (DW Fresh); Farmers Trust CC (Farmers Trust); Noordvaal Market Agents (Pty) Ltd (Noordvaal); Marco Fresh Produce Market Agency (Marco); and Wenpro Market Agents CC (Wenpro).

During the search, the commission will seize information, documents, data and records that have a bearing on the investigation. The operation is being conducted with due regard to the rights of all the affected persons.

The commission obtained search and seizure warrants from the High Court Gauteng Division, Pretoria, in terms of section 46 of the Competition Act.

“The commission is concerned with the prevalence of collusion in the food sector, as higher prices of these commodities affect the most vulnerable households. The poor spend a disproportionally high percentage of their income on food,” said Competition Commissioner Tembinkosi Bonakele.

The Commissioner said cartel activities in this sector serve to keep out emerging black farmers and agents from the market.

“It is for these reasons that this sector ranks high on our priority list, and cartels, big or small, will be rooted out,” said Bonakele. – SAnews.gov.za

 

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