By Jaco de Klerk, Director – Commercial
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The Competition Commission (the “Commission”) recently launched a market inquiry into the Fresh Produce Market (the “Inquiry”) to establish if any conduct exists in this industry that impedes, restricts or distorts competition between parties in this industry. Where it is established that a party’s conduct has an adverse effect on competition, the Commission is empowered in terms of section 43C of the Competition Act No. 89 of 1998 (the “Act") to take substantial remedial actions to address the issue.
Firms in this industry are advised not to take the Inquiry lightly considering the breadth of its scope. The following three broadly defined themes will serve as a compass to guide the Commission in its Inquiry:
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Efficiency of the value chain, with an emphasis on the dynamics around fresh produce market facilities -
This theme originates from concerns raised by different role players in the market that the value chain is insufficient and uncompetitive, with specific reference to the fresh produce market facilities providing for wholesale between producers and buyers;
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Market dynamics of key inputs and its impact on producers -
Focused on the upper end of the value chain, the costs of essential inputs for fresh produce farmers such as seeds, fertilizers and agrochemicals will be considered in order to establish if price discrimination, buyer power and exclusivity exist, inhibiting competition in the market.
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Barriers to entry, expansion and participation –
Considering that the agricultural value chain in South Africa can be characterized by vertical integration of large commercial farmers, this theme will consider barriers to entry, expansion and participation in this industry. The Inquiry will be focused on barriers faced by new and small farmers and firms owned or controlled by previously disadvantaged persons.
Although this Inquiry is a general inquiry into the state of competition and the levels of concentration within the fresh produce market and not into the activities of a particular company, the Commission is mandated by the Act to take action. If the Inquiry reveals there is an adverse effect on competition in the market, the Commission could inter alia recommend that the Competition Tribunal order any firm to sell any of its shares, interests or assets.
Companies involved in this industry should take no chances when approached by the Commission and seek the necessary legal advice rather sooner than later.