South Africa: Dawn Raids on fresh produce markets

By AAT Senior Contributor, Michael-James Currie

The South African Competition Commission (SACC) conducted yet another set of dawn raids, this time on the premises of nine of South Africa’s largest fresh produce market agents.

SAgrocery.jpgThe agents raided, which had operations at the Tshwane Market in Pretoria and the Joburg Market in Johannesburg, include the 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).

Although South Africa has about 30 fresh produce markets agents, the 6 largest agents allegedly account for approximately 80% of the fresh produce intermediaries. This means that the SACC included 3 agents in its raid which would not ordinarily be regarded as ‘large agents’.

The raid, according to the SACC’s media release, follows from a complaint which the SACC received from the Department of Agriculture, Forestry and Fisheries. The media release alleges that the agents engaged in prohibited cartel conduct, in contravention of Section 4(1)(b) of the South African Competition Act, in that they:

  • 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;
  • 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;
  • keep their prices unsustainably low during these periods where after they (by agreement) quickly increase prices significantly as soon as the smaller agents run out of stock. Accordingly, certain volumes of fresh produce are sold during the late hours of trading with the sole aim of manipulating prices;
  • further make decisions regarding the actual timing of the price increases; and
  • reserve certain fresh produce grades for particular buyers, therefore, engaging in price discrimination based on the identity of buyers.

These agents facilitate the selling of fresh produce on behalf of farmers, for a commission (which rate they have allegedly also fixed over the years), to wholesalers, retailers and hawkers. Accordingly, the alleged conduct is considered particularly harmful as it affects the most vulnerable households. Additionally, SACC Commissioner Tembinkosi Bonakele stated that “…cartel activities in this sector serve to keep out emerging black farmers and agents out of the market. It is for these reasons that this sector ranks high in our priority list, and cartels, big or small, will be rooted out”.

Notably, the SACC in its statement indicated that the alleged conduct is believed to be ongoing. This may raise serious issues for the agents concerned as the SACC has not yet clarified how they intend on dealing with ongoing conduct for purposes of constituting an offence under section 73A of the Competition Amendment Act (In terms of the section 73A, any director or person with management authority may be held criminally liable for ‘causing’ or ‘knowingly acquiescing’ in cartel conduct). Accordingly, how this uncertainty will impact on the SACC’s corporate leniency policy remains to be seen. For more info on this, see South African Competition Commission… More Dawn Raids!

In conclusion, the timing of this dawn raid coincides with the SACC’s recent (ongoing) Market Inquiry into the Grocery Retail Market Sector. However, to what extent, if any, the Market Inquiry has had any relevance or impact on this dawn raid is unclear and remains a matter of mere speculation.

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