The Role of Business Conduct
in Agriculture – Competition
Concerns
Gauteng Food Summit
10 July 2008
Overview of Presentation
• Competition policy, the competition
authorities and their functions
• Commission’s approach to
agriculture and food as a priority
area
• Competition Concerns
• Conclusion and Implications
Main sections of the
Competition Act
• Merger review: whether merger likely to
substantially prevent or lessen competition
• Collusion between competitors prohibited
• Restrictive vertical practices prohibited –
vertical agreements that substantially prevent
or lessen competition
• Abuse of a dominant position prohibited, e.g. :
o Excessive pricing
o Refusing access to an essential facility
o Exclusionary acts
o Price discrimination
Approach to agriculture & food
• Prioritisation process undertaken by
Commission focused on:
o Accelerated and Shared Growth
o Poor consumers
o Where strong indications of anticompetitive conduct
• Food and agro-processing identified as
very important focus – critical for social
welfare
• Others: banking; infrastructure &
construction; intermediate industrial
products
Context to agriculture & food
• Anti-competitive conduct in bread, milling,
dairy, poultry
• Wider debates - liberalisation of agricultural
markets with expectation of improved
efficiency and lower consumer prices
• Mixed outcomes at best, partly because of
low levels of effective competition:
– High concentration levels across the
supply chain
– High barriers to entry
– Anti-competitive Conduct
• Previous studies found no anti-competitive
behaviour
Bread Cartel Case Study
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Commission initiated complaint in Western Cape
Leniency application received from Premier Foods
As cartels tend to be secretive, leniency assists Commission in
prosecuting
Found that Premier (Blue Ribbon), Foodcorp, Tiger Brands
(Albany) and Pioneer (Sasko) had agreed:

to increase price of bread to customers;
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to fix their discounts to distributors; and

Close down certain bakeries
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not to poach each others independent
distributors
Effect: prices higher than they would have been under competition
Ongoing investigation in baking and milling
• Same four as in baking
• Vertical integration: milling, bread & grain products
• Animal feed milling: Rainbow Epol, Astral Meadow,
Senwesco
Bread, flour and wheat prices
Competition concerns & current
cases?
• Inputs: fertilizer
– Complaints received alleging collusive behaviour and abuse
of dominance on part of producers resulting in import parity
pricing to detriment of farmers
– Fertilizer largest input to grain production
• Bulk storage (Silos)
• Former cooperatives – now privatised
• Referred complaint on exclusionary acts and inducement
• Dominated by three main firms (Senwes, OTK/Afrgi,
Noordwes)
• Regional dominance
• Also involved in trading activities in the derivative market
(Safex)
• Dairy
–
Initiated by the Commission following information
received from a milk producer
– Respondents: Clover (granted immunity), Parmalat,
Ladismith Cheese, Woodlands Dairy, Lancewood,
Nestle and Milkwood
– Collusion, including price suppression, and surplus
extraction
• Poultry
– Recently referred to Tribunal
– Respondents: Astral and Elite
– Collusion to fix trading conditions, allocate markets
and also abuse of dominance by Astral
Conclusions & Implications
• High concentrations levels prevail, leading to
poor competitive outcomes:
– still significant concentration, high barriers to entry and
oligopolistic market structures across the value chains
• State regulation appears to have been replaced
by private regulation in many sectors 
liberalisation has benefited processors
• Directly contributes to higher food prices
• Anti-competitive conduct affecting farmers
contributes to lower production
• Impact on poorest households
• Sector is an ongoing focus for the Commission