Towards a fair and efficient economy for all. Background Regulation – Agricultural marketing...

Towards a fair and efficient economy for all

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


Price increases, selected food products (StatsSA)

Jan 2008-Jan 2009

April 2008-April 2009

700g Brown Bread

34.2% 22.4%

2.5kg Mealie Meal 6.6% 6.3%1kg Fresh Beef Mince

12.3% 13.2%

1kg Fresh Chicken Portions

13.8% 16.0%

2L Fresh Milk 7.7% 7.5%500g Brick Margarine 53.2% 34.4%750ml Sunflower Oil 28.9% -9.7%1kg White Sugar 10.5% 16.4%

Bread, flour and wheat prices, Rand per 700g brown loaf

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Mark-up of bread over wheat, Rand per loaf556g wheat SAFEX, Rand500g flour, CPI, Rand700g brown loaf, CPI, Rand

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


The agro-food chain


Commission’s 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


• Retail

• Bread and milling

• Grain storage and trading

• Dairy

• Poultry

• Pelagic Fish

• Animal feed

• Fertilizer and other input sectors

• Fats and Oils

Major Cases


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 OrganisationTowards a fair and efficient economy for all

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 Commission’s 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 Towards a fair and efficient economy for all

Grain storage and trading

TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL

• 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


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


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


Fertilizer

TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALLTowards a fair and efficient economy for all

• 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

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


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


Thank you!

Tel: 012 394 3294Fax:012 394 4294

email: [email protected]

TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALLTowards a fair and efficient economy for all

Towards a fair and efficient economy for all. Background Regulation – Agricultural marketing...

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