Searching for bad apples

The Competition Commission (CompCom) has launched an inquiry into the fresh produce market to establish whether any features in the value chain impede, restrict, or distort competition.

The inquiry will peel back all the layers of the value chain to assess whether there is anti-competitive behaviour in the market.

The CompCom will assess the efficiency and market dynamics of the industry. They will also look for blemishes in the industry that inhibit entry, expansion, and participation in the market. 

It will focus on a representative basket of fruit and vegetables for the inquiry. The basket accounts for 70% of the production and sales in the industry.

They will begin their investigation by the end of March. The work of the inquiry into fresh produce is expected to expire after 18 months.

Here’s what’s on their grocery list to investigate:

Many complaints

The Competition Commission has good reason to look into this – the fresh produce industry accounts for 2.5% of South Africa’s GDP and is responsible for 5% of total employment in the country.

“The food and agro-processing sector has been a priority for the commission since 2008 due to its significant contribution to the economy broadly and its potential to serve as a driver of inclusive growth in the South African economy,” commissioner Doris Tshepe said.

Ahmore Burger-Smidt, the head of regulatory practice at Werksmans Attorneys, said that the CompCom had received several complaints about the sector and has conducted concentration and food-price studies that reveal a need for further inquiry.

According to a Stats SA inflation release, the price of food and non-alcoholic drinks has increased by 13.2% from last year. This was a significant cause of inflation, surprising on the upside in February, as it increased by 0.1% to 7%.

Hard line on food

The CompCom has a reputation for going after technology and financial giants, but its interest in traditional sectors, such as the food industry, is not new.

For example, it found collusion baked into the South African bread industry.

Bread companies artificially inflated the price of bread in the Western Cape from 1999 to 2007.

Premier Foods, Tiger Brands, Pioneer Foods, and Foodcorp colluded to fix selling prices and other trading conditions. 

• Pioneer foods were forced to pay R195 million for its involvement with the cartel.
• A R100 million fine was imposed on Tiger Brands for their participation in the cartel.
• Foodcorp had to pay a R45 million fine.

The commision will investigate whether any similar arrangement exists in the fresh produce market.

*With assistance from Monica Martins