South Africa: Produce market agents raided in “price-fixing” cartel investigation

South Africa: Produce market agents raided in “price-fixing” cartel investigation

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South Africa’s competition watchdog yesterday raided the premises of nine fresh produce market agents at two major food hubs, as part of a probe into a suspected price-fixing cartel accused of suppressing competition by undercutting market entrants. 

The markets in question raided by the Competition Commission of South Africa were the Johannesburg Market and Pretoria’s Tshwane Market.

Earlier today, the Commission said it had extended its “search and seizure operation” to other fresh produce market agents with premises in Cape Town and Durban.

The agents – who serve as market intermediaries between growers and buyers – are suspected of being involved in a cartel and price-fixing conduct, in contravention of the Competition Act.

A release said the agents had allegedly been undercutting the prices of smaller intermediaries by charging “way below the market price for certain agreed periods of a trading day.”

The Commission is investigating how the suspected agents allegedly keep their prices low during these periods and then quickly hike up prices as soon as the smaller agents run out of stock.

The Johannesburg Market is a major food hub in South Africa and the largest fruit and vegetable market in the continent by volume, with an estimated 45,000 buyers visiting each day.

It is described as a stock exchange for fresh produce and a one-stop destination for retailers, grocers, street traders, the foodservice industry, exporters and regular consumers.

The Tshwane Market is a centre where prices are formed and fresh produce is traded.

The agents’ activities mainly include selling fresh produce to buyers on behalf of farmers for a commission. The agents are also accused of fixing the commission rate over the years.

“It is the responsibility of the fresh produce market to determine daily average prices for all types of fruits and vegetables available for sale in the market. The average price is calculated with reference to the available stock levels and the closing prices for the previous trading day,” the release said.

“The Commission has reasonable grounds to suspect that the agents 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.

“This conduct is alleged to be ongoing and is in contravention of the provisions of section 4(1)(b)(i) of the Competition Act.”

It is also alleged that the agents reserved certain fresh produce grades for particular buyers.

There are about 30 fresh produce market agents in the country, according to the Commission, with six accounting for about 80% of the fresh produce intermediaries.

The raids were part of an investigation into cartel conduct which was reported by the Department of Agriculture, Forestry and Fisheries (CAFF). Documents, data and records were seized.

“The Commission is concerned with the prevalence of collusion in the food sector, as higher prices of these commodities affect the most vulnerable households. The poor spend a disproportionately high percentage of their income on food,” Commission deputy commissioner Tembinkosi Bonakele said.

“Also, 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.”

Commission has “got it all wrong”

Speaking with PBUK, a representative from one of the companies named in the release, Subtropico Market Agents, denied any wrongdoing and claimed the Commission had “got it all wrong”.

“There was an inspection in my office yesterday and we gave our 100% support in their inspection. I would like them to finish their inspection because they’ve got it all wrong,” managing director Anton Vos said.

“The market price is determined by supply and demand; it depends on the quality of the produce, the trademark, the grading of the produce. It all depends on that kind of stuff which can have an impact on your price.”

He added market prices were also determined by a range of other factors.

“Supply and demand depends on how many volumes are in the market and from there on, the prices are determined. So price-fixing, it’s impossible,” he said.

“The market agencies are highly competitive to each other, we compete to get the produce off the same farmers so you must perform otherwise you’re going to lose your producer.

“You are selling on behalf on your producer, and you are just earning a commission like a stake agent will do on the selling of a property. That’s the bottom line.”

He went on to say he didn’t know “where they [the Commission] get their facts”, adding “they don’t know the business, they don’t understand the business and if they just asked we could have told them how the business is working.”

“It is the only market in the world where supply and demand is still determining the price.”

PBUK also tried to reach out to several of the other companies named in the release but at the time of writing had been unable to connect.

The Commission names the following as companies raided in Cape Town – Subtropico Ltd, RSA Group Ltd, and Fine Bros Ltd.

In Durban, the Commission is also executing a search and seizure warrant at premises of RSA Group, Wenpro KZN Ltd, and Delta Market Agents Ltd.

Yesterday’s raid in Johannesburg and Pretoria related to the following companies: Botha Roodt Group, Subtropico Ltd, RSA Group Ltd, Dapper Market Agents Ltd, DW Fresh Produce CC, Farmers Trust CC, Noordvaal Market Agents Ltd, Marco Fresh Produce Market Agency, and Wenpro Market Agents CC.

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