Johannesburg
– The Competition Commission has raided nine fresh produce market agents in a search
and seizure operation.
In a
statement issued on Thursday, the authority said the raids occurred this
morning.
The
suspects are: Botha Roodt Group, Subtropico, RSA Group, Dapper Market Agents, DW
Fresh Produce, Farmers Trust, Noordvaal Market Agents, Marco Fresh Produce
Market Agency and Wenpro Market Agents.
The legally-sanctioned
search and seizure operation is part of an investigation into cartel conduct
which was reported by the Department of Agriculture, Forestry and Fisheries.
The premises are located in the Tshwane Market in Pretoria and the Joburg
Market in Johannesburg, Gauteng, the country’s economic hub.
“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 disproportionally high percentage of their income on food. 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,” said Commissioner
Tembinkosi Bonakele.
The
authority says the agents,
which serve as fresh produce market intermediaries between farmers and buyers
of freshly produced fruits and vegetables in South Africa, are suspected of
being involved in cartel and price fixing conduct in contravention of the
Competition Act.
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It is
alleged that the agents 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, it says.
It is
further alleged that the suspected agents keep their prices unsustainably low
during these periods and quickly increase prices significantly as soon as the
smaller agents run out of stock. As a result, the Commission says, certain
volumes of stock of fresh produce are sold during late hours of trading with
the aim to manipulate prices.
It also
alleges the agents also further make decisions regarding the actual timing of
the price increases.
“The
Commission understands that the suspects drive suppress competition and drive
it out of the market. They, by agreement, increase prices paid for fresh
produce.”
Reserving products
It is
also suspected that the agents reserve certain fresh produce grades for
particular buyers. It is alleged that the agents practice price discrimination
based on the identity of the buyers.
There
are about 30 fresh produce market agents in the country, although only six are
significant in size and account for about 80 percent of the fresh produce
intermediaries, the commission says.
“Given
the sheer size of the suspects, the suspected cartel conducts results in large
proportion of freshly produced fruits and vegetables being sold at much higher
prices than the average daily selling price.”
It
explains the agents’ activities mainly include selling fresh fruits and
vegetables on behalf of farmers, for a commission, to buyers including
wholesalers, retailers and hawkers. The commission suspects that the agents
have over the years fixed the commission rate.
It notes
it is the responsibility of the fresh produce market to determine daily average
prices for all type 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.
Reasonable grounds
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 of the Competition Act.