The RSA Group, an agent that serves as a market intermediary between farmers and buyers of freshly produced fruits and vegetables, was one of nine firms targeted by the Competition Commission in a number of search and seizure operations carried out at fresh produce markets across the country last week. RSA Group managing director, Jaco Oosthuizen, said in a statement that they would be cooperating with the Commission's investigation.
"The RSA Group believes that these allegations are based on a number of misconceptions as to how the markets operate," Oosthuizen said.
"We will cooperate with and assist the Commission as it goes about its investigation, and have confidence that a thorough ventilation of the relevant facts and circumstances will set the record straight."
The Commission said it had reasonable grounds to suspect that larger market agents fix their commission rates and coordinate their pricing activities to squeeze out smaller rivals. The agents are allegedly 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.
The suspected agents also allegedly keep their prices unsustainably low during these periods and quickly increase prices significantly as soon as the smaller agents run out of stock.
Certain volumes of stock of fresh produce are thought to be sold during late hours of trading in a bid to manipulate prices. The Commission alleged the cartel suppresses competition and drives it out of the market when members of the cartel increase prices for fresh produce by agreement.
Oosthuizen said not only are fresh produce markets highly competitive, fluid and transparent platforms, but they were also regulated by legislation and monitored by a regulator who is appointed by the Minister of Agriculture, Fisheries and Forestry.
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Oosthuizen said market forces, coupled with the monitoring of agents' activities by the regulator, combined to mitigate against suggestions of collusive engagement. He said collusion for any purpose, whether to compete with major competitors or to drive out small players was fundamentally at odds with how a price discovery market functions.
"There are many fast-moving forces that impact pricing decisions during trading hours, ranging from hostile weather, product quality and perishability to supply and demand dynamics," Oosthuizen said.
"These all contribute to price volatility. If sales agents don't respond quickly and effectively in finding the right price, the producers and buyers look to rivals, in the market or outside the market, for their business. While sales agents may react to changing market forces in similar ways this is not suggestive of collusive conduct. In fact, salespeople frequently adjust prices in different directions, according to their context in reading the market."
Oosthuizen said the RSA Group while the Competition Commission's process was likely to take some time, the company's operations would be unaffected and it remained committed to all of its stakeholders.
AFRICAN NEWS AGENCY