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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.