A tribunal has reserved its judgment on Monday in a matter where an urgent application for interim relief brought by The Kamberg Potato Company (Pty) Ltd t/a Mighty Mzambane (“Kamberg”) against Wesgrow Potatoes.
Kamberg, a professional seed potato grower, accuses Wesgrow, a potato seed grower and supplier, of engaging in prohibited practices in contravention of section 5(1) and section 8(c) and 8(d)(i) of the Competition Act.
In March 2015, the Commission referred a complaint to the Tribunal against Wesgrow and HZPC for entering into exclusive agreements in the market for the production and supply of the Mondial seed potato varietal. On January 15, 2020, the Commission, Wesgrow and HZPC concluded a settlement agreement which was made an order of the Tribunal. Kamberg alleges that Wesgrow was in breach of the Tribunal’s order and if it were to be released to the market it would assist but Wesgro was not releasing to the market.
The Tribunal panel was comprised of advocate Tembeka Ngcukaitobi SC, Professor Liberty Mncube and Dr Thando Vilakazi.
Legal representative for Kamberg, advocate Christopher Whitcutt SC, said what they said to show the prima facie first they needed to show that Wesgrow was a dominant firm, secondly the conduct that this conduct has an exclusionary effect. “We do that with relevance to the market. We submit that the relevant market is a market for the production and Mondial seed potato variety,” Whitcutt said.
There is dominance as per their affidavit stating that they have 46% or 64%, so that makes the dominance point.
Whitcutt said what they said was that the effective agreement was that Wesgro was seeking to enforce in the High Court constitutes exclusionary acts because it foreclose Kamberg from entering or accessing the market and prevents or impedes Kamberg’s expansion in the market. “It also requires or induces a supplier or customer not to deal with the competitor because there is that exclusivity with the growers have exclusive relationships with Wesgrow. What we have seen is that unless Kamberg obtains it Mondial seeds from, it has tried but cannot obtain them anywhere in the market, so there is definitely an abuse of the dominance position. We submit that there is an abuse the effect which is abuse of dominance because it utilises its influence and market share."
“Our submission in essence is that the conduct described in the papers and the aims of the agreement by which Kamberg was able to access, those terms were prohibitive. Those terms effectively were contrary to the ruling and sought to entrench contrary to the agreement and by parity of reason for these reasons that the agreement was reached. The agreement sought to extend the statutory rights which had expired. They were advantageous to Wesgrow but not to Kamberg permitting the latter to become a competitor in the market selling those potatoes. The barriers to entry which have been described Wesgrow’s answer is you terminate the agreement that is your fault. You could have carried on getting from us. Kamberg’s answer is yes but only on those terms, we cannot source from anywhere else as a matter of fact. And you say well that is fine and you must sell your potatoes and Kamberg’s answer is well we can’t because our business is not geared for selling those potatoes and it will effectively mean we go out of business. That is abuse.”
Kamberg said it has prima facie demonstrated that Wesgrow’s conduct has anti-competitive effects which were not justified by the logical efficiency or competitive gains which Wesgrow has failed to demonstrate.
Kamberg said they also talk about the insurmountable barriers of preventing seed growers from entering the market for the production and supply of Mondial seeds was that there were very few entrants in the relevant market. The enforcement of the agreement has a negative agreement on the potential competitors who seek to produce Mondial seed potatoes but are foreclosed on doing so in terms of the agreement and we said there is no technological efficiency or other pro-competitive gains.
Whitcutt said in relation to the irreparable harm and balance of convenience enquiry was when foreclosed by Wesgrow’s conduct, it would be prevented from getting its product to market and cannot participate as a competitor in the market. “Accordingly there is a real possibility that Kamberg will exit the market. This will defy market competition, competitive prices and choice in an already dominated market as well as foreclose a medium-size firm in the market. Wesgrow’s conduct has consequences for Kamberg, competition and consumers as well as the public purse given that its exclusionary conduct will deny consumers the opportunity to purchase seed potatoes from the form which may possess superior and more cost-effective products, maybe more efficient production and supply of the product.”
For Wesgrow, advocate Gavin Marriott said it was hard to conceive of what the exclusionary act was, bearing in mind that this was a voluntary cancellation by Kamberg. “It cannot seriously expect to be continued to be supplied after the event. But then there is something I think is particularly important on the facts of this case. If Kamberg was going to argue that it has been excluded, in other words its participation in the market has been undermined through the action of Wesgrow, it was required to take the Tribunal into confidence and tell you in specific terms what it has been doing for the last 10 months. Remember it voluntarily cancelled the agreement, now it is a business – a farming operation. It did not just decide that on a whim. It must have had a plan. It must have decided it was going to plant something on its land. We cannot seriously be expected to believe that that land is now lying fallow,” Marriott said.
He added that in the answering affidavit they state that Kamberg failed to take the Tribunal into confidence as to what it has done in the past 10 months insofar as planting of crops was concerned. “If Kamberg intends to remain a seed potato grower, a substantial number of different varieties are available to plant on its farm. And Kamberg is free to purchase Mondial seed potatoes from any other supplier. I assume Kamberg has in fact done so.”
Wesgrow called on the Tribunal to dismiss the entire application, citing that there was no cause of action called breach of an order and if there was one, the aggrieved party went on for contempt and could not ask for an interim order on a final order.
Ngcukaitobi said the Tribunal would reserve the decision and the parties would be informed when the decision was ready.