Competition Commission roots out price fixing

Raid fresh produce market agentsOn the morning of 23 March 2017, the Competition Commission conducted a search and seizure operation at the premises of nine fresh produce market agents.

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. 

It is alleged that the agents are involved in prohibited coordinated activities aimed at undercutting prices charged by smaller intermediaries by charging way below the market price for certain agreed periods of a trading day. 

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. Thus, certain volumes of stock of fresh produce are sold during late hours of trading with the aim to manipulate prices.

It is also suspected that the agents reserve certain fresh produce grades for particular buyers. It is alleged that agents practice price discrimination based on the identity of the buyers.

There are about 30 fresh produce market agents in the country and the significantly big ones are about six only and account for about 80 per cent of the fresh produce intermediaries. 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.

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 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 available stock levels and the closing prices for the previous trading day.

‘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. 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,’ Tembinkosi Bonakele of the Competition Commission states.