PRETORIA, The South African Competition Commission has laid a charge against Rooibos Limited for alleged abuse of the tea market after one of Rooibos' competitors complained that the country's largest processor of rooibos tea has signed exclusive agreements with producers favouring the company.
Competition Commission spokesperson Sipho Ngwema said Monday that the matter had now been referred to the Competition Tribunal for adjudication. Should Rooibios Limited be found guilty, it would be liable to a stiff fine.
"The matter has been referred to the tribunal for adjudication and we are also seeking a penalty of ten per cent of the company's turnover, therefore the processes of tribunal will now unfold until we get to the finalisation of this."
The commission's investigation focused on Rooibos Limited's monopoly of rooibos tea supply from rooibos tea commercial farmers, in order to force its competitors out of the processing level of the value chain or prevent the expansion of its rivals in the market.
The fact that rooibos tea is only grown in a small geographic region means that its source of supply is limited and access to it by rooibos tea processors is critical for them to remain competitive in the market.
Although there are about 220 rooibos tea commercial farmers all based in the rooibos producing areas of Western Cape and Northern Cape provinces, only a limited number of rooibos tea commercial farmers contribute the bulk of the total production of rooibos tea which is supplied to rooibos tea processors.
Rooibos tea processors purchase rooibos tea from rooibos tea commercial farmers in bulk and then dry and treat rooibos tea which is then sold to the local packers and the export market as a bulk product for packaging into final products and other value added products.
Rooibos Limited remains a dominant player in the processing of rooibos tea by virtue of the fact that it inherited the assets and the monopoly position previously occupied by the Rooibos Tea Control Board. The board was established in 1954 by the previous apartheid era government to, among other things, regulate the marketing, pricing and research in the rooibos tea industry.
Some of the entrants in rooibos tea processing were formed by farmers who were discontented with the monopoly position of Rooibos Limited. However, in 2014 Rooibos Limited introduced two exclusionary contracting strategies to lock-in or foreclose the supply of rooibos tea from farmers and thus, the Commissions said, starving its competitors of access to a product that only grows in a small geographic region.
The Commission is seeking an order from the Tribunal declaring that Rooibos Limited has contravened the Competition Act and that the company is liable to pay an administrative penalty equal to 10 percent of its annual turnover.
The Commission is concerned of Rooibos Limited's ongoing anti-competitive conduct, particularly as this hampers the growth of the agro-processing industry in South Africa, said Hardin Ratshisusu, the deputy commissioner. Dominant firms have a special responsibility to ensure they do not stifle competition.
Source: NAM NEWS NETWORK