DQS

Meat industry cooperating with Comp Comm Investigation

The Competition Commission launched an investigation into the alleged fixing of prices and trading conditions in the meat industry by conducting simultaneous search and seizure operations at 13 premises belonging to seven meat suppliers in three provinces in June. The meat suppliers as well as the Red Meat Producers Organisation (RPO) has confirmed that they are cooperating with the investigation.

The Competition Commission launched an investigation into the alleged fixing of prices and trading conditions in the meat industry by conducting simultaneous search and seizure operations at 13 premises belonging to seven meat suppliers in three provinces in June. The meat suppliers as well as the Red Meat Producers Organisation (RPO) has confirmed that they are cooperating with the investigation.

The Commission is probing alleged contraventions of the Competition Act by Karan Beef (Pty) Ltd (Karan Beef), Sparta Foods (Pty) Ltd (Sparta), Chalmar Beef (Pty) Ltd (Chalmar), Beefmaster Kimberley (Pty) Ltd (Beefmaster), Morgan Beef (Pty) Ltd (Morgan), Beefcor (Pty) Ltd (Beefcor), and Fabvleis (Pty) Ltd t/a Midland Meat (Fabvleis).

The companies – operating from Gauteng, the Free State and Northern Cape – are meat suppliers which are also known as feedlots. They purchase weaner calves from farmers in order to bulk feed them in preparation for slaughtering in the production of beef. They also sell beef to wholesale and retail customers.

The meat suppliers are alleged to have entered into an agreement and/or engaged in concerted practices to fix the prices and trading conditions when purchasing weaner calves from farmers. They are also alleged to have an agreement to fix the prices at which they sell meat to wholesale and retail customers.

The meat industry forms an important part of the food sector which is one of the Commission’s priority sectors. The Commission remains committed in its quest to fight collusion in the food sector as a whole, as higher prices of food affect the most vulnerable and poor households who spend a disproportionately high percentage of their income on food.

The Commission states that the search and seizure operations were conducted with due regard to the rights of all the affected persons. The Commission obtained search and seizure warrants from the High Court Gauteng Division, Pretoria; the Northern Cape Division, Kimberley; and the Free State Division in Bloemfontein in terms of section 46 of the Competition Act.

According to Sipho Ngwema, Competition Commission head of communications, the next step was to interview people, subpoena documents and use other legal tools to get to the bottom of the suspicions in the matter.

If the meat suppliers were found guilty of price fixing, they could face an administrative penalty of up to 10% of the company’s turnover in addition to other appropriate remedies available to the Competition Tribunal.

Karan Beef said in a statement that they fully co-operated with the investigation by providing all documents and information that was required and said that they are happy to co-operate with ongoing investigations.

“I am surprised that the Competition Commission initiated this investigation,” commented Karan Beef CEO, Arnold Pretorius. “I don’t believe that there is any collusion to fix prices either in the purchase of weaner calves, or in the sale of our beef products. If anything, Karan Beef is in fierce competition with other producers in the beef industry implicated in this investigation. I respect the work of the Competition Commission to protect South African consumers, particularly those most vulnerable to food inflation.”  

The Red Meat Producers Organisation has also said it welcomes any investigation that will ensure free market principles and pledged its full cooperation insofar as any investigation goes.

“Free market principles are one of the most important cornerstones of the red meat industry. Those principles must be upheld and protected at all cost. The RPO is on record as not having requested or initiated such an investigation as an organization.”

According to Landbou.com, some players in the meat industry are questioning the timing of the probe, given that the complaint had been lodged with the Competition Commission 18 months ago. At the time, the meat industry and feedlots in particular were under enormous pressure. Following the drought, the supply of weaners to feedlots rocketed and the price of maize reached record highs. As a result of the oversupply of weaners, the price dropped dramatically but feedlots claim they still have not made much money for the very reason that fodder for livestock was very expensive and retailers have exploited the oversupply by paying low purchase prices for red meat.

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