1. Towards a fair and efficient economy for all

2. Background Regulation – Agricultural marketing boards, co-ops Deregulation effects since after 1996:  closing down of boards;  market concentration;  dominant private corporations and private co-ops Towards a fair and efficient economy for all

3. Price increases, selected food products (StatsSA) Jan 2008-Jan 2009 April 2008-April 2009 700g Brown Bread34.2%22.4% 2.5kg Mealie Meal6.6%6.3% 1kg Fresh Beef Mince12.3%13.2% 1kg Fresh Chicken Portions 13.8%16.0% 2L Fresh Milk7.7%7.5% 500g Brick Margarine53.2%34.4% 750ml Sunflower Oil28.9%-9.7% 1kg White Sugar10.5%16.4%

4. Bread, flour and wheat prices, Rand per 700g brown loaf

5. High food prices - contributory factors Availability of grains worldwide Unfavorable climatic conditions Increased demand for animal proteins Increasing energy and fuel costs – transport Increasing input costs – fertilizer Anti-competitive conduct in the agro-food chain Towards a fair and efficient economy for all

6. The agro-food chain Towards a fair and efficient economy for all InputsPrimary productionProcessing/PackagingDistribution/Retail (local and exports)Consumers

7. Commission’s interventions Prioritisation of the food value chain  Impact on low income consumers  A number of complaints  Research and scoping exercises show strong indications of anti-competitive conduct Towards a fair and efficient economy for all

8. Retail Bread and milling Grain storage and trading Dairy Poultry Pelagic Fish Animal feed Fertilizer and other input sectors Fats and Oils Major Cases Towards a fair and efficient economy for all

9. Supermarkets What led to the investigation?  Public outcry re food prices = preliminary study  Buyer Power – rebates & listing costs  Long term lease agreements – raising entry barriers  Category Management – facilitating collusion  Information Exchange – Role of market intelligence consultants  Complaint from Milk Producers Organisation Towards a fair and efficient economy for all

10. Bread investigation Commission tipped off of simultaneous price increases, initiated an investigation Blue Ribbon (Premier), Albany (Tiger), Sasko (Pioneer) & Foodcorp Price fixing & market allocation Progress:  Premier: leniency in terms of Commission’s Corporate Leniency Policy  Tiger: penalty of R98 784 869.90  Foodcorp: penalty of R45 406 359.82  Pioneer: defending case, June 2009 Initiated investigation in milling Towards a fair and efficient economy for all

11. Grain storage and trading TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL Complaint received by trader against Senwes Abuse of dominance in the storage & handling of grain Tribunal ruled exclusionary conduct – sec 8(c) Matter is being appealed Other cases in grain storage under investigation Towards a fair and efficient economy for all

12. Dairy TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL Commission referred complaint -Dec 2006 Collusion & abuse of dominance by processors: (Clover, Parmalat, Lancewood, Woodlands, Nestle, Milkwood) Appear to have regulated the markets themselves following governments de-regulation Suppressing raw milk prices, raising barriers to entry through exclusive arrangements Case is currently tied up in legal processes Towards a fair and efficient economy for all

13. Poultry TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL Commission referred case against Astral in 2008 Abuse of dominance, especially in breeding by engaging in exclusionary conduct. Poultry industry main source of protein for majority Increasing vertical integration and concentration Concerns around exclusionary conduct at different levels (breeding – broiler) Case is at the pleadings stage Towards a fair and efficient economy for all

14. Fertilizer TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL Towards a fair and efficient economy for all High levels of concentration in many inputs to farming, including fertilizer Fertilizer is the single largest input cost in production of crops such as maize, wheat; competitive pricing crucial for increased food production SA makes two of the three main ‘building blocks’ for fertilizer: Nitrogen (in form of ammonia) and Phosphate Long running cartel from 1990s fixing prices and allocating customers and markets – Sasol reached settlement with Commission, with penalty of R250mn; case proceeding against Omnia and Kynoch/Yara Sasol is local monopoly in ammonia production, charges inland import parity prices; cases proceeding of abuse of dominance Foskor is local monopoly supplier of phosphate rock – reaching settlement with Commission

15. Commission's work TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL High concentration levels prevail, barriers to entry, poor competitive outcomes Need to:  undermine cartels, opportunities for new entry  Increase agricultural production by addressing effects of anti-competitive conduct on costs  Improve understanding across govt and relevant public institutions It will take time for markets to adjust Towards a fair and efficient economy for all

16. How can you help? TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL Business, labour, community, government Proactive action, collective responsibility Improve understanding Pressure on companies to comply Monitoring market conditions Reporting anti-competitive conduct Towards a fair and efficient economy for all

17. Thank you! Tel: 012 394 3294 Fax:012 394 4294 email: tembinkosib@compcom.co.za TOWARDS A FAIR AND EFFICIENT ECONOMY FOR ALL Towards a fair and efficient economy for all