Karan Beef and PIC deal to go ahead despite collusion fine

SOUTH AFRICA – The Competition Commission has said that Karan Beef’s collusion fine may unlikely affect its buyout deal with the Public Investment Corporation (PIC), reports Business Day.

“In no way does this investigation into Karan Beef and the fine affect the PIC’s deal with Karan Beef,” said David Maimela, the commission’s acting chief of staff.

This came after PIC and Pelo Agricultural Ventures said they would buy Karan Beef, Africa’s largest feedlot for US$365 million.

PIC processes 2,040 head of cattle daily and debones up to 300 tonnes of meat a day and South Africa is its biggest market, with significant exports to UAE, Kuwait, Qatar, Bahrain, Oman, Jordan, Egypt, Mauritius, Seychelles, Maldives, China and Hong Kong.

It owns a herd of about 150,000 and has also purchased three adjoining farms, an abattoir and a nearby distribution center.

The deal which awaits the Competition Commission’s approval, was thrown into speculations in regard to the commission’s verdict to fine Karan Beef the collusion fee.

Collusion charges

In September, beef processing firms I&J and Karan Beef were prosecuted by the competition commission for collusion.

They were charged with dividing markets in the supply of processed beef products such as beef burger patties, steak sizzlers, crumbed beef steaklet, viennas and boerewors.

Karan is said to have paid a fine of US$190,354.00 after the commission found out it divided the beef market by allocating customers and specific types of goods, contravening the Competition Act.

“Karan Beef has admitted guilt and will not be prosecuted. I&J is fighting the charges and will be taken to the Competition Tribunal. As the commission, we have asked the tribunal to impose an administrative penalty of 10% of I&J’s annual turnover,” said Maimela.

According to an investigation initiated by the commission, the two had from 2000 until recently entered a manufacturing agreement in terms of which Karan Beef will stop producing certain processed beef products for its own account and produce on behalf of I&J.

The agreement further entailed that Karan Beef should not sell certain of its processed beef products to certain customers which were reserved for I&J.

On the other hand, the commission asked the Tribunal to impose an administrative penalty of 10% of I&J’s annual turnover.

The investigations came after the commission raided 13 premises belonging to seven meat suppliers as part of an investigation into the alleged fixing of prices and trading conditions.