SOUTH AFRICA – Rooibos Limited has been referred to the Competition Tribunal for prosecution on charges relating to abuse of dominance by inducing rooibos tea farmers not to deal with rooibos tea processors it competes with.
The Competition Commission said this followed an investigation against Rooibos Limited, the largest processor of rooibos tea in South Africa, after receiving a complaint from a processor of rooibos tea in 2015.
The commission’s investigation focused on Rooibos Limited’s monopolisation of rooibos tea supply from rooibos tea commercial farmers, in order to foreclose its competitors in 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, 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 in the Western and Northern Cape, 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 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 discontent 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 has referred the complaint to the Tribunal for adjudication.
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,” Hardin Ratshisusu, the deputy Commissioner said.
“Dominant firms have a special responsibility to ensure they do not stifle competition.”
June 20, 2017: Business Report