By BO Staff Writer
Yet another South African company has been found guilty of corruption and “cartel conduct” by the Competition Commission.
The Commission wants Unilever, of which Johann Rupert’s Remgro has a 25.8% stake, to pay a penalty equal to 10% of its annual turnover for cartel activity with the edible oils & fats producer, Sime Darby.
Sime Derby makes household solid vegetable oil, Holsum. Unilever produces Flora, Rama and Stork margarines.
According to Remgro’s website, Unilever’s “net profit” for the financial year ending 30 June 2016 increased to over R1.5 billion. Unilever ranks as one of Remgro’s largest assets.
The Commission found that Unilever and Sime Derby agreed not to compete with each other in the market for cooking oils and margarine. Speaking on news network, ANN7, Makgale Mohlala, Head of Cartels at the Competition Commission said, “they agreed that Unilever would sell to retail customers such as PicknPay and Shoprite, and Sime Derby would sell to industrial customers which are manufacturers of products that use the cooking oils and margarine to produce other products.”
Mohlala said this created a division of markets where one company would be active in the market supplying industrial customers while the other would be active in retail. “This is prohibited interms of the Competition Act,” he said.
“Cartels raise entry barriers [to industry]” said Mohlala. He further said “cartels result in lack of innovation because firms know that their market is secured, they don’t have to be innovative, bringing in new ideas, new products, because they are going to be selling their products irrespective.”
“If you have markets that are cartelised, what ever transformation efforts you are trying to implement in the economy, you will get a resistance from the cartels because … those changes will disrupt their benefits,” said Mohlala.
Read the Competition Commission’s full statement on the cartel behaviour of these white-owned companies below:
Competition Commission charges Unilever South Africa (Pty) Ltd for cartel conduct
The Competition Commission (Commission) has referred to the Competition Tribunal for prosecution a cartel case against Unilever South Africa (Pty) Ltd (Unilever) and Sime Darby Hudson Knight (Pty) Ltd (Sime Darby).
This follows the investigation by the Commission which found that Unilever and Sime Darby divided markets by allocating specific types of products and customers goods in the market for the manufacturing and supply of bakery and cooking products throughout South Africa. This conduct contravene section 4(1)(b)(ii) of the Competition Act.
The Commission’s investigation found that from at least 2004 to 2013 Unilever and Sime Darby entered into a Sale of Business agreement, which contained a clause in terms of which they agreed not to compete with each other in respect of certain pack sizes of margarine and edible oils.
In terms of the non-compete clause, Unilever and Sime Darby agreed that:
· Sime Darby would not supply industrial customers with margarine pack sizes that were less than 15kg;
· Sime Darby would not supply to retail sector of the market where Unilever is active;
· Sime Darby would not supply retail customers with its Crispa branded edible oils;
· Sime Darby would only produce and supply 25 litre pack size of edible oils, which it would supply to industrial customers exclusively; and
· Unilever would not supply industrial customers with its Flora branded edible oils.
Sime Darby settled with the Commission in 2016. The Commission is seeking an order from the Competition Tribunal declaring that Unilever and Sime Darby contravened Section 4(1)(b)(ii) of the Competition Act as well as an order declaring Unilever liable for payment of an administrative penalty equal to 10% of its annual turnover.
“Food and agro-processing is an important focus area for the Competition Commission, and we are determined to root out exploitation of consumers by cartels that are so prevalent in this sector,” said the Commissioner of the Competition Commission, Tembinkosi Bonakele.
It is alleged that in 2004 when Unilever sold its refinery business to Sime Darby, the parties concluded a Sale of Business Agreement which detailed an arrangement to divide markets by allocating specific types of goods and customers in contravention of section 4(1)(b)(ii) of the Act;
In 2014, the Commission received a search warrant from the High Court of South Africa, Gauteng Division, Pretoria and KwaZulu-Natal, Pietermaritzburg, for a search warrant to enter and seize information, documents, data and records from the premises of the respondents.
The Commission subsequently conducted a search and seizure operation at the offices of Sime Darby in Boksburg and the Unilever offices in Durban. Electronic data and hard copy documents were seized.
Following the search and seizure operation, Sime Darby entered into settlement discussions with the Commission which culminated in the conclusion of a Consent Agreement confirmed by the Tribunal on 18 July 2016.
Issued by Sipho Ngwema, Head of Communications: Competition Commission, on behalf of the Commission. For more information, please contact him at:
012 394 3493/ 078 048 1213/ [email protected]