COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 01/CR/Jan10
In the matter between:
The Competition Commission Applicant
and
Rainbow Farms (Pty) Ltd Respondent
Panel : N Manoim (Presiding Member), Y Carrim
Member), and A Wessels (Tribunal
Member)
Heard on : 01 September 2010
Decided on : 01 September 2010
Order
The Tribunal hereby confirms the order as agreed to and proposed^ by the
Competition Commission and the respondent, annexed hereto marked "A".
N Manoim
Concurring: Y Carrim and A Wesseis
BEFORE THE COMPETITION TRIBUNAL OF SOUTH
AFRICA (HELD AT PRETORIA)
CT CASE NO; 01/CR/Jan2010
CC CASE HO: 2008Jul2853
In the matter between:
THE COMPETITION COMMISSION APPLICANT
and
RAINBOW FARMS (PTY) LIMITED RESPONDENT
SETTLEMENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND
RAINBOW FARMS (PTY) LTD IN RESPECT OF ALLEGED CONTRAVENTIONS OF
SECTION 5(2) OF THE COMPETITION ACT NO. 89 OF 1998 AS AMENDED
The Applicant and Respondent hereby agree that application be made to the
Competition Tribunal (Tribunal") to confirm this Settlement Agreement as an order
of the Tribunal in terms of section 58(1)(a)(iii) and 59(1)(a) of the Act on the terms
set out below. This agreement is concluded in settlement of the allegations of
minimum resale price maintenance, as further detailed herein, referred by the
Competition Commission ('the Commission") to 1he Tribunal
1. DEFINITIONS
In this Settlement Agreement, unless the context indicates otherwise, the following
definitions shall apply:
1.1 'Act' means the Competition Act, 89 of 1998, as amended.
1.2. 'Bagged feed' means an animal feed product, produced by Epol specifically at its
mill in Berlin, Eastern Cape province;
1.3. 'Commission' means tie Applicant, the Competition Commission of South Africa,
a statutory body established in terms of section 19 of the Act, with its principal place
of business at Building C, the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria.
1.4. 'Complainant* means Greg Kaiser, an employee at B D Kaiser (Pty) Limited t/a
Jireh Powersave fJirerf), also known as B D Kaiser CC after 21 April 2008.
1.5. 'Epol means Epol South Africa, a division of Rainbow.
1.6. 'Epol Berlin' means one of the mills of Epol, operating in the Berlin area of the
Eastern Cape.
1.7. "Parties” means the Commission and Rainbow.
1.8. 'Rainbow' means the Respondent, Rainbow Farms (Pty) Limited, a company duly
incorporated with limited liability in accordance with the laws of South Africa with its
principal place of business at 1 Stanley Methven Road, Hammarsdafe.
1.9. "Settlement Agreement" means this settlement agreement duly signed and
concluded between the Commission and Rainbow.
2. THE COMPLAINT INVESTIGATION AND THE COMMISSION'S FINDINGS
2.1. On 16 July 2008, the Applicant received a complaint against Epol Berlin from the
Complainant, an employee at Jireh, In his complaint, the Complainant alleged that
Epol is engaged in the practice of minimum resale price maintenance in contravention
of section 5(2) of the Act. The allegation was that Epol forced Jireh to sell the
Respondents products at fixed prices forcing them to be uncompetitive. The
Complainant based his allegation on various letters sent to Jireh from Epol's offices.
2.2. The Commission conducted an investigation into tie Respondent's alleged
conduct and found the following:
2.2.1. At the times relevant to the complaint Epol was a division of the Respondent
Epol is a manufacturer and supplier of animal feed for a wide range of animal species,
it operates various feed mills countrywide, from where rt supplies feed to farmers and
to independent wholesalers and/or retailers, who in turn, sell the feed to their
customers.
2.2.2. Epol Berlin, in the Eastern Cape, sold bagged feed directly from its premises on
a cash payment basis, fn mid 2004 Epol Berlin stopped supplying bagged feed on a
cash basis. However due to the demand from its customers, Rainbow appointed D L
Agricultural Supplies ("DL") to take over Epol Berlin's role of supplying bagged feed for
cash to customers in Berlin, Rainbow provided DL with a selling price list which
resulted in DL's prices being the same as the prices at which Epol Berlin would have
sold to its customers directly from the mill.
2.2.3. Jireh, another stockist in Berlin and a competitor of DL, demanded supply from
Epoi Berlin on the same terms and at the same pricing as DL. Epol Berlin accordingly
supplied product to Jireh on this basis.
2.2.4. During 2006, it came to Epol Berlin's attention that Jireh was selling the
bagged feed at prices below the selling price list. Accordingly, Epol Berlin addressed a
letter to Jireh, requiring it to sell the bagged feed in accordance with the terms of the
supply agreement, namely at Epol Berlin's prescribed selling prices.
2.2.5. Jireh complained about this conduct to Epol Berlin, and as soon as Epol's head
office became aware that Epol Berlin's conduct of dictating resale prices to DL and
Jireh could constitute a contravention of the Act, Epol head office immediately
ordered Epol Berlin to desist from requiring DL or Jireh to sell at specified prices.
2.2.6. The Commission's investigation revealed that this conduct was confined to two
stockists in the Eastern Cape and that it persisted for a period of two years, until 6
April 2006.
3. ADMISSION
3.1. Rainbow admits that it contravened section 5(2) of the Act in that Epol Berlin
dictated the minimum resale price of bagged animal feed to DL and Jireh as alleged in
dictated the minimum resale price of bagged animal feed to DL and Jireh as alleged in
clause 2 above.
4. AGREEMENT CONCERNING FUTURE CONDUCT
4.1 Rainbow agrees and undertakes:
4.1.1. to prepare and circulate a statement summarising the content of this
Settlement Agreement to its directors and shareholders within 30 days of the date of
confirmation of fills Settlement Agreement as an order of the Tribunal;
4.1.2. develop and implement a compliance programme designed to ensure that its
employees, management, directors and/or subsidiaries and divisions do not engage in
any conduct which constitutes a prohibited practice in terms of the Act, a copy of
which programme shall be submitted to the Commission within 60 days of the date of
confirmation of this Settlement Agreement as an order of the Tribunal.
4.1.3. not to engage in the practice of minimum resale maintenance in contravention
of section 5(2) of the Act and to take necessary steps to make sure that none of its
divisions or subsidiaries is engaged in similar conduct or any other conduct that
contravenes any of the provisions of chapter 2 of the Act;
5. ADMINISTRATIVE PENALTY
5.1 In terms of section 58(1)(a)(iB) and 59(1)(a) of the Act, the Respondent is liable to
pay an administrative penalty. The parties have agreed that Rainbow shall pay a
penalty in the sum of R1 000 000.00 (one million rands).
5.2. Rainbow shall pay the administrative penalty within ninety (90) days of the
confirmation of this Settlement Agreement as an order of the Tnbum] into the following
account
NAME; COMPETITION COMMISSION FEE ACCOUNT
BANK: ABSA BANK, PRETORIA
ACCOUNT NO:
BRANCH CODE:
5.3. The Commission shall pay the administrative penally to the National Revenue
Fund in accordance with section 59(4) of the Act.
6. FULL AND FINAL SETTLEMENT
6.1 This agreement is entered into in full and final settlement and upon confirmation
by the Tribunal concludes all proceedings between the Commission and Rainbow
relating to the alleged contravention by Rainbow, and any of its divisions, of section
5(2) of the Act that is subject of the Commission's referral under CC Case Number
2008Jui2853 and CT Case Number 01 /CR/Jan2010.
Dated and signed at Westville on this the 10 th day of August 2010
Group Human Resources and Legal Director
Rainbow Farms (Pty) Ltd
duly authorised
Dated and signed at Pretoria on this the 4 th day of August 2010
Commissioner
Competition Commission