Commission targets two seed potatoes companies
Competition Commission claims Wesgrow and HZPC Holland are unlawfully refusing access to other potato seed growers to the Mondial variety
The Competition Commission has referred a Netherlands-based seed potato breeder and its exclusive South African distributor to the Competition Tribunal for prosecution, for alleged abuse of dominance in relation to the exclusive supply of Mondial seed potatoes varietal in the country.
Wesgrow Potatoes, a local potato seed grower, has an exclusive agreement with HZPC Holland to sell the Mondial seed potato varietal to commercial farmers. In turn, commercial farmers grow the potatoes for sale to consumers as table potatoes. HZPC is the developer and breeder of the Mondial seed potato varietal. Its business is the cultivation and marketing of certain seed potato varieties across the world.
The Mondial seed potato varietal are planted across potato producing regions in South Africa and are distributed nationwide. The Mondial potato is highly regarded in the market and can be grown on most soil types, has a good drought tolerance, high yield and good storability.
According to the commission, when a new variety of potato is created, a breeder is afforded exclusive rights over the variety for 20 years. This is a type of intellectual property right that enables the breeder to recoup research and development costs through the exclusive rights.
HZPC was granted a plant breeder’s right over the Mondial seed potato varietal in October 1993. The exclusive rights therefore expired in October 2013, the commission said on Monday. It said the Mondial seed potato varietal should therefore be available in the open market, free of intellectual property right restrictions. The Competition Commissioner launched the investigation into Wesgrow and HZPC in 2015.
The commission investigates among other things prohibited practices or anticompetitive conduct while the Competition Tribunal is the adjudicative body, very much like a court.
The commission contends that HZPC and Wesgrow are unlawfully refusing access to other seed growers to the Mondial variety, despite expiry of the plant breeder’s right. The continuation of the exclusivity between HZPC and Wesgrow means that other South African potato seed growers are excluded from growing and selling the Mondial seed potato varietal to farmers, the Commission said.
It said it was of the view that Wesgrow and HZPC’s conduct had resulted in the creation of "insurmountable" barriers to entry to the market for producing and supplying Mondial seed potato varietal. The two companies’ conduct, the commission said, has had a particular impact on the potential competitors of Wesgrow who seek to produce and supply Mondial seed potato varietal; and
It has substantially prevented and/or lessened competition in the market for the production and supply of Mondial seed potato varietal.
The commission is seeking an order from the tribunal that both companies contravened the Competition Act and that Wesgrow must pay a fine (administrative penalty) equal to 10% of its annual turnover.
In addition, the commission is asking that the licence agreement between Wesgrow and HZPC be declared void, along with all other related agreements between Wesgrow and its customers. Further, the commission wants the tribunal to interdict the companies from entering into similar agreements in future.
The two companies could not be reached for comment on Monday.