Competition Commission probe as food prices spike

The Competition Commission launched its fresh market inquiry into the economy of fruit and vegetables in a briefing on Thursday, saying it feels the costs and volatility of certain foodstuff prices are not fully understood.

This was said even as food prices and their inputs are well documented  by agricultural economists.

The inquiry which one company told Business Day will cost it tens of millions of rand in lawyers fees, has raised concern about costs it places on farmers, fruit markets and retailers. 

Bowmans lawyer Heather Irvine said in an article  companies must provide detailed information about their suppliers, pricing, products and business strategy to the commission if asked. 

The inquiry, which is staffed by 12 individuals and looks set to take the statutory 18 months to complete, is examining the businesses and growers involved in the production and sale of five fruits and six vegetables and will look at fertiliser and seed markets too.

The fruits and vegetables include apples, citrus, table grapes, bananas, spinach, carrots and potatoes. 

It hopes to ascertain if there are factors that distort competition in these markets and will examine whether small and black businesses are firmly established in the fruit and vegetable supply chain. 

One of its reasons behind the inquiry is that farming is a large scale enterprise with fewer farmers and not enough small-scale ones. 

The inquiry starts on March 31. 

Deputy commissioner Hardin Ratshisusu said more needed to be understood in food pricing: “The commission has been producing a quarterly report on food prices. And if you look at the fresh produce, you see a lot of volatility that is unexplained. It is an inquiry of this nature that can understand what is actually driving the kinds of prices we see in the market.”

Food prices have risen globally in part due to the Ukraine war, the drought in Argentina and Brazil which produces 50% of the world’s soya and the increased global cost of fertiliser and energy. Rand weakness also increases the costs of imported fertiliser and agricultural equipment.

Agriculture economist Wandile Sihlobo said: “The food price increases that we are seeing is not a unique occurrence. It is a global story. SA is interlinked to the global markets and feels the impact of global challenges.”

Competition economist at FTI, Nicola Theron, said: “Generally, these inquiries are very costly and the recommendations to date have been very minor. The Fresh Produce Market Inquiry seems like a waste of money and resources to me.

“Agricultural organisations and agricultural economists at universities will have most of the information that the Commission wants to obtain during this process.”

She said there has already been a grocery market inquiry — and after that lengthy process the main recommendations were that long-term leases by large supermarkets should be terminated. 

While in the draft terms of reference, retailers who had already faced a grocery inquiry were excluded but are now included.  

“In other words, there seems to be little learning from prior inquiries and little effort to limit the scope of the current one,” she said

Her views have been echoed by off the record comments to Business Day by other experts. 

The commission has the power to make wide-ranging enforceable recommendations in the industry it investigates and this will be the second inquiry in which it has these new regulatory powers to enforce its recommendations.  

The commission has investigated health-care markets, data prices, online sales websites, the liquid petroleum gas markets and has launched an inquiry into digital media. 

At Pick n Pay’s financial results in May 2022, Gareth Ackerman said: “We have had nearly a decade of grocery market inquiries by the Competition Commission, who essentially found nothing. Now there’s a new inquiry into fresh produce. This comes at a huge cost in both money and time.”

Asked by Business Day if an inquiry was needed as it comes at great cost to the commission and the firms involved, Ratshisusu said it had to understand the market and if rising prices of goods such as fertiliser were just due to market forces “or if there was exploitation in the market”. 

“We do our best to minimise the cost to the fiscus. We do our best to minimise the cost to stakeholders. But we encourage stakeholders to participate. As you can see, we don’t take these decisions lightly.”

Commissioner Doris Tshepe said: “Before we launch an inquiry, we have to have reason to believe that there may exist features or combinations of features in that market, which may impede or restrict competition in that market.” 

childk@businesslive.co.za