Clover, South Africa’s biggest dairy producer, will largely deny any wrongdoing or involvement in price-fixing, at the preliminary arguments to be heard by the Competition Commission tribunal on 2 May. The commission formulated six complaints relating to price-fixing and anticompetitive behaviour against eight dairy companies: Clover Industries, Clover SA, Parmalat, Ladismith Cheese, Woodlands, Lancewood, Nestlé SA and Milkwood Dairy. Five of these six charges apply to Clover.
The charges stem from the commission’s 2005 investigation after a small dairy farmer in the southern Cape complained that milk processors were using price-fixing tactics. he first charge is that Clover is alleged to have exchanged sensitive information on milk procurement prices, enabling competitors to coordinate their pricing strategies to fix the purchase price of raw milk. Clover said they would deny this. John Bredin, the Clover chairperson, said, “If one farmer gets a higher price from Clover than his neighbour gets from Parmalat, he gets his field officer to phone Clover to query it. We don’t see how this can be seen as collusion.” The second charge was the issue of swapping milk with Nestlé, which allowed the companies to maintain the price of milk at artificially high levels. Clover’s deputy chief executive Manie Roode admitted Clover had an exchange agreement in place with Nestlé, but denied this was a contravention of the Competition Act.
“Nestlé’s processing facility is in East London and Clover’s is on the Highveld. We have huge milk producers in the Eastern Cape and give them to Nestle’s facility in exchange for their milk on the Highveld. We don’t see this as an offence. The exchange agreement is simply an efficient way of getting the raw material to the processing facility and saving on transport, which benefits all stakeholders.” The third charge relates to the removal of C-Milk. “When farmers produce C-Milk, which is milk over and above their quota, they sell it to us as at export parity price. This is part of the surplus removal and we have corporate leniency on this matter under Charge Six,” said Roode.
The fourth charge, which has not been levelled against Clover, says that dairy companies abused their dominant market positions by forcing producers into exclusivity agreements, compelling producers to sell them their total milk production. In effect, this prevented producers from selling their surplus to third parties or consumers and prevented smaller players from entering the market. The fifth charge, which Clover denies, is that they and Woodlands fixed a higher selling price for milk and agreed not to compete in selling milk in certain areas. And the sixth charge relates to the removal of surplus milk from the market, a practice the commission says decreases milk supply and keeps prices artificially high. The eight dairy companies, which control the South African dairy market, could face fines of up to 10% of their operating profit if rulings go against them. – Robyn Joubert
