The competition commission has referred a complaint by New Scotland Sawmill against state-owned Komatiland Forests (KLF) to the competition tribunal.
The commission found that KLF, a softwood sawlog producer, sells its logs by first allocating consignments of predetermined volumes to 10 millers who have long-term contracts with the company. Left-over logs are allocated to the open or spot market where mills with short-term contracts can access them. The pricing mechanism for the spot market sales artificially sets prices above market clearing levels, resulting in the margin earned by smaller millers covering variable costs but not total costs. L
Large mills with considerable buying power can contest the higher prices through price arbitration. The competition commission alleges that the anticompetitive effect is twofold. It excludes contract mills that don’t have long-term contracts, and leads to timber price determination in the downstream market in the hands of a few firms that dominate the market. Secondly it leads to artificially inflated prices that are then passed on to the final consumer. GM for KLF, Leslie Mudimeli, says the company intends to defend itself against the allegations and has referred the matter to its attorneys. – Heidi Clark
