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Competition Commission settles poultry case with Astral Operations
COMPETITION COMMISSION
PRESS RELEASE
22 November 2012
Competition Commission settles poultry case with Astral Operations
The Competition Commission has reached a settlement agreement with Astral Operations
Limited in which Astral has admitted to colluding with its competitor to fix the price of fresh
poultry in the Western Cape. Astral has also admitted that the terms of its Elite joint venture
was an abuse of dominance and had an exclusionary effect undermining Country Bird’s
ability to compete. Astral has agreed to pay an administrative penalty amounting to R16 732
894.47 being 3% of County Fair (a division of Astral) fresh poultry revenue in the Western
Cape for the 2008 financial year.
As part of the agreement, Astral has undertaken not to engage in any conduct that
contravenes the Competition Act, to cooperate with the Commission in any on-going
investigations and to submit its pricing data to the South African Poultry Association via third
party statisticians and in a form that is aggregated across all product categories and pack
sizes.
Background and Findings
The settlement agreement with Astral follows a suite of complaints and investigations
against firms involved in poultry markets. This falls within the Commission’s prioritisation of
staple foods as poultry is the single largest source of protein for low income consumers. The
cases are as follows:
The Elite Complaint: On 20 February 2007, Country Bird and Supreme lodged the Elite
Complaint in terms of which Astral and Elite were alleged to have contravened the Act by
entering into a joint venture which resulted in the restriction of competition and the fixing of
trading conditions for the supply of parent breeding stock.
Upon completion of its investigation, the Commission referred a case of abuse of dominance
against Astral and Country Bird to the Tribunal for determination. The Commission found
that as part of the joint venture, Country Bird was restricted to source 90% of its parent stock
requirements from Elite. This prevented Country Bird from dealing with other suppliers of
parent stock. Elite was on the other hand, forced to procure its feed requirements only from
Meadow Feeds thus eliminating competition. Furthermore, Astral required one of its
customers, MPC Chickens (Proprietary) Limited, to not supply day old chicks to Supreme.
Breeding Stock and Broiler Production Complaints: The Breeding Stock and Broiler
Production Complaints were initiated against the South African Poultry Association (“SAPA”)
and all of its past and present members involved in the breeding stock and broiler production
market. However, the Commission focused its investigation on the largest players which are
Rainbow Chickens Limited (“Rainbow”), Astral, Pioneer Foods (Proprietary) Limited
(“Pioneer”) and Country Bird. The Commission’s investigation encompassed market
allocation specifically against Pioneer and Rainbow; exclusive supply agreements against all
broiler producers (including Astral); tying allegations against certain breeding stock
suppliers and information exchange against all of the respondents through their membership
in SAPA.
Subsequent to its investigation, the Commission decided to non-refer this complaint to the
Tribunal subject to undertakings by the respondents regarding future exchanges of
information through SAPA.
Fresh Poultry Products Complaint: During April 2010, the Commission received a
leniency application which related to the ‘Broiler Products Complaint’ from Pioneer on behalf
of its Agri division, Tydstroom Poultry (“Tydstroom”) in respect of fresh poultry products. The
alleged conduct is said to have taken place in the Western Cape.
The Commission’s investigation revealed that representatives of County Fair attended a
meeting at Tydstroom which resulted in an agreement between Tydstroom and County Fair
to co-operate with each other in attempting to raise pricing levels for fresh poultry in the
Western Cape. The said agreement included inter alia notifying each other of upcoming
price increases and the timing of such increases. Furthermore, representatives of County
Fair and Tydstroom telephoned one another in an endeavour to monitor compliance with the
agreement reached.
Malmesbury Dairy Feed Complaint: On 09 April 2010, the Commission initiated a
complaint in the dairy feed market. The Commission had received information that Astral
(Meadow Feeds) and its competitors were allegedly involved in a study group known as the
Malmesbury dairy study group; the purpose of which was to facilitate the flow of information,
including pending price increases or decreases.
The Commission’s investigation revealed that this was a study group of farmers and not
processors and therefore it found no evidence of price fixing or market allocation against
processors.
Breeders and Culls Complaint: The Commission initiated a complaint, following an
application for leniency by Astral, of price fixing against Astral and its competitors in the
market for the sale of depleted breeders and culls, which are live chickens that have passed
the end of their useful productive lives. The investigation is still on-going.
ENDS
Further Information:
Trudi Makhaya, Manager: Advocacy and Stakeholder Relations
012 394 3326/ 073 289 3570 / trudim@compcom.co.za
Keitumetse Letebele, Head: Communications
012 394 3183 / 082 783 3397/ keitumetsel@compcom.co.za
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