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Poultry Market Ripe for Competition Probe, Says Official

28 June 2013

SOUTH AFRICA - The Competition Commission says the poultry sector in South Africa may be a "good candidate" for a market inquiry — one similar to that the commission is about to embark on in the private healthcare sector.

According to BusinessDay, Trudi Makhaya, deputy commissioner of the commission, said that under the amended Competition Act it may conduct formal inquiries into the state of competition in any market where it believes some features may prevent, distort or restrict competition.

"The poultry sector is one that the commission will consider during its upcoming strategic planning process for the 2014-18 period."

The commission can summons people to appear before an inquiry and demand evidence. It outlines the powers of the presiding officer at hearings and deals with offences, including the failure to answer questions truthfully.

The possibility of such an inquiry was first raised by the Association of Meat Importers and Exporters (Amie) in a letter to Trade and Industry Minister Rob Davies when it expressed concern about the South African Poultry Association’s application for tariff hikes on frozen chicken imports, mainly against Brazil and Argentina.

Amie CEO David Wolpert said the market inquiry should cover the entire industry, from breeder to plate, with all the structures of breeding, feeding, brining, distribution, marketing and imports.

He said that the inquiry should study the effect on employment in the import value and processing chain and local industry, as well as quantify the economic and social effects of any changes in the duty levied on imports.

Neither the poultry association nor Amie "operate in isolation and both have an important role to play in the future of employment and food security in South Africa," Mr Wolpert said. "Short-term solutions should not be considered to resolve longer-term macro requirements."

Poultry association CEO Kevin Lovell said it would welcome an inquiry. The industry had already been subjected to the commission’s probe into anticompetitive conduct in several areas, ranging from poultry feed to breeding stock and broiler chicks.

He said the association was awaiting a letter of nonreferral from the commission.

Amie should not use a market inquiry into the whole industry to attack the poultry association, Mr Lovell said. "If they think we have contravened the (Competition) Act, they must report us." Poultry would be a good target for a value chain probe, though there might be overlaps with studies done by the National Agricultural Marketing Council, he said.

Chris Charter, a director in the competition practice of law firm Cliffe Dekker Hofmeyr, said the industry could probably benefit from a market inquiry to establish what it was that rendered local producers unable to compete effectively, and to consider the effect of imports — with or without tariff barriers — on local businesses and consumers.

"However, it strikes me that the issues at play here go beyond pure competition issues and stray significantly into broader issues of industrial and trade policy, as well as the public interest," Mr Charter said.

"These issues really fall outside the scope of a market inquiry as contemplated in the act. In fact, there may be a tension between the strict competition law considerations and the broader policy questions, and it may not be fair to expect the commission to come up with the solution as that is not really within its mandate as arbiter of competition rather than industrial policy," he said.

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