Watchdog starts probe into fruit and vegetable prices
The Competition Commission launched its fresh market inquiry into the economy of fruit and vegetables during a briefing on Thursday, saying it believes that 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 tens of millions of rand in lawyer fees, has raised concern about the costs for farmers, fruit markets and retailers.
Bowmans lawyer Heather Irvine said in an article companies will have to 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 as well.
The fruits and vegetables include apples, citrus, table grapes, bananas, spinach, carrots and potatoes.
The inquiry hopes to ascertain whether there are factors that distort competition in these markets and will also examine whether small and black businesses are established sufficiently firmly in the fruit and vegetable supply chain.
One of the reasons behind the inquiry is that farming is a large-scale enterprise with a decreasing number of farmers and not enough small-scale participants.
The inquiry is due to start on March 31.
Deputy commissioner Hardin Ratshisusu said more needs to be understood about 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 invasion of Ukraine, 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 the grocery inquiry were excluded, they 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,” Theron 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 after it has acquired the new regulatory powers to enforce its recommendations.
The commission has investigated health-care markets, data prices, online sales websites, the liquefied petroleum gas markets and has launched an inquiry into digital media.
During Pick n Pay’s financial results presentation in May 2022, chair Gareth Ackerman said: “We have had nearly a decade of grocery market inquiries by the Competition Commission, who essentially found nothing. Now there’ sa new inquiry into fresh produce. This comes at a huge cost in both money and time.”
Asked by Business Day if an inquiry is needed as it comes at a great cost to the commission and the firms involved, Ratshisusu said it has to understand the market and if rising prices of goods such as fertiliser are 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.”
Retail Correspondent