I&J denies allegations of 'cartel conduct'

I&J denies allegations of 'cartel conduct'
JOHANNESBURG - Frozen foods company Irvin & Johnson (I&J) has denied allegations of cartel conduct and contravening section 4 of the Competition Act.
I&J yesterday (MON) appeared before the Competition Tribunal where it presented its closing arguments in a case brought by the Competition Commission.
The commission accused I&J of allegedly dividing markets in the supply of processed beef products such as beef burger patties, steak sizzlers, crumbed beef steaklets, viennas and boerewors.

I&J was charged – along with beef processing company, Karan Beef – in October 2018 following an investigation by the commission.    

The commission argued that I&J and Karan Beef agreed not to compete with each other in the market for the supply of processed beef products.

Its legal representative Mfundo Ngobese said I&J had in the year 2000 signed a manufacturing agreement with Karan Beef.

Ngobese said Karan Beef agreed to withdraw from supplying processed beef products to retail and food service customers, and instead produce and supply these goods to I&J.
In terms of the agreement, Karan Beef was allowed to only sell its beef patties at its factory shops in Balfour and City Deep.

“The commission submits that this agreement divided the markets by allocating specific products or services. The conclusion of this agreement created a vertical relationship between the respondents which were, prior to its conclusion, in a horizontal relationship,” Ngobese said.

“That is, the existing vertical relationship between the respondents is a result of a collusive agreement between respondents. This conduct amounts to an agreement to divide the market by allocation of specific goods or services in contravention of section 4(1)(b)(ii) of the Act.”

Karan Beef settled with the commission in late 2018 and agreed to pay an administrative penalty, or a fine, of R2.7 million.

Advocate Wim Trengove SC, representing I&J, dismissed the allegations of collusion between the two companies.

Trengove said that I&J  had merely outsourced its beef processing business considering the difficulties in the procurement of fresh beef and the limits on I&J’s beef processing capacity.

“There are three central issues relevant to the merits of the case. The first is the true agreement between the parties. If the true agreement between the parties was not one dividing the markets, the Commission’s case must fail,” Trengove said.

“The second issue is whether the Manufacturing Agreement is properly characterised as an agreement prohibited by section 4(1)(b)(ii) of the Competition Act. If not, the complaint must be dismissed.

“The third is the true operation of section 67(1) of the Competition Act. whatever the true intent of the parties or characterisation of the Manufacturing Agreement, the Commission cannot secure an adverse finding unless the conduct complained of subsisted within the three years prior to initiation of the complaint.”

The commission has asked the tribunal to impose an administrative penalty of 10 percent of yearly turnover on I&J.

The tribunal’s presiding officer Enver Daniels reserved judgement and would make a ruling once they had studied all the arguments.