Not even tea is safe from corruption allegations
Rooibos Limited is accused of unfair exclusionary contracts that cut off access for other tea processors to the market.
Be careful the next time you take a sip of your refreshing tea nectar. You may be supporting a brand which is accused of “abuse of dominance” through anti-competitive practices.
This after the Competition Commission referred Rooibos Limited, the largest processor of rooibos tea in South Africa, to the competition tribunal this week for “prosecution on charges relating to abuse of dominance by inducing rooibos farmers not to deal with rooibos tea processors it competes with”.
Rooibos, a “unique caffeine-free product containing extremely high levels of anti-oxidants, grows nowhere else in the world except in the Mediterranean climate of the Cederberg region of the Western Cape with acidic soil properties”.
“In view of the fact that rooibos tea is only grown in a small geographic region, its source of supply is limited and access to it by rooibos tea processors is critical for them to remain competitive in the market,” said Sipho Ngwema, spokesperson for the Competition Commission.
Ngwema said the primary reason for the investigation, which emanated from a complaint laid in 2015, was because out of about “220 rooibos commercial farmers, only a limited number” contribute to the bulk of the total production of rooibos tea supplied to processors.
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The commission says, historically, processors obtained their supply from farmers through one-year supply agreements. In 2014, Rooibos Limited, a company inherited from the Rooibos Tea Control Board established by the apartheid government in 1954, “introduced two exclusionary contracting strategies to lock in or foreclose the supply of rooibos tea from farmers”.
This starved its “competitors of access to a product that only grows in a small geographic region” through “supply commitments” where farmers are forced to “supply half of their production to Rooibos Limited”.
Ngwema says the “Commission is seeking an order from the Tribunal declaring that Rooibos Limited has contravened the Competition Act and that the company is liable to pay an administrative penalty equal to 10% of its annual turnover”.
Nick Altini, a competition lawyer, told The Citizen that there is a much bigger risk for Rooibos Limited facing class action from other tea processors if the opt to admit guilt and pay the fine. Altini said the bread cartel case handled by the commission previously opened the door for civil society and distributors to sue the companies accused of anti-competitive practices in court.
Lerato Motaung, head of registry at the Competition Tribunal, explained that based on the documents received from the commission the tribunal gives both parties 20 days in which to make representations. This will determine whether there is a pre-trial or full hearing on the matter.
Motaung informed The Citizen that Rooibos Limited has an option of paying the fine without admitting guilt. Should both parties, Rooibos Ltd and the competition commission, be dissatisfied with the ruling of the tribunal they can take the matter to the competition appeals court.
Managing director Rooibos Limited, Martin Bergh, wrote to The Citizen that they “do not believe that we are guilty of any contravention” and due to the complexities of competition law, the company is taking legal advice before proceeding with the matter.
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