Competition Commission spokesperson Sipho Ngwema says Rooibos Ltd exclusionary contracts with farmers are in contravention of the Competition Act. He says Rooibos Ltd has locked in volumes of rooibos tea production from commercial farmers in the company’s favour.
Now the Commission has approached the Competition Tribunal for an order declaring that Rooibos Limited has violated market laws.
According to Mgwema, rooibos is only limited to the Western Cape and in addition Rooibos Ltd controls about 60% of the market.
They have locked in a lot of supply with the farmers and that is contravention of the Competition Act.— Sipho Mgwema, Competition commission spokesperson
The exclusionary nature of those agreements means there is eventually no supply for the rest and the others suffer in that situation.— Sipho Mgwema, Competition commission spokesperson
Martin Bergh, MD at Rooibos Ltd says he still needs clarity on why they are investigated for contravening competition laws when they don't harvest the tea. He says they only do primary processing of the product that the farmers producers.
In 2013, a client approached them and asked for a five year contract in order to have a smooth purchasing process. Bergh says they facilitated the process in which some farmers went into a five year contract with the client.
To his surprise, he was then told they investigated for being anti competitive when they simply facilitate the purchasing process.
The contract doesn't stop any of their competitors from buying from those farmers, says Bergh.
To hear the rest of the interview, listen below: