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South Africa: Unilever facing fine for collusion

Mar 02, 2017

The Competition Commission recommends Unilever be prosecuted for engaging in collusion in the manufacture and supply of baking and cooking products.

The anti-graft agency said on Wednesday it had referred the transnational consumer-goods company to the Competition Tribunal for prosecution in a case that could see Unilever being fined 10 percent of its annual turnover.

Commissioner Thembinkosi Bonakele said the agency found that, between 2004 and 2013, Unilever and margarine- and cooking-oil-maker Sime Darby allegedly entered into an agreement not to compete on certain packs of margarine and edible oils.

“Food and agro-processing is an important focus area for the commission, and we are determined to root out the exploitation of consumers by cartels that are so prevalent in this sector,” Bonakele said.

Last year, Sime Darby settled with the commission, agreeing to pay a fine of R35 million for collusion and to invest R135 million in packaging and warehousing facilities that would compete with Unilever for retail customers. The company also agreed to appoint a black economic empowerment distributor.

The Unilever probe comes just three weeks after the commission announced that it was pursuing a case against nearly 20 South African and international banks for colluding in the trading of foreign exchange.

Barclays Africa Group and Citibank have settled with the commission and agreed to testify against the remaining banks.

On Wednesday, the commission said it conducted search-and-seizure operations at the offices of Sime Darby in Boksburg and at Unilever’s headquarters in Durban, after it obtained search warrants from the high courts in Gauteng and KwaZulu-Natal. It said that, in 2004, when Unilever sold its refinery business to Sime Darby, the two companies concluded a sale-of-business agreement that included an arrangement on how specific goods would be allocated in certain markets, in contravention of section 4(1)(b)(ii) of the Competition Act.

The commission said the two agreed that Sime Darby would not supply industrial customers with packs of margarine that were less than 15kg, nor would it produce or supply 25-litre edible oils in markets where Unilever was active. In return, Unilever agreed not supply industrial customers with its Flora-brand of edible oils, it said.

The probe is not Unilever’s first brush with anti-graft agencies. In 2011, the European Commission hit Unilever and Procter & Gamble with a combined fine of £281 million (R4.4 billion at current exchange rates) for fixing the price of washing powder in eight European countries. The fine was reduced after the two companies co-operated with the commission’s investigation and agreed to settle.

Sibonile Dube, the corporate affairs director of Unilever Southern Africa, said the company would wait for the process to unfold before commenting.

“As this matter is subject to litigation, we will not be commenting on it,” Dube said.

 

Source: Business Report

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