Alleged Anti-Competitive Business Practice by Illovo Sugar (Malawi) Limited and its Appointed Warehouse Administrator for Karonga Warehouse The Commission considered a report of investigations into alleged anti-competitive business practice by Illovo Sugar (Malawi Limited) and its appoint Warehouse Administrator for Karonga, Simama General Dealers. The facts before the Commission were that Karonga Business Association alleged that Illovo Sugar Malawi Limited had granted Simama General Dealers a monopoly in the distribution of sugar in Karonga and neighbouring districts. It was submitted that Illovo had granted Simama General Dealers an exclusive arrangement which enabled Simama General Dealers to be a transporter of sugar from Dwangwa sugar mill, a sugar stock manager at Karonga Distribution Centre, and sugar wholesaler and retailer in Karonga and neighbouring districts. It was also submitted that Simama General Dealers, as a Warehouse Administrator was preventing other wholesalers from buying sugar directly from Illovo. In considering the case the Commission reviewed written and verbal submissions by Illovo Sugar Limited and Simama General Dealers and submissions by business persons in Karonga. The Commission established that Illovo has established five distribution centres for sugar across the country and these are in Karonga, Mzuzu, Lilongwe, Balaka and Limbe. The company has rented Warehouses for stocking of the sugar which is sold in quantities of not less than one tonne at a uniform ex-factory price. The Commission noted that Illovo has entered into an agreement with owners of the Warehouses to, in addition to making available the warehouses, be in-charge of transporting sugar from Illovo mills (Dwangwa and Nchalo) and manage the stocks at the Warehouse. The selling of sugar is done by Illovo from the Limbe Offices and the Distribution Centres serve as collection centres. However, the Commission established that in Karonga most small sugar wholesalers buy sugar from Simama General Dealers at a price which is higher than the ex-factory price but lower than that the price offered by Chipiku Stores and Metro. It was established that small sugar wholesalers are blocked by Simama General Dealers to buy sugar directly from Illovo through various tricks including non-disclosure of information to other wholesalers about procedures for paying for sugar orders and in some cases providing false information about sugar non-availability at the Distribution Centre. The Commission established that as a result of this, smallscale sugar wholesalers are forced to buy sugar from Simama General Dealers or Pezani General Dealers (which is an affiliate of Simama General Dealers) at a price higher than the ex-factory price. Consequently, the wholesalers sell to retailers at a price higher that the price they would have charged if they had bought the sugar directly from Illovo. Consumers therefore end up buying sugar at a price higher than the normal market price. In considering this case, the Commission recognised the importance of sugar as a basic commodity whose distribution is a matter of public interest. The Board noted that the sugar distribution system that Illovo Sugar (Malawi) Limited has put in place is meant to ensure availability of sugar across the country and at uniform and affordable price for consumers. It was, however, observed that while the intention of the distribution system is commendable, the measures put in place to implement the system have compromised attainment of its intended objectives as well as infringing provisions of the Competition and Fair Trading Act. In particular, the Commission found the Warehouse Management Agreement which Illovo signed with Simama General Dealers wanting in relation to provisions of the Competition and Fair Trading Act (CFTA). The Commission observed that the design of the sugar distribution system that Illovo adopted is generally prone to abuse by Warehouse Administrators and, therefore, requires Illovo Sugar (Malawi) Limited to put in place a foul-proof monitoring system. The Commission, however, observed that the monitoring system that Illovo has put in place is suspect in many respects as it failed to detect obvious violation of the system by Simama General Dealers. It was also established that Simama General Dealers was able to manipulate the system for its own undue advantage because the sugar distribution system is characterised by information asymmetries. In this regard, the Commission has ordered Illovo Sugar (Malawi) Limited to transparent in implementing the sugar distribution system and that the system needs to be aligned with the law of the land, in this case to the provisions of the Competition and Fair Trading Act Cap 48:09. The Commission, therefore, issues the following six Orders: i. That Illovo Warehouse Administrators or their affiliated enterprises should not be allowed to engage in sugar wholesaling or retailing thereby controlling the supply chain of sugar which is an essential commodity of interest to the public; ii. That Illovo should notify with the Commission the new warehouse distribution agreement to enable the Commission to review it for the parties to address any possible anti-competitive provisions and effects in the agreement which may result in Competition and consumer harm. The Notification should be done within 30 days; iii. That Illovo should clearly mark all Distribution Centres with their branding within 30 days; iv. That Illovo should provide information both on site and in local press related to prevailing prices of sugar to ensure that wholesalers have adequate information to make informed decisions. This should be done within 30 days, v. That Illovo should outline procedures on how wholesalers can access sugar. The information should be clearly communicated through various forms of informative ways and not be the sole responsibility of depot agents within 30days. Illovo should publish the addresses, contacts and physical location of their warehouse and not the warehouse operators, within 30 days; vi. That Illovo should address the delay in confirming cash deposits into its account and that Loading Authorities should be expeditiously issued to buyers. vii. That Illovo should undertake that in implementation of the above 5 Orders, there should be no unfair or harmful effects on the Consumer or its customers.
Posted on: Tue, 11 Jun 2013 12:40:49 +0000
Trending Topics
Recently Viewed Topics
© 2015