SAB anticompetitive case resumes

2013-07-23 15:52

The long-running case against South African Breweries (SAB), the local subsidiary of brewing giant SABMiller, resumed at the competition tribunal this week.

The case, in which it is alleged by the competition commission that SAB took part in anticompetitive practices in its distribution arrangements, was first heard in August 2010, but was suspended.

In April 2011 the tribunal ruled that it was dismissing the complaint because of earlier decisions that had been taken by the Competition Appeal Court and the Supreme Court of Appeal, which tied its hands.

Tribunal chairperson Norman Manoim expressed concern that the case had not be decided on its merits, but rather on a technicality.

SAB had argued that the commission had amended the initial complaint lodged by The Big Daddy’s Group, so that it no longer resembled the initial complaint.

The commission took the tribunal’s decision on appeal and in November 2012 the Competition Appeal Court ruled that in dismissing the case the tribunal had applied the precedents too rigidly.

This gave the green light for the hearing to recommence.

The start of the hearing in 2010

When the case first came before the tribunal in August 2010, there appeared to be a last-minute scramble between the commission and SAB to settle the case. However, no agreement was reached.

SAB was facing four charges of alleged contraventions of the Competition Act, which include market allocation and price-fixing.

The commission began its investigation into SAB in 2004 after receiving complaints from liquor distributors.

The investigation was referred against SAB and 13 of its distributors in 2007.

The commission alleges that SAB carved up markets with third-party distributors, curbed distributors’ ability to stock its rivals’ products, gave preferential discounts to its chosen distributors and fixed prices with its distributors.

If found guilty on even some of these charges, SAB could be looking at a potential fine of 10% of its annual turnover.

SAB has been adamant in the build-up to the case that it has done nothing wrong.

Previous testimony

In 2010, the commission’s first witness was Nico Pitsiladi, a director of The Big Daddy’s Group, which lodged the initial complaint against SAB in 2004.

The Big Daddy’s Group owns a number of wholesaling operations in Eastern Cape.

Central to Pitsiladi’s complaint is the role played by SAB-appointed wholesalers.

SAB has 14 of these wholesalers in the country and each is allocated a geographical area in which to sell SAB products.

Part of the agreement that SAB reaches with these independent firms who act as wholesalers is that SAB will not deliver beer into that region.

Pitsiladi said this effectively makes the appointed wholesalers SAB depots, and this distribution model has put a squeeze on independent wholesalers like his company.

Pitsiladi also argued that SAB offers these appointed wholesalers beer at a discounted price, and independent wholesalers like Big Daddy’s don’t get offered these discounts.

He said that the price he is charged to buy beer from the appointed wholesaler is the same price that retailers can buy the beer for, which means his margins are so squeezed that it is not profitable to sell beer.

“Big Daddy’s competes at the distribution level with SAB’s appointed distributors,” said Pitsiladi in his witness statement. “Big Daddy’s runs a low cost distribution operation but is effectively blocked from competitive supplies from SAB.”

Pitsiladi also alleged that SAB sets the prices that these appointed wholesalers could sell its products at.

- City Press

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