Cooking oil cartel’s ‘closed list’

Johannesburg - The consumer goods behemoth Unilever entered into a number of written agreements with Malaysian-owned Sime Darby Hudson & Knight, among them an explicit “non-compete” list of products.

This is the main basis of the case for market division referred to the Competition Commission this week around Unilever’s alleged cartel conduct in the margarine and cooking oil market.

Unilever controls the Stork, Rama and Flora brands.

Sime Darby’s major brand is Crispa.

The commission is asking for the maximum 10% fine on Unilever’s revenue in South Africa after having settled with Sime Darby exactly a year ago, in March last year.

READ: Unilever to be charged for cartel activity

The Competition Tribunal released the referral it received from the Competition Commission on Friday.

It includes the “non-compete” list alongside an affidavit from an inspector at the commission, Tshepiso Mnguni.

The investigation into Unilever and Sime Darby started in October 2012 after a complaint by businessman Juan Lerena.

Originally, there was another accused company, Felda Iffco, also a Malaysian group with a cooking oil refinery in Johannesburg.

Sime Darby Hudson & Knight had purchased Unilever’s refinery and bakery business in 2004.

As part of that deal, the non-compete list was drawn up, as well as separate agreements on other forms of cooperation.

Unilever provides Sime Darby with raw oils, while Sime Darby gave Unilever the exclusive right to packaging its products.

A “raw materials agreement” reads that the two companies must honour the non-compete agreement for as long as Unilever supplies raw materials to Sime Darby.

In the agreement, this is called a “smart partnership” that “encourages networking and mutual understanding and symbolises the business synergy between the parties to accomplish mutually beneficial objectives and outcomes”.

READ: Competition Commission ups cartel behaviour 

Another agreement between the companies gives Unilever the exclusive right to package Sime Darby’s products.

This “made it possible for Unilever to monitor and enforce compliance with the non-compete agreement,” said Mnguni.

The non-compete list bars Sime Darby from entering the retail, wholesale, forecourt, restaurant, bakery and hotel markets. This left it servicing industrial customers. Unilever in turn allegedly would not touch that remaining market with its own brands.

Sime Darby agreed not to produce its products in unit volumes below 5kg for frying oil, below 15kg for margarine and below 25kg for specialty oils.

The case is going to the tribunal despite Sime Darby admitting to exactly the same charge in its settlement last year.

Unilever SA’s corporate affairs director, Sibonile Dube, told City Press via email that the company would not comment on the matter because it is subject to litigation.

Sime Darby committed to building new facilities and also appointed a BEE distributor with a guaranteed, but confidential, revenue when it settled in March last year.

Part of Sime Darby’s settlement agreement was that it would testify against Unilever at the tribunal.

The deal with Unilever apparently ended in 2013, meaning that Unilever would not have to worry about the recent criminalisation of cartel conduct.

READ: State corruption and private cartels corrode public trust - Patel 

This new penalty applies to executives of companies guilty of cartel conduct, but not conduct before the amendment to the Competition Act, which was only effected in 2016.

Unilever produces an astonishing number of household products ranging from foods and drinks to cleaning chemicals, washing detergents, soaps and deodorants.

Its brands in South Africa include Vaseline, Lux, Lifebuoy and Shield, as well as Omo, Skip, Sunlight and Handy Andy, Flora, Knorr, Rama and Robertsons spices and herbs.

As a private company, its revenues are not known, but 10% would probably be an astronomical sum.

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