Storm may brew in rooibos probe

21 Jun 2017

Rooibos Limited, which controls 70% of the global rooibos tea market, could face class action by other local processors if it is found guilty of abusing its market dominance, says Nick Altini, a competition lawyer with Baker McKenzie.

Altini said if Rooibos Limited admitted a contravention of the Competition Act and settled with the Competition Commission, other local processors could launch damages claims against Rooibos Limited.

Although the commission has successfully prosecuted many cases of anticompetitive conduct, the opportunities for class action have been limited as companies were prepared to pay settlement fines, but not admit guilt.

Just last week, Bidvest paid a R2m settlement agreement with the commission in a case involving acquisition of control of Adcock Ingram before Bidvest had received approval from the competition authorities.

Bidvest paid the fine, but did not admit guilt.

Altini said one of the country's most prominent cases of abuse of dominance involved South African Airways (SAA) and its incentivised commission scheme arrangements with travel agents.

"This had an exclusionary effect on other domestic airlines as the scheme induced travel agents not to deal with SAA's rivals in the domestic air travel market and caused custom to be steered away from them," said Altini.

After several years of arguments and appeals before the competition authorities, SAA was eventually found guilty.

The outcome enabled Comair and the insolvent estate of Nationwide to claim damages in the high court.

In 2016, the court awarded the Nationwide estate R105m in damages and earlier in 2017, awarded Comair R1.1bn.

The rooibos tea investigation focuses on Rooibos Limited's monopolisation of the rooibos supply from commercial farmers in the Western Cape and Northern Cape. The commission has said Rooibos Limited had two exclusionary contracting strategies to foreclose the supply of tea from farmers to other rooibos tea processors.

Altini said the difficulty for Rooibos Limited was that if it settled with the commission, it opened itself up to damages litigation, as SAA did.

"The other rooibos processors could conceivably group together in a class action suit against Rooibos Limited, as they would likely have the requisite commonality of interest to seek class certification," said Altini.

The commission's investigation was undertaken after a complaint was lodged by Khoisan Tea.

Source: Business Day