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The largest processor of rooibos tea in SA faces an administrative penalty equal to 10% of its annual turnover.
The largest processor of rooibos tea in SA faces an administrative penalty equal to 10% of its annual turnover.

Rooibos Limited guilty of abuse of dominance

FMCG SUPPLIER NEWS

By Ann Crotty - Jun 20th 2017, 10:31

Rooibos Limited, which describes itself as the "preferred supplier" of rooibos tea, has been charged with abuse of dominance by the Competition Commission and faces an administrative penalty equal to 10% of its annual turnover. 

The charge follows a complaint lodged by Khoisan Tea in 2015.

The commission said Rooibos Limited has used its dominant position in the market to prevent the expansion of its rivals.

Rooibos Limited is the largest processor of rooibos tea in SA, which is the only natural source of rooibos tea. An estimated 15-million kilogrammes of rooibos tea is sold annually with a retail value of R1.5bn. Rooibos Limited, which was previously the Rooibos Tea Control Board, controls about 70% of that market.

On Monday Deputy Competition Commissioner Hardin Ratshisusu noted: "Dominant firms have a special responsibility to ensure they do not stifle competition."

He said the commission was concerned about Rooibos Limited’s ongoing anticompetitive conduct, "particularly as this hampers the growth of the agro-processing industry in SA".

The commission said Rooibos Limited was the dominant player in the processing of rooibos tea because of the inherited assets and monopoly position it had previously enjoyed as the Rooibos Tea Control Board. The board was established in 1954 by the previous government to regulate the marketing, pricing and research in the industry.

In 1993 the Rooibos Tea Control Board was privatised and became Rooibos Limited. Since then a number of rooibos farmers, who were unhappy with the monopoly enjoyed by Rooibos Limited, set up their own processing companies. However, they struggled to secure supplies after 2014 when Rooibos Limited entered into long-term agreements with farmers requiring them to commit to four-year supply contracts.

Rooibos Limited also required farmers to supply up to half their production if they wanted to access its research facilities. This became a particularly sensitive issue after the collapse of the research function undertaken by the SA Research Agricultural Council in 2014.

The commission’s decision to refer the abuse of dominance charge to the Competition Tribunal followed an investigation it undertook after it received a complaint from Khoisan Tea, which was established in 1997. Ratshisusu said the supplies to independent processors either declined or stagnated after these moves by Rooibos Limited.

Martin Bergh, MD of Rooibos Limited, could not be contacted for comment. Management at Khoisan Tea could also not be contacted on Monday.
© BusinessLIVE MMXVII 

Read more about: tea | supplier news | rooibos limited

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