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Bid to resolve SAB competition hearing fails

Despite a dramatic last-minute attempt to settle the Competition Commission’s case against South African Breweries, the negotiations came to naught and the Competition Tribunal’s hearing into the charges levelled against SAB and 13 of its distributors will continue.

The commission and South African Breweries called a halt to the hearing, which had just begun this week, so that the two parties could thrash out a settlement. The hearing, which was set to run for the next three weeks, officially kicked off on Wednesday, with all the involved parties making their opening arguments.

But after lunch it was announced that the tribunal was standing down for the day. The commission was only an hour into questioning its first witness. Both the commission and SAB confirmed that they were engaging about a potential settlement.

SAB spokesperson Robyn Chalmers told the Mail & Guardian that SAB had been approached by the commission about a possible settlement of the case. However, the commission disputes this.

Commissioner Shan Ramburuth says “it is misleading to suggest that we initiated these negotiations”. “The factual situation is that these negotiations were brokered by lawyers
representing SAB’s distributors.

The basis upon which we settle is if we get a substantially similar outcome as would happen if we had won the case,” says Ramburuth. Chalmers says ‘SAB has been willing to engage with the commission throughout the process, and is open to the discussions.”

SAB is currently 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.

It alleges that SAB carved up markets with third-party distributors, curbed the ability of distributors to stock its rivals’ products, gave preferential discounts to its chosen distributors and fixed prices with them. If found guilty on even some of these charges, SAB could be facing a fine of 10% of its annual turnover.

SAB was adamant in the build-up to the case that it had done nothing wrong. A statement released the day before the tribunal hearing began said that SAB “intends to fully contest the case of alleged anti-competitive behaviour”.

SAB’s director of strategy, Harald Harvey, was quoted as saying: “After six years of investigation, we welcome the opportunity to directly address the allegations. We believe the evidence will prove that we have consistently operated in a way that is pro-consumer and pro-competitive.”

After the commission’s council, Anthony Gotz, had outlined the commission’s case on Wednesday, SAB’s council, David Unterhalter, attacked the commission’s case, calling it “outlandish” and arguing that it was “not sustainable”.

The commission’s first witness was Nico Pitsiladi, a director of the Big Daddy’s Group, who lodged the initial complaint against SAB in 2004. The Big Daddy’s Group owns a number of wholesale operations in the Eastern Cape and Pitsiladi testified that SAB was selling beer to his customers through its depots and distributors at the same price he was paying for beer, which made it impossible for his company to make a profit.

He also testified that wholesalers like Big Daddy’s couldn’t make any profit selling quarts and only up to 5% to 7% profit on selling 340ml bottles and cans. But as much as 78% of the beer market was for quarts, he said. Gotz then questioned Pitsiladi about email correspondence in which it appeared that SAB was prescribing the retail price on a number of its products.

Pitsiladi confirmed that this was exactly what the correspondence represented and later discussed a pledge that he was asked to sign by SAB in which he agreed to charge certain retail prices for some products. At this point lunch was called and the tribunal hearing stood down to allow for the settlement discussions to take place.

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Lloyd Gedye
Lloyd Gedye
Lloyd Gedye is a freelance journalist and one of the founders of The Con.

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