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JSE
THEE
THEE - The Competition Commission - Media Release
Media Release
04 August 2010
Competition Commission reaches a settlement with Foskor
The Competition Commission has entered into a consent agreement with Foskor in
settlement of the phosphoric acid excessive pricing complaint. The Commission
has filed an application with the Tribunal for the confirmation of this
agreement.
The Commission`s investigation of this was triggered by a complaint in 2007 from
animal feed producers (AFPs) alleging that Foskor had contravened the
Competition Act in that:
* It entered into a toll manufacturing agreement with SASOL. The latter
would produce phosphoric acids and related products on behalf Foskor
and Foskor would market these products. The Commission found that the
agreement constituted a division of markets between Foskor and SASOL
in contravention of the Competition Act.
* It was charging an excessive price for phosphoric acid.
Foskor produces phosphate rock and is the main local supplier of phosphoric
acid, an important component in fertiliser and animal feed products. Foskor
exports the vast majority of its phosphoric acid. Foskor`s position as the main
supplier of phosphoric acid enables it to control prices locally. Foskor`s price
to local buyers including an add-on equivalent to 75% of the freight costs to
export customers (mainly in India). As soon as being made aware of the anti-
competitive implications of such pricing, in August 2008, Foskor removed this
component, substantially reducing prices to local customers. It has since
maintained prices to local customers in line with the prices it receives from
exports.
Under the agreement Foskor has committed to refrain from engaging in excessive
pricing of phosphoric acid, and specifically not to revert to its previous
pricing policies for the sale of phosphoric acid, phosphate rock, as well as MAP
and DAP (two fertiliser products which it now sells directly to the retail
farming community). It has also undertaken measures to increase transparency in
the downstream market for fertiliser products.
In addition, Foskor admitted the collusion allegations and filed a leniency
application with the Competition Commission under which it provided all relevant
information regarding its toll production agreement with Sasol. Under the toll
production agreement, Sasol undertook to produce phosphoric acid and related
products for Foskor to sell in the local market meaning that, by agreement,
local buyers who had been able to choose between Sasol and Foskor, now only had
Foskor to turn to. Sasol admitted to this collusive arrangement and settled its
part with the Commission in the agreement confirmed by the Tribunal on 20 May
2009.
As a result of the quick action and cooperation by Foskor and the significant
reduction in prices payable by animal feed producers and end consumers, the
Commission is not seeking a penalty against the firm.
Commissioner Shan Ramburuth noted that "these commitments mean that South
Africa`s large endowment of phosphate rock, mined by Foskor, yields
competitively priced phosphoric acid and related products for SA consumers. This
is also likely to lead to lower input costs in the production of field crops,
such as maize."
ENDS
Further Info:
Keitumetse Letebele, HOD: Communications
012 394 3183/ 082 783 3397/ keitumetsel@compcom.co.za
Date: 04/08/2010 14:38:01 Produced by the JSE SENS Department.
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