Processed frozen food manufacturer Irvin & Johnson (I&J) has come out victorious in a case where they were accused of cartel conduct by the Competition Commission in 2017.
The commission alleged that I&J and beef processing company Karan Beef had participated in a cartel to divide markets, by entering into a manufacturing agreement in 2000 and a subsequent amended agreement in 2002, in contravention of the Competition Act.
Karan Beef agreed to pay an administrative fine of R2.7m while I&J denied the allegations and opted to take the matter to the Competition Tribunal for litigation.
The commission had accused I&J and Karan Beef of allegedly dividing markets in the supply of processed beef products such as beef burger patties, steak sizzlers, crumbed beef steaklets, viennas and boerewors.
The tribunal dismissed the case due to lack of evidence and said the burden of proof lay with the commission.
“No evidence was put up by the commission that the agreements impacted adversely on competition in any segment of the market, such as increased prices to customers or improved volumes for I&J-owned brands,” the tribunal said in its finding.
The tribunal said the conduct of I&J and Karan Beef also did not accord with that usually associated with cartels such as secretive arrangements or meetings.
“On the contrary, at some point of the first two years, the products were jointly branded, with the Karan logo depicted on the I&J product. Hence, customers and the public alike were aware of this.”
The tribunal said the manufacturing agreement, assessed in its context and purpose, did not contravene the Competition Act.
In reaching its decision in this matter, the tribunal emphasized that “cartel conduct is considered to be the most egregious and harmful to competition and consumers alike and must be treated with the appropriate attention and sanction by competition agencies.” However, the tribunal said, the priority given to the combating of the cartel conduct must be balanced against the edicts of procedural fairness norms and the constitution.
The tribunal concluded that the commission bore the burden to prove, on a balance of probabilities, that there was a contravention of the Competition Act.
“In the tribunal’s view, the commission has failed to discharge its burden of proving that the manufacturing agreement and the subsequent amending agreement resulted in the division of markets between two competitors as contemplated,” the tribunal said.
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