LEGAL: Senwes Competition Matter Resolved
Recent Gauteng Business News
The Competition Tribunal has confirmed a settlement agreement between agri-business Senwes and the Competition Commission. The terms of the settlement encapsulate the principle of different storage tariffs options already adopted by Senwes in 2010, as well as equal access thereto.
The Parties have also agreed that the Senwes Grain Marketing business, comprising of Senwes client base and goodwill in relation to white maize, sunflower and sundry commodities, will be housed in a separate entity of which Senwes will be the sole shareholder. The Silo business shall continue as a division of Senwes, whilst trading in yellow maize and wheat will continue to form part of the Bunge Senwes joint venture. It is foreseen that the changes will be implemented by 31 January 2014. Senwes clients and suppliers will be advised of appropriate arrangements in due course.
We are satisfied with the outcome of this commercial settlement and have already started to consider practical opportunities to ensure the sustainability and success of both these businesses, Francois Strydom, the Managing Director of Senwes, said. The separate structure will also make us sufficiently agile to add third party shareholders and to create opportunities for further access to grain in future.
During April 2012 the Constitutional Court found that Senwes contravened section 8(c) of the Competition Act. A complaint of uncompetitive business practices relating to grain storage tariffs, which was lodged by the Competition Commission against Senwes in 2006, resulted in an extensive legal process which included the Competition Appeal Court, the Appellate Division of the High Court and eventually the Constitutional Court.
Early in 2006, after a two-year long investigation, the Competition Commission referred a complaint against Senwes by CTH Trading, situated in Stellenbosch, to the Competition Tribunal for a ruling. It was alleged that Senwes contravened certain sections of the Competition Act in that it abused its dominant position in the grain market and induced grain producers not to do business with competitors. Senwes was of the opinion that there was no factual legal basis for the complaint and opposed the complaints.
After an extensive legal process, the Tribunal found that the complaints, as referred to the Tribunal, did not constitute a contravention of the Competition Act. However, the Tribunal found that Senwes placed the margins of competitors in the grain trading markets under pressure. This contravention was dealt with by the Tribunal as a so-called margin squeeze in terms of section 8(c) of the Competition Act. The finding did not carry a penalty.
After various appeals and cross-appeals, which ended up in the Constitutional Court, the latter eventually found in favour of the Commission. The Constitutional Court held, through Judge Jafta in a majority judgment, that the Supreme Court of Appeal erred in concluding that a complaint relating to a contravention of Section 8(c) of the Act was not part of the referral. He pointed out that the error made by the Tribunal was to call the breach a margin squeeze, a term which is not used in the Act. The order granted by the Supreme Court of Appeal was set aside and the Tribunals ruling was amended by deleting references to margin squeeze. Senwes and the Commission thereafter engaged in settlement negotiations.
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