Unilever, one of the biggest fast moving consumer goods businesses in the world, stands accused of using its muscle to overcharge the poorest people in South Africa.
South Africa’s competition police have charged Unilever for operating a cartel. The global giant, with group revenue of more than $50 billion, is said to have championed a cartel that essentially inflated prices of bakery and cooking products including edible oils, hard and softy margarine. Affected brands include names like Flora and Holsum, a cooking oil largely used by poor people.
Unilever sells food, household and personal care products. It has a product line that includes popular brands like Handy Andy, Dove, Knorr, Omo, Surf, Lipton, Lux, Vaseline, Lifebouy etc. It is highly concerning when a firm with a product list like that is charged with price fixing.
South Africa’s competition police are indeed concerned about such practices in industry’s that impact on everyday household survival. The Competition Commission head Tembinkosi Bonakele says “Food and agro-processing is an important focus area for the Competition Commission, and we are determined to root out exploitation of consumers by cartels that are so prevalent in this sector.”
South Africa’s Competition Commission has referred the Unilever case to the Competition Tribunal for prosecution. It is a cartel case against Unilever South Africa and Sime Darby Hudson Knight.
The charge follows an investigation which found that Unilever and Sime Darby divided markets by allocating specific types of products in South Africa. This conduct contravened the Competition Act.
The Commission said its investigation found that from at least 2004 to 2013 Unilever and Sime Darby entered into a Sale of Business agreement, which contained a clause in terms of which they agreed not to compete with each other in respect of certain pack sizes of margarine and edible oils.
“In terms of the non-compete clause, Unilever and Sime Darby agreed that:
- Sime Darby would not supply industrial customers with margarine pack sizes that were less than 15kg;
- Sime Darby would not supply to retail sector of the market where Unilever is active;
- Sime Darby would not supply retail customers with its Crispa branded edible oils;
- Sime Darby would only produce and supply 25 litre pack size of edible oils, which it would supply to industrial customers exclusively; and
- Unilever would not supply industrial customers with its Flora branded edible oils.
Sime Darby settled with the Commission in 2016. The Commission is seeking an order from the Competition Tribunal declaring that Unilever and Sime Darby contravened the Competition Act as well as an order declaring Unilever liable for payment of an administrative penalty equal to 10% of its annual turnover.
There is a string of cases in South Africa where big corporations are found to have screwed poor people. These include the bread cartel case where major bakeries divided the bread market thus inflating prices. The case angered many people and is being pursued as a class action lawsuit by civil society organisations, including the Black Sash.