As previously advised, the Competition Commission has referred certain complaints against seven dairy processors, including Clover, to the Competition Tribunal for determination. One processor, Lancewood (Pty) Ltd, has reached a settlement with the Commission.

Clover’s objections regarding the late referral of the complaints, the duplication of complaints, and procedural unfairness have been dismissed by the Courts. 

Based on objections of Woodlands Dairy (Pty) Ltd and Milkwood Dairy (Pty) Ltd, the Tribunal has since determined that there were certain irregularities in the summonses issued by the Commission in 2005. The Commission has appealed this decision to the Competition Appeal Court, and the two companies have cross-appealed for further relief. Judgment was handed down on 28 August 2009.

The Competition Appeal Court has ruled that the summons in respect of Woodlands is void, and that the Commission has to return all the documents procured from Woodlands in the proceedings, together with the interrogation of the two Woodlands witnesses.

As the summons issued against Clover during March 2005 is worded similarly to the Woodlands summons, Clover has already advised the Commission that it intends pursuing similar objections against the Clover summons.

The correct interpretation and application of the Competition Appeal Court’s judgment will determine whether and how the complaints or some of them will proceed to trial. The respective legal teams are considering the impact of the judgment on the Referral made to the Competition Tribunal at the end of 2006.

If the complaints or some of them do go to trial, Clover will defend itself and will rely on the international economic experts it has engaged to express an independent opinion as to whether or not anti-competitive behaviour was established.

At this point in time it is not possible to predict whether or when the complaints will proceed to trial, nor what the possible outcome may be.

In the interim, Clover has lodged an application for designation of the Dairy Industry with the Minister of Trade and Industry. The application for designation is made in terms of section 10(3)(b)(iv) of the Competition Act 89 of 1998 (“the Act”), which stipulates that an industry may be granted exemption from the rigors of the Competition Act if the Minister of Trade and Industry, in consultation with the Minister responsible for that specific industry, grants such designation in order to ensure the economic stability of such an industry.

Clover argues that the stability of the Dairy Industry is under threat because of the intrinsic instability of dairy incomes, the greater ease of farmer exit, and unfair competition from subsidised imports.

The request is that the Dairy Industry be exempted from certain provisions of the Act for a period of five years, to allow for the collection and dissemination of industry data, and discussions between the relevant firms and role players to establish rules going forward, and to consider the establishment of a private regulator for the Dairy Industry.

The DTI has indicated that Clover should receive an update on the process during September 2009.