Abstract
Regionalisation and globalisation, following the liberalisation of markets, have led to growing trade and more significant cross-border investments by multinational firms. While globalisation can benefit both consumers and producers, there is also a risk that the anti-competitive conduct of firms could spill over borders or affect export markets. This can occur if firms engaging in cartel activity in one country export to these markets or have cross-holdings with the players of the affected markets across borders. The potential threat of cartels or collusive conduct is particularly egregious and can cause substantial harm to consumers and economies.
In 2014, the Competition Commission of South Africa investigated an alleged cartel in the edible oils industry between Unilever South Africa (Pty) Ltd and Sime Darby Hudson Knight (Pty) Ltd (SDHK). The alleged cartel operated from 2004 to 2013, where Unilever and SDHK Ltd were suspected to have divided markets and refrained from competition, causing significant economic and consumer harm. In 2016, the Competition Commission of South Africa started another investigation into another alleged cartel in the edible oils refinery industry, involving Wilmar Continental Edible Oils and Fats (Pty) Ltd.; DH Brothers Industries (Pty) Ltd. Trading as Willowton Oil and Cake Mills; FR Waring Holdings (Pty) Ltd.; Africa Sun Oil Refineries (Pty) Ltd; and Epic Foods (Pty) Ltd., who have been alleged to have conspired to fix the prices of edible oils including margarine and baking fats. This cartel was said to have started before 2007, highlighting the industry's alarming vulnerability to anti-competitive practices that demand immediate attention from competition authorities.
Since there is a possibility of a cartel in one region spreading to another area, especially with Malawi importing edible oils from South Africa and Zambia and Zimbabwe having some members of the two alleged cartels operating in their respective markets, this study assessed whether the alleged collusive behaviour uncovered in the South African edible oils industry affected or spread into the sunflower oil and margarine markets of Botswana, Malawi, Zambia, and Zimbabwe. The dissertation employed a case study approach combining qualitative primary data from interviews with competition authorities, publicly available documents and data sources, and quantitative assessments using South African retail prices (sunflower oil and margarine) and trade data to check for similar trends before the cartels, during, and after the alleged cartels.
The results from the qualitative analysis highlighted structural factors that could have facilitated collusion in the selected countries. These include concentrated markets in Malawi and Zambia. Furthermore, the presence of industry associations in Malawi, Zambia and Zimbabwe could have encouraged the flow of information among competitors through the
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associations. The barriers to establishing an oil refinery seem substantial in Zambia, as setting up a plant could take approximately two years. While some quantitative assessments showed collusive markers (higher correlation, higher mean prices, higher prices from the uniformity test) indicative of conspiracy in all four countries, other evidence revealed the alleged South African cartels possibly affecting the Botswana, Zambia and Zimbabwe sunflower oil market but not affecting the sunflower oil market in Malawi because Malawi relies on only 3% of imports to meet edible oil demand which is not significant to cause substantial effects. The assessment also found no evidence that the alleged South African cartels affected the margarine markets in Zambia and Malawi. However, the margarine markets in Botswana and Zimbabwe could have been affected.
The quantitative test results showed evidence of collusion in the selected countries’ markets, which requires further sophisticated research. Additionally, establishing price-tracking initiatives by competition authorities could help facilitate further analysis of regional cartels.