LIVINGSTONE MARUFU
The Competition Tariff Commission (CTC) has intervened to stop Nova Feed, Feedmix and Gain Cash and Carry from practicing conditional selling, a move which undermines competition and clients’ freedom.
Under the ‘controversial’ condition, poultry farmers were compelled to procure chicks from the three companies only if they also buy stock feed to raise the birds from them.
The practice is termed tied or conditional selling under Section 2 of the Competition Act.
“During (our) market research, the Commission noted that the Nova Feed, Feedmix and Gain Cash and Carry were making the sale of broiler day old chicks (DOC) conditional upon buying a particular number of stock feed bags.
“Such a business practice or arrangement enhances the price of DOCs as the farmer has limited choice on stock feed suppliers to buy from. This business practice is also detrimental to other stock feed distributors as it denies them access to customers in that they do not have DOC or are not able to supply bundled products of DOC and stock feed,” CTC said.
“The Commission further unearthed that this was an industry wide practice engaged in by most distributors in times of DOC shortages. Submissions from smallholder farmers, chick breeders, industry representative bodies and the veterinary department confirmed the existence of the practice.
It said the practice was exploitative in nature as it compelled farmers to access chicks on condition they buy stock feeds.
This created a strategic barrier to entry as potential feed distributors had to distribute DOC for them to achieve the necessary sufficient scale to operate efficiently in the market, the Commission added.
Though some of the firms denied the practice proclaiming that these were actions instituted by salespeople without the knowledge of the executives, the Commission negotiated with the firms involved to ensure discontinuance of the practice that existed or that could come into existence.
Furthermore, some of the firms were against personalised orders suggesting preferring an order to all distributors.
The Commission analysed various representations and concluded that orders served on individual distributors would effectively address tied or conditional selling.
Firms were thus ordered to forthwith “cease and desist” from tied and conditional selling of DOCs and broiler stock feed.
They were also to take reasonable actions in ensuring that persons employed should not engage in tied and conditional selling as well as submitting compliance programmes to the Commission within six months of issuance of the orders.
