CCPC fines Hybrid, Ross, Quantum and Tiger Chicks for bad business practices

The Competition and Consumer Protection Commission (CCPC) has charged four hatcheries 7 seven per cent of their annual turn over, for fixing trade conditions and setting production quotas in a long-running cartel case.

In a statement Tuesday, Commission Public Relations Officer Namukolo Kasumpa stated that the charge follows investigations where Hybrid Poultry Farm Zambia Limited, Ross Breeders Zambia Limited, Quantum Foods Zambia Limited and TIGER Chicks were found guilty of collusive practices contrary to the provisions of the Competition and Consumer Protection Act.

“The Board of Commissioners of the Competition and Consumer Protection Commission (CCPC) has fined four hatcheries in Lusaka seven per cent of their annual turnover for fixing trade conditions and setting production quotas in a long-running cartel case. Further, the Board has ordered them to terminate the agreement and to independently set a time requirement for pre-booking that is viable and auditable.The decision to fine Hybrid Poultry Farm Zambia Limited, Ross Breeders Zambia Limited, Quantum Foods Zambia Limited and TIGER Chicks was made during the 30th Board of Commissioners Meeting for the Adjudication of cases held on 1st March 2018. This was after a comprehensive investigation by the Competition and Consumer Protection Commission found that the four hatcheries were involved in collusive practices contrary to the provisions of the Competition and Consumer Protection Act, No. 24 of 2010,” Kasumpa stated.

She said the four companies that formed a cartel had no defence for such actions when questioned by the commission.

“Further, the investigation revealed that there was no justification for all four hatcheries to have a common policy as each hatchery had different production capacities, customer base, number of agents and employees and would therefore not all take the same time to sort out orders from poultry growers, neither did each hatchery need four weeks to supply day old chicks to farmers. The investigation revealed that the four weeks’ time requirement agreed by the hatcheries was in fact a trading condition and was therefore in violation of section 9(1) (a) of the CCP Act. Furthermore, it was noted that the four hatcheries through the chick order policy intended to limit the production of day old chicks on the market and consequently the price of day old chicks. In this regard, the four hatcheries were indirectly setting production quotas and thus violated section 9(1) (d) of the Act. The investigation also revealed that the chick order policy was consistent with the definition of an agreement under the Act and was therefore considered as an agreement,” she stated.

Kasumpa said the CCPC board of Directors has since created remedies aimed at breaking the cartel and ordered the hatcheries to follow the laid down procedure.

“The Board also directed that the hatcheries develop and implement compliance programmes in their respective firms within 90 days of receiving the directive and to publish quarterly performance numbers on deliveries of day old chicks in three newspapers with nationwide circulation. The Commission initiated the investigation in 2013 after the Poultry Association of Zambia (PAZ) posted a news item on its website on 26th February 2013 which stated that hatcheries through PAZ had agreed to only set eggs according to demand and that poultry farmers had to book four weeks in advance for day old chicks. The investigation which lasted four years revealed that the four hatcheries whilst being competitors in the production of day old chicks had through the Poultry Association of Zambia (PAZ) agreed to develop and implement a common policy known as a ‘Chick Order Policy’ that required poultry farmers to book day old chicks four weeks in advance,” she stated.

Kasumpa called on other companies to desist from creating cartels but to follow provisions of the Competition and Consumer Act.

“The Board noted that the agreement affected competition among hatcheries in the market for the sale of day old chicks since a similar trading condition was imposed on poultry farmers. The fact that poultry farmers were faced with a similar trading condition set by hatcheries entailed that their ability to choose the hatchery to deal with was reduced as far as delivery of day old chicks upon purchase was concerned given that the trading condition was the same for all hatcheries i.e. they have to book day old chicks four weeks in advance. In addition, the agreement was discouraging to other hatcheries from investing in technology or methods that make it possible to supply day old chicks less than the four weeks required by the agreement,” stated Kasumpa.

“Based on these facts, The Board of Commissioners decided that each hatchery be fined 7 per cent of their annual turnover for violating section 9(1) (a) and (d) of the Act in accordance with section 9(3) of the Act. In addition, the Board directed the Four Hatcheries to develop and implement compliance programmes in their respective firms, terminate the agreement and set a time requirement for pre-booking independently that is viable and auditable and to publish quarterly performance numbers on deliveries of day old chicks in three newspapers with nationwide circulation. We would like to warn businesses that are engaged in collusive arrangements to desist from such conduct.”

         

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