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Tinashe Makichi Business Reporter
The Competition and Tariff Commission (CTC) has reportedly won a case it filed against Innscor Group Africa for unfair competition practices. The Zimbabwe Stock Exchange- listed company will pay $3,1 million fine as a result of its loss. The CTC had opened investigations into the group after it was discovered that it did not follow proper regulatory procedures in its acquisition of a majority stake in National Foods.
Innscor increased its shareholding in Natfoods to 49,9 percent from 36 percent between 2003 and 2011.
The company also subsequently reduced its shareholding to 37 percent after disposing 11 percent for $11,7 million — to Tiger Brands of South Africa in 2011.
Innscor was supposed to have notified the CTC about the merger but they only did this when the commission had raised questions on the deal after stakeholders lodged complaints that the merger created a strong market share for the two big companies, thus reducing competition.
In terms of the Competition Act, if a company does not notify the regulator of a merger or the acquisition of a controlling stake within 30 days, it could be penalised.
Other stakeholders noted that the merger between Innscor and Natfoods had contributed to pushing competitors out of business.
Stakeholders said the merger increased the chances of price transfer where Natfoods supplied Innscor with flour at a lower price than what was being offered by competitors.
Following efforts by the CTC to engage Innscor on a possibility of an out of court settlement, the Innscor board went on to file an appeal through writs of execution at the administrative court. However, the appeal was rejected last week by the court.
CTC assistant director (competition) Mr Benjamin Chinhengo confirmed that the CTC made several engagements with Innscor with the idea of reaching a consensus but no conclusion was reached.
“I cannot exactly confirm on the issue before the courts but the fact that Innscor’s appeal was rejected makes them liable to a $3,1 million fine.”
“It is reported that the administrative court yesterday ordered Innscor to pay $3,1 million for breaching competition rules,” said a source who could not be named.
The source went on to say Innscor previously refused an out of court settlement as proposed by the CTC but eventually lost the case in which they will pay a fine of $3 million instead of $500 000 which the CTC was pushing for.
Innscor has in the past few years made several acquisitions under its strategy of backward integration within the fast-moving consumer goods supply chain.
In July 2009, the group purchased a 49 percent stake in Irvine’s Zimbabwe, a major producer of chicken and table eggs.
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