Namib Mills sued over bakery deals
The Namibian Competition Commission has asked the High Court to declare that grain processing company Namib Mills has been abusing its dominant position in the wheat flour market and should pay a penalty of N$51 million for contravening the Competition Act.
According to a recent report in The Namibian, the Competition Commission in Namibia has asked the High Court to declare that grain processing company Namib Mills has been abusing its dominant position in the wheat flour market and should pay a penalty of N$51 million for contravening the Competition Act.
Loan agreements that Namib Mills concluded with 54 bakeries across Namibia include a clause stating that the bakeries should buy the wheat flour they need only from Namib Mills, and that is allowing the milling company to preserve its dominant position in the wheat flour market, the commission is claiming in a case in which it is suing the company in the Windhoek High Court.
The commission is asking the court to penalise Namib Mills for abusing its dominant market position, constrain the company from compelling bakeries to buy wheat flour from it only, and direct it to remove the clause restricting bakeries’ choice of flour suppliers from its loan agreements with them.
Namib Mills has given notice that it will be opposing the commission’s application but has not yet filed its answer to the commission’s allegations with the court. The company instead asked the court to compel the commission to disclose to it every document that was relied on when the commission last year considered a complaint against Namib Mills and made a finding that its agreements with bakeries contravened the Competition Act.
In an affidavit already filed with the court, the commission’s chief executive officer, Vitalis Ndalikokule, says Namib Mills concluded loan agreements with 54 bakeries in Namibia between 2009 and 2013.
The agreements included a clause stating that for a period of five years the bakeries may buy wheat flour products from Namib Mills only, and that if they bought flour from another supplier, the company was entitled to ask for the full settlement of the loan within seven days or could remove the bakery equipment the bakeries had bought with the money lent to them.
The agreements had the effect of excluding rival suppliers of wheat flour from competing with Namib Mills to supply flour to the 54 bakeries, and enabled Namib Mills to preserve and enhance its power in the wheat flour market, Ndalikokule alleges in his affidavit.
Namib Mills is overwhelmingly dominant in the supply of wheat flour in Namibia, with its share of the Namibian wheat market having ranged from 76% in 2011/12 to 64,6% in 2015/16, Ndalikokule says. In comparison, its main competitor, Bokomo Foods Namibia, had a wheat market share of 20% in 2011/12, increasing to 33,2% in 2015/16.
The Competition Act states that the High Court may penalise an undertaking that abused its dominant position in a market in Namibia, and that a financial penalty imposed by the court could be as much as 10% of the global turnover of the undertaking during the preceding financial year.
According to the formula used by the commission to determine the percentage that had to be used to calculate the penalty to be imposed on Namib Mills, the company should be ordered to pay a penalty of 2,57% of its turnover during 2015, Ndalikokule says.
Calculated on a turnover of N$1,99 billion during 2015, Namib Mills should pay a penalty of N$51,26 million, he has proposed.
Judge Usiku postponed the matter to 7 December for a further case management hearing.
By Werner Menges
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