Challenges facing the agricultural sector


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Challenges facing the agricultural sector

  1. 1. 23 Jul Presenter’s name Challenges Facing the Agricultural Sector
  2. 2. Agenda Welcome Carl Opperman – CEO Agri Wes-Cape: Challenges and Realities in Agriculture Sector Today Wage Determination SD 13 Background Scope of Application Wages and Deductions Other terms and conditions Who is an employee in terms of SD13? 2
  3. 3. Agenda ESTA Developments New Earnings Threshold Wildcat Strikes – The Law Wildcat Strikes and Recovering Damages Intellectual Property Competition Law and the Agricultural Section Questions and Answers 3
  4. 4. Challenges and Realities in  Agriculture Sector Today 4
  5. 5. Which other industry embraces  life 24h / 365 days on going? Who supplies Food & Fibre? What economy foundation is not  build on Agriculture? 5
  6. 6. Basic Facts about SA  Agriculture • Only 12% of South Africa’s landmass is considered  arable and only 3% "truly fertile".  • Only 1.5% of the land is under irrigation, producing  30% of the country’s crops.  • Contribution to GDP dropped from 21% in 1910 to  between 3‐5% over the last decade.  • Declining contribution frequently misinterpreted as  agriculture’s declining role in the country’s economy.  6
  7. 7. Basic Facts about SA  Agriculture • The physical performance of South African  agriculture is heavily influenced by the climate.  • 20% of farmers generate 80% of agricultural output  value. • 60% of South Africans are urbanised and depend  on the agri‐food chain and specifically the food  processing, distribution and retailing system.  7
  8. 8. Basic Facts about SA  Agriculture • Transport and distribution a major cost and also  contributor to carbon foot print. • Agriculture has been a net earner of foreign  exchange – exporting more in rand terms than  importing. • Agriculture has been challenged to produce more  food in the next 50 years than it did in the past 500  years.  8
  9. 9. Land capacity of South Africa 9
  10. 10. Number of farming Units Source:  Stats SA 10
  11. 11. South African Farming  Structure Source:  Stats SA 11
  12. 12. Agriculture’s output and GDP  contribution 1911 ‐ 2005 12
  13. 13. Contribution of agriculture to  the GDP in SA,  1990 to 2012  13
  14. 14. The cost squeeze for SA  farmers 2008 to 2012 (2005 = base year = 1)  14
  15. 15. Farm Income & Expenditure 15
  16. 16. Earner of Foreign Exchange 16
  17. 17. Export / Import Value (F.O.B) 17
  18. 18. Agriculture’s linkages with the  rest of the economy • Backward linkages − Purchases of goods such as fertilizers,  chemicals and implements • Forward linkages − Supply of raw materials to industry and the  food supply chain in general • Approximately 70 % of agricultural output is used  as intermediary products in other sectors 18
  19. 19. Global agriculture in the  21st century faces multiple  challenges  • Resource depletion − It has to produce more food and fibre to feed  a growing population with a smaller rural  labour force • More feedstocks for a potentially huge bio‐ energy market • Contribute to overall development in the many  agriculture‐dependent developing countries 19
  20. 20. Global agriculture in the  21st century faces multiple  challenges  • Adopt more efficient and sustainable production  methods • Adapt to climate change • Price volatility • Diet changes • Increased competition via globalisation,  demographic transition and urbanization 20
  21. 21. PSE Definition The producer support estimate (PSE) is an  indicator of the annual monetary value of  gross transfers from consumers and  taxpayers to support agricultural producers,  measured at farm gate level, arising from  policy measures, regardless of their nature,  objectives or impacts on farm production or  income. 21
  22. 22. PSE Producer Support Estimates, 2011 22
  23. 23. Affordability of food a global challenge  What proportion of people’s household  expenditures goes to food? 23
  24. 24. Top most constraining  factors • Trust in the political system • Competence of personnel in the public sector • Public sector's ability for sufficient service  delivery • Electricity supply • Cost of Crime • Efficiency of national infrastructure • Cost of transport Source: ABC 24
  25. 25. Top most constraining  factors • Administrative regulation in SA • Availability of professional labour • Cost of using infrastructure • SA's labour policy • Cost of financing • Labour administration costs • Availability of skilled labour • Current exchange rate Source: ABC 25
  26. 26. Challenges in the local  agricultural sector • Policy coherence in relation to agriculture • Administered prices • Agricultural research • Labour in agriculture • Trade dispensation • Land reform 26
  27. 27. Challenges in the local  agricultural sector • Protection of natural resources (impact of mining  on agriculture) • African development • Infrastructure (the lack of) • Integrated Growth and Development Plan for  agriculture • Disaster management 27
  28. 28. Policy challenges • Spatial challenges continues to marginalise the  poor • The ailing public health system confronts a  massive disease burden • The performance of the public service is uneven • Corruption undermines state legitimacy and  service delivery • South Africa remains a divided society 28
  29. 29. Dankie /  Thank You 29
  30. 30. 23 Jul By Jacques van Wyk New Wage Determination SD 13
  31. 31. A Sectoral Determination supplements and amends the provisions of the Basic Conditions of Employment Act 75 of 1997 (“BCEA”) in a particular sector. If a determination is silent the BCEA shall have application (section 1(5) of Determination 13). 31 SD 13 Background
  32. 32. Applies to all farm workers in all farming activities within South Africa. A farm worker is an employee who is employed mainly or wholly in connection with farming activities. Farming activities includes primary and secondary agriculture, mixed farming, horticulture, aqua farming and the farming of animal products or field crops excluding the forestry sector. Includes domestic workers and security guards (if not employed in the private security sector). 32 SD 13 Scope of Application
  33. 33. Not defined. Look at what the courts say and the definitions provided by AgriSETA and StatsSA and the DoL approach. Look at the nature of the enterprise in which the employees and their employer are associated for a common purpose. 33 SD 13 What is “Secondary Agriculture”?
  34. 34. It must be work conducted in furtherance of the primary purpose of the employer which must be the production of agricultural products. What about processing and production? (question of fact: if they are controlled by the same undertaking and are connected with the farm land then they will likely fall within the definition of secondary agriculture). 34 SD 13 What is “Secondary Agriculture”? (continued)
  35. 35. Factors that may play a role in determining whether an activity constitutes secondary agriculture: The dimension of the activities of the secondary side of the undertaking. Whether the operation need necessarily be part and parcel of the farming operation. The commercialisation of the enterprise. The location of the processing facility in an industrial area. Examples: Abattoir on farm vs abattoir in industrial area serving other suppliers. 35 SD 13 What is “Secondary Agriculture” (continued)
  36. 36. The magnitude of the operations and the number of employees employed in the secondary industry. Whether employees execute other farming tasks. Whether production is industrialised. Where the employees live: in an industrial area or on the farm. Whether the processing activity is dependent upon urban infrastructure. 36 SD 13 What is “Secondary Agriculture”? (continued)
  37. 37. Distinction between “wage” and “remuneration”: “remuneration” is “payment in money or in kind, or both in money and in kind”. “wage” is “amount of money”. Minimum wage is amount of R105 per day, irrespective of additional payment in kind such as housing, food, electricity, transport. 37 SD 13 Wage Increases and Exemption Applications
  38. 38. New minimum wage (for a 9 hour day) as of 1 March 2013 until 28 February 2014 [67% increase!]. Will be further increased from 1 March 2014 until 28 February 2015 to [previous year’s minimum wage + minimum wage+ CPI + 1.5%]. Again from 1 March 2015 until 28 February 2016 to [previous year’s minimum wage + minimum wage+ CPI + 1.5%]. 38 SD 13 Wage Increases and Exemption Applications
  39. 39. What are the consequences of non-compliance: Fine (schedule 2 of the BCEA); and Term of imprisonment? (section 93 of BCEA). 39 SD 13 Wage Increases and Exemption Applications
  40. 40. Employer may make the following deductions from an employee’s wage: Housing; Food; and Selected “others”. Provided certain prescribed criteria are met. 40 SD 13 Deductions
  41. 41. A 10% deduction for housing if it: is provided as part of employment; has a durable and waterproof roof; has glass windows that can be opened; is at least 30 square meters in size; 41 SD 13 Deductions (continued) - housing
  42. 42. electricity is available inside the house (in so far as such infrastructure is on the farm); safe water is available inside the house or within 100 meters from the house; flush toilet or pit latrine is inside or near the house; and no other deductions are made for housing (e.g. for electricity or water). 42 SD 13 Deductions (continued) - housing
  43. 43. Where more than two workers in collective housing (e.g. “hostels”): Maximum deduction in total in respect of all resident workers = 25% in total of minimum wage (R105); and Equal part to be deducted from each of the residents’ wages. No deduction for housing from wages of a worker under 18 years of age. 43 SD 13 Deductions (continued) - housing
  44. 44. A 10% deduction for food if it is: provided free of other charges; provided on an ongoing and regular basis as part of the employee's conditions of employment; The deduction may not exceed the actual cost to the employer for providing the food; and No other deductions for food may be made of the worker's remuneration. 44 SD 13 Deductions (continued) - food
  45. 45. Third parties (e.g. bank, union, medical aid) on written instructions from worker; in terms of a law or court order (e.g. tax or child maintenance); and no more than 10% of the wage for the repayment of an advance or loan made to the worker. 45 SD 13 Deductions (continued) – “other”
  46. 46. Currently no provision for deduction for electricity. Department of Labour (“DOL”): Contentious issue. The DOL have requested a legal opinion and will issue guidelines for employers. 46 SD 13 Deductions (continued) – electricity?
  47. 47. Thousands of Exemption applications were made. Few granted. The key factor: a real and pressing financial need for the exemption (for example, the failure to obtain an exemption would necessitate significant retrenchments or result in the failure of the enterprise). How? By way of an application to the DOL. 47 SD 13 Exemption Applications
  48. 48. Exemption application: the procedure: Determine whether there are trade unions representing affected employees; If yes, then approach them in order to obtain their consent to the application for exemption; If the trade union consents a copy of the consent must be attached to the application (the consent should be contained on the union’s letterhead); 48 SD 13 Exemption Applications (continued)
  49. 49. If no consent, the trade union must nonetheless be served with a copy of the application and informed they can made representations to the DOL. If there are no trade unions the employer must try to obtain the employee’s consent. In addition an affidavit must be completed which states that “none of the employees affected by the application are unionised”; If the employees do not consent proof must nonetheless be attached to the affidavit indicating they have been informed of the process; 49 SD 13 Exemption Applications (continued)
  50. 50. Thereafter, submit a copy of the application (BCEA Form 6) to the DOL. The form must be accompanied by the following documentation: Copies of the Employer’s financial statements (income statement, cash flow statement, balance sheet); Motivational letter indicating why exemption is sought; Project plan indicating projections of meeting the prescribed conditions; 50 SD 13 Exemption Applications (continued)
  51. 51. List of employees with their salaries reflected; Farm Workers form; Trade union consent (if applicable); Alternatively employees consent and affidavit setting out steps taken to notify employees (if applicable). 51 SD 13 Exemption Applications (continued)
  52. 52. There are a number of additional ‘unusual’ terms and conditions contained within SD13: Extension of ordinary working hours of employees; Overtime; Remuneration for work on Sundays; Termination of employment; Accommodation, livestock and crops on termination; 52 SD 13 Other Terms and Conditions
  53. 53. 23 Jul New Earnings Threshold
  54. 54. With effect from 1 July 2013: Increase from R183 008 to 193 805; Threshold calculated in accordance with employee’s earnings (what is included and excluded?); “Earnings” is regular annual remuneration before deductions (income tax, medical, pension etc.). Does not include subsistence and transport allowances. 54 New Earnings Threshold
  55. 55. Implications of threshold? More employees entitled to the protections of the BCEA. Ordinary hours of work, overtime, compressed working week, averaging hours of work, meal intervals, daily and weekly rest periods, pay for work on Sundays, night work and work on public holiday. Administrative and financial consequences. 55 New Earnings Threshold (continued)
  56. 56. 23 Jul ESTA
  57. 57. The purpose of the Extension of Security of Tenure Act 62 of 1997 (“ESTA”) is to: Provide long-term security of occupancy, residency or possession of land. Provide for and put in place the conditions that must be met and circumstances that allow for persons to be evicted from land. It applies to occupiers of land other than land designated as a township. 57 ESTA Overview and Recent Cases
  58. 58. Give two months’ written notice of intention to apply for eviction order to: Occupier; Local municipality; Department of Land Affairs. Obtain court order for eviction Will only be granted if ‘just and equitable’ to evict taking into account a range of factors. Once court order obtained, give notice to occupier that he/she is to be evicted 58 ESTA Eviction Process
  59. 59. What constitutes ‘just and equitable’ circumstances? The following factors: the period of time the person has occupied the land; whether valid grounds exist for ending the right to occupy; the land owner’s conduct; potential hardship to be suffered by person evicted; and availability of alternative accommodation. Pivotal to show ‘meaningful engagement’ by land owner. 59 ESTA Just and Equitable
  60. 60. May institute proceedings in the Magistrates Court or the Land Claims Court. Each court has advantages and disadvantages. Land Claims Court: Is more inclined to issue injunctions. Is more explicit in its disapproval should the department so ordered fail to comply with its injunctions. Judges concern themselves solely with land claim issues and eviction applications. Is a High Court and accordingly there is no automatic right to appeal. 60 ESTA - Magistrate’s Court or Land Claims Court?
  61. 61. Magistrates Court: More inclined to grant postponements until such time as the relevant department acts as ordered, if at all. This may lead to months or even years of delay. Eviction order is sent to the Land Claims Court on automatic review. Upon conclusion of review proceedings if the eviction order is granted the respondents have an automatic right of appeal. This delays the proceedings even further. 61 ESTA Magistrate’s Court or Land Claims Court? (continued)
  62. 62. 23 Jul Wildcat Strikes – The Law
  63. 63. The strikes in Marikana and De Doorns have focused attention on wildcat strikes in South Africa. De Doorns strikes: Workers demanded a wage increase from R69 to R150/day before striking unlawfully. The conduct of the strikers and persons amongst them led to approximately R100 000 000* in damages to export table- grape farms. The Food and Allied Workers Union (FAWU) now threatens further strike action. FAWU members number approximately 2500 out of roughly 8000 permanent employees. * 63 Wildcat Strikes – An overview of recent strikes
  64. 64. For a strike to be lawful, it must comply with chapter 4 of the LRA. The issue in dispute must be referred to a bargaining council or CCMA for conciliation; A certificate stating the dispute is unresolved must be issued or a period of 30 days must elapse from the date of referral; and Notice of strike action must be given at least 48 hours before the strike. If procedure is not followed, the strike is regarded as unlawful. 64 Wildcat Strikes – What does the law require?
  65. 65. Obtain an interdict from the Labour Court to bring the unlawful strike to a halt. Must prove: A right has been infringed; Irreparable harm will occur if the interdict is not granted; Granting the interdict is more convenient than not; and The applicant has no other satisfactory remedy. 65 Wildcat Strikes – What are the Employer’s remedies?
  66. 66. The employer may also claim compensation or damages. The employer may dismiss the employees but this should be regarded as a mechanism of last resort. 66 Wildcat Strikes – What are the Employer’s remedies?
  67. 67. 23 Jul By Nasheetah Smith Wildcat Strikes – Recovering Damages
  68. 68. Rights in terms of Protected strikes: If the strike is protected, then the LRA grants immunity to striking employees and trade unions against the following: Breach of contract claims; Delictual and civil claims; and Dismissals (other than for operational reasons) Immunity does not protect strikers who commit unlawful conduct during the strike. 68 Wildcat Strikes – Damages Recovery
  69. 69. Section 67(6) of the LRA provides that: “Civil legal proceedings may not be instituted against any person for participating in a protected strike or a protected lock-out; or any conduct in contemplation or in furtherance of a protected strike or a protected lock-out.” The immunity granted under S67 is not absolute. Section 67(8) expressly excludes “…any act in contemplation or in furtherance of a strike or lock- out, if that act is an offence” 69 Wildcat Strikes – Damages Recovery
  70. 70. Criminal conduct would therefore not be condoned. Any damages suffered as a result of the unlawful conduct of the strikers will expose them, the organisers, protestors and/or trade union to delictual liability. 70 Wildcat Strikes – Damages Recovery
  71. 71. In recent cases, conduct such as intimidation, assault and damage to property was found not be afforded immunity under Section 67(2) and (6). (Minister of Correctional Services and Another v Ngubo and others (2000); Fourways Mall v SA Commercial Catering and Allied Workers Union(1999)) Damages claims arising out of unlawful conduct which constitutes an offence would have to be instituted in the High Court. 71 Wildcat Strikes – Damages Recovery (continued)
  72. 72. What about Unprotected Strikes: The immunity granted in Section 67 is not granted at all in regard to unprotected strikes. Section 68(1)(b) allows Employers to sue for losses suffered as a result of any conduct in contemplation or in furtherance of an unprotected strike. The remedy may be enforced against the strikers or their trade unions. 72 Wildcat Strikes – Damages Recovery (continued)
  73. 73. What must Employers prove in such a case: the strike was unprotected; the employer suffered a loss as a result of unprotected strike (for example, loss arising from the blockading of the entrance of the employer’s premises, the refusal to work, the loss of productivity occasioned thereby etcetera) ; where relief is sought against a trade union it must be demonstrated that the trade union participated in the unprotected strike or committed acts in contemplation or in furtherance thereof. 73 Wildcat Strikes – Damages Recovery (continued)
  74. 74. In Mangaung Local Municipality v SA Municipal Workers Union (2003) the court held: “…where a trade union has a collective bargaining relationship with an employer, and its members embark on unprotected strike action and the trade union becomes aware of such unprotected strike and is requested to intervene but fails to do so without just cause, such trade union is liable in terms of S68(1)(b) of the Act to compensate the employer who suffers losses due to such an unprotected strike.” 74 Wildcat Strikes – Damages Recovery (continued)
  75. 75. What can be recovered? limited under Section 68(1)(b) to “…just and equitable compensation…”; Therefore unlikely that an Employer will be able to recover all its damages under the LRA. 75 Wildcat Strikes – Damages Recovery (continued)
  76. 76. What is just and equitable? the courts have held that the compensation granted must be fair and is aimed at compensating the aggrieved party and not to penalise the wrongdoer (Algoa Bus Company v SATAWU [2010]). the courts have a wide discretion to award a lesser amount than the full extent of the damages claimed and 68(1)(b) requires them to take a number of factors into account when doing so. 76 Wildcat Strikes – Damages Recovery (continued)
  77. 77. Factors to be taken into account will include whether- attempts were made to comply with the provisions of the LRA and the extent of those attempts; the strike or conduct was premeditated; the strike or conduct was in response to unjustified conduct by another party to the dispute; there was compliance with an interdict granted by the Labour Court; 77 Wildcat Strikes – Damages Recovery (continued)
  78. 78. the interests of orderly collective bargaining; the duration of the strike or lock-out; and the financial position of the employer, trade union or employees respectively. 78 Wildcat Strikes – Damages Recovery (continued)
  79. 79. 68 (1) provides exclusive jurisdiction to the Labour Court to grant orders for payment of losses incurred as a result of the unprotected strike or conduct in furtherance thereof however excludes the following: Non-striking employees and third party delictual claims; Civil claims arising out of criminal offences 79 Wildcat Strikes – Damages Recovery (continued)
  80. 80. Delictual claims arising out of unlawful behaviour/conduct during protected and unprotected strikes All delictual claims arising out of criminal offences committed during protected strikes will be dealt with by the High Court; The law is unclear whether delictual claims arising out of criminal offences committed during unprotected strikes should be dealt exclusively by the Labour Court or whether such claims can also be dealt with by the High Court given that same are common law offences; 80 Wildcat Strikes – Damages Recovery (continued)
  81. 81. In Coin Security Group (Pty) Ltd v SA National Union for Security Officers & Other Workers & Others the Court held that: the Labour Court has exclusive jurisdiction to consider conduct such as intimidating, assaulting, vandalising and threatening and verbally abusing co-workers for purposes of interdictory relief in terms of S68(1)(a) when defining “conduct in furtherance of the strike” The court however did not confirm whether the Labour Court would also have exclusive jurisdiction to deal with delictual claims arising out of the criminal conduct. 81 Wildcat Strikes – Damages Recovery (continued)
  82. 82. What damages can be claimed? Patrimonial losses - actual damages and not potential damages; Damages that are easily quantifiable and can be proven by evidentiary proof 82 Wildcat Strikes – Damages Recovery (continued)
  83. 83. List of necessary information for instituting claims: Date of incident(s); Details of parties involved (individuals; union members; union); Evidence proving involvement of parties (photo, video, sound recordings etcetera); Estimation of damages suffered and proof thereof; CAS numbers (in the event of criminal charges being laid); List of witnesses and witness statements; Any and all relevant correspondence between parties. 83 Wildcat Strikes – Damages Recovery (continued)
  84. 84. Would arise in the instance where employees or their trade unions failed to adhere to a court order. When? If an interdict has been granted preventing employees from engaging in unlawful strike action and / or committing acts of misconduct during such strikes and the fail to comply with that order. The law has recently been clarified on whether a trade union can also be held in contempt for failing to restrain the actions of its members. 84 Wildcat Strikes – Contempt of Court proceedings
  85. 85. In2Food (Pty) Ltd v FAWU and others J350/13 (decided on 1 March 2013) Relevant facts Interim order granted restraining FAWU and its members from embarking upon an unlawful strike; FAWU and its members failed to adhere to order, causing substantial loss and damage to the employer; Contempt of court order then obtained. It called upon FAWU and its members to show cause why they should not be held in contempt in a final order; FAWU found to have been in contempt and received a R500 000 fine. 85 Wildcat Strikes – Contempt of Court proceedings (continued)
  86. 86. Important points to be aware of: The damages occasioned to the employer was in excess of R16 000 000. The contempt fine is therefore not aimed at recouping damages. Furthermore, the fine is payable to the court and not the employer; 86 Wildcat Strikes – Contempt of Court proceedings (continued)
  87. 87. Important points to be aware of: However, these proceedings still serve a valuable function: Acts as a deterrent; Seeks to add an additional financial burden on trade unions; Imposes a duty upon unions to take positive steps 87 Wildcat Strikes – Contempt of Court proceedings (continued)
  88. 88. “The time has come in our labour relations history that trade unions should be held accountable for the actions of their members. For too long trade unions have glibly washed their hands of the violent actions of their members” “Alarmingly, on the evidence before me, the union and its officials have not taken sufficient steps to dissuade and prevent their members from continuing their violent and unlawful actions” 88 Wildcat Strikes – Contempt of Court proceedings (continued)
  89. 89. 23 Jul By Janine Hollesen Intellectual Property
  90. 90. Product of the intellect Commercial value Sold Licensed Objective : Identify the IP for protection / licensing 90 What is Intellectual Property and the Relevance in the Agricultural Sector?
  91. 91. Patents Trade Marks Copyright Trade Secrets and Know-how Plant Breeder’s rights 91 Intellectual Property
  92. 92. Territorial Limited duration Any invention registered if it involves an inventive step capable of being used or applied in trade or industry or agriculture Absolute novelty requirement : invention must be new in South Africa or elsewhere 92 Patents
  94. 94. Shape / appearance of articles Manufactured in an industrial process Territorial Limited duration New = design does not from part of the State of the Art 94 Designs
  96. 96. Registered = certainty with regard to protection Territorial Distinguishing function Search Process Duration 96 Trade Marks
  97. 97. 45 classes Class 29 – preserved, dried and cooked fruits and vegetables; eggs; milk; processed olives; olive oil Class 30 – staple foods including flour and preparations made from flour Class 31 –fresh fruit and vegetables Class 32 – non-alcoholic beverages Class 33 – alcoholic beverages including wine Class 35 – marketing, retail and wholesale services; export services; forest management Class 39 – transport, packaging and warehousing services; Class 42 – scientific and research services; Class 44 – agricultural services; afforestation services 97 Trade marks
  98. 98. 98 Examples
  99. 99. Copyright Act Types of works protected Literary works Artistic works Sound recordings Musical works Cinematograph films Computer programmes 50 years 99 Copyright
  100. 100. Trade secret = information not generally available / competitive advantage Examples : chemical formula, manufacturing process, a machine design, business method Know-how = body of information, the compilation of which has competitive value Examples = customer lists, supplier lists, parts specifications, quality assurance and testing procedures Cannot convert general knowledge by labelling 100 Trade secrets and Know-how
  101. 101. Registered Right DUS requirements Territorial Limited duration – Trees and vines – 25 years Other varieties – 20 years 101 Plant Breeder’s rights
  102. 102. Patents Trade Marks Copyright Trade Secrets and Know-how Plant Breeder’s rights 102 Intellectual Property
  103. 103. Identify the IP right Registered Obtain advice and secure protection as soon a possible 103 Intellectual Property Protection
  104. 104. NB = identify the IP that is being licensed Is the right valid and enforceable in South Africa and in other territories to which the licence extends? Searches Obtain advice regarding terms of licensing agreement Exclusive / Non-exclusive / Duration / Royalties / Termination IN CONCLUSION : Ensure that the subject matter of IP is capable of being licensed or whether you will be paying for non-existent rights. 104 Licensing
  105. 105. Presenter’s name Competition Law and the Agricultural Sector By Irma Gouws
  106. 106. Commission’s focus on Agricultural Businesses The Competition Commission has identified food and agro-processing as a priority investigation area (2009) “The far reaching liberalisation has not yielded the desired policy outcomes, in that the agricultural value chain appears to be still largely characterised by anti- competitive outcomes, including high concentration, high barriers to entry, concentration of ownership, vertical integration as well as anti-competitive behaviour in the pricing of food. These have serious consequences for the welfare of the poorest households.” There have been investigations in grain, diary, poultry, fertilizer, milling and baking industries
  107. 107. Section 4 – Restrictive horizontal practices Section 4 of the Competition Act 89 of 1998 (“the Act”) prohibits agreements or concerted practices between organisations in a “horizontal relationship”. “Horizontal relationship” refers to organisations which are competitors or potential competitors. “Agreements” as defined in the Act include: “contract, arrangement or understanding, whether or not legally enforceable”; 107
  108. 108. Section 4 – Restrictive horizontal practices “Concerted Practices” as defined in the Act mean: “co-operative, or co-ordinated conduct between organisations, achieved through direct or indirect contact, that replaces their independent action, but which does not amount to an agreement”. 108
  109. 109. Section 4 – Restrictive horizontal practices Section 4(1)(a) prohibits agreements or concerted practices amongst competitors if – the agreement substantially prevents or lessens competition in a market (i.e. the conduct has an anti- competitive effect); and if there are no technological, efficiency or other pro- competitive gains to outweigh the anti-competitive effect. 109
  110. 110. Section 4 – Restrictive horizontal practices These agreements require an assessment of their anti- competitive effect and a balancing between the anti- competitive effect and the efficiency or other pro- competitive benefits. This is referred to as a “rule of reason” analysis. 110
  111. 111. Section 4 – Restrictive horizontal practices Section 4(1)(b) prohibits agreements or concerted practices amongst competitors which involve – (i) directly or indirectly fixing a purchase or selling price or other trading condition; (ii) dividing markets by allocating customers, suppliers, territories or specific types of goods or services; or (iii) collusive tendering (i.e. bid-rigging) This conduct is prohibited whether or not it gives rise to an anti-competitive effect 111
  112. 112. Exchange of information between competitors Section 4(1)(a) the artificial removal of uncertainty can in itself remove rivalry. Section 4(1)(b) facilitating factor for collusion & monitoring of compliance with collusive arrangements. 112
  113. 113. Western Cape Citrus Producers Forum. Banana Cartel: Del Monte and Dole engaged in “general market gossip”. UK Diary “Hub and Spoke” cartel. UK Agricultural Tractor Registration Exchange. 113 Examples
  114. 114. How does information exchange take place? Joint Ventures; Benchmarking Studies; License Agreements; Supply Agreements; Industry bodies/Trade Associations: Facilitate information exchange. Useful! They gather and disseminate information such as investments, employment figures, product standards. 114
  115. 115. Sharing of information between competitors There is increasing recognition that information exchange could result in large efficiency benefits: improve investment decisions and organisational learning of firms, which could potentially result in better quality, more variety and better future ability to respond to demand changes; more efficient production planning; improved distribution and marketing strategies; better product positioning (in the case of differentiated products), all of which could improve consumers welfare.
  116. 116. Sharing of information between competitors The problem for Competition Law is to distinguish those exchanges of information which have a neutral or beneficial effect upon efficiency from those which seriously threaten the competitive process by facilitating collusive behaviour.
  117. 117. Anti-competitive effects… Two crucial questions: What is the nature of the information exchanged? What is the structure of the market? 117
  118. 118. Nature of Information Exchanged Pricing information Capacities, costs, demand, prices, sales Keep an eye on compliance with agreement! Customer information Could result in shifts in pricing policies and erode vigour of competition between firms 118
  119. 119. Nature of Information Exchanged Specificity Individual v Market/Industry as a whole; Aggregated information; Historic, current and future; Confidential v Public. 119
  120. 120. Structure of the market The level of concentration & structure of supply and demand must be considered. One must consider: the number of competitors; the symmetry and stability of market shares; barriers to entry; the existence of any structural links between competitors; the homogeneity of products; market transparency. 120
  121. 121. Drawing the line – not to share… Price, costs, investments, business strategy, rebates, discounts; Sales and production targets; Bidding and tender procedures; Customer information; Confidential information and information that create competitive advantage; Current information; Individual company data; Implied direction or recommendations. 121
  122. 122. The neutral area… Exchange with non-competitors. “Process” type information that will result in industry efficiency. Public domain. Historic information. Aggregated data – BUT avoid if disaggregation is simple. 122
  123. 123. Your company and employees need to know the do’s and don’ts of competition law… Compliance with the Competition Act is not negotiable – ignorance of the law is not a mitigating factor! There is always a good commercial reason for anti-competitive behaviour and agreements
  124. 124. Presenter’s name THANK YOU Jacques van Wyk Nasheetah Smith Janine Hollesen Irma Gouws Thandi Lamprecht Nothing in this presentation should be construed as formal legal advice from any lawyer or this firm. Readers are advised to consult professional legal advisors for guidance on legislation which may affect their businesses. © 2013 Werksmans Incorporated trading as Werksmans Attorneys. All rights reserved.