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Potato supplier HZPC and its distributor Wesgrow charged by South African Competition Commission

Wesgrow Potato growing operation in South Africa. (Courtesy: Wesgrow Seed Potatoes / Facebook)

South Africa’s competition watchdog (Competition Commission South Africa) has charged the Dutch seed potato breeder HZPC Holland B.V. and its exclusive South African distributor Wesgrow Potatoes for anti-competitve conduct for the exclusive supply of the variety Mondial.

HZPC is the developer and breeder of the potato variety Mondial. Its business is the cultivation and marketing of certain seed potato varieties across the world.

Wesgro or Wesgrow?

In the press release of the Competition Commission South Africa the HZPC representative in South Africa is referred to as Wesgro Potatoes (Pty) Ltd (Wesgro).

We are not sure if this is an error or its legal name, but since the company is doing business as Wesgrow Potatoes, we will refer to the company as Wesgrow on PotatoPro.

Wesgrow Potatoes (Pty) Ltd, a potato seed grower in South Africa, has an exclusive agreement with HZPC Holland BV (HZPC) to sell the Mondial seed potato variety to commercial farmers.

In turn, commercial farmers grow the potatoes for sale to consumers as table potatoes.

The Mondial seed potato varietal are planted across potato producing regions in South Africa and are distributed nationwide. The Mondial potato is regarded as one of the finest in the market.

HZPC's Mondial Potato Variety is regarded as one of the finest in the South African market. The Mondial potato variety grown by Wesgrow in South Africa is seen here in a presentation by Wesgrow
(Courtesy: Wesgrow Seed Potatoes / Facebook)

When a new variety of potato is created, a breeder is afforded exclusive rights over the variety for 20 years.

This is a type of intellectual property right that enables the breeder to recoup research and development costs through the exclusive rights.

HZPC was granted a plant breeder’s right over the Mondial seed potato variety in October 1993. The exclusive rights therefore expired in October 2013. The Mondial seed potato variety should therefore be available in the open market, free of intellectual property right restrictions, according to the Competition Commision South Africa.

The Competition Commissioner started an investigation against Wesgro and HZPC in March 2015.

The Competition Commission South Africa:

“The Commission contends that HZPC and Wesgrow are unlawfully refusing access to other seed growers to the Mondial variety, despite expiry of the plant breeder’s right.”

“The continuation of the exclusivity between HZPC and Wesgro means that other South African potato seed growers are excluded from growing and selling the Mondial seed potato varietal to farmers.”

“The Commission is of the view that Wesgro and HZPC’s conduct has resulted in the following anticompetitive effects:
  • It has maintained insurmountable barriers to entry to the market for producing and supplying Mondial seed potato varietal;
  • It has a particular impact on the potential competitors of Wesgro who seek to produce and supply Mondial seed potato varietal; and
  • It has substantially prevented and/or lessened competition in the market for the production and supply of Mondial seed potato varietal.”
“The Commission is seeking an order from the Tribunal that both companies contravened the Competition Act and that Wesgro must pay a fine (administrative penalty) equal to 10% of its annual turnover.”

“In addition, the Commission is asking that the license agreement between Wesgro and HZPC be declared void, along with all other related agreements between Wesgro and its customers.”

“Further, the Commission wants the Tribunal to interdict the companies from entering into similar agreements in future.”