Potato seed growers granted access to Mondial seed potato varietal, Wesgrow customers no longer restricted from saving seed
Potato seed growers in South Africa will now have ongoing access to the Mondial seed potato varietal, after the Tribunal today approved a settlement agreement between a Netherlands-based seed potato breeder, its exclusive South African distributor and the Competition Commission.
In what the Commission today described as “the first case of this nature in South Africa” (involving plant breeders’ rights and seed potato varietals), the approval of the settlement agreement also ensures that consumers will ultimately benefit from greater competition in the market for the production and supply of the Mondial seed potato varietal.
The Commission earlier submitted that this was not possible before, due to an exclusive agreement between HZPC Holland B.V. (HZPC) and Wesgrow Potatoes (Pty) Ltd (Wesgrow). It said the exclusive agreement meant that other potato seed growers were excluded from growing and selling the Mondial seed potato varietal to farmers. The respondents disagreed, arguing that the agreements were not detrimental to competition.
The Commission told the Tribunal that today’s approval of the settlement agreement sets a precedent in relation to other seed potato varietals, when plant breeders’ rights expire in the future.
HZPC and Wesgrow do not admit to infringing the Competition Act and no administrative penalty has been imposed. However, the companies have provided several undertakings in terms of which they will give other professional seed growers access to the varietal and will not restrict their customers from saving seed.
Background
The Commission referred HZPC Holland B.V. (HZPC) and Wesgrow Potatoes (Pty) Ltd (Wesgrow) to the Tribunal in 2017, for alleged anti-competitive conduct in relation to the exclusive supply of the Mondial seed potato varietal in South Africa.
Regarded as one of the finest in the market, the Mondial seed potato varietal is said to have better disease resistance and produces more ton per hectare than other varieties. The waxy potatoes keep their shape during boiling and are ideal for use in salads and as “slap” chips.
HZPC is an international seed potato breeder. Through research and development, it breeds and markets original seed potato varieties across the world, including the Mondial seed potato varietal. In countries where it does not have a branch, it enters into license agreements to supply to local markets. In South Africa, it entered into agreements with Wesgrow.
The local seed potato grower, which also exports to other African countries, has had exclusive agreements with HZPC to sell the Mondial seed potato varietal to commercial farmers who grow the potatoes for sale to consumers as table potatoes. HZPC would provide Wesgrow with the initial genetic material in exchange for license fees (royalties).
Plant breeders’ rights
When a new potato variety is created, a breeder is afforded exclusive rights over it for 20 years in terms of the Plant Breeder’s Rights Act 15 of 1976. This is a type of intellectual property right enabling breeders to recoup research and development costs, as breeding a particular seed potato variety can take over a decade and requires significant financial investment.
HZPC was granted a Plant Breeder’s Right over the Mondial seed potato varietal in October 1993. The exclusive rights, therefore, expired in October 2013.
The Commission’s complaint referral
The Commission alleged that: “Wesgrow unlawfully refused access to other seed potato growers to the Mondial potato varietal after expiry of the plant breeder’s right on 11 October 2013. This was done through an agreement between HZPC and Wesgrow, still effective for the period after 11 October 2013 to date, and further through agreements that Wesgrow concluded with its customers, effective for the period 11 October 2013 to date.”
Abuse of dominance
The Commission accused Wesgro of abusing its dominance through agreements the company had with its customers and alleged that the company had required its customers not to deal with any of its potential competitors, in contravention of the Competition Act.
Prohibited practice
The Commission claimed that continuation of the exclusive agreement between HZPC and Wesgrow after October 2013 meant that other potato seed growers were excluded from growing and selling the Mondial seed potato varietal to farmers, thereby depriving customers of choice in contravention of the Competition Act.
The Commission was also of the view that Wesgrow and HZPC’s conduct had maintained already near insurmountable barriers to entry to the market for the production and supply of Mondial seed potato varietal; significantly foreclosed potential competitors from the market; and substantially prevented and/or lessened competition in the market.
Settlement agreement
HZPC and Wesgrow do not admit to having contravened the Competition Act and there is no administrative penalty to be paid.
The companies do, however, make several undertakings which seek to address the contractual conditions Wesgrow had concluded with customers, which sought to regulate how they could utilise the Mondial Seed potatoes. These include the following:
- For three years Wesgrow will supply plantlets to professional seed growers, seed banks, labs and tissue culture facilities at cost, which includes reasonable import and transport costs (where applicable) and handling fees re- the preservation and care of such material;
- Plantlets will be supplied by Wesgrow and, where not possible, HZPC. This obligation only applies once, where after it will be the responsibility of the company to which the plantlets are supplied to produce and maintain its own genetic material for the Mondial varietal. Wesgrow shall not impose any conditions on the companies to which plantlets are supplied and shall not prevent reverse engineering;
- Wesgrow will not prohibit its customers from planting farm saved seed of the Mondial seed potato varietal; and
- Wesgrow undertakes to not enforce the provisions of specific clauses in its standard sales agreement with professional seed growers insofar as such clauses prevent storage of farm saved seed; require professional seed grower to pay a royalty to Wesgrow in respect of the potatoes harvested from farm saved seed; prohibit doing any act inconsistent with the Plant Breeder’s Rights Act; and include a waiver of any right/ privilege granted under the Plant Breeder’s Rights Act.
A full copy of the settlement agreement, the Tribunal’s order and the Commission’s submissions is available on the Tribunal website at www.comptrib.co.za
Issued by:
Gillian de Gouveia
Communications Officer
Tel: +27 (0) 12 394 1383
Cell: +27 (0) 82 410 1195
E-Mail: GillianD@comptrib.co.za
Twitter: @comptrib
Back to Press Releases
