A decision to refer three major dairy firms to the attorney-general is shaking the industry, Ahmed Kotb reports Minister of Industry and Foreign Trade, Mahmoud Eissa, decided last week to refer dairy manufacturers Juhayna, Nile Company for Food Industries (Enjoy), and the International Company for Agricultural and Industrial Projects (Beity) to the attorney-general following a report by the Egyptian Competition Authority (ECA) that says there are monopoly practices in the dairy industry. The Egyptian Association of Dairy Producers (EADP) had earlier sent a court notice to Eissa giving him 15 days to refer the case to the public prosecutor, after claiming that the major dairy manufacturers who control more than 60 per cent of dairy farm productions are imposing unfair prices without negotiating with their owners. The case dates back to December 2007 when the then minister of trade and industry requested an investigation of anti-competitive practices in the dairy industry. Another two complaints by EADP were filed to the attorney-general last year against monopoly practices by dairy manufacturers that negatively affected dairy farms. ECA prepared a study of the case and concluded in a report that there are violations by the manufacturers to Article 6 of the competition protection law because they set an agreement on prices of buying raw milk from the farms. The report also mentioned that the price of a litre of milk sold to consumers reached LE7 and continues to increase while its production price is estimated at LE1.5. At the same time, the report adds, milk farms are obliged to sell the litre to the mentioned manufacturers at LE2.4 while it costs them LE2.8. Mohamed El-Tarouti, head of EADP whose members produce 90 per cent of total local production of milk, accused the manufacturers of causing huge losses at many farms -- 200 dairy farms in Egypt -- leading to a decline in local production of milk because of their "monopoly practices". El-Tarouti said, in a press statement, that he sent to the attorney-general all evidences that prove the accusations and that according to the law there will be an expected fine of LE600 million to be imposed on any company proven to have violated the law of competition protection. "Eissa's decision is unfair because there are no monopolies in the market," Hatem Saleh, head of the dairy division at the Federation of Egyptian Industries, told Al-Ahram Weekly. He added that there are 150 dairy factories in Egypt which create a highly competitive market. Besides, he said, there is a pricing committee created by the Ministry of Trade and Industry and the Ministry of Agriculture in the late 1990s and consisted of producers, manufacturers, and members from the two ministries. "The committee holds regular meetings to agree on fair prices for all parties," Saleh stated. However, he added, during the first quarter of 2010, a series of meetings were held to agree on the prices as usual, only for the producers to reject them although they had been agreed upon by all parties, including themselves, during a meeting. "EADP then decided to file a complaint against the legitimacy of the meetings which they were part of alongside representatives from the government," Saleh exclaimed, adding that prices have been fluctuating since then. Since dairy products cannot be preserved for a long time, their prices are subject to regular changes. "Milk production increases in the winter and decreases in the summer," Saleh pointed out. He also said that consumption figures increase in the summer and decrease in winter. "That makes the producers force certain prices in the summer because demand is higher than production, unlike in winter when the manufacturers have the upper hand," he stated. "This has nothing to do with monopoly practices." Saleh believes the attorney-general will shelf the case at the end, but the damage to the manufacturers by just accusing them of illegal practices "is hard to amend". Many effects are hard to spot at the moment but, for one, the Egyptian bourse announced a temporary halt to trading on Juhayna's stocks, the biggest dairy manufacturer. Total investments in the dairy market are estimated at around LE7 billion, with an annual growth rate of 20 per cent, according to Saleh.
