South Africa: Tobacco Firm Cut Us Out, Rival Complains

Source from:  Business Day (Johannesburg) 20 August 2007 08/21/2007

AN INDEPENDENT tobacco company failed partly because it could not penetrate its target market as a result of alleged exclusionary tactics employed by cigarette giant British American Tobacco SA (Batsa), the Competition Tribunal heard on Friday . Under cross-examination by Fanie Cilliers, acting on behalf of Batsa, Independent Tobacco Company (ITC) founder Piet Botha blamed the exclusionary contracts signed between Batsa, vending machine owners as well as venue owners. The evidence formed part of an inquiry into alleged abuse of dominance by giant Batsa, which has about 90% of the market, after the Competition Commission and Japan Tobacco International referred allegations to the tribunal in 2005. Botha, who left Batsa in December 1999, launched two brands, value-for-money Reva Spark and super-premium Matrix brands in August 2000, with his partners. The launch was before the introduction of restrictive tobacco legislation in October, which came into effect in January 2001, and strictly limited marketing for tobacco companies . Botha said Batsa denied the company any visible space in its target market. The company had targeted Matrix at premium venues such as night clubs and the vending machines in those clubs. He said Batsa had exclusive contracts with the owners of the machines and clubs, in effect cutting his company out of its target market. He said it was unable to penetrate its target market at all, although it did unsuccessfully enter less-premium venues and machines. He also alleged that signage was either removed by Batsa employees, or Batsa employees prevented signage from being erected at targeted stores. However, Cilliers argued that most of Botha's evidence was hearsay. He said Batsa had told Botha during discussions in 2001 and 2002 that there were no contracts that excluded competition from promotions at venues, and vending machines owners had agreed to allow ITC space . Cilliers also said that Botha had been told by Batsa that if contracts were being seen as exclusionary, Batsa would waive those rights, giving ITC an entry into the market. Botha said this was not the case in the field. Cilliers said Batsa was protecting its customers against infringement of the impending tobacco laws by removing signage as interpretation of the law was unclear. Botha denied that ITC's signage would have infringed the new laws, saying the company was wound down towards the end of 2002 and ceased trading in mid-2003 . Hearings are set to continue this month and in January next year. Enditem