Tuesday, November 22, 2011
Ex-post evaluation of the consumer impacts of a decision by Competition Commission of Mauritius (CCM) concerning block processed cheddar cheese
Posted by D. Daniel Sokol
Mauritius reminds the competition community about the importance of post evulation impact. All too often agencies do not follow up to see the impact of their actions. However, the Competition Commission of Mauritius (CCM) has just produced an ex-post evaluation of the consumer impacts of a decision taken last year by CCM. The report shows substantial consumer benefits, of about 130m Mauritian Rupees or more, after CCM intervention concerning block processed cheddar cheese. The report was released last Friday at a workshop for professionals including lawyers and financial analysts. http://www.gov.mu/portal/sites/ccm/pdf/INV001-EvaluationReport-Non-Confidential.pdf
As background, in September 2010, the Commissioners decided to limit the types of contracts that could be used when selling Kraft processed block cheddar cheese in Mauritius. Contractual features that had been used included retroactive rebates for supermarkets that achieved customised sales targets. Block cheese is particularly popular in Mauritius and Kraft sold about 90% of processed block cheddar cheese at the time of the case. Since the Commissioners decision, the market for block cheese in Mauritius has evolved.
The main findings are:
· The distributor of Kraft processed block cheddar cheese has discontinued the practice of offering anticompetitive retroactive rebates in exchange for prominent shelf space.
· Starting in the spring of 2011, two new brands namely, Bega and Melbourne, have successfully penetrated the market with growing sales volume. The market has become more competitive with a lower concentration level, as measured by the HHI declining significantly from 8,200 in the year 2010 to between 4,000 – 5,000 by August 2011.
· Prices for block processed cheddar cheese 250g have fallen significantly in the post-CCM intervention period. Consumers are now paying on average around Rs 62.40 per unit compared to Rs 72.30 in early 2011, prior to new entry in the market of block processed cheddar cheese.
· Consumers have already realised savings on expenditure in the range of Rs 8m – Rs 39m over last 4-month May – August 2011 period. On an annual basis that would range between Rs 25m – Rs 117m. The expected benefits over a period of 6 years, assuming a 6% discount rate, would range between Rs 130m – Rs 600m.