Khor Reports blog exclusive: Earlier, we reported on questions raised in Sarawak on the actions of dominant players seeking to affect market access. The palm oil industry is waiting for other large plantations to sign on to Wilmar's pledge or something similar. In the weeks surrounding November 2013, the big players were abuzz with talk of the Unilever Manifesto. It appears that Wilmar went bravely ahead with a high-end version on 5 December, while many palm oil players worried about implementation risks and sought a measured version; basically seeking time for more detailed studies. Announcements were awaited in January and early February, but the big plantations have been so far quiet. We hear from sources that issues behind a hold-up are due to a) NGO insistence on higher-end promises and also due to b) corporate lawyers having to check on anti-trust issues i.e. is this an economic cartel? Having the top 10-20 players all sitting down together and planning a big move that would impact the palm oil supply chain in Indonesia and Malaysia clearly raises legal antennae! Both countries have Competition Acts. Palm oil sustainability has entered a heightened phase, with the entry of new players, The Forest Trust (TFT; associated with Greenpeace via its program with Golden Agri / Sinar Mas) and Climate Advisers. It is following the strategy outlined by the WWF commodity "roundtables" programs to get big buyers, big processors/traders and big producers to sign on, in order to effect rapid change in commodity supply-chains.
4.15pm update: Got an alert from a reader that wording was changed on an earlier draft to get past the cartel problem. If so, the hold-up in Manifesto announcement could be due to other issues.
Since it's a long time since we studied "industrial economics 101" at university, we can look at the Wikipedia definition of a cartel (http://en.wikipedia.org/wiki/Cartel): "A cartel is aformal (explicit) "agreement" among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production.[1] Cartels usually occur in an oligopolistic industry, where the number of sellers is small (usually because barriers to entry, most notably startup costs, are high) and the products being traded are usually commodities. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion (also called the cartel agreement) is to increase individual members' profits by reducing competition.... One can distinguish private cartels from public cartels. In the public cartel a government is involved to enforce the cartel agreement, and the government's sovereignty shields such cartels from legal actions. Inversely, private cartels are subject to legal liability under the antitrust laws now found in nearly every nation of the world. Furthermore, the purpose of private cartels is to benefit only those individuals who constitute it, public cartels, in theory, work to pass on benefits to the populace as a whole....."
4.15pm update: Got an alert from a reader that wording was changed on an earlier draft to get past the cartel problem. If so, the hold-up in Manifesto announcement could be due to other issues.
Since it's a long time since we studied "industrial economics 101" at university, we can look at the Wikipedia definition of a cartel (http://en.wikipedia.org/wiki/Cartel): "A cartel is aformal (explicit) "agreement" among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production.[1] Cartels usually occur in an oligopolistic industry, where the number of sellers is small (usually because barriers to entry, most notably startup costs, are high) and the products being traded are usually commodities. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion (also called the cartel agreement) is to increase individual members' profits by reducing competition.... One can distinguish private cartels from public cartels. In the public cartel a government is involved to enforce the cartel agreement, and the government's sovereignty shields such cartels from legal actions. Inversely, private cartels are subject to legal liability under the antitrust laws now found in nearly every nation of the world. Furthermore, the purpose of private cartels is to benefit only those individuals who constitute it, public cartels, in theory, work to pass on benefits to the populace as a whole....."