Staple foods on competition body's menu

The Competition Commission is cracking down on companies that fix the prices of staple foods, with two more bakers due to be prosecuted and several milk producers set to appear before the Competition Tribunal shortly.

Commission enforcement and exemption division manager Thulani Kunene said the commission would file papers against Foodcorp and Pioneer Foods this month. In addition, with all the paperwork relating to the alleged milk cartel now complete, dates for the tribunal hearing would be set down next week.

The commission's strategy was focused on food products that affect the majority of consumers, especially the poor, he said. It was investigating anticompetitive practices in milling and was examining the entire bread value chain — from farmer to supermarket shelf.

Kunene said the commission also had evidence of cartels in other areas of the food sector and was investigating these. Details would be released in due course.

The commission's first foray into anticompetitive practices was its investigation into a possible milk cartel, which implicated eight dairy processors. In December 2006, the commission referred cartel charges against the eight to the tribunal for prosecution.

Seeking the maximum

Kunene said the commission would seek the maximum penalty against the producers — up to 10% of annual turnover.

The companies that are implicated are Clover Industries, Clover, Parmalat, Nestlé, Ladismith Cheese, Woodlands Dairy, Lancewood and Milkwood Dairy.

The case against the Clover, Parmalat and Woodlands face six charges, while Nestlé, Ladismith, Lancewood and Milkwood each face one charge.

In December 2006, the commission accused Clover, Parmalat and Nestlé of exchanging sensitive information on procurement of raw milk and entering into long-term supply and exchange agreements to sell surpluses to each other.

The commission also alleged that Clover and Parmalat had abused their dominant market positions to compel raw milk producers to sell them their total milk production.

This meant surpluses could not be sold at competitive prices or directly to consumers.

Accused of creating an artificial shortage

Other allegations include that Clover, Parmalat and Woodlands co-ordinated the removal of surplus milk from the market, decreasing the available supply.

Clover has since received conditional leniency on the surplus removal charge, but still faces five other charges.

Kunene said buying up surplus milk to turn into cheese or milk powder for the export market artificially inflated prices.

On the other hand, the commission's investigation into bread price fixing is also set to enter round two when the commission prosecutes Foodcorp and Pioneer.

In November, the tribunal upheld the R99m penalty Tiger Brands had agreed to pay for its role in bread and milling cartels. The fast-moving consumer goods firm was fined for its role in the baking cartel, but qualified for immunity in relation to its role in the milling cartel after agreeing to co-operate with the commission in its investigation.

Caught out, and co-operating

Tiger Brands was fined 5,7% of revenue from its national bread operations. It also had to take remedial steps. Kunene said the company had not faced the maximum fine as it had co-operated.

Premier, which is also implicated, has been granted immunity after approaching the commission with information.

Pioneer Foods MD Andre Hanekom said the company was aware the commission was moving closer to prosecution, but it had not yet received any official documentation.

Pioneer hoped to come to an agreement, once amicable terms were reached.

Foodcorp CEO Justin Williamson said the company had not received formal prosecution notification from the commission. Its internal investigation was continuing, but with 3000 staff it was a “case of trying to find the right people to speak to”.

Kunene said the commission had provided the companies with the names of implicated staff members and dates on which they allegedly met to discuss bread prices.

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