The outcome of the Competition Commission’s report on collusion in the bread and milling industry did not come as a surprise, Grain SA said on Thursday.
The commission ordered Tiger Brands to pay an administrative penalty of R99-million, after the company admitted that it had participated in bread and milling cartels. It also agreed to assist the commission in prosecuting remaining cartel members who had not cooperated.
Chairperson Neels Ferreira said the collusion amounts to blatant exploitation of the wheat value chain. ”Grain SA welcomes the enforcement of recognised mechanisms in order to bring to light uncompetitive business practices, as well as the continuation of applicable legal processes”.
Ferreira said the bread and milling industries are placed in a strong competitive position due to the structure of the wheat industry since the deregulation of the wheat market in 1997.
”The four major role players control more than 90% of the wheat-milling activities as well as a significant percentage of South Africa’s bread-baking activities,” he said.
”It is disappointing that this position of power was taken even further by collusion. In fact, by accepting price binding as a strategy, unaffordable inefficiency was made part and parcel of the value chain … such improper conduct amounts to misuse of power and a one-sided discarding of normal disciplines that exist within a competitive market.”
The investigation by the commission is regarded positively in the sense that the balance in the industry can now be restored, he said.
”The institutions which have now been implicated and identified as involved in this matter are essential links in the value chain, and are grain producers’ only direct link with end users.”
Ferreira said that earlier this year Grain SA requested the National Marketing Council and the Competition Commission to investigate thoroughly the aspects of the current marketing mechanism applying to grain and, more specifically, wheat in South Africa.
The terms of reference of this investigation included the role of South African Futures Exchange (Safex) contracts in the price structure, as well as certain aspects relating to quality.
”Feedback from these two institutions is expected in due course,” he said. — Sapa