Tiger Brands chief executive Nick Dennis could be in hot water if allegations that he misled the Competition Commission during its investigation into bread price-fixing are true.
Commission head Shan Ramburuth says a full investigation will take place and if it is proved that Dennis knew about the price-fixing he could face criminal charges and Tiger Brands could face tougher financial penalties.
The allegations came to light through an unsigned letter that was sent to the board of Tiger Brands last week. It claimed that Dennis, chief financial officer Noel Doyle and managing executive for Tiger’s bread business, Haydn Franklin, knew about the price-fixing of bread.
The letter, which claimed to be from ”long-serving and reasonably senior managers” at Tiger Brands, has been handed to law firm Edward Nathan Sonnenberg.
The firm was appointed by Tiger Brands to conduct the initial investigation into priceÂÂfixing that exonerated Dennis and other senior executives, claiming that it was managers two tiers below Dennis who colluded with competitors.
Ramburuth says the Competition Commission will demand an explanation about the letter and if Dennis has provided the commission with false information ”he will be liable for criminal action to be taken against him”.
Ramburuth says the Competition Act stipulates that the punishment can be a fine or six months in prison. ”If it turns out that this is indeed true and they [Tiger Brands] haven’t declared everything to us truthfully, we would have to consider the possibility of withdrawing leniency.”
Tiger Brands company secretary Ian Isdale told the Mail & Guardian that no one understood the ramifications of the Competition Act like the commission and therefore Tiger Brands did not dispute its comments.
The bread price-fixing scandal broke three weeks ago when the Competition Commission announced it was fining Tiger Brands R98-million for colluding with two of its competitors in the bread and milling industry, Pioneer Foods and Premier Foods.
The commission’s investigation was launched following a complaint lodged by Western Cape independent bread distributor Imraahn Mukaddam, who became suspicious when all three companies raised bread prices and cut distributor discounts by similar margins in December last year.
Under the Competition Commission’s corporate leniency programme, Premier Foods was the first to cooperate with the commission’s investigation and walked away with no fine, while Tiger Brands was given a reduced fine for further information supplied to the commission.
The Competition Tribunal approved the consent agreement entered into by the Competition Commission and Tiger Brands at hearings held this week.
Tiger Brands has agreed to pay the R98-million fine, take disciplinary action against staff who colluded with competitors and to institute a company-wide education programme on competition law.
Meanwhile Cosatu, the National Consumer Forum, Black Sash, the South African Human Rights Commission (SAHRC) and Mukaddam all made representations to the tribunal, mostly calling for tougher sanctions against the cartel.
The Black Sash’s advocacy coordinator, Ratula Beukman, told the tribunal that it viewed the Tiger Brands fine as ”merely a slap on the wrist”.
”It does not go to the root of the price-fixing or identify individuals responsible for these collusive practices,” said Beukman. ”Given the widespread sweeping impact of these practices, the assertion by the CEO that he did not know anything about it is astounding and warrants further investigation.”
Beukman also told the tribunal that if, as the Competition Commission claimed, price-fixing had been going on for 12 years, then Black Sash proposed fining the companies involved for every year, not just the last financial year. The Black Sash also called for key players to be identified and charged criminally.
The tribunal’s chairperson, David Lewis, said the tribunal shared the belief that the only appropriate deterrent for collusion of this nature was prison time for those involved, but said the law did not allow for such punishment.
”If this had occurred in Britain, Australia or Ireland there would be several people packing their bags and spending a very unpleasant Christmas,” said Lewis. Mukaddam called for the tribunal to declare the entire consent agreement null and void.
”The denial by the directors of Tiger Consumer Brands that they had any knowledge of the prohibited practices, despite the fact that these activities occurred over a period of 12 years and included such critical operational decisions such as closing of bakeries, either highlights their incompetence or illustrates their dishonesty,” said Mukaddam.
It came to light during the hearing that Tiger Brands had closed six bakeries as part of an agreement with its competitors, which in turn closed bakeries that benefited Tiger Brands. Dennis said he knew bakeries were being closed, but was never informed that the closures were part of an exchange programme with its competitors.
Mukaddam said the companies involved had tarnished the reputation of the baker in South Africa and compared them with organised crime gangs like the Mafia.
”We believe that these godfathers called CEOs should be held accountable,” said Mukaddam.
The SAHRC told the tribunal that the anti-competitive practices might have violated basic human rights like the right to sufficient food and the right of children to basic nutrition. The SAHRC’s Christine Jesseman said anti-competitive practices, when placed in their complete social context, became ”thieves at the dinner table”.
Cosatu also said the fine imposed was too lenient and called on the commission to broaden its investigation into all firms involved in the whole food manufacturing and retailing chain.
The National Consumer Forum called for Tiger Brands’s R98-million fine to be used to empower consumers so that they can understand and make use of the institutions and agencies that government and the Constitution have put at their disposal.
The Competition Commission confirmed it would still be taking action against Pioneer Foods and 14 millers implicated in collusion and price-fixing.