Competition Commission chokes on new bread price

The South African competition watchdog the Competition Commission on Wednesday slammed bread price increases, saying the “blatant profiteering is an insult to the nation”.

Bread maker Tiger Brands on Monday implemented price increases on its Albany bread brand—soon after the Competition Commission hit it with a R99-million fine for admitting its role in a bread price-fixing cartel. It is now charging 40 cents more for a loaf of Albany bread.

“This blatant profiteering is an insult to the nation, particularly the poor. It demonstrates that either the collusion is continuing or the cartel members are acting to maintain the artificially high margins they achieved by acting unlawfully,” said Shan Ramburuth, competition commissioner.

The commission has requested an explanation.

Tiger Brands is the only company that has implemented price hikes. Its peers Pioneer Foods, Premier Foods and Foodcorp, also implicated in the bread-cartel scandal, are expected to follow suit.

“Should evidence show that the collusive behaviour is continuing, we are able to withdraw the immunity we’ve granted to other players. We are also prosecuting the remaining cartel members, Pioneer and Foodcorp. Perhaps most shockingly, we have received new allegations of other anti-competitive behaviour by these parties, which we are vigorously pursuing,” said Ramburuth.

Tiger Brands has denied that prices increases were implemented to plug the gap on the R99-million fine, but has cited higher wheat prices.

Wheat prices—which make about 20% of bread input—nearly doubled in the past year to trade around R3 000 per tonne as the world’s wheat inventories shrunk due to threats of crop failure in the world’s top wheat exporters.

Ramburuth said that while input prices such as wheat and transport costs may have seen recent spikes, firms colluding to set prices normally do so to extract the highest price possible.

“The increases are coming on top of what is an artificially high price in the first instance and could have been seized by the bread producers as an opportunity to suppress the margin to what would be more market-related,” he added.

He said bread producers have now seen fit to make a “song and dance” about price increases—this after they did not mention the increases during the negotiations with Tiger Brands and Premier Food.

“[W]e have to wonder if this is a cynical act to demonstrate a false transparency, or if it is price signalling to their competitors—both further evidence of their disingenuousness. It would appear that old habits die hard.”

Ramburuth also announced that the commission will be instituting more rigorous reporting requirements for companies found to have contravened the Act, particularly when evidence of cartel activity was found. It is anticipated that market participants, particular shareholders and consumers will increasingly assist as watchdogs to hold the companies accountable.

Foodcorp and Pioneer Foods were not immediately available for comment.

Premier Foods’ corporate affairs manager Steven Mallach said he could not comment on the Competition Commission’s statement. “In terms of our agreement with the commission we are prohibited from commenting on the status of those investigations [into price collusion],” he said.

On Monday, Premier Foods said the company would finalise its price increase within 10 to 14 days. MD Andre Hanekom said earlier in the week that the company expected increases of between 35 and 40 cents, depending on the loaf and the region in which it was sold.—I-Net Bridge, Sapa

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