First bread, now milk: Price prosecutions to start

Prosecution procedures into alleged price-fixing by certain South African milk producers will begin next week, the Competition Commission said on Tuesday.

Eight dairy companies investigated for alleged price-fixing will be involved in pre-hearings next week, said the commission’s head of enforcements and exemption, Thulani Kunene.

”The matter will be going ahead. It’s a large number of respondents. Most of them face more than one allegation [for] different contraventions,” said Kunene.

The pre-hearings will set up the logistics to prepare for trial before the Competition Tribunal takes over. Issues such as the dates of the trial and who to call as witnesses will be discussed.

In 2006, the Competition Commission referred a cartel case against Clover Industries, Clover South Africa, Parmalat, Ladismith Cheese, Woodlands Dairy, Lancewood, Nestlé South Africa and Milkwood Dairy to the Competition Tribunal.

Clover successfully applied at the time for leniency in relation to the accusation that it had removed surplus milk from the market in order to keep prices high.

Kunene said that although some parties have applied for corporate leniency — where they will not be prosecuted in exchange for providing information about other members of the cartel — it is still being determined exactly who is eligible.

A separate investigation is under way into a complaint by the Milk Producers’ Organisation, which said supermarkets were taking part in price-fixing.

In 2006, the commission said investigations since 2005 had found evidence of price-fixing by milk producers and the manipulation of trading conditions for raw and retail milk.

If found guilty, the milk companies could have to pay a penalty of up to 10% of their annual turnover.

The Congress of South African Trade Unions (Cosatu) said on Wednesday that it was ”absolutely outrageous that people can be profiteering from the sale of such basic foods as bread and milk, on which the poorest families spend such a high proportion of their small incomes”.

”Should the Competition Tribunal find the companies guilty, all those responsible must be punished much more severely than Tiger Brands, whose R99-million fine could be absorbed into their running costs and passed on to the consumer in higher prices.”

Cosatu spokesperson Patrick Craven said that if found guilty, the directors of the companies should be held personally responsible and forced to cut prices in order to repay consumers ”what has been unlawfully taken from them”.

In November last year, after an investigation by the Competition Commission, Tiger Brands admitted to being involved in illegal price-fixing in the bread industry, along with, among others, Premier Foods and Pioneer Foods.

This followed a complaint in December 2006 by Western Cape bread distributors about alleged bread and milling cartels.

Tiger Brands was made to pay an administrative penalty of R99-million. Last month, the price of bread rose with between 35c and 40c a loaf. — Sapa

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