Tiger Brands has admitted guilt and agreed to pay a fine, but it seems this is just the start as it could face a barrage of civil cases to recoup illegal profits resulting from collusion.
During a consent order hearing at the Competition Tribunal last week the Department of Health announced that it had launched an audit to determine how much it had been overcharged by the drug companies involved in the cartel. It also instructed the state attorney to consider initiating legal proceedings against the four companies.
Tribunal chairperson David Lewis called for the Competition Commission to forward the consent order agreement to all the major hospital groups, saying they had a responsibility to take legal action against drug companies for rigging tenders.
The commission has also laid charges of perjury against Adcock Ingram Critical Care’s (AICC) managing executive, Arthur Barnett, who was allegedly instrumental in the cartel’s activities.
Tiger Brands company secretary Ian Isdale is also in the firing line after a Competition Commission witness claimed that he and two Tiger Brands board members, who have since left the company, had known about the collusion since 2002 and failed to act upon the information.
Lewis expressed dismay that Isdale did not attend the hearing last week. The tribunal’s panel was eager to interrogate him following his statement last year before the tribunal that the bread cartel was the only form of collusive practice that Tiger’s senior executive was aware of.
Tiger Brands’s new CEO, Peter Matlare, told the tribunal that Isdale had been removed from any position related to the collusion cases until the company had completed an internal investigation into the conduct of Isdale and the board members.
Isdale told the Mail & Guardian he had drafted a letter of demand to Lewis requesting a public apology. “He has made statements that I consider defamatory and factually inaccurate,” said Isdale. “My credibility was attacked in a public forum in my absence by a person of authority who I hardly know, which I found extraordinary.”
Isdale said he had not misled the tribunal and a transcript of the Tiger Brands bread cartel hearing shows that he was never asked whether senior executives at Tiger Brands knew of any other collusive practices within the group.
The Competition Commission said it had not been convinced by Tiger Brands’s argument that the collusive practices were carried out by rogue employees acting on their own. Tiger Brands, it said, had shown a “fundamental lack of corporate governance”.
Lewis expressed similar sentiments and said it was hard to believe that collusion was not happening in other markets serviced by AICC, calling for a full investigation into all markets that Tiger Brands operates in.
A barrage of civil claims would hit Tiger Brands hard as it has already agreed to pay a R99-million fine for its part in the bread cartel and R53-million for its part in the pharmaceuticals cartel.
Some commentators have said that the fines meted out to Tiger Brands had been too low and the profits they had made through collusion over many years far outweigh the fines they have been forced to cough up.
The National Consumer Forum (NCF) argued that the R53-million fine was “literally a steal”, that AICC, a Tiger Brands subsidiary, could have pocketed close to R238-million over the seven years it was involved in collusion.
The drug companies sold 17-million units a year at R4 more than the actual price, which amounts to a profit from collusion of R68-million.
This collusion occurred over seven years, which meant the unjustified mark-up could amount to R476-million, of which the AICC could have pocketed more than half, the NCF said.
The Black Sash’s advocacy programme manager, Nkosikhulule Nyembezi, backed the call for a fine levied over revenue from all the years of collusion.
The NCF said it was dismayed that collusion was taking place in the health sector where consumers are “most physically vulnerable” and where good hospital care is increasingly “unaffordable to the working person”.
The Health Department said that attempts to profiteer on drips, which were often life-saving for patients, was “inexcusable and morally reprehensible”.
“We have not heard any apology from these four companies or any statement from them clearly outlining their commitment to the eradication of such practices in the future,” said health deputy director general Dr Kamy Chetty. “These findings beg the question of whether this is the only case of collusion in the industry and for how long this collusion has been going on.”
Cosatu industrial policy coordinator Jonas Mosia said that in light of both collusion cases at the tribunal the federation could only arrive at the conclusion that the Tiger Brands is a “habitual criminal”.
“We have lost any remaining thread of hope that this tiger will ever change its stripes,” said Mosia.
The NCF has called for a lengthy investigation into whether Tiger Brands’s senior management were complicit in the collusion.
The Black Sash said that charges of perjury against Barnett set an important precedent. “Any individual responsible for collusive practices will be identified and brought to book”.