Give us our daily bread
South Africa’s Competition Commission has alleged bizarre behaviour by the country’s biggest food companies, saying their representatives met in churches to pray before they rigged wheat prices.
The commission alleges that meetings took place between 1999 and 2007 on a regional and national level and that a range of venues was used, including hotels, stadiums, sports clubs, Wimpy restaurants and churches.
“In KZN [KwaZulu-Natal], the meetings took place every four to six weeks,” says the commission’s referral affidavit. “The attendees of these meetings in KZN referred to them as kerkvergaderings, or church meetings. In the Free State region, some of the price fixing meetings were held in the hall of the NG Kerk in Viljoenskroon and were, quite astonishingly, often preceded by a prayer [seeking what divine blessing is unclear],” says the affidavit.
The commission’s affidavit refers to the alleged cartel’s activities as a “serious infringement”, pointing out that the prices of milled wheat products affect the poorest of the poor, for whom these products are a staple.
It referred its case against the alleged wheat-milling cartel to the Competition Tribunal this week, accusing Pioneer Foods, Tiger Brands, Foodcorp, Premier Foods and Godrich Milling of collusion, price fixing and market division.
Tiger Brands and Premier Foods have been granted immunity because they agreed to cooperate with the commission and spill the beans on the cartel’s activities.
The commission has requested that Foodcorp, Pioneer Foods and Godrich Milling be fined 10% of annual turnover.
“The respondents met behind closed doors, ensured that there was virtually no paper trail and at other times cloaked their activities in the guise of normal commercial practices, designed specifically to pass muster under prima facie anti-trust scrutiny,” the commission’s affidavit reads. It lists 51 staffers from the five accused companies who were involved in meetings and phone calls during which price-sensitive information was discussed.
Of these, who range from regional staff to general managers, 14 are from Premier Foods, 13 from Tiger Brands, 14 from Pioneer Foods, five from Foodcorp and five from Godrich Milling.
This contradicts arguments by the food giants that the collusion was the result of rogue employees acting on their own.
This was a common argument used by the food giants when they had to face the music in the now concluded bread cartel case, which resulted in the milling investigation.
Premier Foods (Blue Ribbon Bakeries), Foodcorp (Sunbake Bakeries), Tiger Brands (Albany Bakeries) and Pioneer Foods (Sasko and Duens) were all involved in the commission’s bread cartel case.
Premier was granted immunity from prosecution in that case because of its cooperation with the investigation and the fact that it confessed to its role in the cartel.
Tiger Brands also decided to cooperate with the commission, culminating in its admission of participation and a fine of more than R90-million.
Foodcorp was the third to settle with the commission, paying a fine of R45-million.
Pioneer took the commission on, claiming it was not part of a national bread cartel, but was found guilty by the Competition Tribunal.
It was fined R195-million by the tribunal, but the commission has since taken the case on appeal, arguing that the tribunal erred in ruling that such a small fine should be paid. It was looking for the maximum fine of 10% of annual group turnover, which would have been closer to R1,5-billion.
Justin Williamson, Foodcorp managing director, told the Mail & Guardian that until now he had not had any insight into what was alleged to have been happening in the industry.
“To be honest I was stunned by how many meetings the referral affidavit says took place between Tiger, Premier and Pioneer. I think Tiger’s name is mentioned 19 times in the referral,” says Williamson.
“We are a relatively small regional player with only one mill in Pretoria and around 12% of wheat market share and only 3% of maize share, so it certainly seems like the big fish got away.
“We had done an extensive internal investigation into the matter but the referral raised some issues we were not previously aware of. We are investigating them,” said Williamson.
Godrich Milling’s Tony Godrich said the issue came as a shock to the company. “As we are not sure what to do, we have asked our attorneys to handle the whole matter—who I am sure will give us the right advice,” said Godrich.
Pioneer Foods responded by issuing a cautionary to the JSE this week, stating that the fine for its alleged contraventions of the Competition Act could amount to as much as R1,6-billion.
“As mentioned before, the company wants to resolve the milling and other matters through cooperation with the commission, and without recourse to proceedings before the Competition Tribunal, if possible,” says the cautionary. “The company has already met the commission in this regard.
“The administrative penalty sought by the commission in the milling matter may be adjusted lower depending on the outcome of continuing negotiations with the commission,” the cautionary says.
Tiger Brands chose not to comment further following a cautionary it put out to the JSE last week. It said that, in the event that the commission did refer its milling investigation to the tribunal for determination, with Tiger Brands cited as a co-respondent, no relief was expected to be sought against Tiger Brands.
Premier Foods had not responded to the M&G at the time of going to print.