Patel: Pioneer Foods forced to cut bread price

Pioneer Foods will reduce the sale price of bread and flour products by a total of R160-million as part of a R1,05-billion settlement reached on Tuesday in its price-fixing cases, Economic Development Minister Ebrahim Patel said.

In a speech in the National Assembly, Patel announced on Tuesday that in addition to paying R445-million of penalties, the 90-year-old company also had to pay R250-million into the National Revenue Fund and had to increase its planned capital expenditure of R1,2-billion over the next two years by a further R150-million.

The settlement brings an end to long-standing cases against Pioneer over its conduct in the wheat, maize, poultry and eggs market.

It is the largest settlement in the history of the Competition Commission involving a single company and is expected to be confirmed by the Competition Tribunal soon, Patel told Members of Parliament.

The penalty is also the biggest ever imposed on a single company.

Patel said the case proved that it was becoming harder for companies to get away with anti-competitive behaviour.

“This settlement shows the resolve of the competition authorities to act swiftly and effectively to promote a competitive food-processing sector. Vertically integrated firms in the milling and poultry markets leverage their control of critical inputs like wheat and poultry feed to exclude other firms or to sustain cartel arrangements. For this reason, both structural and behavioural measures are important to bring new players into the value chain.
This new pro-active stance of the competition authorities, coupled with a strong investigative capacity, makes it harder for companies to escape with anti-competitive conduct.”

Patel said ordinary South Africans would benefit from the net price reductions by a total R160-million on bread and flour, which are staple food products.

“Government would monitor compliance with the subsidy and ensure that the price reductions benefit ordinary consumers,” he said

The modalities of the price reduction will be announced by the company and the Competition Commission, and Pioneer’s compliance with these undertakings will be audited.

“I have asked the Competition Commission to monitor the actions of bakeries and retailers to ensure that the benefit reaches the intended beneficiaries and to provide a written report to me that I intend to table in Parliament,” he added.

Pioneer initially denied any wrong-doing and resisted a settlement, while smaller competitors like Tiger Brands and Premier Foods cooperated with the commission and divulged information about collusive behaviour.

Patel signalled shortly after his appointment to Cabinet that government would cast a spotlight on anti-competitive behaviour, particularly in the local food market.

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