Big fine for fixing bread price

Johannesburg - Consumer food brands maker Foodcorp has agreed to pay a fine of R45.4m for participating in the bread and milling cartel that rocked the country late in 2007.

In a statement issued on Monday, the Competition Commission said it had reached a settlement agreement with Foodcorp over the latter's participation in the bread cartel.

"In terms of the consent agreement, Foodcorp admits that Sunbake Bakeries (operated by Foodcorp) was engaged in fixing the price of bread sold to consumers," the Commission said in a statement.

The fine represents 6.7% of Foodcorp turnover from all its baking operations for the 2006 fiscal year.

In late 2007, listed food giant Tiger Brands (TBS) received a R99m fine for its involvement, after working with Foodcorp and other players to inflate the price of bread to independent distributors by between 30 cents and 35 cents per loaf in December 2006.

The settlement agreement, which is yet to get a final stamp of approval from the Competition Tribunal, compels Foodcorp to help the Commission in the prosecution of any other cartel members.

Pioneer Foods (PFG), trading as Sasko and Duens bakeries, remains the sole respondent in the case after Tiger Brands (TBS) reached a similar settlement in 2007, paying R99m. Premier Foods, on the other hand, was granted leniency from prosecution in exchange for helping the Commission in its investigations.

Initial investigations found that three companies - Tiger Brands, Premier Foods and Pioneer Foods - inflated the price of bread to independent distributors in the Western Cape by between 30 cents and 35 cents per loaf in December 2006.

Foodcorp was included to the trio after the Commission expanded its probe throughout the country.

It was found to have flouted antitrust laws in Malelane, a small town in Mpumalanga near Kruger National Park, and surrounding areas.

The commission found that all four companies systematically broke the law between 1995 and 2006 by fixing the price of bread, and allocating one another areas where they would distribute the staple food product.

These companies held telephonic discussions and meetings where they directly fixed the selling price of bread; directly fixed the dates when such agreed price increases would be effective; and divided markets by allocating territories where each firm would be the only one operating a bakery in a particular territory and supply all distributors in the allocated area, the commission said.

The Competition Tribunal will be holding a hearing on Tuesday at 10:00 on whether to approve the settlement.

- I-Net Bridge