PRESS STATEMENT

16 January 2008

Competition Commission outraged to see bread price increases

The Competition Commission today said the rapidity with which all the large bread producers had moved to increase prices at roughly the same time following the collusion uncovered in the industry flew in the face of its ongoing investigation into the bread and milling industries.

The Commission has requested an explanation.

“This blatant profiteering is an insult to the nation, particularly the poor. It demonstrates that either the collusion is continuing or the cartel members are acting to maintain the artificially-high margins they achieved by acting unlawfully,” said Shan Ramburuth, Competition Commissioner.

The Commissioner said they would not be stopping with the fine levied against Tiger Brands.

“Should evidence show that the collusive behaviour is continuing we are able to withdraw the immunity we’ve granted to other players. We are also prosecuting the remaining cartel members, Pioneer and Foodcorp. Perhaps most shockingly, we have received new allegations of other anti-competitive behaviour by these parties, which we are vigorously pursuing,” he said.

While he said the Commission’s job is to ensure compliance with the law and not set prices, we expected our actions to prompt the bread producers to see fit to reduce the prices they had colluded over 12 years to fix rather than increase them yet again,” said Shan Ramburuth, Competition Commissioner.

He said that while input prices such as wheat and transport costs may have seen recent spikes, firms colluding to set prices normally do so to extract the highest price possible. Therefore, the increases are coming on top of what is an artificially high price in the first instance and could have been seized by the bread producers as an opportunity to suppress the margin to what would be more market related.

“In that the bread producers have now seen fit to make a song and dance about price increases (though no mention was made of them during our protracted negotiations with Tiger Brands and Premier Food), we have to wonder if this is a cynical act to demonstrate a false transparency, or is price signalling to their competitors, both further evidence of their disingenuousness. It would appear that old habits die hard.”

Ramburuth also announced that the Commission would be instituting more rigorous reporting requirements for companies found to have contravened the Act, particularly when evidence of cartel activity had been found. It anticipates that market participants, particular shareholders and consumers will increasingly assist as watchdogs to hold the companies accountable.

ENDS

Prepared by: FD Beachhead

Dani Cohen 

Jennifer Cohen

On behalf of:  The Competition Commission

Further info:  

Shan Ramburuth, Commissioner

Thulani Kunene, Head of Enforcements and Exemptions