SA wheat millers to be prosecuted

Posted on 15. Mar, 2010 by admin in News-Food

The Competition Commission, subsequent to its investigation into collusion in  the wheat milling market, has referred its findings  to the Competition
Tribunal against Pioneer Foods (Pty) Limited (“Pioneer”), Foodcorp (Pty)
Limited trading as Ruto Mills (“Foodcorp”), Godrich Milling (Pty) Limited
(“Godrich”), Premier Foods (Pty) Ltd (“Premier Foods”) and Tiger Brands Ltd

The case was initiated following revelations by Premier Foods during the
bread cartel investigation that the cartel, which involved largely the same
companies, also covered their milling operations. Premier Foods and Tiger
Brands were subsequently granted conditional immunity from prosecution by the Commission provided that they fully co-operate in the Commission`s investigation and prosecution of this case.

In its investigation the Commission found that the respondents contravened the Competition Act by engaging in price fixing and dividing markets by
allocating customers. This was facilitated through secret meetings and
telephone calls between the employees of these firms. Arrangements seem to have been designed to, amongst other things, prevent price wars and
discounting in the industry.  The meetings were held at various venues,
including churches, stadia and hotels.

Premier Foods, Tiger Brands, Foodcorp and Pioneer Foods control more than 90 percent of the wheat flour market. All four mill their own wheat into flour and use it to supply both their own bakeries and independent parties such as chain stores and smaller bakeries.  Only Godrich does not have significant baking operations of its own. Premier Foods, Tiger Brands and Pioneer Foods have mills throughout the country, while Foodcorp and Godrich have mills in Gauteng. Flour is the main ingredient in the production of bread.

The Commission has asked the Tribunal to impose an administrative penalty of 10 percent of annual turnover for the 2009 financial year on each of the
firms involved, except Premier Foods and Tiger Brands which have been granted conditional immunity.

“In addition to the negative effect of this conduct on consumers, it has also
inhibited small bakeries from being effective competitors,” says Commissioner Shan Ramburuth.

Tags: Bread, Bread cartel, Competition Commission, Featured, Foodcorp, Godrich Milling, Milling, Premier Foods, Ruto Mills, Wheat