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JSE
GEN
GEN - General - Tribunal Imposes Penalty Of R195 Million On Pioneer
The Competition Tribunal
TRIBUNAL IMPOSES PENALTY OF R195 MILLION ON PIONEER
(To date, the maximum penalty the tribunal is entitled to levy)
SUMMARY
The Competition Tribunal has, today 3 February 2010, imposed a penalty of
R195 718 614, on Pioneer for its role in a bread cartel and has ordered
Pioneer to desist from such conduct forthwith. The cartel involved the four
primary bakeries Tiger (Albany), Premier (Blue Ribbon), Foodcorp (Sunbake)
and Pioneer which owns Sasko and Duens bakeries. Together the four bakeries
enjoy a market share of between 50-60% of the domestic bread market in South
Africa.
The case concerns two complaint referrals brought against Pioneer of a bread
cartel operating in the Western Cape (the Western Cape complaint) and a
bread cartel operating in inland region (referred to as the Inland/National
complaint).
During 2007 Premier Foods sought leniency from the Commission for its role
in the cartel. Tiger Consumer Brands and Foodcorp subsequently negotiated
agreements with the Competition Commission (consent order agreements) in
which they agreed to pay fines and desist from the conduct. Pioneer opted to
fight the case before the Tribunal and remained as the single respondent in
the matter.
The administrative penalty of R195m amounts to 10% of Sasko`s (Pioneer`s
bread baking division) national 2006 bread turnover. The Competition
Commission asked the Tribunal to impose a penalty of 10% of Pioneer`s total
group turnover, not only on its baking division for each complaint. In
effect the Commission was seeking a penalty of between R396m to R1.5bn.
Pioneer on the other hand asked the Tribunal to adopt a piece-meal approach
and to impose a penalty upon it only in relation to the Western Cape
referral arguing that this should not exceed 2.25% of Sasko`s (bread
division) 2006 turnover for the Western Cape. Had the Tribunal followed the
latter approach, Pioneer would be facing a maximum penalty of 10% in respect
of each occasion when it was found to be in contravention of the Act - in
this case this would amount to fourteen contraventions - seven in the
Western Cape and seven in the inland region.
The Tribunal accepted that the agreement in the Western Cape was for a
shorter duration than that in the national/inland region. Accordingly for
the Western Cape contravention it imposed a penalty of 9.5% on Sasko`s
(bread and baking) Western Cape turnover for 2006 being R46 019 954 and for
the national./inland contraventions, the Tribunal imposed a penalty of 10%
on Sasko`s 2006 turnover (less Western Cape) being R149 698 660. The
Tribunal has the discretion to impose a penalty of up to 10% of the firm`s
annul turnover in the Republic and its exports from the Republic and to date
this is the highest penalty it is entitled to levy. The total penalty in
respect of both complaints is R195m
In terms of the Western Cape complaint the Tribunal says that it has no
hesitation in finding that the bread division of Pioneer (Sasko and Duens)
has been involved in a conspiracy to fix the increase of the price of a
standard loaf of bread in the Western Cape (Western Cape Complaint) as well
as the timing of this increase. This - in addition to Pioneer`s concession
made regarding the fixing of the agents` commissions and those concessions
made with respect to the various market allocations - amounts to a
comprehensive contravention of Section 4(1)(b)(i) and (ii) of the
Competition Act.
In terms of the Inland/National complaint the Tribunal has also no
hesitation in finding that Pioneer had contravened sections 4(1)(b)(i) and
(ii) in the inland region or in that part of the country excluding the
Western Cape, over a period of time from as far back as 1999 to date.
Issued by: Jane Sussens
Communications Advisor
The Competition Tribunal
Tel: (011) 482 8118
Cell: 082 920 0875
Fax: (011) 482 8119
On Behalf of: Lerato Motaung
Registrar
The Competition Tribunal
Tel: (012) 394 3355
Cell: 082 556 3221
E-Mail: leratom@comptrib.co.za
Date: 03/02/2010 14:59:22 Produced by the JSE SENS Department.
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