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South Africa’s Premier Foods reaches settlement over bread cartel claim

Vince Bamford

By Vince Bamford+

12-May-2016
Last updated on 12-May-2016 at 17:15 GMT2016-05-12T17:15:03Z

Four businesses took part in the bread cartel. Photo: iStock - zwawol
Four businesses took part in the bread cartel. Photo: iStock - zwawol

South African bakery and confectionery business Premier Foods has reached a settlement with civil society organizations over its involvement in a bread cartel.

The country’s Competition Commission today (May 12) said it welcomed the agreement between Waterfall City-based Premier Foods and civil society organizations including Black Sash, COSATU, the Children’s Resources Centre and the National Consumer Forum.

The deal ends a long-running civil claim brought by victims of the bread cartel for damages suffered as a result of Premier Foods’ participation.

Premier, Pioneer Foods (trading as Sasko and Duens Bakeries), Tiger Food Brands (trading as Albany Bakeries) and Foodcorp – whose combined brands hold about a 60% share of South Africa’s domestic bread market – colluded to fix bread prices from the late 1990s until 2006.

Told price of bread was going up 30%

The cartel was exposed, according to the commission, after Cape Town businessman Imraahn Mukaddam became suspicious when his bread supplier told him the price of bread would be going up by 30%, and that all the other suppliers would also be raising the price by the same amount.

Premier has been granted immunity from prosecution as it was the initial whistleblower in the cartel, but North Gauteng High Court ruled victims could initiate civil claims against the company. However, the Supreme Court of Appeal (SCA) last year upheld an appeal by Premier against the high court decision.

The SCA judgement prevented victims of the bread cartel instituting civil claims for damages against Premier Foods, although they could against the other three firms that had participated in the bread cartel.

Application to appeal ruling

Last November, the Commission lodged an application for leave to appeal the SCA judgement, with that case due to be heard this week at the Constitutional Court.

At the time it lodged the appeal, the commission said bread was a staple food in South Africa relied upon by millions of consumers.

Collusion is the most egregious form of anti-competitive behavior and has adverse effects on both consumers and the economy,” it added. “The most affected victim is always the consumer. In this case, these consumers were deprived of low prices.”

The commission today said the settlement between Premier Foods and civil society organizations resolves the dispute, and the Constitutional Court proceedings have now been withdrawn.

Civil claims against the remaining respondents are ongoing before the Western Cape High Court.

'Lowest point in history of collusion'

The bread cartel was a low point in the history of collusion in South Africa,” said Competition Commissioner Tembinkosi Bonakele.

We congratulate and commend civil society organizations and Premier Foods for bringing finality to this ugly side of corporate behavior.

We hope this settlement will pave way for the other respondents to do the right thing,” he added.

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