Pioneer Food’s R855 million settlement with the Competition Commission for anti-competitive behaviour finally closes all cases against the food giant in the bread, flour and wheat industries. And provided Pioneer has made full disclosure to the Commission, and cooperates with it in current poultry and egg cartel investigations, the company will escape further prosecution for these cases.
Pioneer was granted corporate leniency for the involvement of its Nulaid subsidiary in collusion in the whole fresh egg and day-old chick markets. The company also received conditional immunity in the poultry market.
The Competition Commission’s investigations into the poultry value chain started in April 2009, with poultry breeding stock and broiler production, poultry products and poultry feed.
Rainbow Chickens, Astral Foods, Pioneer, Country Bird Holdings and Afgri fell under the spotlight, as did the South African Poultry Association (SAPA) and the Animal Feed Manufacturers Association. The main allegations were that the companies carved out territories so as not to compete in an open market, which enabled them to charge significantly higher prices than independent manufacturers.
In a statement announcing the Pioneer settlement, the Commission said, “Their prices were in some cases 25% higher than those of the smaller poultry feed producers.”
It also said that collusion was reinforced and sustained through extensive information sharing involving industry associations such as SAPA.In May 2010, the Commission started investigating collusion and supply restraints in the markets for whole fresh eggs, day-old chicks, point of lay hens and cull chickens.
Companies under the spotlight here are Nulaid, Hy-line South Africa, Avichick, Eggbert, Top Lay, Fair Acres, Heidel Eggs, Lund Eggs, Evan Joubert trading as “Waterglen Pluimvee”, Paardeberg Flinkwink, Outeniqua Eggs Success Ventures trading as “Golden Yolk”, Rosendal, Nantes Eggs, Eikenhof, Elkana, Windmeul Eggs, Morningside, Sunrise Eggs, Eden Rock and Cocorico.
The release of case information has caught some by surprise. SAPA CEO Kevin Lovell said he was concerned that the Commission maintains that the poultry meat industry is involved in anti-competitive activities, as though it is a proven fact. But these claims have not been subject to the proper legal process, he added.
“It’s a form of trial by media and that is disappointing.” Lovell said that SAPA had submitted all the necessary information to the Commission four to five months ago, but has not had any follow-up.
The association provides industry information for the use of all participants in the production chain in a transparent and open manner, all the while maintaining individual confidentiality, he explained.
The poultry meat industry doesn’t set prices, nor does it allocate markets, he added.
“Our customers, the retailers, set prices. The whole model is a very effective one. They have as few suppliers as possible to simplify their purchasing mechanisms, but there are still enough suppliers to play the one off against the other, he said. “The fact that prices might move in unison reflects nothing more than the retail sector’s very effective price negotiation mechanisms. If we were able to control prices, we’d increase our prices when input costs increase, something we’ve been singularly unsuccessful in doing over many years.”
In addition, vagueness surrounding the Competition Act can make it difficult to do business, said Transvaal Agriculture Union general manager Bennie van Zyl.
“It’s sometimes hard for companies to know when they’ve crossed a line the Competition Commission isn’t happy with.” It should only step in where behaviour is to the detriment of the other parties, he added. “By disallowing certain activities, such as the joint importation of bulk inputs by companies, it can chase up costs.”