Food manufacturer Pioneer Foods will pay ZAR500m (US$72.2m) in a settlement with the South African Competition Commission over price fixing charges.
The settlement will resolve all of the commission’s outstanding cases against the company in the wheat, maize, poultry and eggs markets.
This is a significant reduction on the ZAR1.6bn the Commission initially sought, which was calculated as 10% of the company’s annucal turnover for the financial year ended 30 September 2009.
Pioneer Foods will pay ZAR250m as an administrative penalty to the National Revenue Fund and ZAR250m to create an Agro-processing Competitiveness Fund to be administered by the Industrial Development Corporation (IDC). The fund will aim to promote competitiveness, employment and growth in food value chains.
Additionally, it will adjust its pricing of flour and bread over a “defined period” to reduce its gross margin by ZAR160m when compared with the similar period in 2009/10; increase its capex expenditure by ZAR150m; co-operate with the Competition Commission in the ongoing investigations and prosecutions of the cases that are the subject of this settlement; stop anti-competitive conduct and implement a competition compliance programme.
The settlement includes Pioneer Foods’ involvement in price fixing and market allocation in flour and maize; collusion in flour, bread and maize through information exchange involving the National Chamber of Milling and the South African Chamber of Baking; exclusionary conduct against small independent bakery in the Southern Cape; and anti-competitive conduct at various levels throughout the poultry and egg supply chains.
This is in addition to the ZAR195m charge imposed by the tribunal in a separate competition case and which was paid by the company in April 2010.
Competition Commissioner Shan Ramburuth said: “This agreement has gone beyond just a penalty and includes price adjustment for the benefit of consumers and a fund to promote competition in the agroprocessing industry. The Commission welcomes Pioneer’s approach, as evidenced in this agreement, to resolving the matters and agreeing to undertakings aimed at a more competitive and dynamic economy in these crucial sectors.”