Zweli Mokgata

Zweli Mokgata

Eight dairy companies could face hefty fines similar to the fine imposed on Tiger Brands, if they are found guilty of fixing the price of milk.

The Competition Commission yesterday said it has gathered enough evidence against the dairy processors from investigations which started in February 2005.

Clover Industries (Clover), Clover SA (CSA), Parmalat, Ladismith Cheese, Woodlands Dairy, Lancewood, Nestlé SA and Milkwood Dairy will take centre stage before the Competition Tribunal when hearings into the alleged price-fixing scam begin next week.

Shan Ramburuth, a Competition Commission official, said: "We have a very strong case which will prove that there was collusion among the companies to set the price of milk in the market."

Clover received corporate leniency and will not be prosecuted in exchange for providing information about the other members of the cartel.

The initial complaint was made by the commission and was followed shortly by a rebuttal from the Milk Producers Organisation with claims that supermarkets were also involved in price-fixing.

"We are still investigating the complaint against the supermarket chains, but that's a separate case," Ramburuth said.

In prosecuting the case, the commission will seek an order to declare that the companies committed a prohibited practice under the Competition Act. A penalty of up to 10percent annual turnover could also be imposed.

For CSA, which earned R4,48 billion last year, this could mean a fine of up to R448million.

Heather Irvine, a director at Deneys Reitz Attorneys, said: "Either one of two things will happen; either the commission will prosecute or the companies will arrange a settlement similar to the one made in the Tiger Brands case."

For the past year, there has been no way for consumers to know how much more they have had to pay for milk, but in removing the cartel, prices are likely to fall. Irvine said: "The tribunal's hearing won't be able to determine how much the price went up.

"All that will be determined is whether they were involved in the collusive behaviour, which would have driven up the price through increased market demand."

She added: "The commission is beginning to get tougher on cartel behaviour and is showing an increasing ability to detect this type of behaviour.

"Their strategy of granting corporate leniency is proving to be effective in collecting information in its investigations."

The companies involved would not comment on the forthcoming hearings.

Parmalat said: "We are still busy with that issue and don't want to pre-empt anything before the hearings."