Commission appeals bread cartel penalty

THE Competition Commission has lodged an appeal with the Competition Appeal Court against a ruling by the Competition Tribunal on the administrative penalty imposed on Pioneer Foods.

THE Competition Commission has lodged an appeal with the Competition Appeal Court against a ruling by the Competition Tribunal on the administrative penalty imposed on Pioneer Foods.

The company was found to have been involved in a bread cartel.

In a statement yesterday, the commission said a fine of 10percent of Pioneer's turnover for 2006, which would amount to about R1,5billion, should be imposed. This, instead of the R195million fine actually imposed, which was 10percent of the firm's baking division turnover in the same year.

Pioneer said yesterday it has raised a provision of R195million to settle the penalty in the bread matter, following the release of the Competition Tribunal's decision on February 3.

As a result of the provision raised, earnings per share and headline earnings per share for the six months ending March 2010, is expected to decrease between 25percent and 45percent from the previous corresponding period.

Had the provision not been taken into account, earnings and headline earnings would have increased by between 20percent and 40percent, Pioneer said.

It said it had resolved that it is in its interests to oppose the Competition Commission's appeal and to lodge a cross appeal which, if successful, may have the effect of the penalty being reduced.

The case involved the Commission's allegations that Pioneer Foods, which owns Sasko and Duens bakeries, colluded with Tiger Brands, Foodcorp and Premier Foods to increase the price of bread.

Premier was granted leniency in exchange for its cooperation with the Commission, while Tiger and Foodcorp settled their cases, admitted the conduct and paid administrative penalties.

The Commission proceeded with the case against Pioneer and asked the Tribunal to impose a penalty of 10percent of the Pioneer group turnover for 2006.

. In its finding, the tribunal noted that cartels were the most egregious offences in competition law, that poor consumers were particularly affected and that, in the absence of mitigating factors, cartels deserved the maximum penalty provided in law.

The Commission said the Tribunal had also concluded that Pioneer's defence was premised on manifest falsehoods.

The Commission "welcomed" the Tribunal's findings on the facts, "namely that Pioneer had engaged in cartel behaviour", but it did not believe that the criteria prescribed by the Tribunal to determine the penalty were appropriate to deter cartel behaviour.

The Commission has asked the appeal court to reverse the Tribunal's finding and impose the increased penalty. - Sapa and I-Net Bridge

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