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Competition Commission v Foodcorp (Pty) Ltd (50/CR/May08) [2009] ZACT 14 (6 January 2009)

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IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA

Case No 50/CR/Mar08

2007NOV3354

In the matter between:

THE COMPETITION COMMISSION Applicant

and

FOODCORP (PTY) LTD T/A SUNBAKE BAKERIES Respondent

In re:

THE COMPETITION COMMISSION Applicant

and

PIONEER FOODS (PTY) LTD T/A SASKO & DUENS BAKERIES First Respondent

FOODCORP (PTY) LTD T/A SUNBAKE BAKERIES Second Respondent

SETTLEMENT AGREEMENT BETWEEN THE СОМPETITION СОМMISSION FOODCORP (PTY) LTD IN REGARD TO CONTRAVENTIONS OF SECTIONS 4(1)(b)(i) OF THE COMPETITION АСТ, 1998 (ACT NO. 89 OF 1998)

The Commission and Foodcorp hereby agree that application be made to the Tribunal for an order in terms of section 58(1)(a)(f)of the Competition Act, No, 89 of 1998, as amended, on the terms set out more fully below.

For the purposes of this Settlement Agreement the following definitions shall apply:

1. The "Act" means the Competition Act, 1998 (Act No. 89 of 1998)

2. "Commission" means the Competition Commission of South Africa, a statutory

body, established in terms of section 19 of the Act, with its principal place of business at Building C, Mulayo Building, dti Campus, 77 Meintjtes Street, Sunnyside, Pretoria, Gauteng;

1.3 "Commissioner" means the Commissioner of the Competition Commission, appointed in terms of section 22 of the Act

1.4 "Settlement Agreement" means this agreement duly signed and concluded

between the Commission and Foodcorp;

1.5 "Complaints" means the complaint initiated by the Commissioner of the Commission in terms of section 49B of the Act under case number 2007Jan2717 and a complaint filed by one Andrehette van Wyk in terms of section 49B(2) of the Act under case number 2007Nov3354,

3. Justin Williamson - the Chief Executive Officer;

4. Cliff Sampson - the Managing Director; and

5. Ockert Strydom - the former Chief Executive Officer of Sunbake Bakeries and includes an individual reference to one or more of them, as the context may require;

6. "CLP" means the Corporate Leniency Policy prepared and issued by the Commission as a guideline, to clarify the Commission's policy approach on matters failing within its jurisdiction in terms of the Act,

7. "Days" means calendar days;

1.9 "Foodcorp" means Foodcorp (Pty) Ltd trading as Sunbake Bakeries;

1.10 "Parties" means the Commission and Foodcorp;

8. "Pioneer" means Pioneer Foods Ltd trading as Sasko and Duens Bakeries;

9. "Premier" means Premier Foods Ltd trading as Blue Ribbon Bakeries;

10. "Tiger" means Tiger Consumer Brands Limited trading as Albany Bakeries;

11. "Tribunal" means the Competition Tribunal of South Africa, a statutory body, established in terms of section 26 of the Act, with its principal place of business at Building C, Mulayo Building, dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng.

2. The Complaints and Complaint Investigation

12. During December 2006, the Commission received information regarding price-fixing and the division of markets by Premier, Tiger and other firms active in the production and wholesale distribution of bread in the Western Cape.

13. The Commission subsequently initiated a complaint against these firms ("the Western Cape complaint") that:

14. During the period November 2006 to December 2006, Tiger, Pioneer and Premier directly fixed the price of bread to their customers in the Western Cape;

15. The said firms fixed the discounts which each of them offered to their independent distributors in the Western Cape to a maximum of 75c per loaf of bread; and

2.2 3 The said firms agreed not to poach each other's distributors, in contravention of section 4 of the Act Foodcorp was not named as a respondent in the Western Cape complaint.

16. During the investigations the Commission's inspectors interviewed representatives of the firms that were alleged to be involved in the price-fixing and division of markets.

17. Premier, shortly before its representatives were interviewed, approached the Commission and applied for immunity from prosecution in terms of the CLP confessing to its involvement in price-fixing and market allocation. Premier subsequently provided the Commission with detailed information about its role and that of Tiger, Pioneer and Foodcorp in price-fixing and market allocation, not only in the Western Cape, but throughout the Republic of South Africa. Premier was granted conditional leniency after agreeing to assist the Commission in its investigations and in proceedings before the Tribunal

18. The Commission initiated an investigation into these allegations under case number 2007Jan2717 ("the national complaint"). The investigation established that at various stages during the period 1995 to 2006, Premier, Tiger, Pioneer and Foodcorp were involved in price-fixing and market allocation in contravention of section 4(1)(b)(i) and (ii) of the Act in that representatives of the firms:

2.5.1 Held telephonic discussions and meetings where they directly fixed the selling price of bread to their customers; and

2.5.2 Directly fixed the implementation dates when such agreed price increases would be effective; and

2.5.3 Divided markets by allocating territories where each firm would be the only one operating a bakery in a particular territory and/or supplying all distributors in the allocated area.

6. The Commission subsequently received a complaint that Sunbake Bakery had been involved in price-fixing in the Matelane and surrounding areas in that its representatives had held discussions and corresponded with its competitors directly fixing the price of bread to their customers and agreeing to the timing of such increases. This complaint was submitted under case number 2007Nov3354 ("the Malelane complaint").

3. The Complaint Referral

3.1 The Commission referred the national complaint to the Tribunal on 6 May 2008. The Malelane complaint is yet to be referred to the Tribunal.

3.2 Tiger, after receiving the Western Cape Complaint Referral conducted its own investigation of the allegations made against it. It thereafter approached the Commission with a view to settling the matter in consequence whereof a Consent Agreement was concluded. As part of its cooperation, Tiger corroborated the information contained in Premier's leniency application. Hence upon referral of the national complaint, Tiger was not named as a party as it had settled with the Commission.

3.3 Foodcorp, shortly after referral of She national complaint, but prior to the referral of the Malelane complaint, approached the Commission indicating its willingness to settle with the Commission and requesting an opportunity to conduct its own internal investigation into the allegations made against it. Upon conceding its investigation, Foodcorp engaged the Commission further with respect to its findings which engagements have culminated in this Settlement Agreement.

4. Statement of Conduct

4.1 Foodcorp admits that it has contravened sections 4(1)(b)(i) of the Act in that:

4.1.1 Sunbake Bakeries and its competitors were engaged in price-fixing in respect of bread sold to their customers and the timing of such increases; and

4.1.2 Sunbake Bakeries and its competitors in the Malelane and surrounding areas

met to fix the prices of bread and the timing of such increase.

2. The Corporate Senior Management of Foodcorp confirm that, to the best of their knowledge and belief, there are no further contraventions of section 4 of the Act which were and/or might have been engaged in by Foodcorp.

Agreement Concerning Future Conduct

5.1 Foodcorp agrees to cooperate with the Commission in relation to the prosecution of any other firm arising from the Commission's investigation of the Complaints,

5.2 Foodcorp agrees:

19. To circulate a statement summarising the contents of this Settlemen Agreement to all employees above Paterson Grade D employed within Foodcorp within 30 days from the date of confirmation of this agreement as an order of the Tribunal.

20. To develop and implement a compliance programme incorporating corporate governance designed to ensure that employees, management and directors within Foodcorp do not engage in any contraventions of section 4(1)(b) of the Act, a copy of which programme shall be submitted to the Commission within 80 days of the date of confirmation of this consent order by the Tribunal.

8.

21. Having regard to the provisions of section 56(1)(a)(iii), read with sections 59(1)(a), 59(2) and (3) of the Act, Foodcorp accepts that it is liable for an administrative penalty.

22. The parties have agreed that Foodcorp should pay an administrative penalty in the amount of 6,7% of its turnover from all its baking operations for the financial year ending in 2006. This amounts to R45 406 359,82 (forty-five million, four hundred and six thousand, three hundred and fifty-nine rand and eighty-two cents).

23. The penalty amount will be paid by Foodcorp to the Commission in three equal annual payments, the first such payment to be made within 30 days of the date of confirmation of this settlement agreement by the Tribunal. The remaining two payments will be due on the 31st of January 2010 and the 31st of January 2011 respectively.

6.4 The Commission will pay these sums to the National Revenue Fund in terms of section 59(4) of the Act.

7. Full and Final Resolution

This Settlement Agreement is entered into in full and final settlement of all proceedings between the parties, and upon confirmation as an order by the Tribunal, concludes all proceedings between the Commission, and Foodcorp relating to any alleged contravention by Foodcorp of section 4(1)(b) of the Act that is the subject of the Commission's investigations under case numbers 2007Jan2717 and 2007Nov33S4.

Dated and signed in Durban this the 23 day of December 2008.

Justin Williamson

Foodcorp (Pty) Ltd

Dated and signed in Pretoria on this the 22 day of December 2008.

Shan Ramburuth

The Commissioner, Competition Commission