The eight dairy companies accused of fixing the price of milk exchanged sensitive information on the purchase price of milk from farmers, the Competition Commission found this week.
This enabled them to co-ordinate their pricing strategies and fix the retail price of raw milk.
The commission has referred the case to the Competition Tribunal for prosecution.
The probe, which took two years to complete, found that by buying surplus milk from farmers and selling it to each other, the firms maintained artificially high prices that froze out smaller operators.
The commission said: “Clover and Parmalat abused their dominant positions in exclusive agreements that compelled producers to supply them with their total milk production.
“Producers were prevented from selling surplus raw milk at competitive prices to third parties or consumers directly. This practice also prevented the entry of smaller milk processors and distributors into the market,” it said.
Heather Irvine, a director at Deneys Reitz Attorneys, said, “Now the tribunal 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 pay for milk than they should. However, with the cartel's demise, prices are likely to fall.
“The tribunal's hearing will not 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,” said Irvine.
She added, “The commission is beginning to get tougher on cartel behaviour and is showing an increasing ability to detect this type of behaviour.
“Its strategy of granting corporate leniency is proving to be very effective in collecting good information in investigations.”
The companies would not comment on the imminent hearings, with Parmalat saying: “We don't want to pre-empt anything.”
The Tiger Brands case was one of the largest settlements reached in a competition case. It agreed to pay R98.8-million for contraventions of the Competition Act.
The firm was found guilty of colluding with fellow bread producers Premier Foods and Pioneer Foods to raise bread prices by between 30c and 35c a loaf.
Premier Foods approached the commission for leniency and provided damning evidence against its co-accused.
Shan Ramburuth, a competition commissioner, said, “This blatant profiteering is an insult, particularly to the poor. It demonstrates that the collusion is continuing or that the cartel members are acting to keep the artificially high margins they achieved previously.”
Ramburuth announced that the commission would be instituting more rigorous reporting requirements for companies found to have contravened the Act, particularly when evidence of cartel activity was found.
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