They met each other in smoky back rooms to collude on... bread prices. The three are allegedly Pioneer Foods, Tiger Brands and Premier Foods, and if the allegations are true, they have really made life even harder for the poorest of the poor.

Bruce Whitfield:
How much does a standard loaf of brown bread cost? I have to tell you that I have absolutely no idea. Many of us are very fortunate that we don’t have to count our pennies when we go out and buy a loaf of bread. Send me an sms please, anyone who thinks they can estimate the price of a loaf of bread. I would just be interested to see the spread between the lowest and the highest for a price of book standard brown bread.

How much do you think a loaf of brown bread costs? And the reason for that is three of the country’s biggest bakeries this week have been accused of collusion. It is a filthy word for meeting in smoky back rooms and checking out each other’s prices and possibly upping your prices in line with the competitors to make sure you don’t lose out on market share.

Collusion, it is a nasty thing and the competition authorities don’t like it very much. It all erupted, and this is the only way that the Competition Commission found out because ordinary consumers did not complain, this was left up to bread distributors in the Western Cape, they reported that Blue Ribbon, Albany, Sasko and Duens bakeries all upped their prices by 30 and 35 cents a loaf the week before Christmas.

Lesley Morphet is the Competition Specialist at Deneys Reitz, a law firm in Gauteng and Lesley, just having a look at the competition authorities at the moment, they do seem to be very keen on bearing their teeth, especially when it comes to food prices. They got involved in Pick ‘n Pay, they got involved in milk prices and they are also now involved in bread.

Lesley Morphet:
Absolutely Bruce, they said at the beginning of the year that food was an area that they were going to be focussing on, because this was an area that affects the poorest of the poor as consumers.

Bruce Whitfield:
Absolutely, the thing is, the poorest of the poor is an issue and I don’t know if you know the answer to this very simple question: how much a loaf of bread is supposed to cost. I don’t want to put you on the spot, but so many of us probably cannot tell you how much a loaf of bread costs and that is one of the issues that these companies seem to have taken advantage of?

Lesley Morphet:
Absolutely, well it is not so much how much it should cost, but making sure that you don’t all charge the same price.

Bruce Whitfield:
Absolutely and what are the allegations, the key allegations here, that Pioneer Foods, Tiger Brands and Premier Foods actually did meet in smoky bad lit rooms and hustle on prices?

Lesley Morphet:
The idea is that they agreed amongst one another that they would not sell to certain distributors or they had fixed the discount given to distributors to a maximum of 75 cents per loaf regardless of the volumes purchased and they simultaneously increased the price 30, 35 cents per loaf.

Bruce Whitfield:
What are the implications of that then for consumers?

Lesley Morphet:
That the distributors as a result are not going to be able to pass on discounts which they are not getting, they are not going to be able to lower prices and distribute a price that they think in appropriate. They have to distribute it a price which is in line with what the manufacturers are thinking.

Bruce Whitfield:
But in terms of the corporate leniency policy, which now the competition authorities have implemented in terms of actually, it looks like giving Premier Foods a bit of a break here, it looks like they have effectively what looks like a plea bargain in a criminal case?

Lesley Morphet:
Yes, that is sort of the idea, this is a popular approach worldwide, corporate leniency policies when you are trying to nab a cartel and it has been working very effectively elsewhere in the world.

The idea is that you must be first through the door and then if you own up, tell them everything and co-operate with them throughout the time, then yes, you won’t be penalised.

Bruce Whitfield:
So collude, collude until you are caught and then run squealing like a small child that has been caught stealing sweets in the playground.

Lesley Morphet:
Yes, but of course, if everybody else is worrying that somebody else might squeal first, that would be one way of stopping the cartel.

Bruce Whitfield:
How much does a loaf of bread cost Lesley? Ordinary brown bread, take a guess?

Lesley Morphet:
You know, I honestly don’t know.

Bruce Whitfield:
And so many other people don’t know either Lesley. I have got estimates on my sms screen in front of me, everything from R4.50 up to R9 and yes, R4.50 seems very conservative. I cannot tell you what a loaf of bread costs, and again, that points to the fact that we as consumers don’t have our finger on the pulse and that is I suppose a concern and that is why the competition authorities are stepping in this particular case?

Lesley Morphet:
Yes, that is certainly one of the ideas.

Bruce Whitfield:
Lesley Morphet thanks very much indeed, from Deneys Reitz.