Milk producers less than lily white

Milk producers have to appear before the Competition Commission over price-fixing next week.

This comes only months after bread producers were fined millions for price-fixing.

The eight dairy firms, which together have a monopoly in the South Africa dairy market, could face fines of up to 10 percent of their operating profit.

The eight producers are Clover Industries Ltd, Clover SA, Parmalat, Ladismith Cheese, Woodlands, Lancewood, Nestle SA and Milkwood Dairy.

The investigation into price-fixing in the milk industry started in February 2005 with evidence discovered of price-fixing in raw and retail milk.

The accused industry players are expected to meet the commission on February 4 and 7 to discuss trial dates, make documents available to be entered as evidence and finalise a running order of those testifying.

The commission is also investigating allegations that retailers have been colluding to fix prices.

Among its findings are that Clover, Parmalat, Ladismith, Woodlands, Lancewood and Nestle exchanged sensitive information on the buying of raw milk, enabling them to fix the purchase price of raw milk from producers.

Clover, Parmalat, Woodlands and Nestle also agreed to sell surplus milk to each other instead of selling this stock off at lower prices to consumers.

"This arrangement enabled colluding firms to maintain the price of milk at artificially high levels," reads the commission report.

Collusion between Clover and Parmalat forced milk producers to supply them with their entire production capacity, preventing them from selling their surplus to third parties or directly to consumers. In effect, this prevented smaller players from entering the market.

Clover SA and Woodlands are also accused of fixing a higher selling price of long-life milk and agreeing not to compete in selling long-life milk in certain areas.

Clover, Woodlands and Parmalat also face charges that they removed surplus milk from the market, with the decreased supply artificially maintaining high prices.

Clover was given corporate leniency by the commission and will not be prosecuted for this offence.

Clover on Wednesday said it planned to challenge the various charges levelled against it.

Clover deputy chief executive Manie Roode said the company had successfully applied for corporate leniency over the surplus-removal issue.

This came after Clover exported surplus milk in the form of cheese and powder milk to Europe, said Roode.

He said that, unlike the bread industry, the dairy industry was far more complex, with a large variety of products.

"You will find there is a huge price difference in our products, with Clover products more expensive in some cases," Roode said of the price-fixing allegations.

Pick 'n Pay CEO Nick Badminton denied allegations of his company's involvement in price-fixing and pledged to continue the fight against collusion.

"Deregulation of the previous boards of control, which we strongly supported, was meant to ensure competition, and collusion among suppliers flies directly in the face of this intention and of consumer sovereignty.

"We can assure South African consumers that we always have, and always will, fight collusion very aggressively. We are supplied by over 50 dairies around South Africa and our buying is decentralised by region.

"We aim to make sure that we supply our customers with the lowest possible price and best possible quality," said Badminton.

Cosatu warned on Wednesday that the unfolding price-fixing saga, which increased the cost of living, would be used as an argument for higher wages come negotiation time.

"We are very concerned, but not surprised, that the Competition Commission is now investigating the milk companies," said Cosatu spokesperson Patrick Craven.

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