Designing appropriate remedies for competition law enforcement: The pioneer foods settlementagreement

Journal of Competition Law and Economics

Volumn 8, Issue 2, 2012, Pages 425-447

  Bonakele, Tembinkosi ^a   Mncube, Liberty ^a  

^a UNIVERSITY OF JOHANNESBURG   (South Africa)

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EID: 84862308425     PISSN: 17446414     EISSN: 17446422     Source Type: Journal    
DOI: 10.1093/joclec/nhs010     Document Type: Article

References (41)

1. The National Treasury Department made an application to intervene in the Tribunal questioning the settlement agreement's validity and the Commission's authority to conclude it
2. Trade Unions, NGOs, and the National Department for Economic Development came in support of the Commission
3. For example, the Minister of the National Department for Economic Development pronounced proudly in the National Parliament that "[t]his settlement shows the resolve of the competition authorities to act swiftly and effectively to promote a competitive food-processing sector.... For this reason, both structural and behavioural measures are important to bring in new players along the value chain. The new, pro-active stance of the competition authorities, coupled with a strong investigativecapacity, makes it harder for companies to escape with anti-competitive conduct."
4. Statement by Ebrahim Patel, Minister of Econ. Development, to the National Assembly on the Competition Commission Investigation, at 7 (Nov. 2, 2010), available at http://images.businessday.co.za/Pioneer.pdf.
5. Price reductions only applied to selected products whose gross margins were high enough to avoid predatory outcomes
6. The amount of time has been relatively short since the implementation of remedies in the Pioneer Foods settlement agreement to be able to proffer a well-substantiated judgement on its success or failure. As such, we will not assess the impact of the capital expenditure remedy. However, we note that Pioneer Foods has not reduced its capital expenditure to date. In fact, it has committed to build a new biscuit factory. In general, we will not evaluate the deterrence effects of the settlement agreement on Pioneer Foods, although we make reference to fines and deterrence.
7. See Daniel Zimmer, Consumer Welfare, Economic Freedom and the Moral Quality of Competition Law - Comments on Gregory Werden and Victor Vanberg, in COMPETITION POLICY AND THE ECONOMIC APPROACH: FOUNDATIONS AND LIMITATIONS 72 (Josef Drexl, Wolfgang Kerber & Rupprecht Podszun eds., Edward Elgar Publishing 2011).
8. See Mark C. Modak-Truran, Corrective Justice and the Revival of Judicial Virtue, 12 YALE J.L. & HUMAN. 249 (2000).
9. Kent Roach, The Limits of Corrective Justice and the Potential of Equity in Constitutional Remedies, 33 ARIZ. L. REV. 859 (1991).
10. Competition Act 89 of 1998 s. 49D(1).
11. Order and Reasons, Competition Comm'n v. South African Airways (Competition Tribunal), Case No.83/CR/Oct04 at¶ 47 (Dec. 4, 2006) (S. Afr.), available at http://www.icn-capetown.org.za/%5Ccomptrib%5Ccomptribdocs%5C577%5C83CROct04.pdf.
12. Competition Act 89 of 1998 s. 58(1)(a).
13. See Ioannis Lianos, Is the Availability of "Appropriate" Remedies a Limit to Competition Law Liability Under Article 102 TFEU? The Mishiefs of "Discretionary Remedialism" in Competition Law, in COMPETITION LAW AND THE ENFORCEMENT OF ARTICLE 82 165-202 (Federico F. Etro & Ioannis I. Kokkoris eds., Oxford Univ. Press 2010).
14. Marketing Act 37 of 1937
15. See Consent and Settlement Agreement Between the Competition Commission and Pioneer Foods (Pty) Ltd. in Regard to Contraventions of Sections of the Competition Act 89 of 1998, as Amended, Competition Comm'n v. Pioneer Foods (Pty) Ltd. (Competition Tribunal), Case No. 15/CR/Mar10 (Nov. 30, 2010) (S. Afr.), available at http://www.comptrib.co.za/cases/consent-order/retrieve_case/1218.
16. Competition Act 89 of 1998 s. 4(1)(b)(i).
17. Competition Act 89 of 1998 s. 8(c).
18. While the Commission pursued predation allegations only on Pioneer Foods in the Western Cape province, there were allegations of similar conduct by other cartelist firms in other regions
19. A. Mitchell Polinsky & Daniel L. Rubinfeld, A Note on Optimal Public Enforcement with Settlements and Litigation Costs, 12 RES. L. & ECON. 1 (1989).
20. Concerns about the inadequacy of fines are the object of an intense debate within the competition policy circles
21. See Joseph E. Harrington, Jr., Post-Cartel Pricing During Litigation, 52 J. INDUS. ECON. 517 (2004).
22. ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT, HARD CORE CARTELS: RECENT PROGRESS AND CHALLENGES AHEAD (2003)
23. Massimo Motta, On Cartel Deterrence and Fines in the European Union, 29 EUR. COMPETITION L. REV. 209 (2008).
24. See Wouter P. J. Wils, Optimal Antitrust Fines: Theory and Practice, 29 WORLD COMPETITION 183 (2006).
25. John M. Connor & Robert H. Lande, Cartel Overcharges: Implications for U.S. and EU Fining Policies, 51 ANTITRUST BULL.983 (2007).
26. Connor and Lande conclude that average cartel overcharges in the United States are between 15 percent and 36 percent, with most of the median and average results between 20 percent and 30 percent. They recommend that the Sentencing Commission raise the current level of cartel penalties.
27. John M. Connor & Robert H. Lande, How High Do Cartels Raise Prices? Implications for Reform of the Antitrust Sentencing Guidelines, 80 TUL. L. REV. 513 (2005).
28. John M. Connor, The Great Global Price-Fixing Conspiracy: Sanctions and Deterrence, 4 CONCURRENCES: REVUE DES DROITS DE LA CONCURRENCES 17-20 (2006).
29. Frederic Jenny, Optimal Antitrust Enforcement: From Theory to Policy Options, in IOANNIS KOKKORIS & IOANNIS LIANOS, THE REFORM OF EC COMPETITION LAW: NEW CHALLENGES 121 (Kluwer Law Int'l 2009)
30. Administrative Penalty and Reasons for the Competition Tribunal's Decision, Competition Comm'n v. Fed. Mogul Aftermarket Southern Africa (Pty) Ltd. and Others (Competition Tribunal), Case No. 08/CR/Mar01 (Jan. 28, 2003) (S. Afr.), available at http://www.comptrib.co.za/assets/Uploads/Case-Documents/08CRMar01.pdf.
31. Jason Aproskie & Sha'ista Goga, Administrative Penalties: Impact and Alternatives, prepared for the Fourth Annual Competition Commission, Competition Tribunal and Mandela Institute Conference on Competition, Law Economics and Policy (2010)
32. The penalty includes the fine of $63.2 million (USD) (or R500 million) and the price reduction commitment of $20.2 million (or R160 million).
33. See Massimo Motta, Recent CAC Judgement Opens Door to Leniency on Cartels, BUS. REPORT, Aug. 31, 2011.
34. See A. Mitchell Polinsky & Daniel L. Rubinfeld, The Deadweight Loss of Coupon Remedies for Price Overcharges, 56 J. INDUS. ECON. 402 (2008).
35. Similarly in 1994, Circa Pharmaceuticals settled a class-action price-fixing suit by issuing $2.5 million in coupons that permitted former customers to purchase Circa products at a discount.
36. See also A. Mitchell Polinsky & Daniel L. Rubinfeld, The Deadweight Loss of Coupon Remedies for Price Overcharges, 56 J. INDUS. ECON. 402 (2008) (modelling the deadweight loss from coupon remedies).
37. Severin Borenstein, Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits, 39 J.L. & ECON. 379 (1996).
38. See Media Release, Competition Commission, Pioneer Implements Agreement with Competition Commission to Reduce the Price of Selected Bread and Flour Products (Dec. 14, 2010), available at http://www.compcom.co.za/assets/Uploads/AttachedFiles/MyDocuments/ Pioneer-media-release-14Dec10.pdf.
39. This approach is largely empirical, and it does not require making specific economic assumptions about the market
40. For instance, the manager of Pioneer Food's subsidiary division, Sasko, indicated in testimony to the Tribunal as part of the bread cartel hearings that bread prices were never reduced when input costs declined because consumers apparently did not appreciate fluctuations in bread prices
41. See Samantha Enslin-Payne, Tiger Brands Loses Market Share, BUS. REPORT (NATIONAL), Feb. 21, 2011, at 19, available at http://www.iol.co.za/business/companies/tiger-brandsloses-market-share-1.1029831.