THE COURT REFUSES TO GRANT A CERTIFICATION ORDER IN THE BREADCARTEL CLASS ACTION CASES: A CLOSER EXAMINATION OF THE WESTERN CAPE JUDGMENT The Trustees for the time being of the Children’s Resource Centre Trust v Pioneer Foods (Pty) and Imraahn Ismail Muka

Abstract

In the above cases, which came before the Western Cape High Court for hearing on both 23 and 25 November 2010, the judge, Francois Van Zyl, AJ dismissed the two applications for leave to institute the class actions on behalf of the applicants against the respondent bread-manufacturing companies (ie, Pioneer Foods (Pty) Ltd, Tiger Consumer Brands Limited and Premier Foods Limited)who, together with Foodcorp (Pty) Ltd, enjoy between 50% and 60% of the domestic bread market in South Africa. The judge promised to give reasons for his decision subsequent to his ruling on 26 November 2010 and, indeed, on 07 April 2011, he provided detailed reasons for his decision in terms of Rule 49(1)(c) of the Rules of the High Court. Material facts as accepted by the Court and which are relevant for the purposes of this case note are as follows: Both cases emanated from a complaint raised with the Competition Commission following an allegation of a bread cartel operated by the Respondent companies in the Western Cape in December 2006. After a preliminary investigation, the Commission initiated a complaint against the three respondents in the above applications. One of the respondent companies, Premier, applied for leniency and disclosed to the Commission that, together with Pioneer and Tiger, it was part of a bread cartel in the Western Cape which fixed the selling price of bread and other trading conditions. Following this disclosure, Premier was granted corporate leniency by the Commission and, on 14 February 2007, an agreement was concluded between Premier and the Commission in terms of which Premier agreed to assist the Commission in its investigations and subsequent prosecution of the other respondents before the competition Tribunal. On the same day that the corporate-leniency agreement was concluded with Premier, the Commission referred the complaint made against Tiger and Pioneer in the Western Cape to the Competition Tribunal. Following the referral, Tiger negotiated a consent agreement with the Commission, in terms of which it admitted that it enteredinto an agreement with Premier and Pioneer during December 2006 regarding bread prices and discounts to independent distributors in the Western Cape which amounted to a contravention of the provisions of the Competition Act (89 of 1998). On 27 November 2007, the Competition Tribunal made a consent order against Tiger in terms of section 49D of the Competition Act and levied against it an agreed administrative penalty of approximately R98 million. With regard to the third respondent company, Pioneer, complaints against it were subsequently heard by the Competition Tribunal and, on 03 February 2010, it was found that, together with Premier and Tiger, it was part of a bread cartel in December 2006 in the Western Cape in contravention of the provisions of the Competition Act. Taking into account other contraventions of the Competition Act committed by the company in other parts of the country, Pioneer wassubsequently ordered to pay an administrative penalty of approximately R195 million. In the final analysis, the facts established that bread-cartel operations took place during December 2006 in the Western Cape. It was further established that the three respondent companies were part of that bread cartel in contravention of the provisions of the Competition Act (ie, Premier applied forand was granted corporate leniency, Tiger negotiated a consent agreement which was made a consent order by the Competition Tribunal in terms of the Competition Act and Pioneer was found by the Tribunal to have been in contravention of the Competition Act and an administrative penalty was imposed upon it). It was in the context of the above circumstances that the applicants brought applications for class-action certification against the three respondents in the Western Cape High Court for the compensation of theconsumers and distributors who were detrimentally affected by the conduct of the respondent companies in contravention of the Competition Act. The AJ’s primary reasons for dismissing the applications included, firstly, the fact that while it is important in cases such as this to clearly identify a class for the purposes of the “class action” on the “opt-out” basis, the applicants failed to identify the “class” for the purposes of the application.