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The Bread Case

The “Bread Cartel Case” essentially involves two separate class actions, one on behalf of bread consumers nationwide and the other on behalf of bread distributors in the Western Cape. These actions have been launched against three of SA’s largest bread producers, Premier Foods Ltd, Tiger Consumer Brands Ltd and Pioneer Foods (Pty) Ltd. At this stage the focus is on obtaining class certification for the two class claims so that proceedings can continue. The Western Cape High Court refused to certify classes in an urgent application last year (2011). Leave to appeal was however granted by the Supreme Court of Appeal and the appeal is expected to be argued later this year.

Class actions in South Africa are relatively novel and class action claims for damages have never been launched in any previous case. The law relating to class actions in South Africa, being in its relative infancy, is such that the general view is that one of the rights in the Bill of Rights must have been infringed to qualify for class action standing. Although both the consumer and bread distributor class actions are based on an infringement of the Bill of Rights, it is clearly apparent that class action jurisprudence needs to be extended beyond matters relating only to matters arising from the Bill of Rights.

Class certification is a preliminary step to the prosecution of the underlying claim, the basis of the class action being that individual claims will be replaced by the class claim. This leads to efficiency and economy in the proceedings as common issues apply in both class actions. In class actions, individual claimants are represented by appointed class representatives acting in their collective interests. In these cases, the objective is to relieve individual claimants of the need to institute individual proceedings. For both consumers and distributors the facts are such that a class action is the only appropriate method of securing a realistic result.

The basis of the consumer class action is an “opt out” class with the result that all consumers will be bound by any judgment unless they elect not to be part of the class action. In relation to the bread distributors, the class action is on an “opt in” basis; only bread distributors that elect to join the class action will be bound by any judgment. In both cases, damages are sought. Those that elect to either opt out , consumers, or not opt in, bread distributors, will be free to pursue their own damages claims against the bread producers.

In essence, and underlying both class actions, is the unlawful conduct of the bread producers, as found by the Competition Authorities, in relation to their collusion on bread price increases to consumers and discount reductions to bread distributors. This unlawful conduct has infringed the fundamental rights of the consumers and bread distributors.

In short, the unlawful conduct, practically price fixing, is a restrictive horizontal practice that breaches the Competition Act. Consumers paid more for bread and distributors earned less for distributing bread. This all happened due to the unlawful conduct of the bread producers. The irony is that despite the significant penalties that have been paid by the bread producers as a result of the Competition Authorities findings, neither consumers nor bread distributors have been compensated for the unlawful conduct of the bread producers. The State in fact was the primary beneficiary of these penalties.

The class actions now seek to secure damages for the unlawful conduct of the bread producers exclusively for those that have suffered by overpaying as consumers or receiving lower discounts as distributors. These damages will thereafter be distributed amongst consumers and bread distributors in different ways. Fundamentally, those that have suffered due to the unlawful conduct of the bread producers are entitled to be compensated.

The class actions, if successful, will promote access to justice.

Adv Chris Shone
Director of the Institute for Accountability in Southern Africa
July 2012

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