changes monopolies act

Biscuit manufacturers had always, through The Biscuit Association, worked to agreed prices and discounts. There was a peculiar situation in the Western Cape where several wholesalers dominated the market and had worked themselves into the position where biscuit manufacturers delivered biscuits to various grocery stores, but had to charge a wholesaler who would make payment for the biscuits. The wholesaler in turn would recover the money from the store and charge the store at a higher price. No biscuit manufacturer dared to make a direct sale as he would loose heavily with the Wholesaler’s Association. This had caused a lot of dissatisfaction amongst new shopkeepers.

It must have been about 1979 that the government decided to introduce a Monopolies Act to prevent price collusion. One of the first complaints came from grocers in the Cape who were frustrated with arrangements there. The Monopolies Board investigated the situation. This led to their finding that the biscuit manufacturers had a price agreement amongst themselves. After much discussion the Board finally ruled that biscuit manufacturers would no longer be permitted to discuss and collaborate on prices, with severe penalties for those in breach of this. Biscuit manufacturers were permitted to agree on a discount system, but this was to be based on volumes and not on trading habits. The arrangement with the Wholesale, Grocery and Manufacturers Association was prohibited.

Representations were made to the Board about price agreements and the Board eventually agreed that manufacturers could collaborate on prices provided any price increases had been approved by the Price Controller. In this way it was considered by the Board that the biscuit manufacturers would not make excessive profits. The irony of it was that the biscuit manufacturers never did make big profits, but it was the principle that competition was not active in controlling prices that concerned the Board.

Manufacturers found that the process through the Price Controller was slow and cumbersome and some of the manufacturers suffered financially. All manufacturers were very careful not to discuss prices. It eventually evolved that Bakers Ltd, when they felt the pressures of cost, unilaterally increased their prices – this avoided the delaying price control procedure. It was noted that before long all other manufacturers also, without any discussion, followed suit in increasing their prices. This was to be expected as they were suffering under the same cost increase problems. This was the routine that the industry settled into.