Johannesburg - The Competition Commission has
initiated an investigation against major South African supermarket chains,
Pick n Pay, Shoprite/Checkers, Woolworths and Spar (who together comprise
more than 60% of the market by turnover), as well as the major wholesaler-retailers, Massmart and Metcash for alleged contraventions sections 4(1)(a),
5(1) and 8(c) of the Competition Act.
The investigation has been prompted by concerns raised by various
stakeholders and the public in general. Concerns raised fall within the food
and agro-processing sector, which has been identified as a priority by the
commission.
In a preliminary review of industry practices and structural
characteristics in the industry the commission identified several potential
concerns, including:
1. Concentration of buyer power
This can be manifested in practices such as exclusive supply arrangements,
listing fees, slotting allowances, payment policies, returns policies,
promotional discounts and other rebates, potentially limiting upstream
competition and making it difficult for small producers to gain and retain
access to retailers' shelves.
2. Long-term exclusive lease agreements
Property developers allegedly enter into exclusive anchor deals with major
retailers for periods as long as 20 years. The retailers receive favourable
rental rates which can function as a barrier to entry and could have the
effect of excluding competitors.
3. Category Management
Category captains are appointed from the ranks of the largest manufacturer
in a particular product category to manage all aspects of that category in
the retail stores. In other words, one competitor is given the task to
manage the placement, promotion and pricing of other competitor's products,
on a category-wide basis. Through this conduct category captains may gain
access to sensitive information such as the sales volume data of all brands.
This could potentially minimise inter-brand competition.
Moreover,
competitive exclusion may take place and the conduct could facilitate
collusion. This has been the focus of extensive anti-trust concern in the
US.
4. Information Exchange
The commission is concerned that supermarkets could be exchanging price
sensitive information, which may have an impact on competition.
As part of its investigation the Commission will engage with the respondents
as well as the members of the public to get an in-depth understanding of
competition in this market. The commission will decide at the end of its
investigation whether there are sufficient grounds to refer the matter to
the Competition Tribunal for adjudication.
"The commission has made several interventions along the food value
chain,
from production through to processing. This complaint initiation now aims to
uncover if there are any possible competition concerns arising in the retail
space, where consumers would most directly be impacted," explained
Commissioner Shan Ramburuth.
- I-Net Bridge