Supermarket Probe Targets Big Four
Jun 30 2009
Retail Wrap >>

South Africa's big four supermarket chains (Pick 'n Pay, Shoprite-Checkers, Woolworths and Spar) as well as major wholesale retailers (Massmart and Metcash) are to be investigated for anti-competitive behaviour, which affects food prices.

The Competition Commission announced on Monday that it was investigating possible contraventions of the Competition Act. The investigation was prompted by concerns raised by groups including farmers, small retailers and trade union federation Cosatu, said the commission's manager of strategy and stakeholder relations, Nandi Mokoena.

"The investigation is not aimed directly at pricing behaviour. We're looking at the conduct of retailers and the effects on competition," Mokoena said.

In a statement on Monday, the commission said a preliminary study had identified several potential concerns:

• concentration of buyer power (‘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’)
• long-term exclusive lease agreements (‘Property developers allegedly enter into exclusive anchor deals with major retailers for periods as long as 20 years’)
• 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 competitors' products, on a category-wide basis. Through this conduct, "category captains" could gain access to sensitive information such as the sales volumes of brands. This could minimise interbrand competition.)
• Exchange of price-sensitive information.

Spar's marketing director, Roelf Venter, said retailers had nothing to hide and were highly competitive. "As far as collusion goes, I would say 'no'."

Shoprite CEO Whitey Basson said, "Negotiation processes support the free-market system, in which prices are determined by supply and demand."

Pick 'n Pay and Woolworths also said they would co-operate fully with the commission.

The commission said a decision would be taken at the end of the investigation whether there are sufficient grounds to refer the matter to the Competition Tribunal.

Adapted from Source: www.iol.co.za,30 June 2009