| Mon 29 Jun 2009, 14:30 | | THEE - Competition Commission to probe the supermarket industry |
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JSE
THEE
THEE - Competition Commission to probe the supermarket industry
PRESS STATEMENT
29 JUNE 2009
Competition Commission to probe the supermarket industry
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.
ENDS
Prepared by: FD Beachhead
Jennifer Cohen 011 214 2401/ 082 468 6469/ jennifer.cohen@fd.com
Dani Cohen 021 487 9021 / 082 897 0443 dani.cohen@fd.com
Senzi Dlamini 011 214 2420 / 073 494 0030 senzi.dlamini@fd.com
On behalf of: The Competition Commission
Further info:
Nandi Mokoena, Manager of Strategy and Stakeholder Relations, Competition
Commission 012 394 3286 / 082 399 1328 / nandisilem@compcom.co.za
Keitumetse Letebele, HOD Communications
012 394 3183 / 082 783 3397 / keitumetsel@compcom.co.za
Date: 29/06/2009 14:30:01 Produced by the JSE SENS Department.
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