Stores ‘demand special terms’

2009-08-22 00:00

A KZN midlands-based manufacturer has spoken out about the preferential trading terms allegedly demanded by certain major supermarket groups in South Africa, in the wake of the Competitions Commission’s investigation into anti-competitive behaviour in the supermarket industry.

The source, who spoke to The Witness on condition of anonymity, said the trading terms struck between supermarket chains and their manufacturers and suppliers centre on four key practices.

“These fees can total up to 15% of sales to the retail stores concerned, which the supplier includes in his price and which in turn is passed on to the consumer,” he said.

The alleged practices are “confidential rebates” demanded by certain supermarket chains, so-called “exclusivity fees”, “listing fees” and additional responsibilities at store-level that certain supermarket groups place on suppliers.

The source has an in-depth history and understanding of the commission’s investigations of the supermarket industry dating back several years.

He explained that the “confidential rebates” demanded by certain supermarket chains are paid by manufacturers in order to have the privilege of “getting their products into stores and supermarket shelves”.

“Without these ‘trading terms’, the supermarkets will not consider taking on your products,” he said.

The source alleged that larger suppliers may also offer extra “fees” in order to shut out the competition, particularly small suppliers, preventing the competing supplier from placing his goods in-store.

Weekend Witness received responses from Woolworths and Pick n Pay about the “confidential rebates” and the commission’s investigation.

Said Woolworths, “We are at pains to ensure that our practices drive the best prices for our quality standards, and do not have an anti-competitive effect. It [the commission’s investigation] is about testing pro-competitive and anti-competitive effects of certain practices. We welcome this investigation and will co-operate fully with anything that will improve the value offer for our customers.”

Pick n Pay said, “Our record over more than four decades stands as a company which has consistently fought cartels, boards of control and price fixing.”

ABOUT two months ago, the Competition Commission launched an investigation into anticompetitive behaviour in the supermarket industry.

There are four areas of concern.

CONCENTRATION OF BUYER POWER:

Practices such as exclusive supplyarrangements, 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 intoexclusive anchor deals with major retailers for periods as long as 20 years. Retailers pay favourable rental rates, which can function as a barrier to entry for others.

CATEGORY MANAGEMENT:

A competitor is given the task to manage the placement, promotion and pricing of other competitors’ products on a category-wide basis. These “category captains” may gain access to sensitive information, such as the sales volume data of all brands, potentially minimising interbrand competition. The conduct could facilitate collusion.

INFORMATION EXCHANGE:

The commission is concerned that supermarkets could be exchanging price-sensitive information, which may have an impact on competition.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.