‘Consumers never win’

2009-07-04 00:00

IT appears that finger-pointing between role-players in the food sector will ultimately leave consumers more confused, less informed and poorer.

This despite the fact that the Competition Commission this week launched an investigation into anti-competitive behaviour in the supermarket industry.

The move has been backed by major consumer groups.

They told Weekend Witness that although they welcome the investigation, consumers inevitably suffer as a result of food price hikes.

“Consumers are the ones who, in the end, pick up the tab for all the increases in costs. The finger-pointing … is indicative of one thing: someone or more than one is not being honest.

“A strong, independent agency needs to find out who [is being dishonest],” said Paul Crankshaw of the National Consumer Forum.

“Consumers always bear the brunt. And whenever prices come down, consumers never get the benefit,” vice chair of the SA National Consumer Union Ina Wilken told Weekend Witness.

Crankshaw believes the investigation represents the tip of the iceberg.

“We need similar investigations into every step in the va­lue chain in the food sector. There are doubtless a variety of factors and practices that are contributing to this food price crisis, and as a country we need to tackle all of them if we want to slay the food price monster,” he said.

Wilken agrees, noting that other players in the chain also play a significant role. “All we ever see and experience is ongoing price increases with ‘specials’ occasionally attracting people to retailers.”

How much more pressure can South African consumers absorb, with recent price hikes in fuel and electricity adding to the load.

Consumers are spending an increasing proportion of their income on food.

For the poor, this proportion of their household budget is as much as 57%.

There are four areas of concern.

Concentration of buyer power:

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. Retailers pay favourable rental rates, which can function as a barrier to entry for others. Category Management:

One 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 inter-brand 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.

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