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.


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.


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.


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.


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

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