Smaller suppliers excluded by supermarket terms

10 February 2011

10 February 2011 | Nick Martindale

South Africa’s Competition Commission has called on the country’s leading supermarkets to change their procurement practices to ensure smaller suppliers are able to compete with larger firms.

Oupa Bodibe, manager of advocacy and stakeholder relations at the Competition Commission, told SM: “Our concerns are that smaller suppliers are being excluded by cumbersome terms set by supermarkets. We are worried that this will lead to dominance by a few big suppliers.”

The commission’s investigation into the practices of South Africa’s four main supermarkets – Pick n Pay, Shoprite/Checkers, Woolworths and Spar – and wholesale retailers Massmart and Metcash delivered a “not guilty” verdict on charges of price fixing and abuse of buying power. However, it highlighted concerns over practices such as exclusive payment policies, returns policies and promotional discounts.

The report said: “The commission is concerned that these practices may place smaller suppliers at a disadvantage. In the long run, this may undermine the competitive process at this level of the supply chain.

“For this reason, the commission urges the supermarket chains to facilitate entry of small suppliers by changing their procurement policies and proactive disclosure of information on entry requirements.”

The commission voiced disquiet over the practice of handing decisions on product placement, promotion and pricing to “category captains”, which it said tend to be representatives of the largest manufacturers.

The commission was concerned that “the activities of category captains, combined with the potentially sensitive competitive information at their disposal, could facilitate collusion and/or competitive exclusion”.

Dennis Cope, finance director at Pick n Pay, pledged to work closely with the commission on any outstanding issues.

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