Member Article

On 17 May 2016, the Competition Commission (the “Commission”) held a press conference to update all stakeholders on the Grocery Retail Market Inquiry (the “Inquiry”). The press conference introduced the Inquiry Panel (the “Panel”) and provided an opportunity for stakeholders in attendance to ask any questions to assist in clarifying the purpose of the Inquiry and what can be expected during the process. A summary of the press conference is set out below.

The Panel confirmed that the preliminary date on which the Inquiry is expected to be completed is 29 May 2017, but added that this date may be revised depending on the progression of the Inquiry.

The Panel also confirmed that the purpose of the Inquiry is not to investigate any activity of any particular firm. Rather, its purpose is to understand the different markets that exist within the retail sector, as the Commission has reason to believe that there are features within the sector that may prevent, distort or restrict competition. The Inquiry is a factual one aimed at assisting the Panel in making recommendations to the Economic Development Minister.

The scope of the Inquiry extends to all shops that predominantly sell fast-moving consumer goods, with the exception of hardware, clothing and household appliances. Moreover, the Inquiry is primarily interested in small and independent grocery retailers in townships, peri-urban and rural areas, and the informal economy.

The Panel referred to the Terms of Reference published on 30 October 2015, which provide six objectives in terms of which competition in the sector will be assessed, namely:

• the impact of the expansion, diversification and consolidation of national supermarket chains on small and independent retailers;
• the impact of long-term exclusive leases on competition in the sector;
• the dynamics of competition between local and foreign-owned small and independent retailers;
• the impact of regulations, including municipal town planning and by-laws on small and independent retailers;
• the impact of buyer groups on small and independent retailers; and
• the impact of certain identified value chains on the operations of small and independent retailers.

The Panel indicated that these objectives do not constitute an exhaustive list, but rather serve as a guideline for all stakeholders and should form the basis of their submissions to the Panel. The Panel also indicated that these objectives will be further guided by the following public interest concerns:

• the provision of competitive prices and product choices to consumers;
• promoting small and medium-sized enterprises’ participation in the economy;
• promoting a greater spread of ownership; in particular, to increase the ownership stakes of historically disadvantaged persons; and
• promoting employment and advancing the social and economic welfare of South Africans.

The press conference also marked the Commission’s publication of the Draft Statement of Issues, the Draft Guidelines for Participation and the Draft Administrative Timelines relating to the Inquiry.

The Draft Statement of Issues invites all stakeholders to submit information related to the grocery retail sector, including information on the following topics:

• the causes of the barriers and the existence of any factors and developments in the grocery retail sector that may prevent or affect competition in this sector within the relevant areas;
• the structure of the grocery retail sector, as well as trends and the players who operate at each level of this sector’s supply chain; and
• the degree of competition between the different players in the grocery retail supply chain.

The Draft Statement of Issues also expands on the six objectives identified in the Terms of Reference. The Panel made it clear that all interested parties are invited to comment; however, they are primarily concerned with information pertaining to small, independent and informal grocery retailers.

The Draft Guidelines for Participation provides information on how stakeholders can participate in the Inquiry, including on how to submit information, public hearings and how information and data will be handled and, in particular, how confidential information will be safeguarded.

The Draft Administrative Timelines provide a breakdown of the timeline for the Inquiry.

Finally, the Panel indicated that it is primarily concerned with information that can assist it in understanding the sector and not anything outside of the scope of the Inquiry. However, should the Panel receive any information that would be of particular interest to the Commission, it will consult the Commission, which will, in turn, decide whether to investigate or initiate a complaint, or take any further steps as it sees fit in accordance with the applicable provisions of the Competition Act, 89 of 1998 (as amended) (the “Competition Act”). The Panel is, however, of the opinion that this exercise will not lead to such situations, as the Inquiry is purely a forum to ventilate issues and add transparency to the market.

The Panel will look at all information received and will weigh up all the different evidential facts placed before it. It will be guided by chapter 4A of the Competition Act during the course of the investigation and in making its recommendations.

Stakeholders have until 15 June 2016 to make their submissions regarding the Draft Statement of Issues, the Draft Administrative Timelines, and the Draft Guidelines for Participation. All documents relating to the inquiry and referenced in this note can be found here.

For more information or should you require assistance in making submissions to the Panel, please contact the competition team.