Commission publishes terms of reference in supermarket inquiry

The Competition Commission, on 30 October 2015, published the Terms of Reference for the Grocery Retail Sector Market Inquiry (Inquiry). This follows the announcement of the Inquiry in May and the publication of the draft Terms of Reference in June 2015.

The Commission is empowered to launch a market inquiry where it has reason to believe that a market has features which prevents, distorts or restricts competition or to achieve the purposes of the Competition Act, No 89 of 1998. In this instance, the Commission’s belief is based on several factors, including:

1. the market power yielded by the large supermarket chains in respect of positioning in shopping centres or malls to obtain grocery anchor tenant status through long term exclusive leases;
2. the rate of expansion of the larger supermarket chains (through acquisition and greenfield development), especially in townships, peri-urban and rural areas;
3. the impact of the expansion of larger supermarket chains on informal traders in these areas;
4. various aspects related to the practice of franchising by large supermarket chains, including designated supply provisions, prescribed pricing, branding and packaging and the acquisition of independent franchised stores by the large supermarket chains; and
5. the dynamics of competition between local and foreign nationals operating informal retail offerings.

The scope of the market inquiry will include:

• the impact of the expansion, diversification and consolidation of national supermarket chains on small and independent retailers in townships, peri-urban and rural areas and the informal economy;
• the impact of long term exclusive leases entered into between financiers, property developers and national supermarket chains on competition in the grocery retail sector;
• the dynamics of competition between local and foreign owned small and independent retailers in townships, peri-urban areas, rural areas and the informal economy;
• the impact of regulations, including, among other things, municipal town planning and by-laws on small and independent retailers in townships, peri-urban areas, rural areas and the informal economy;
• the impact of buyer groups on small and independent retailers in townships, peri-urban areas, rural areas and the informal economy; and
• the impact of certain identified value chains on the operations of small and independent retailers in townships, peri-urban areas, rural areas and the informal economy.