Competition Commission initiates market inquiry into the retail grocery sector

On 12 May 2015, Economic Development Minister Ebrahim Patel announced that the Competition Commission will conduct a market inquiry into the retail grocery sector in terms of s43B of the Competition Act, No 89 of 1998 (Act).

The market inquiry shall involve all shops that predominantly sell fast moving consumer goods. It encompasses all types of retail offerings from small informal businesses and independent grocery stores to supermarket and wholesale groups. The Commission has indicated that it believes that this market has features that may prevent, distort or restrict competition.

On 12 June 2015, the Commission published its draft terms of reference in the Government Gazette for public comment. The scope of the market inquiry will, at this stage, include the following six issues:

• 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.

In addition to these six broad issues, the Commission indicated that it may consider the competitive dynamics in the grocery retail sector, including pricing practices, extent of consumer choice and innovation, the impact of franchise retailers, and the causes and impact of the decline in small and independent retailers in townships, peri-urban areas, rural areas and the informal economy.

All public comments on the draft terms of reference must be submitted to the Commission by 6 July 2015.