Battle for the malls
The Competition Commission’s market inquiry into the grocery retail industry is now open for what will be a flood of extremely diverse submissions. Mall developers and giant retailers, as well as spaza shopkeepers, street traders, organised immigrant communities and municipal councils all have a stake in what happens.
The manufacturers of staple foods will also be drawn into the fray after the inquiry’s panel this week put its “statement of issues” on the table.
This is a preliminary list of what the panel thinks should be looked at during a yearlong investigation, and fleshes out the terms of reference published last year.
All of this is provisional, the panel’s chair, Halton Cheadle, said at a press conference this week.
The outcome of the inquiry will be recommendations that may affect policies and bylaws – and could become the basis of prosecutions by the competition authorities.
It is the commission’s fourth market inquiry. Two ongoing inquiries are probing the private healthcare and liquid petroleum gas markets, and there has already been one into the banking sector.
While there is a commonplace perception that the supermarkets are killing informal retail in townships, the panel this week complained that there was an “apparent lack of clarity” about whether this was true.
Official statistics say small independent businesses are being destroyed. Other, private statistics say they are multiplying. The first objective of the panel is to figure out what is happening. Then it will evaluate what the competition between supermarkets and small traders achieves in terms of consumer benefits, as well as employment and business ownership.
A second major objective is to shine a light on the long-standing controversy over exclusive lease agreements in malls.
This is when a major supermarket in a mall has a lease that bans competitors in the same mall.
In 2009, an investigation was launched covering some of the same ground, and the exclusivity leases in particular. That investigation was abandoned in 2014. According to Cheadle, the complaints around the issue have continued unabated.
Last year Game lost an appeal in the Supreme Court of Appeal stemming from its Foodco segment in the Cape Gate mall being squashed by Pick n Pay due to this kind of agreement.
The leases are an important part of how the giants compete against each other – and how smaller players are kept off their terrain.
The panel wants to establish how common these leases are, and the extent to which they harm competitors and consumers.
The panel is also meant to investigate the controversial claim that often lies at the heart of South Africa’s periodic outbursts of xenophobic violence: the supposed unfair superiority of foreign traders displacing local shop owners.
Asked how this commonplace rationale for xenophobic violence falls into the scope of competition law, panellist Lulama Mtanga said that some allegations, such as foreign traders being “favoured” by some buyer groups, will be looked at.
Fellow panellist Lumkile Mondi added that they were “keen to hear all submissions, not just from citizens”.
The panel will look into why foreigners are “perceived to be more successful” than local traders, as well as what “inhibits” locals from competing.
Municipal bylaws are also going to be under the microscope following complaints about onerous regulations on street traders and the occasional heavy-handed police blitzes against them.
Outside the actual retail sector, the panel is also intent on investigation the value chains of certain key products that make or break small traders.
These will probably include bread, milk, maize, paraffin and toiletries, according to this week’s statement of issues.
The common thread will be products that make up a major part of small retailers’ sales – and products that are important for the poor to be able to access.
Behaviour by manufacturers that affect the availability of these things through the small and informal retail sector will be probed.