Small com­pany’s firm stand ben­e­fited all con­sumers

Weekend Post (South Africa) - - THIS WEEK YOU’RE SAYING ... -

WE all love a good David and Go­liath story – those peo­ple who stand up to en­ti­ties far more pow­er­ful than them, at great per­sonal risk and ex­pense, be­cause toe­ing the line about an in­jus­tice is sim­ply un­con­scionable to them.

That’s es­sen­tially what hap­pened when the ex­clu­sive dis­trib­u­tor of SMEG branded prod­ucts in South Africa – SBS House­hold Ap­pli­ances, trading as SMEG – tried to force a Pi­eter­mar­itzburg-based, fam­ily-run busi­ness not to sell their up­mar­ket ap­pli­ances at “too low” prices.

In 2014, Save Hy­per was sell­ing an SMEG gas stove at R14 999 while Hirsch’s was sell­ing the iden­ti­cal stove for R17 999. When a cus­tomer com­plained, Hirsch went to SMEG, re­quest­ing the dis­trib­u­tor’s in­ter­ven­tion.

The is­sue wasn’t that Save Hy­per was get­ting a pref­er­en­tial price from SMEG – it was that they chose to im­pose far lower profit mar­gins than their com­peti­tors – just 2 to 3%.

So SMEG ordered Save to in­crease their prices so as not to dis­rupt the mar­ket and an­noy other ap­pli­ance re­tail­ers who were im­pos­ing much higher mark-ups. When Save re­fused to bow to pres­sure, SMEG made good on its threat to stop sup­ply­ing the Pi­eter­mar­itzburg out­let – that was in Oc­to­ber 2014 and the “ban” lasted un­til early last year.

But the swish Ital­ian ap­pli­ances are back on Save Hy­per’s floor – and SMEG is no longer say­ing a word about it­slow mark-ups.

The com­pany never had a right to dic­tate in the first place: that’s called min­i­mum re­sale price main­te­nance, which is a form of price fix­ing, and it’s out­lawed by the Com­pe­ti­tion Act.

Save Whole­salers Cash and Carry – op­er­at­ing eight su­per­mar­kets and their flag­ship out­let, Save Hy­per – which has an ap­pli­ance and elec­tron­ics show­room above its gro­ceries shop floor – knew it was il­le­gal and turned to the Com­pe­ti­tion Com­mis­sion for help.

The up­shot was a con­sent agree­ment en­tered into be­tween SMEG and the com­mis­sion in which the ap­pli­ance dis­trib­u­tor ad­mit­ted prac­tis­ing min­i­mum re­sale price main­te­nance and was fined R100 000.

Save’s le­gal bill was many times that amount, but the com­pany’s ex­ec­u­tive Ebrahim Ka­jee says the com­pany has no re­grets.

“SMEG is a great prod­uct, and so are the dis­trib­u­tors, on a per­sonal level, but what they did to us wasn’t right, and we re­fused to ac­cept it.”

Re­tail­ers have the right to charge what­ever they want to, Ka­jee says, and if that’s below av­er­age prices on a par­tic­u­lar item or range, con­sumers have the right to ben­e­fit from that.

“We were just fight­ing for what is right,” Ka­jee said last week.

Asked to com­ment, Mar­garet Hirsch, Hirsch’s chief op­er­a­tions ex­ec­u­tive, said: “What we do is we just stick to our knit­ting.

“We do what we do best. We try to give our cus­tomers the best pos­si­ble deals and ser­vice ev­ery day.”

Clearly the Con­sumer Tri­bunal pan­elists have huge ad­mi­ra­tion for the Save own­ers.

“Save acted cor­rectly in stand­ing up to SMEG – de­spite threats that they would lose all sup­ply of prod­uct by SMEG if they con­tin­ued dis­count­ing the gas ap­pli­ance in ques­tion – and they should be com­mended for that,” the com­mis­sion said.

“Their ac­tions have helped so­ci­ety at large to ac­quaint them­selves with the pro­vi­sions of the Act which af­ford them pro­tec­tion against such prac­tices.”

Ka­jee said the case had led to a change in at­ti­tude among some sup­pli­ers. “Fi­nally they’re aware that they can’t bully and dic­tate to us about pric­ing. The ta­bles have turned. ‘Sell it for what­ever you like,’ is all they’re say­ing now.”

It’s very rare for a com­pany to turn to the Com­pe­ti­tion Com­mis­sion to chal­lenge this form of price fix­ing, ei­ther be­cause re­tail­ers aren’t aware that min­i­mum re­sale price main­te­nance is pro­hib­ited in South Africa, or more likely be­cause they fear los­ing their source of sup­ply of the prod­ucts.

The tri­bunal chose to go pub­lic with the rea­sons for its or­der to make other re­tail­ers aware that it is il­le­gal for a sup­plier to bully or threaten them into not dis­count­ing their rec­om­mended sell­ing price, and if that they ex­pe­ri­ence that, they should com­plain to the Com­mis­sion. Thanks to Save’s brave stand, they prob­a­bly won’t have to.

I dare­say the sup­pli­ers are now play­ing nice when it comes to deal­ing with the re­tail­ers about price. At least for a while . . . NOTH­ING NEW… Jon Ab­bott of Cape Town, a for­mer Star jour­nal­ist, told me that price fix­ing was rife in the 70s, “but it wasn’t po­liced with much en­thu­si­asm”.

“My in­ves­ti­ga­tions at the time re­sulted in the first price-fix­ing con­vic­tion un­der the then five-year-old Monopolostic Con­di­tions Act.”

In March 1975, Hampo, a Premier Milling sub­sidiary that had the Pen­tax cam­era agency in South Africa, was fined the princely sum of R300 for fix­ing the price of Pen­tax ac­ces­sories – 150 items, rang­ing from lenses to flash guns and binoc­u­lars.

“The mag­is­trate came to the pe­cu­liar de­ci­sion that Hampo could fix prices on the Pen­tax cam­era it­self be­cause that was patented, but it could not do so on the ac­ces­sories,” Ab­bott said.

Hampo had sent out a cir­cu­lar to re­tail­ers stat­ing that deal­ers must not grant dis­counts of more than 10% off Hampo’s sug­gested prices and warned that those who did “will not be sup­plied at all”. CON­TACT WENDY: E-mail: con­ Twit­ter: @wendy­knowler

MY STORE, MY PRICE: Save Hy­per ex­ec­u­tive Ebrahim Ka­jee in the store’s SMEG sec­tion. The com­pany stood up to SMEG when the dis­trib­u­tor re­fused to sup­ply them be­cause their “too low” prices were dis­rupt­ing the mar­ket


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