The Competition Commission has found insufficient evidence that certain supermarkets were contravening the Competition Act, but was concerned about their insistence on exclusive long-term leases in shopping malls.

"The investigation revealed that there was insufficient evidence to show contraventions in terms of the Competition Act pertaining to abuse of buyer power; category management and information exchange," the commission said in a statement on Thursday.

It remained concerned about "long-term exclusive leases" which may amount to a contravention of the Competition Act, particularly where supermarkets had market power.

The probe was in response to complaints about rising food prices. The investigation looked into practices at Pick n Pay, Shoprite/Checkers, Woolworths and Spar, as well as wholesale retailers Massmart and Metcash, for alleged contraventions of the act.

They focused on the retail of key staple foods including poultry, bread and maize meal, milk, fats and oils and canned fish, and barriers to entry for businesses.

Concerns noted by the commission include, besides the lease agreements, information exchange, category management and concentration of buyer power.

Regarding the leases, the commission found that insisting on being the only supermarket in a mall prevents independent and small retailers from entering certain shopping malls.

The commission would discuss this concern with supermarkets, property developers and banks to find a constructive solution.
If a solution isn't found on this issue, the commission will proceed with prosecution.

Although it didn't find evidence of information exchange, it did find that third parties like AC Nielsen and Synovate collect scanner data from supermarkets which they disseminate to suppliers.

Suppliers get detailed information about their performance and that of competitors per retail chain, per product category and by region.

The commission is currently investigating allegations of information exchange in the maize and wheat, poultry, pelagic fish and vegetable oils industries.

It could not find evidence of collusion on the pricing of the food items it isolated for investigation between the retail chains, which are high-volume and low-margin items. They use low prices on these items to attract consumers on a regular basis, the commission said.

Supermarket chains were also not found to be abusing their buyer-power by placing onerous demands on suppliers, especially small suppliers.

This could include practices such as exclusive supply arrangement, listing fees, slotting allowances, payment policies, return policies, promotional discounts and other rebates.
Larger suppliers considered their relationship with supermarkets to be equal or tilted toward the retailers.

While the large supplier alluded to tough negotiations with the supermarkets over pricing, they did not indicate that there has been an impact on their margins and investment capability.

But, smaller suppliers raised concerns with the difficulty of complying with a range of allowances and rebates demanded by retailers.

They have also raised concerns regarding adverse payment terms and retrospective deductions from payments when retailers realise that they have offered deeper discounts to their competitors.

In the long run, this may undermine the competitive process at this level of the supply chain. For this reason, the Commission urges the supermarket chains to facilitate entry of small suppliers by for example changing their procurement policies and proactive disclosure of information on entry requirements.

There were no concerns over category management.