Filed under: Retail
June 30, 2009
By Florence de Vries and Reuters
Retailers Pick n Pay, Massmart, Woolworths, Shoprite and Spar have welcomed the competition commission’s decision yesterday to investigate possible antitrust breaches.
The announcement of the inquiry hit retail stocks and raised concern about more aggressive regulation under the new government. The commission said it was investigating the five retailers over concerns about possible anti-competitive behaviour. It said the retailers’ purchasing methods, rental agreements and possible collaboration would be probed.
Commissioner Shan Ramburuth said concerns included long-term exclusive property lease agreements and the concentration of buyer power, which made it difficult for small producers to get products on supermarket shelves. The commission was also concerned that the groups were exchanging price-sensitive information.
Shares in Pick n Pay closed 2.8 percent lower at R32.66. Massmart was flat at R80 after dipping 0.24 percent earlier. Woolworths edged up 1.1 percent to R12.78, Spar dropped 2.8 percent to R56 and Shoprite lost 2.3 percent to R53.20.
The food and drug retailers index fell 0.43 percent, while the general retail index slipped a fraction.
Roelf Venter, the group marketing director at Spar, said that in the past few months there had been repeated rumours of anti-competitive behaviour, but that Spar had nothing to hide.
“We welcome the investigation,” he said. Competition between the major players in the retail market had been fierce, but the investigation was probably fuelled by sensitivities about food inflation.
Pick n Pay chief executive Nick Badminton said the group welcomed any investigation or inquiry, and would co-operate fully with the commission. “Our record stands as a company that has consistently fought anti-competitive practices, price-fixing and collusion.”
Woolworths also pledged its co-operation.
Massmart chief executive Grant Pattison labelled the move “responsible in light of speculation about the competitiveness of the retail sector”.
Shoprite chief executive Whitey Basson said he welcomed the investigation so all stakeholders, especially consumers, would have a clear picture of the situation. The group’s concern was centred on negotiating the best prices on behalf of the people who frequented its 1 068 stores. “Negotiation processes support the free market system… Shoprite sources product locally and internationally to secure the lowest possible prices.”
One economist said the commission’s move was not only important for food prices – a key driver of inflation – but could signal a more aggressive approach to regulation by the new government. Razia Khan, the head of research for Africa at Standard Chartered Investors, said there might be signs of a more activist government.
“The implication of this runs deeper than just food prices,” she said. “It may be seen as a landmark in terms of the approach of the authorities to regulate business.”
The competition commission is independent, but some investors worry that the government could exert pressure through antitrust authorities to promote its pro-poor agenda and possibly influence the outcome of corporate mergers.
Food inflation has remained persistently high despite falling international prices, and consumer groups have repeatedly called for an investigation.
After the probe, it will be decided whether to refer the retailers to the competition tribunal.
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