The Competition Commission has fleshed out the details of how small and black businesses that supply large grocery stores and agro-processing firms or sell their products online will be able to seek relief from abuses by market bullies through the Competition Act.
The commission published new guidelines on the price discrimination and buyer-power provisions of the amended Competition Act on Wednesday. The guidelines provide much-needed detail on how the regulations, gazetted last week, will be applied and set some parameters for their application.
The aim of the provisions is to reduce market concentration and increase participation. Such provisions are, however, also controversial as the use of market power to negotiate supplier prices downwards is to the advantage of the consumer and keeps inflation lower.
The commission’s chief economist, James Hodge, said in an interview on Thursday that the provisions came from a recognition that SA had not made much progress in reducing concentration of the economy.
However, after an initial draft of the regulations last year, business, including small business, needed more certainty on conduct as the many hundreds of thousands of supply negotiations that take place each day cannot be the subject of complex, legal assessments, he said.
“The provisions are unique from a global perspective in that they aim specifically to assist small business and historically disadvantaged players,” said Hodge.
The price discrimination provision aims to prevent small firms from being charged higher prices than larger firms for critical inputs because they are small and are not part of favoured trading relations.
The guidelines aim to ensure that only material price discrimination and not trivial cases are enforced by determining how important the input is and what effect a lower price would have on the small firm to drop prices itself or drive more sales. They set “safe harbours”, or price differences below which the commission will not investigate, of 5% for important inputs and 10% for less important inputs.
The buyer power provision, which seeks to enforce fair trade, will apply to the grocery and retail sector, the agro-processing sector and online platforms.
It will be unfair for a grocery or retail store or agro-processor to, among others: make payment terms longer than 30 days for perishable products and 60 days for others; cancel orders for perishable products at short notice; make unilateral changes to the contract; or require payments for wastage when this is the fault of the supplier.
In online commerce “intermediation services”, such as online stores, it will be unfair to: treat different suppliers differently; rank them; place restrictions on where they can sell their products; sell the same products through other means; or use the data gathered on the supplier’s sales to enter into competition with it.
Both the provisions and the guidelines have been published for comment. Hodge said it was expected that they would come into effect in November.
Lobby group the Small Business Institute said that while the regulations could help, the more important thing was for the government to improve the general environment for doing business.
“Hand-in-hand with going after the bad guys must come a better environment for SMMEs to do business. While prices paid to suppliers are important, we are a bit dubious about solutions that don’t look at the economy as a whole,” said executive director Bernard Swanepoel.
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