The Competition Commission of Mauritius

Application of the Act to the Food Retailing Sector

20/April/2016

Sailesh RAMYEAD

COMPETITION COMMISSION OF MAURITIUS

The Retail Sector

Retail

About 22,586

licences *

Wholesale & Retail- 10%

of GDP

>10% CCM INV

F& B > 38% of

basket **

* As per CSO Statistics as at 2012, includes Retail sale in non specialised store(foodstuff predominant) and

Other retail sale in non-specialised stores (non-foodstuff predominant)

** Includes food, beverages, tobacco

Caution!Does not

mean relevant market


The Retail Sector


RBP HARM TO RETAILERS


Harm to Retailers

[Examples]


Collusion harm to

retailers

Price fixing

• Suppliers fix the price of their products

• Retailers cannot bargain

• Reduce margin of retailers

• Limit discounts to retailers

Market allocation

• Suppliers divide markets geographically

• Suppliers divide market in other ways

• Volume (e.g. small packs/large packs)

• Retail outlets (e.g. hypermarkets/supermarkets...)

• Again no bargaining


Margin squeeze

Strategy for vertically integrated dominant firms (operate in both upstream and downstream)

• Suppliers/distributors and their clients (retailers) are competitors

• The strategy is to reduce the profit margin of competitors that are both customers of the dominant firm and rivals on the market for the derived product

• Charging a high price for the input and/or charging a low price for the derived product

• The anti competitive effects are the risks of foreclosure of equally efficient competitors whose access to the market is eliminated or hampered

• An equally efficient firm will be unable to compete in the downstream market on a lasting basis

• The competitors of the dominant firm cannot trade profitably in the downstream market on a sustainable basis


Exclusive dealing/rebates


Tying


Refusal to Supply


RBP BY RETAILERS


Retailers as buyers

• Monopoly situation – supply or acquire

• Retailers as buyers – acquire

• If > 30 or 3 retailers above 70% in acquisition market

– monopoly situation (monopsony)

• Monopsonists can breach CA if engage in conducts:

• has the object or effect of preventing, restricting or

distorting competition [in acquisition market]; or

• in any other way constitutes exploitation of the monopoly

situation


Retailers as buyers

• The UK and EU conducted Sector Enquiries in Retail

Sector

• Generally found competition to exist to benefit of

consumers

• However found that few supermarkets to control the

market

• Buyer power was the main issue


Joint Purchases

• Otherwise independent retailers purchase jointly

• May fall within:

• Horizontal agreements (fix purchase price):

• Section 41 - collusive

• Section 44 – non-collusive

• May also fall within merger provision

• If change in ownership and control

• Impact on competition must be taken into account

• If the group sets the selling price may also amount to price fixing


Private Brands

• Retailer’s own brand

• Can be beneficial to competition and consumers

• Can increase inter-brand competition

• Can be cheaper and offer choice to consumers

• However, retailer must ensure not to unduly favour private

brands to the detriment of other brands


Exclusive distribution

• Only one or few dealers authorised to sell the

product

• Exclusivity by dominant buyer!

• Need to balance the effects on competition

• On one hand can increase inter-brand competition

• On the other hand can reduce intra-brand

competition


Resale Price Maintenance (RPM)

• Agreement between seller and reseller to fix price

• Maximum price permissible

• Minimum, fixed price and price range prohibited

• Breach by object or effect

• Reseller (dealer) would be party

• Dealer can also be found to breach the Act and be

fined

• Can lead to horizontal agreements


Resale Price Maintenance (RPM)

• Price recommendation permitted

• However, the words ‘Recommended Price’ must

appear on the product if the price appears

• Dealer’s role

• Recommended price must NOT be binding: e.g

incentive to abide by recommended price


Other matters

• Loyalty rebates

• Shelf space allocation

• Associations


Cases

• Kraft Cheese

• Retroactive rebates

• Preferential shelf space

• Effect of exclusive dealing

• Supply of coolers by PBL and QBL

• Lack of space in small shops

• Effects of exclusive dealing


Dos and Don’ts

• Do• Conduct compliance programme

• Be careful in dealing with sensitive information with

suppliers if you are also active upstream

• Take advise before entering in exclusive agreements

• Don’t • Discuss price or sensitive information with competitors

• Impose price for supplier to charge smaller outlets

• Accept products with resale price set by supplier without

words ‘recommended price’

• Abuse of your buyer power


Questions


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