the competition commission of mauritius
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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
COMPETITION COMMISSION OF MAURITIUS
The Retail Sector
COMPETITION COMMISSION OF MAURITIUS
RBP HARM TO RETAILERS
COMPETITION COMMISSION OF MAURITIUS
Harm to Retailers
[Examples]
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
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Exclusive dealing/rebates
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Tying
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Refusal to Supply
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RBP BY RETAILERS
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
Other matters
• Loyalty rebates
• Shelf space allocation
• Associations
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
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
COMPETITION COMMISSION OF MAURITIUS
Questions
COMPETITION COMMISSION OF MAURITIUS
www.ccm.mu
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