the competition commission of mauritius
TRANSCRIPT
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Application of the Act to the Food Retailing Sector
20/April/2016
Sailesh RAMYEAD
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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
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COMPETITION COMMISSION OF MAURITIUS
The Retail Sector
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COMPETITION COMMISSION OF MAURITIUS
RBP HARM TO RETAILERS
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COMPETITION COMMISSION OF MAURITIUS
Harm to Retailers
[Examples]
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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
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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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COMPETITION COMMISSION OF MAURITIUS
Exclusive dealing/rebates
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COMPETITION COMMISSION OF MAURITIUS
Tying
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COMPETITION COMMISSION OF MAURITIUS
Refusal to Supply
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COMPETITION COMMISSION OF MAURITIUS
RBP BY RETAILERS
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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
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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
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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
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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
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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
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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
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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
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COMPETITION COMMISSION OF MAURITIUS
Other matters
• Loyalty rebates
• Shelf space allocation
• Associations
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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
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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
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COMPETITION COMMISSION OF MAURITIUS
Questions
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COMPETITION COMMISSION OF MAURITIUS
www.ccm.mu