The Competition Authority of Botswana (CA) rejected an exemption application brought by two FMCG players. The applicants, Choppies Distribution Centre and Payless Supermarkets, sought to justify their application by demonstrating that by increasing their buyer power the applicants would be able to ensure lower prices and better quality products for consumers and that these pro-competitive outcomes outweigh any anti-competitive effects.
After evaluating the exemption application, the CA found that the agreement between Choppies and Payless would result in a substantial lessening of competition. In particular, the CA held that:
- There is no competition between Choppies and Payless, the duo had monthly promotions wherein they had the same goods on promotion at identical or similar prices and the pamphlets were an exact replica of each other.
- The two stores had alleged that Choppies would not benefit from the arrangement. It however emerged that Choppies was benefiting, particularly given, the quantity of Choppies in house brands found in Payless stores. Payless did not have any in house brands, but instead sold a variety of Choppies goods in large volumes.
- Further, the Authority finds that the granting of an exemption to the applicants would be in effect granting the Choppies and Payless the leeway to continue with their price fixing and distortion of competition.
The CA was also not convinced that there were any other public interest benefits which would outweigh the anti-competitive effects referred to above.
This exemption application followed a similar application in 2014 which was also rejected.
Primerio Director, John Oxenham, says that this application demonstrates the importance of ensuring that objective and credible economic evidence accompanies an exemption application in order to prove the likely economic benefits to the public.
When asked to comment, Michael-James Currie, a competition lawyer practising across sub-Saharan Africa, says that buyer power in the context of FMCG retailers is a particularly topical issue not only in Botswana but also in South Africa where buyer power has specifically been included in the Competition Amendment Bill (which is soon to be brought into effect) as well as Kenya (who have also specifically included abuse of buyer power as a standalone provision). The motivation behind these legislative amendments, says Currie, follow largely as a result of concerns raised by the respective competition agencies of South Africa and Kenya regarding the buyer power which large retailers exert on small suppliers.
It is not yet clear whether Choppies-Payless proceed to appeal the CA’s decision or whether they will seek to pursue a fresh exemption application bolstered with more compelling economic evidence. To the extent that the applicants abide by the CA’s decision, they will be required to dissolve their “buying group agreement” within three months.