There Is No Good Economic Reason for Any Retailer to Tell a Supplier They Can’t Sell Goods Elsewhere

Statement by Toby Chance MP – DA Spokesperson on Trade, Industry and Competition:

The Democratic Alliance is considering our approach to amend the Competition Act to address anti-competitive exclusivity agreements in retail.

There is no good economic reason that any retailer should tell a supplier they can’t sell goods elsewhere, and there is no reason any supplier should force a retailer to carry only their brand of a certain class of product.

Today news has emerged that a dispute between Woolworths and Grey’s Marine, a supplier of fish, has forced the small business to close down after supplying Woolworths for over 30 years. 230 jobs have been lost and the company has gone out of business.

This issue has also come to the fore after the liquidation of Beyers Chocolates, following a dispute with Woolworths over exclusivity agreements. Beyers, a supplier to Woolworths for 34 years, was forced to close down after Woolworths withdrew its business, claiming Beyers had infringed its exclusivity agreement by supplying products to other retailers.

Beyers had borrowed R200 million to fund a new factory to expand its capacity. When Woolworths pulled out, Beyers could not repay the debt. Liquidation has led to the loss of over 700 jobs.

Beyers contended that exclusivity agreements should be confined to product categories and should not apply to companies with production facilities that also supply non-competitive products to other customers.

Under South African competition law (Section 7 of the Competition Act), if a firm controls 45% or more of a defined market, they are automatically deemed to possess significant market power. The 45% threshold represents an irrefutable presumption of dominance.

Where a dominant firm imposes unfair or discriminatory contract terms on smaller contracting parties, this may constitute an abuse of dominance under Section 8. This is particularly relevant in supply chain relationships where smaller businesses contract with large corporates.

In the Beyers instance, the Competition Commission took the view that because Woolworths only controlled 9% of the groceries market it could not be regarded as dominant. In the DA’s view, the “dominance threshold” of 45% shouldn’t be required to show that an exclusivity agreement is abusive.

Dominance, in the Beyers and Grey’s cases, was established based on the contractual dependence of the supplier on the customer for the majority of its business, built up over many years. Sudden changes to the agreements between Beyers, Grey’s and Woolworths can be argued to represent abuse of dominance which an amended Competition Act must address.

The DA has also learned of a third small business which was forced into liquidation in 2024 under very similar circumstances with Woolworths.

The DA absolutely and unequivocally stands for the economic and market freedoms of all businesses to contract between one another on legal terms they agree – however, after big retailers make small businesses contract for exclusivity, and later seek to renegotiate terms once operational dependence has been established, they are taking advantage of their position and competition law must step in.