Calls for competition reforms as brands collapse under exclusivity deals

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From Boardroom Buzz to Dinner-Table Drama

South Africans have long heard academics warn about “supermarket strangulation,” yet the closures of Grey’s Marine and Beyers Chocolates transformed abstract theory into kitchen-table reality. Grey’s, a three-decade pioneer of sustainably line-caught Cape hake, and Beyers, a 34-year confectioner once found on 22 foreign shelves, were economic anchors in Atlantis and Stellenbosch. Their bankruptcies did more than wipe trademarks off the register; they ruptured family networks where one wage packet keeps cousins, grandparents and neighbours afloat.

Both firms unravelled for the same reason: exclusivity agreements that, once breached, unleashed instant retaliation. When retailers noticed Grey’s fillets or Beyers pralines slipping into rival aisles, clauses that had lain dormant for years were triggered overnight. The lesson? A chain with under ten percent of national till money can still throttle a supplier. The Democratic Alliance says the law must stop measuring dominance purely by overall share and start weighing “economic dependence,” and it has drafted changes to the 1998 Competition Act to prove it.

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What “Exclusivity” Really Means When the Fine Print Ages

Retailers defend lock-in contracts as the only sane reply to three headaches: scarce shelf centimetres, the need for unique house-label cachet, and the terror of multi-store food recalls. One contract, they argue, keeps “Taste the Difference” trout mousse out of competitor baskets and protects shoppers from botulism headlines. But a one-page rider signed in year one mutates. Annual volume rebates, promotional kickbacks, eye-level positioning fees and penalty interest snowball until the maker’s gross margin scrapes the very low single digits.

At that point the retailer parachutes in a copy-cat private label, built with the supplier’s own specs, and the supplier cannot flee: ovens, blast chillers and traceability software were custom-paid for with borrowed money that still needs servicing. Liquidation becomes cheaper than divorce. Grey’s and Beyers are neither unlucky anomalies nor victims of slack management; they are textbook casualties of a system that turns committed factories into locked-in cost centres.

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Dependence: The Metric the Law Forgot to Measure

Conventional competition analysis draws neat boxes: chocolate truffles sold in supermarkets sit inside the market, garage forecourt bars and exports sit outside. Yet this ignores the noose that tightens when a grocer owns the last premium metre of refrigerated space able to amortise a supplier’s sunk costs. Switching is not a matter of swapping labels; it means re-engineering recipes, rerunning Kosher and Halaal audits, printing trilingual sleeves and renegotiating international cocoa forward contracts.

The moment IP clauses quietly transfer recipe ownership after five years, the supplier becomes a tenant farmer in someone’s else field. French jurists call this “bilateral dependency with asymmetric clout”; workers in Atlantis call it a shuttered factory gate. The DA’s tweak would let the Competition Commission declare dominance wherever a producer’s “commercial survival” hinges on one counterparty, a test already embedded in France’s Egalim law and in pending EU rules on farm-gate bullying.

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What the Amendment Will Actually Say, Clause by Clause

New Dominance Tripwires

A firm will be presumed dominant if:
- It snaps up thirty percent of a supplier’s national revenue for two years running;
- The cost of walking away tops fifteen percent of that supplier’s annual turnover; or
- It axes a contract with less than twelve months’ notice.

Blacklist for Tied-In Trading

A planned Section 8(1)(g) will outlaw exclusivity or “quasi-exclusivity” with a dependent partner, unless the retailer can prove the lock-in is indispensable for food-safety, proportionate to its own verifiable investment, and bereft of milder alternatives.

Private Tribunal Shortcut

Suppliers will approach the Competition Tribunal directly, skipping an overworked Commission. Remedies stretch from damages to emergency orders halting a de-listing, plus court-managed renegotiation.

Six-Month Sector Probes

The Commission may launch a groceries-specific market inquiry on its own motion, mimicking the UK Groceries Code Adjudicator’s rapid-fire audits.

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Lessons from Abroad - and How South Africa Could Leap Ahead

Australia’s 2017 “Effects Test” outlaws any behaviour that simply lessens competition, dominance or not. France caps supermarket contracts at twelve months and bans below-cost resale. Brazil’s competition tribunal temporarily lowered grocery thresholds during the pandemic to keep shelves stocked. Each regime also installed a grocery ombudsman, funded by a levy on mega-chains. South African small suppliers now lobby for a South African Grocery Buyer Ombud, bankrolled by retailers above R5-billion turnover and lodged inside the Tribunal for speed and stature.

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Winners, Losers and the Grey Zone in Between

• Scenario A – Bill Passes in 2025:* Retailers pre-emptively prune penalty clauses and pilot dual listing. Within two years a fisher co-op resurrects Grey’s equipment and employs 180 people selling hake to three banners at once. Investors rediscover mid-tier food processors, citing lower buyer risk.

• Scenario B – Bill Stalls:* Chocolate brands quietly fold into one conglomerate tethered to a single chain. Imports rush the gap and the national chocolate trade deficit balloons from R1.1 to R1.6 billion within five years.

• Scenario C – Sunset Review Compromise:* Retailers accept the law but win a statutory five-year review clause. The Commission builds a public dashboard of mutual-dependence ratios, nurturing a brand-new industry of compliance economists.

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Beyond Groceries: Tea, Tech and T-Shirts

The exclusivity virus is already roaming. Rooibos fermenters say global beverage giants demand “block exclusivity” on organic grades. Local fashion labels complain department stores impose six-month design embargoes longer than a hemline season. If the amendment crosses the finish line for food, expect copy-paste templates for textiles and tech hardware - much as Australia’s Effects Test leapt from bread to ride-sharing apps overnight.

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How Retailers Will Hack the New Playbook

• Tiered Sourcing:* Instead of one supplier of trout mousse for 200 shops, chains may slice regions among several SMEs so no single maker crosses the thirty-percent-turnover red line.

• Sudden-Death Insurance:* Expect new policies that compensate suppliers for overnight de-listing, underwritten by reinsurers hungry for ESG brownie points.

• Real-Time Shelf Data:* Retailers may be forced to share live sell-through numbers with vendors, trimming the forecast errors that currently trigger “performance failures” pinned on the little guy.

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Jobs on the Line: Retrenchment vs. Resilience

Section 189A of the Labour Relations Act forces large employers to consult unions before mass layoffs, yet when a retailer rips up a supply contract the pain tumbles down to smaller firms outside the Act’s safeguards. A mooted “Joint Employer” clause would drag the retailer into retrenchment talks if more than twenty percent of the supplier’s payroll is at risk. COSATU likes the idea; the Food and Allied Workers Union fears it could scare retailers away from SMEs altogether.

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Will Your Grocery Bill Explode? Modellers Say No

A University of Cape Town CGE model simulates a two-percent procurement-cost bump when supermarkets dual-source chocolate. Shelf prices inch up just 0.3 percent because chains squeeze logistics partners and trim advertising budgets. Inflationistas may need to find a new horror story.

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A Realistic Calendar You Can Set Your Watch To

• Q1 2025: Portfolio Committee tables the bill; citizens vent in Johannesburg, Durban and Cape Town.
• Q2 2025: Technical panel releases a “Supplier Dependency Index.”
• Q3–Q4 2025: Parliament passes the amendment; the President signs it into law effective 1 January 2026.
• June 2026: Transitional grace period ends; old exclusivity clauses die unless registered.
• *2027: * Tribunal delivers its first landmark ruling against abuse of commercial dependence in the Rooibos belt, locking in precedent for every sector that hates a bully.

What is South Africa doing to prevent large retailers from exploiting suppliers?

South Africa is amending its 1998 Competition Act to address retailer dominance. Key changes include new dominance criteria based on supplier revenue and exit costs, blacklisting exploitative exclusivity clauses, and providing suppliers direct access to the Competition Tribunal for dispute resolution and market inquiries. This aims to protect suppliers from economic dependence on large retailers.

Why are these changes necessary, and what are the consequences of the current system?

The current system allows powerful retailers to impose unfair exclusivity agreements, leading to