Manufacturers, brands, distributors and wholesalers – you now have the chance to reset and consolidate, with the law at your back.
My previous opinion piece on this subject was directed towards buying groups, procurement officers and members of those groups (https://bydesign.co.za/blog/). This time, it’s the suppliers who are the recipients of my humble opinion.
Note: The last article was met with some resistance by groups who incorrectly claimed —and unfortunately, advised their members and listed suppliers accordingly — that the law was not yet in effect, whereas in fact, it most definitely is, via a letter dated 13 Feb 2020 by Ebrahim Patel (Minister of Trade & Industry)
Simply put, not only is compliance to these new laws mandatory for all suppliers — including wholesalers, distributors and supplier of products and services — but also, there is a ‘window of opportunity’ to do the right thing.
Our capitalistic nature and system has embedded a culture of leveraging every conceivable advantage over the competition, eking out those last few decimal points of profit and it really does seem justifiable to offer a higher rebate, a better price or a chunkier discount et al — because we get higher volumes, or ‘X’ buyer has influence over a larger audience, meaning that they have a bigger stick than the other person. You get the point?
In the context of South Africa, disadvantaging one buyer over another, based on buying power and/or volumes (using an arsenal of incentives eg price, rebates, discounts or settlements etc), cannot advance the country or its people holistically, in any meaningful way. To achieve economic inclusivity, without negatively affecting consumers, requires creating laws that level the playing fields and removes the power from protecting incumbents.
“Volumes alone cannot a discount make”— It simply opens the door to supplier bullying.
For suppliers, the reality of this law places you at a crossroads between hesitancy to move and your commitment to a long-term decision to transform your trading terms within the scope of the law. Although resistance to your legal compliance and obligations may be a predictable outcome, it will likely be of short endurance, or challenged by filing a claim with the Competitions Commission.
Anyone can file a complaint for investigation – free and confidentially.
This new act basically takes aim at the source of the problem — that is, preferential trading terms offered from suppliers to a select base, founded on volumes — and the law gives substantial power to buyers. Essentially, anyone can file a complaint for investigation to the Competitions Commission. That means any business of any size, including an independent retailer, spaza shop, corporate, buying group, (wholesalers and distributors seem to fall into both sides of this equation) can free, gratis and mahala, file a complaint against you purely because you offer an entity a better price, based on their volumes or buying power.
I can almost hear many readers saying to themselves: There are so many methods and criteria involved in formulating discounts, rebates, early settlements, incentives, commissions etc that are buried so deep in our trading terms that here is no way of figuring it all out!
Indeed, it has become so complicated that the proverbial smoke and mirrors makes it beyond analysis and decoding.
Note: no-one needs to decipher the complexities evolved over many years. If you are subjected to an investigation, the onus of proof falls upon you to prove that the pricing differential is justified by efficiencies other than volumes, or buying power, or indeed, relationships.
It’s important to consider the mature approach to Supply Chain Procurement that utilises Total Cost of Ownership (TCO) when pondering what you can do to earn the right to better pricing. Traditional costing methods such as Purchase Price Variance (PPV) typically miss between 20 to 40 percent of the actual costs of acquisition. These methods only take into account the price for which the supplier is willing to sell the item, when there are many other factors that can improve efficiencies to justify (or earn) an even better price. This, in effect, is the purpose and spirit that this new act is intended to incentivise – the maturing of business not reliant on incumbent buying power.
The Competitions Commission Tribunal has simplified this process for complainants, underscoring the urgency with which you should act. At this time of year, many suppliers are likely renegotiating their terms of trading, and the question arises: Which suppliers will take the window of opportunity and mature into this new era, with the understanding that being efficient oneself and demanding efficiencies from others, are key to your own future growth?
Below is a summarised version of the simple steps involved to lodge a confidential complaint to the Competitions Tribunal and the clout that such a complaint delivers.
Be smart and put efficiency centre-stage.
Step 1: Complaining against another party
Any person may provide information to the Commission concerning an alleged breach.
Step 2: Joining an existing case of a similar complaint
On receipt, the Commission may publish a public notice inviting any person to join the same complaint.
Step 3: Giving relevant information
The relevant information must be submitted to the Commission, including the nature of the complaint, what the breach entails, whether the act is still current, and any other additional information.
Step 4: Protecting information given to the Commission
If the information sent to the Commission contains trade, business or industrial information that belongs to you or a firm, has a particular economic value, and is not generally available to or known by others – you may request that that information be kept confidential.
Step 5: Seeking interim relief
Regardless of whether a hearing or investigation has commenced, any person who has lodged a complaint with the Commission may ask the Competition Tribunal for an interim relief order.
Step 6: Where the commission would not act
If the Commission declines to refer a complainant’s case to the Competition Tribunal for prosecution, the complainant may, within 10 days after receiving a ‘Notice of Non-Referral’ from the Commission, refer the matter to the Competition Tribunal at his/her own cost.
Step 7: Withdrawal of a complaint
At any time during an investigation, a complainant may withdraw a complaint lodged with the Commission and the Commission will accept the withdrawal. The Commission may however decide to continue investigating the case as if it had been initiated by the Commission itself.
Ron Basel – https://bydesign.co.za/blog/