Four wholesalers- Metro Sefalana Cash and Carry Limited, Trans Africa (Pty) Ltd, Trident Holdings (Pty) Ltd and Trade World (Pty) Ltd - have been summoned to appear before the Competition Authority for possible resale price maintenance with their banner group members.
Competition Authority Director of Legal and Enforcement, Duncan Morotsi said these wholesalers have contravened Section 26 (1) of the Competition Act which states that an enterprise shall not enter into a vertical agreement with another business enterprise to the extent that the agreement involves resale price maintenance.
The Competition Authority conducted a Competitive Analysis of the Retail and Wholesale Sector Study in 2013 and concluded that there was anti-competitive conduct between these four wholesalers and their banner group members in contravention of section 26 (1) of the Act by entering into vertical agreements through resale price maintenance in the fast moving consumer goods market with their banner group members.
“The Authority in its investigation found that the wholesalers all issued their banner group members with pamphlets but did not make it clear that the prices were not binding on them and there was no reflection that the prices indicated on the pamphlets were just recommended prices. The banner group members were therefore selling the goods at the prices indicated on the pamphlets,” said Morotsi.
The Authority states that in terms of the law, a minimum resale price may be set provided it is made clear that the price is not binding on the seller and the product has the recommended price stated on it or the words ‘recommended price’ reflected next to the price.
Appearing before the Competition Commission on Tuesday, Trident Holding Representative, Jane Cross requested to be given 30 days to work on the problem and reach an amicable solution with the Competition Authority.
“We have been engaging with the Competition Authority so we thought there was no need for us to appear before the Commission since we have been in an engagement with The Authority. So in this case we request to be given time to work on our issue and reach an amicable solution with the Competition Authority,” she said.
All the respondents have requested to be given a 30 day period to work on their problems and reach an amicable settlement with the Competition Authority.
Competition Commission Chairman, Onkemetse Tshosa agreed with the Competition Authority to give them 30 days to work on their cases on the condition that they will reach a settlement with the Authority against the contravention.
Sefalana, Trans Africa and Trident Holdings have been given 30 days while Trade World was left pending as its representative Isaac Seloko, was not recognised as a lawyer because he referred himself as both the lawyer and consultant in the case.
Through its applications before the Commission, the Authority is seeking an order declaring that the Wholesalers have contravened section 26 (1) of the Act, an order declaring each Wholesaler liable for payment of an administrative penalty equal to 10 percent of annual turnover in terms of section 43 (4) of the Act and an order for the Wholesalers to cease and desist from engaging in prohibited practices in contravention of the Act.
Sefalana has 18 supermarkets under the retail name ‘Shoppers’, 25 Cash and Carry outlets trading under the name ‘Sefalana Cash and Carry’, three Hyper Stores located in Gaborone, Francistown and Mahalapye trading as ‘Sefalana Hyper Store’ and a cigarette distribution outlet trading as ‘Capital Tobacco’. The group has more than 400 banner group members.
According to Competition Authority analysis, the group entered into vertical agreements through resale price maintenance in the fast moving consumer goods market with their banner group members being Super Deal and Super 7.
Trident Holdings contravened through Big 11, Trans Africa with 3 Square while Trade World contravened Sec 26 (1) of the Competition Act through Trade Deal.
Competition Authority has proposed an amendment bill to criminalise cartel behaviour in Botswana as a way of trying to prevent the conduct that will likely reduce incidences of bid collusions that result in rigging. Competition Authority Legal and enforcement Director, Duncan Morotsi said bid rigging is one of the major acts in the country but it is still difficult for the Authority to detect.
“Procurement officers must be involved in combating bid rigging. We should have a mechanism where public officers are fighting bid rigging because the act is there but we cannot easily detect it yet,” he said. Speaking during the Competition Authority bid-rigging workshop on Tuesday, Morotsi said bid rigging is not a criminal conduct under the Competition Authority law, but the amendment is proposed to punish those officials engaged in the conduct. “We are working closely with procurement entities to try to combat bid rigging in public procurement but the procurement law is there to black list serial offenders,” he said.
He said under the competition Act bid rigging involves agreement between enterprises whereby in response for bids one of the agreements agrees to submit a bid or the parties agree upon the price terms and conditions of a bid to be submitted. “Batswana should help prevent bid-rigging. Going forward we are saying let’s search ourselves and see how we can have a perfect market play,” said Morotsi, adding that the Whistle blowing Act bill is still awaiting approval by the cabinet. Although he could not state the exact figures, he said Bid Rigging cases account for approximately 40 percent of the restrictive business cases handled by the Competition Authority since establishment in 2012.
Citing some cases of bid rigging held by the authority, Morotsi said the cartel is most common in the car panel beating enterprises but it is difficult to reverse the harm. “Car panel beating enterprises mostly engage into this conduct when they are bidding to the insurance companies. The problem is difficult to solve because the insurance industry also increases the premiums to cover up the cost of repairing cars”. In his address Minister of Investment, Trade and Industry, Vincent Seretse said government desires to make public procurement in this country fully functional and transparent. “It is my hope that we will engage and find better ways of detecting bid-rigging which continues to bleed government coffers millions of Pula and undermine the quality of projects and services that we render to the public,” said Seretse.
He said the local procurement adjudicating board (Public Procurement and Asset Disposal Board PPADB) through its Act and Regulations has spelt out issues of bid rigging in the spirit of fair and transparent competition in the public procurement system. He said public tenders are one way in which the country can promote fair and transparent trade as most of government budget is spent on public procurement of goods and services. In the current financial year alone, the government’s development budget stands at about P13.81 billion. Seretse highlighted that bid rigging can increase the costs of goods and services by up to 20 percent or more, and data has shown that the cost is around 35 percent to 55 percent for developing countries.
“The victims of bid-rigging are customers and in public procurement where the customer is the Government, the harm extends to the whole economy, as the high prices paid to unscrupulous bidders affect other developmental goals,” he said. He explained that the impact is particularly serious when it involves the provision of essential goods and services that affect the lives and well - being of citizens. “In view of this background, it cannot be over-emphasised that the fight against bid-rigging is crucial for enhancing the economy of Botswana. As a developing country, the Government of Botswana is a major consumer of goods and services and we must be concerned about this trend where public money worth millions of Pula is lost through a tapestry of collusive activities,” said Seretse.