Small business enterprises owned by historically disadvantaged people will no longer be bullied by the big boys in terms of prices and practices.
Thanks to the Competition Commission Act which has effectively leveled the playing fields with strict guidelines that were designed to allow small business to prosper and grow.
In the past, SMMEs and firms owned by historically disadvantaged people (HDP) have had to contend with the ugly demon that was unfair trading and tended to find themselves on the shorter end of the stick in which they were forced to abide by unfair prices and high demands.
Well, that was now a thing of the past, at least on paper, as the new act unlocks the system and has introduced buyer power guidelines aimed to boost SMMEs.
The guidelines in essence protects small business owners from corporate wolves that seek to benefit at the cost of small businesses. They prohibit a firm with buyer power from imposing an unfair price or trading condition.
Released in May this year, the Commission said that the amendments made to the Act seek to support fair participation in the economy by SMMEs and HDPs.
“The weak bargaining position of SME and HDP firms is sometimes exploited by powerful buyers to unfairly suppress prices or impose tradition conditions which unfairly transfer costs or risks onto these suppliers,” the Commission notes in the Act.The Commissioner of the Competition Commission, Thembinkosi Bonakele, welcomed the release of the guidelines.
“The buyer power provisions present an opportunity for SMMEs or HDP firms to effectively participate in the economy without undue hindrances as a result of abuse of market power by dominant buyers,” he said.
Bonakele said this is an important step towards the realisation of a growing an inclusive economy in South Africa.
“These guidelines also come at an important time when the Commission is seeing such participation in the economy under threat from the COVID-19 crisis,” Bonakele also said.
The Act also dealt with the issue of pricing, a tendency it noted small companies continued to be overpriced by the big boys of the game.
“The higher prices resulting from this inequitable bargaining position makes SME and HDP firms less competitive and is a further unnecessary hurdle in the way of efforts to establish and grow their businesses, ” the Commission noted in its papers.
Bonakele further welcomed this move, saying increasingly the commission has been witnessing powerful buyers unfairly trying to shift their own economic hardship onto their suppliers which puts the sustainability of the suppliers at risk.
“The Commission has already taken enforcement action under these provisions in the dairy industry and is looking to apply them urgently in other parts of the food value-chain and online services.
“The guidelines provide a clear set of rights for small and historically- disadvantaged suppliers to stand by in their negotiations with powerful buyers,” he also said.
A Provisional List of Unfair Trading Conditions lists more than twenty actions the Commission considered as unfair trading practices.
They only apply to designated sectors such as agro-processing, grocery wholesale and retail, eCommerce and online services.
Trading practices the Commission considered unfair included the buyer cancelling orders of perishable products at such short notice that a supplier cannot reasonably be expected to find an alternative means of commercialising or using those products.
Buyers paying the supplier later than 30 days from delivery was also considered an unfair trading practice.
Another unfair trading practice was when the buyer requires the supplier to pay for the deterioration or loss, or both, of products that occurred on the buyer’s premises, or after ownership had been transferred to the buyer, even where such deterioration or loss was not caused by the supplier’s negligence or fault.
It was also considered unfair trading practice if the buyer threatened to carry out, or carried out, acts of commercial retaliation against the supplier if the supplier took legal action, including filing a complaint with enforcement authorities or by cooperating with enforcement authorities during an investigation.If the buyer demands compensation from the supplier for the cost of examining customer complaints relating to the sale of the supplier’s products even if there was no negligence or fault from the supplier, this was also considered an unfair trading practice.