Woolworths under siege

Woolworths has received severe criticism over its impact on South African suppliers and alleged exclusivity agreements.

Last week, the DA’s spokesperson on Trade, Industry and Competition, Toby Chance, said the matter concerned them greatly.

It has reached such a level that the Democratic Alliance is considering amending 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,” Chance said.

“There is no reason any supplier should force a retailer to carry only their brand of a certain class of product.”

Chance’s comments followed news that a dispute between Woolworths and Grey’s Marine, which has supplied the retailer with fish for over 30 years.

According to a report by The Citizen, Grey’s Marine accused Woolworths of mistreatment, threats, bullying, and intimidation.

At the height of its success, Grey’s Marine generated over R200 million in revenue and employed 200 full-time workers.

Grey’s Marine said Woolworths systematically dismantled a business it had helped build over more than three decades.

According to the founders of Grey’s Marine, the dispute with Woolworths caused the company to shut its doors and lay off all its staff.

Similar allegations came from Beyers Chocolates, founded in 1987 by Kees Beyers, which said Woolworths caused its demise.

Beyers said that after they started to supply chocolates to Woolworths’ competitors, including Checkers and Pick n Pay, things turned nasty.

Beyers argued that Woolworths maintained its product exclusivity by making different products for other customers.

However, Woolworths said that Beyers produced products for its competitors using its intellectual property and formulas.

Beyers said Woolworths told them they had to choose between losing their supplier agreement with it or shutting down their other factory.

“It became very personal, and over a short period of time, they cut all the business they were doing with us,” he said.

“It is a sad story. 700 South Africans lost their jobs, and Woolworths said that it is entirely on us.”

Woolworths hits back

Woolworths disputed Kees Beyers’ version, saying many of the public claims and allegations are incomplete or incorrect.

“While we would ordinarily not comment publicly on supplier relationships, we believe it is important to set the record straight,” it said.

Woolworths said it had worked with Beyers for more than three decades in what was, for many years, a valued partnership.

In 2019, the parties entered into an exclusivity agreement relating to certain Woolworths chocolate products and formulations.

“During 2023, we became aware that products materially similar to Woolworths-exclusive offerings were being supplied to competitors,” it said.

“This was not disclosed to Woolworths and only became apparent once similar products appeared more broadly in the market.”

Woolworths said it went against the agreement’s intent and raised concerns about the future of the commercial relationship and the supplier’s commitment to the contract.

It said that there were several engagements to find a workable path forward. However, the parties were unable to align on the conditions required to continue the relationship.

As a result, Woolworths decided to transition its chocolate supply to alternative manufacturers to protect its proprietary product development.

By January 2025, Woolworths’ chocolate products were no longer being manufactured by Beyers.

“This was not a decision taken lightly, but it was the right one for our business and our customers,” the company said.

Woolworths added that between 2018 and 2023, it more than doubled its business with Beyers Chocolates.

“At the same time, Beyers continued supplying a broad range of retailers both during and after the conclusion of our relationship,” it said.

“Accordingly, statements suggesting Woolworths was responsible for Beyers’ liquidation are inaccurate and do not reflect the facts.”

The DA wants to take the matter further

These two stories prompted the DA to consider amending the Competition Act to address anti-competitive exclusivity agreements in retail.

Toby Chance cited the South African Competition Act, specifically Section 7, which he wants to amend to address abuse.

It states that if a firm controls 45% or more of a defined market, they are automatically deemed to possess significant market power.

“Where a dominant firm imposes unfair or discriminatory contract terms on smaller contracting parties, this may constitute an abuse of dominance,” he said.

“This is particularly relevant in supply chain relationships where smaller businesses contract with large corporates.

In the Beyers case, the Competition Commission said Woolworths controlled only 9% of the grocery market and 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,” he said.

“Dominance, in the Beyers and Grey’s cases, was established based on the supplier’s contractual dependence on the customer for most of its business,” he said.

“Sudden changes to the agreements between Beyers, Grey’s and Woolworths can be argued to represent abuse of dominance.”

The DA said it stands for the economic and market freedoms of all businesses to contract between one another on legal terms they agree.

However, after big retailers contract small businesses for exclusivity and later seek to renegotiate terms, it changes matters.

“Once operational dependence has been established, and they are taking advantage of their position, competition law must step in,” Chance said.