As we gear up for the new year and the return to school for children across the country, we take a look at the intended effects of the Competition Commission's ("Commission") investigation into the pricing of school uniforms and the subsequent agreements signed before the Competition Tribunal ("Tribunal") in 2019.
Prior to 2015, the Commission received complaints from parents and school uniform suppliers regarding the high costs of school uniforms as well as exclusive agreements that prevented other suppliers from entering the market. This culminated in the Commission undertaking advocacy initiatives with various stakeholders – including various schools, certain school groups and the National Department of Basic Education ("DBE").
These engagements culminated in the drafting of a circular which dealt with the existence of exclusive agreements between schools and school uniform manufacturers or retailers, and was recommended to all public schools, former model C schools, and private schools. The circular recommended that the schools follow certain guidelines:
- School uniform should be as generic as possible such that it is obtainable from as many suppliers as possible;
- Exclusivity should be limited to items that the schools regard as necessary to obtain from pre-selected suppliers, for example, badges;
- Schools should endeavour to follow a competitive bidding process when appointing suppliers. They should appoint more than one supplier in order to give parents more options; and
- Any contracts entered into for the supply of school uniforms should be of a limited duration and at the end of the contract a new bidding process should be embarked upon.
Nevertheless, despite the Commission's advocacy approach and the publishing of the circular to various stakeholders, the Commission was still met with complaints from parents and suppliers. The complaints were founded in section 5(1), 8(c) and 8(a) of the Act – section 5(1) being a restrictive vertical practice (i.e. the exclusive agreement between schools and suppliers) that has the effect of lessening competition, and sections 8(a) and 8(c) related to the exclusionary effects of the agreements as well as their ability to enable excessive pricing.
The Commission investigated these complaints and found that exclusive supply agreements between the suppliers and various schools excluded potential and existing school uniform suppliers from entering into and expanding in the school uniform market. The Commission further found that these exclusive agreements may enable suppliers to extract higher prices from customers as the supplier would not face any competition from other suppliers and would not be at risk of losing any market share in the process.
School uniforms (and their pricing) have significant public interest ramifications and as such, the Commission adopted an unorthodox and novel approach based on its findings. Instead of referring the matter to the Tribunal for adjudication and the possible imposition of a financial penalty on the schools, the Commission instead engaged with certain schools and agreed that they would comply with the guidelines as set out in the circular and described above. This agreement was made an Order of the Tribunal in 2019.
It appears that the Competition authorities played an interventionist role in its investigation into the pricing of school uniforms. Although the merits of such an approach can be debated, it is hardly debatable that lower prices for school uniforms would benefit the community.
The Commission succinctly described the purpose of the agreements and its significance to the South African public: "The Commission considered the benefits to the public interest if the cost of school uniform items could be reduced. At many schools, the cost of school uniform items represent a significant part of the cost of schooling. In South Africa, many parents struggle to afford schooling for their children. The Commission concluded that the interests of consumers and competitors in the relevant market would be better served by not proceeding any further with the complaint referral and by rather obtaining undertakings from the Respondents as to future conduct."
The respective agreements concluded with certain schools can be accessed here:
- St Andrews School for Girls – https://www.comptrib.co.za/case-detail/8304
- ADvTech – https://www.comptrib.co.za/case-detail/8305
- Curro – https://www.comptrib.co.za/case-detail/8346
- Reddam House – https://www.comptrib.co.za/case-detail/8507
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.