RESALE PRICE MAINTENANCE

What is Resale Price Maintenance?

Resale price maintenance (RPM) occurs when a supplier enforces a minimum price at which a retailer or distributor must on-sell those goods, thereby preventing the reseller from setting own prices for goods/services. Under RPM arrangements, retailers are not allowed to sell products below the specified minimum price, even if they want to offer discounts or promotions. Most common forms of RPM arrangements are where a supplier i) sets a specific price – a minimum retail price or a minimum margin, at which a product must be resold, and ii)imposes restrictions on how much a reseller can discount the product price.

Prohibition of RPM

Section 2 of the Competition Act [Chapter 14:28] (theAct) defines an unfair business practice as a restrictive practice or conduct specified in the First Schedule. In terms of Section 42, acts or omissions specified in the First Schedule are unfair business practices for purposes of the Act. Paragraph (9) of the First Schedule provides for RPM as an unfair business practice and defines it as specifying the minimum price at which a product must be resold to customers. The practice restricts businesses from competing effectively and is a breach of the Act.

Recommended Resale Price

Suppliers can recommend prices at which resellers may resell products, an arrangement  known as recommended resale price, and which is not RPM as a reseller may resell products at a price they determine themselves. However, if a supplier tries to force a reseller to sell at the recommended resale price, it becomes RPM.

Anticompetitive Effects of RPM

Whilst price ceilings can be a mechanism to protect consumers from exploitation by unscrupulous retailers, the same cannot be said for RPM, given the likely anticompetitive effects arising from such arrangements. Setting of floor prices reduces incentive for innovation and operational efficiency while restricting competition and deteriorating consumer welfare.  The following anti-competitive effects are associated with RPM: –

• Higher prices for consumers  – by imposing minimum resale prices on products, prices are kept artificially high restricting retailers’ ability to offer discounts or compete on price.
• Limited consumer choice – when businesses engage in RPM, consumers lose out as they cannot shop around for better value. RPM prevents retailers from engaging in non-price competition such as customer service, product quality and product selection. This reduces consumer choice and results in a less competitive marketplace.
• Creation of barriers to entry for new players – when manufacturers/suppliers enforce minimum resale prices, it is difficult for new entrants to compete on price to gain market share.
• Limited access to goods and services – if retailers cannot set their own prices or engage in price competition, they may choose not to stock certain products or serve certain markets where profitability is uncertain (e.g., remote areas). This results in limited access to goods and services for consumers in these areas.
• Formation and maintenance of cartels – RPM can be used to fix prices at all stages of distribution and facilitates cartels. Retailers can conspire to set retail prices at monopoly levels and, because it is the manufacturer who appears to be setting retail prices, collusion diverts attention from the collective price setting by the retailers.

Criminal Liability for Engaging in RPM

The Act provides for criminal liability of any person who engages in RPM. In terms of Section 42 (3) of the Act: –

“Any person who enters into or engages in or otherwise gives effect to an unfair business practice shall be guilty of an offence and liable – a) in the case of an individual  to a fine  not exceeding level twelve or to imprisonment for a period not exceeding two years or to both such fine and imprisonment; and b) in any other case to a fine not exceeding level fourteen.

The Commission, after establishing a case of RPM, refers the matter for prosecution and the appropriate level of fine is determined by the presiding officer.

Zim’s citrus exports seen soaring this year

ZIMBABWEAN citrus exports to China are expected to be surpassed this year after the total external trade of the fruit variety reached a value of US$33,78 million last year, up from just over US$10 million in 2021.

The prediction is based on the General Administration of Customs of China (GACC), in June, allowing 11 local citrus orchards and six citrus pack houses to export the fruit variety into China.

Fresh citrus produce to be exported includes sweet orange (citrus sinensis), mandarin orange  (citrus reticulata), grapefruit (citrus paradisi), lemon (citrus limon and  citrus aurantifolia) and sour orange (citrus aurantium).

In its second quarter newsletter, the Competition Tariff Commission (CTC) said with stability coming into play post-pandemic and sudden growth in demand, this created growth opportunities for Zimbabwean agricultural citrus farmers.

“Zimbabwean citrus exports have been increasing over the past eight years with the highest export value recorded in 2022 of US$33,781 million. Fresh or dried oranges are the main exports,” the CTC said.

“China’s import of Zimbabwean citrus produce will increase citrus exports compared to 2022. 

“The CEA facilitates citrus exporters’ access to a bigger market and market diversification opportunity reducing dependence on local markets. 

“Given that farmers are complying with GACC standards, this means investment into machinery and processes to ensure that products meet standards.”

The CTC said that improvement in local farms and orchards transforms the farming industry through innovations and adoption of new technologies.

The commission based its findings off the recorded trade figures listed on international trade tracking website, the Trade Map.

“According to Trade Map, China imported citrus fruits worth US$594 million in 2019 alone,” the CTC said. 

“China’s orange production has slightly increased over the past 3 years from 2018/19 to 2020/21, from 7 200 000 MT (metric tonnes) to 7 500 000 MT, while consumption increased from 6 989 000 MT to 7 335 000 MT.

“In the same period, there has been a drastic reduction in imports from 4 340 000 MT to 2 900 000 MT and stagnant exports of 55 000 MT. 

“Before the pandemic, China’s orange imports witnessed seven consecutive

Read More…

Citrus exports rakes in US$33,8 million

Sikhulekelani Moyo, mskhulekelani16@gmail.com

Zimbabwe’s citrus exports raked in US$33,8 million in 2022 with fresh or dried oranges singled out as the main contributors to exports receipts, the Competition Tariff s Commission (CTC) has said.

In its latest newsletter, CTC said the country’s citrus exports have been increasing over the past eight years with the highest export value of US$33, 781 million recorded last year.

“In 2021, citrus fruit production in Zimbabwe was 138,264 metric tons (MT) and has been growing at an average annual rate of 2,89 percent, according to the World Bank. It exported 57,283 MT of citrus produce to the UK, Singapore, UAE, Malaysia, Hong Kong, Netherlands, and Zambia,” said CTC.

Zimbabwe and China entered into a Citrus Export Agreement (CEA) , a development that CTC said will open new opportunities  to boost  agricultural trade.

Eleven citrus orchards and six citrus pack houses from Zimbabwe were selected to be part of the citrus exporters to China.

Fresh citrus products to be exported include sweet orange (citrus sinensis), mandarin orange (citrus reticulata ), grapefruit (citrus paradisi), lemon (citrus limon and citrus aurantifolia), and sour orange (citrus aurantium).

The commission said the agreement will bring increased demand for agricultu ral produce and improvement in the balance of trade as well as the transf ormation of the farming industry and gaining new markets.

China ‘s import of Zimbabwean citrus produce will increase citrus exports compared to 2022. The CEA facilitates citrus exporters’ access to a bigger market and market diversification opportunity reducing dependence on local markets,” they said.

Given that farmers are complying with General Administration of Customs of China (GACC) standards, this means investment into machinery and processes to ensure that products meet standards. Improvements in local farms and orchards transform the farming industry through innovations and adoption of new technologies.”

According to Trade Map, China imported citrus fruits worth US$594 million in 2019 alone.

China’s orange production has slightly increased over the past three years from 2018/19 to 2020/21, from 7 200 000 MT to 7 500 000 MT, while consumption increased from

Read More…

Zim in line to reap big from China citrus market

ZIMBABWE’S citrus producers stand to benefit from the massive Chinese market following the conclusion of the Citrus Export Agreement (CEA) with Asia’s largest economy, says the Competition and Tariff Commission (CTC).

Signed in 2015, the agreement was largely designed to secure a ready export market for citrus produce for smallholder growers under the Shashi Irrigation Scheme in Bindura.

The agreement smoothens the movement of first-order shipments from registered companies that have met stipulated compliance requirements.

Zimbabwe’s fresh and dried citrus exports reached an eight-year high of US$33,8 million in 2022, from less than US$5 million in 2015, and tapping into the Chinese market provides an excellent opportunity to further stimulate the shipments.

In 2021,citrus fruit production in Zimbabwe was 138 264 tonnes.

Of that output, Zimbabwe exported 57 283 tonnes to the United Kingdom (UK), Netherlands, Singapore, Malaysia, Hong Kong in Asia, United Arab Emirates (UAE), and Zambia.

Apart from their health benefits to human consumption, citrus products have another essential utility given their medicinal values such as in the production of insecticides, cosmetic and soap industries.

According to the World Bank, Zimbabwe’s citrus exports have been growing at an annual rate of 2,89 percent since 2015, with the highest export value recorded in 2022.

South Africa, Egypt, Australia, the United States of America (USA), and Spain with regard to the Chinese citrus market.

In 2022, South Africa topped the fresh and dried oranges suppliers list to the Chinese market deliveri ng products worth US$117,499 followed by Egypt at US$36,181, Australia (US$35,564), USA (US$30,137) while Spain supplied US$7,942.

Zimbabwe is primed to benefit immensely from the Chinese citrus fruit market if the opportunity is taken up seriously,particularly after a dip in China’s citrus imports given the unprecedented rise in freight and labor costs attributable to Covid-19 pandemic.

Although the Chinese market presents a huge opportunity for Zimbabwe’s citrus exports, the country faces stiff competition from other African markets, hence the need to invest more in enhancing quality and competitiveness of products to meet international standards.

Read More…

Almin Metal Industries acquires City Glass

ALMIN Metal Industries (Almin) has acquired three companies — RD Architectural Aluminium (AA), Lupane Timber Products (LTP) and City Glass and Paint Supplies (City Glass) —  becoming one of the biggest merger deals inked recently.

Almin is a Zimbabwean-registered company with various subsidiaries operating in the manufacturing sector and related markets.

It extrudes and powder coats various aluminium profiles, irrigation pipes and fittings and complements local production through the sale of imported aluminium accessories.

Almin has operations in Harare, Bulawayo, Mutare and Gweru.

AA, LTP and City Glass have interests in fabrication and installation of aluminium and glass windows, doors, shopfronts and building facades among others.

The parties approached the Competition and Tariff Commission (CTC) in February this year seeking approval of the deal, which has since been concluded.

 “The commission approved the merger on condition that Almin, its subsidiaries and affiliates, and its successors in title should supply other aluminium and glass fabricators with toughened and tinted glass, and offer non-discriminatory terms and conditions on glass supply that include inter-alia prices, quantity, quality and or any other,” CTC said in its second quarter report.

It said the merged operation would offer several services including fabrication processes and painting and processing of trees into timber.

CTC approves six mergers

“The aluminium market has more competitors as the barriers to entry are minimum. As an importer, entry and exit in the market is free,” it said.

“However, it is difficult as a manufacturer. The glass market has imported products as Zimbabwe does not produce glass but value adds to imported glass thus the market is highly competitive with numerous players.

“The timber market has exogenous tree plantations controlled by the Forestry Commission. It also has numerous timber product manufacturers (formal and informal), big competitors and a number of small players (40% of the market).”

The report said all the industries were extremely competitive with many formal and informal new players.

The commission classified the transaction as a conglomerate merger with vertical elements,

Read More…

Shepco acquires shares in Haggie Rand

MINING and industrial equipment manufacturing concern, Shepco Industrial Supplies (Shepco) has acquired a significant shareholding in Haggie Rand Zimbabwe (Haggie Rand) for an undisclosed amount.

The two parties approached the Competition and Tariff Commission (CTC) in March this year seeking approval of the deal, which has since been accorded.

The acquisition comes barely a year after Haggie Rand Zimbabwe parent company, the Industrial Development Corporation of South Africa, invited suitors saying it was exiting the Bulawayo-based firm.

Shepco is a business group with mining, industrial and manufacturing operations of nails, bolts and nuts, spares and maintenance for the mining industry, mining equipment (locomotives, loaders, co-pans, conveyor rollers), and distributing safety wear.

Haggie Rand produces steel wire products including wire drawing, wire rope, aluminium conductors and chains and fittings.

The commission defined the relevant market as the drawing of wire in the whole of Zimbabwe, and manufacturing and distribution of nails in the country.

Due to the customer supplier relationship between activities of the merging parties, the merger was classified as vertical. Haggie Rand is involved in wire drawing whereas Shepco is a manufacturer and distributor of wire nails.

“Competition analysis considered theories of harm affecting vertical mergers namely input and customer foreclosure,” CTC said in its second quarter report.

“Input foreclosures arise when Haggie Rand restricts access to nail wire that it would have otherwise supplied to Shepco’s competitors such as Coal Zim, Survival Fasteners, Tassburg Fasteners and other competitors outside the merger.

“Haggie Rand is producing way below its production capacity due to working capital challenges, constituting at most 1% of the market. Its current investors are unwilling to inject funding to resuscitate operations hence Haggie Rand is severely undercapitalised.”

CTC further noted: “Market power is one of the prerequisites to engage in input foreclosure.

“In this instance, Haggie Rand does not have the ability to engage in such a practice as it is a very small player.

“Moreso, 90% of locally drawn wire is imported.

Read More…