Choppies CEO could be imprisoned for contravening Competition Act

15 Jul 2019

It was bad enough that a joint application by Choppies Distribution Centre and Payless Supermarket to be exempted from certain requirements of the Competition Act failed but things could get appreciably worse for Choppies CEO, Ramachandran Ottapathu.

Section 27 of the Competition Act requires competitors to purchase goods independently of each other but companies can apply for exemption from this requirement. On such basis, in June 2014, Choppies and Payless made a joint application to the Competition Authority for an exemption to participate in a Choppies-helmed buying group contract. The applicants claimed that despite being part of this buying group, they remained rival businesses; that their goods were priced independently of each other and there has never been any collusion or disruption of the market or lessening of competition; and that the buying group had merely allowed them to negotiate better pricing and discounts from their mainly South African suppliers.

However, investigations by the Authority turned up information that proved the contrary. In an 11-page decision written by the Competition Authority’s CEO, Tebelelo Pule, it emerged that prior to receiving the application, the Authority “had received complaints from customers, employees of Payless and competitors that Choppies had taken over Payless.” The allegations were to the effect that Choppies and Payless were being run by the same entity because Payless staff members wore Choppies uniform, that Choppies’ banners were displayed inside Payless stores and that Payless was selling Choppies house brands. The Authority would itself later find that there was no competition between Choppies and Payless, that the two supermarket chains had monthly promotions wherein they had the same goods on promotion at identical or similar prices and that the pamphlets were an exact replica of the other.

Pule’s decision says that Choppies, which was not supposed to benefit from the arrangement, was actually benefiting based on the quantity of its in-house brands sold in Payless’ 11 stores in Gaborone, Mochudi, Tlokweng and Molepolole. On the other hand, Payless did not have any in-house brands but instead sold a variety of Choppies’ goods in large volumes. All in all, the Authority’s investigations revealed “a price-fixing pattern and a distortion of competition.”

In an ongoing boardroom battle for Choppies’ control, a faction led by the group’s chairperson, Festus Mogae, has alleged that Ottapathu purposefully misled the Competition Authority. That charge exposes Ottapathu to criminal complicity and if new evidence is unearthed, he could be fined a sum not exceedingP30 000, imprisoned for a term not exceeding two years or subjected to both penalties. Such penalties are spelled out in Section 76 (1) (h).

From what Sunday Standard learns, the Authority could have reported the matter to the police but there was not enough evidence to establish a criminal case. The ongoing battle means that more of Choppies’ dirtier laundry will be aired in public and if such laundry establishes a criminal case, Ottapathu could be hauled before the court for knowingly providing false information.