‘No more exclusive supply agreements for school uniforms’ – Competition Commission

School uniform suppliers will no longer enter into exclusive supply agreements with schools and school groups.

This comes as the competition tribunal of South Africa recently confirmed an order to change existing supply agreements.

The commission formed part of efforts to increase competition, reduce barriers to entry and ensure cheaper prices in the school uniforms market.

The consent agreement was between McCullagh and Bothwell (Hyde Park) (Pty) Ltd; DRRW Investments (Pty) Ltd (collectively, “McCullagh and Bothwell”) and the Competition Commission.

McCullagh & Bothwell are associated with many of South Africa’s most prominent schools, such as Diocesan School for Girls, Crawford College, among others and have played a key role in the design and supply of their uniform and sport accessories.

Competition Tribunal of South Africa spokesperson Gillian de Gouveia said “in accordance with the consent agreement, McCullagh and Bothwell will have to, among others, ensure that any new supply agreements with schools do not contain a clause whereby it is appointed as the sole stockist of school uniform items.”

“Existing supply agreements must also be amended to have a termination date of no later than five years after the date of signature of the amended agreement.”

She said the new supply agreements had to be limited to a period of no more than five years and McCullagh and Bothwell could enter into any evergreen agreements.

In the consent agreement, the commission states that McCullagh and Bothwell had readily co-operated since the beginning of the investigation and had started amending existing supply agreements.

“McCullagh and Bothwell does not make any admission of liability and contends that it has not engaged in any unlawful conduct in contravention of the Competition Act, as described in the consent agreement.

“The commission, in turn, says that the interests of consumers and competitors in the relevant market would be better served by ensuring changes in the market now, by obtaining undertakings from the respondents regarding future conduct, rather than proceeding with lengthy litigation proceedings to achieve the same outcome.”

In 2015, the commission received numerous complaints relating to the high cost of school uniform items and exclusive agreements preventing suppliers from entering the market. The commission undertook various advocacy initiatives to address these concerns.

The non-exclusivity agreement comes after the commission launched an investigation into several schools and school uniform manufacturers and suppliers in 2017 for possible contraventions of the Competition Act, following numerous complaints received from parents and school uniform suppliers.

The commission’s investigation found that exclusive supply agreements of a long duration enabled school uniform suppliers to charge customers higher prices and prevent other potential suppliers from entering the market and competing for customers.

De Gouveia said such agreements meant that customers could only source school uniform items from one supplier.

“This means the customers become a captured market, increasing the risk that the supplier may charge high prices.”

She said the investigation concluded that exclusive supply agreements could substantially prevent or lessen competition in the market by excluding potential and existing school uniform suppliers from entering into or growing in the relevant market.

“In respect of McCullagh and Bothwell, the commission concluded that the exclusive agreements between McCullagh and Bothwell and schools are likely to have contravened sections of the Competition Act.”

A public version of the consent agreement is available on the Tribunal’s website at www.comptrib.co.za.