Commission levels playing field on school uniforms

Project name:
Assistance to the Competition Commission with a financial assessment of potential excessive pricing in the provision of school uniforms

Service:
Competition economics

Sector:
Education
Public and Social

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Competition Commission of South Africa

Date:
2017

Country:
South Africa


The Competition Commission of South Africa initiated a complaint in January 2017 against direct suppliers of school uniforms following allegations of possible abuse of dominance and restrictive practices in the supply of school uniforms across the country. The allegations were that certain schools or other suppliers had concluded exclusive supply agreements and were charging excessive prices for school uniforms to the detriment of parents and guardians.

Genesis was appointed by the commission to undertake a detailed assessment of the allegations against school-uniform retailers for excessive pricing. Genesis's assessment involved developing a financial model that calculated economic costs for over 10 000 school-uniform stock, keeping units from eight of the largest school-uniform retailers in South Africa.

The model also calculated the mark-up on economic cost, gross margin and ROCE (return on capital employed) for each school-uniform retailer. Our results showed that prices were significantly above economic costs for two retailers and materially above economic costs for two others.

Genesis also found that the returns on capital employed were significantly higher that the weighted average cost of capital for five of the eight school-uniform retailers, which supported a finding that the market for school uniforms was not competitive.

This finding motivated the commission to engage proactively with the industry to phase out exclusive supply arrangement and promote a more competitive market in the sale of school uniforms.

This engagement prompted the Independent Schools Association of Southern Africa (Isasa) to pledge that:

• uniforms would be made as generic as possible;

• schools would have multiple suppliers; and

• supplier contracts would not operate in perpetuity.

Schools urged to stick to uniform guidelines

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