Pick n Pay Stores Limited

Compliance

The compliance framework rests on the Group’s comprehensive set of policies, which are regularly updated to reflect governance best practice and the evolving regulatory environment. All employees and companies in the Group are obliged to comply with these policies.

Compliance questionnaires are distributed bi-annually to relevant departments to monitor compliance with statutes and regulations that have a bearing on the retail industry, such as the Companies Act, the Competition Act and the Consumer Protection Act. Statutory developments are regularly monitored to establish the compliance regime. Current areas being assessed include the Protection of Personal Information Act, the many provincial liquor statutes and the environmental laws.

Compliance questionnaires form the dual function of monitoring compliance and educating employees in the requirements of statutory and regulatory compliance in the retail sector. Employees are trained in sessions dealing with important legal issues arising from statutory provisions, such as the Consumer Protection Act and the Competition Act.

The compliance questionnaires are audited internally to ensure accurate reporting.

No judgments, damages, penalties or fines for non-compliance with any legislation were recorded and/or levied against any company in the Group, or against any director, officer or employee during the period under review.

Each year, the executive directors and relevant members of senior management declare that to the best of their knowledge, they and the companies they serve, have complied with all relevant statutes and regulations. The most recent declarations were completed in March 2015, and no incidents of contravention of the policies or the statutes were reported.

Litigation matters

The Group is not involved, and has not in the 2015 financial period been involved, in any legal or arbitration proceedings which may have or have had a material effect on the financial position of the Group, nor is the Group aware of any such proceedings that are pending or threatened.

Competition Commission

In June 2009, the Competition Commission initiated an investigation into various practices of supermarket retailers, examining competition concerns relating to grocery retail, including buyer power, category management, information exchange and long-term lease agreements. After investigation, the Competition Commission informed retailers that they were dismissing all concerns but would further examine long-term exclusive lease agreements. The Group co-operated fully with the Competition Commission in providing all information and explanations requested.

In January 2014, the Competition Commission announced that it had concluded that the investigation into long-term exclusive lease agreements did not warrant referral to the Competition Tribunal for determination. This announcement confirmed the Group’s belief that our lease agreements were freely entered into and reflected commercial practice that was standard both internationally and in South Africa.

All matters under investigation in regard to supermarket retailers were concluded with a notice of non-referral of complaint, confirming the Group’s belief that no anti-competitive behaviour existed in the grocery retail sector.

Despite this notice of non-referral, it was reported in the media that various property associations had lodged complaints against the long-term exclusive lease agreements that they entered into over the years with retailers, and that Massmart Holdings Limited had also lodged a complaint.

After conducting extensive internal research into how other competition authorities dealt with similar complaints, it was recently announced that the Competition Commission had taken a decision to conduct a market inquiry into the grocery retail sector as opposed to another investigation. The Competition Commission has issued a notice of non-referral to the complainants, stating that it would not refer any part of the complaint to the Competition Tribunal.

The terms of the market inquiry have, at the time of writing, not been finalised. We remain of the firm belief that no anti-competitive behaviour exists in relation to long-term exclusive lease agreements, or indeed in the grocery retail sector.