Price-fixing claims against PnP

"The franchiser is the direct cause of the financial difficulty of the franchise. By controlling the sale price of products, they are dictating and limiting the gross profit of the franchise. This is retail price fixing to the prejudice of the franchise."

http://www.sundaytribune.co.za
February 24, 2010

Price-fixing claims against PnP
Kamini Padayachee

A Durban North businessman has accused Pick n Pay of price fixing and of having a flawed pricing system.

Mark Coetzee, 44, manager and sole director of Pick n Pay franchise Rinaldo Mini Market, makes the claims in papers filed in the Durban High Court in response to an application brought by the retailing giant to recover money from him.

The retailer claims Coetzee owes them R4,5-million for stock.

Pick n Pay has taken over control of the store according to a consent order granted in January, pending the outcome of its application.

Coetzee says Pick n Pay controlled the sale price of products and therefore the amount of gross profit the mini market made, and the store had become unprofitable.

"The franchiser is the direct cause of the financial difficulty of the franchise. By controlling the sale price of products, they are dictating and limiting the gross profit of the franchise. This is retail price fixing to the prejudice of the franchise."
The store had also suffered from the recession and because it had been robbed.

Coetzee also claimed the pricing system used by Pick n Pay was flawed, as it showed different figures for the amount of stock shrinkage.

Coetzee said he was told by Wim Theron, general manager of Pick n Pay's corporate division, that other mini markets were in the same predicament.

In replying papers, Pick n Pay franchise division legal manager Vaughan Veale said the retailer was not guilty of price fixing and there was nothing wrong with its pricing system.

"(Coetzee's) inability to trade the business profitably is not due to the fact that the sale price of goods is determined by (Pick n Pay)."

Acting Judge Thandi Norman has reserved judgment.

http://www.sundaytribune.co.za/?fSectionId=239&fArticleId=vn20100224073002597C746970


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Risks: Franchisor controls both wholesale costs and retail prices, Gross margin controlled by franchisor, Price maintenance, Opportunism: contract creates powers which are used to strip investor value during relationship, Price fixing, South Africa, 20100224 Price fixing

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