The Competition Commission published a practice note on the Promotion of Competition and Inclusion in Supplier Panels of Banks and Insurers on February 28, building on the enforcement and advocacy work the commission has undertaken with insurers and banks over time.
The commission reports in a May 4 media release that it regularly receives complaints alleging unfair competition practices in supplier panels that relate to the provision of services to customers of banks and insurers, such as conveyancers, various household repairers, automotive repairers and product suppliers.
To address these complaints, the commission undertook advocacy engagements with the major banks during 2020, addressing competition issues related to conveyancing law firms that are on the panels of major banks.
Following advocacy engagements with the commission, the banks committed to reform their conveyancing practices by removing exclusionary conflict-of-interest clauses, limiting the duration of their service level agreements to five years – to enable new conveyancers to join their panels.
The banks also sought to review minimum investment amounts for small conveyancers as criteria in their performance scorecards.
As such, in July 2021, the commission published the Guideline on Competition in the South African Automotive Aftermarket – a section of which addresses supplier panel issues in automotive repairs.
The February-issued practice note is the culmination of this previous work and extends to all supplier panels of banks and insurers, in addition to conveyancing and automotive.
“This practice note is part of the tools the commission will use to address market conduct issues of barriers to entry, transformation and lack of inclusivity in the broader financial sector,” says Competition Commissioner Tembinkosi Bonakele.
The practice note outlines competition principles to be considered by banks and insurers in establishing or reviewing existing supplier panels.
These principles include ensuring fair evaluation criteria for appointments of suppliers to panels, ensuring fair allocation of work to suppliers on panels and eliminating long-term exclusive agreements and reducing contract periods to five years or less to enable entry and participation of new suppliers.
It also includes increasing small and medium-sized enterprises and historically disadvantaged individuals’ participation on supplier panels, increasing transparency in the application and selection process, promoting consumer choice on the selection of approved suppliers and monitoring the performance of suppliers on panels.
Further, the principles also serve to ensure that supplier panel subcontracting arrangements comply with the Competition Act.
In developing the practice note, the commission considered comments from stakeholders on panel practices, including the Banking Association of South Africa and the South African Insurance Association.
The commission notes that the financial sector stakeholders have an important role to play in ensuring compliance with the practice note and in self-monitoring of reforms that are required.
“Banks and insurers are encouraged to apply the competition principles contained in the practice note to conduct a self-review and reform their practices in supplier panels, particularly in relation to fair appointments and allocation of work to suppliers,” he says.