Wholsaler challenges Johnson & Johnson’s new distribution model at Competition Tribunal

Local personal care and household products wholesaler, Continental Cash & Carry says its sales declined after big supplier for the industry, Johnson & Johnson changed its distribution model to a new one that now requires wholesalers to through intermediaries.

The Competition Tribunal heard submissions from Continental Cash & Carry as well as from Johnson & Johnson on Wednesday. Continental Cash & Carry accuses Johnson & Johnson of price discrimination arising from the shift in its distribution model to intermediaries opposed to the previous arrangement whereby wholesalers would buy directly from the supplier.

Continental Cash & Carry said demand for its entire personal care segment had been growing considerably year on year until Johnson & Johnson changed its distribution model.

“The discrimination impedes Continental's ability to effectively participate. The adverse effects relates not only to continental's inability to sell J&J products, but it's undermined its position in the broader personal care segment, regarding the direct effect of the discrimination,” a representative for Continental told the Tribunal.

Continental is seeking a draft order from the Tribunal compelling Johnson & Johnson to supply products including baby wipes, baby oil, mouthwash, aqueous creams and petroleum jelly among others for the period of 6 months or until conclusion of the case being heard by the Competition Commission.

The company is also seeking terms of supply from Johnson & Johnson that are “no less favorable on to the average terms of supply to Shoprite, Pick n Pay and Massmart” which are entities that Continental competes against.

Continental Cash & Carry argued that there is no basis for it and other historically disadvantaged persons in the same sector to be required to to compete at a structural disadvantage imposed against against modern trade wholesalers.

In its papers before the Tribunal, Kenvue which holds Johnson & Johnson’s care products, argues that Continental’s interim relief application is aimed at securing a commercial advantage to which it is not entitled. It maintains that the new distribution model will not harm Continental’s ability to compete effectively.

However, Continental argued on Wednesday that the magnitude of the price differential between it and other modern wholesalers who include supermarkets is “significant”. It said modern traders receives discounts of almost double those offered to continental, while others get triple discounts offered to continental.

“Then in relation to the significance of the cost structure,  we say that Continental continentals cost of sales constitute a high proportion of its total cost. It's as high as 97%.” 


Legal representatives argued that according to local regulations, “an action by a dominant firm, as the seller of goods or services, (constitutes) price discrimination, if it's likely to impede the ability of SMEs or HDP firms to participate” effectively.

“Our case, from the outset, has been, there's an artificial distinction… it involves splitting customers into two. The one is a traditional trade channel. The other one is called the modern trade, and then beneficial terms are extended to the latter,” noted the legal representatives in a presentation at the Competition Tribunal.

Such statutes had been put in place to provide SMEs and other black owned competitors with a fair opportunity to participate in the economy.

Nonetheless, the new distribution model by Johnson &Johnson created a playing field that was skewed as modern traders who receive supplies from the company get “much better terms than the traditional” traders.

Moreover, wholesalers that fall into each of those categories were direct competitors on the market. This created a situation where all players in the modern trade continued to enjoy an undue advantage of everyone in the traditional trade.

BUSINESS REPORT