Newcomer Facts & Fiction is taking on the industry giant with a formal application to the Competition Board over claims of unfair practices, writes Max Gebhardt
THE on-going row between book giant CNA Gallo and the newcomer to the industry, Facts & Fiction, is set to flare up again, with the news that Facts & Fiction is to take fresh allegations of unfair practices to the Competition Board.
The relationship between the two has been acrimonious ever since present Facts & Fiction managing director Anthony Ward left the CNA stable last year to form his own company.
Ward told the Mail & Guardian this week that he would be approaching the Competition Board with new evidence of unfair competitive behaviour by the CNA Gallo Group.
Ward said he had instructed attorneys to submit an application to the Competition Board to consider the entire structure of the book industry. “The two applications [by Facts & Fiction to the board] in the past have been met with very cursory treatment and we have instructed our lawyers to take a formal stance,” he said.
The books industry is worth an estimated R1,4-billion per annum. Facts & Fiction and CNA compete head-on in the general book market, valued at R275-million, and CNA is estimated to control 95%. CNA Gallo lifted earnings by 5% to 5,8c a share, on turnover up 6% to R703-million in the six months to September 30.
CNA has about 320 shops nationwide and Exclusive Books, part of the CNA Gallo stable, has 10 specialist bookstores. Facts & Fiction has seven outlets in Gauteng, with plans for another three in the Western Cape this year.
Industry insiders say Ward’s company has not only managed to expand the market, but at the same time has captured 10% of CNA’s share.
The reason for his decision to approach the Competition Board was prompted by two levels of uncompetitive behaviour, says Ward.
“On the retail level, we are faced with bullying tactics to prevent us from gaining retail space or by making it extremely frustrating to acquire any space. The other level is in terms of the whole book market where there is monopolistic and uncompetitive behaviour,” he said.
Mirroring the allegations made to the Competition Board last year by Facts & Fiction, Ward says he knows of two different instances where his competitor has made attempts to prevent his company from expanding into new premises.
September last year saw the Competition Board informally investigate charges against CNA Gallo that it had allegedly tried to block Facts & Fiction from gaining retail space in the Rosebank Mall, among other centres.
Assistant director Hennie Roux, from the board, said the charges had been investigated but it had found that the matters didn’t warrant a formal investigation in terms of the Act.
Ward describes the CNA Gallo Group as a bullyboy preventing everybody from playing fairly and squarely in the market.
He expressed concern at CNA’s horizontal and vertical integration. Over the past 10 years Exclusive Books has gobbled up a large share of the independent booksellers, with the latest being Sheldons.
The CNA Gallo Group has the controlling share in a number of distribution, warehouse and publishing companies, including a stake in Trans South African Book Distributors (50%), Struik Holdings (46%) and Heinemann (50%).
“It is obvious that the situation is monopolistic in nature,” Ward said.
On a number of occasions, he said, CNA Gallo had used delaying tactics in delivering books to his stores – an accusation backed up by other independent booksellers.
CNA Gallo director Geoff Engel, however, refuted Ward’s allegations of monopolistic behaviour or unfair competitive practices. He said the company had already stood the test by the Competition Board on whether it was behaving in a monopolistic fashion.
The very fact that there are so many new entrants into the book trade and CNA’s declining market share, says Engel, shows it is not hampering market growth.
“I would be happy to debate any specific points with Anthony, but he only levels broad accusations against us,” he said.
According to Engel, CNA Gallo does not have the clout to influence landlords’ decisions on the allocation of retail space, and none of aits stores is an anchor tenant, as is the case with the large supermarkets.
“If anything needs to be considered, it’s Facts & Fiction’s 50% ownership by Stocks & Stocks – a major landlord.”
Even though CNA Gallo might be vertically integrated into the market, Engel says it does not have control over the board of directors or management of these companies (in distribution etc) – that rests with the partners.
“Technically we have no control over these companies,” he said.
In addition, the only time CNA Gallo ever holds back stock is owing to commercial considerations, such as when a client is overdue on their accounts or over their credit limit, says Engel.
While the slanging match continues, both sides welcome the chance to see the matter finally settled by the Competition Board.