Competition Commission to review optical franchise dispute in terms of deregulation

An application is also being prepared to the Competition Tribunal for interim relief from the HPCSA regulations.

In October 2003 the HPCSA released a Policy Document on Undesirable Business Practices which declared, among other things, that franchising in the optical industry was illegal while also advising even greater restrictive practices for the industry. In its report, the franchised optical industry was granted a probationary period of six months from the date of the council meeting in which to redefine their business models to bring it in line with the regulations as set out by the council. In effect, this would mean that operations such as Torga Optical would have to cease to exist in its present trading form.

Ian Buchanan, Chief Executive of Torga, believes that the HPCSA regulations indicate a heavy handed authoritarian approach that not only threatens the livelihood of many optical practitioners but is also anti-competitive and in conflict with the Competition Act no 89 of 1998.

Says Buchanan: "These unreasonable regulations not only question our business practise 11 years after the fact, but questions the integrity of every optical franchisee. Since Torga's first store opened in 1993, its growth and increased buying power has meant that pricing of optical prescriptions have fallen through its great value marketing strategies. The consumer has benefited from optical franchising in South Africa and the consumer is not the one complaining. The HPCSA rulings may be appropriate to doctors and dentists, but they are certainly not appropriate for the optometric industry. It seems as if the Professional Board for Optometry has mislead the HPCSA in this regard"

Buchanan notes that, while the optical industry has been deregulated in countries such as the United Kingdom and the United States in terms of advertising, franchising, and lay ownership, the HPCSA has managed to impose ever-more restrictive regulations in South Africa.

Despite this, says Buchanan "In this country there are a number of franchise optical operations, retail groups, combinations of franchise and groups as well as several independent practitioners that have all managed to create successful businesses. This has not met with the approval of vested interest groups within the Professional Board for Optometry who want optometry to remain as it was 30 years back – under the control of the individual optometrist. They are not interested in bringing down the price of spectacles to the public, but only their own self interest. Ultimately it will be the consumer that will bear the brunt of increased prices due to lessened buying power and increased operational costs."

Restrictions that exist in South Africa today include limitations on the advertising of spectacles, a practice that has never been regulated in most parts of the world. Internationally, optical industry deregulation issues focused upon the ownership of professional optometry practice; the dispensing side of optometry that includes the manufacture and retailing of frames and lenses, has largely been unregulated.

Firms like Australia's OPSM, until recently listed on the Sydney Stock Exchange, and Dollond and Aitchinson in the United Kingdom are long established corporately owned optical businesses that have freely practised, advertised products and services and successfully operated ethical business practice for years. Yet, in South Africa corporate ownership is denied, and advertising is severely restricted. Clearly the suffocating policies of the HPCSA are in contradiction to the Competition Act as well as not in the public interest.

Says Buchanan: "The ignorance of the HPCSA and its failure to be cognisant of international norms is cause for concern. Healthy competition increases levels of service to the consumer, controls price increases and would allow the industry to be governed by free market principles, proven globally to benefit consumers."

The PBO (Professional Board of Optometry) is the statutory board of optical professionals that falls under the HPCSA, and also, one of the major obstacles to reform within the optical industry. The PBO have repeatedly ignored proposed changes by the SAOA (South African Optometric Association) that has, during the past five years, repeatedly called for at least partial deregulation of the optometric industry as well as abolishing restrictions of advertising. Yet, its proposals were continually blocked by the PBO whose optometrist members are , ironically, members of SAOA. The SAOA represents some 85% of South African optical professionals.

"It is without doubt in the public interest for the price of spectacles and optometry services to come down. For this to occur, greater and healthy competition is needed in line with, and as proven by, successful international practices. It is inexplicable that in South Africa, an emerging market, can have such an inefficient and outdated regulations for the provision and retail of professional optometric products and services," says Buchanan.

Both the PBO and the HPCSA have yet to prove that, during its ten year history in South Africa, optical franchisors have operated in conflict with public interest. Both bodies continually harp on issues that include fears of increased cost to consumers, a concern that has been allayed repeatedly as franchise operations have managed to lower the cost of optometry to the public. During the past decade, there has also been no public objection to either optical advertising or franchise operations. It is reasonable to conclude that the public sees this business model as in the public interest.

Says Buchanan: "With our submission to the Competition Commission, Torga Optical aims to prove that not only are the actions of the HPCSA anti competitive, but completely unsubstantiated in its wayward and irresponsible approach to over regulating an industry to look after the self interest of a few old school optometrists and to ignore the public interest."