Competition Commission of SA orders retail chains to cease enforcing exclusivity clauses in mall leasing

SOUTH AFRICA – The Competition Commission of South Africa has recommended South African shopping centres to cease their exclusive leases with the country’s biggest supermarket chains.

The move is in accordance to findings of a grocery retail market inquiry which was initiated in November 2015 to deepen understand a sector dominated by Shoprite Holdings and its upmarket chain Checkers, Pick n Pay Stores, Spar Group and Woolworths Holdings.

The inquiry found “features in the South African grocery retail sector that may prevent, distort or restrict competition,” said inquiry chairman Halton Cheadle.

Among those features are exclusive leases and tenant mix clauses negotiated by the major chains in shopping malls across the country to deny opportunities for specialist, emerging chains and small, medium and micro-enterprises (SMME) in areas where the majority of consumers do their weekly and monthly shopping.

Some exclusive leases between landlords and the big four retail chains are between 20 and 40 years long, shutting out the entry of small businesses into malls for decades.

 “Of even greater concern, these agreements also systematically deny the opportunity for specialist stores and independent entrepreneurs to locate in the mall if they compete with any of the national chains’ product lines,” Cheadle said, quoting the report.

The inquiry found that more than 70% of shopping malls, which account for about half of all grocery sales nationally, are subject to exclusive lease agreements.

It recommended that national grocery retailers immediately cease enforcing exclusivity clauses against specialist and SMME stores in shopping malls and all grocery retailers in non-urban areas where there are fewer alternative malls.

Cheadle said the measures will be achieved through voluntary compliance within six months from Nov. 25 or the regulator would instigate “legislation in the form of regulations or a code of practice.”

“The inquiry strongly believes that a less concentrated grocery retail sector, with a large ecosystem of small independent traders alongside national retail chains, is in the best interest of the economy and consumers,” Cheadle said.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.