Massmart steps up fight over exclusivity clauses

SOUTH AFRICA – Massmart has taken the fight with its competitors over exclusivity clauses in lease agreements with landlords in shopping malls directly to the Competition Commission. It lodged a formal complaint with the commission last week.

SOUTH AFRICA – Massmart has taken the fight with its competitors over exclusivity clauses in lease agreements with landlords in shopping malls directly to the Competition Commission. It lodged a formal complaint with the commission last week.

Massmart said its efforts to roll out its own fresh food business, Foodco, at most Game stores were being stymied by opposition from other grocery chains where exclusivity agreements had been signed. Massmart has lodged a complaint against competitors Pick n Pay, Shoprite and Spar.

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It has been at loggerheads with the national retail chains since it tried to enter the fresh food market, claiming Massmart has been severely restricted in its ability to compete directly, either in trading area or the range of products.

The exclusivity clauses are provisions within a lease agreement, mostly aimed at benefiting anchor retailers, to prevent or restrict direct competitors from trading at the same mall.

Massmart said these agreements were “intuitively anticompetitive” and prevented it from developing an offering that can compete effectively with the national retail chains.

This is the second complaint lodged with the commission within a month relating to exclusivity clauses. The first was lodged last month by the South African Property Owners Association. The commission announced it would be revisiting the contentious issue when it received the complaint from the association.

The commission started a similar investigation in 2009 against the major supermarket chains and wholesale retailers. However, at the beginning of this year the commission said it could not find sufficient evidence to refer the matter to the Competition Tribunal for further prosecution.

Roelf Venter, chairman of the Spar Guild of Southern Africa, said they worked closely with the commission during the previous investigation in 2009, and were aware of the commission’s discomfort with exclusivity clauses.

He said they were aware of the complaint lodged by Massmart on Friday. “We have legal and valid agreements with our landlords. We are waiting for the commission to give guidance with the investigation.”

Retailers who enjoy entrenched positions in malls have also instituted litigation to prevent Massmart’s Game from competing in fresh offerings.

This has been the case in Midlands Mall (Pick n Pay), CapeGate (Shoprite and Pick n Pay) and Ulundi (Spar), Massmart group communication manager Annaleigh Vallie said. She said they have been threatened with similar action in more than a dozen other stores.

Apparently one of the national chains has sent letters to 13 malls, warning landlords to honour the agreements. Presently about 55 Game stores sell dry groceries and its Fresh offering.

Competition Commission spokesman Mava Scott said yesterday they have only received Massmart’s complaint on Friday and were assessing the submission. “It is too early to comment on the merits or remedial action to be taken,” he said.

Massmart said in a statement it appeared as if the traditional reliance placed on exclusivity clauses by anchor retailers has created a form of “contractual entitlement”. “It is an easy option that enables the entrenched anchor retailers to contract out of competition with new entrants.”

November 4, 2014; http://www.bdlive.co.za/business/retail/2014/11/03/massmart-steps-up-fight-over-exclusivity-clauses

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