Pick n Pay fosters healthy competition in SA’s retail market, scraps off exclusivity lease agreements

SOUTH AFRICA – South African retail chain, Pick n Pay, has heed to the call of the Competition Commission of South Africa to cease use of exclusive lease agreements in all shopping centres where it has set base.

The Competition Tribunal, the body which has the final say on anti-competition matters in the country, has confirmed that the retailer has signed an agreement with the Competition Commission to end the use of such restrictive terms.

Under the agreement, supermarkets that are privately-owned and controlled by historically disadvantaged persons (HDP) can immediately access letting space in all shopping centres where a Pick n Pay store has exclusivity provisions in its lease agreement.

“The abovementioned HDP Supermarkets can be single or multiple store operations as long as they are privately owned and controlled by historically disadvantaged persons, including individual franchisees or buyer group members of other national retail brands but excluding corporate stores of those brands,” stated the Competition Tribunal.

In addition to the HDP-owned supermarkets, small or medium-sized businesses and speciality stores (including butcheries, bakeries, delicatessens, liquor stores and greengrocers, or stores that sell 15 or fewer product lines) can also immediately trade alongside Pick n Pay.

For many decades, South Africa’s Big Four supermarket chains — Shoprite and its upmarket chain Checkers, Pick n Pay, Spar and Woolworths — prevented one another and smaller grocers from opening stores at a particular shopping mall to protect their turf, remain competitive and profitable.

To do this, supermarket chains entered into exclusive lease agreements with shopping mall landlords, which paved the way for such chains to be the only seller of specific goods at malls, for as long as 30 years.

This disadvantaged consumers as they would have limited shopping choices but gave landlords a favourable deal as they would be guaranteed to keep supermarket chains as tenants for a long time.

But the use of exclusive lease agreements by supermarket chains and shopping mall landlords is starting to end after the intervention of the Competition Commission.

Pick Pay, which had 1,933 stores (Pick n Pay and Boxer branded stores) across South Africa by February 2021, has agreed to phase out exclusive lease agreements with its landlords over six years, ending on 31 December 2026.

Pick n Pay has also agreed to not sign new leases that include exclusive clauses for new stores that it plans to open.

The agreement to end the use of exclusive agreements also applies to 761 Pick n Pay stores that are not owned by the retail giant, but are owned and operated by franchisees.

Shoprite, Africa’s leading retailer was the first to agree with the commission and tribunal in October 2020, to immediately stop enforcing exclusivity provisions in its lease agreements with landlords.