Major retailers face litigation from Competition Commission over shopping centre leases
This article first appeared on IOL News.
The Competition Commission has threatened the major grocery retailers Shoprite, Pick n Pay, Woolworths and Spar with litigation and legislation if they continue to enter into long-term exclusive lease agreements for shopping centre space with developers.
The threat was included in the commission’s recommendations in the final report of the Grocery Retail Market Inquiry, which was handed over on Monday to Trade and Industry Minister Ebrahim Patel in Pretoria.
Grocery Retail Market Inquiry chairperson Halton Cheadle said: “If the national supermarket chains do not undertake to give effect to these recommendations, the government should introduce legislation, in the form of a statute, regulations, or a code of practice to give effect to these recommendations.”
The inquiry found “features in the South African grocery retail sector that may prevent, distort or restrict competition”.
For now the commission is hoping that the big chains will voluntarily refrain from enforcing clauses that restrict landlords from leasing space in the same shopping centre to potential competitors and that this will fix the anti-competitive situation in the grocery retail sector.
The report’s recommendations took a no-nonsense approach to the issue and warned that the recommendations “do not preclude the commission from pursuing litigation in respect of the existing complaints and evidence gathered in this inquiry”.
“The inquiry is of the view that the evidence gathered in these proceedings may establish a prima facie case for a referral to the tribunal. However, the inquiry also accepts that litigation is a protracted process and the interests of consumers may be best served by an immediate and voluntary compliance by the national supermarket chains,” said Cheadle.
“National supermarket chains must, with immediate effect, cease from enforcing exclusivity provisions, or provisions that have a substantially similar effect, in their lease agreements against: SMMEs, speciality stores, and other grocery retailers (including the emerging challenger retailers) in shopping centres located in non-urban areas.”
Meanwhile, the commission found that spaza shops had struggled to adapt to changing competitive dynamics in township areas.
To alleviate the situation the report recommended “an incentive programme to provide seed finance for innovative commercial models or infrastructure”.