Thursday, May 30th, 2024

Major Shift in South African Shopping Malls: Spar, Pick n Pay, and Shoprite Mandated to Terminate Exclusivity Agreements

The Competition Tribunal has recently sanctioned a consent agreement between the Competition Commission and the Spar Group, aiming to terminate long-standing exclusive lease deals within the grocery retail industry.

This confirmation solidifies the cessation of exclusivity contracts held by major retailers like Shoprite and Pick n Pay, enabling more than 2,000 shopping centers across South Africa to diversify their offerings, welcoming a broader array of shops and stores.

Typically, exclusive lease arrangements in the grocery sector grant a particular tenant, often a national supermarket chain, exclusive rights to operate within a specific shopping center, excluding any other grocery retailers.

This latest order by the Tribunal marks Spar Group as the third major retailer in South Africa to commit to phasing out lengthy exclusive lease agreements in shopping centers across the country. This move follows the release of the Commission’s Grocery Retail Market Inquiry (GRMI) report in December 2019.

The GRMI report highlighted that these long-term exclusive lease agreements contribute to high levels of market concentration, hindering smaller and emerging retailers from participating in shopping centers. Furthermore, it pointed out that such agreements restrict consumer choice, leading to potential harm for consumers by limiting dynamism and innovation in the grocery retail sector.

As per the GRMI recommendations, the Commission advocated for voluntary cessation of this practice through engagements with retailers.

Shoprite was the first national supermarket chain to voluntarily finalize a consent agreement with the Commission, a decision confirmed by the Tribunal in October 2020. Subsequently, in June 2021, the Tribunal also endorsed a consent agreement between the Commission and Pick n Pay.

Under Spar’s consent agreement, the group will immediately halt the enforcement of exclusivity provisions in headleases for Company-owned stores and refrain from including such provisions in future lease agreements for their Company-owned stores.