The Competition Tribunal has confirmed, as an order, a consent agreement between the Competition Commission and the Spar Group aimed at ending long-term exclusive lease agreements in the grocery retail sector.<\/p>\n\n\n\n
The confirmation sets in stone the ending of exclusivity agreements from all major retailers – including Shoprite and Pick n Pay – which will see over 2,000 retail centres in South Africa open up to a wider variety of shops and stores.<\/p>\n\n\n\n
Exclusive lease agreements in the grocery sector usually grant a tenant, such as a national supermarket chain, exclusive rights to operate in a specific shopping centre to the exclusion of any other grocery retailers.<\/p>\n\n\n\n
The Tribunal\u2019s order means that the Spar Group is now the third retailer in South Africa that has agreed to phase out long-term exclusive lease agreements in shopping centres across South Africa following the release of the Commission\u2019s Grocery Retail Market Inquiry (GRMI) report published in December 2019.<\/p>\n\n\n\n
The Commission, in its GRMI report, concluded, among others, that long-term exclusive lease agreements perpetuate concentration levels and impede participation by smaller and emerging retailers in shopping centres.<\/p>\n\n\n\n
In addition, it found that exclusive lease agreements limit consumer choice, thereby giving rise to consumer harm and depriving consumers of dynamism and innovation in the grocery retail sector. <\/p>\n\n\n\n
The GRMI recommended that the Commission engage with retailers to stop this practice voluntarily.<\/p>\n\n\n\n
Shoprite was the first national supermarket chain to voluntarily conclude a consent agreement with the Commission. Shoprite\u2019s consent agreement was confirmed by the Tribunal in October 2020. In June 2021, the Tribunal also confirmed a consent agreement between the Commission and Pick n Pay.<\/p>\n\n\n\n
In terms of Sparr’s consent agreement, the group will immediately stop enforcing exclusivity provisions contained in headleases (lease agreements between the Spar Group, as the tenant, and a landlord regarding the lease of premises located in a shopping centre) in respect of Company-owned stores and will not include exclusivity provisions in lease agreements for Company-owned stores in the future.<\/p>\n\n\n\n
Company-owned stores refer to stores which are owned and controlled (through ownership) by the Spar Group. These are also referred to as corporate stores.<\/p>\n\n\n\n
The group will also immediately stop enforcing exclusivity provisions (or provisions that have a substantially similar effect) in long-term exclusive lease agreements against speciality stores and SMMEs (although competitor franchisees are excluded from this for 12 months).<\/p>\n\n\n\n
It also agreed not to enter any new exclusivity agreements in new leases.<\/p>\n\n\n\n