The Competition Tribunal has confirmed a consent agreement between the Competition Commission and the Spar Group aimed at ending long-term exclusive lease agreements in the grocery retail sector.
Exclusive lease agreements in the grocery retail 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.
The Tribunal’s order means that the Spar Group is now the third retailer in South Africa to agree to phase out long-term exclusive lease agreements in shopping centres across the country. This follows the release of the Commission’s Grocery Retail Market Inquiry published in December 2019 which concluded that long-term exclusive lease agreements perpetuate concentration levels and impede participation by smaller and emerging retailers. In addition, it found that these exclusive lease agreements limit consumer choice.
Shoprite Checkers was the first national supermarket chain to voluntarily conclude a consent agreement with the Commission which 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 Retailers.
The terms of the Spar Group’s consent agreement include:
- The Spar Group will immediately stop enforcing exclusivity provisions contained in headleases i.e., lease agreements between the retailer, as a tenant, and a landlord regarding the lease of premises located in a shopping centre in respect of company-owned stores.
- The retailer will also immediately stop enforcing exclusivity in long-term exclusive lease agreements against SMMEs, specialty and limited lined stores and supermarkets owned and controlled by historically disadvantaged persons. This commitment, however, excludes SMMEs and historically disadvantaged persons specialty and limited line stores and/or supermarkets that are franchisees or members of emerging challenger retailers or national chains for a period of twelve months from the date of signature of the consent agreement.
- In respect of new supermarket leases, the Spar Group will not incorporate exclusivity provisions (or provisions that have substantially the same effect) into any new supermarket leases in shopping centres other than those in respect of renewals of existing leases.
All long-term exclusivity lease agreements need to be phased out by the 31st of December 2026.
