Retail sector probe welcome, says Massmart

Massmart has welcomed the Competition Commission’s market inquiry into the retail sector but says it will continue pursuing its own legal proceedings against anticompetitive exclusive lease agreements held by large grocers.

Under these provisions, big food retailers, known as anchor tenants, can block the sale of certain types of food and groceries by other retailers within the same shopping mall.

Last year, the South African subsidiary of US Wal-Mart filed a complaint with the Competition Commission, saying plans to roll out its fresh-food business, Foodcoat, at most Game stores in malls was being stymied by Shoprite and Pick n Pay and Spar.

It has since escalated the complaint to the Competition Tribunal, which has the power to remove such exclusivity clauses. Dealing with the tribunal directly is a quicker route to resolving the issue than a market inquiry.

"(We are) committed to collaborating closely with the Competition Commission in its industry inquiry, while simultaneously asserting our rights in the forum provided by the Competition Tribunal," a Massmart spokesman said.

On Friday, the competition watchdogs launched the first market inquiry in the retail sector. The inquiry followed an investigation into the sector four years ago that ended without finding evidence of anticompeti-tive behaviour.

Questioned on the reasons a further examination of the competitive landscape, the commission said: "The commission has recently noted increasing concerns relating to the issue of long-term exclusive leases, as evidenced by a number of complaints received."

Typically, these leases hold for a minimum of 10 years but can be renewed up to 40 years.

The market inquiry will also examine the effect of buyer groups on small independent retailers and the dynamics of competition between local and foreign shop owners. The latter have been accused of unfairly taking market share from local spaza shops.

It will be the commission’s third market inquiry since amendments to the Competition Act in April 2013 extended its powers to examine the general state of competition in a market if it had any reason to believe any feature of the market may prevent, distort or restrict competition.

There was little reaction to the inquiry in the market on Friday among SA’s large grocers. All the major food retailers save for Spar posted gains.