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Panel to ask hard questions about retail sector

| Legislation

The Competition Commission panel appointed to conduct a year-long market inquiry into the grocery retail sector, is set to ruffle feathers as it tackles contentious issues, most notably lease exclusivity at malls.

This is the first market inquiry into the multibillion-rand grocery sector, although there have already been a number of investigations.

Norton Rose Fulbright SA director Jason van Dijk said retailers and other players involved in the grocery retail supply chain should be prepared to engage in a lengthy and detailed process.

"In the past, retailers have come under scrutiny by the commission in relation to very specific issues, such as exclusivity clauses in lease agreements.

"However, the commission has not been able to sufficiently prove that they have contravened the Competition Act."

Van Dijk said: "If there are, in fact, anticompetitive features uncovered during the course of the grocery retail market inquiry, and these are appropriately addressed in the commission’s findings, consumers are likely to reap the benefits."

Werksmans Advisory Services director Ahmore Burger-Smidt said the commission had received several complaints in relation to these agreements, dating back to 2013. The clauses usually preclude landlords from allowing competing supermarkets in the same space.

"It could be argued that the restrictions that flow from the long-term exclusive leases affect consumers’ choices… and, ultimately, have an impact upon competition.

"At the same time, one should consider upfront investment and the ability, as well as timeframe, in order to recoup such investment," Burger-Smidt said.

Massmart has encountered massive hurdles in introducing its Cambridge stores because of long-term lease contracts.

It said it would stress the matter to the panel, which will receive submissions from interested parties in July and August. Massmart said the covenants between "entrenched national grocery retailers and their landlords" were "intuitively anticompetitive".

Pick n Pay said its focus was on serving customers "in a competitive and dynamic market".

The panel has a particular interest in the effect of national chains on small and independent retailers in townships, peri-urban, and rural areas.

Panel chairman Halton Cheadle said it was not the intention of the panel to find wrong-doing for the commission to investigate, but rather to see what recommendations could be made concerning policy and regulation. The panel hoped to submit a final report to Economic Development Minister Ebrahim Patel on May 29 next year.

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