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South African supermarkets told to drop exclusivity deals with malls

| Legislation

The Competition Commission has warned that South Africa’s major supermarket chains may be forced to drop exclusivity clauses in shopping mall leases if they fail to do so voluntarily.

In a 600-page report published on Monday (25 November), the competition watchdog said that the clauses prevent, distort or restrict competition.

 

The report found that well over 70% of South Africa’s shopping centres are subject to exclusive lease agreements, said the inquiry’s chairperson Halton Cheadle.

“What is even more concerning about this picture is that these exclusive lease agreements endure for significant periods of time, some up to 20 to 40 years,” he said.

“These agreements not only keep out other national retail chains, they also deny opportunities for emerging chains to get traction in the market by locating where the bulk of consumers do their weekly and monthly shopping.

“Of even greater concern, these agreements also systematically deny the opportunity for specialist stores and independent entrepreneurs to locate in the mall if they compete with any of the national chains’ product lines.

“These agreements not only hinder competition, but they also deny opportunities for SMMEs and historically disadvantaged entrepreneurs to participate in the economy, and they deny consumers the benefit of a broader product choice.”

Cheadle said that a less concentrated grocery retail sector, with a large ecosystem of small independent traders alongside national retail chains is in the best interests of the economy and the consumers.

“Independent retailers provide important avenues for participation in the economy, provide support for smaller suppliers further up the value chain, whilst also offering consumers greater product choice. There is still a role for large supermarkets for the bulk shopping experience, but this should not be to the exclusion of others.”

 

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