South Africa: Competition Watchdog Gets Tough On Big Four Supermarket Chains

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There may soon be more than one big supermarket at your local mall, if a new ruling by the Competition Commission is enforced.

The Competition Commission has fired a shot across the bows of SA's retail industry, telling the big four supermarket chains - Shoprite, Pick n Pay, Spar, and Woolworths - to immediately stop their entrenched use of long-term exclusive lease agreements at shopping malls to remain competitive and profitable.

SA's competition watchdog is so concerned about exclusive lease agreements, which are entered into between supermarket chains and shopping mall landlords, that it has recommended that the use of such agreements must cease with "immediate effect" and be phased out within five years. And no new leases or renewals at SA's more than 2,000 malls can include exclusive lease agreements.

Long-term exclusive lease agreements allow supermarket chains to be the only seller of specific goods at a mall to protect their turf and can be in force for as long as 30 years in their rental agreement with landlords. These agreements also include restrictions on the type of non-supermarket tenants that landlords can allow to trade at malls, thus restricting the entrance of competitors.

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