Pick n Pay, which has nearly 2,000 stores in South Africa, is a big user of exclusive lease agreements. It is the latest retailer to agree with the Competition Commission and Competition Tribunal to end the use of exclusive lease agreements. This is good for the consumer.
For many decades, South Africa's Big Four supermarket chains -- Shoprite, Pick n Pay, Spar and Woolworths -- prevented one another and smaller grocers from opening stores at a particular shopping mall to protect their turf, remain competitive and profitable.
To do this, supermarket chains entered into exclusive lease agreements with shopping mall landlords, which paved the way for such chains to be the only seller of specific goods at malls, for as long as 30 years.
Put differently, there couldn't be more than two competing supermarket chains at some shopping malls. This was by design between supermarket chains and landlords, which disadvantaged consumers as they would have limited shopping choices. For landlords, the use of exclusive lease agreements was profitable as they would be guaranteed to keep supermarket chains as tenants for a long time. After all, supermarket chains take up large spaces at malls.