Competition body criticises exclusive long-term leases by supermarket chains

Long-term exclusive lease agreements by SA’s major supermarket chains at shopping centres are stopping new competitors from getting a foothold, the Competition Commission has found. 

The commission released the provisional findings of a multi-year inquiry into the SA retail market on Wednesday. 

In remarks ahead of the official release of the report, the commission said that emerging retailers were being “foreclosed from the shopping centre environment” where SA shoppers buy half their groceries, due to exclusive leases held by big chains. 

The commission announced the inquiry in late 2015, saying it was launching a probe into whether the retail grocery sector prevented or restricted competition. 

The inquiry found that, due to exclusivity provisions, smaller independent retailerS had been forced out of major shopping centres “in order to compete in the South African grocery retail sector.

“The Inquiry finds it concerning that their growth and competitive ability has been substantially limited because of exclusion from the shopping malls,” the commission stated.  

It also found that national supermarket chains were better able to negotiate rebates for goods than independent retailers, which helped them reduce costs and gave them an “unfair competitive advantage”. 

The entry of national supermarket chains in to new areas, meanwhile, was also found to have lead to a decline in the number of independent retailers, but also increased choice and lowered prices.