Tribunal confirms Spar Group Ltd consent agreement aimed at ending long-term exclusive leases in shopping centres
The following Press Release serves as an explanatory note to assist the media in reporting on this case and is not binding on the Competition Tribunal or any member of the Tribunal
The Competition Tribunal (“Tribunal”) has confirmed, as an order, a consent agreement between the Competition Commission (“Commission”) and the Spar Group Ltd (“Spar Group”) aimed at ending long-term exclusive lease agreements in the grocery retail sector.
Exclusive lease agreements in the grocery sector usually grant a tenant, such as such as a national supermarket chain, exclusive rights to operate in a specific shopping centre to the exclusion of any other grocery retailers.
The Tribunal’s order means that the Spar Group is now the third retailer in South Africa that has agreed to phase out long-term exclusive lease agreements in shopping centres across South Africa following the release of the Commission’s Grocery Retail Market Inquiry (“GRMI”) report published in December 2019.
The Commission in its GRMI report concluded, among others, that long-term exclusive lease agreements perpetuate concentration levels and impede participation by smaller and emerging retailers in shopping centres. In addition, it found that exclusive lease agreements limit consumer choice, thereby giving rise to consumer harm and deprive consumers of dynamism and innovation in the grocery retail sector. The GRMI recommended that the Commission engage with retailers to voluntarily stop this practice.
Shoprite Checkers (Pty) Ltd (“Shoprite”) was the first national supermarket chain to voluntarily conclude a consent agreement with the Commission. Shoprite’s consent agreement was confirmed by the Tribunal in October 2020. In June 2021, the Tribunal also confirmed a consent agreement between the Commission and Pick n Pay Retailers (Pty) Ltd (“Pick n Pay”).
Terms of the Spar Group’s consent agreement
Headleases
The Spar Group will immediately stop enforcing exclusivity provisions contained in headleases (lease agreements between the Spar Group, as the tenant, and a landlord regarding the lease of premises located in a shopping centre) in respect of Company-owned stores and will not include exclusivity provisions in lease agreements for Company-owned stores in the future.
Company-owned stores refer to stores which are owned and controlled (through ownership) by the Spar Group. These are also referred to as corporate stores.
SMMEs, HDP speciality and limited line stores and HDP supermarkets
The Spar Group will, furthermore, immediately stop enforcing exclusivity provisions (or provisions that have a substantially similar effect) in long-term exclusive lease agreements against:
- small or medium-sized businesses (“SMMEs”);
- speciality and limited line stores owned and controlled by historically disadvantaged persons (“HDPs”). A specialty and limited line store refers to a single or multiple store operation within the grocery retail sector that focuses on a specific product category such as butcheries, bakeries, delicatessens, liquor stores and greengrocers, or which stocks and sells 15 or less product lines; and
- supermarkets owned and controlled by HDPs (excluding corporate stores of national chains).
The above commitment, however, excludes (for a period of 12 months from the date of signature of the consent agreement) SMMEs, HDP speciality and limited line stores and HDP supermarkets that are franchisees or members of emerging challenger retailers or national chains.
Emerging challenger retailers are players that operate mid-sized and large grocery stores (some of which only focus on particular product categories or regions), which may function in a similar fashion to the national chains and which may operate on a franchise or corporate basis.
National chains are retailers which carry a full range of grocery products. These firms not only have a well-developed retail network (which comprises, among others, corporate owned, franchisees and affiliated stores) but also an integrated wholesaling function.
New supermarket leases
The Spar Group will not incorporate exclusivity provisions (or provisions that have substantially the same effect) into any new supermarket leases in shopping centres other than those in respect of renewals of existing leases.
All exclusivity phased out by 31 December 2026
The Spar Group will not enforce any remaining exclusivity provisions (or provisions that have substantially the same effect) in long-term exclusive lease agreements (those surviving the abovementioned waivers) after 31 December 2026.
Spar Retail Members
The Spar Group shall endeavour to persuade Spar Retail Members i.e. retail members of the Spar Guild who are party to a Spar Membership Agreement (an agreement between the Spar Guild and a Spar Retail Member):
- to adhere to the provisions of clause 4 of the consent agreement within 12 months from the date of signature of the consent agreement; and
- not to conclude lease agreements which include exclusivity provisions.
In terms of an addendum to the consent agreement, the Commission reserves the right to investigate and prosecute any Spar Retail Member to the extent that it continues to enforce exclusive provisions in a manner inconsistent with clause 4.2 of the consent agreement.
No admission
No admission is made by the Spar Group of any competition law contravention.
The non-confidential version of the consent agreement is available on the Tribunal’s website at http://test.comptrib.gendel.com/case-detail/20531
Issued by:
Gillian de Gouveia, Communications Manager
On behalf of the Competition Tribunal of South Africa
Cell: +27 (0) 82 410 1195
E-Mail: GillianD@comptrib.co.za
Twitter: @comptrib
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