Mall wars over retailing rights

By Tania Broughton Time of article published Nov 10, 2014

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Durban - In another clash between retail giants over exclusivity in shopping centres, Masstores and the Spar group are locked in a potentially precedent-setting legal battle, each wanting a strong foothold in the growing consumer market in Ulundi and surrounding areas.

And while Spar may have won the most recent battle – interdicting Massmart from converting its Game Store into a Cambridge food store – the war is far from over, with the judge hearing the matter saying it required far more interrogation.

Spar launched its urgent Durban High Court application seeking an order to protect its “sole trading rights” in the King Senzangakhona Shopping Centre, which it claimed stemmed from the lease it had signed with the previous owners of the centre in May, 2008.

The lease provided that the landlord would not enter into any other lease agreements with tenants who would compete with Spar, being bakeries, butchers, supermarkets, greengrocers, wholesale cash and carries and liquor stores.

In March 2011, the owners entered into a lease with Masstores for a Game store in the centre.

This year, Spar became aware that Masstores (a subsidiary of Massmart) wanted to covert the store into a Cambridge food supermarket, which prompted the urgent application to put a stop to it.

Judge Peter Olsen granted the interim interdict this week but said “this judgment is far from final”, noting that he was “treading a fine line” between giving reasons for making the order, and “the error of appearing unduly to influence the final outcome of the case”.

The case before him is not the only one.

It was recently reported that Massmart had lodged a formal complaint with the Competition Commission in an attempt to end lease exclusivity clauses that restricted Game stores from opening new shops in malls, alleging that the clauses reduced competitiveness.

Pick n Pay has also obtained an interdict against Massmart in the Gauteng High Court on a lease issue at CapeGate Shopping Centre in Cape Town.



In the application before him, Judge Olsen said the new owners of the mall, Synergy Income Fund Limited and Masstores, had suggested that Spar’s application should fail because the conditions of its lease were only enforceable against Khuthala, the previous owners.

But the judge ruled that this obligation had passed on to Synergy.

“There is no dispute that a Cambridge food store would be in direct competition to Spar. The profitability of the Spar would depend on the competition and the value of occupation of the premises had to depend, in part, upon the potential to generate profits. The stipulated rental was accompanied by the clause that recorded Spar’s right to be immune from material competition, a profit advantage,” he said.

In his affidavit, Ivan Morris, the director of Khuthala who negotiated the lease with Game, said at the time that he was mindful of Spar’s lease and had secured its approval for the Game store.

In an e-mail, Sugandrie Gounder, a senior property manager at Massmart, had stated that the store would “hardly be a threat” to the supermarket anchor and would benefit the centre.

She stated that Massmart would not entertain any restrictions on its leases regarding the extension of ranges.

The judge said Massmart had argued that this meant there was no restriction to the “range of activities” Massmart could undertake on the premises.

“But this is not what it says,” the judge said.

“The brand she was seeking to protect was Game, not any other. It would be preposterous for her to state that a wholesale conversion of the Game offering to a supermarket offering would not pose such a threat, and she did not say that.”

He said Massmart had knowledge of Spar’s rights to restrict trading before it had entered into its own lease.

He granted an interim order, giving Massmart until December 4, to show cause why a final interdict should not be granted to protect Spar’s rights. - The Mercury

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