Victory for SMEs as Shoprite to immediately stop enforcing exclusivity clause
CAPE TOWN – The commission on Monday welcomed the decision by the Competition Tribunal to confirm as an order the consent agreement, which states that exclusivity against other supermarkets will cease immediately in non-urban areas and will be phased out over five years in urban areas.
Shoprite Checkers will no longer enforce the exclusivity clauses contained in various lease agreements against small and medium-sized enterprises (SMEs) and specialist line stores with immediate effect, according to a consent agreement with the Competition Commission.
“In line with the recommendations of the Grocery Retail Market Inquiry (GRMI), Shoprite Checkers has, on behalf of its brands Shoprite, Checkers, and Usave, undertaken to waive exclusivity against small and independent grocery retailers and speciality stores in all shopping centres with immediate effect, the commission said in a statement.
Shoprite will also waive exclusivity against other supermarket chains in all non-urban shopping centres with immediate effect and phase out exclusivity over five years in urban areas. The phase-out will involve waiving exclusivity as leases come up for renewal and the retailer will not sign any new lease agreements that contain exclusivity clauses.
Competition Commissioner, Tembinkosi Bonakele said importantly, this undertaking also applied to Shoprite Checkers’ franchise business, OK Foods. Specifically, where Shoprite Checkers held the lease on behalf of a franchisee, the undertaking would be implemented immediately.
Where franchisees hold the lease, Shoprite Checkers and the commission agreed that within a period of 12 months, Shoprite Checkers will work with its franchisees to ensure compliance with the undertaking. Shoprite Checkers will also ensure that its franchise agreements will, in future, not allow franchisees to hold exclusive leases.
“The decision by the Tribunal is an important and positive step towards the rebuilding of the South African economy, following the devastating impact of the coronavirus pandemic, particularly on SMEs.
“The opening of space in shopping centres as a result of this historic agreement also provides an opportunity for new businesses to emerge in the South African retailing environment and this is crucial in providing consumers with product choice and alternative places to shop for grocery products,” said Bonakele.
The confirmation of this consent agreement marks a significant milestone in the enforcement efforts of the commission following 12 years since the initiation of the first broad investigation against exclusive lease agreements by the national supermarket chains.
More importantly, this agreement ushers in a new era in the South African grocery retailing environment as it opens up access for SMEs and other retailers in more than 1000 locations across the country in which Shoprite Checkers has exclusivity.
In its final report on GRMI, the Commission found that long-term exclusive lease agreements are widely prevalent in the grocery retail sectors and give rise to customer harm as they limit consumer choice within shopping centres.