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For long, national supermarkets have enjoyed the benefits offered by the exclusivity clause at the expense of smaller retailers. Through this clause, landlords promised that only that retailer within a shopping centre may operate a particular business.
After 12 years since the first investigation into exclusivity clause by the Competition Commission, one supermarket group has agreed to stop this practise.
Shoprite Checkers will stop with immediate effect, enforcing the exclusivity clause contained in various lease agreements against smaller and speciality stores.
This is in terms of the consent agreement between Shoprite Checkers and the Competition Commission Tribunal. Exclusivity against other supermarkets will cease immediately in non-urban areas, and will be phased out over five years in urban areas.
According to the Competition Commission, the agreement ushers in a new era in the South African grocery retailing environment. This opens up access for SMEs and other retailers in more than 1 000 locations countrywide in which Shoprite Checkers has exclusivity.
The Grocery Retail Market Inquiry’s (GRMI) final report found that long-term exclusive lease agreements are prevalent in the grocery retail sectors. In addition, they give rise to customer harm as they limit consumer choice within shopping centres. In line with GRMI recommendations, Shoprite Checkers on behalf of its brands Shoprite, Checkers and Usave has undertaken to:
- waive exclusivity against small and independent grocery retailers and speciality stores in all shopping centres with immediate effect
- waive exclusivity against other supermarket chains in all non-urban shopping centres with immediate effect. The exclusivity clause will be phased out over five years in urban areas. The phase out will involve waiving exclusivity as leases come up for renewal, and
- not sign any new lease agreements that contain exclusivity clauses.
This undertaking will also apply to Shoprite Checkers’ franchise business and OK Foods. Where Shoprite Checkers holds the lease on behalf of a franchisee, the undertaking will be implemented immediately. In instances where franchisees hold the lease, Shoprite Checkers will within 12 months, work with franchisees to ensure compliance. Furthermore, Shoprite Checkers will also ensure that its franchise agreements will, in future, not allow franchisees to hold exclusive leases.
According to the Competition Commission, this decision is an important and positive step towards the rebuilding of the SA economy. This following the devastating impact of the Covid-19 pandemic impact on SMEs. “The opening of space in malls resulting from this historic agreement also provides an opportunity for new retail entrants. It is also crucial in providing consumers with product choice and alternative places to shop for grocery products.”
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