The Competition Tribunal has confirmed, as an order, a consent agreement between the Competition Commission and the Spar Group aimed at ending long-term exclusive lease agreements in the grocery retail sector.

The confirmation sets in stone the ending of exclusivity agreements from all major retailers – including Shoprite and Pick n Pay – which will see over 2,000 retail centres in South Africa open up to a wider variety of shops and stores.

Exclusive lease agreements in the grocery sector usually grant a tenant, 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 depriving consumers of dynamism and innovation in the grocery retail sector.

The GRMI recommended that the Commission engage with retailers to stop this practice voluntarily.

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.

In terms of Sparr’s consent agreement, the 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.

The group will also immediately stop enforcing exclusivity provisions (or provisions that have a substantially similar effect) in long-term exclusive lease agreements against speciality stores and SMMEs (although competitor franchisees are excluded from this for 12 months).

It also agreed not to enter any new exclusivity agreements in new leases.

The Competition Tribunal said that all exclusivity should be phased out by 31 December 2026.