Massmart has added its voice to growing calls to end lease exclusivity clauses in the retail sector, last week filing a formal complaint with the Competition Commission against retail giants Pick n Pay, Spar and Shoprite. 

Exclusivity clauses were provisions within a lease agreement, at the behest and for the benefit of entrenched anchor retailers, to prevent direct competitors from trading at the same mall.

These could be extended for “very long periods” and, in some instances, “for perpetuity.”

The commission had, last month, reopened its investigation into the lease practises of supermarkets after receiving a fresh complaint from the South African Property Owners’ Association (Sapoa).

Earlier this year, the commission concluded its investigation into the exclusive leases, looking at local markets across the country where exclusive leases had been agreed and enforced by the three major supermarket groups.

It found that the anticompetitive effects of the conduct could not be demonstrated conclusively.

“Sapoa has requested the commission to relook the issue of exclusive clauses in long-term lease agreements between owners of large retail shopping centres and retail anchor tenants across the country.

“The property owners’ association alleges that these give rise to considerable competition concerns and could amount to substantial prevention or lessening of competition in violation of the Competition Act,” SA Government News quoted commission spokesperson Mava Scott as saying at the time.

Massmart argued in a statement on Monday that exclusive lease agreements were anticompetitive and prevented the group from developing an offering that could compete effectively with the entrenched, national retail chains.

“These clauses have the effect of enabling an entrenched clutch of anchor retailers to decide who they will compete against in malls. Sadly, the traditional reliance placed on exclusivity clauses, by anchor retailers, appears to have created a form of ‘contractual entitlement’ – it’s an easy option that enables the entrenched anchor retailers to contract out of competition with new entrants,” said the group.

In its submission to the commission, Massmart said customers had welcomed the introduction of fresh food into its Game stores, but restrictions on what these stores could sell reduced the competitive threat they posed to the entrenched anchor retailers.

Massmart was, however, confident that it had a “compelling” case that would undermine the reliance that the entrenched anchor retailers placed on exclusivity clauses to reduce competition in shopping malls and, ultimately, countrywide.

The group had indicated that it was open to collaborating closely with the commission in its investigation.