South Africa: Competition Tribunal Confirms Consent Agreement Between Shoprite Checkers (Pty) Ltd And The Competition Commission

On 13 October 2020, the Competition Tribunal (Tribunal) confirmed, as an order, a consent agreement between Shoprite Checkers (Pty) Ltd (Shoprite) and the Competition Commission (Commission) in terms of which Shoprite agreed to:

• waive exclusivity provisions in lease agreements against small, medium and micro-enterprises, and independent grocery retailers and specialty stores in all shopping centres with immediate effect;
• waive exclusivity provisions in lease agreements against other supermarket chains in all non-urban shopping centres (including townships and areas outside towns and cities) with immediate effect but phase out the enforcement of exclusivity provisions against other supermarket chains in urban areas within five years; and
• not sign any new lease agreements that contain exclusivity clauses.

The phase out will involve waiving exclusivity as leases come up for renewal.

The consent agreement follows the release of the Commission's Grocery Retail Market Inquiry report (GRMI Report) in November 2019 which found, among others, that long-term exclusive lease agreements were widely prevalent in the grocery retail sector and impeded competition giving rise to consumer harm.

The GRMI Report recommended that the Commission secure voluntary compliance with its recommendations concerning the cancellation or waiver of exclusivity provisions in lease agreements by national supermarket chains. Shoprite has, on behalf of its brands Shoprite, Checkers, and Usave, undertaken to comply with the GRMI Report recommendations in this regard.

The undertakings in terms of the consent agreement also apply to Shoprite's franchise business, OK Foods. Specifically, where Shoprite holds the lease or head lease to a franchise store, the undertaking will be implemented immediately.
Where the lease is held by a franchisee, Shoprite will work with its franchisee to remove the exclusivity within a period of 12 months. Shoprite will also ensure that its franchise agreements will, in future, not allow franchisees to hold exclusive leases.

The Competition Commissioner, Thembinkosi Bonakele, was quoted saying that, '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 corona virus 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'.