The 2019 market inquiry by the Competition Commission unequivocally states that national supermarket chains must stop enforcing exclusivity provisions – or provisions that have a substantially similar effect – in their lease agreements against SMMEs, speciality stores and other grocery retailers in shopping centres located in non-urban areas. 

The three biggest supermarket groups in the country are Shoprite, Pick n Pay and Spar, all three of which are listed on the JSE. 

The 2019 Competition Commission inquiry established that the vast majority of Shoprite and Spar leases, and a majority of Pick n Pay leases, contained exclusivity provisions. 

When it came to remedial action, the report states that “the enforcement of exclusivity by the national supermarket chains as against other grocery retailers must be phased out by the next extension of the lease, or within five years from the date of the publication of this final report, whichever is earlier”.

Spokesperson for the Competition Commission Siyabulela Makunga confirmed the receipt of OBC’s complaint earlier this month. 

“Spar has failed to comply with the 2019 recommendation to end exclusive agreements. In contrast, Shoprite and Pick n Pay have come to agreements with the commission,” he says.

OBC Better Butchery – which has had a footprint in the black retail market for over three decades – was one of the companies that made a submission to the Competition Commission in 2019 on the power wielded by the major national supermarket chains over enforcing exclusive provisions in their lease agreements against challenger retailers and speciality stores.

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For the year to September 2022, Spar Southern Africa posted an 8.4% rise in wholesale turnover to R88-billion. Group turnover, including operations in Switzerland, Poland and Ireland, was R135.6-billion. 

Tony Da Fonseca, managing director of OBC Better Butchery, again lodged a complaint earlier this month against Spar, saying it had come to his attention that the company has entered into lease agreements where the landlord is prohibited from renting commercial retail space to competitors such as OBC. 

“While attempting to conclude lease agreements for available space in various shopping centres where Spar is the anchor tenant, the landlord has openly communicated to us that they cannot conclude a lease agreement with us as Spar is enforcing their exclusivity clause,” he confirms. 

In all four cases, the landlord is Vukile Property Fund. The fund said in response, “We confirm that Vukile currently has some legacy lease agreements in place that contain exclusivity clauses.  We empathize with the position of both parties and will continue to take the recommendations of the Competition Commission very seriously.  Until such time as there is a ruling on this matter, we continue to act according to the rule of law and will honour lease agreements that are in place.  We believe in giving our customers more choice and investing in the development of SMMEs, as this ultimately ensures the future sustainability of our shopping centres”.

Da Fonseca says Spar’s conduct restricts the landlord’s right to rent the available space to OBC. 

“The landlords have told us they do not agree with this exclusionary practice or support it, but they are bound by the terms of the signed lease agreement.  This exclusionary conduct prevents competition and the loss on average of 30 to 50 potential job opportunities per store in the area,” he adds.

While Spar and OBC have, over the past five years, enjoyed a peaceful co-existence in shopping centres such as Vosloorus Crossing Mall in Gauteng and Hazyview Shopping Centre in Mpumalanga, Da Fonseca says there are clear examples of anti-competitive behaviour in other shopping centres. 

The shopping complexes at the centre of the dispute include the Hubyeni Shopping Centre in Limpopo, KwaMashu Shopping Centre, Gugulethu Square and the Mandela Park Shopping Centre in the Free State.

Business Maverick has a copy of the official complaint which shows that OBC has been denied a lease agreement in all four shopping centres, on the grounds of an exclusionary clause in a Spar lease agreement. 

Gugulethu SuperSpar has “staunchly refused the landlord [permission] to lease commercial retail property, citing the contractual exclusivity clause”.

“We won’t stand for these ‘blocking’ bullying tactics of these big players who flout Competition Commission rulings and have engaged in vertical agreements which have the effect of preventing or lessening competition without any technological, efficiency or other pro-competitive gain, which outweighs the anticompetitive practice … with the intention of wiping out even the small challenger retailers like ourselves.”

Kevin O’Brien, Spar’s company secretary, told Business Maverick the retailer was unaware of any complaint – whether formal or informal – from any national supermarket chain and, to be specific, from OBC Better Butchery about their exclusion from a retail centre due to the presence of a Spar store in same shopping centre or mall. 

“We cannot comment on complaints that have not been received, as the OBC group has not raised these current issues with us directly. We cannot comment on Competition Commission issues … as the processes between ourselves and the Commission have not reached [a] final conclusion,” he says. BM/DM

• Story updated with Vukile’s response.