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Wednesday May 10, 2017

Supermarkets' exclusive leases under investigation

The multibillion-rand retail sector, which is 90% ruled by the four national supermarket chains, has become the focus of an investigation by the Competition Commission, with public hearings under way in the city.

Shoprite, Pick n Pay, Spar and Woolworths own the lion’s share of the more than R500-billion grocery retail market.

They came under scrutiny after global player Massmart, which owns local companies such as Game, lodged a complaint with the commission alleging the retail giants blocked rivals by means of exclusive mall leases. It argued the lease agreements in some cases could restrict shopping malls from renting space to smaller rivals in the food industry for up to 20 years, thereby preventing competition from entering the sector.

Of further concern was that a single national grocery retailer operating in a shopping centre could charge higher prices due to lack of competition.

Competition Commission spokesperson Sipho Ngwema said testimony had been received from several small businesses such as butcheries, as well as Gugulethu entrepreneurs representing the MJ Group of Companies and the Gugulethu Liquor Traders Association.

"The purpose of the market inquiry is to examine whether there are features or a combination of features in the grocery retail sector which prevent, distort or restrict competition," Ngwema said.

He said the inquiry would mostly probe six major areas.

"These are the impact of the expansion, diversification and consolidation of national supermarket chains on small and independent retailers; the impact of long-term exclusive leases on competition in the sector; and the dynamics of competition between local and foreign-owned small and independent retailers."

Foreign-owned businesses would also come under the spotlight, Ngwema said.

The commission also noted "the movement of national supermarket chains into the townships, peri-urban and rural areas mainly through the construction of shopping centres has affected small, informal and independent retailers in a number of ways".

The big retailers have also been given the opportunity to make submissions and, according to Ngwema, Woolworths has indicated it would do so on Friday.

Cape Argus


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