Grocery chain Spar has come under fire for failing to comply with the Competition Commission’s (CompCom’s) recommendations that retailers end exclusivity lease agreements with shopping mall owners.
CompCom spokesperson Siyabulela Makunga confirmed to Moneyweb that a complaint has been lodged by OBC, for allegedly enforcing exclusivity clauses in leases. The retailer is now being investigated and, if found guilty, could be slapped with a multi-million rand fine.
Makunga said Spar failed to comply with the inquiry recommendation to end exclusive agreements, which resulted in the investigation.
“The matter is currently being investigated. If found guilty, Spar may be liable to pay an administrative penalty of up to 10% of their total revenue calculated for the period of a contravention,” he said.
This week, the retailer reported total revenue of more than R138 million for its full year to end September.
Competitors Shoprite and Pick n Pay have however come to agreements with the commission, said Makunga.
Read:
The complaint
The complaint was lodged on 4 November by OBC managing director Tony Da Fonseca, who said landlords are being prohibited from renting space in their shopping centres to Spar’s competitors.
“While attempting to conclude lease agreements for available space in various shopping centres where Spar is the anchor tenant, the landlords have openly communicated to us that they cannot conclude a lease agreement with us, as Spar is enforcing their exclusivity clause,” said Da Fonseca.
He said OBC has been blocked from trading in shopping centres such as Hubyeni Shopping Centre in Limpopo, KwaMashu Shopping Centre in KwaZulu-Natal, Gugulethu Square in the Western Cape, and Setsing Plaza in the Free State.
Spar’s response
The Spar Group said it is not aware of any formal or informal complaint, from any national supermarket chain, or from OBC Better Butchery, about being excluded from a retail centre due to the presence of Spar stores.
“The Spar group has six distribution centres, servicing more than 2 000 stores in South Africa,” the retailer told Moneyweb.
“We always negotiate lease agreements that ensure that stores are sustainable in the long term.”
In 2019, the CompCom released its Grocery Retail Market Inquiry report, following a four-year probe into exclusionary practices in the retail sector.
It found that long-term exclusivity agreements by the big four supermarket chains – Shoprite, Spar, Woolworths and Pick n Pay – were anti-competitive and disadvantaged both smaller stores and consumers.
It recommended that there be an immediate stop to the clauses that prevent small enterprises, specialty stores, and other grocery retailers from entering the market in urban areas.