According to a statement released on Monday, The Competition Commission of South Africa has decided not to refer its investigation to the Competition Tribunal as it did not find sufficient evidence to prove the major allegations of retailers contravening sections of the Competition Act.
“The Commission examined various competition concerns in grocery retail, including buyer power, category management, information exchange and long term exclusive lease agreements, focusing mainly on staple foods,” the Commission said in a statement.
“In 2011 the Commission concluded its investigation into the first three activities and took the decision to focus on the practice of concluding long term exclusive lease agreements between food retailers and landlords which required further investigation.”
The Commission began their investigation in 2009 against supermarkets and retailers Pick n Pay, Shoprite, Woolworths, Spar, Massmart and Masscash.
This was following allegations of the retailers’ alleged contraventions of sections of the Competition Act, including substantially preventing or lessening competition, and engaging in exclusionary conduct.
According to the statement, exclusive leases given by property developers, owners and shopping mall landlords tend to give supermarkets the sole right to trade as food retailers in shopping centres.
The lease can also be used to restrict the types of tenants that supermarket landlords can allow in the centre.
The supermarkets that gain these exclusive leases are usually “anchor tenants” that are instrumental to attracting other popular retailers.
“The Commission conducted an 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 (Pick n Pay, Shoprite and Spar),” the Commission explained.
“The investigation established that the respondents were dominant in certain local markets and that they would often compel landlords not to deal with competitors (by entering into exclusive lease agreements with landlords in return for agreeing to ‘anchor’ the centre).”
The Commission also found that in some instances, supermarkets would take action against landlords if the exclusivity clause had been breached by bringing another supermarket or part-line store into a mall.
“However, on the basis of the evidence before the Commission, the anti-competitive effects of the conduct could not be demonstrated conclusively. The evidence did not meet the tests required in order to prosecute the firms involved and therefore the Commission has taken the decision not to refer the matter to the Tribunal.”