Competition Commission puts an end to shopping mall exclusivity leases
As more and more shopping malls and strip malls sprang up around the country, the big supermarkets flexed their corporate muscle by building in exclusivity clauses into their leases which often prevented smaller supermarkets, butchers, bakeries, greengrocers, and delis being part of the tenant mix.
After five years of the Competition Commission’s Grocery Retail Market Inquiry, their final report makes strong recommendations on the food retail industry, including a call for the monopoly leases between landlords and the big supermarket chains to come to an end. The exclusivity lease practice will be phased out as those implicated supermarkets’ existing leases will need to run their course which could take as much as five years.
The move was welcomed by the South Africa Property Owners Association (SAPOA) who believe this change will create a more open and free market, limiting price manipulation as new technology and distribution networks improve overall quality and efficiencies.
Many franchise groups, like OBC Chicken & Meat and Food Lover’s Market, were subjected to this exclusivity lease practice whereby they were either denied access or forced to limit their product offering due to one of the four implicated supermarkets having exclusivity in those centers.
According to MD, Tony Da Fonseca, OBC Chicken & Meat was one of the first independent chicken and complementary products franchise retailers to set up supermarkets in townships, taxi ranks and rural areas over thirty years ago offering consistent quality, competitive prices and convenience. “At a time when the major supermarket retailers were not even considering entering peri-urban and rural areas, we were catering to local communities becoming famous as the ‘chicken ekhaya’ of choice and working with and supplying local spaza and informal traders.”
“Once the big players in the retail supermarket arena discovered the potential of trading in high-density areas, we experienced the ‘blocking’ of sites by these anchor tenants who flexed their muscles in having a say on the tenant mix in these new centers. Not only are these anchor retailers trying to block large rival brands from infringing on their territory with their long-term leases, they are also effectively wiping out even the small challenger retailers like ourselves.”
“We experienced multiple cases when positive negotiations with landlords were suddenly reneged on for no reason whatsoever, despite the fact that we add value to a center by being a ‘sub/secondary’ anchor in what would normally be a quieter section of a mall or center. The ramifications of this, says Da Fonseca, is that smaller and independent traders, ranging from fashion, prepared foods to furniture end up in a situation where they alone cannot draw the feet OBC can to a quiet section, adversely affecting their ability to trade profitably. This was proving to have larger implications to traders than simply ‘blocking’ OBC. We are pleased that this unethical and discriminatory practice will be stopped.”
[su_note note_color=”#ffffff” text_color=”#a09c9c”]The views and opinions in this article are those of the writer and do not necessarily reflect those of the Association.[/su_note]
Tony da Fonseca is the managing director of the OBC Group, an award-winning network of franchised retail butcheries. Under his astute leadership, and despite the depressed economy, the Group has recorded exponential growth over the past few years. It expects to operate 70 plus state-of-the-art butcheries in South Africa by the end of 2020 and expansion into neighboring states is developing nicely as well. Despite his heavy workload, Tony serves on FASA’s Executive Committee since 2012. He chaired it during the period 2017/19 and is currently its immediate past chairman.
