The Competition Tribunal has officially confirmed a consent agreement between the Competition Commission and the Spar Group. This agreement is a crucial step in putting an end to long-term exclusive lease agreements that have restricted the entry of diverse shops and stores in more than 2,000 retail centers across the country.

The confirmation of the consent agreement not only solidifies the commitment of the Spar Group to ending exclusivity agreements but also makes it the third major retailer in South Africa to take such a step. The decision follows the findings of the Commission’s Grocery Retail Market Inquiry (GRMI) report, which was released in December 2019.

Exclusive lease agreements, a common practice in the grocery sector, typically grant a single tenant, often a national supermarket chain, exclusive rights to operate within a specific shopping center, effectively excluding any other grocery retailers.

The Competition Tribunal’s order sets a precedent for other major retailers, including industry giants like Shoprite and Pick n Pay, to follow suit. The termination of these exclusivity agreements is expected to foster a more competitive environment, opening up opportunities for smaller and emerging retailers.

The GRMI report, upon which these decisions are based, emphasized that long-term exclusive lease agreements contribute to concentration levels and hinder the participation of smaller retailers in shopping centers. Furthermore, such agreements were found to limit consumer choice, resulting in harm to consumers by depriving them of variety, dynamism, and innovation in the grocery retail sector.

Shoprite, as the first national supermarket chain, voluntarily entered into a consent agreement with the Commission, and the Tribunal confirmed it in October 2020. Subsequently, in June 2021, Pick n Pay also concluded a consent agreement with the Commission.

Under Spar’s consent agreement, the group has committed to immediately cease enforcing exclusivity provisions in headleases for Company-owned stores and to refrain from including exclusivity provisions in future lease agreements for such stores. Company-owned stores are those owned and controlled directly by the Spar Group.

Furthermore, Spar will stop enforcing exclusivity provisions, or those with substantially similar effects, in long-term exclusive lease agreements against specialty stores and Small, Medium, and Micro Enterprises (SMMEs). However, competitor franchisees are exempt from this restriction for a 12-month period. Spar has also pledged not to enter into any new exclusivity agreements in future leases.

The Competition Tribunal has set a deadline for the phasing out of all exclusivity agreements by December 31, 2026, signaling a commitment to fostering a more open and competitive grocery retail landscape in South Africa.