Tribunal to hear Massmart case against lease exclusivity clauses

Makro store in Midrand, Johannesburg.

Picture: Sowetan/Antonio Muchave

The retail giant — which owns local brands such as Game, Makro, Builder’s Warehouse — is scheduled for a hearing at the Competition Tribunal next month where it will attempt to bring action against Spar, Pick n Pay, Shoprite/Checkers as well as the South African Property Owners Association.

At issue are provisions in lease contracts by these parties, which allegedly block the sale by competitors of certain types of perishable food and dry groceries.

The action by Massmart is coming despite that a market inquiry into the grocery retail sector was already underway, speaheaded by chairman Halton Cheadle and panellists Lulama Mtanga and Lumkile Mondi.

Massmart first filed a complaint with the competition authorities in September 2014 which has so far borne little fruit. The Competition Tribunal has the power to set aside such exclusivity clauses.

Dealing with the tribunal directly may prove to be a quicker route to resolve the issue ahead of the industry-wide market inquiry into the sector.

The inquiry was initiated by the Competition Commission and is expected to produce a report by May next year. This is the first market inquiry into the multibillion-rand grocery sector, although there have already been a number of investigations.

The panel has a particular interest in the effect of national chains on small and independent retailers in townships, peri-urban, and rural areas. It will explore exclusivity agreements as part of this research.

Concerning the Tribunal proceedings, analysts say the big retailers who have been cited by Massmart may ask the regulatory body not to make a ruling of any kind until the market inquiry is complete. Massmart will have to prove that its case is strong enough to stand on its own two feet.