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'If retailers didn't own market power exclusive lease agreements wouldn't exist'

26 November 2019 10:20 AM
Tags:
Competition Commission
Exclusive lease agreements
Retailers

South African Competition Commission commissioner Tembinkosi Bonakele weighs in on the inquiry's findings.

The Competition Commission has released its final report on the Grocery Retail Market Inquiry on Monday.

The inquiry looked into factors that prevent, distort or restrict competition.

The report recommended that exclusive leases between shopping centres and the big four grocers in South Africa, Woolworths, Spar, Shoprite Checkers and Pick n Pay to be ended.

RELATED: Competition Commission goes after four big supermarket chains

Bongani Bingwa chats to the watchdog's commissioner Tembinkosi Bonakele to weigh in on the report.

The big four is really big and it is able to, therefore, impose certain restrictions, for example in shopping malls we found that in 70% of the malls you have exclusive lease agreements with large retailers.

Tembinkosi Bonakele, Commissioner - South African Competition Commission

He says these agreements make it difficult for smaller retailers to enter the market.

These leases are very long and vary from 10 years to 40 years and that doesn't seem viable even from a finance point of view. These leases are exclusionary, they serve to exclude others.

Tembinkosi Bonakele, Commissioner - South African Competition Commission

Even if the retailers can dispute the numbers of the report, the fact remains that consumers have limited choice when it comes to buying groceries, he adds.

They can quibble about market share, but we know that they control shopping malls. If you only have a Pick n Pay at a particular shopping mall, it means that Pick n Pay controls that market exclusively. If they didn't have market power, they wouldn't insist on exclusive lease agreements.

Tembinkosi Bonakele, Commissioner - South African Competition Commission

Listen below to the full conversation:


26 November 2019 10:20 AM
Tags:
Competition Commission
Exclusive lease agreements
Retailers

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