The Commission initiated a market inquiry into the South African ”grocery retail sector” in November 2015, and part of which inquiry dealt with ‘exclusionary clauses’ in lease agreements. An ‘exclusionary clause’ in a long-term lease generally reads that the tenant shall enjoy exclusivity in that no other competitor will be allowed to rent a retail space in the same property or building, save with the prior written consent of the tenant.
The Commission concluded that national supermarket chains resorted to ‘exclusionary clauses’ in long term leases, thereby allowing dominant retailers to retain market power, to the exclusion of smaller, independent stores. This was viewed as a distortion of competition between the national supermarket chains, wholesalers and independent retailers.
In the Commission’s final report, published in November 2019, the inquiry concluded and recommended the following remedial steps be taken:
The enquiry by the Commission focused only on the ”Grocery Retail Sector” and other retail spheres were not considered.
By law, and in terms of a contractual agreement, exclusionary clauses can still be enforced, the Commission’s findings are not promulgated in law. However, the Inquiry recommended that its recommendations is achieved through voluntary undertakings by the national supermarket chains. The Commission will continue the Inquiry’s process and secure voluntary compliance with the recommendations, failing which legislation in the form of regulations or a code of practice will be introduced.
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