JOHANNESBURG – Leasing agreements between South Africa’s big-four food retailers and shopping mall owners will come under scrutiny from the anti-trust watchdog, it said on Friday, as it gave details of its competition investigation into the sector.
Large food retailers Shoprite, Pick n Pay, Spar and Woolworths together make up more than 90% of the $18 billion a year grocery market. They are accused of blocking rivals with exclusive shopping mall leases.
The probe, announced last month, comes after Massmart, a unit of Arkansas-based Wal-Mart, lodged a complaint with the regulator saying its expansion plans were being hampered by the leasing arrangements.
The leases can restrict malls from renting out space to rival retailers for five to 20 years.
The Competition Commission published the objectives of its investigation into the sector for public comment on Friday, saying the exclusive lease agreements could be causing distortions in the retail market.
“The Commission is initiating the grocery retail sector inquiry because it has reason to believe there are features in the sector that may prevent, distort and restrict competition,” it said in the terms of reference posted on its website.
“The quality of service, including pricing and promotions, can be expected to be better where there are competing retailers in the same shopping centre,” the commission said.
The investigation also comes amid anger that small informal foreign-owned grocery shops undercut local ‘mom and pop stores’ popularly known as ‘spazas’, which partly led to anti-immigrant violence in April.
The small spazas were set up in black suburbs during apartheid to sell staples such as maize meal because shopping malls were miles way. These shops have also suffered since big retailers rolled into black neighbourhoods.
“Given the importance of the informal sector, it is important to make a deliberate effort to examine competition between local and foreign-owned small and independent retailers,” the commission said.
A 2002 study by the University of South Africa’s Bureau of Market Research estimated that spaza shops brought in $705 million a year, employing nearly 300 000 people.
Upon completion of the inquiry, the regulator could recommend policy changes to promote competition.
The watchdog is also probing a high-profile currency-rigging case involving several global banks as well as an investigation into the private healthcare industry, which is dominated by hospital firms Netcare and Mediclinic.
It is unclear how long the investigation will take but a similar market inquiry into bank charges in 2006 ran for about two years.