Anticompetitive Consequences of Exclusivity Clauses Contained in Shopping Centres’ Lease Agreements

Authors

  • Motseotsile Clement Marumoagae University of the Witwatersrand

DOI:

https://doi.org/10.17159//1727-3781/2024/v27i0a17231

Keywords:

Lease agreements, exclusivity clauses, anchor tenants , landlords, competition

Abstract

This article discusses the impact of commercial lease agreements concluded in shopping centres that contain exclusivity clauses on competition. It assesses whether these clauses restrict equitable retailer participation in shopping centres, thereby denying consumers competitive prices and product choices. It also demonstrates that the South African Competition Commission has classified lease agreements' exclusivity clauses as problematic and persuaded the major grocery retailers to phase them out. While this is a positive step, this article argues that there should be some regulatory framework that can ensure that none of these retailers continue to restrict competition in shopping centres by enforcing exclusivity clauses. The Commission should play a prominent role in ensuring that the terms of the consent orders signed by some of these retailers are respected to ensure that competition is promoted in shopping centres in South Africa.

Downloads

Download data is not yet available.

Author Biography

  • Motseotsile Clement Marumoagae, University of the Witwatersrand

    LLB LLM (Wits) LLM (NWU) PhD (UCT) Diploma in Insolvency Law Practice (UP). Professor, University of Witwatersrand, South Africa. 

References

Bibliography

Literature

American Bar Association "A Practical Guide to Reviewing a Commercial Lease" 1984 Real Property, Probate and Trust Journal 891-940

Ater I "Vertical Foreclosure Using Exclusivity Clauses: Evidence from Shopping Malls" 2015 Journal of Economics and Management Strategy 620-642

Bertarelli S "Do Vertical Contracts Lead to Foreclosure and Efficiency Gains? An Empirical Study of the Food and Beverage Industry" 2024 European Scientific Journal 1-18

Blumenthal R The Competition Commission's Non-Referral of Exclusivity Clauses in the Shopping Centre Lease Context: A Monumental Misjudgement – A Section 5(1) Analysis of Anticompetitiveness (LLM-dissertation University of Cape Town 2015)

Boshoff W and Van Jaarsveld R "Market Definition Using Consumer Characteristics and Cluster Analysis" 2019 South African Journal of Economics 302-325

Bruwer J "Solving the Ideal Tenant Mix Puzzle for a Proposed Shopping Centre: A Practical Research Methodology" 1997 Property Management 160-172

Ceccato V and Tcacencu S "Perceived Safety in a Shopping Centre: A Swedish Case Study" in Ceccato V and Armitage R (eds) Retail Crime: International Evidence and Prevention (Palgrave Macmillan Cham 2018) ch 9

Coetzee J "The End of the Road for the Use of Long-Term Exclusive Lease Agreements" 2020 Without Prejudice 6-7

Colwell PF and Munneke HJ "Percentage Leases and the Advantages of Regional Malls" 1998 Journal of Real Estate Research 239-252

Damian DS The Impact of the Anchor Store on the Performance of a Commercial Centre (Masters-dissertation ISCTE Business School 2018)

Harmse CPJ Service Quality in a Landlord-Small Business Relationship in Shopping Centres (PhD-thesis University of Pretoria 2012)

Joshi KK and Gupta S "Factors Affecting Performance of a Shopping Mall" 2017 Journal of Business and Management 1-14

Kelly L et al Principles of Competition Law in South Africa (Oxford University Press Oxford 2016)

Kemei KK The Effect of Anchor Tenants of the Financial Performance of Shopping Malls in Nairobi (Masters-dissertation University of Nairobi 2019)

Kiriri PN "The Role of Anchor Tenant in Driving Traffic in a Shopping Mall: The Case of Nakumatt Exit from Three Shopping Malls in Nairobi" 2019 Journal of Language, Technology and Entrepreneurship in Africa 151-162

Lafontaine F and Slade ME "Exclusive Contracts and Vertical Restraints: Empirical Evidence and Public Policy" in Buccirossi P (ed) Handbook of Antitrust Economics (MIT Press Cambridge 2008) 391-414

Mandiriza T "Exclusive Leases at Shopping Centres Remain a Problem" 2015 Competition News 1-24

Massey P "Market Definition and Market Power in Competition Analysis: Some Practical Issues" 2000 The Economic and Social Review 309-328

McAndrews JP "Operating Agreement — Control Within Shopping Center Complex" 1972 Real Property, Probate and Trust Journal 812-820

Merrill TW "The Economics of Leasing" 2020 JLA 1-52

Mncube L, Federico G and Motta M "The Assessment of Exclusive Contracts: The Competition Case Against Computicket in South Africa" 2022 Review of Industrial Organization 403-429

North EJ and Kotze T "Customer Perceptions of the Attractiveness of Shopping Centres in Pretoria" 2004 Southern African Business Review 30-38

Parker L "Unlawful Competition" 1996 Juta's Business Law 116-117

Pitt M and Musa ZN "Towards Defining Shopping Centres and Their Management Systems" 2009 Journal of Retail and Leisure Property 39-55

Rajagopal "Growing Shopping Malls and Behaviour of Urban Shoppers" 2009 Journal of Retail and Leisure Property 99-118

Schapiro A "Exclusive Rights Clauses in Shopping Centres Leases" 1986 Alta L Rev 510-521

September-Van Huffel A "Commodus Usus, Exclusive Trade Rights and Public Policy in Lease: Masstores (Pty) Ltd v Pick 'n Pay Retailers (Pty) Ltd" 2022 SALJ 286-299

Sivaraman K and Vijayan P "A Study on the Impact of Shopping Malls on Retail Sector With Special Reference to Nattika Panchayath Of Thrissur District" 2020 International Research Journal of Management and Commerce 14-23

Tay RS, Lau CK and Leung MS "The Determination of Rent in Shopping Centers: Some Evidence from Hong Kong" 1999 Journal of Real Estate Literature 183-196

Wolfson JM "Shopping Centers – Lease Problems in a New Legal Specialty" 1969 Law Notes for the Young Lawyer 25-32

You TS et al "The Management of Positive Inter-Store Externalities in Shopping Centers: Some Empirical Evidence" Unpublished paper delivered at the European Real Estate Society Conference (2001 Helsinki)

Case law

Cancun Trading No 24 CC and Seven-Eleven Corp SA (Pty) Ltd (18/IR/Dec99) [2000] ZACT 10 (7 April 2000)

Competition Commission and South African Airways (Pty) Ltd (Final) 2005 2 CPLR 303 (CT); 2020 2 CPLR 821 (CT)

Competition Commission of South Africa v Mediclinic Southern Africa (Pty) Ltd 2022 4 SA 323 (CC)

Competition Commission v Interaction Market Services Holdings (Pty) Ltd In re: Interaction Market Services v Competition Commission 2022 1 CPLR 1 (CAC)

Computicket (Pty) Ltd v Competition Commission of South Africa (170/CAC/Feb19) 2019 ZACAC 4 (23 October 2019)

Dun and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) (Pty) Ltd 1968 1 SA 209 (C)

FFS Finance South Africa (RF) (Pty) t/a Ford Credit v Lamola 2024 2 SA 427 (GP)

Geary & Son (Pty) Ltd v Gove 1964 1 SA 434 (A)

Loureiro v iMvula Quality Protection (Pty) Ltd 2014 5 BCLR 511 (CC)

Masstores (Pty) Limited v Pick 'n Pay Retailers (Pty) Limited 2017 1 SA 613 (CC)

Maxima Latvija v Konkurences Padome C-345/14 ECLI:EU:C:2015

Mittal Steel South Africa Limited v Harmony Gold Mining Company Limited (70/CAC/Apr07) 2009 ZACAC 1 (29 May 2009)

Phumelela Gaming and Leisure Limited v Grundlingh 2007 6 SA 350 (CC)

Shoprite Checkers Proprietary Limited v Massmart Holdings Limited (CRP034Jun15, EXC088Jul15, EXC107AUG15, EXC109AUG15, STA204DEC15) [2016] ZACT 74 (1 September 2016)

South African Airways (Pty) Ltd v Comair Ltd 2012 1 SA 20 (CAC)

Taylor & Horne (Pty) Ltd v Dentall (Pty) Ltd 1991 1 SA 412 (A)

Titan Hospitality and Retail Services CC t/a Titan Pos v God's Power Chahuruvah 2022 JOL 52260 (LC)

Trident Steel (Proprietary) Limited and Dorbyl Limited (89/LM/Oct00) 2001 ZACT 2 (30 January 2001)

Tsutsumani Business Enterprises CC v Competition Tribunal 2023 3 CPLR 34 (CAC)

Union Wine Ltd v E Snell and Co Ltd 1990 4 All SA 355 (C)

Uniplate Group (Pty) Ltd v The Competition Commission of South Africa (176/CAC/Jul19) 2020 ZACAC 10 (25 February 2020)

Waste Products Utilisation (Pty) Ltd v Wilkes 2003 2 SA 515 (W)

York Timbers Ltd and SA Forestry Company Ltd (15/IR/Feb01) 2001 ZACT 19 (9 May 2001)

Legislation

Competition Act 89 of 1999

Government publications

GN 580 in GG 38863 of 12 June 2015

International instruments

Treaty on the Functioning of the European Union (1957)

Internet sources

Anonymous 2024 How Do You Leverage Use and Exclusivity Clauses to Attract and Retain Desirable Tenants? https://www.linkedin.com/advice/0/

how-do-you-leverage-use-exclusivity-clauses accessed 20 October 2023

Boshoff WH 2013 Why Define Markets in Competition Cases? Stellenbosch Economic Working Papers: 10/13 https://www.ekon.sun.ac.za/

wpapers/2013/wp102013/wp-10-2013.pdf accessed 24 September 2024

Braam-Mesken M 2016 The Changing Role of Anchor Tenants https://www.across-magazine.com/changing-role-anchor-tenants/ accessed 10 October 2023

Competition Commission 2011 Media Release: Competition Commission Findings of the Supermarket Industry Probe https://www.compcom.co.za/

wp-content/uploads/2014/09/Supermarket-Investigation-Release.pdf accessed 2 October 2023

Competition Commission 2019 The Grocery Retail Market Inquiry. Final Report: Non-Confidential https://www.compcom.co.za/wp-content/uploads/

2019/12/GRMI-Non-Confidential-Report.pdf accessed 2 October 2023

Competition Commission 2019 The Grocery Retail Market Inquiry Final Report: Summary of the Findings and Recommendations https://www.compcom.co.za/wp-content/uploads/2019/12/Grocery-Retail-Market-Inquiry-SUMMARY_.pdf accessed 24 September 2024

Competition Commission 2020 Tribunal Confirms Commission and Shoprite Checkers Consent Agreement Concerning Long-Term Exclusive Lease Agreements https://www.comptrib.co.za/info-library/case-press-releases/

tribunal-confirms-commission-shoprite-checkers-consent-agreement-concerning-long-term-exclusive-lease-agreements accessed 30 September 2023

Competition Commission 2021 Tribunal Confirms Consent Agreement: Pick n Pay Exclusivity Provisions in Lease Agreements Immediately Scrapped Against Privately Black-Owned Supermarkets, Small Businesses and Speciality Stores https://www.comptrib.co.za/info-library/case-press-releases/tribunal-confirms-consent-agreement-pick-n-pay-exclusivity-provisions-in-lease-agreements-immediately-scrapped-against-privately-black-owned-supermarkets-small-businesses-and-speciality-stores

Competition Commission 2023 https://www.compcom.co.za/wp-content/uploads/2023/08/Media-Statement-Commission-and-Spar-Group-reaches-settlement-agreement-30-August-2023.pdf

Competition Commission 2023 Media Statement: Commission and SPAR Group Reach Agreement on the Cessation of Long-Term Exclusive Leases https://www.compcom.co.za/wp-content/uploads/2023/08/Media-Statement-Commission-and-Spar-Group-reaches-settlement-agreement-30-August-2023.pdf accessed 24 September 2024

Das Nair R and Chisoro S 2015 The Expansion of Regional Supermarket Chains: Changing Models of Retailing and the Implications for Local Supplier Capabilities in South Africa, Botswana, Zambia, and Zimbabwe. WIDER Working Paper 2015/114 https://www.wider.unu.edu/sites/default/

files/WP2015-114-.pdf accessed 24 September 2024

Department of Trade, Industry and Competition 2021 Competition Policy for Jobs and Industrial Development http://www.thedtic.gov.za/wp-content/uploads/20210519_Competition_policy.pdf accessed 30 September 2023

Dewey Mclean Levy Inc 2022 Shopping Centre Tenants in Distress https://dmlinc.co.za/2022/01/26/shopping-centre-tenants-in-distress/ accessed 30 September 2023

Duberman J 2022 Exclusive Use Provisions in Commercial Leases https://www.outsidegc.com/blog/exclusive-use-provisions-in-commercial-leases accessed 30 September 2023

Fadairo M and Yu J 2014 Economic Rationales of Exclusive Dealing; Empirical Evidence from the French Distribution Networks. Working Paper 2014-05 https://core.ac.uk/reader/52308440 accessed 24 September 2024

MacKenzie N 2014 Arguments for and Against Exclusive Lease Agreements https://www.competitionchronicle.com/2014/06/exclusive-leases-with-anchor-tenants-in-south-africa/ accessed15 October 2023

Morgan KM 2008 Battle Over Leasing Covenants in Lieu of Exclusives https://www.law.com/njlawjournal/almID/1205775582338/ accessed 15 October 2023

Ndebele O 2016 Tenant Mix Contributes to Retail Success https://www.bizcommunity.com/Article/196/460/157193.html accessed 15 October 2023

Organisation for Economic Co-operation and Development 2016 Defining Geographic Markets Across National Borders. Working Party No 3 on Co-operation and Enforcement https://one.oecd.org/document/DAF/

COMP/WP3(2016)5/en/pdf accessed 24 September 2024

O'Regan M 2015 European Court of Justice Provides Guidance on When Provisions of Property Leases May Be Anti-Competitive https://competitionlawblog.kluwercompetitionlaw.com/2015/12/17/european-court-of-justice-provides-guidance-on-when-provisions-of-property-leases-may-be-anti-competitive/ accessed 15 October 2023

Perl J 2018 Are Non-Compete Clauses in Commercial Lease Agreements Enforceable? https://www.perlattorney.com/blog/are-non-compete-clauses

-in-commercial-lease-agreements-enforceable accessed 24 September 2024

Pisegna V 2017 Exclusive Use and Related Use Restrictions for Commercial Lease Contracts https://www.kb-law.com/articles/

documents/article-2017-05-26-Exclusive-Use-and-Related-Use-Restrictions-for-Commercial-Lease-Contracts.pdf accessed 15 October 2023

Popova B and Koeva V 2016 Right of the Anchor Tenant to Prevent the Lessor from Letting Commercial Premises to Third Parties: The Competition Law Test https://cms.law/en/bgr/publication/right-of-the-anchor-tenant-to-prevent-the-lessor-from-letting-commercial-premises-to-third-parties-the-competition-law-test accessed 10 December 2023

Published

10-12-2024

Issue

Section

Special Edition: Banking, Competition & Corporate Law

How to Cite

Marumoagae, M. C. (2024). Anticompetitive Consequences of Exclusivity Clauses Contained in Shopping Centres’ Lease Agreements. Potchefstroom Electronic Law Journal, 27, (Published on 10 December 2024) pp 1-40. https://doi.org/10.17159//1727-3781/2024/v27i0a17231

Similar Articles

81-90 of 598

You may also start an advanced similarity search for this article.