1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: CO026MAY20/AME195MAR22
In the application for modifying a consent agreement between:
SHOPRITE CHECKERS PROPRIETARY LIMITED
Applicant
And
THE COMPETITION COMMISSION SOUTH
AFRICA
Respondent
In re: the consent order between:
Case No: CO026MAY20
THE COMPETITION COMMISSION SOUTH
AFRICA
Applicant
And
SHOPRITE CHECKERS PROPRIETARY LIMITED
Respondent
Panel: Ms M Mazwai (Presiding Member)
Mr AW Wessels (Tribunal Member)
Prof. I Valodia (Tribunal Member)
Heard on: 15 December 2022
Order Issued on: 7 July 2023
Reasons Issued on:
7 July 2023
REASONS FOR DECISION AND ORDER
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INTRODUCTION
1. This matter concerns an application to vary the terms of a consent agreement
concluded between Shoprite Checkers Proprietary Limited (“Shoprite”) and
the Competition Commission (“Commission”) on 28 September 2020
(“Shoprite consent agreement ”) which was confirmed by this Tribunal on
9 October 2020.
2. In its application, Shoprite seeks an order in the following terms:
2.1. granting leave for the amendment of the Shoprite consent agreement
concluded between Shoprite and the Commission, and confirmed by
the Tribunal under case number CO26MAY20;
2.2. confirming the amendments to the Shoprite consent agreement
concluded between Shoprite and the Commission, in accordance with
annexure JP12 attached to the founding affidavit in the modification
application; and
2.3. granting further and/or alternative relief.
3. The application is brought in terms of section 27(1)(d) of the Competition Act
89 of 1998 as amended (“the Competition Act”) read with rule 42 of the Rules
for the Conduct of Proceedings in the Competition Tribunal1 (“Tribunal Rules”)
and clause 6 of the Shoprite consent agreement.
4. Shoprite alleges that there is good cause to modify the Shoprite consent
agreement because of changed circumstances and market developments
which warrant granting the application. These alleged changed circumstances
include:
1 Competition Tribunal Rules published under GN2 in GG 22025 of 1 February 2001.
3
4.1. Alleged material differences between the Shoprite consent agreement
and Pick n Pay’s consent agreement dated 11 June 20212 (“the Pick
n Pay consent agreement”) which creates a market distortion between
these two large retailers in South Africa;
4.2. The impact of the Covid 19 pandemic on the market; and
4.3. The impact of the July 2021 looting and vandalism that plagued the
Gauteng and KwaZulu-Natal provinces of South Africa.
5. The application was opposed by the Commission on grounds that Shoprite
has not established that the alleged “changed circumstances and market
developments” constitute “good cause” to amend the Shoprite consent
agreement3 and has not shown any basis (legal or factual) upon which the
Tribunal may grant the relief sought in its application.
6. Pick n Pay filed submissions during the Tribunal’s proceedings also
challenging Shoprite’s application. Pick n Pay, like the Commission, submitted
that once a consent order or settlement agreement is made an order of the
Tribunal, it may only be set aside on the grounds set out in section 66 of the
Competition Act, which Shoprite does not rely on. Further, Pick n Pay alleged
that in the event that the Tribunal entertains the variation application under
section 27(1)(d) and/or the provisions of clause 6 in the Shoprite consent
agreement, Shoprite has not demonstrated that there is good cause to grant
the variation application.
7. After hearing the parties, we have decided to partly grant the variation
application for the reasons set out below.
2 Confirmed by the Tribunal on 11 June 2021.
3 Competition Commission ‘Answering Affidavit’ ( 25 April 2022) Hearing Bundle at p267, paras 11 to
11.2.
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BACKGROUND
8. The Commission conducted a market inquiry into the South African grocery
retail sector , the Grocery Retail Market Inquiry (“GRMI”) , findings and
recommendations of which are in the Grocery Retail Market Inquiry Report
dated 25 November 2019 (“GRMI Report”).
9. The GRMI found that the practice of concluding long -term lease agreements
that entrench exclusivity in shopping malls for incumbent large retailers
“fundamentally undermined the objectives of the Act and broader national
economic policies aimed at facilitating transformation and economic
inclusion.”4
10. The GRMI states inter alia that the practice of long -term exclusive lea se
agreements with shopping centres sustained foreclosure of competing
retailers, particularly small and independent retailers as well as emerging
challenger retailers, over significantly long periods . It further finds that t he
pattern of long term exclusive lease agreements appears to have persisted
with the initial lease generally being for a ten year period, and with the addition
of renewal clauses, some of the lease agreements could endure for at least
30 years.5
11. The GRMI recommended remedial action in respect of long -term lease
agreements, which included that:
“1100.1 National supermarket chains must, w ith immediate effect,
cease from enforcing exclusivity provisions, or provisions that
have a substantially similar effect, in their lease agreements
against:
1100.1.1 SMME’s;
4 GRMI Report at para 58.
5 GRMI Report at para 45.
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1100.1.2 speciality stores; and
1100.1.3 at the grocery retailers (including the emerging
challenger retailers) in shopping centres located in
non-urban areas.
1100.2 No new leases or extensions to leases by grocery retailers
may incorporate exclusivity clauses (or clauses that have
substantially the same effect) or clauses that may serve to
restrict the product lines, store size and location of other
stores selling grocery items within the shopping centre.
1100.3 Subject to 1100.1 above, the enforcement of exclusivity by the
national supermarket chains against other grocery retailers
must be phased out by the next extension of the lease or
within five years from the date of the publication of this Final
Report, whichever is earlier.” 6 (own emphasis)
12. The recommendations in the GRMI Report are not peremptory but are rather
aimed at voluntary compliance.
13. In an effort to address the concerns identified in the GRMI Report , Shoprite
proposed a draft consent agreement in a letter of 22 April 2020 for the
Commission’s consideration, which closely replicated the wording of the
recommended remedial action in the GRMI Report.
14. After settlement discussions with the Commission, Shoprite and the
Commission concluded a consent agreement which was signed on 29
September 2020 and confirmed by the Tribunal on 9 October 2020. The
Shoprite consent agreement was the first consent agreeme nt concluded in
voluntary compliance with the recommendations of the GRMI Report.
6 Shoprite Checkers ‘Founding Affidavit’ Hearing Bundle at p9-11, para 12, with reference to the GRMI
Report at para 1100.
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15. In its answering affidavit, the Commission states that Shoprite was advised
that the other consent agreements would comply with the GRMI Report’s
recommendations.7
16. To date , save for the Pick n Pay consent agreement , no other consent
agreements have been concluded or confirmed by the Tribunal.
Differences between the Shoprite and Pick n Pay consent agreements
17. The Pick n Pay consent agreement was signed on 25 May 2021 and confirmed
by the Tribunal on 11 June 2021 . As with the Shoprite consent agreement,
the Pick n Pay consent agreement was entered into as voluntary compliance
and the result of negotiations between the Commission and Pick n Pay.
18. Shoprite, in this application , alleges that certain clauses (as set out below)
which relate to : (i) the scope of the application of the Pick n Pay consent
agreement; (ii) exclusivity provisions when renewing existing lease
agreements; and (iii) the time period that Pick n Pay has to phase out the
application of its exclusivity provisions in its lease agreements , are more
advantageous than the terms in the Shoprite consent agreement.
19. The relevant differences between the Shoprite and Pick n Pay consent
agreements, are the following:
19.1. Non-Urban Areas versus HDP Supermarkets: Shoprite agreed to
cease enforcing exclusivity provisions8 (or provisions with a
substantially similar effect ) in its Long-Term Exclusive L ease
7 Answering Affidavit at p302, para 90.
8 “Exclusivity Provisions” as defined in the Pick n Pay consent agreement (but not the Shoprite consent
agreement) refers to a provision in a Long -Term Lease Agreement that precludes the landlord from
letting premises in the same Shopping Centre to potential ly competing grocery retailers and Speciality
Stores (Pick n Pay consent agreement (11 June 2021) Hearing Bundle at p84-85 clause 1.6).
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Agreements9 against any other supermarkets 10 in shopping centres
located in specified Non-Urban Areas11 whereas Pick n Pay ’s
agreement to cease enforcing exclusivity provisions is in respect of
HDP Supermarkets.12
19.2. “HDP Supermarket” is defined in the Pick n Pay consent agreement,13
as privately owned single or multiple store operations owned and
controlled by historically disadvantaged persons as per section 3(2) of
the Competition Act, including individual franchisees or buyer group
members of other national retail brands but excluding corporate stores
of those brands.
19.3. Renewal of existing leases: Shoprite agreed that it shall not
incorporate exclusivity provisions (or provisions that have
substantially the same effect ), into any new supermarket leases in
Shopping Centres.14 The Pick n Pay consent agreement also puts an
end to exclusivity in new leases . However the Pick ‘n Pay consent
agreement allows Pick n Pay to incorporate exclusivity provisions
when it renews existin g leases (other than in relation to SMME's,
speciality and limited line stores and HDP supermarkets).15
9 “Long-Term Exclusive Lease Agreement” refers to lease agreements entered into between property
developers and supermarkets which include provisions that restrict the landlord from letting premises
in the same shopping centre to potentially competing grocery retailers and specialty stores ( Shoprite
consent agreement (9 October 2020) Hearing Bundle at p40 clause 1.11).
10 “Supermarket” refers to a store devoted to the retail sale of groceries and household goods and which
stocks a range of goods from more than 15 product categories ( Shoprite consent agreement Hearing
Bundle at p42 clause 1.21).
11 “Non-Urban Areas” is defined in clause 1.12 of the Shoprite consent agreement as Peri-Urban Areas,
Townships and Rural Areas , in which Shop rite has existing stores (specified in Annexure C to the
consent agreement ); clause 1.14 defines “Peri-Urban Areas” as locations adjoining an urban area
between suburbs and the countryside ; clause 1.15 defines “Rural Areas” as areas that are located
outside towns and cities and without access to ordinary public services such as water and sanitation,
especially areas of predominant agricultural production ; and clause 1.22 defines “Township” as less
formal an underdeveloped urban areas that were set aside during the period of a path aid for black
population groups. (Shoprite consent agreement Hearing Bundle p41-42).
12 Clause 4.1.1.3 of the respective Shoprite and Pick n Pay consent agreements.
13 Clause 1.11 of the Pick n Pay consent agreement.
14 Clause 1.16 of the Shoprite consent agreement defines “Shopping Centre” as a group of retail and
other commercial establishme nts that are developed, owned and managed as a single property,
typically with on-site parking provided (Shoprite consent agreement Hearing Bundle p41).
15 Clause 4.1.2 of the respective Shoprite and Pick n Pay consent agreements.
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19.4. No exclusivity after December 2024 v ersus December 2026:
Shoprite agreed not to enforce exclusivity provisions (or provisions
that have substantially the same effect), against supermarkets in any
extended (or renewed) long term exclusive lease agreement or after
the elapse of five years reckoned from 17 December 2019 (that is until
December 2024) whichever is the earlier . In the Pick n Pay consent
agreement, the expiry date for enforcing exclusivity is 31 December
2026.16
Amendments sought by Shoprite
20. Shoprite alleges that the Pick n Pay consent agreement has the effect of
creating uneven competitive playing fields which is not intended by the GRMI.
21. Shoprite seeks to change the scope of the application of its agreement to
cease enforcing exclusivity in Non-Urban Areas as currently contained in the
Shoprite consent agreement to HDP Supermarkets (as contained in the Pick
n Pay consent agreement) , enabling it to continue enforcing the exclusivity
provisions in respect of renewals of existing leases until 31 December 2026,
and expanding the phasing out period of exclusivity provisions in lease
agreements to 31 December 2026 (as the Pick n Pay consent agreement
provides).
22. Shoprite specifically seeks the following amendments to its consent
agreement:
22.1. Insertion of a definition of “HDP Supermarket” (as defined in the Pick
n Pay consent agreement) as “privately owned single or multiple store
operations owned and controlled by historically disadvantaged
persons as per section 3(2) of the Act, including individual franchisees
or buyer group members of other national retail brands but excluding
corporate stores of those brands.”;
16 Clause 4.1.3 of the respective Shoprite and Pick n Pay consent agreements.
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22.2. An amendment to the effect that the immediate cessation of the
enforcement of exclusivity provisions only appl ies in relation to HDP
supermarkets and not supermarkets in shopping centres located in
Non-Urban Areas;
22.3. An amendment to the effect that it may continue enforcing the
exclusivity provisions in respect of renewals of existing leases until 31
December 2026;
22.4. Shoprite seeks to continue the enforcement of exclusivity provisions
against supermarkets (save for SMME's, speciality and limited line
stores, and HDP supermarkets) until 31 December 2026.
23. Shoprite submits that the differences in the consent agreements, has already
had, and will conti nue to have, a significant impact on competition in the
grocery retail market over a period of some six years.17
THE COMMISSION’S SUBMISSIONS
24. The Commission raised two preliminary points. First, the Commission alleged
that an investigation and agreement from the Commission is a jurisdictional
pre-requisite for a variation or an amendment of the consent order, and that
this jurisdictional pre-requisite has not been met. 18 Second, the Commission
refers to the general principles of common law cited by the Constitutional
Court in the Ntuli judgment19 where the Constitutional Court stated that once
a court order has been pronounced upon, the court itself has no authority to
correct, alter or supplement it.
25. We found neither of these arguments persuasive.
17 Shoprite ‘Replying Affidavit’ (16 May 2022) Hearing Bundle at p395, para 8.
18 Answering Affidavit Hearing Bundle at p268, para 13.
19 The Minister of Justice v Nicko Ntuli (CCT17/95-CCT15/97) [1997] ZACC 7 (5 June 1997) (“Ntuli”) at
para 22.
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26. Section 27(1) of the Competition Act provides that the Tribunal may make any
ruling or order necessary or incidental to the performance of its functions in
terms of the Competition Act . Th e Constitutional Court in Hosken
Consolidated Investments 20 confirmed that section 27(1)(d) has been
“formulated widely” and “confers wide powers” on the Tribunal. In our view,
section 27(1)(d) is wide enough to give the Tribunal jurisdiction – when
warranted and under certain circumstances - to amend or vary consent orders
as a necessary function of its regulatory mandate. In such cases, the
Tribunal’s intervention must be in accordance with the principles of legality,
transparency and fairness as set out in the Constitution of the Republic of
South Africa, 1996 and required by the Competition Act.21
27. Regarding the Tribunal’s power to vary its own order, the Tribunal has read
this power into the discretion conferred upon it in terms of section 27(1)(d) of
the Competition Act.22
28. Further, the Constitutional Court in Ntuli recognised that there are exceptions
to the general principle that a court may not vary its own order and that the
“list of exceptions might not be exhaustive and that a court might have a
discretionary power to vary its order in other appropriate cases” 23 (own
emphasis). The Constitutional Court’s judgment confirms that there may be
circumstances where it is appropriate to vary an order if there is good cause
for such variation.24 On the principle enunciated in Ntuli, we conclude that the
Tribunal is empowered under section 27(1)(d) of the Competition Act to vary
its order in limited circumstances on good cause shown. We deal with good
cause below.
20 Hosken Consolidated Investments Limited and Tsogo Sun Holdings Limited v Competition
Commission (CCT296/17) [2019] ZACC 2 (1 February 2019) (“Hosken”) at paras 76 – 77.
21 Foskor (Pty) Ltd v Competition Commission and Others (CO037Aug10/VAR240Feb16) [2019]
21 Foskor (Pty) Ltd v Competition Commission and Others (CO037Aug10/VAR240Feb16) [2019]
ZANCT 181 (18 December 2019) (" Foskor”) at para 73. It bears mention that the Shoprite consent
agreement differs from the Foskor consent agreement in that there was no variation clause in the Foskor
consent agreement . The Tribunal, h owever confirmed that variation may be granted under section
27(1)(d). Further, the Foskor consent agreement was concluded pursuant to an investigation into anti -
competitive conduct by a specific market player whereas the Shoprite consent agreement does not
arise from a complaint investigation but rather from a market inquiry.
22 Life Wise (Pty) Ltd t/a Eldan Auto Body v Competition Commission of South Africa (197/CAC/Nov21)
[2022] ZACAC 3; [2022] 1 CPLR 3 (CAC) (8 April 2022) at para 7.
23 Ntuli at para 23.
24 Ntuli at para 30.
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29. Furthermore, the consent agreement itself provides for variation. Clause 6 of
the Shoprite consent agreement makes provision for Shoprite to approach the
Tribunal to vary the order “on good cause shown”. It provides:
“6.1 The Commission or Shoprite may bring any di sputes regarding
the terms of this consent order to the Tribunal for determination;
and either party may upon good cause shown, apply to the
Tribunal for the waiver, relaxation, modification and/or
substitution of all or any part of this consent order.
…
6.3 in the event of the Commission withholding its consent to a
waiver, relaxation or modification, Shoprite shall be entitled to
apply to the Tribunal for an order waiving, relaxing or modifying
this Settlement Agreement and the remedies provided herei n.
The Commission shall be entitled to oppose such application.”
30. It is clear from the language used in clause 6.1 of the Shoprite consent
agreement, that Shoprite and the Commission made specific provision for a
variation of the terms of the agreement in circumstances where there is “good
cause” for such variation. This provision contemplates an application for
variation in circumstances that are not provided for in terms of section 66 of
the Competition Act that circumscribes the basis of variation.
31. Notably, the Commission itself submitted that “the Tribunal has jurisdiction in
terms of paragraph 6.1 of the Tribunal’s order to entertain the application” .25
There is accordingly no merit to the Commission’s point in limine.
32. The Commission, in its heads of argument, further contends that Shoprite is
essentially requesting the Tribunal to make a new consent agreement through
25 Answering Affidavit Hearing Bundle at p269, para 15.
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the variation application which the Tribunal has no jurisdiction to do.26 We do
not agree with this contention. Clause 6.1 of the consent agreement clearly
contemplates a dispute regarding the terms of the Shoprite consent order.
33. Given the above, we conclude that the Tribunal is empowered in terms of
section 27(1)(d) read with clause 6 of the consent agreement, to vary the
consent order provided that Shoprite can show good cause.
HAS SHOPRITE SHOWN GOOD CAUSE?
34. In its opposition to variation, the Commission alleges that:27
34.1. The removal of the exclusivity provisions of Shoprite (and Pick n
Pay’s) lease agreements has created competition;
34.2. Shoprite has not suffered any harm as a result of the consent
agreement;
34.3. Shoprite is not prevented from expanding;
34.4. Shoprite is not precluded from entering shopping centres where Pick
n Pay’s has retail space;
34.5. The differences between the two consent agreements are transient or
transitional in nature and do not warrant a variation;
34.6. The interests of the public prevail over Shoprite’s private interests; and
34.7. The Tribunal's order will set a dangerous precedent.
26 Competition Commission ‘Heads of Argument’, Heads of Argument and Other Submissions Bundle
at p62, para 28.
27 Answering Affidavit Hearing Bundle at p285, para 49.
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OUR ANALYSIS
35. It is important to note that this application is not a challenge to the validity of
the two relevant consent agreements. The Tribunal has already considered
and confirmed both the Shoprite and the Pick n Pay consent agreements.
36. There is no allegation that the Shoprite consent agreement in its current form,
ought not to have been confirmed by the Tribunal because it does not promote
the objectives of the Competition Act, is not in the public interest, is irrational
or is shockingly inappropriate.
37. Shoprite is also not c hallenging the validity of the Pick n Pay agreeme nt.
There is no application before this Tribunal to set aside or vary that agreement.
38. This matter is about whether there is good cause shown to grant the
application for a variation of the Shoprite consent agreement because of
alleged changed circumstances.
39. We note that t here is no one-size-fits all approach to consent agreements ,
including consent agreements emanating from market inquiries. Consent
agreements are negotiated between the Commission and a party on a case -
by-case basis, considering the individual circumstances of the party entering
into the agreement with the Commissi on and the prevailing circumstances at
the time of entering into the agreement. There may therefore be deviations
from one consent agreement to another depending on the circumstances of
each case. There is therefore no concern that this order will create dangerous
precedent as alleged by the Commission since each matter is considered on
its merits.
40. The Tribunal has the discretion to determine what constitutes good cause in
the interests of justice based on the facts of the case.28 In Foskor, the Tribunal
28 Competition Commission of South Africa v Pickfords Removals SA (Pty) Ltd (CCT123/19) [2020]
ZACC 14 (24 June 2020) at para 54.
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noted that the Constitutional Court and Competition Appeal Court have held
that the Tribunal “should not adopt an over -technical approach to parties
seeking relief when the subject matter of the dispute falls within the mandate
of the Tribunal” as this could result in a barrier to justice.29
41. In this context, we must determine whether or not there is good cause to grant
the variation application and allow the amendments to the Shoprite consent
agreement.
42. Shoprite submits that the changed circumstances of the Covid pandemic and
the July 2021 looting constitute good cause. We are not convinced that these
events on their own constitute good cause to vary the Shoprite consent
agreement in the context where the foreclosure of rivals was sustained over
long periods, which in the words of the GRMI “fundamentally undermined the
objectives of the Act and broader national economic policies aimed at
facilitating transformation and economic inclusion”. The consent agreement is
aimed at opening up the grocery retail market to competition to the benefit of
consumers. We therefore focus our analysis on an assessment of each of the
differences between the two consent agreements separately.
Removal of exclusivity in Non-Urban Areas versus HDP Supermarkets
43. It is common cause that clause 4.1.1.3 of the Pick n Pay consent agreement,
does not have the reference to “Non-Urban Areas” as the Shoprite consent
agreement does. The Pick n Pay consent agreement waives exclusivity
against HDP Supermarkets nationally.
44. As indicated above, individual circumstances are considered when the
Commission enters into consent agreements. Shoprite and Pi ck n Pay are
both large retailers but have a different geographic footprint in terms of where
the majority of their retail stores are located in South Africa.
29 Foskor at paras 63 - 64, with reference to Hosken Consolidated Investments Limited and Tsogo Sun
Holdings Limited v Competition Commission (CCT296/17) [2019] ZACC 2 (1 February 2019) at paras
76 – 77 and Hosken Consolidated Investments Limited and Another v Competition Commission
(154/CAC/Sept17) [2017] ZACAC 5 (30 October 2017) at para 26.
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45. Shoprite has a larger presence in rural and township areas relative to its
national competitors . The term “Non -Urban Areas” was included in GRMI
Report as a result of Shoprite’s own submissions during the GRMI.
46. In comparison to Shoprite, Pick n Pay has a relatively smaller presence and
therefore a smaller number of stores with leases containing ex clusivity
provisions in Non -Urban Areas. In our view, t o apply the Non-Urban Areas
approach to Pick n Pay would accordingly not have achieved the objectives of
removing barriers to entry into the retail market to the same extent as the
abovementioned national HDP provision contained in the Pick n Pay
agreement. Similarly, the requirement of Shoprite to remove exclusivity in
relation to Non-Urban Areas achieves the objectives of the GRMI to open up
these markets to competition to the benefit of South African consumers.
47. On the evidence before us, as at December 2019, Shoprite had a total number
of 1053 leases containing exclusivity provisions (including both Urban and
Non-Urban Areas). Following confirmation of the Shoprite consent agreement
in October 2020, Shoprite began removing exclusivity provisions in lease
agreements. By April 2022, Shoprite removed exclusivity provisions in 425
non-urban leases . We understand that Shoprite does not have any further
leases with exclusivity provisions in Non-Urban Areas.30
48. As at the date of this application, being 22 March 2022, there were 15 actual
new entrants in shopping centres situated in Non -Urban Areas, where
Shoprite waived exclusivity , 3 of which represent ent ry by HDP
Supermarkets.31 Notably, Pick n Pay is not amongst these identified new
entrants.
30 Replying Affidavit Hearing Bundle at p387 and p398, paras 11-12.
31 Founding Affidavit Hearing Bundle at p24, para 41.
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49. Shoprite’s (national) competitors have indicated their intention to enter 1 6
shopping centres in Non -Urban Areas where Shoprite is operating or where
Shoprite has removed exclusivity provisions from renewed leases. Pick n Pay
has indicated its intention to enter into 6 of those 16 shopping centres.32 This
indicates the level of increased competition in the grocery retail market in Non-
Urban Areas following the Shoprite consent agreement . The increase in
competition is undoubtedly to the benefit of consumers , specifically in Non -
Urban Areas, who are generally lower income-earning consumers.
50. Furthermore, as mentioned, Shoprite has a relatively larger footprint in Non -
Urban Areas where consumers, especially low income consumers have less
choice. This affects the most vulnerable consumers by making entry possible
in Non-Urban Areas.
51. It would not be in the public interest for the Tribunal to grant the application to
amend clause 4.1.1.3 in circumstances where competition has increased
between supermarkets in Non -Urban Areas and where there is no cogent
evidence that Shoprite is substantially worse off given the differences in the
two relevant retailers’ footprint. Further, the HDP provision that applies to Pick
n Pay is geographically wider, in that it is national.
52. Given the above, we conclude that Shoprite has not made out a convincing
case for good cause to amend its consent agreement to mirror that of Pick n
Pay in relation to the Non-Urban versus HDP issue.
Exclusivity provisions in renewals of existing leases
53. Shoprite agreed that it will not incorporate exclusivity provisions into any new
supermarket lease agreements or into existing leases when renewed .
However, Pick n Pay may incorporate exclusivity provisions when it renews
existing leases until 31 December 2026.
32 Founding Affidavit Hearing Bundle at p25, para 42.
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54. Shoprite submitted that it would like to enter 46 shopping centres, 41 of which
are in Urban Areas, but it is prevented from doing so because its competitors
(specifically Pick n Pay and Spar) continue to enforce the ir exclusivity
provisions. Pick n Pay holds leases in 43 of these shopping centres.33
55. In our view, the amendment sought is not warranted. This is because Shoprite
is not precluded from entering shopping centr es where Pick n Pay ha s a
presence. Shoprite may enter any shopping centre nationally where Pick n
Pay has exclusivity provisions provided that it does so with an HDP
franchise.34 Entry by Shoprite is thus not prevented as Shoprite alleges, but
must be through an individual HDP franchisee. This is consistent with the
objectives of the GRMI to enhance ownership transformation in the grocery
retail sector. Further, while the consent agreement has removed barriers and
made entry by rivals of Shoprite possible, evidence of actual entry by
competitors appears to be limited and uncertain. For instance, the evidence
shows that by April 2022, Shoprite had removed exclusivity provisions in 266
urban leases. Shoprite still has 362 urban lease agreements which contain
exclusivity provisions.35 Shoprite’s national competitors ha ve indicated their
intention to enter 12 shopping centres in Urban Areas where Shoprite is
operating or where Shoprite has removed exclusivity when renewing leases.
Pick n Pay intends to enter 4 of the 12 shopping centres in Urban Areas.36
56. In our view, the entry of these competitors in 12 of Shoprite’s total of 628
shopping centres in Urban Areas where Shoprite previously held exclusivity,
introduces further competition in the market but not of a scale that is likely to
significantly distort competition between Shoprite and its national competitors.
33 Founding Affidavit Hearing Bundle at p28, para 43.
34 Clause 4.1.1.3 of the Pick n Pay consent agreement read with the definition of HDP Supermarkets,
which includes individual franchisees or buyer group members of other national retail brands but
excluding corporate stores of those brands.
35 Replying Affidavit Hearing Bundle at p397, para 11.
36 Founding Affidavit Hearing Bundle at p25, para 42.
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57. We therefore conclude that Shoprite has not made out a sufficient case for
good cause and we do not grant the application by Shoprite to amend clause
4.1.2 in the Shoprite consent agreement.
Extension of the phasing out period – 2024 versus 2026
58. Shoprite will not have any exclusivity provisions in lease agreements after the
lapse of five years from 17 December 2019 (that is after December 2024).
Pick n Pay’s consent agreement on the other hand, extends the phasing out
period by a further two years relative to that of Shoprite ( all exclusivity ends
after 31 December 2026).
59. The Commission contends that while the end date for exclusivity between the
two consent agreements (the glide path) may differ, there is parity since the
final outcome in both consent agreements result in the phasing out of
exclusive lease agreements.37
60. In a market inquiry, the Commission intervenes to ensure that a market is,
becomes or remains competitive. The Commission contends that a “slight”
divergence on the path to ending lease exclusivity may be equally onerous for
Pick n Pay as the glide path faced by Shoprite because Pick n Pay allegedly
is smaller and less profitable to Shoprite.38 This is not a convincing argument.
While we accept the Commission’s justification for the differences in respect
of Non-Urban Areas/HDP Supermarkets and the renewal provisions, we are
of the view that the fact that Shoprite is allegedly more profitable does not hold
as a justification for the significant difference (of approximately two years)
between the respective phase-out dates.
61. In our discretion, it would be fair to grant the variation application allowing
Shoprite to amend clause 4.1.3 giving it until 31 December 2026 to ultimately
phase out all exclusivity provisions in lease agreements.
37 Answering Affidavit Hearing Bundle at p296, para 71.
38 Answering Affidavit Hearing Bundle at p290, para 62.
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62. We therefore grant the application by Shoprite to amend clause 4.1.3 in the
Shoprite consent agreement to extend the ultimate phase out date to
December 2026.
63. We also caution the Commission to, in the future, carefully consider the
potential implications for competition in markets of entering into disparate
consent agreements with different market participants stemming from the
same market inquir y. In addition to allegations of potential distortions of
competition in the market, disparate consent agreements may lead to the
undesirable situation where parties (specifically th ose that are first to
contemplate settlement) are deterred from voluntarily entering into consent
agreements. This may have a chilling effect on settlements which have the
benefit of expedition in correcting markets and promoting competition, as well
as saving costs and resources associated with litigation.
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ORDER
1. Accordingly we make the following order:
1.1. The application for leave to include the definition of “HDP
Supermarket” in the Shoprite Consent Agreement is dismissed;
1.2. The application for leave to amend clause 4.1.1.3 in the Shoprite
Consent Agreement is dismissed;
1.3. The application for leave to amend the provisions of clause 4.1.2 in
the Shoprite Consent Agreement is dismissed.
1.4. The application for leave to amend the provisions of clause 4.1.3 in
the Shoprite Consent Agreement is granted by deleting the words
“the lapse of five years reckoned from 17 December 2019” and
replacing it with the words “31 December 2026”.
2. There is no order as to costs.
_______________________
MS MONDO MAZWAI
Mr Andreas Wessels and Prof. Imraan Valodia concurring
Tribunal Case Manager: Ms Mpumelelo Tshabalala
For the Applicant:
Adv Margaretha J Engelbrecht SC
Adv Claire F Avidon
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For the Respondent/Commission: Mr Bukhosibakhe Majenge
Ms Nelly Sakata
Mr Simphiwe Gumede