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Shoprite takes legal action against Walmart

by , 16 October 2013

In a bid to tackle competitor Walmart, Shoprite is turning to exclusivity clauses in its leases with shopping malls. This step to fight the competition saw Shoprite file a suit with the Western Cape High Court. Let's take a closer look at what's going on...

Shoprite is fighting off Walmart with “an interesting weapon,” reports BDLive. The South African grocer is resorting to “exclusivity clauses commonly included in shopping mall lease agreements”.

Shoprite's legal challenge concerns the “Massmart Game store in the CapeGate centre,” says Fin24. The interdict that Shoprite filed at the Western Cape High Court says this store directly competes “against its outlet in the same mall”.

Hyprop Investments, the landlord of the mall, “allows Shoprite to operate as the sole supermarket, grocery store and liquor store,” says the SABC. Last month, “Massmart's Game brand rolled out its Foodco business at the mall. This part of the business “introduces a wider food range”.

Exclusivity clauses found in leases are to entice big brands

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The clauses contained in the lease “are not uncommon,” notes BDLive. The idea behind them is to entice brands to the mall so that the companies have “the assurance of limited competition”. This allows the tenant a better chance of being “profitable from the outset”.

Brian Leroni, the corporate affairs executive for Massmart, says that the move by Shoprite is “an attempt to stifle legitimate competition by Game,” says Fin24. Massmart believes that this is “prejudicial to South African consumers”.

Massmart have referred the matter to the Competition Commission for them to investigate it further, adds Fin24.

In the papers it filed with the court, Shoprite says “there was 'little doubt' it would lose sales and suffer financial loss if Game” was allowed to trade in the same goods as it was, reports BDLive.

Looks like we will have to wait and see what the Competition Commission says after its investigation.




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