Supermarkets agree to phase out leases

Supermarkets agree to phase out leases
February 8, 2010 - 4:59PM


More supermarket retailers have promised the competition watchdog to end a practice that prevents rivals from opening in the same shopping centre.

Aldi Foods Pty Ltd, Franklins Pty Ltd, SPAR Australia Ltd, Australian United Retailers Ltd and Metcash Ltd have agreed with the Australian Competition and Consumer Commission (ACCC) that they will not enter into any new leasing agreements with restrictive provisions.

In the case of existing leases, the supermarket groups will not enforce any restrictive provisions beyond five years after the commencement of trading.

"These further agreements with the next tier of supermarket operators mean that many more shopping centres will no longer be hamstrung by restrictive provisions in leases that prevent or hinder the entry of competing supermarkets," ACCC chairman Graeme Samuel said in a statement on Monday.

The pact between the ACCC and the five groups follows similar agreements with Wesfarmers Ltd owned Coles and Woolworths Ltd in September last year.

The two retail giants promised the ACCC they would no longer insert restrictive provisions into their supermarket leases, and 80 per cent of shopping centre deals favouring the two companies were abolished.

FW Holst retail analyst David Spry said consumers would benefit from the agreements and there would be no major effect on any retailer's profitability.

"I don't think it would have a major impact on profitability as I see it," Mr Spry said.

"I suppose the only time it may, if it came close to one of the better performing stores and took a little bit of the cream off that in each individual store.

"Overall, on a group basis, it probably won't be material," Mr Spry said.

"It's a win for the consumers, there's no question about that."

The agreements reached with Coles and Woolworths are in the form of court-enforceable undertakings that have been voluntarily provided.