Exclusivity clauses contained commercial property lease agreements are increasingly being scrutinised by the competition authorities.

Exclusivity clauses in leases generally restrict a landlord's freedom to let other units in its building. This restriction might be framed by reference to a type of tenant (for instance, the landlord might promise not to let any other units in its shopping centre to direct competitors of a current tenant) or by reference to a number of named companies (usually competitors of the tenant in question). Two recent matters involving the competition authorities and exclusivity clauses in leases are:

• the merger involving the Mergence Africa Property Investment Trust, four retail properties and the leasehold rights to two letting properties. In this matter, the Competition Commission was concerned that the exclusivity clauses in favour of Shoprite in the lease agreements in respect of two of the properties could prevent small and medium sized enterprises (SMEs) from operating in the centres. The Commission approved the proposed transaction on condition that the exclusivity clauses be removed within 180 days of the merger being approved; and
• the dispute between Shoprite and Massmart in terms of which Shoprite's exclusivity clause in a lease prevents Massmart from extending its existing offering to include food at a particular mall. The Cape High Court granted an interdict against Massmart to stop it from expanding its product offering to include food at the mall. Massmart has since referred the issue to the Commission for determination. It remains to be seen whether Massmart will succeed in its attempt to challenge the exclusivity clause, notwithstanding the fact that Massmart is not a SME. This matter is on-going.