Reactions to more competitive supermarket lease agreements

Posted by Daniel Palmer on 21st September 2009

The ACCC agreement with Coles and Woolworths to get rid of restrictive shopping centre leases has been welcomed by leading industry players as a step toward a more competitive grocery sector. Outlined below are the reactions of prominent players:

ACCC

“This is a major breakthrough for grocery competition in Australia,” ACCC chairman, Graeme Samuel, said. “Reducing the barriers to entry for new and expanding players opens the possibility for Australian consumers to have greater choices in where to shop, and potentially pay lower prices as a result.”

“Over 700 supermarket leases were identified through the ACCC (Grocery Price Inquiry) investigation as potentially restrictive, and this agreement addresses all those existing leases involving Coles and Woolworths, as well as dealing with all future arrangements,” Mr Samuel added. “I welcome the co-operation of Coles and Woolworths in the development of this arrangement.”

Federal Minister for Competition Policy

“This pro-competitive agreement means that out of 750 active restrictive leases involving Coles and Woolworths, 602 will cease immediately,” Dr Craig Emerson said. “The remaining 20 per cent will be gone within five years and no restrictive provisions will be allowed in new stores.”

The “ground-breaking move” will open up shopping centre space for competitors such as Aldi, Franklins, Foodworks and IGA stores, he suggested.

Woolworths

“By taking this voluntary step, Woolworths is responsibly addressing ACCC concerns and desires to achieve pro-competitive structural reform across the industry,” the supermarket chain claimed in a statement. “Woolworths hopes all other supermarket operators will also work cooperatively with the ACCC to effect similar measures to adopt the same approach to their leases.”

Coles

Coles Managing Director Ian McLeod said that Coles had stated at last year’s ACCC Grocery Inquiry that it would be open to a review of lease arrangements.

“We think these changes are a common sense approach to take and is consistent with our position at the Grocery Inquiry last year,” Mr McLeod said. “We are pleased that a phased approach will be adopted for existing lease arrangements, which will allow a managed transition to the new arrangements under the voluntary undertaking.”

Aldi

Matthew Barnes, ALDI Managing Director Buying, says it represents a major step forward in removing an anti-competitive practice from the Australian supermarket landscape.

“Restrictive provisions in supermarket leases have been one of the most significant barriers to our ability to expand the ALDI network here in Australia,” he explained. “Our submission to the ACCC last year highlighted this issue and the subsequent effect of depriving Australian consumers of greater choice and lower prices for their groceries.”

ARA

The Australian Retailers Association, which represents over 5,000 independent and national retailers (but not Coles nor Woolworths), echoed similar sentiments to Aldi, believing it to be a long overdue move.

“An open retail market free from restrictive and anti-competitive leasing arrangements provides greater choice for consumers in regards to product and price in one location,” Executive Director Russell Zimmerman said. “Today’s announcement allows new entrants to Australia’s supermarket and grocery sector, including ALDI, to take out leases in shopping centres where they have previously been excluded.”

“The ARA now calls on the Rudd Government, COAG and the ACCC to support harmonised lease legislation across all states to allow equal and fair access to shop space on competitive terms for all retailers.”