CA Probes the State of Competition in Shopping Malls

The Competition Authority is conducting a market inquiry to assess the state, nature and form of competition in the retail property market (shopping malls). Botswana has in the past few years seen the proliferation of shopping malls, in line with global trends in which customers are provided with one-stop shopping areas in aesthetically appealing structures that bring together different types of stores.

The current market study comes as a result of a number of complaints to the Authority about some anti-competitive elements in Botswana’s shopping malls. In fact, the Authority intervened in a case at Molapo Crossing Shopping Mall in Gaborone which revealed the existence of an anti-competitive exclusive agreement between the shopping mall owner and the anchor tenant.  The Authority was motivated to conduct a nationwide inquiry into the retail property market, to ascertain how agreements relating to leasing of the space are done, as per section 49 of the Competition Act.

The Molapo Crossing inquiry indicated the existence of an exclusive agreement between the shopping mall owner and the Anchor tenant, Pick n’ Pay, which restricted free competition within the mall by foreclosing the upstream market and eliminating effective access of actual or potential competitors. This created a barrier to entry for any competitor who would have wished to enter the said market and possibly compete with the anchor tenant. Following the removal of these provisions upon the Authority’s intervention, that specific market was opened up to free and fair competition.

Typically contracts between the anchor tenants and shopping mall developers tend to lean on provisions which are exclusionary, which in effect have a tendency to stipulate which businesses cannot be given space in the said mall. The signing of contracts is deemed necessary for the financial stability of shopping mall projects, and to draw retail traffic that would result in visits to the smaller stores in the mall as well. Anchor tenants in the shopping malls have the potential to deprive other enterprises from setting up competing businesses in the mall, which is a breach of competition law. 

During the development of most shopping malls in Botswana, the Competition Law was not yet in place to encourage competition within these structures. Anchor tenants in Botswana are usually the large retail chain stores such as Pick n’ Pay, Choppies, Spar and Shoprite.

The inquiry will seek to establish among other things; the number of shopping malls and anchor tenants across the country, the process by which shopping mall tenants are awarded space, how shopping mall rentals are set, the number of shops existing in the shopping malls competing with anchor tenants, as well as competition complaints or concerns that exist in the market. It is expected to help redress competition issues that may exist in the retail property market.

The inquiry is being conducted in Gaborone, Francistown, Selebi - Phikwe, Maun, Palapye, Jwaneng, Serowe, Kanye, Mochudi, Kasane, Ghanzi, Ramotswa, Molepolole, Lobatse, Mogoditshane. The Competition Authority is currently analysing data from the shopping malls inquiry.