The Australian Competition and Consumer Commission (ACCC) has reached an agreement with Coles and Woolworths to change the way lease agreements with shopping centre landlords are managed.
Both companies have agreed that they will not include restrictive provisions in any new supermarket leases, and in the case of existing supermarket leases, they will not enforce restrictive provisions after a store has been open for five years.
This phasing out in the case of current leases takes account of commercial arrangements and rental contracts already in place.
"This is a major breakthrough for grocery competition in Australia," said ACCC chairman, Graeme Samuel.
"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."
During its Grocery Inquiry in 2008, the ACCC identified a practice where supermarket operators would include tenancy terms which may have prevented shopping centre managers leasing space to any competing supermarkets. This had the potential to impose restrictions on the number of supermarket outlets in centres and consequently fewer options for consumers.
"Over 700 supermarket leases were identified through the ACCC investigation as potentially restrictive, and this agreement addresses all those existing leases involving Coles and Woolworths, as well as dealing with all future arrangements…," said Samuel.
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,” said McLeod.
“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.”
The agreement is in the form of a court enforceable undertaking that has been voluntarily provided by Coles and Woolworths.
"Phasing out restrictive provisions in supermarket shopping centre leases is an important step. Another is governments revising the regime of planning laws in order to maximise competition for the benefit of consumers,” said Samuel.
"There are a number of other supermarket operators not covered by these agreements, and the ACCC will now enter into discussions with a view to them adopting the same approach in their leases.
"We will also be talking to shopping centre landlords to ensure a smooth transition."