The announcement by Federal Competition Minister, Craig Emerson, that Aldi, Franklins, SPAR, Foodworks and Metcash have agreed not to enter into new shopping centre leases with restrictive clauses is just more window dressing by the Federal Government, writes Frank Zumbo. 

A further agreement struck with the Australian Competition and Consumer Commission that these supermarkets will not, in relation to existing leases, enforce restrictive lease clauses beyond the first five years of the start of trading means that existing restrictive lease clauses can still continue to operate. That's bad news for competition and consumers and represents another missed opportunity to rid the supermarket sector of all restrictive clauses in shopping centres leases.

The Federal Government and the ACCC have previously missed a golden opportunity to remove all restrictive clauses in shopping centre leases involving Coles and Woolworths. Again, that's bad news for consumers as any restriction on competition prevents competitors from taking on Coles and Woolworths in the shopping centre.

Restrictive clauses in shopping centre leases raise serious competition issues and should have all been removed immediately. In relation to Coles and Woolworths, only 80 per cent of the restrictive clauses in shopping centre leases were targeted. There are still upwards of 20 per cent of these restrictive clauses remaining in relation to Coles and Woolworths. While the remaining restrictive clauses should be progressively phased out within the next few years, those remaining clauses continue to operate to prevent competitors coming into shopping centres to compete with Coles and Woolworths.

Removing restrictive lease clauses, however, is only part of the picture. Removing these clauses will do nothing to increase competition in shopping centres where the shopping centre landlord does not make space available in the centre for additional supermarket competitors. Unless independent supermarkets can get new space in shopping centres, they can't take on Coles and Woolworths in those shopping centres.

Similarly, the removal of restrictive lease clauses in relation to Aldi, Franklins, SPAR, Foodworks and Metcash will equally be of no use where the shopping centre landlord does not make new space available in a shopping centre for additional supermarket competitors.

The simple reality is that consumers can't switch to another supermarket if that other supermarket is not allowed to open up in the shopping centre. Removing restrictive clauses will do nothing for competition if new supermarket competitors can't get into existing shopping centres.

Until all restrictive lease clauses are removed and until additional supermarket competitors are allowed to open up in shopping centres around the country, the Federal Government will only be fiddling around the edges and failing to tackle the underlying problem in the Australian supermarket sector and that's the dominance of Coles and Woolworths.

Frank Zumbo is an Associate Professor within the School of Business Law and Taxation at the University of New South Wales. Frank has been a tireless consumer advocate and is one of Australia’s leading commentators on competition, consumer and franchising law.