COVID-19 Block Exemption for the Banking and Retail Property Sectors

26 March 2020

COVID-19 Block Exemption for the Banking and Retail Property Sectors

The Minister of Trade and Industry after consultation with the Competition Commission has issued Regulation in terms of Section 10(10) read with Section 78(1) of the Competition Act. The purpose of these regulations are exempt certain categories of agreements or practices between banks, the Banking Association of South Africa  and/or the Payments Association of South Africa as well as categories of agreements or practices between retail tenants and landlords, from the application of Sections 4 and 5 of the Competition Act for the sole purpose of responding to COVID-19. These exemptions only apply to the agreements or practices that will be discussed below and specifically excludes any agreements in the banking and retail sector which seek to set prices.

Retail Sector Exemptions

Agreements or practices amongst and between designated retail tenants and retail property landlords with the sole purpose of ensuring the survival of tenants of retail properties during the COVID-19 pandemic , which are limited to agreements or practices in respect of payment holidays and/or rental discounts, limitations on evictions of tenants and/or the suspension or adjustment to lease agreement clauses that restrict the designated retail tenants from undertaking reasonable measures required to protect viability during the pandemic.

To qualify for an exemption, such agreements must extend to all South African retail tenants in the designated retail lines, including small, independent retailers, unless otherwise authorised by the Minister or the Competition Commission.

The designated retailers for purposes of these regulations include clothing, footwear and home textile retailers, personal care services, and restaurants.

Banking Sector Exemptions

The purpose of these exemptions is to:

  • Promote concerted conduct to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster.
  • Enable the banking sector to minimise the negative impact o the ability of customers, both business and private, to manage their finances during the national disaster and be in a position to continue normal operations beyond the national disaster; and
  • Enable the banking sector to manage banking infrastructure including the payment infrastructure, ATMs and branches.

The following practices are exempt for purposes of this Regulation:

Payment System

Agreements or practices with the sole purpose of ensuring essential payment systems continue to operate during the COVID-19 national disaster, which are limited to the development of industry monitoring, operational policies and contingency plans in respect of:

  • the continued availability of bank notes to ATMs, branches and businesses.
  • the continued provision of essential ATM, branch and corporate banking services.  
  • the continued provision of electronic payments systems.

Debtor and Credit Management

Agreements or practices with the sole purpose of ensuring the management of debtors and extension of credit continue during the COVID-19 national disaster, which are limited to the development of industry policies and monitoring in respect of:

  • payment holidays and debt relief for business and individual debtors subject to financial stress.
  • limitations set on asset repossessions of business and individual debtors subject to financial stress.  
  • the extension of credit lines to individuals and businesses subject to financial stress.

What these Exemptions Mean

These exemptions allow banks and retail property landlords to engage with one another to find potential avenues for limiting the effect of the COVID-19 pandemic on their relevant sectors without falling foul of the provisions of the Competition Act prohibiting collusion between competitors as well as a vertical integrated leverage its position. These exemptions only apply to the specific practices discussed above.