Woolworths Ltd and Coles, Australia's two largest retailers, have agreed to end "restrictive provisions" in the leases for their supermarkets, the country's competition watchdog said today (18 September).

After weeks of talks with the Australian Competition and Consumer Commission, the two companies said they would put a halt to practices that, the watchdog claimed, prevented competing stores from entering shopping centres where Woolworths or Coles were based.

"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."

In the ACCC's inquiry into Australia's grocery sector last year, the watchdog identified tenancy agreements between Woolworths and Coles and their shopping centre landlords that may have prevented space being leased to other chains.

"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," Samuel said.

"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."

Woolworths said it hoped all supermarket chains in Australia would sign up to similar agreements with the ACCC.

"Woolworths is aware that such terms are also present in the lease agreements of other
supermarket chains, as it has inherited a number of similar leases as a result of previous
store acquisitions," the retailer said. 

"By taking this voluntary step, Woolworths is responsibly addressing ACCC concerns and desires to achieve pro-competitive structural reform across the industry."