The Australian Competition and Consumer Commission (ACCC) and the country's federal government are looking to eradicate restrictive lease agreements that prevent more than one supermarket chain operating in a shopping centre.

Last year, the Grocery Price Inquiry established that restrictive covenants were rife, with over 700 potentially violating the Trade Practices Act. The leases allowed major chains to have a guarantee that they would have a shopping centre to themselves for as many as 40 years, or receive a substantial discount in rent if a competitor was allowed to operate.

ACCC chairman Graeme Samuel said that the competition watchdog was hoping to receive cooperation from Coles and Woolworths in removing the covenants and they will contemplate prosecution if the majors do not comply.

"We regard this as the single most important finding under the grocery inquiry," he said, according to AAP. "This was something that hadn't been on the radar screen in the past, but it became evident that this was a significant inhibition on competitors expanding into the marketplace."

"[The ACCC response] depends on the reaction of Coles and Woolies and landlords - the landlords are as complicit in this - we need to be addressing both of them," Samuel added. "Our preference would be to have this matter resolved quickly, very expediently."

"But if we've got anti-competitive arrangements that can't be dealt with in a satisfactory manner and that are preventing competition thriving in the supermarket sector, then our final resort will be to go to court and to prosecute."

The Minister for Competition and Consumer Affairs, Dr Craig Emerson, reported that the federal government would work with the competition regulator and the states in a bid to ban the restrictive covenants.

Australian Food News is Australia's leading resource for the food industry, delivering daily news from the grocery, retail and hospitality sectors to 40,000 professionals each month. http://www.ausfoodnews.com.au/