Do Malls Have Any Business Getting Into Retail?

February 16, 2021

Vertical integration — apparel retailers that make their own merchandise, farmers that sell their own produce, malls that own their own tenants — can be an efficient way to run a business, with benefits for owners and customers alike. Or it can be harmful, if the setup pushes out rivals, leaving consumers with fewer choices and higher prices.

Whether vertical integration spills into antitrust territory depends on whether it adds up to behavior that stifles competition and harms the consumer, according to Alon Kapen, a partner at law firm Farrell Fritz. There are two potentially problematic scenarios when it comes to mall ownership of retailers.

One would be the mall granting its own retailers leases that are more favorable than what its other tenants must sign. The second would be if the mall shuts down a retailer’s stores in rival malls. The latter could be quite harmful to a competing mall, especially if the retailer is an anchor. But to be an antitrust issue, the injured mall would have to show that it was consumers who ultimately suffered.

“In this market, under these circumstances, maybe it’s more of a concern from an antitrust standpoint, because you may eliminate a rival, in this case another mall,” Kapen said by phone. “If a mall is eliminated, then the surviving mall may raise prices. But antitrust is not in the business of saving competitors.”

Then again, malls aren’t usually in the business of saving tenants.

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  • Related Practice Areas: Corporate, Emerging Companies & Venture Capital
  • Featured Attorneys: Alon Y. Kapen
  • Publications: Retail Dive