Competition Bureau Secures Court Orders in Probe of Grocery Giants' Property Controls

Federal Watchdog Escalates Grocery Sector Investigation

Canada's Competition Bureau is escalating its formal investigation into the country's grocery sector, securing court orders that compel two of the largest players, George Weston Limited (parent of Loblaw Companies Ltd.) and Empire Company Limited (parent of Sobeys Inc.), to hand over crucial documents. The Federal Court of Canada granted these orders as part of a probe into allegations that major grocers are actively hindering competition through restrictive land-use agreements, a practice that critics argue contributes to persistently high food prices for Canadians.

The investigation centers on the use of so-called "property controls" or "restrictive covenants." These are clauses embedded in lease agreements and property deeds that can prevent rival grocery stores or discount chains from opening in the same shopping plaza or even within a certain radius. The Bureau is examining whether these controls are being used systematically by dominant incumbents to create "food deserts" in some areas and maintain a stranglehold on the market, thereby limiting consumer choice and keeping prices artificially inflated.

In a statement, the Commissioner of Competition, Matthew Boswell, emphasized the importance of a competitive grocery landscape. "Higher grocery prices have had a significant impact on Canadians. We are doing everything in our power to ensure a more competitive grocery market in Canada," he stated. "This includes taking action to address practices that may be restricting competition in the grocery industry."

A History of Scrutiny and Public Pressure

This latest move is part of a broader, multi-faceted effort by the federal government to tackle food inflation, which has become a major political and economic issue. For months, politicians and consumer advocates have accused the major grocers of "greedflation"—using inflationary pressures as a cover to increase their profit margins at the expense of consumers. The grocery giants have consistently denied these claims, attributing price hikes to increased costs from suppliers, global supply chain disruptions, and transportation expenses.

The current probe follows a market study released by the Competition Bureau in June 2023, which concluded that Canada's grocery industry is highly concentrated and that increased competition is needed to help stabilize prices. That report recommended, among other things, that governments take action to limit the use of restrictive property controls. The current investigation moves beyond a study to a formal inquiry with legal powers to compel evidence.

The focus on property controls is a key element of the Competition Bureau's escalating probe into Canadian grocery giants. By limiting where competitors can operate, these clauses can effectively lock out new entrants, including international chains or independent grocers that could offer lower prices. The Bureau's investigation will seek to determine the extent of this practice and whether it constitutes an anti-competitive act under the Competition Act.

Industry Faces Pressure on Multiple Fronts

The grocery retailers are facing regulatory and legal challenges from various directions, not just on competition. The sector is also adapting to significant environmental regulations. For instance, the recent legal battle over single-use plastics has direct implications for grocery packaging and operations. The Federal Court of Appeal's decision to uphold Canada's single-use plastics ban means retailers must continue to navigate complex supply chain adjustments for items like checkout bags, straws, and cutlery, adding another layer of operational pressure on top of the competition inquiry.

The parent companies, George Weston and Empire, had initially resisted the Bureau's requests for information, arguing the demands were overly broad. However, the Federal Court's decision compels them to produce records and information related to their real estate holdings, lease agreements, and internal communications regarding property controls. This information will be critical for the Bureau to build a case if it finds that the law has been broken.

Potential Outcomes and Implications for Consumers

If the Competition Bureau finds sufficient evidence of anti-competitive behaviour, it can take the case to the Competition Tribunal. Potential remedies could include orders to cease the practice, the imposition of significant financial penalties, or even requirements to amend or nullify existing lease agreements containing such restrictive clauses. Such an outcome could dramatically reshape the commercial real estate landscape for retail and pave the way for more competition in the grocery sector.

For Canadian consumers, the stakes are high. A more competitive market could lead to more choice, innovation, and, most importantly, lower prices at the checkout counter. The investigation represents a critical test of the Competition Bureau's enhanced powers and the federal government's commitment to fostering a more competitive marketplace for essential goods. The findings, whatever they may be, will have lasting implications for Canada's corporate landscape and the wallets of every Canadian household.