Federal Watchdog Sues Grocery Giants Over Alleged Anti-Competitive Land Use

Canada's Competition Bureau has launched a major legal challenge against two of the country's largest grocery retailers, Loblaw Companies Ltd. and Empire Company Ltd., arguing that their long-standing use of restrictive land controls stifles competition and harms consumers. In an application filed with the Competition Tribunal, the federal watchdog is seeking to end the practice of so-called 'restrictive covenants' which it claims are used to block or delay new grocery stores from opening, thereby limiting choice and keeping food prices high.

The core of the Bureau's case centres on property controls, also known as restrictive covenants, which are clauses embedded in lease agreements and property deeds. These clauses can prevent other potential tenants—specifically rival supermarkets—from operating in the same shopping plaza or on land that has been sold. The Bureau alleges that Loblaw and Empire, which operates Sobeys, have systematically used these controls to create and maintain local monopolies, making it exceedingly difficult for new entrants or independent grocers to establish a foothold in many Canadian communities. The restrictions can last for decades, effectively locking down prime retail locations.

Matthew Boswell, the Commissioner of Competition, stated that this practice is a key factor in limiting competition within the grocery sector. "Forcing a new grocer to build a new store or find a location outside of an existing shopping centre can be so expensive that it prevents them from opening in a neighbourhood altogether," the Bureau noted in a statement. The legal action specifically highlights the Halifax Regional Municipality as a case study, where the Bureau claims these property controls have had a tangible negative impact on consumer choice and prices.

A Concentrated Market Under Scrutiny

This legal action does not exist in a vacuum. It is the latest and one of the most direct steps taken by the federal government to address mounting public and political pressure over food affordability and the concentration of power within Canada's grocery industry. The sector is dominated by a handful of major players, with Loblaws, Sobeys, and Metro controlling a significant majority of the market share. This concentration has led to accusations of 'greedflation' and calls for greater oversight.

Over the past two years, grocery executives have been called before parliamentary committees to defend their pricing strategies and profit margins amidst record food inflation. While the companies have consistently maintained that rising costs from suppliers, not excessive profits, are the primary driver of higher shelf prices, public skepticism remains high. The Bureau's lawsuit targets a structural element of the market that critics have long pointed to as a barrier to entry. As detailed in other reports, the Competition Bureau challenges grocery giants on multiple fronts, but these land controls are seen as a foundational issue preventing a more dynamic marketplace.

In response to the allegations, both Loblaw and Empire have stated that such property clauses are a common and legal practice in the commercial real estate industry across North America, not just in the grocery sector. They argue these controls are necessary to justify the significant capital investments required to build and operate large-format stores. The companies contend that these clauses provide business certainty and are not intended to be anti-competitive. They are expected to vigorously defend their practices before the Competition Tribunal.

The Legal Path Forward

The case will be heard by the Competition Tribunal, a specialized quasi-judicial body that adjudicates cases brought forward by the Competition Bureau under the Competition Act. The Bureau is arguing that the use of these restrictive covenants constitutes an abuse of dominant market position and substantially lessens competition. If the Tribunal sides with the Bureau, it has the power to issue an order prohibiting Loblaw and Empire from enforcing existing restrictive covenants and from entering into new ones in the future.

Such a ruling would be a landmark decision with the potential to reshape the landscape of Canadian retail. By removing these long-standing barriers, the decision could pave the way for independent grocers and international chains like Aldi or Lidl—which have so far been hesitant to enter the Canadian market—to find viable locations more easily. Proponents of the Bureau's action believe this would inject much-needed competition into the sector, which could eventually lead to lower prices and more innovation. The specifics of the legal filing confirm that the Competition Bureau sues grocery giants over restrictive land controls in a targeted effort to change market dynamics fundamentally.

The proceedings are expected to be lengthy and complex, involving detailed economic analysis and extensive legal arguments. The outcome will be closely watched by consumers, industry players, and policymakers as a critical test of the Competition Act's effectiveness in promoting a fair and competitive marketplace for all Canadians.