Probe into Property Controls Deepens as Bureau Seeks Court Order

The battle over grocery affordability in Canada has opened a new front, moving from checkout aisles to the fine print of real estate contracts. The Competition Bureau of Canada has launched a formal investigation into the use of so-called “property controls” by the country’s largest grocery chains. This probe targets long-standing industry practices that critics argue have created invisible walls around major supermarkets, effectively locking out competition and keeping prices artificially high for millions of Canadians.

At the heart of the investigation are restrictive covenants, clauses embedded in lease agreements and property deeds. These legal instruments, often referred to as property controls, are used by anchor tenants like a major grocery store to dictate what other businesses can operate within a specific shopping centre or on a particular parcel of land. In practice, a dominant grocer can use such a clause to prohibit another supermarket from opening in the same plaza or even in a nearby development. These restrictions can last for many years, sometimes decades, creating “food deserts” in some areas and limiting consumer choice in others.

Escalating Actions and Legal Maneuvers

The Competition Bureau’s concern is that these controls are not merely a standard business practice to protect investment, but a deliberate strategy to suppress competition. By preventing new entrants—whether they be independent grocers, discount chains, or international players—from gaining a foothold in established markets, the incumbent giants can maintain their market share and pricing power. This issue was a key finding in the Bureau's 2023 retail grocery market study, which identified property controls as a significant barrier to entry and expansion in the highly concentrated sector.

Frustrated by what it deemed a lack of voluntary cooperation, the Bureau has escalated its efforts. In a decisive step, the agency announced it was seeking a legal order from the Federal Court of Canada to force major grocers, including Loblaw parent George Weston Ltd. and Sobeys parent Empire Company Ltd., to hand over internal records. This move underscores the seriousness of the probe, as the Competition Bureau secures court order in probe of grocery giants' property controls to gather the necessary evidence to determine if these practices violate the Competition Act.

Connecting the Dots: Broader Competition Act Reform

This investigation is not occurring in a vacuum. It is a direct application of the federal government's broader push to modernize and strengthen Canada's competition laws. For years, experts have argued that the existing legislation was insufficient to tackle the sophisticated strategies employed by dominant firms in concentrated industries. The grocery sector, with its handful of powerful players, has become the poster child for these concerns.

The federal government's recent legislative changes, particularly through Bills C-56 and C-59, have aimed to give the Competition Bureau more teeth. The ongoing overhaul of the Competition Act is designed specifically to address issues like the ones at the centre of this probe. The amendments expand the Bureau's powers to investigate, challenge anti-competitive agreements, and address practices that harm consumers and smaller businesses. This investigation into property controls can be seen as one of the first major tests of the Bureau's enhanced mandate and the government's commitment to fostering a more competitive marketplace.

Industry Position and Potential Outcomes

For their part, the grocery companies have maintained that such property clauses are a normal and legal part of commercial real estate negotiations, intended to ensure a stable and predictable business environment for their significant capital investments. They often argue that these controls are necessary to secure the financing and long-term viability of a new store and the shopping centre it anchors. Representatives from the major chains have stated they are cooperating with the Bureau's inquiry.

The outcome of this investigation could have profound implications for Canada's retail landscape. If the Bureau finds that the use of property controls substantially prevents or lessens competition, it could take action before the Competition Tribunal. Potential remedies could include orders prohibiting the enforcement of existing restrictive covenants and banning their use in future agreements. Such a result would be a landmark victory for competition advocates and could pry open markets across the country, paving the way for new grocery stores and potentially lower prices. Conversely, if the grocers successfully defend their practices, it could highlight remaining limitations in the Competition Act, prompting further calls for legislative reform.

As the legal process unfolds, Canadians struggling with food inflation will be watching closely. The Competition Bureau's focus on the foundational, often-overlooked elements of market structure like real estate controls demonstrates a sophisticated approach to tackling a complex problem. Whether it leads to more choice at the checkout remains to be seen, but it has undeniably intensified the scrutiny on an industry facing unprecedented public and political pressure.