Property controls may be restricting new store openings and market competition
The Competition Bureau is taking a closer look at real estate clauses used by grocery chains in Canada, raising concerns about their potential impact on competition.
The Bureau is specifically investigating whether these property controls, often included in leases or deeds, are preventing other retailers from opening nearby stores or selling certain products.
These restrictive clauses, commonly used by major grocers like Sobeys and Loblaw, allow a grocery store to limit what type of business can move into a location after they leave. For example, if a grocery store relocates, the clause could prevent a competitor or even a bakery or specialty food retailer from setting up in the same space.
The Bureau's investigation, launched earlier this year, is part of its ongoing efforts to ensure fair competition in the grocery sector. It obtained court orders to advance its investigations into the use of these property controls by Sobeys and Loblaw, but no conclusions have been reached so far.
“Property controls may shield grocery stores from competition by preventing businesses from opening a retail food store or by limiting the products competitors can sell,” the Bureau said in a statement. This, in turn, could reduce competition, leading to higher prices and fewer choices for consumers.
The regulator has asked grocery retailers and real estate professionals to share any information about how these clauses have affected their ability to operate or expand. The Bureau is particularly interested in hearing from anyone who has experienced restrictions that have prevented them from opening a store or selling specific products. This includes both domestic and international grocers and other food retailers who have encountered these property controls in Canada.
Concerns about the use of these clauses have been raised by the Public Interest Advocacy Centre, which found that restrictive covenants could contribute to the creation of "food deserts"—areas where communities are left with little access to fresh food because grocery stores are unable to open nearby.
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While these clauses may offer some protection for landlords and grocery stores, they also raise concerns about limiting market competition. The Bureau's investigation will weigh the benefits and drawbacks of these practices to determine their overall impact on the grocery sector and consumers.
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