The Competition Bureau is investigating the use of restrictive real estate clauses in the Canadian grocery sector.
Deputy commissioner Anthony Durocher told a House of Commons committee studying food prices that these measures, often called “property controls,” can be a major barrier to entry and expansion in the Canadian marketplace.
“We are actively pursuing an enforcement investigation in the grocery sector relating to the use of property controls,” Durocher told MPs.
The Competition Bureau confirmed the investigation via email, noting there’s no conclusion of wrongdoing at this time.
In the Bureau’s June 2023 report on competition in the grocery sector, it described property controls as clauses added to a lease or deed that limit how real estate can be used by competitors.
This can include limiting the kinds of stores that can open in a mall, or limiting the kind of store that’s allowed to open in that location after a tenant leaves the property.
For example, if a grocery store is moving to a nearby location, the property control clause could prevent a competitor from entering the old store.
“The effect is they can ultimately just make it harder for a competitor to get into the same space,” explained associate deputy commissioner Bradley Callaghan at the committee meeting.
“It could be the same commercial mall, but it also could cover a wider geographic area.”
The Bureau’s report recommended that governments limit use of the clauses in the sector, saying they make it harder for new supermarkets to open, and can curb competition.
Durocher said that recent amendments to the Competition Act have given the Bureau more tools to protect and promote competition.
These changes came into effect in December.
“The Bureau is committed to using the new tools made available through these amendments wherever necessary to protect competition,” said Durocher.
Durocher said property controls can be an obstacle both for independent grocery stores and chains looking to expand, as well as for foreign players to enter the Canadian market.
“That is why one of our recommendations in the report, and this is something that a number of other countries have done, is to consider limiting their use or banning them altogether in the grocery sector, because they can be harmful to competition,” he said.
Industry Minister Francois-Philippe Champagne recently said he’s been trying to attract foreign grocers to enter Canada as a way of boosting competition.