Key Takeaways:
- Canada’s largest grocery stores, including Loblaws, Sobeys, and Metro, are using property controls to limit competition from other grocery stores, dollar stores, pharmacies, and gas stations.
- Property controls, also known as restrictive covenants or exclusivity clauses, are agreements between a landowner and a retailer that restrict what other businesses can operate on the property and what products they can sell.
- The use of property controls by grocery giants is criticized for limiting competition, leading to higher prices and reduced consumer choice.
- The Competition Bureau is investigating the use of property controls by grocery stores and has obtained court orders to advance its investigation.
- The Manitoba government has introduced legislation to stop property controls that prevent competitors from selling food near grocery giants.
Introduction to Property Controls
Canada’s biggest grocery giants, including Loblaws, Sobeys, and Metro, are using property law to control how other grocery stores, dollar stores, pharmacies, and gas stations can compete with them. An investigation by CBC’s Marketplace found that property controls, also known as restrictive covenants or exclusivity clauses, are common in the grocery sector. These agreements between a landowner and a retailer restrict what other businesses can operate on the property and what products they can sell. While property controls are not unusual, their use in the grocery sector is criticized for limiting competition and leading to higher prices.
The Scope of Property Controls
The scope of property controls varies significantly from property to property. Some contracts stipulate that the grocery giants cannot "unreasonably" withhold permission for competitors to open up or to sell food, while others explicitly grant them any and all discretion. For example, a Sobeys in Winnipeg has a property control that states no one can sell food on the same developer’s adjacent land unless Sobeys says so, and that permission can be withheld "unreasonably and arbitrarily." A Metro property control in Waterloo, Ontario, restricts what food products a Shoppers Drug Mart can sell in the same plaza and prohibits restaurants with a 50-seat capacity or more from opening within 61 meters of Metro’s store.
The Impact on Consumers
The use of property controls by grocery giants has a significant impact on consumers. Teresa Petrie, a shopper in Picton, Ontario, has noticed a steep increase in the cost of groceries in her hometown. After learning that both the No Frills and the Foodland she shops at have property controls banning anyone in their respective plazas from selling fresh food, she is concerned that a lack of competition is affecting her prices. "It’s not right," said Petrie. "Our society’s allowed this to happen and now everybody is paying for it." Petrie’s local Foodland controls not only who sells food near it, but also what food they can sell. The restrictive covenant states that the neighboring dollar store cannot sell "fresh or frozen food, including meats, fruits, vegetables, fish, poultry, bakery, pre-packaged bread, delicatessen, bulk food or dairy products."
The Criticism of Property Controls
Economist Jim Stanford, a grocery industry critic, argues that property controls are a "particularly egregious and incremental way that companies have taken advantage of consumers." Stanford says that grocery giants use property controls to limit competition and maintain their market power. "These are not mom-and-pop shops," said Stanford. "They are not subject to the same competitive constraints as firms in other industries." The Retail Council of Canada reports that Loblaws, Empire, and Metro own nearly 60% of the Canadian market share, making it difficult for smaller retailers to compete.
The Investigation and Response
The Competition Bureau is investigating the use of property controls by grocery stores and has obtained court orders to advance its investigation. Anthony Durocher, acting senior deputy commissioner at the Competition Bureau, told Marketplace that property controls "can deny consumers the benefits of competition including lower prices, greater choice and increased innovation." The Manitoba government has introduced legislation to stop property controls that prevent competitors from selling food near grocery giants. Premier Wab Kinew said that the newly registered controls will soon be reviewed by the government, and decisions will be made on an individual basis about whether they hold up. Loblaws said in a statement that eliminating property controls across the industry would "mean more stores, more discount options and a more competitive market for Canadians."
Conclusion and Future Actions
The use of property controls by grocery giants is a complex issue that affects consumers and smaller retailers. While the Competition Bureau and the Manitoba government are taking steps to address the issue, more needs to be done to ensure that consumers have access to competitive prices and a wide range of products. As Durocher said, "We really encourage all grocers to seriously consider their use of property controls and to review their practices to ensure that they are complying with the Competition Act." The federal government has granted the bureau expanded power to enforce the act, and it is "very much prioritizing" putting those tools to use. As the investigation continues, it is essential for consumers to be aware of the issue and to demand action from their governments to promote competition and fair prices in the grocery sector.