Canada’s Competition Bureau has followed up on its two-year-old campaign to reduce property-control stipulations that aim to prevent competing stores from opening within the same shopping centre.
The agency has issued new guidance urging that retail companies only ask for property controls when they enhance competition.
A property control usually takes the form of a lease clause inserted by tenants that bans the same sorts of retailers from opening at properties where they have an outlet. One common example is a grocery store that demands legal guarantees preventing the landlord from leasing space in the same mall or shopping centre to another grocery store.
Last fall, the Competition Bureau launched an investigation into the Sobeys and Loblaw grocery store chains to determine if restrictions the companies imposed through their leases have the possibility of restricting competition. The agency said at the time that such property controls could lead to a situation where “consumers may be denied the benefits of competition, including lower prices, better quality and more choice."
The Competition Bureau announced some success this year when Empire Company Ltd., owner of the Sobeys chain, agreed to remove a property control that restricted retail grocery store competition in Crowsnest Pass, Alberta, a town of about 6,000 residents, roughly two-and-a-half hours south of Calgary.
The Competition Bureau campaign is part of a larger effort to encourage more grocery store chains to come to Canada. Loblaws, Sobeys and Metro, sometimes known as the Big Three, control almost two-thirds of the country's market.
Law firm Blake, Cassels & Graydon said one major takeaway for consideration from the guidelines is whether a property control, regardless of whether it has an anti-competitive purpose, is likely to prevent or lessen competition substantially.
"The competition law assessment is therefore highly fact dependent, and parties that may have market power should exercise caution," said the law firm in a published analysis.
Blake also noted that the Competition Bureau recognizes that property controls can be pro-competitive by incentivizing entry or investment, and that involved parties should clearly document any rationales along these lines.
From a purely practical perspective, the undertaking to eliminate the property controls might not make much difference in many cases, according to the head of one retail real estate investment trust.
"We're not going to build two grocery stores in the same development," said Michael Zakuta, CEO of Montreal-based Plaza REIT, in an interview with CoStar News last year. "If you have one grocer, you won't look for another grocer, because one, you don't need it, and two, it's not going to work."