(Ottawa) The Competition Bureau says it is investigating the use of restrictive real estate clauses in the Canadian food sector.
Deputy Commissioner Anthony Durocher told a House of Commons committee studying food prices that these measures, often called “property controls”, can pose a major barrier to market entry and expansion canadian.
“We are actively conducting an enforcement investigation in the food sector regarding the use of property controls,” Durocher told MPs on Thursday.
The Competition Bureau confirmed the investigation by email, emphasizing that there is no finding of wrongdoing at this time.
In the Bureau’s June 2023 report on competition in the grocery industry, it describes ownership controls as clauses added to a lease or deed that limit how real estate can be used by competitors .
This may include limiting the types of stores that can open in a shopping center or limiting the type of store allowed to open in that location after a tenant leaves the property.
For example, if a grocery store moves nearby, the ownership control clause could prevent a competitor from entering the old store. This could be a rival grocer or even a more specific business like a bakery.
The clause could also prevent other stores from selling similar products.
“The effect is that ultimately they may just make it more difficult for a competitor to enter the same space,” Associate Deputy Commissioner Bradley Callaghan said at the committee meeting.
“It could be the same shopping center, but it could also cover a wider geographic area. »
The Bureau’s report recommends that governments restrict the use of these clauses in the sector, saying they make it more difficult to open new supermarkets and can dampen competition.
Mr. Durocher indicated that recent amendments to the Competition Act have given the Bureau more tools to protect and promote competition, notably thanks to Bill C-56, which became law in December.
“The Bureau is committed to using the new tools made available through these modifications whenever necessary to protect competition,” maintained Mr. Durocher.
“We are encouraged to see that the Bureau is already seeking to use its new powers,” Audrey Champoux, spokesperson for the Minister of Industry, François-Philippe Champagne, said in an email.
“Canadians expect it and we are pleased to see they are acting quickly. »
The “bar will be high” for the office
Keldon Bester, executive director of the Canadian Antimonopoly Project, welcomed the announcement of an investigation by the Bureau.
“I’m glad to see the office moving quickly,” he said.
A key amendment to Bill C-56 expands the scope of the types of agreements the office can review, Bester said.
Previously, the Competition Act contained provisions prohibiting competitors from entering into agreements that could prevent or lessen competition in a market. Now, those provisions include agreements that don’t just involve two competitors, such as an agreement between a grocer and its owner, Mr. Bester said.
Land controls also make business consolidation more attractive as a means of growth, Bester said.
“If prime real estate is wrapped up in these types of deals, if a company wants to expand, they have an incentive to buy them out and reduce competition,” he said.
The bar will be high for the Bureau to prove that such clauses are widely used and that their widespread use harms competition, said Michael Osborne, chair of the Canadian competition department of law firm Cozen O’Connor.
“It’s not an easy argument to make, and it shouldn’t be,” he said.
“The Competition Bureau has yet to prove that, overall, this results in a substantial lessening or prevention of competition. »
Durocher told MPs that land controls can pose a barrier to both independent grocery stores and chains looking to expand, as well as foreign players looking to enter the Canadian market.
“That’s 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 groceries, because they can harm competition,” he said.
Minister Champagne recently said he was trying to attract foreign grocers to Canada in order to stimulate competition.
If the Bureau believes that ownership control agreements in Canadian grocery stores limit competition, it can make its findings public and communicate that these types of agreements are “no longer acceptable,” Bester said. And if the new changes to the law made by Bill C-59 are passed, the bill will also have the power to impose fines for such agreements.
But it would also be good for governments to pass legislation restricting such agreements, Bester added.
“What we really need to do in Canada, at a general level, is change the norm of the status quo,” he said. By doing this – and you need the law to do this – we can actually attract more competition from existing players. »