Canadian Competition Bureau Seeks Feedback on Competitor Property Controls: A Move to Enhance Commercial Real Estate Competition

The Canadian Competition Bureau is actively seeking input on its preliminary enforcement approach to competitor property controls—a move aimed at fostering greater competition within Canada’s commercial real estate sector.

What Are Competitor Property Controls?

Competitor property controls, such as exclusivity clauses and restrictive covenants, have been identified as potential barriers to competition, particularly in the retail industry. Exclusivity clauses prevent landlords from leasing space to competitors of existing tenants, while restrictive covenants limit how future owners can use commercial property. The Bureau is keen to ensure that these controls do not stifle market dynamics or restrict consumer choice.

Major Players Under Scrutiny

The Bureau’s investigation is currently targeting major players in the commercial real estate market, such as Empire Company Limited and George Weston, parent companies of Sobeys and Loblaws. These companies have been noted for using property controls that may hinder competition. The enforcement strategy involves invoking the abuse of dominance provisions under the Competition Act. If a property control is found to be anti-competitive, the Bureau may seek orders to prohibit its use and impose penalties.

Amendments to the Competition Act

Recent amendments to the Competition Act have broadened the Bureau’s scope to address agreements that lessen competition, even if they don’t involve direct competitors. Some of these changes are effective immediately, while others will take effect in December 2024.

Call for Feedback from Canadians

The Bureau is inviting feedback from Canadians—including tenants, lessors, and landowners—to help refine its enforcement approach. This consultation is crucial for balancing the needs of competition with legitimate business practices. Canadians can submit their feedback until October 7, 2024, through an online form, with submissions published on the Bureau’s website unless confidentiality is requested. The feedback will play a key role in helping the Bureau evaluate the competitive impact of property controls and shape its final enforcement strategy.

The Bureau’s Stance on Property Controls

The Bureau acknowledges that while property controls can sometimes be justified, such as in encouraging new market entries, they must be as limited as possible. Exclusivity clauses may be considered pro-competitive if they allow retailers to invest in new shopping plazas without immediate competition. However, restrictive covenants are typically viewed as exclusionary and long-lasting, creating areas devoid of competition and are rarely justified outside exceptional circumstances.

Adapting to an Evolving Commercial Real Estate Landscape

As the commercial real estate landscape continues to evolve, the Bureau has expressed its commitment to adapting its approach to ensure fair competition and protect consumer interests.

If you’re seeking assistance with buying, selling, or leasing commercial real estate, contact Steve Cecchetto from the KT Team.