The Battle for Your Grocery Dollars: How Big Retailers Restrict Competition
The power play: Canada's largest grocery retailers are employing a strategic tactic to control the food retail landscape in your neighborhood, and it's a game-changer. CBC's Marketplace uncovers how these giants, such as Loblaws, Sobeys, and Metro, are using property law to dictate the terms of competition.
The strategy: Property controls, also known as restrictive covenants or exclusivity clauses, are agreements between landowners and retailers that limit the types of businesses and products allowed on a property. These deals incentivize retailers to set up shop, but they also create a barrier for other businesses to enter the market.
The controversy: While property controls are common across industries, their use in the grocery sector has sparked criticism. Economist and industry critic Jim Stanford argues that these giants have an unfair advantage, stating, "These are not your typical small businesses; they operate outside the usual competitive constraints." But here's where it gets controversial—are these practices anti-competitive, or just smart business?
Unveiling the secrets: Marketplace's investigation reveals a web of legal documents, hidden behind paywalls, containing property controls that vary widely from one location to the next. Some contracts give the giants the power to veto competitors' food sales, while others grant them complete discretion.
Case in point: A Sobeys store in Winnipeg showcases the impact of these controls. The attached property control forbids any food sales on adjacent land without Sobeys' consent, and this permission can be denied arbitrarily. Similarly, a Metro store in Waterloo restricts the food products sold by a nearby Shoppers Drug Mart and prohibits large restaurants from opening within 61 meters.
Denial and acknowledgment: Sobeys and Metro deny that property controls hinder competition, while Loblaws admitted last year that these controls restrict competition. However, Loblaws refuses to eliminate them unless other major retailers follow suit. Stanford explains, "It's a mutually beneficial arrangement for landowners and retailers, but consumers ultimately bear the cost."
The radius of control: When developers own vast tracts of land, property controls can extend up to a five-kilometer radius, preventing any retailer from selling fresh food within that area. This is the reality for Teresa Petrie, a resident of Picton, Ontario, who has witnessed soaring grocery prices. Both the No Frills and Foodland stores she frequents have property controls, banning fresh food sales in their plazas.
The impact on consumers: Petrie believes the lack of competition is driving up prices. "It's unfair," she says. "These practices affect everyone, and there should be laws to protect consumers." The Foodland store near Petrie not only controls nearby food sales but also dictates what products the neighboring dollar store can offer. The restrictive covenant even specifies that certain national brands cannot be sold as loss leaders.
The rising concern: Grocery prices have been outpacing inflation since the pandemic, prompting experts and governments to question Canada's competitive landscape. With Loblaw, Empire, and Metro owning nearly 60% of the market share, the Competition Bureau is investigating the use of property controls.
The legal battle: In 2024, the Competition Bureau obtained court orders to investigate Sobeys' and Loblaws' parent companies. They've negotiated with Loblaw and Empire to modify or remove property controls in Crowsnest Pass, Alberta, and Halifax. Anthony Durocher, from the Competition Bureau, warns that these controls can deprive consumers of lower prices, more choices, and innovation.
A provincial response: Manitoba took action by introducing the Property Controls for Grocery Stores and Supermarkets Act, requiring companies to register their controls or risk invalidation. Premier Wab Kinew believes these controls should be eliminated, stating, "I expect all property controls to be canceled eventually." Loblaws agrees that removing these controls would lead to more stores and a more competitive market.
The call for change: Shoppers like Petrie want government intervention to stop the giants' control. As the Competition Bureau's investigations continue, Durocher encourages grocers to reconsider their practices. But the question remains—are property controls a necessary evil for business growth, or a violation of fair competition? Share your thoughts in the comments, and let's spark a discussion on this complex issue.
