Grocery store property controls should not be wiped out, says the head of the Canadian Federation of Independent Grocers.

Gary Sands, senior vice-president of the federation, made his comments to the Canadian Press.

“We believe there are reasonable circumstances for restrictive covenants,” Sands told CP. “But there’s others where they’re completely unreasonable and they’re not necessary, and they’re not good for the industry, and they’re not good for competition, and they’re not good for the consumer.”

Sands emphasized that his organization support a review of these practices but opposes an outright ban.

His comments came after Loblaw CEO Per Bank, in an op-ed column in The Globe and Mail, called for the elimination of all commercial property controls. Bank argued that strong competition benefits consumers, pushing for industry-wide rejection of property controls to support a more competitive market.

The debate stems from a Competition Bureau investigation into whether these controls restrict competition in the grocery industry.

Restrictive covenants, or property controls, are common in grocery, retail, and food service sectors, especially in shopping centres. These clauses prevent a tenant’s competitors from operating in the same location, Lisa Hutcheson, a retail strategist with J.C. Williams Group, told CP.

She stated that property controls often add value by creating a unique mix of tenants but agreed that a review of these controls is timely.

Hutcheson believes removing property controls wouldn’t significantly alter the landscape, as businesses would still carefully select locations to avoid oversaturation.

“But the grocers’ new tack may be ‘what the customer wants to hear,’” she remarked.

In June 2023, the Competition Bureau recommended limiting the use of property controls in the grocery industry to help new supermarkets enter the market and boost competition.

Bank countered claims that Canadian grocers are profiting excessively from inflation-driven price hikes, calling it a “false narrative.” He attributed high food prices to global factors such as supply-chain issues, climate change, and geopolitical instability, noting that grocers in Canada maintain lower profit margins than other major economic sectors.

The Competition Bureau’s ongoing investigation involves examining instances where property controls may have blocked other grocers from opening stores or restricted specific food product sales. In June 2024, the bureau obtained court orders requiring parent companies of Loblaw and Sobeys to submit information relevant to the probe, though it has yet to conclude any wrongdoing.

Sobeys’ parent company, Empire, previously challenged the investigation, arguing that it compromises the bureau’s independence, CP.

In the wake of Bank’s column, Empire CEO Michael Medline said the company will support the elimination of all property controls. But it’s up to government to make that decision, he said in a statement issued to CP, Canadian Grocer and other media outlets.

“Empire would be pleased to see government eliminate real estate exclusivity clauses, across all retail businesses, including those selling food or pharmacy-related products,” he said in the statement.

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