Canada's grocery giants are quietly wielding power over your local food scene, and it's time to shed light on this hidden monopoly. How? Through the strategic use of property law.
An eye-opening investigation by CBC's Marketplace reveals that major players like Loblaws, Sobeys, and Metro employ property controls to dictate the fate of nearby grocery stores, dollar stores, pharmacies, and gas stations. These controls are agreements between landowners and retailers, restricting the types of businesses and products allowed on the property, all to gain an edge over competitors.
But here's the twist: these legal tactics, known as restrictive covenants or exclusivity clauses, are not unique to the grocery industry. They're prevalent across sectors, like limiting the number of dental practices in a plaza. However, their use in the grocery sector has sparked controversy.
Economist and industry critic Jim Stanford emphasizes, "These giants aren't your typical mom-and-pop shops. They play by different rules, shielded from the competitive pressures faced by other industries."
Marketplace uncovered a web of legal documents, hidden behind paywalls, revealing property controls lurking in lease agreements and even registered on property titles. The terms vary widely, with some contracts allowing giants to veto competitors' plans unreasonably, while others grant them absolute discretion.
For instance, a Sobeys in Winnipeg forbids anyone on the developer's adjacent land from selling food without their consent, and they can withhold permission arbitrarily. In Waterloo, a Metro property control restricts the food products a Shoppers Drug Mart can offer and prohibits large restaurants from opening nearby.
While Metro and Sobeys deny property controls hinder competition, Loblaws admitted last year that these controls do restrict competition but refused to eliminate them unless other major retailers followed suit. Stanford explains, "It's a win-win for landowners and retailers, but consumers bear the brunt."
In some cases, property controls extend to vast areas, preventing retailers within a five-kilometer radius from selling fresh food. This affects places like Teresa Petrie's hometown in Picton, Ontario, where grocery prices are soaring. Petrie believes the lack of competition due to property controls is to blame.
The local Foodland in Picton not only controls nearby food sales but also dictates what a neighboring dollar store can sell. The restrictive covenant bans the sale of fresh and frozen food, meats, fruits, vegetables, and more. While soft drinks and non-perishable items are allowed, the dollar store can't use big brands as loss leaders, selling them below cost to attract customers.
And this is where it gets controversial: Grocery prices have been skyrocketing since the pandemic, outpacing inflation. Experts and governments question Canada's competition landscape, especially after years of mergers and acquisitions. Loblaw, Empire, and Metro now dominate nearly 60% of the market.
Stanford argues that property controls are just one tool in the giants' arsenal, stating, "They're blatantly exploiting consumers with these tactics." Federal hearings in 2023 aimed to address rising grocery prices, calling on grocery CEOs for answers.
Michael Medline, Empire's CEO, assured lawmakers that they were working to contain price increases, citing slim profit margins. Yet, the narrative for shareholders was different. Sobeys boasted of solid results and Metro celebrated surpassing $1 billion in net earnings.
Loblaw, during a stakeholder call, highlighted strong performance and billions in revenue and earnings. Despite this, they maintain that grocery profit margins are among the lowest compared to other sectors.
Stanford challenges this, pointing out that grocery margins are not low when compared to similar retail industries that don't manufacture their products. He calls their claims of low profitability a farce, contrasting it with their boasts to investors about profitability.
The Competition Bureau is now investigating, obtaining court orders to probe property controls by Sobeys and Loblaws' parent companies. They've negotiated modifications in Crowsnest Pass, Alberta, and Halifax, but the battle isn't over.
Anthony Durocher of the Competition Bureau warns that property controls can deprive consumers of lower prices, more choices, and innovation. He highlights the grocery sector's consolidation and the daily impact on shoppers.
Manitoba took a stand, introducing the first-of-its-kind legislation in Canada, requiring grocery companies to register their property controls or face invalidation. Premier Wab Kinew believes these controls should be abolished, expecting all of them to be canceled eventually.
The policy has already made an impact, with 23 controls, including some from Loblaw, canceled due to non-registration. Empire, however, sought exemptions for many of its stores.
Kinew advocates for a bipartisan approach, stating, "Breaking down property controls benefits everyone." Loblaws agrees, suggesting that eliminating controls industry-wide would foster more competition and options for Canadians.
They've released 150 controls nationwide and are willing to do more if other retailers follow. Metro declined to comment, and Empire remained silent despite repeated requests.
Consumers like Petrie demand government intervention to curb the giants' power. Federal Minister Melanie Joly promises ongoing monitoring to ensure grocery competition. As the Competition Bureau's investigations unfold, the fate of Canada's grocery landscape hangs in the balance.
What do you think? Should property controls be abolished to foster fair competition, or is this a necessary strategy for retailers? Share your thoughts and let's spark a conversation!
