How grocery giants control who can sell food in your neighbourhood

Canada’s biggest grocery giants — including Loblaws, Sobeys and Metro — are using property law to control how other grocery stores, dollar stores, pharmacies and gas stations can compete with them, an investigation by CBC’s Marketplace has found.

Property controls are deals made between a land owner and a retailer that restrict what other kinds of businesses can operate on the property and what the competitors are able to sell. The terms are negotiated to incentivize the retailer to open their store on the land.

Known in legal terms as restrictive covenants or exclusivity clauses, property controls are common across industries. In a plaza, for example, they could limit the number of veterinary offices or dental practices. While they aren’t unusual, there is criticism about their use in the grocery sector.

“These are not mom-and-pop shops,” said Jim Stanford, an economist and grocery industry critic. “They are not subject to the same competitive constraints as firms in other industries.”

Marketplace obtained legal documents for dozens of properties across Canada — locked behind opaque systems and paywalls — and found several property controls buried in lease agreements or even registered directly on property titles. The scope of the terms negotiated by grocery giants varied significantly from property to property.

While some contracts stipulate the giants cannot “unreasonably” withhold permission for competitors to open up or to sell food, others explicitly grant them any and all discretion.

The property control attached to a Sobeys in Winnipeg states no one can sell food on the same developer’s adjacent land unless Sobeys says so, and that permission can be withheld “unreasonably and arbitrarily.”

Meanwhile, a Metro property control in Waterloo, Ont., restricts what food products a Shoppers Drug Mart can sell in the same plaza and prohibits restaurants with a 50-seat capacity or more from opening within 61 metres of Metro’s store.

Metro and Sobeys have both denied that property controls are a barrier to competition, while Loblaws acknowledged last year that property controls restrict competition, but wouldn’t agree to eliminate all of them unless other major grocery retailers do the same.

“From the property owner's perspective, it's a good way to attract major anchor clients to their property,” said Stanford. “From the retailer's perspective … it's a good way to limit how much competition they would face once they set up there.

“It’s a kind of mutual back-scratching arrangement that these companies invented, but unfortunately consumers were the ones who paid the price.”

When developers own larger tracts of land, Marketplace found property controls that indicate a radius of up to five kilometres within which no retailer is allowed to sell fresh food on the land. 

That’s the case for the grocery stores Teresa Petrie shops at in Picton, Ont., about 80 kilometres west of Kingston.

Petrie has been noticing a steep increase in the cost of groceries in her hometown. After learning that both the No Frills and the Foodland she shops at have property controls banning anyone in their respective plazas from selling fresh food, she is concerned that a lack of competition is affecting her prices.