Concerns raised over binding land clauses
Not all anti-competitive practices are illegal—but that doesn’t mean they’re off-limits to regulators.
Canada’s Competition Bureau is urging businesses to reconsider property controls in commercial leases that may restrict market access, even when they do not contravene the Competition Act.
In guidance released Wednesday, the Bureau encouraged retailers and landlords to limit the use of property controls to situations where they are justifiable and contribute to competition.
These controls, which appear in commercial lease agreements, may limit the types of stores permitted in a location or restrict which businesses may occupy a space after a tenant leaves.
Examples include exclusivity clauses and restrictive covenants that can affect leasing decisions in retail properties such as shopping malls.
The Bureau stated that although such controls may not always raise legal concerns under the Act, they can make it more difficult for businesses to enter or expand in markets.
The guidance follows a June 2023 grocery market study, in which the Bureau reported that certain property controls can reduce competition among grocers and limit consumer access to alternatives. The study found that these clauses can act as barriers to new entrants in the grocery sector.
Earlier this year, the Bureau reached an agreement with Empire Co. Ltd. to remove a property control related to a location in Crowsnest Pass, Alberta. According to the Bureau, the clause was restricting grocery store competition in the area.
The Bureau also raised concerns about restrictive covenants, noting that these controls apply to the land itself and can bind future owners. The guidance stated that the use of restrictive covenants is not considered justified except in exceptional circumstances.
This advisory does not introduce new legal requirements but provides guidance on the Bureau’s current approach to assessing commercial lease practices. The Bureau’s position applies across sectors and focuses on how such clauses may affect competitive conditions.
Should commercial property controls be reassessed even if they comply with existing law? Share your perspective in the comments.
