Canada’s federal Competition Bureau has won a court order permitting it to investigate two of the country’s largest grocery chains for what it describes as possible property-control violations in and around Halifax, Nova Scotia.
Sobeys and Loblaw will now be required to participate in an investigation into possible anticompetitive restrictions placed on real estate by providing documents and information, according to a statement issued by the Competition Bureau issued Tuesday.
The Competition Bureau aims to investigate lease clauses employed by the grocery chains that “prohibit the landlord from leasing space to another tenant that competes with the existing tenant,” as well as “restrictions on land that prevent a purchaser or owner of a commercial property from using the location to operate or lease to operators of certain types of businesses.”
Sobeys, through its Empire affiliate, filed a legal motion against the investigation earlier this spring, disputing the claim it is dominant in the grocery market and stating that “they have a well-founded perception of being unfairly targeted.”
Sobeys told CoStar News in an email it has no comment on the matter. Loblaw did not immediately reply to an email asking for comment.
The Competition Bureau, a federal government agency, issued a report last June urging measures to encourage more foreign grocery chains to open in Canada as a means of helping consumers. The report indicated that Loblaw, Sobeys and Metro together make over $100 billion in sales and earn $3.6 billion in profits per year.
Foreign-based grocers have had a tough time penetrating the Canadian market. In 2022, Walmart and Costco controlled only 7.5% and 11% of sales, respectively.
Industry observers have expressed skepticism concerning the possibility of more grocery chains entering the Canadian market. One issue is that building grocery stores is often not the most profitable use of land, as Kevin Henley, president and CEO of Canadian Net Real Estate Investment Trust, recently told CoStar News.
Another issue is that grocery stores often do not wish to compete against each other in the same shopping centre, as Michael Zakuta, CEO of Montreal-based Plaza REIT said in a recent interview
"We're not going to build two grocery stores in the same development," Zakuta said. "It's a bit of a joke when you get down to it. If you have one grocer, you won't look for another grocer, because one, you don't need it, and two, it's not going to work."