UMVA has learned that Empire Company Ltd., the parent company of Sobeys, is facing mounting pressure to disclose confidential terms of its leases with mall owners, held by the grocery store chain.
The request comes from anti-trust lawyers who argue that Sobeys' operators are breaching the Competition Act by including restrictive clauses in those leases. The Competition Bureau has written to the Federal Court, alleging that Empire has engaged in anti-competitive conduct by controlling available real estate through the use of property controls.
According to information obtained by UMVA, the lawyers are seeking terms of leases and real estate holdings in 51 local markets in seven provinces, including Ontario. Empire operates over 1,300 grocery stores across Canada, including Sobeys, Farm Boy, Safeway, IGA, Foodland, and FreshCo.
The company's real estate holdings are substantial, with a commercial real estate subsidiary, ECL Developments Limited, and a 41.5% share in Crombie Real Estate Investment Trust, which has 300 property investments in Canada. In certain areas of Canada, a grocery store owned by or affiliated with Empire is either the only seller or one of a small number of sellers of full-line grocery products.
A two-year investigation into Empire's use of property controls in Canada has yielded significant findings. The Competition Bureau's probe targeted "Empire's use of property controls and whether such use has given Empire the ability to exclude actual or potential competitors from selling food products in proximity to Empire's grocery stores."
The investigation revealed that real estate suitable and commercially attractive for grocery stores appears limited in various areas of Canada. Property controls are one factor that significantly impacts the availability of suitable real estate in particular geographic areas. This has led to complaints that the Competition Bureau has failed to support competition by approving 30 years' worth of mergers in the grocery trade.
The result has been a consolidation of the industry, with Loblaw, Metro Inc., and Empire Co. becoming the three major players in Canada. Critics argue that this has reduced competition and limited consumer choice. "It really grinds my gears," Bloc Québécois MP Yves Perron said at a hearing of the Commons agriculture committee.
The Competition Bureau has partially acknowledged its failure to block mergers, stating that its focus on local grocery competition has allowed for a slow reduction in the number of grocers across Canada as the industry has consolidated. The Bureau's actions have sparked renewed calls for greater scrutiny of the grocery industry and its competitive practices.
