The Competition Bureau Weighs in with Final Property Control Guidelines

Written By Adam Kalbfleisch, Alixe Cameron, Jane Helmstadter, Mark Lewis, Mercy Liu, Michelle Yung, Richard Burgos, Simon Crawford, Zirjan Derwa

The Competition Bureau (Bureau) has released its finalized property control guidelines (Guidelines) outlining the Bureau's ongoing approach to enforcing competition property controls under the Competition Act (Act). These replace the preliminary guidelines published on August 7, 2024, which were subject to a public consultation process last summer/fall, and which Bennett Jones covered in a previous blog, Key Changes to Property Control Rules: What Landlords and Tenants Need to Know Before October 7, 2024. Although not legally binding, the Guidelines provide valuable insight into the Bureau's enforcement approach to property controls and outline its expectations for businesses operating in the commercial real estate sector.

The issuance of the Guidelines follows Parliament's significant recent amendments to the Act in Bill C-56 and Bill C-59, which received royal assent in December 2023 and June 2024 respectively, and which expanded the scope of the abuse of dominance (sections 78 and 79) and civil collaboration (section 90.1) provisions of the Act, both of which may impact the use of property controls in commercial real estate. Bennett Jones has covered these amendments in detail in two previous blogs, Revamped Competition Act Radically Alters Canadian Competition Law and Federal Government to Significantly Overhaul the Competition Act.

The Guidelines and Property Controls

The Guidelines state that competitor property controls are restrictions on the use of commercial real estate and, according to the Bureau, these controls may insulate firms from competition and therefore raise competition concerns. The Guidelines specifically address two types of property controls:

• Exclusivity clauses: A clause within a commercial lease that limits how the land can be used by competitors to a tenant. This could prohibit the landlord from leasing a unit or a piece of land to a company that competes with an existing tenant, or limit what or how products can be sold. It could also be a clause that gives an incentive not to lease to competitors of a tenant
• Restrictive covenants: A restriction on land that prevents a purchaser or owner of a commercial property from using the location to operate, or lease to operators of, certain types of businesses that compete with a previous owner.

Although the Guidelines state that property controls can insulate firms from competitors, thereby causing competition concerns, they also recognize that, conversely, property controls can sometimes increase competition. Accordingly, property controls themselves are not explicitly illegal under the Act¹ but, depending on the type of property control and the degree of restriction, they may contravene provisions under the Act. The Bureau will generally consider property controls under the abuse of dominance and the civil agreements provisions of the Act (sections 79 and 90.1 respectively), although other provisions may apply depending on the specific facts and circumstances.

In particular, the Bureau has confirmed that it will not take enforcement action against competitor property controls where it considers them to be "pro-competitive". According to the Bureau, controls may be "pro-competitive" and therefore justified when they incentivize businesses to enter a market or invest in improving a space already being leased. For example, if no retailers are willing to fill a vacancy in a shopping centre absent a property control, then a property control may be justified.

Importantly, the Bureau has also made clear that even property controls that are lacking pro-competitive justification do not automatically contravene the Act. That said, a property control that is justified is less likely to raise enforcement concerns under the Act than one that is not.

The Bureau has opined that whether a business can justify a competitor property control hinges on three factors:

1. Timeframe: Competitor property controls should only last "as long as necessary to protect incentives for entry or investment", the determination of which will be made on a case-by-case basis.
2. Geographic area: Competitor property controls should cover as minimal geographic areas as necessary and generally should not extend to other properties owned by a landlord (or its affiliates).
3. Products and services: Competitor property controls should not limit competitors more than necessary in the products or services covered; extensive restrictions are less likely to be justifiable.

One of the main takeaways from the Guidelines is that, from the Bureau's perspective, exclusivity clauses are only justifiable in limited circumstances, typically where they attract investment or new market entry. For example, a movie theatre considering whether to become an anchor tenant in a shopping centre would need to factor in the significant upfront costs of installing auditoriums, projection and sound systems, and acoustic treatments. The potential tenant would be disincentivized to do so without its lease containing an exclusivity clause preventing the entry of another movie theatre, as entry by a competitor would make the potential tenant's entry and investment in constructing the space uneconomic. As a result, the potential movie theatre tenant may forgo the tenancy altogether, resulting in the shopping centre losing other potential retail tenants and shoppers that they would otherwise draw in through an anchor movie theatre tenant.

The Bureau takes a stricter stance on restrictive covenants than on exclusivity clauses, viewing the former as rarely justifiable outside of "exceptional circumstances" owing to the advantages they can grant incumbent businesses in a commercial property. Notably, the Bureau currently does not provide any examples of when a restrictive covenant could be justified.

Penalties under the Guidelines

If an exclusivity clause is found to be an anti-competitive business practice or has the effect of harming competition, then the Bureau may seek an order prohibiting it.

Owing to the Bureau's heightened concern around restrictive covenants, the Bureau may also seek administrative monetary penalties (AMPs) in addition to other remedies, such as a prohibition or corrective order.²

Additionally, on June 20, 2025, Bill C-59 amendments expanding the right of private access to the civil collaboration provision came into force and permit the Competition Tribunal to make "disgorgement" orders in private actions for alleged violations, requiring that the party found to have contravened the Act must repay any profits earned as a result of the anti-competitive conduct.

Questions to Help Determine Whether a Property Control is Appropriate

As general advice, the Bureau outlined key questions it believes businesses should consider when determining whether to implement a new or maintain an existing property control:

1. Is the property control necessary to allow a new business to enter the market or to encourage a new investment? Are there other ways to allow for this entry or investment that do not make it more difficult for rivals to compete?
2. Could this property control last for a shorter time?
3. Could this property control cover less geographic area?
4. Could this property control cover fewer products or services?

The Bureau's Current Focus—Grocery Retailers

As the Guidelines were released following a significant consultation period, businesses should expect that the Bureau is interested in and will scrutinize the use of property controls going forward. As such, anyone involved in commercial real estate transactions should consider any potential impacts the Guidelines may have on their business, including any existing agreements or new agreements not yet entered into. From a practical perspective, however, the Bureau's finite resources suggest that the Bureau will be particularly interested in property controls in certain retail sectors, such as the grocery sector.

In fact, on October 21, 2024, the Bureau launched a separate call-out for information inviting market participants to weigh in on the specific use of property controls in the grocery industry, and to help the Bureau advance investigations into two Canadian grocery chains.³ The Bureau is anticipated to issue further guidance or statements on competitor property controls pending the outcome of these investigations and depending on the feedback they receive from market participants in the grocery industry. Whether the Bureau takes enforcement action against the two Canadian grocery chains, and the type of enforcement action ultimately taken, will also provide further insight into how the Bureau may pursue competitor property controls going forward, particularly against participants in the broader retail sector of commercial real estate.

If your business has any questions about negotiating, implementing, removing or objecting to competitor property controls, please reach out to the authors or any member of the Bennett Jones Competition/Antitrust group or Commercial Real Estate group.

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