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Competition Bureau Finalizes Competitor Property Controls Guidance

Fasken
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Overview

On June 4, 2025, the Competition Bureau (the “Bureau”) published updated guidance (the “Guidance”) that describes its approach to competitor property controls under the Competition Act (the “Act”). In this regard, competitor property controls are restrictions that limit how commercial real estate can be used by others. In the Bureau’s view, such restrictions can raise serious competition concerns by, for example, “making it difficult for businesses to open new stores” or “limiting the products that can be sold in a store”.

The Guidance arrives on the heels of recent amendments to the Act that, among other things, strengthened the Bureau’s ability to prevent abuse of dominance and extended the application of the civil competitor collaboration provisions to collaborations among parties that are not competitors. The Guidance addresses the following two types of competitor property control that, according to the Guidance, are “common across Canada” and potentially subject to these recently amended provisions:

  • Exclusivity Clauses: Clauses within a commercial lease that limit how the land can be used by competitors to a tenant (e.g., by prohibiting the lessor from leasing a unit or a piece of land to a company that competes with an existing tenant or by limiting what or how products can be sold).
  • Restrictive Covenants: 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 that compete with a previous owner.

Unlike the Bureau’s draft guidance issued in August 2024, the Guidance helpfully acknowledges that “not all competitor property controls meet the legal tests to raise issues under the Competition Act”. That said, the Guidance “encourage[s] firms to only use [property controls] where they increase competition” (emphasis added). This statement, which was not included in the draft guidance, is surprising for at least two reasons. First, it goes well beyond the Bureau’s mandate of addressing and deterring conduct that negatively impacts competition in Canada in a meaningful way. Second, it appears to be encouraging businesses to refrain from engaging in what are otherwise lawful business practices (such as entering into exclusivity clauses that are neutral or do not negatively impact competition in Canada in a meaningful way).

Property controls can be pro-competitive

The Guidance recognizes that, in certain limited cases, competitor property controls can be pro-competitive.[1] In this regard, the Guidance provides as follows:

… in limited cases, [competitor property controls] can also increase competition. An example would be if a property control is necessary for a firm to make pro-competitive investments, such as to enter a market.

Exclusivity clauses are … justified … where they go no further than necessary to encourage new entry or to allow a tenant to make investments to develop their store. This could be because once a key tenant has made the investments necessary to open their store and attract customers to the plaza, the increased customer base may make it more attractive for competitors to open stores in the plaza as well. The presence of competitors could in turn reduce the benefit the key tenant receives from its investments in opening their store. This could reduce or eliminate their incentive to make the investments unless they are protected by an exclusivity clause.

Despite recognizing the pro-competitive effect that exclusivity clauses can provide to, for example, anchor tenants who can use an exclusivity clause to leverage a lease into increased investments that attract more customers to a shopping centre and benefit consumers, the Guidance recommends that lessors of property consider whether there are other suitable tenants who do not require an exclusivity clause. While the Bureau acknowledges that the question of “whether a different tenant would be appropriate may depend on a variety of factors, including the nature of their business, how they would fit within the mix of retailers in the area, and how effective they would be at attracting customers to the development”, this recommendation seems to place a new and potentially costly obligation on lessors.

Factors considered when assessing whether property controls are justified

Considering whether a competitor property control is justified because of a credible pro-competitive rationale is a key part of the Bureau’s analysis. In this regard, the Guidance indicates that the Bureau will assess the following three key factors when considering if a competitor property control is justified:

  • Timeframe: Competitor property controls should only last as long as necessary to protect incentives for entry or investment. The longer a competitor property control lasts, the less likely it is to be justified.
  • Geographic Area: Competitor property controls should cover the smallest geographic area necessary. For example, exclusivity clauses that limit competition at other properties owned by the lessor are generally not justified.
  • Products and Services: Competitor property controls should not limit competitors more than necessary in the products or services they cover. The more extensive restrictions are, the less likely they are to be justified.

Abuse of dominance enforcement

As discussed in a prior blog post, recent amendments to the Act introduced a new framework for abuse of dominance, which applies a different test depending on the remedy being sought. In summary:

  • Prohibition order: In order for a prohibition order to be imposed, it must be established that a firm (either on its own or jointly with another firm) is dominant in a market and has engaged in or is engaging in either (1) a practice of anti-competitive acts or (2) conduct (that is not a result of superior competitive performance) that has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market in which the dominant firm has a plausible competitive interest. In other words, in this context, the abuse of dominance provisions require either anti-competitive intent or anti-competitive effects.
  • Other remedies: In order for any other remedies to be imposed, such as administrative monetary penalties, it must be established that a firm (either on its own or jointly with another firm) is dominant in a market and has engaged in or is engaging in both (1) a practice of anti-competitive acts and (2) conduct (that is not a result of superior competitive performance) that has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market in which the dominant firm has a plausible competitive interest. In other words, in this context, the abuse of dominance provisions require both anti-competitive intent and anti-competitive effects.
  • The Guidance includes a high-level discussion of the application of the abuse of dominance provisions to competitor property controls. In particular, the Guidance provides as follows:

  • Dominance: The Bureau will consider several factors when evaluating whether a firm (either on its own or jointly with another firm) is dominant in a market, including (1) the ability to restrict competitors or competition; (2) the presence of effective competitors, which the Bureau often considers based on market share; (3) barriers to entry in the market, including barriers to entry created by the competitor property control; (4) the position of the firm in the broader industry; and (5) evidence of bargaining leverage, including the ability to seek the competitor property control. Importantly, the Guidance notes that “[d]ominance can be created by the competitor property control itself in cases where there is already a lack of existing effective competitors and it creates a significant barrier to competitors entering the market”. In most cases, the Bureau will consider the party who proposed or benefits competitively from the competitor property control to be a potential target of an abuse of dominance investigation.

  • Practice of anti-competitive acts: The Bureau will consider several factors when evaluating whether conduct constitutes an anti-competitive business practice, including (1) subjective evidence of intent (which may be gleaned from business documents describing the reasons for the behaviour); (2) the likely outcome of the behaviour (as firms may be found to have intended the reasonably foreseeable consequences of their actions); and (3) any pro-competitive or efficiency-enhancing justifications for the behaviour. Importantly, in the context of competitor property controls, the Guidance provides as follows:

  • Restricting competition is inherent in a competitor property control. This is because restricting competition is the source of a competitor property control’s value. Competitor property controls may prevent competitors from entering markets in locations that would be competitively significant or exclude them from a market entirely. If a competitor property control is not capable of restricting competition it does not provide any benefit, raising questions about why it exists.

    However, as discussed, there are certain limited situations where these types of restrictions can support competition. We will consider these types of justifications as we determine whether a competitor property control is an anti-competitive business practice. In the absence of evidence of this type of pro-competitive justification we will likely consider competitor property controls used by dominant firms to be anti-competitive business practices. As noted, we do not consider the use of restrictive covenants to be justified outside of exceptional circumstances.

  • Effect on competition: When evaluating the effect that a competitor property control has on competition, the Bureau will consider whether it creates, increases or protects the market power of one of the targets in a market or is likely to do so. The analysis will center on barriers to entry or expansion created by the competitor property control and the presence of effective competition. In this regard, the Guidance notes that “[b]arriers to entry or expansion include restricting tenants from selling products or services that compete with the lessor or other retailers”. As part of its analysis of competitive effects, the Bureau will consider a number of factors, such as (1) whether there are other competitors already in the market; (2) how effective these competitors are; (3) whether there are feasible options for commercial real estate available to these competitors; (4) whether these competitors will be less effective if they used other commercial real estate; and (5) whether a competitor needs to establish several stores in an area to be effective.

As with the draft guidance, businesses reviewing the Guidance could understandably be very concerned about the application of the abuse of dominance provisions to competitor property controls based on, among other things, the Bureau’s apparent view that (1) the mere presence of a competitor property control could demonstrate dominance and (2) competitor property controls are inherently anti-competitive. However, each of these positions is, in our view, unsupported by the abuse of dominance provisions themselves and existing jurisprudence, with the result that competitor property controls will need to be evaluated on a case-by-case basis having regard to all the facts in question. In any event, in order to obtain a remedy beyond a prohibition order, it is necessary to demonstrate, among other things, (1) dominance in one or more relevant markets and (2) that the competitor property control has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market in which the dominant firm has a plausible competitive interest. Dominance and the need for a substantial prevention or lessening of competition (an “SPLC”) are not meaningfully discussed in the Guidance, which limits the value of the Guidance to the business community. 

Civil anti-competitive collaborations enforcement

Historically, section 90.1 of the Act allowed the Tribunal to issue certain remedies in respect of existing or proposed agreements between competitors or potential competitors that were likely to result in an SPLC. However, since December 15, 2024, section 90.1 of the Act has extended to collaborations among parties that are not competitors, provided that a “significant purpose” of the collaboration, or any part of it, is to prevent or lessen competition in any market.

The Guidance acknowledges that “[a]greements that contain competitor property controls are not usually between competitors” and that, in such circumstances, “section 90.1 can apply to agreements that include property controls [only] if a significant purpose of any part of the agreement is to harm competition in a market and the agreement has the effect of harming competition” (emphasis added). However, as noted below, the Guidance inappropriately conflates the purpose and effect requirements:

When assessing an agreement that contains … competitor property controls, we focus on if the agreement has the effect of harming competition. If so, we expect that the agreement will raise issues under section 90.1. This is because if the agreement has the effect of harming competition it will likely also have a significant purpose to do so.

Beyond the statement above, the Guidance fails to explain which factors the Bureau will consider when evaluating whether a “significant purpose” of a competitor property control is preventing or lessening competition in a market. The Guidance would have benefitted from the inclusion of that information – particularly given that there is not yet any judicial guidance on this point. In any event, in our view, it will be challenging to establish this element, which could potentially limit the effectiveness of section 90.1 as applied to competitor property controls.

According to the Guidance, the Bureau will typically consider all parties to an agreement to be potential targets of an investigation under section 90.1 of the Act. In the context of competitor property controls, this could include (1) tenants and lessors, in the case of exclusivity clauses; and (2) buyers and sellers of property, in the case of restrictive covenants. Depending on the circumstances, the Bureau may seek different remedies from different parties to an agreement.

Compliance takeaways

In the Guidance, the Bureau encourages all businesses that use or are considering competitor property controls to ask themselves the following questions:

  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 period of time?
  3. Could this property control cover less geographic area?
  4. Could this property control cover fewer products or services?

Although these vaguely prescriptive questions confirm the Bureau’s suggestion that competitor property controls are inherently anti-competitive and only justifiable in very limited situations, all of the requisite elements of the relevant rule of reason provisions need to be established in order to demonstrate a contravention of these provisions and, in turn, to obtain a remedial order or penalty. Some parts of the Guidance’s commentary and compliance suggestions seem to imply that any harm to competition is sufficient, but the Guidance does not clearly say when an SPLC will have to be proven in order to obtain such an order.

Although the Guidance is targeted towards commercial retail agreements broadly, the Bureau contextualizes its approach by reference to international enforcement actions conducted in the United Kingdom and New Zealand that limited the ability of large grocers to use property controls. These countries have different legal frameworks with lower thresholds to challenge property controls than are available under the Act, which currently allows property control clauses that are neutral in their competitive effects. Furthermore, as alluded to by the Guidance itself, the retail sector is not monolithic. Naturally, the justifications for property controls and their competitive effects on other retailers in a shopping centre, plaza or other location could vary dramatically between specialty areas.

If you have questions about the Guidance or would like assistance providing feedback to the Bureau, you can reach out to any member of Fasken’s Competition, Marketing & Foreign Investment group. Our group has significant experience advising clients on all aspects of Canadian competition law.

The information and guidance provided in this blog post do not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member of Fasken’s Competition, Marketing & Foreign Investment group.



[1] This statement does not generally apply to restrictive covenants, which the Bureau does not consider to be justified outside of “exceptional circumstances.”

Team

Primary Contacts
  • Antonio Di Domenico, Partner | Co-leader, Competition, Marketing & Foreign Investment, Toronto, ON, +1 416 868 3410, [email protected]
  • Chris Margison, Counsel | Competition, Marketing & Foreign Investment, Toronto, ON, +1 416 943 8975, [email protected]
  • Henry Gray, Associate | Political Law, Ottawa, ON, +1 613 696 3173, [email protected]

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