Competition Bureau Releases Updated Guidance About Property Controls
What REALTORS® need to know about the changes.
The Competition Bureau of Canada recently released updated guidance about competitor property controls and the Competition Act to help address concerns about potentially anti-competitive contractual provisions in agreements for commercial real estate.
The guidance specifically relates to exclusivity clauses and restrictive covenants, which may be common in retail settings, and can make it more difficult for firms to enter new markets or expand.
At the same time, recent significant amendments to the Competition Act expanded the Bureau’s scope of action to review competitor collaborations, specially under the abuse of dominance (sections 78 and 79) and civil anti-competitive collaboration (section 90.1) provisions.
The guidance states that property controls can raise competition concerns while acknowledging they can also increase competition in certain cases and may be necessary to promote pro-competitive investments, e.g., to persuade a firm to enter into a lease in a shopping plaza.
The Bureau sets out potential concerns as follows:
- Exclusivity clauses in a commercial lease may limit how land may be used by competitors to a tenant, such as prohibiting a lessor from leasing to a company that competes with an existing tenant, or which limits what or how products can be sold.
- Restrictive covenants may prevent a future owner from using the location to themselves operate, or lease to operators, of certain types of businesses that compete with a previous owner.
According to the guidance, to promote compliance businesses should consider:
- Whether the property control is necessary to allow a business to enter the market or encourage new investment or can this be achieved through other means.
- The timeframe, geographic area, and scope of product or services covered. For example, could it have been for a shorter period of time, a smaller geographic area, or affect fewer products or services.
The Bureau will consider these factors in its analysis of property controls.
REALTORS® dealing with commercial properties should be aware of the Bureau’s recent changes to its enforcement approach. Should any further developments impacting REALTORS® be announced, CREA will release additional communications.
The article above is for information purposes and is not legal advice or a substitute for legal counsel.
