The Manitoba government has initiated action against Sobeys, asserting that the grocery titan’s property agreements are obstructing market competition. This announcement came on Thursday as officials revealed their intention to present the matter to the province’s municipal board, following the enactment of legislation last year that forbids “restrictive covenants” in property sales, which could hinder the establishment of new grocery stores near existing ones.
Government’s Stance on Competition
Mintu Sandhu, the Minister of Public Service Delivery, voiced strong criticism of Sobeys, labelling the company’s property controls as detrimental to public interest. “Each and every one of these predatory property controls is against public interest,” Sandhu stated. He elaborated, “When we allow a company like Sobeys to block competition, it becomes easier for them to raise prices.” The government is currently addressing property controls at four specific Sobeys locations and anticipates a decision from the board within the next six to eight weeks.
Premier Wab Kinew highlighted that since the new law was enacted, all major grocery chains have ceased their property controls except for Sobeys. The province is eager to engage with the parent company, Empire, to discuss these concerns; however, Sandhu noted that they have yet to receive a response from the executive team.
Sobeys’ Property Controls Under Scrutiny
The province has identified that Sobeys maintains 43 property controls that were established prior to the legislative changes. Some of these controls are particularly restrictive, with one extending into a local farmer’s field, effectively preventing any potential competitors from operating even a significant distance away. Kinew remarked, “There’s no competitor allowed to set up shop even in the farmer’s fields or even across the streets, a long ways away from where this grocer is actually doing business.” He added, “At the end of the day, if this wasn’t benefiting the company’s bottom line, they wouldn’t be doing it.”
Broader Implications for Grocery Pricing
The issue of restrictive covenants has garnered attention from the federal Competition Bureau, which last year urged retailers and landlords to revise or eliminate competitor property controls that lack justification. Their 2023 grocery market study indicated that such restrictions can significantly inhibit competition, ultimately depriving consumers of the advantages that come with a competitive market.
Recent data from Statistics Canada has revealed that Manitoba’s inflation rate surged to three per cent last month compared to the same time last year, with food prices being a primary contributor to this inflationary pressure. When questioned about whether the removal of property controls could lead to reduced food prices for families, Kinew acknowledged the complexities involved. “Obviously, if a property control gets struck down, competition isn’t going to rush in the following day. It’s going to take some time for the business case to be built and for a new tenant to set up shop,” he explained. Nonetheless, he remains optimistic that in the long term, this move will help to drive down grocery prices.
Why it Matters
The government’s challenge against Sobeys is a significant step in fostering a more competitive grocery market in Manitoba. By addressing restrictive property controls, the province aims to lower food prices for consumers, which have been a growing concern amid rising inflation. This situation underscores the importance of regulatory frameworks in promoting fair competition and ensuring that consumers benefit from a diverse range of choices in the marketplace. The outcome of this case could set a precedent for how property agreements are managed in the grocery sector across Canada, potentially leading to a transformation in the way grocery businesses operate and compete.
