We’re already in a moment of anxiety over grocery prices in Canada, and citizens should brace themselves for food costs to go up even more. The blockage of the Strait of Hormuz that has sent oil prices near historic highs throughout the world has also blockaded one of the world’s major sources of fertilizer, and agriculture, it turns out, depends a great deal on fuel and fertilizer. Those costs haven’t been fully baked into the prices of major food commodities yet, but they will be over the coming year.
The federal government has already renamed and expanded the previous GST/HST rebate provided to low-income tax filers, with the new rebate called the “Canada Groceries and Essentials Benefit.” And the federal Competition Bureau has singled out some of the oligopolistic features of Canada’s grocery market, lamenting both the lack of serious foreign competition (Wal-Mart excepted) as well as the methods Canadian grocers use to suppress lower-cost competitors. The New Democrats at Queen’s Park are specifically targeting one of those methods this week: that is, restrictive property controls, or covenants, that grocers use to keep landlords from renting out commercial spaces to competitors.
On Tuesday the NDP will use one of their private member’s business slots in the legislative agenda to debate Bill 113, the Fair Prices and Tax-Free Groceries Act. The bill has two parts. The first would endeavour to remove the HST on groceries, including non-alcoholic beverages. It’s difficult to see this doing much for affordability, not least because so many groceries are already untaxed. (There are some quirks the NDP’s bill would inadvertently address. Cow’s milk is tax-free but non-dairy milk alternatives like soy, almond, or oat milk are taxed; the NDP bill would be mildly pro-vegan.) Then there’s the additional problem that changing the HST requires negotiation with the federal government, so this isn’t something that could be done instantly or even under Ontario’s own authority.
The second piece of Bill 113, however, is more interesting because it addresses a genuinely novel problem that’s squarely in provincial jurisdiction: those restrictive land covenants. Basically, the issue here is a cozy bargain struck between large commercial landlords and the country’s major grocery chains. In exchange for getting one of the big three grocers (Loblaw, Sobeys, Metro) as a tenant at one of their properties, the landlord will agree not to rent space to a competitor at the same mall or, in some documented cases, at any other commercial space owned by the landlord within a certain distance.
(Toronto-based writer Jacob Fillipp maintains a database of restrictive covenants around Canada. Some of the restrictions grocers are able to extract are eye-opening, such as the Waterloo Metro that was able to guarantee that any prospective Shoppers Drug Mart the landlord might lease to would be limited in extremely precise detail in what foods it could sell.)
The Competition Bureau shone its considerable spotlight on this issue years ago and has done some follow-up reporting since, but is limited in what it can do here: in order to pursue a legal remedy like fines or even having a court void a restrictive covenant, the Bureau needs to prove that a specific restrictive covenant on a specific property is both intended to thwart competition and is having the actual effect of doing so. That’s a high bar to prove and isn’t a general remedy to the problem.
At least one company, Loblaw, says they’re no longer asking landlords to enforce restrictive covenants near their stores but it’s not always clear to landlords or their other tenants exactly how much they’ve been liberated. In any event, the beneficence of one company is even less of a solution than the Competition Bureau’s piecemeal enforcement.
The actual answer is legislation, and because this is a matter of property and contract law this is provincial jurisdiction notwithstanding the Competition Bureau’s exceptional role. The NDP’s Bill 113 would require the government to remove restrictive covenants everywhere in the province where they “have the effect of limiting and controlling competition among food retailers.”
If the Ford government is interested in ideas for how to do that, Manitoba has (once again) been at the frontier of populist-coded grocery policy. The NDP government there required grocers to register their covenants with the province and forbade the creation of new ones. Grocers could plead their case for any covenant they registered (even the Competition Bureau recognized there are some limited cases where covenants can actually be pro-competitive) but otherwise these kinds of property restrictions were declared void.
This is a real issue that has a real solution that’s entirely within the province’s power to address. That doesn’t mean implementing it would lead to some nirvana of cheap groceries. The effect would likely be small and might not even be noticed in the context of the coming price surge. A small but real solution, however, is immensely preferable to governments applying showy band-aids that do nothing or make things worse.