Roundup: Empire's Grocery Contract Promises Met With Skepticism
Plus: Air passenger advocate warns that Canada's complaints resolution system could get even worse, and Sleep Country expands into the United States
Grocery giant EMPIRE’s announcement this week that it is dropping exclusive property agreements and controls is being met with skepticism among critics who say such contracts are stifling competition and are raising prices for consumers.
“Pinky promises don’t hold up in court,” says Jacob Filipp, who tracks grocery store covenants in Canada, including Empire’s. “Trusting a corporation to do what they say, that’s not the way to solve a regulatory or competition problem.”
The Stellarton, N.S.-based company on Tuesday announced it will no longer enforce restrictive covenant interests on any of its properties, including those previously sold, and will not introduce any on new locations. The company also says it will not enforce exclusivity clauses or radius restrictions, which prevent specialty food retailers such as butchers or bakers from opening near its stores.
Empire owns more than 1,500 grocery locations across Canada, including the Sobeys, Safeway, Farm Boy, IGA and Longo’s brands, among others.
Property controls are common in the industry, with restrictions also typically preventing new grocery stores from opening on the site of another that has closed or moved, often for a significant period of time. As Filipp explained on a recent episode of the Do Not Pass Go podcast, some clauses extend well beyond grocery retail, such as billiard halls or arcades being prohibited within a specified radius of a store.
In its statement this week, Empire admitted its move stems from regulatory and legal heat. The Competition Bureau is investigating property controls while Manitoba, which banned them last year, announced in April that it intends to bring court cases against the company.
“While these arrangements are not inherently anti-competitive, we recognize the increased scrutiny in this area and the importance of ensuring they are used appropriately,” the company said. “We have engaged constructively with various stakeholders, including the Competition Bureau, and that dialogue has helped inform our ongoing practices in this area.”
But, Filipp adds, the company has not said it will legally amend its property contracts to remove restrictions and exclusivity clauses, only that it will not enforce them. Empire did not return requests for comment on whether it will in fact change its contracts.
The Canadian Anti-Monopoly Project welcomed the company’s promises to refrain from enforcing its contracts, but also believes that stronger assurances are required.
“The move is a good one by Empire but it doesn’t negate the need for the Competition Bureau’s investigation or provincial action against property controls,” says CAMP executive director Keldon Bester. “It will take actual transparency and accountability if this commitment is going to be worth anything.”
🎧 ON THE PODCAST THIS WEEK:
Inside StubHub's World Cup Scandals
The World Cup is over and we have a winner: after an exciting and drama-filled tournament, Spain has been crowned the ultimate champion. But there’s also a loser – and that is clearly StubHub.
🛒 GROCERIES & RETAIL
Also in food news, a report on Canada’s new grocery CODE OF CONDUCT finds that there’s considerable mistrust between suppliers and retailers, with both worried about complaining about the other for fear of retaliation. “The concern most frequently identified by members relates to the potential impact that raising issues may have on ongoing commercial relationships,” the report says. “In particular, some members have expressed concerns regarding possible retribution, negative commercial consequences, or damage to important business relationships, even where the Code specifically encourages direct engagement between parties through designated Code Representatives.” It isn’t just suppliers reluctant to raise concerns with big grocery chains, the report notes, it’s also independent retailers who are afraid to complain about suppliers. The Code, which came into effect at the beginning of this year and includes 200 signatories from across the food chain, was established in response to suppliers complaints’ about fees from the big grocers. The report concludes that it’s still early days for the Code, and that the office that administers it will be focusing on growing awareness about how its tools and processes work with its signatories.
Toronto Mayor OLIVIA CHOW has joined the growing list of elected officials and politicians who oppose surveillance pricing, which is individualized pricing set by retailers based on the data they have about a person. Chow introduced a motion on Tuesday, which passed, that will “identify all possible mechanisms for the city of Toronto to ban and regulate surveillance pricing that increases prices on groceries, including those sold online and delivered within the city, and report to the new term of City Council in the first quarter of 2027 with options for consideration.” Manitoba enacted a prohibition on surveillance pricing in June, while federal NDP leader Avi Lewis has called for a nation-wide ban. Chow’s move could bring her into conflict with Ontario Premier Doug Ford, who opposes outlawing surveillance pricing. Ford has said that individualized pricing goes against his free-market beliefs and allows retailers to provide discounts to consumers.
If you’ve heard the jingle, you know it well: “SLEEP COUNTRY CANADA, why buy a mattress anywhere else?” The Toronto-based retailer is working hard to answer its own question for consumers with, “Because you can’t,” with the acquisition this week of SLEEP NUMBER. The $702-million (U.S.) deal for the Minneapolis-based retailer allows Sleep Country to expand into the United States and gives it more than 800 locations. With brands and previous acquisitions including Dormez-vous, Endy, Silk & Snow, Hush, Casper Canada and Simba, Sleep Country says it is now the second-largest sleep-oriented retailer in the world, trailing only Kentucky-based SOMNIGROUP.
✈️ AIRLINES
Air passenger advocates are warning that Canada’s broken airline complaints resolution system is about to get worse. In a video released this week, AIR PASSENGER RIGHTS president Gabor Lukacs criticizes the government’s recently introduced legislation, Bill C-31, which seeks to hand adjudication of complaints to third-party mediators that are picked by the likes of AIR CANADA and WESTJET. “On May 1, the government admitted Canada’s passenger rights system is broken. But instead of fixing it, the government is proposing to hand that broken system to the airlines themselves,” the group says in its post. “This is not a fix. This is the fox guarding the henhouse, legislated by the same government that let the hens get loose in the first place.” The complaint backlog currently sits at more than 97,000, with the problem being that the resolution process is too complex, according to Lukacs. Each complaint typically requires hundreds of pages of documents and therefore a full work day to resolve, on average, compared to just minutes in Europe where the process is based on publicly available data. The airlines and government have said that outsourcing the system from the Canadian Transportation Agency to third-party adjudicators will instead speed up resolutions.
📱 TELECOM
The Competitive Network Operators of Canada, an advocacy group representing the nation’s smaller telecom service providers, is asking the Canadian Radio-television and Telecommunications Commission to reconsider the rates it has set for wholesale access to big companies’ fibre networks. The organization, which counts companies including Toronto-based EGATE and Woodstock, Ont.-based EXECULINK as members, has posted a breakdown of costs for its members versus the nation’s large telcos to illustrate its point. Consumers can sign up with BELL for a gigabit connection in Ontario or Quebec at $75-$85, for example, but a smaller provider that relies on wholesale access to Bell’s network has to pay more than $105 in costs alone, before adding a profit margin. Similarly, a gigabit connection in Alberta or British Columbia from TELUS can be had from the company for $85-$105 while an indie’s cost is $114. The organization says the CRTC’s access rates are killing competition. “When the incumbent’s retail price is lower than what we’re forced to pay them at wholesale just to compete, that’s not a market, that’s an error in the design of the regulatory framework,” says CNOC chair Paul Anderson in a release. “The CRTC was ordered to eradicate barriers to entry and competition for smaller independent providers. Instead its framework is threatening to eradicate them.”
🕺 ENTERTAINMENT
The continuing PARAMOUNT-WARNER BROS merger saga had some plot developments this week. A California judge forced a 14-day pause on the $110 billion (U.S.) deal, while at the same time European Union antitrust regulators gave it the go-ahead. The U.S. decision came in light of a number of U.S. states challenging the merger, which they say will harm competition in film and television production and distribution and affect news coverage and streaming services. Paramount, which says it is on track to close the merger by the end of September, says more than 65 jurisdictions have either cleared the transaction or chosen not to challenge it. Canada is not one of those yet, with the Competition Bureau still reviewing the deal.
🏠 REAL ESTATE
Prime Minister Mark Carney’s old employer, BROOKFIELD ASSET MANAGEMENT, made a big purchase this week alongside the CANADIAN PENSION PLAN INVESTMENT BOARD. The two paid $5.2 billion (U.S.) to acquire New York-based LXP Industrial Trust, one of the largest owners of warehouse and logistics facilities in the United States, with about 53 million square feet across 108 properties across the southern and midwest U.S. LXP now has 40 days to look for a better deal. Brookfield Asset Management is based in New York, but its parent Brookfield Corp. is headquartered in Toronto.
🚨 COMING UP
Trust in the news media is declining precipitously thanks to a confluence of factors. The destruction of its business model by Google and Facebook, consolidation under uncaring financialized owners, and self-inflicted wounds from an abandonment of standards and practices are all part of it. TARA HENLEY, writer of the Lean Out Substack and author of the new book, The Trust Spiral: Why the Media Needs Objectivity, joins the Do Not Pass Go podcast this Tuesday to discuss what news outlets need to do in order to restore their readers’ faith in them.