NDP challenge Sobeys’ property controls

WINNIPEG — The Manitoba government is taking aim at Sobeys Inc. in a bid to boost local competition.

The province said Thursday it would challenge contracts made by the Canadian grocery giant that prevent competitors from setting up shop nearby.

Manitoba will submit four cases for Municipal Board review, including one in Brandon.

“When there’s more competition, there are better prices,” Premier Wab Kinew said.

Last year, the provincial government passed a law allowing for the removal of registered controls if the Municipal Board deems it to be in the public interest.

The four cases span seven property controls: one at 1645 18th St. in Brandon, one each on Leila Avenue and Sage Creek Boulevard in Winnipeg, and four covering different land parcels on 178 Provincial Trunk Highway 12 in Steinbach. The Steinbach restrictions extend into a farmer’s field and across the street, Kinew said. No competition is allowed to open in the space.

The Municipal Board decisions should take six to eight weeks, Kinew said.

Manitoba is taking a phased approach to “not put too much pressure” on the board, Public Service Delivery Minister Mintu Sandhu said.

He hopes Sobeys will remove its other restrictions after the four cases are heard. Regardless, the government will fight “every single one” of the remaining controls, Sandhu said.

Sobeys — a subsidiary of Empire Co. Ltd., which also counts the Safeway, FreshCo and IGA chains under its banner — holds 43 property controls in the province. It’s the last corporation to hold such covenants in Manitoba: others relinquished a collective 23 property controls since the law passed in June.

The law also prohibits new restrictions or exclusivity clauses from being created.

Sobeys’ controls span 25 locations, the government said.

Sandhu’s office sent a letter in March to Pierre St-Laurent, president and CEO of Empire, offering to meet. Sandhu said he never heard back.

Sobeys didn’t respond to questions by end of day Thursday.

The Brandon location is a perfect example of the problem the province is looking to address, a spokesperson for Sandhu told the Sun on Thursday. The province chose the 18th Street property as one of the first four cases because it embodies the issue at hand, he said.

“This location represents the exact, anti-competitive issue we want to address,” ministerial spokesperson Ben Leahy said.

“This location sits empty, and even though the location hasn’t hosted a grocery store in nine years, the property controls, which last until 2053, continue to prevent other grocery stores from opening in the restricted area. The only purpose of this property control is to prevent competition.”

Removing property controls will lead to greater competition over time, Kinew said.

“Competition isn’t going to rush in the following day — it’s going to take some time for the business case to be built.”

However, one University of Saskatchewan agriculture and resource economics professor questioned whether more companies will appear, no matter the rules.

“It’s a very, very low likelihood of any other grocery retailer coming in,” said Stuart Smyth. “These companies have already figured out their economic efficiency models to say, ‘OK, we need one grocery store here.’”

The arrival of a new, large retailer — and dozens of stores — is likely the best way to increase competition and affect prices, Smyth said. The handful of established grocery chains isn’t enough “to be noticeable on households’ weekly grocery purchases.”

Sobeys may also have to break existing contracts and pay fines in order to relinquish property controls. This could be passed to the provincial government as a cost, Smyth said.

A small food retailer in Brandon noted its grocery prices won’t change with the end of property controls. Big-box stores get discounts on bulk orders, while smaller shops don’t have the volume and often pay higher prices for products, a representative said.

Meantime, not all property controls are bad, said Gary Sands, a senior vice-president with the Canadian Federation of Independent Grocers. “There are cases, in our view, where a property control is actually reasonable.”

For example, small businesses that open in a plaza might negotiate so another grocer doesn’t open in the strip. That’s reasonable, Sands said.

“Each case has to be looked at individually,” he added. “We don’t feel the Municipal Board has expertise and knowledge of the retail grocery industry.”

Instead, the federal Competition Bureau should handle property control cases, Sands said.

Sobeys renewed its five-year lease for the Brandon property in 2023. The grocer had not operated out of the building for more than six years when it re-signed a lease, but had set up shop across the street at the Shoppers Mall in July 2017.

While looking for subleasers, Sobeys was unwilling to let a competing grocery store sublease the vacant property, a Shindico representative said in 2019.

The tactic to reduce competition at the south-end Sobey’s store prompted the province’s legislation to block grocery property controls across the province, Glen Simard, northern and municipal relations minister and MLA for Brandon East, told the Sun in December. He said he proposed the legislation after seeing the case in Brandon.

The goal of the legislation was to drive down the price of groceries, Simard said at the time. The empty storefront beside Staples and Liquor Mart in Brandon would be better off being used by a competitor, he added.

“There’s no reason why maybe a discount grocer can’t be in here. No reason why a direct competitor can’t be here,” Simard said. “Brandon’s a big place, and people are clamouring for more choice, more competition.”

In Winnipeg, Frank Capasso hopes for a second grocery store in the Sage Creek area. Its population is set to grow as a new development — Sage North — opens.

A Sobeys location at 50 Sage Creek Blvd. is the neighbourhood’s only grocery option.

“It’s important that we have more competition, because competition makes a difference in prices,” said Capasso, president of the Sage Creek Residents’ Association.

Food prices in Manitoba jumped 4.9 per cent year-over-year last March. It beat the national average — a four per cent increase.

Kinew and Sandhu pointed to other government measures, including freezing the price of a one-litre carton of milk and removing the PST from more grocery food, as efforts to reduce prices.

» Winnipeg Free Press, with files from The Brandon Sun