How Recent Competition Act Amendments Are Shaping Commercial Leases

This article was originally published in Law360 Canada.

Overview

Recent amendments to competition law will prohibit the use of exclusivity clauses in commercial leases in all but specific circumstances. Changes to Canada’s Competition Act (R.S.C. 1985, c. C-34) enacted in June and December 2024 have the stated intent to expand the scope and enforcement powers concerning anti-competitive lease provisions.[1]

Key Amendments and Their Implications

The Competition Tribunal, the enforcement arm of the federal Competition Bureau, can now intervene if a firm’s conduct demonstrates either anti-competitive intent or effect.  A reduction to the threshold for enforcement serves to increase the risk for businesses relying on exclusivity clauses in their commercial leases.[2]

The Competition Act anti-competitive provisions now cover agreements between non-competitors if a significant purpose of the agreement is to lessen competition. Practically, this means a landlord-tenant lease clause that excludes competitors (for example, giving a shopping centre’s anchor grocery store the exclusive right to sell groceries on the premises) can be reviewed and struck down by the Competition Tribunal if it is determined that its purpose is to substantially lessen competition in a market. Previously, the law targeted only anti-competitive agreements between actual competitors, so these “vertical” arrangements were not subject to enforcement. Now, any agreement that has a perceived anti-competitive aim or effect can face scrutiny, even if the parties are not rivals.[3]

Finally, the penalties for non-compliance are now substantial, with amendments allowing for a fine of $10,000,000 or more per infraction.[4]

Property Controls Under Scrutiny

The Competition Bureau's 2024 guidelines characterize two key property controls as serious competition concerns:

• Exclusivity Clauses: Lease provisions that prevent landlords from leasing to competitors of an existing tenant or restrict the types of products/services which can be offered by other tenants.

• Restrictive Covenants: Restrictions on land use that prevent future owners or tenants from operating certain businesses.

The Competition Bureau has expressed that exclusivity clauses are generally sustainable only if narrowly tailored, time‑limited, and necessary to induce pro‑competitive investment (e.g. enabling a new entrant to develop a store). Overly broad geography, indefinite duration, or blanket product bans are unlikely to be justified. Restrictive covenants are viewed as unjustified outside of exceptional circumstances.[5]

Early Enforcement and Industry Response

The highest-profile enforcement efforts so far have been in the grocery industry. In June 2024, the Competition Bureau publicly investigated major grocery chains over long-standing property controls that prevented competing grocers from opening nearby.[6]

In January 2025, the Competition Bureau announced a major win: one large chain agreed to remove a restrictive covenant that had effectively given it a monopoly in a small Alberta town. That covenant had kept any other grocery store from opening in the area for years. With it gone, a competitor is set to open shop — an outcome the Bureau touts as a victory for consumers.[7]

Several major retailers have responded proactively by announcing that they will no longer be placing restrictive covenants on the properties that they sell, and are working to release existing restrictive covenants.[8]

Practical Considerations

Tenants

Commercial leasing tenants should, both internally and with the assistance of their legal counsel:

• Evaluate Existing Agreements: Identify exclusivity clauses and restrictive covenants in your lease portfolio.

• Assess Competitive Impact: Determine if clauses significantly lessen competition or involve dominant parties. In some cases, tenants may become a victim of their own success, becoming a “dominant firm” by virtue of their hard work.

• Narrow or Remove Restrictions: Limit duration, geographic scope, and product categories; remove non‑essential clauses.

• Document Justifications: If retaining or seeking an exclusivity clause, maintain contemporaneous evidence showing the clause was necessary for investment or market entry.

• Alternative Remedies: Negotiate remedies in leases, such as rent reductions, conversion to percentage rent, or termination rights if exclusivity provisions are invalidated.

• Review Indemnities: Seek to narrow landlord-indemnification requirements for competition law challenges to minimize financial exposure.

• Engage Counsel: When negotiating or renewing leases to align with best practices.

Landlords

Commercial landlords share many of the same concerns as tenants, and should, with the assistance of their legal counsel:

• Evaluate Existing Agreements: Identify exclusivity clauses and restrictive covenants in your lease portfolio.

• Seek Amendments where Possible: In co-operation with tenants, determine if it is viable to remove provisions that offend the Competition Act. If restrictive covenants exist, seek to remove them with the co-operation of the parties to the restrictive covenant.

• Review Standard Leasing Terms: Review existing standard leasing terms for any offending provisions.

• Educate Staff: Provide resources to management and staff engaging in commercial leasing negotiations to inform them of the changes to the law and how they should be managing the changes with their tenant clientele.

• Evaluate the Necessity of Exclusivity Clauses: Where tenants still seek exclusivity clauses in their leasing arrangements, critically evaluate if the clause is required, and if so, seek indemnification from the tenant for any enforcement action.

 Looking Ahead

The full impact of the 2024 amendments will unfold as additional guidelines and Tribunal decisions emerge. Landlords and tenants should remain vigilant, continuously reviewing lease terms and adapting to a more competitive and closely regulated real estate environment. Early compliance and proactive adjustments will minimize risk. Further changes are coming in June 2025 as private enforcement rights will come into force.

[1] Competition Act, RSC 1985, c C-34, <https://canlii.ca/t/56fc2>.

[2] Competition Bureau, Abuse of Dominance Enforcement Guidelines (March 7, 2019) at para. 34, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/abuse-dominance-enforcement-guidelines.

[3] Competition Act, RSC 1985, c C-34, s 90.1, https://canlii.ca/t/7vdv#sec90.1 .

[4] Ibid.

[5] Competition Bureau, Competitor property controls and the Competition Act, online at https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/competitor-property-controls-and-competition-act.

[6] Competition Bureau, Competition Bureau advances investigations into Sobeys and Loblaw’s use of property controls (June 2024), online at https://www.canada.ca/en/competition-bureau/news/2024/06/competition-bureau-advances-investigations-into-sobeys-and-loblaws-use-of-property-controls.html.

[7] Competition Bureau, Competition Bureau takes action to protect competition in the grocery industry in an Alberta community (January 2025), online at https://www.canada.ca/en/competition-bureau/news/2025/01/competition-bureau-takes-action-to-protect-competition-in-the-grocery-industry-in-an-alberta-community.html.

[8] Loblaws Company Limited, Real talk - Property Controls, published February 20, 2025, online at https://www.loblaw.ca/en/real-talk-property-controls/; Canadian Grocer, Walmart Canada axing some property controls amid grocery competition scrutiny (November 22, 2024, online at https://canadiangrocer.com/walmart-canada-axing-some-property-controls-amid-grocery-competition-scrutiny.