T
he Competition Bureau, Canada's competition law enforcement agency, has issued guidance on property controls in commercial and residential real estate. The guidance highlights concerns about exclusivity clauses in commercial leases and restrictive covenants, which can raise "serious competition concerns" under the abuse of dominance and anticompetitive collaboration provisions of the Competition Act.

    The Bureau views unjustified property controls as potential violations and barriers to entry. Businesses are urged to assess and eliminate such controls, considering four factors: necessity for new entry or investment, duration of restrictions, geographic scope, and products/services covered. The Guidance emphasizes that any property control should go no further than necessary to achieve a legitimate, pro-competitive purpose.

    The Bureau considers restrictive covenants particularly concerning due to their potential to insulate firms from competition and their ability to follow the property beyond the life of the lease. The use of restrictive covenants by businesses with market power is more likely to attract scrutiny.

    Property controls can raise issues under both the abuse of dominance and anticompetitive collaboration provisions of the Act. In assessing legality, the Bureau will consider anticompetitive intent and harm to competition. The Guidance suggests that property controls may be justified only in limited circumstances, such as to incentivize investments to enter a market.

    The Bureau has also warned landlords and tenants about potentially illegal conduct, including agreements on rental prices, lease terms, and restricting housing supply. The cartel conspiracy provision prohibits agreements between competitors to fix prices, allocate markets or customers, or restrict output. Remedies include steep fines, possible jail terms, and private party class action suits.

    The Bureau is investigating the use of AI-driven algorithmic pricing in Canadian real estate rental markets and has released a discussion paper on algorithmic pricing for public consultation. It is also investigating buyer realtor compensation and data-sharing practices of Québec realtors.

    Businesses should review their commercial lease portfolios for exclusivity provisions and restrictive covenants that may not be necessary or whose terms go beyond what is necessary to achieve a legitimate purpose. This is especially so regarding restrictive covenants registered on title, which the Bureau views with enhanced skepticism.