‘Competition makes a difference in prices’

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

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

The four cases span seven property controls: one each on Leila Avenue and Sage Creek Boulevard in Winnipeg, one on 18th Street in Brandon, 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’s 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.

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; 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.

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.

gabrielle.piche@winnipegfreepress.com