Sep 2025
Competition Act Impacting Commercial Leasing
Exclusive Use Provisions
By Tonya Mah
Many commercial landlords and tenants have negotiated exclusive use rights in their leases - that is, the landlord covenants with a tenant that the landlord will restrict new tenants at the centre from offering certain specified services or merchandise that competes with such tenant’s merchandise or services (“Exclusive Use Provisions”). In essence after the landlord grants an Exclusive Use Provision to a tenant, it adds a restrictive use provision in all future leases it enters into and the landlord does not lease space within that centre to other parties who seek to offer merchandise or services that are within the Exclusive Use Provisions it has granted in favour of its tenants within the centre. The intent of including an Exclusive Use Provision in a lease, is to limit/prevent future competing businesses from operating within the landlord’s centre which would impact such tenant’s sales and profits, creating a safe territory wherein competitors are restricted from operating.
However, the Competition Act[1] was recently amended to add section 90.1(1.01), causing anxiety among commercial landlords and tenants.
Section 90.1 of Competition Act
Section 90.1 (1) of the Competition Act states “If, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that an agreement or arrangement or a proposed agreement or arrangement between persons of whom two or more are competitors prevents or lessens, has prevented or lessened or is likely to prevent or lessen competition substantially in a market, the Tribunal may make an order,
(a) prohibiting any person — whether or not a party to the agreement or arrangement, from doing anything under the agreement or arrangement; or
(b) requiring any person — whether or not a party to the agreement or arrangement — with the consent of that person and the Commissioner, to take any other action.
Key Addition to the Competition Act Section 90.1(1)(1.01)
The Competition Act was recently amended to add section 90.1(1)(1.01), now the application of the Competition Act extends beyond competitors, to contracts among non-competitors if “the Tribunal finds that a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market, it may make an order under subsection 90.1(1) even if none of the persons referred to in that subsection are competitors.”
Implications for Commercial Landlord and Tenants
This amendment to the Competition Act, raise concerns and questions not only regarding commercial landlords granting Exclusive Use Provisions in future leases, but also raises questions and uncertainty in relation to Exclusive Use Provisions previously granted by landlords to tenants, well in advance of this amendment to the Competition Act.
A concern that Section 90.1(1)(1.01) of the Competition Act is intended to address is, that including an Exclusive Use Provision in a commercial lease may result in a tenant’s prices being higher than if competitors were permitted at the centre, resulting in consumers paying higher prices.[2]
The Competition Bureau can impose significant penalties and orders when a finding is made of a violation of section 90.1(1)(1.01) of the Competition Act. These penalties, together with the uncertainty of how this newly enacted section of the Competition Act will be interpreted has many commercial landlords and tenants concerned.
Justified Use of Exclusive Use Provisions
According to the Competition Bureaus website, there may be limited circumstances when it is acceptable/justifiable for a commercial landlord to grant a tenant an Exclusive Use Provision, “because they increase competition overall”[3], such as when the inclusion of an Exclusive Use Provision encourages a tenant to open a business it would not otherwise open.
Guidelines published on the Government of Canada’s webpage[4], encourages all businesses using competitor property controls to ask themselves:
- Is the property control necessary to allow a new business to enter the market or to encourage a new investment?
- Could this property control last for a shorter period of time?
- Could this property control cover fewer products or services?
- Could this property control cover less geographic area?
Answering these questions and amending the property control accordingly, may reduce the risk of being found to be in breach of the Competition Act and being subject to penalties.
We would not recommend generally relying on this “justified use” to include an Exclusive Use Provision in a lease, unless the Exclusive Use Provision is carefully reviewed and scrutinized with counsel.
Existing Leases
Are Exclusive Use Provision granted to tenants in existing leases grandfathered, since they may have been entered into long before the Competition Act was amended? No, pursuant to 90.1(9.1) the limitation period for an application under this section, is an agreement that is terminated for more than three years.
Can a landlord enter into a new lease wherein the new tenant is seeking to sell merchandise that is contrary to Exclusive Use Provision previously granted to a tenant since Exclusive Use Provisions are contrary to the Competition Act? We would not recommend this. Although an Exclusive Use Provision is contrary to the Competition Act, tenants may still seek to enforce their Exclusive Use Provision and commence legal action against the landlord if the landlord leases space to another tenant contrary to its Exclusive Use Provision.
We recommend that landlords and tenants carefully review all existing lease agreements (and agreements that have terminated or expired within the last three years) to determine if an Exclusive Use Provision was granted and if there is an Exclusive Use Provision, we recommend the landlord and tenant enter into a written lease amending agreement in compliance with the lease, wherein the Exclusive Use Provision is deleted entirely from the leasing agreement.
Summary
The Competition Act permits the Tribunal to impose significant penalties and divesting orders for violations of the Competition Act. Accordingly, we recommend that: a) all existing leases (and leases that have terminated or expired within the last 3 years) with Exclusive Use Provisions be reviewed and properly amended wherein the Exclusive Use Provision is deleted in their entirety; and b) landlords refrain from granting future Exclusive Use Provisions in future leasing agreements (unless such Exclusive Use Provision is carefully scrutinized and reasonably determined to be justified- which could be a risky exception to rely on). As what is a “justified use” of an Exclusive Use Provision, is vague and has yet to be interpreted,
Please contact us, should you have questions regarding an Exclusive Use Provision in a commercial lease.
[1] Competition Act (R.S.C., 1985, c. C-34)
[2] https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/competitor-property-controls-and-competition-act
[3] https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/competitor-property-controls-and-competition-act
[4] https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/competitor-property-controls-and-competition-act