In a prior blog, we discussed the initial steps that the Competition Bureau (the “Bureau”) was taking to challenge anti-competitive practices in the grocery industry, including in regards to property controls in commercial leases. On June 4, 2025, the Bureau released an update to their enforcement guidelines, in an attempt to clarify how businesses can comply with the Competition Act (the “Act”) and how the Bureau will approach anti-competitive controls in commercial leases.

This blog briefly summarizes certain of the main updates to the enforcement guidelines.

Justified Property Controls

In their updated enforcement guidelines, the Bureau has identified certain situations where property controls may be justified. These are limited to situations where the property control in question increases competition and consumer choice, including situations where “no retailer would otherwise make the necessary investments to become a key tenant in a new shopping plaza. Without the exclusivity clause there may be no retailers of a particular type in the shopping plaza, and so the clause increased competition”.

When assessing whether a property control is justified or otherwise anti-competitive, the Bureau has clarified that they will consider three factors:

1. Timeframe – Competitor property control should only last as long as necessary to protect incentives for entry or investment.
2. Geographic area – Competitor property controls should cover the smallest geographic area necessary.
3. Products and services – Competitor property controls should not limit competitors more than necessary in the products or services that they cover.

With respect to all of these criteria, the broader the scope imposed as part of a property control, the less likely the property control is to be justified or defensible under Bureau scrutiny.

Effect of Property Controls

When assessing how a property control will impact competition, including with respect to the criterion above, the Bureau will consider whether the property controls gives one firm in the market too much power or whether it would make it easier for such firm to consolidate its power. The Bureau will consider the following questions:

• Are there other competitors already in the market?
• How effective are competitors?
• Are there other feasible options for commercial real estate available to competitors?
• Would competitors be less effective if they used other commercial real estate?
• Does a competitor need to establish several stores in an area to be effective?
• Are there other barriers to entry or expansion that already exist, that may compound the effects of the competitor property control?

Enforcement Under Abuse of Dominance

As part of the update, the enforcement guidelines include an overview of how the abuse of dominance provisions in the Act will apply to competitor property controls.
In assessing whether a firm is deemed “dominant” for the purposes of enforcement, the Bureau will consider the following factors:

• The ability to restrict competitors or competition;
• The presence of effective competitors, which may be heavily weighed based on market share;
• Barriers to entry in the market, including barriers to entry created by the competitor property control;
• The position of the firm in the broader industry; and
• Evidence of bargaining leverage, including the ability to seek the competitor property control.

In certain instances, the property control itself can create dominance, especially when there are not already strong competitors in the market and the restriction makes it even more difficult for others to enter.

It is expected that the Bureau’s first course of action in situations where a dominant firm implements a property control would be for the Bureau to seek an order prohibiting its use or enforcement. However, if the restriction is both an anti-competitive practice and demonstrably harms competition, the Bureau may take further steps that include seeking administrative monetary penalties.

Enforcement Under Anti-Competitive Collaboration Provisions

In their enforcement guidelines, the Bureau also spoke to how competitor property controls can be reviewed under Section 90.1 (anti-competitive collaborations) of the Act. Section 90.1 applies to agreements that either (a) involve at least two competitors, or (b) do not involve competitors if a significant purpose of any part of the agreement is to prevent or lessen competition in the market.

For a property control to raise concerns under Section 90.1, it must have the effect of substantially harming competition.

While the Bureau acknowledges that competitor property controls are usually not formed between competitors, Section 90.1 can still apply if (a) a significant purpose of any part of the agreement is to harm competition in a market, and (b) the agreement has the actual effect of harming competition.

It is also worth noting that the Bureau has made it clear that:

“When assessing an agreement that contains a competitor property controls, we focus on if the agreement has the effect of harming competition. If so, we expect that the agreement will raise issues under section 90.1. This is because if the agreement has the effect of harming competition it will likely also have a significant purpose to do so.”

The remedies that the Bureau may seek when a property control raises issues under Section 90.1 include:

• Prohibiting the terms of the competitor property control and their enforcement;
• Requiring other measures to restore competition where necessary; or
• Seeking administrative monetary penalties.

Conclusion and Key Considerations

With its updated enforcement guidelines, the Bureau appears to be taking a more flexible stance on competitor property controls, acknowledging the need for a case-by-case approach. At the same time, the Bureau’s recent update and continued investigation into Loblaw shows their continued commitment to eliminating property controls in Canada, with a special focus on the grocery industry.

Looking to the future, enforcement in this area will likely remain highly fact-specific. Whether a particular property control clause violates the Act will depend on the market context, the intent and effect of the restriction, and any underlying justification.

If you have any questions or concerns relating to property controls, Sotos LLP can assist. Please contact Jason Brisebois at 416.572.7323 or jbrisebois@sotos.ca or Bailee Kleinhandler at 416.572.7311 or bkleinhandler@sotos.ca to discuss your grocery sector needs.

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With the imposition of the new U.S. administration’s tariffs on imported materials and goods, more Canadians are choosing to support local products and producers. Businesses often attempt to make this choice easier for consumers by including wording such as “Made in Canada” or “Product of Canada” (collectively referred to as “Canadian Origin Claims”) on their labels. Although this can be a powerful marketing tool, there are strict regulations concerning their use and serious legal consequences for incorrectly or deceptively marketing a product using these claims.

Understanding Canadian Origin Claims

In Canada, there is no obligation to make “Made in Canada” or “Product of Canada” claims in regards to a product; rather these claims are voluntary. However, if a business chooses to make such a claim, it must be accurate and comply with all applicable regulations.

Canadian Origin Claims are primarily enforced by the Competition Bureau (the “Bureau”), through the Competition Act, R.S.C, 1985, c. C-34, which directly prohibits false or misleading representations (including Section 52 and Section 74.01). The Consumer Packaging and Labelling Act, R.S.C., 1985, c. C-38 (Section 7) and the Textile Labelling Act, R.S.C., 1985, c. T-10 (Section 5), also contain provisions which prohibit false or misleading representations regarding specific product types.

With respect to food-products, the Canadian Food Inspection Agency (the “CFIA”) is responsible for enforcing the rules under the Food and Drugs Act and the Safe Food for Canadians Act, S.C. 2012, c. 24.

What are the key difference between “Made in Canada” and “Product of Canada”?

The primary difference between these two claims is primarily the amount of Canadian content a product contains.

“Product of Canada”

“Product of Canada” claims require at least 98% of the total direct costs of production to have been incurred in Canada. This means that all, or virtually all of the direct costs were incurred in Canada.

“Made in Canada”

The “Made in Canada” claim has a lower threshold than the “Product of Canada” claim, meaning that only at least 51% of direct costs must have been spent in Canada. If you choose to use a “Made in Canada” claim, you must determine whether a qualifying statement is required to ensure clarity and precision. If it is required, the qualifying statement must be tailored to accurately reflect the specific details of the content that is imported. For example, “Made in Canada with imported parts” or “Made in Canada from domestic and imported ingredients”.

While businesses are encouraged by the Bureau to include clear and specific qualifying details, businesses should be cautious of using broad terms like “produced” or “manufactured” without necessary precision as these terms may be interpreted by consumers as equivalent to a “Made in Canada” claim.

Direct costs refer to the expenses that are directly incurred in producing or manufacturing goods. According to the Bureau’s guidance, these costs include:

1. expenditures on materials incurred by the producer/manufacturer in the production or manufacturing of the goods; and
2. expenditures on labour incurred by the producer/manufacturer that relate to the production or manufacturing of the goods and can reasonably be allocated to the production or manufacturing of the goods.

What factors will the Bureau consider?

When assessing whether a Canadian Origin Claim is accurate or misleading, the Bureau will look at several key factors, including the overall message the claim conveys to consumers, where the product underwent its final “substantial transformation”, and where the majority of direct production costs were incurred.

The term “substantial transformation” has been defined by the CFIA to refer to a significant change in the form, appearance, or nature of a product as a result of processing or manufacturing, such that it becomes a new product with a different identity that is commonly recognized as distinct by consumers.

Ultimately, the Bureau will consider the general impression that is being conveyed by a representation. As described in the Bureau’s enforcement guidelines, this means that the Bureau will consider “the general impression conveyed through a combination of words, visual elements, illustrations and overall layout that may alter the plain meaning of a representation”.

What about food products?

As discussed above, the CFIA is responsible for enforcing claims as they relate to food products sold in Canada. Similar to the guidelines under the Competition Act, a business is not obligated to make a Canadian Origin Claim. However, once they do, they must comply with the Food and Drugs Act (Section 5(1)) and the Safe Food for Canadians Act (Section 6(1)).

“Product of Canada” claims should be used for products where nearly all the contents are Canadian-sourced. While some minor non-Canadian materials can be included (such as spices, minerals, or flavouring), they must be minimal and should make up less than 2% of the total product. Packaging materials sourced from outside of Canada do not affect the eligibility of a “Product of Canada” claim, since the focus is primarily on the origin of the ingredients and manufacturing, not the packaging.

In contrast, food products may still use a “Made in Canada” claim even if most of the ingredients come from other countries, as long as the final “substantial transformation” happens in Canada and the label includes a qualifying statement clearly indicating that the product includes imported content.

What about symbols?

Often times, the packaging of products will contain a symbol of Canadiana, such as the Canadian flag or a maple leaf. The inclusion of these symbols and logos, whether intentional or not, can create the impression that the item was “Made in Canada” or a “Product of Canada” amongst consumers. Including such symbols may result in the Bureau holding the business to those standards.

In order to overcome this, it is important to include a clear qualifying statement, to describe the actual origin of the product. This statement should be placed in close proximity to the logo or symbol being used.

What are the penalties and consequences for non-compliance?

The penalties for a false or misleading Canadian Origin Claim will depend entirely on whether the conduct falls under the civil or criminal provisions of the Competition Act.

Under the civil penalties included in the Competition Act, violations can lead to:

1. For corporations, the penalty for a first time violation is up to the greater of:
   1. $10 million ($15 million for each subsequent violation); and
   2. three times the value of the benefit derives from the deceptive conduct, or if that amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenue.
2. For individuals, the penalty for first time violation is up to the greater of:
   1. $750,000 ($1 million for each subsequent violation); and
   2. three times the value of the benefit derived from the deceptive conduct, if that amount is reasonably determined.

Under the criminal penalties of the Competition Act, an individual found to have made false or misleading claims, on summary conviction, may face a maximum penalty of a fine up to $200,000, imprisonment for a term of one year, or both. On a conviction of indictment, an individual may be subject to a fine at the court’s discretion, imprisonment for a term of up to 14 years, or both.

Conclusion

Ultimately, Canadian Origin Claims can boost consumer trust and brand loyalty, especially during these uncertain times, but only if they are made responsibly. There is no obligation to label your product as “Made in Canada” or as a “Product of Canada”, but once a Canadian Origin Claim is made, it must meet the standards outlined above.

If you have any concerns or questions relating to Canadian Origin Claims, Sotos LLP can assist.

Please contact Jason Brisebois at 416.572.7323 or jbrisebois@sotos.ca, or Bailee Kleinhandler at 416.572.7311 or bkleinhandler@sotos.ca to discuss your Canadian Origin Claims.

1. Government of Canada, Competition Bureau, “Product of Canada and “Made in Canada” Claims (2025) at s 3.1 [Bureau Guideline].
2. Ibid.
3. Ibid at s 3.2.1.
4. Ibid.
5. Bureau Guidelines, supra note 1 at s 3.2.2.
6. Ibid at s 2.1.
7. Government of Canada, Competition Bureau, Origin claims on food labels (2023) [Food labels].
8. Bureau Guidelines, supra note 1 at s 3.1.1.
9. Ibid.
10. Food labels, supra note 7.
11. Ibid.
12. Food labels, supra note 7.
13. Bureau Guidelines, supra note 1 at s 4.
14. Ibid.
15. Ibid.

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The Competition Bureau (the “Bureau”) has taken a significant step to challenge anti-competitive practices in the grocery industry. After an extensive investigation by the Bureau, Empire Company Limited (“Empire”) has agreed with the Bureau to remove a property control clause in a commercial lease that had previously prevented competitors from establishing competing grocery stores in Crowsnest Pass, Alberta only. This action by the Bureau represents one of the first applications of the newly-amended Competition Act (the “Act”) provisions.

What is a property control?

Property controls are negotiated restrictions in commercial lease agreements that limit how commercial real estate spaces may be used (including by other potential tenants), imposing restrictions on landlords as to who they may lease space to. Such provisions often decide what types of businesses may lease space from landlords, preventing certain businesses (namely competition), from establishing operations in violation of the provision.

While the largest commercial landlords in Canada generally enjoy significant bargaining power over potential tenants, the consolidated nature of the grocery industry in Canada, combined with the fact that grocery stores tend to be desirable and traffic-generating anchor tenants that drive potential customers to larger commercial developments, Canada’s large and mid-sized grocery chains have had significant success negotiating property control provisions to their benefit. In the grocery industry specifically, large grocery chains often use property controls to restrict landlords from allowing competing grocery businesses to open on lands owned by the landlord unrelated to the location. As a result, property controls have a direct impact on market competition, making it significantly more difficult to open competing stores in the same commercial plaza, or potentially nearby commercial plazas controlled by the same commercial landlord.

The impact of such provisions are acutely felt in smaller communities with limited commercial real estate, or in areas where commercial real estate is controlled by one or a small number of large commercial landlords.

How does the Competition Act address this issue?

The Act has been recently amended to prohibit companies from forming agreements that significantly restrict or reduce competition. Prior to the above amendments, the Bureau was restricted in its ability to investigate agreements between parties that were not considered competitors, such as supply and lease agreements. For example, agreements between landlords and grocery retailers fell outside the Bureau’s scope because the parties were not classified as “competitors” under the Act. However, the recent changes and specifically the amendments to Section 90.1 of the Act, have expanded the authority of the Competition Bureau. Now, the Competition Bureau can challenge agreements between parties that restrict or lessen competition, even if those agreements do not involve direct competitors.

What happened between the Competition Bureau and Empire?

In 2024, the Bureau began investigating the use of property controls by Empire, the parent company of Sobeys Inc., which operates grocery banners such as “Sobeys”, “IGA”, and “FreshCo”. The investigation was conducted to help “determine whether Sobeys and Loblaw are imposing anti-competitive restrictions on the use of real estate…that impact competition in the retail sale of food products”. During the investigation, the Bureau became aware of a property control restriction that was imposed by Empire on one of its “IGA” brand stores, located in Crowsnest Pass, Alberta, a town of approximately 6,000 people.

This property control provision was imposed by Empire in the region in 2017, and effectively eliminated the ability of other parties to establish competing stores to service Crowsnest Pass. The Bureau found that the provision “protected Empire’s grocery store from competition and ensured that it would continue to be the only grocery store in the area”. While conducting their investigation, the Bureau considered the question of whether the restrictions were anti-competitive in nature.

Following the investigation, Empire agreed to remove the property control. As Commissioner of Competition Matthew Boswell stated:

“Market forces – not property controls – should determine whether and where new grocery stores can open in communities across Canada. The removal of this property control in Crowsnest Pass will allow for more grocery competition to the benefit of its residents. We encourage all businesses that use property controls to review them and ensure that they comply with the law.”

The Bureau’s intervention in Crowsnest Pass raises broader questions about the future of property controls in Canada’s grocery industry.

What does this mean for the grocery industry generally?

Competition is key to affordability and choice for consumers, as it may drive the stores to offer lower prices and a wider selection of products to attract consumer dollars. However, property controls can severely limit this competition, and reduce incentives on retailers to compete for such consumer dollars. Even certain large retailers, such as Walmart, have noted that property controls restrict consumers options, making it more difficult for new players to enter the market. This issue is particularly important in smaller communities, where consumer choice is limited, and the ability to “shop around” may be limited or non existent.

The recent amendments to the Act therefore aim to provide the Bureau the power to challenge restrictive covenants in commercial lease agreements. However, the impact of these changes will likely have a greater impact in smaller towns than in major cities like Toronto. In large cities, consumers have access to numerous competing retailers within a short distance, making it easier to avoid the restrictions imposed by a single lease agreement. In contract, in smaller towns, a restrictive covenant can effectively eliminate all competition, leaving residents with no alternative grocery or retail options, as they are unable to drive to another nearby store.

In larger cities, the general thinking is that competition is easier to come by, as density translates to a larger number of consumers, which in turn drives a great number of commercial real estate for grocers to choose form, as well as an ability of consumers to more easily shop around. In smaller towns like Crowsnest Pass, however, there may only be demand for one or a small number of grocery retailers, which means that anti-competitive practices are significantly more easy to impose, but also for the Bureau to police.

While it remains to be seen whether the Bureau intends to continue to take action against property controls, those who will benefit the most from a sustained effort by the Bureau against these practices are likely to be independent grocers and smaller chains, especially those in smaller and rural communities. Assuming that the Bureau continues to challenge property controls, the end result may reduce the practice by large grocers to insist on property controls, potentially creating new opportunities for smaller chains and speciality stores to open in prime retail spaces, such as the same malls or plazas as larger grocery chains.

Certain large grocery chains have expressed openness to removing these restrictive provisions but have conditioned their willingness on all similarly large grocery chains doing the same. Without a broad, industry-wide change, large grocery retailers that also own shopping centers and retail spaces could still control who operates on their properties. This means that those larger chains will strategically select tenants to maintain their dominance in the market, resulting in restrictive agreements continuing in a different form. Additionally, it remains unclear whether the Bureau intends to take an active role in enforcing these new provisions, leaving questions about how much will actually change in practice.

Final guidelines from the Bureau regarding property controls are expected to be published later this year. These guidelines will be informed by the recent public consultation process, where the Bureau encouraged market participants in the food retail and real estate sectors to share their experiences with this practice. While the Bureau has not yet provided specific guidance on how future investigations will be initiated, it is likely that such investigations will be triggered by complaints, market studies, or the Bureau’s general monitoring of the grocery sector.

Conclusion

The recent amendment to the Act are intended to promote greater competition in the grocery sector, especially in smaller communities. However, for real, industry-wide change, major grocery chains would need to willingly stop using property controls altogether, which is something that remains unlikely in the short term.

It is still too early to determine whether this signals a broader push by the Bureau to actively scrutinize and challenge property controls altogether. The recent ruling in Crowsnest Pass sets a precedent, but how these changes will be applied in larger markets with multiple stores remains uncertain. What works in a small town may not have the same impact in a city where competition is already present and where commercial real estate is controlled by the very corporations that dominate the grocery industry.

If major grocery chains continue to enforce property controls wherever possible, the impact of these amendments could be limited. The real test will be whether the industry as a whole moves toward loosening these restrictions, or whether these changes simply create small victories in select markets without disrupting the status quo.

If you have any questions or concerns relating to the enforcement of property controls, Sotos LLP can assist. Please contact John Sotos at 416.977.9806 or jsotos@sotos.ca or Jason Brisebois at 416.572.7323 or jbrisebois@sotos.ca or Bailee Kleinhandler at 416.572.7311 or bkleinhandler@sotos.ca to discuss your grocery sector needs.

1. Government of Canada, Competition Bureau, Competition Bureau advanced investigations into Sobeys and Loblaw’s use of property controls (2024).
2. Ibid.
3. Government of Canada, Competition Bureau, Competition Bureau takes action to protect competition in the grocery industry in an Alberta community (2025).
4. Rosa Saba, “Walmart Canada axing some property controls amid grocery competition scrutiny” Canadian Grocer (November 22, 2024).
5. Government of Canada, Competition Bureau, Call-out for information about property controls in the Canadian grocery industry (2024).

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On March 3, 2025, the Trump administration confirmed that the United States would proceed with imposing blanket tariffs on imports from Canada and Mexico, and increases to existing tariffs on China, effective March 4, 2025. These tariffs include a 25% tariff on all imports from Canada and Mexico, with the exception of Canadian energy resources and minerals, which face a reduced 10% tariff. The tariffs were initially planned to take effect on February 4, 2025, but were delayed by the Trump administration pursuant to ongoing negotiations with Canada and Mexico. The White House has also announced the imposition of 25% U.S. tariffs on all steel and aluminum imports with an expected effective date for imposition of March 12, 2025.

On March 4, 2025, the Government of Canada announced that, in response to U.S. tariffs, the Government of Canada would move forward with 25% tariffs on $155 billion worth of imported U.S. goods, beginning immediately with a first tranche covering $30 billion worth of goods. The scope of the Canadian counter tariffs will be increased to $155 billion if the current U.S. tariffs are maintained, and may also be increased if new U.S. tariffs are imposed. Beyond the federal government’s response, several Canadian provinces have implemented their own retaliatory measures. These include restricting government procurement opportunities for U.S. suppliers, terminating existing contracts and disqualifying future bids from U.S. companies, and removing American alcoholic products from provincially-controlled liquor stores. Ontario Premier Doug Ford has also indicated that he is considering imposing an export tax on Ontario-produced energy, and even halting energy and certain mineral resource exports altogether.

The implementation of U.S. tariffs and Canadian counter tariffs on imported goods will have widespread effects across various industries, including the franchise sector. Franchisors and franchisees must understand and prepare contingencies on how to navigate the legal and business consequences posed by the rising costs, disrupted supply chains and shifting market dynamics associated with these tariffs.

Supply Chain Analysis: Key Considerations for the Franchisor-Franchisee Relationship

Franchisees that depend on imported goods—whether for equipment, supplies, or inventory—may face substantial cost increases due to tariffs. For instance, tariffs on raw materials, such as steel and aluminum, as well as finished products, will likely drive up operational expenses and delay deliveries, potentially disrupting the system’s supply chain. This will impose increased costs on franchisees, which will necessitate a difficult decision between absorbing such costs, passing them on to customers, or a combination of both. Many franchise agreements also require the use of specific materials and equipment to maintain consistency throughout the system, which may limit (absent franchisor intervention) the ability of franchisees to easily adapt to changing economic circumstances.

Maintaining a strong franchisor-franchisee relationship is key in navigating these changing market conditions. Below are certain key considerations for franchisors in navigating this relationship:

• Initial Investment: Franchisors must consider whether they should make changes to their initial investment expectations and requirements for franchisees. If tariffs increase the cost of equipment, supplies, or inventory, franchisors should consider reviewing and revising the initial investment estimates to reflect these higher costs. Failure to do so may mislead potential franchisees about their expected expenses. Moreover, failing to account for such changes may be setting franchisees up for failure before they even begin operating.
• Ongoing Expenses and Unit Economics: Franchisors should evaluate how tariff-induced cost increases affect their unit economics, including per-location profitability, break-even points, and overall financial sustainability. Clearly presenting this data can help franchisees make informed investment decisions. If tariffs impact ongoing costs, such as supply procurement or vendor agreements, these changes should be disclosed. Franchisees should be made aware of potential cost fluctuations. Franchisors should assess franchisee costs on a market-by-market basis, and prepare to be flexible on procurement where necessary to ensure that franchisees’ unit level economics remain viable in light of this volatility.
• Supply Chain and Sourcing Restrictions: If a franchise system mandates specific suppliers affected by tariffs, these restrictions should be transparently disclosed. Franchisors may also explore whether allowing some flexibility in supplier selection can help mitigate disputes, and actively work with franchisees to assess whether domestic alternatives exist that will (while perhaps not entirely consistent with brand standards applicable in the U.S.) allow the franchisee to continue operating without further hardship than is necessary.
• Financial Performance Representations: Franchisors should monitor profit margins and other financial metrics due to tariff-related cost increases and assess whether tariff-related cost increases are a development that impacts financial performance representations. Providing outdated or overly optimistic projections could expose franchisors to legal claims and otherwise adversely impact the franchisor-franchisee relationship.

Consumer Price Sensitivity

Franchisors should also consider whether to authorize or encourage price increases for goods and services. However, price-sensitive consumers may reduce their spending or seek alternatives, particularly in highly competitive industries such as quick-service restaurants, retail, and hospitality. It is critical that franchisors consider balancing necessary price adjustments with consumer expectations in order to maintain brand reputation and profitability. In light of these challenges, franchisors should consider which obligations currently imposed on franchisees are crucial to maintaining brand standards, and which others may be more flexible.

Adapting to Tariffs for Growth and Expansion

Predictable costs and strong unit economics are the hallmarks of a successful franchise system. While tariffs imposed by the U.S. and Canada’s counter tariffs may create new cost pressures, they also present opportunities for Canadian brands to emphasize domestic production and sourcing, which can resonate with consumers and differentiate them in the market. Similarly, U.S. brands entering Canada may still find opportunities to expand, particularly when the favourable exchange rate helps offset tariff impacts, allowing cost-competitive pricing in the Canadian market. Franchisors and businesses that adapt their supply chains, pricing strategies, and brand positioning to these evolving dynamics can still find opportunities for growth and expansion despite the shifting trade landscape.

Opportunities and Competitive Shifts

While tariffs impose significant challenges for businesses of all stripes, they also provide opportunities for savvy and opportunistic businesses. For example, Canadian franchise systems with predominantly domestic supply chains may reap the benefits of changing consumer preferences towards Canadian-made products, while products previously bound for the U.S. may be sold domestically at the same or lower prices. Franchisors can also re-evaluate global sourcing strategies to mitigate tariff exposure.

To address ongoing challenges, franchisors should consider the following actions:

• Supply Chain Diversification: The tariffs should prompt franchisors to carefully re-evaluate suppliers and explore domestic alternatives where feasible.
• Negotiating Terms: Franchisors and franchisees should also work with suppliers to share or reduce tariff-related cost burdens.
• Efficiency Measures: Franchisors and franchisees should invest in technology or streamline operations to offset increased expenses.
• Franchise Disclosure and Agreement Revisions: It is critical that franchisors assess whether franchise disclosure documents and franchise agreements need adjustments to address unforeseen consequences arising from the tariffs.

Advertising Considerations: Made in Canada

While not the primary focus of this article, businesses should keep in mind that promoting products as “Made in Canada” or “Product of Canada”, or highlighting Canadian ownership, can be a valuable strategy for brands seeking to reduce the impact of tariffs between Canada and the United States. However, businesses must ensure that such claims comply with Canadian law, including the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act. These acts prohibit false or misleading representations, and restrict how and when such claims can be used. Businesses that choose to make “Made in Canada” or “Product of Canada” claims must ensure their claims meet the appropriate guidelines and thresholds. Our firm works closely with companies to develop compliant, strategic branding approaches that not only highlight Canadian origins, but also help navigate cross-border trade challenges.

Conclusion

U.S. tariffs present significant challenges for the franchise industry, with potential legal and financial implications for franchisors and franchisees alike. If you have any concerns as to how these tariffs will affect your system, and how to navigate these challenges, Sotos LLP can help. At Sotos LLP, we have acted for hundreds of clients in every aspect of the franchising process for over forty years. We have extensive knowledge of the regulatory issues that may arise from the introduction of tariffs and regularly assist with supply chain evaluations, contract revisions, and strategic planning to mitigate risks and seize opportunities in this complex regulatory environment. Our firm can assist in developing tailored strategies to mitigate the impact of tariffs, whether through supply chain restructuring, trade compliance planning, or leveraging available exemptions We can also assist in reviewing disclosure requirements in light of the tariffs.

Please contact Peter Viitre at 416.977.7754 or pviitre@sotos.ca, Jason Brisebois at 416.572.7323 or jbrisebois@sotos.ca, or Nicole Perez at 416.977.3674 or nperez@sotos.ca to see how we can help your franchised business adapt to ever-changing economic conditions.

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The Canadian Trademarks Opposition Board announced the Pilot Project in December 2024. Beginning January 2025, the Canadian Intellectual Property Office (“CIPO”) will send notices to registered trademark owners asking them to prove that their trademarks are actively in “use” in Canada. If the registered trademark owner is not able to provide proper evidence, the trademark registration may be cancelled.

Background

Unlike other countries, Canada does not require trademark owners to provide evidence of use of their trademarks prior to a mark being registered or to file any evidence during the lifespan of the registration that the trademark owner continues to use the registered mark.

Under Section 45 of the Canadian Trademarks Act (the “Act”), the Registrar can ask a trademark owner to prove that it has been actually using its trademark in Canada over the past three years. If the trademark owner is not able to provide evidence that the trademark as been in use, and that there is no exceptional circumstances for the non-use, the trademark registration can either be changed to only cover the goods and services that are actually being used or the registration may be cancelled entirely.

Who will be examined?

Registered trademarks will randomly be picked from the following categories:

• registrations based on use;
• registrations that said they would be used in the future, and proof of use was given;
• registrations that are used or registered in another country;
• registrations that fall into more than one of these categories; or
• registrations that have been registered for more than three years.

What is the purpose of the Pilot Project?

The goal of the Pilot Project is to ensure that the Trademark Register includes only trademarks that are actively being used in Canada. It is essentially cleaning up old or unused trademarks – as CIPO has stated, clearing out the “deadwood” from the Trademark Register.

The Pilot Project has three main goals:

• make it easier and faster for businesses to register new trademarks;
• help to maintain fairness by getting rid of unused trademarks that block new ideas for brands; and
• keep the trademark system honest by ensuring the Trademark Register only shows active trademarks and what they are being used for.

How will the Pilot Project work?

The Pilot Project will happen in two steps.

Step 1: Starting in January 2025, CIPO will send out 100 notices. Then, in February and March 2025, CIPO will send out two more groups of 50 notices each. The notices will target trademarks that are over three years old, and will ask trademark owners to prove that they have been using their trademarks in Canada over the past three years.

Step 2: CIPO will ask the public for feedback on the project. CIPO is hoping to gather information on whether the process should be permanent and how it should work in the future.

How to respond to a notice?

To help trademark owners, CIPO has shared resources, such as a guide and sample affidavit, to help prepare evidence. However, CIPO warns that any evidence submitted will be made public, as required by Section 29(1)(f) of the Act. Trademark owners should therefore be careful not to include personal or sensitive business information that is not necessary and should redact the information before submitting. It is strongly recommended that you speak with legal counsel experienced in trademark matters to assist you in responding to any notice from CIPO.

Registered trademark owners can prove that their trademark was used in Canada in the last three years by submitting a detailed affidavit or statutory declaration, complete with exhibits and supporting evidence. This document should confirm that the trademark is being used in Canada and include examples to demonstrate how the trademark was used for all the goods and/or services listed in the registration.

If the trademark has not been in use, registered trademark owners can submit an affidavit or declaration explaining why the trademark has not been in use and if there were any special circumstances. The Registrar will consider:

• how long the trademark was not used;
• if the reason for not using the trademark was out of the owner’s control; and
• if the owner plans to start using the trademark again soon.

Trademark owners must send their evidence demonstrating use within three months of getting the notice from CIPO. If the trademark owner fails to do so, CIPO may unilaterally cancel the trademark registration.

Why is this important?

With the Pilot Project sending out Section 45 notices more often, trademark owners need to be ready to prove that they are actually using their trademarks in Canada. This includes keeping copies of invoices, photographs of products, and marketing materials that show the trademark is being used with the goods and/or services that it is registered for. Trademark owners need to be proactive not only to protect their trademark but also to follow CIPO’s rules and requirements.

For more specific details on the Pilot Project, please see the Government of Canada’s practice note.

How can Sotos LLP help?

If you receive a Section 45 notice, want to review the status of your registrations, or have any other trademark related concerns, Sotos LLP can help. Specifically, we can assist in ensuring that your evidence is properly prepared and submitted to meet CIPO’s requirements.

At Sotos LLP, we have acted for hundreds of trademark owners in every aspect of protecting their intellectual property for more than 40 years. We have extensive knowledge of intellectual property issues, and regularly act in the procurement and licensing of trademarks, as well as in defending our clients’ trademarks rights and opposing trademark applications on behalf of our clients.

Please contact John Yiokaris at 416.977.3998 or jyiokaris@sotos.ca or Bailee Kleinhandler at 416.573.7311 or bkleinhandler@sotos.ca to discuss your intellectual property and trademark issues.

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