Chip Taylor

Anti-competitive covenants

I had never run across this before. From the Chicago Tribune:

When the Dominick's store in West Lawn closed last spring, ending more than two decades in the Southwest Side neighborhood, residents expected another grocer to quickly fill the void.

A year later, however, the 54,000-square-foot building remains vacant, and neighborhood residents who once walked to the store now take buses or beg rides to full-line grocery stores miles away.

Pete's Market, a local grocery chain, wanted to take over the space. But Dominick's has blocked Pete's and every other grocer from using the space inside an aging shopping plaza by placing a restriction in the deed that bars grocery stores.

Restrictive covenants have been a common tactic in the grocery industry, used to thwart competition and control markets. Records show that two North Side properties that used to house Dominick's groceries carry the same restrictions.

I have a mixed reaction to this. My first thought is that it probably isn't as beneficial to the grocery chain or as harmful to the community as it first appears. The grocery chain pulled out of the neighborhood for a reason -- probably because the neighborhood couldn't really support a supermarket. In that case, I'm not sure what the grocery is protecting itself from; the next store probably won't do any better. And if that's the case, the neighborhood isn't really deprived of a supermarket in the long run; it will still be minus a supermarket after the next one folds up.

On the other hand, the next supermarket may know something the last one didn't. And it is a fact that other chains are willing to move into the vacated buildings in some instances. Of course, the next chain might be able to buy another piece of property, but what the heck -- there is already a vacant supermarket building. Constructing another seems wasteful.

The City of Chicago is planning to put a stop to the practice:

But across the nation, community groups and elected officials are beginning to cry foul, saying restrictive covenants not only hurt business competition but punish whole neighborhoods.

"Who are they, because they want to pull up stakes, to say that we can't have something that's similar in our neighborhood?" Edie Cavanaugh, executive director of the West Lawn Chamber of Commerce, said of Dominick's and the grocery industry. "That's just not right."

Now in what is believed to be the first legislation of its kind in the country, the Chicago City Council will consider an ordinance that would prevent proprietors of groceries or drugstores from engaging in the practice.

"When a business leaves the community, that doesn't give the business the right to leave the community high and dry," said Ald. Manuel Flores (1st), who plans to introduce the ordinance at the May 11 City Council meeting.

Flores said the legislation targets groceries and pharmacies because they are vital to the health of neighborhoods and frequently occupy large tracts of land in shopping centers or at key intersections where they are catalysts for development.

That's true. The loss of a local supermarket is the sort of thing that contributes to a neighborhood's downward spiral. You lose the supermarket; people move away; there are fewer people to support a supermarket; you can't get one or the next one fails; more people move away, and so on. Of course, the loss of the supermarket is as likely to be a symptom as the cause, but the causation is cumulative. If some chain is willing to come in and give it a go, it's a shame to see extra obstacles in its way.

Here is what Dominick's has to say:

Dominick's spokeswoman Wynona Redmond said it is never the company's intention to deprive a neighborhood of access to groceries and that, in some instances, it has lifted its covenants.

"We deal with each site on a case-by-case basis," Redmond said. "There's no one-size-fits-all remedy."

Sounds like unadulterated BS to me. If a covenant to prohibit grocery stores isn't intended to prohibit grocery stores, then what is it intended to do?

I think restrictive covenants are useful in other contexts. Residential subdivisions use them to prohibit certain uses or to require certain design standards. Seems like a good private alternative to micromanagement by the local planning office to me.

Conservation easements (similar to, but not the same as a restrictive covenant) are used by people who want to preserve their own land from development in perpetuity.

But I think I would have problems getting worked up over an effort to prohibit them in this context.

Hat tip: Otis White's Urban Notebook.