On 15 October 2010 the OFT issued draft guidance on the application of competition law to land agreements. This follows the revocation of the Competition Act 1998 (Land Agreements Exclusion and Revocation) Order 2004 (the 'Order') which takes effect from 6 April 2011.
Under the Order, specified land agreements are excluded from the UK prohibition of anticompetitive agreements. From 6 April 2011, however, the special exclusion will be revoked and companies will have to self-assess land agreements for compatibility with the full range of competition law, as is necessary for other types of agreement.
Only those agreements that appreciably prevent, restrict or distort competition will be caught (and will consequently be void and unenforceable). The OFT states that there is no presumption that a restriction in a land agreement constitutes an infringement of competition law, and that it expects only a minority of restrictions to be anti-competitive. Further, competition law will only bite against those land agreements that are between businesses, and not transactions with individuals.
The draft guidance focuses on the self-assessment process and is intended to assist in applying the general principles of competition law. It provides a framework for assessing relevant features such as restrictions that may limit the way that land is used or the way in which rights over the land are exercised. The OFT notes that the types of restriction most likely to impact on competition are those which keep other companies out of a market, or which aim to make it more difficult for other businesses to compete.
Assessing the relevant market is a key step in determining whether there is a competition issue in a particular case and the OFT provides some guidance on this aspect. The guidance also sets out worked examples and a flow-chart to aid the self-assessment process.
In order to complete the picture, there is some guidance on how the chapter II prohibition against abuse of a dominant position (which has always been potentially applicable to land agreements) may apply.
As ever the effectiveness of these guidelines will depend on how useful they are in real life situations and the OFT is inviting feedback by 14 January. Final guidance is expected in 2011, although it is not clear if this will be before or after the exclusion is revoked on 6 April.
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