In April this year, the treatment of land agreements under EU
competition law has now radically changed. Whereas previously land
agreements such as leases, sub-leases, and title deeds and
conditions, generally have been allowed to contain restrictions,
such restrictions will now be subject to the rules of competition
law.
In preparation for this, the Office of Fair Trading has released
draft guidance for businesses intending to conduct reviews into
their land agreements. Such guidance intends to provide a practical
framework for conducting these reviews by highlighting certain
aspects of the new legal framework including:
- That it only applies to "undertakings" and will not affect individuals not engaged in business;
- That while not retroactive, it does apply to all existing land agreements as from 6 April 2010;
- That restrictions by themselves do not give rise to a presumption of infringement;
- That to infringe, the restriction must appreciably affect competition in the relevant market; and
- That restrictions which make it more difficult for a business to enter into or compete in the relevant market are more likely to be seen to be anti-competitive.
The type of restrictions that will fall foul of the competition
law regime will depend upon their effects on competition and not on
the particular wording of that restriction. There are exemptions
for certain restrictions, such as that found under s.9 of the
Competition Act if it can be shown that a restriction brings
economic and consumer benefits and that it has been drafted in the
lease restrictive manner possible.
Although no definitive list of restrictions can be drawn up,
examples of restrictions which may be caught by the new law may
include exclusivity clauses and restrictive covenants. Restrictions
that are found to appreciably affect competition will be
unenforceable and the party that relied on it may be subject to
investigations and liable to fines and/or damages to third
parties.
In conducting their reviews into land agreements, businesses should
consider the following factors:
- What the relevant product and geographical market is;
- The competitive conditions in the market for the land itself. For instance, is there other suitable land for that particular activity available;
- The nature and location of the property affected by the restriction;
- Whether the site has unique qualities;
- Whether there are planning restrictions in place that may create trade barriers;
- The duration of any restriction; and
- The actual difference the restriction makes to the functioning of the relevant market.
It is recommended that businesses conduct reviews into land
agreements they are a party to/or intend to be a party to using
these factors to identify any potential competition law concerns
and to see if amendments may be necessary to make them competition
law compliant. They should also ensure that staff and management
are sufficiently aware of, and have received adequate training in,
competition law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.