The Competition Act 1998 was introduced to bring the UK in line with EU regulations and deals with restrictive practices engaged in by companies operating within the UK that distort, restrict or prevent competition.

It is governed by the Competition and Markets Authority (CMA) who were formerly known as the Office of Fair Trading (OFT).

Property transactions – referred to in the Act as “Land Agreements” were excluded from the provisions of the Act.

However the exclusion of Land Agreements from the Competition Act 1998 was revoked with effect 6 April 2011.

Why was the exclusion revoked? Concerns had been raised about the practices of the major supermarket

groups acquiring land for new stores in towns and acquiring additional parcels of land and placing restrictive covenants on them prohibiting their use for the sale of food. This was put a stop to by the GMI Controlled Land Order 2010 which made such restrictions illegal.

Consideration was then given to other restrictive practices within the property industry and the exclusion of land agreements was revoked on 6 April 2011.

COMPETITION ACT 1998

ALL PROVISIONS WHICH BREACH CHAPTER 1 OF THE COMPETITION ACT 1998 ARE AUTOMATICALLY VOID AND UNENFORCEABLE – SLATE WIPED CLEAN ?

SO NEITHER SIDE CAN RELY ON THE ORIGINAL AGREEMENT BEING OPERABLE

BUT PLANNING AUTHORITY RESTRICTIONS ON DEVELOPMENT ARE STILL PERMISSIBLE

LANDLORDS & TENANTS SHOULD AUDIT THEIR LEASES & TITLE DEEDS AND TAKE ADVICE FROM “COMPETITION LAWYERS”

LAND AGREEMENTSWhat does this cover ?

COVERS TITLE DEEDS, ONWARD SALES CONTRACTS, LOCK-OUTS, LEASES, SIDE LETTER EXCLUSIVITY AGREEMENTS, RESTRICTIVE USERS, TENANT MIX POLICIES

TRIGGERED WHEN BREACH IS IDENTIFIED. TENANT MAY COMPLAIN TO CMA. CMA MAY ACT THEMSELVES PARTIES MUST SELF-ASSESS – THERE IS NO EASY CHECK WITH CMA BETWEEN THE PARTIES ( L/L & T ) IT IS CONTRACTUAL CMA IS INTERESTED IN PREVENTING ANTI-COMPETITIVE BEHAVIOUR

CMA GUIDELINES- ANTI-COMPETITIVE IF “PREVENTS RESTRICTS OR DISTORTS COMPETITION”- THE IMPACT ON COMPETITION MUST BE “APPRECIABLE” – 10% -15%- CONSIDER BOTH THE “PRODUCT DIMENSION” AND GEOGRAPHIC DIMENSION”- ECONOMIC BENEFITS AS A WHOLE CONSIDERED – SO EXEMPTION MAY BE

GRANTED- RESTRICTION MUST BE SUFFICIENT TO ACHIEVE PURPOSE BUT NO MORE

THAN SUFFICIENT

COMPLAINANT MUST BE ABLE TO DEMONSTRATE RESTRICTION IS “APPRECIABLY” RESTRICTING COMPETITION

HOW IS ACTION TRIGGERED ?WHAT ARE THE GUIDELINES ?

Anchor tenant (Department store) would qualify as exemption – down to commercial viability – but for limited period

Restrictive users to achieve retail mix qualify if not too anti-competitive

Existing centre – exclusivity to one coffee shop – a product issue not qualify

Food court in existing or proposed centre – each specified use would qualify

Small town – restriction in title on use – would not qualify as circumstances may change

Reasonable duration for exemption – sufficient to achieve purpose – 5 years – fit out cost – developing business – returns in 4th, 5th years

CMA – WORKED EXAMPLES OF QUALIFYING/NON QUALIFYING

EXEMPTIONS

TENANTS STILL SEEK EXCLUSIVITIES IN HOT’S L/L’S WILL STILL GRANT THEM WHEN THEY NEED TO – BUT SUBJECT

TO 5 YEAR LIMIT TENANTS INSERTING BREAK CLAUSES CONDITIONAL ON EXCLUSIVITY –

OPERABLE IF/WHEN L/L BREACHES TENANTS SEEKING RESTRICTIONS AGAINST COMPETING TEMPORARY

TENANTS MOST EXCLUSIVITIES LIMIT COMPETITION ON FIRST OR DIRECT

LETTINGS ONLY L/L CAN AGREE ASSIGNMENT TO COMPETING USE BUT AGREE A DEED

OF VARIATION TO ACCOMMODATE ASSIGNEES REVISED TERMS TENANTS NOT YET WILLING TO AGREE TO `LIVE AND LET LIVE` L/L’S IN STRONG CENTRES USING PRE-EMPTIONS MORE TO KEEP OUT

DISCOUNTERS USE OF TENANT MIX POLICY EVER MORE IMPORTANT ( WRITTEN OR

UNWRITTEN) FINANCIAL ARRANGEMENTS/REGEARS TO AVOID LEGAL ACTION

WHAT IS HAPPENING IN PRACTICE ?

FOR LANDLORD

10% OF WORLDWIDE TURNOVER UP TO 15 YEARS DISQUALIFICATION AS DIRECTOR

TENANT CAN SUE LANDLORD FOR BREACH OF CONTRACT

DAMAGES WILL BE LOSS OF PROFITS

ONLY ONE REPORTED CASE SINCE 6th APRIL 2011 Martin Retail Group v Crawley BC 2013

PENALTIES

Crawley Borough Council (CBC) managed a parade of shops on a housing estate

• MRG wanted to sell groceries (alongside news, confectionary, tobacco & stationery products)

• This activity prevented by user clause in MRG's lease (reflected CBC's letting scheme for a diverse retail mix)

• MRG requested a wider user clause as part of its 2011 lease renewal

• Already a supermarket/convenience store in the parade.

• So CBC denied request • Case heard by London County Court. Decision was

that the user restriction was anti-competitive. MRG allowed to sell groceries

MARTIN RETAIL GROUP V CRAWLEY BC ( 2013 )

"There are many legitimate reasons why a person or business may impose or agree to restrictions which affect or limit the way in which land may be used or how a right over land may be exercised in a land agreement. Such restrictions do not necessarily infringe competition law and the CMA expects that only a minority of restrictions will do so.“

It remains to be seen whether there will be any more legal cases on this issue given that there are so many restrictions still in place and new ones being put in place.

The conclusion is that exclusivities are very much alive and well.

Are all land restrictions anti-competitive?