Competition Law And Land Agreements - What's Changed?

How has competition law changed?

Chapter 1 of the Competition Act 1998 (the Competition Act) prohibits agreements between two or more businesses which have the effect of preventing, restricting or distorting competition within the UK.

Up until April 2011, land agreements were excluded from this prohibition by the Competition Act (Land Agreement Exclusion and Revocation) Order 2004 (the Exclusion Order). From 6 April 2011, the Exclusion Order has been revoked and companies will now have to self-assess land agreements to ensure they comply with UK competition law.

What is a land agreement?

All new and existing agreements which create, alter, transfer or terminate an interest in land are caught by the Competition Act. This includes:-

Leases Development agreements Contracts for sale Transfers of land Easements Licences The prohibition on competition excludes planning agreements, for example section 106 agreements. It does not apply where one party to the agreement is an individual who is not acting in a business capacity. This is intended to exclude residential agreements, but there may be some cases where individuals are deemed to be carrying out 'commercial or economic activities'.

The important point to note is that the revocation of the Exclusion Order will be retrospective. This means that existing land agreements entered into prior to 6 April 2011, as well as new ones, will need to be considered. It is also important to realise that provisions in land agreements cannot purely be assessed at the time they are entered into. Provisions that may not breach the Competition Act at the time the agreement is entered into may need to be re-assessed at future points in time, as circumstances and market conditions change.

What sorts of provisions are likely to breach the Competition Act?

Land agreements often contain provisions which restrict the way in which land can be used or how a right can be exercised. Examples of these include:-

Restrictive covenants Exclusivity provisions Permitted user and restrictive user provisions The relevant provision will infringe the Competition Act if it has an 'appreciable effect on competition in the relevant market'. These phrases are important to bear in mind and there has been some guidance given by the OFT, as mentioned below.

Exemptions

There are some limited exemptions that apply. Land agreements where the parties' market share is below a 10-15% threshold will be outside the scope of the Competition Act...