Competition Law And Land Agreements - Practical Illustrations

As we saw in our previous briefing note, a land agreement will fall foul of the Competition Act if it has as its object or effect the restriction of competition, unless it is exempt.

The relevant market

In assessing whether provisions within a land agreement fall foul of the Competition Act the first thing to identify is the market that you are considering. An agreement which restricts the sale of electrical equipment out of premises in Bradford is going to be relevant to the market for electrical equipment in Bradford, but is of no consequence to the market for electrical goods in London or the market for children's clothes in Bradford. So when considering whether a restriction falls foul of the Competition Act you need to identify what the relevant market is and then consider what the effect on that market is.

Some examples

Take a new out of town retail park. The owner is attracted to the site on which it is built because there are no other retail shops within a 20 mile radius and due to planning restrictions there is no realistic possibility of competing retail outlets within the 20 mile radius. The anchor tenant is intended to be a major electrical retailer. In order to attract the anchor tenant the owner of the retail park contracts with the tenant that no other electrical retailer will be granted a tenancy over any part of the retail park for 5 years. The relevant market here would be that for electrical retailers within the catchment area of the retail park.

A variation on the retail park example: Take the owner of two plots of land which are suitable for developing an out of town retail park. There are no other retail shops within a 20 mile radius of the two sites, which are 5 miles apart and benefit from similar amenities. The owner grants a lease of one site to a property developer. In the lease the owner covenants not to use the other site for the development of retail premises. The relevant market in this example is similar to that in the first in terms of geography, but unlike the first example the market is the market for retail premises generally, rather than a particular type of retailer.

Identifying infringement

Having identified the relevant market in each case, does the exclusivity agreement (in the first example) and the restriction on use (in the second) distort competition? The answer in each example is yes, as the beneficiary of the restriction has fettered the ability of a rival to compete.

However, this is not the...