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Home | News & events | Legal updates | Land agreements to be subject to UK competition law
Land agreements to be subject to UK competition law
22 March 2010
From 6 April 2011 the property industry will have to 'self assess' land agreements to ensure they comply with competition law.
Relevant agreements include transfers, surrenders, leases and licences.
Until now, property owners have enjoyed the benefit of the Land Agreements Exclusion Order which excludes land agreements from the ban on anti-competitive agreements. This means land agreements and common restrictions contained in them - like exclusivity clauses - are deemed not to be anti-competitive and so are legal and enforceable.
When the Order was enacted, it was still possible to notify agreements to the Office of Fair Trading (OFT) for formal 'clearance' under the competition rules.
The Government's view at that time was that the majority of land agreements were unlikely to be anti-competitive. So the Order was a useful way of preventing the OFT from being swamped with clearance requests in respect of land agreements that did not cause any significant competition problems.
Since the Order came into force, there have been two important developments:
- first, it is no longer possible to notify agreements to the OFT for competition clearance - this means there is no longer any practical reason for retaining the Order
- second, and more importantly, the Competition Commission's enquiry into grocery retailing found that restrictions in land agreements can be anti-competitive, for example where they prevent companies from entering a market. Such restrictions harm competition - and consumers - and so should be subject to the competition rules in the usual way
It would be extremely difficult to remove the Order from only certain categories of land agreements - such as those in the groceries sector. As a result the Government has decided to revoke the Order completely, with effect from 6 April 2011.
What does this mean?
All land agreements will have to be assessed to ensure compliance with UK competition rules. Under the UK competition 'self assessment regime' it will be for companies to determine whether their land agreements breach competition laws. These assessments can be complex and difficult, as they involve analysing the market impact of the agreement.
As there will be no exemption for existing agreements, these will also need to be reviewed. They may require amendment to ensure compliance with UK competition laws.
Those who are probably most likely to be affected by the revocation of the Order are developers, land owners and those in the retail sector.
The OFT is expected to publish guidance in late 2010 on how it will assess land agreements.
What are the risks?
Anti-competitive restrictions in agreements are void and unenforceable. In addition, the OFT has the power to impose fines of up to 10% of worldwide turnover and to order that an agreement ceases, or is modified.
To minimise the risk, companies should now review their existing land agreements and ensure these - and all new agreements - comply with the competition rules.
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Sarah Livestro
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T: 03700 86 5148
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