Government publishes 'final' Draft Exclusion Order
relating to Land Agreements and the Competition Act
The Department of Trade and Industry has published
what is likely to be the last draft of the land exclusion order
relating to the Competition Act, which will come into effect on 1
March. The new order contains few major surprises, yet reveals some
interesting matters. These include:
- The definition of an ‘interest in
land’ has been extended, so that licences will now benefit
from the exclusion order.
- Town centre management agreements will not
benefit, but the Competition Act is unlikely to have any
significant impact on these agreements because they are not by
their nature anti competitive.
- Landlords will still be able to give covenants
agreeing not to prevent competing uses in shopping centres.
- Examples in the summary, which talk about certain
trades and activities not benefiting from the exclusion order, are
useful and make it clear that the Director General of the Office of
Fair Trading is not trying to exclude factory outlet leases from
the exclusion order.
However, there are still some covenants that are
requested, for example, by sellers of land that will not benefit
from the exclusion and may therefore be caught by the Act.
This is because the focus is on the capacity in
which a party enters into or receives the benefit of a restriction
(i.e. it must be as a holder of an interest in land and not some
other capacity, say, a trading capacity). The most obvious example
is if, say, a food retailer were to dispose of a surplus site but
insist that the buyer covenant not to sell food from that site for
a period of years, this covenant would be for the benefit of the
seller’s retained business, and the agreement would not
benefit from this exclusion.
In addition, we now have a detailed comment from
the DTI on Part II of the Act which the exclusion order will not
affect. For example, ownership by an undertaking of an
‘essential facility’ could confer a dominant position.
The examples quoted in the consultation paper include ports, bus
stations, utility distribution networks and some telecommunications
networks. Companies providing ‘essential facilities’
such as these will need to look carefully at what they do to avoid
falling foul of the Competition Act.
We will shortly be preparing a further detailed
note on the Competition Act and its overall impact on property
transactions.
For further information, please contact Mark
Heighton at mrh@cms-cmck.com or +44 171 367 2177.