Land Agreements and the Competition Act

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 [email protected] or +44 171 367 2177.