The Office of Fair Trading (OFT) has today issued guidance on
the impact of the revocation of the Land Agreements Exclusion Order
on land agreements. As reported in our LawNow of July 2010
(
Land Exclusion Order – What Does This Mean For
Exclusivity Covenants?), the abolition of the Order means that
land agreements will now be treated in the same way as other
commercial agreements.
The purpose of the guidance is to help parties apply the general
principles of competition law to land agreements and assist in
deciding whether a restriction, usually an exclusivity covenant,
will be anti-competitive.
Some of the key points arising from the guidance are as
follows:
- Just because a land agreement contains a restriction does not mean that it will infringe the prohibition against anti-competitive behaviour set out in Chapter I of the Competition Act 1998 and Article 101 of the TFEU. In fact, the OFT recognises that there may be legitimate reasons to include a restriction and expects only a minority will actually fall foul of competition law.
- The prohibition will only apply to land agreements between businesses. It will not affect agreements with individuals acting in their own capacity.
- To assess the impact of a restriction, the context in which the land agreement is implemented will need to be considered. Such assessment will need to involve defining the relevant market in which the parties operate, identifying the parties' market shares and determining whether the restriction will have an "appreciable" impact on competition. If it is determined that the agreement may prevent, restrict or distort competition, then the next step is to consider whether it satisfies the criteria for exemption. These steps are explained fully in the guidance.
- Chapter II of the Competition Act 1998 and Article 102 of the TFEU which prohibit the abuse of a dominant position in a market apply equally to conduct relating to land as they do to any other conduct. The guidance explains how conduct relating to land may trigger these prohibitions.
- The guidance gives some useful examples in section 8 setting out potential scenarios and analysing whether they may breach the competition rules.
- It is clear that restrictions which try to prevent other businesses from entering into the market, or which are aimed at sharing markets, are most likely to be anti-competitive.
The guidance also sets out the enforcement action that may be
taken by the OFT in respect of a prohibited agreement. The
OFT's powers include the ability to impose fines of up to 10%
of worldwide turnover. The land agreement will also be deemed
void and unenforceable. However, if the land agreement
contains severance provisions, it may be possible in less serious
cases for the offending provisions to be severed and the remainder
of the agreement to remain valid and enforceable.
The guidance has been issued as part of a consultation process and
the OFT is inviting interested parties to comment on the guidance
before 14th January 2011. Following this process, the OFT
will consider whether any changes are required to the guidance and
issue the final guidance prior to the revocation coming into force
on 6th April 2011.
The OFT's guidance can be found here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 15/10/2010.