WIREDGOV

The OFT has yesterday published a guideline for businesses about the types of land agreements that may infringe competition law.

Until now, agreements between businesses concerning land have benefited from special treatment and have been excluded from the UK competition law prohibition on anti-competitive agreements.

However, from 6 April this exclusion will be removed and restrictions that prevent, restrict or distort competition will be void and unenforceable. Companies involved in anti-competitive agreements can also face fines of up to 10 per cent of their annual worldwide turnover.

The OFT has carefully considered responses from a number of interested parties on draft text published in October 2010 and, in response, the final guideline seeks to provide greater clarity about the types of agreement that are likely to infringe competition law and those that are not. 

The guideline sets out that:

• There is no presumption that a land agreement will infringe competition law and the OFT expects that only a small minority will do so.
• Restrictions on the use of land may potentially infringe competition law where this protects a business from competition, or prevents its competitors from entering a market.
• Generally, the OFT is unlikely to take further action in cases where none of the parties to an agreement has more than a 30 per cent share of the market in which the land is being used.

OFT Senior Director for Policy, Cavendish Elithorn, said:

'Our guideline should reassure businesses that in most cases there is very unlikely to be a problem with a land agreement, while helping them to consider whether they need to take professional advice. We have taken on board comments received during the consultation, in particular by setting out in more detail the situations where the OFT would be less likely to take action.'

Download a copy of the guideline (pdf 561kb) or read the quick guide.

The OFT has also published a summary of responses to the OFT consultation. For further information see the Land Agreements project page.

NOTES

1. Land agreements that prevent, restrict or distort competition fall under Chapter I of the Competition Act 1998 and, in certain circumstances, Article 101 of the Treaty on the Functioning of the European Union (the TFEU). This applies only to agreements between businesses (including sole traders, partnerships, a company or a group of companies). Otherwise, it does not apply to agreements with or between private individuals.
2. Until 6 April 2011, land agreements are excluded from Chapter I of the Competition Act 1998 by virtue of the Competition Act 1998 (Land Agreements Exclusion and Revocation) Order 2004 (SI 2004/1260) and, prior to that, the Competition Act 1998 (Land and Vertical Agreements Exclusion) Order 2000 (SI 2000/310). The exclusion has been revoked with effect from 6 April 2011, by virtue of the Competition Act 1998 (Land Agreements Exclusion Revocation) Order 2010 (SI 2010/1709). See link www.bis.gov.uk/Consultations/future-of-the-and-agreements-exclusion.
3. Certain land agreements in connection with grocery retailing activities are subject to additional control under the Groceries Market Investigation (Controlled Land) Order 2010. The Order is part of the package of remedies to address the adverse effects on competition resulting from the control of land by large grocery retailers in highly concentrated areas that were identified by the Competition Commission in its 2008 market investigation report on the supply of groceries in the UK.
4. Land agreements that prevent, restrict or distort competition are prohibited agreements unless an exemption applies. In order to qualify for exemption four cumulative criteria must be satisfied. These are set out in section 9 of the Competition Act 1998 and the equivalent provisions in Article 101(3) TFEU. The agreement must contribute to improving production or distribution, or to promoting technical or economic progress, whilst allowing consumers a fair share of the resulting benefits. The agreement must not impose restrictions beyond those indispensable to achieving those objectives. Finally, it must not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.