With effect from today the Land Agreements Exclusion Order which has been in place (in successive formats) since 2000 is finally revoked. This means that for the first time the Competition Act Chapter 1 prohibition applies to land agreements. Therefore going forward all owners and occupiers of property need to ensure that any restrictions which they require or agree in property related agreements do not infringe the Chapter 1 prohibition.
For retailers and leisure operators who normally seek exclusivity covenants from their landlords, the repeal of the Exclusion Order has particular implications.
In its Guidance which was published on 24 March, the OFT set out in some detail its view as to the potential implications for the real estate industry of the repeal of the Order (see our Law-Now dated 28 March for brief details). One of the areas on which the OFT specifically focused was exclusivity covenants.
Although the OFT has recognised that in certain circumstances exclusivity arrangements may not amount to a breach of the Chapter 1 prohibition, one of the key issues is the duration of those arrangements. The OFT has not in the Guidance given any indication as to what length of exclusivity arrangement it would generally regard as being acceptable. Thus, for the moment those retailers and leisure operators who would normally seek to impose those types of obligations have no clear guidance on what is allowed.
Conversely, the repeal of the Order also gives opportunities for those potential occupiers who felt they had been excluded from retail and leisure schemes because of exclusivity arrangements entered into with other existing occupiers, to challenge that situation for the first time. Those operators could seek to set aside the arrangements on the basis that they infringe the Chapter I prohibition.