Chapter 1 of the Competition Act 1998 prohibits agreements between parties which may affect trade within the UK and which have as their object the prevention, restriction or distortion of competition with the UK.
Up until 6th April 2011, land agreements benefitted from an exclusion to the Chapter 1 Prohibition. Since 6th April 2011, the Chapter 1 Prohibition now applies to all agreements including land agreements.
Whilst it would appear that only agreements entered into following 6th April 2011 could be subject to the Chapter 1 Prohibition, the Office of Fair Trading (OFT) is not able to confirm this is the case.
Furthermore, the OFT indicates that it is possible for an agreement which did not infringe the Chapter 1 Prohibition at the time it was entered into may, as a result of a change in its economic context, infringe the Chapter 1 Prohibition at a later date. Companies and individuals are now required to self assess land agreements for compatibility with competition law.
Breaches of the Chapter 1 Prohibition are enforced by the OFT who may initiate proceedings against respective parties. The OFT has powers to carry out unannounced investigations, impose interim measures to halt anti-competitive behaviour, impose fines of up to 10% of a company’s turnover for each year that the infringement continues or order the parties to an agreement. As such, it is important to be aware that any land agreement entered into does not breach the Chapter 1 Prohibition.
The OFT guidance indicates that agreements which create, alter, transfer or terminate an interest in land may be affected by the Chapter 1 Prohibition. ‘Agreements’ in this sense may include Transfers, Leases and Assignments of Leases. The OFT draws particular attention to exclusivity agreements, leasehold use restrictions and freehold restrictive covenants which may be contained within any land agreement.
Typically, agreements between parties with only small market shares within the relevant geographic market are unlikely to have sufficient impact on market conditions to infringe the Chapter 1 Prohibition. However, assessing appreciability is a question of fact in each case and the burden lies with the parties to ensure compliance.
The OFT previously took the view that an agreement would not normally be regarded as infringing the Chapter 1 Prohibition if the combined market share of the parties or the relevant market does not exceed 25%, but please note that in view of the European Commission Notice on agreements of minor importance, the 25% threshold has now been abandoned by the OFT.