A UK court recently considered the application of UK competition law to proposed use restrictions in the commercial lease of retail premises. Since competition law principles are generally the same throughout the EU, the case is relevant in any EU member state.

The case concerned a proposed permitted-use restriction in a lease renewal. The landlord (who owned the other shops in the immediate local area; a “parade” of shops) proposed that the permitted uses of the premises should expressly exclude the sale of alcohol, groceries, fresh food and other convenience goods. The tenant, a newsagent/tobacconist who wanted to compete with one of the other shops by selling convenience goods, argued that the proposal was unlawful on the grounds that it was prohibited by UK competition law and therefore would be void and unenforceable.

During the trial, the landlord conceded that the clause as proposed would be prima facie anti-competitive under the relevant provisions of UK competition law. The judge stated this this was correct because the effect of such a clause, in the context of the letting scheme used for the parade, would be to restrict competition in the sale of convenience goods. Under the letting scheme, the tenants were subject to reciprocal obligations protecting each of them from competition by the others in the parade.

This left the issue of an exemption under UK competition law, should the countervailing benefits outweigh the anti-competitive effects. The judge found that, based on the facts, an exemption was not available.