On 18 March 2016, the Competition Appeal Tribunal (CAT) published only the second case to be brought under the new fast track procedure before the CAT under the provisions of the Consumer Rights Act 2015.
The fast track procedure was designed to allow individuals and SMEs a quick and more cost effective way of enforcing their competition rights against big business. It was also a rare case involving the enforceability of land use restrictions which seldom come before the Courts.
On the 18th of March, the CAT published an order consenting to the settlement of proceedings brought by Shahid Latif and Mohammed Abdul Waheed (“the claimants”) against Tesco Stores Limited (“Tesco”) under Section 47A Competition Act 1998 which claimed damages, injunctive and declaratory relief on the basis that certain land use restrictions imposed upon them by Tesco were contrary to the provisions of the Competition Act 1998 and the common law restraint of trade doctrine. The case was settled on terms with Tesco releasing the claimants from the contested covenant.
Under a transfer agreement by which the claimants sold land to Tesco in 1997, land retained by the claimants was subject to a covenant “not to use or permit any of the Retained Land to be used for the sale of food convenience goods or pharmacy products”.
The claimants alleged that this clause was anti-competitive and so void and unenforceable. They brought proceedings before the CAT on 18th February 2016 against Tesco alleging that certain land use restrictions imposed by Tesco on the claimants were an infringement of Chapter I of Competition Act 1998 or in the alternative, a breach of Chapter II of The Competition Act 1998 and/or a breach of the common law restraint of trade doctrine. The claimants claimed damages and sought a declaration that that the covenant is void and unenforceable. They also sought an injunction restraining Tesco and any of its Group companies from enforcing the covenant as well as asking for designation of the proceedings under the new fast track procedure. The parties agreed to settle the case with Tesco releasing the claimants from the disputed land use restriction. The claimants have now withdrawn their claim with the consent of Tesco under Rule 44(1)(a) of the Tribunal Rules.
Fast Track Procedure
Reforms under The Consumer Rights Act 2015, which amended both the Competition Act 1998 and the Enterprise Act 2002, made changes to the competition private damages actions regime. They came into force on 1 October 2015. The reforms apply the provisions of Section 47A of the Competition Act (claims or damages for breach of competition law) to both follow-on and standalone competition actions in relation to claims arising both before 1 October 2015 as well as after that time. The new provisions also introduced a new “fast-track” procedure for claims made under section 47A before the CAT. The details of the new fast track procedure were set out in Rule 58 of a new version of the CAT Rules published following the coming into force of the new legislation.
Under the fast-track procedure:
- The main substantive hearing must be fixed to commence as soon as practicable and in event within six months of the order designating the proceedings as being subject to the fast-track procedure; and
- The amount of recoverable costs is to be capped at a level to be determined by the CAT.
The new CAT Rules also provide for the grant of injunctions and interim injunctions in the context of damages actions, in accordance with a new power given by section 47D of the Competition Act, as amended by the Consumer Rights Act 2015.
Land Use Restrictions
Historically land use restrictions were exempt from Chapter I of Competition Act 1998. But following the enactment of Competition Act 1998 (Land Agreements Exclusion Revocation) Order 2010, land use restrictions became subject to the prohibition of anti-competitive agreements under Chapter I of Competition Act 1998.
Although as a result of Groceries Market Investigation (Controlled Land) Order 2010, following the Competition Commission’s market investigation into the supply of Groceries, certain large retailers were prohibited from entering into land use restrictions in areas of high concentration. It appears the case in question falls outside the order.
Therefore this was to be one of the few cases challenging the enforceability of land use restrictions which have come before the English Courts so the outcome of this case and the competition analysis of the restriction was being keenly watched by the property industry.
However due to the case being settled, any detailed competitive analysis of these types of restriction will have to await the next case to come before the courts.