Defence against restrictive covenants
Commercial property owners or tenants may be faced with restrictive covenants which they would like to avoid. In these situations, competition law can provide a useful tool to achieve confirmation that the covenant is unenforceable. For example, in 2016 Tesco released a neighbouring site owner from a covenant prohibiting the sale of convenience goods, after the neighbouring site owner had started a competition law action against Tesco.
Careful consideration of anchor tenants
Developers and property owners tend to be keen to attract anchor tenants to their development, and in return such tenants may ask for some protection against competition from other tenants. The European Court of Justice has made it clear that an anchor tenant’s right of approval of new tenants requires a careful assessment of the competitive effects in order to decide whether it is enforceable.
Similarly, in the UK, the position of the Competition and Markets Authority (CMA) is that the lawfulness of an exclusivity clause protecting an anchor tenant depends on several factors, including the presence of other competitors in the local area, the availability in the area of alternative space to competitors and the duration of the exclusivity clause.
Tactical use in negotiations
Competition law can also be a useful instrument when negotiating a new lease in order to get certain restrictions off the table. In 2014 a newsagent in Crawley negotiated new lease terms with the landlord and was unhappy about the proposed user clause, which did not allow the sale of groceries (as there was already another grocery store in the same parade of shops). The Central London County Court agreed with the newsagent that the proposed user clause was anti-competitive.
Gain access rights
Landowners may be forced to grant third parties access to their site. Competition law arguments may be used to gain access where the landowner has a so-called “dominant position”. For example, in 2014 Arriva launched a successful legal challenge against Luton Airport’s award of exclusive access rights to National Express’s coach service to London. A few years earlier, Heathrow Airport had given exclusive access rights to its own valet parking services but a competing parking service operator obtained a High Court order declaring such discriminatory treatment by Heathrow anti-competitive.
Merger filings
Most property professionals will understand that when two property management companies merge, competition filings may need to be made, as happened for example when DTZ acquired Cushman & Wakefield in 2015. However, industry insiders are often surprised when they are told that the acquisition of a single property or property portfolio might also require prior notification.
For example, when Aviva and PSP jointly acquired a portfolio of 14 central London properties in 2015, they first had to obtain European Commission approval.
Similarly, after Hammerson completed its acquisition of the Grand Central Shopping Centre in Birmingham in February 2016, the CMA opened an investigation, which meant that for about five months Hammerson was severely restricted in any changes it could make to the acquired asset.
Buying divestment assets
Where a competition authority has competition concerns, the parties may need to dispose of certain assets. This may provide opportunities for purchasers looking for assets at often depressed prices (as the parties will be given a limited time for the disposal). For example, in 2016 Regus agreed to sell five serviced office space centres in central London in order to gain CMA approval of its acquisition of Avanta.
Collusive bidding between investors
If companies collude in the bidding for commercial property assets, they risk penalties from competition authorities as well as sell-side claims for compensation. For example, in 2014 several large investment firms including Goldman Sachs, KKR and Blackstone reached a multi-million dollar settlement with US investors after the investment firms had been accused of holding prices down by agreeing to refrain from “jumping” each other’s deals.
Pricing arrangements with competitors
In the residential sector, estate agents and other professionals should avoid agreements with competitors about fees and other terms. A “nod and a wink” may be enough to land a company in trouble. The illegal conduct may also take place in the context of an industry association.
For example, the CMA announced in June 2016 its investigation into potential infringements in the “residential estate agency sector” (although it gave no further details). The Italian competition authority is currently investigating the involvement of an association of estate agents in the setting of fee levels.
Advertising restrictions
Rather than agreeing on fee levels, sometimes property agents try to restrict the advertising of fees. However, such arrangements are unlawful where they involve competitors or trade associations. For example, in 2015 the CMA imposed penalties on estate agents and newspapers for agreeing to ban the advertising of fees from the papers.
The battle for the online property portals
Estate agents must decide independently whether they advertise their properties through certain online portals. OnTheMarket.com is a new online listings portal that is trying to break the duopoly currently held by Rightmove and Zoopla.
In April 2016, the CMA revealed that it was aware of certain estate agents having made a collective decision to join the OnTheMarket portal, and at the same time to remove their listings from competing portals. This would breach competition law. At the same time court proceedings are ongoing as to the legality of OnTheMarket’s “one other portal rule” which prohibits agents from listing with more than one other portal.
Ajal Notowicz is a partner in the competition law group at Dickson Minto WS in London and Edinburgh
