The Groceries Market Investigation (
The order names Asda, the Co-op, Marks & Spencer, Morrisons, Sainsbury’s, Tesco and Waitrose as large grocery retailers (but others could be added in the future). It prohibits them from entering into new restrictive covenants that limit grocery retailing except in certain specified circumstances, for example, to comply with obligations imposed by planning agreements. A freehold or leasehold covenant requiring a landowner to use land for a specified purpose would restrict grocery retailing, as would covenants limiting the access of delivery vehicles.
The order identifies existing restrictive covenants that the Competition Commission deems anti-competitive and requires the seven retailers to use their best endeavours to release the covenants within six months and to procure their removal from the registers kept by the Land Registry. If they are unable to persuade the Registry to remove the covenants, the retailers must register their attempt to do so and enter into deeds relinquishing their right to enforce them (and procure similar commitments from their successors in title).
In due course, landowners will have the right to refer for investigation other restrictive covenants in favour of the named retailers. If, after applying the test laid down in the order, the covenants are deemed to be anti-competitive, the retailers will have to take similar steps to release them.
The order also affects exclusivity arrangements. Under these agreements, site owners will not allow another grocery store to operate from a site or will restrict or limit the sale of groceries on the site. They are commonly used to attract anchor tenants to retail parks and shopping centres.
Again, the order identifies existing exclusivity agreements that the Competition Commission deems to be anti-competitive and requires the retailers concerned not to enforce them after a five-year period has expired. In due course, landowners will also be entitled to refer for investigation other exclusivity arrangements in favour of the named retailers. If, after applying the test laid down in the order, these are designated anti-competitive, retailers will lose the right to enforce them from the later of 30 April 2013 or five years from the date on which the grocery store that benefits from the exclusivity arrangement first began trading.
Importantly, the order also prohibits the named retailers from entering into new exclusivity arrangements that last for more than five years from the date on which the stores that benefit from the arrangements begin to trade.
The landowners that benefit from the order will welcome the freedom to use their premises for additional uses or to dispose of them to a wider range of businesses. However, developers will keep a wary eye on the effects on anchor tenants and on any consequences for the terms and conditions in the leases they sign.
Allyson Colby is a property law consultant
