Competition Act claims concerning land agreements may be about to proliferate. Slowly.
I think that I can safely say that it is not often that the application of the law concerning leases of shopping centres in Latvia may have an impact on the way in which landlords and tenants order their affairs in this country. But here is such a case: SIA Maxima Latvija v Konkurences padome [2015] EUECJ C-345/14.
In this case, decided by the European Court of Justice (“ECJ”) last November, a Latvian company operating large shops and hypermarkets concluded 119 commercial lease agreements with shopping centres in Latvia. The Latvian Competition Council (“LCC”) examined all 119 and found that 12 of them contained a clause granting Maxima Latvija, as anchor tenant, the right to control other lettings to competing third parties. The LCC determined that this was an infringement of Latvian competition law, in that the object of the clause in question was the prevention, restriction or distortion of competition. Since this determination meant that it was unnecessary for the LCC to find evidence of any actual anti-competitive effect, it imposed a fine of approximately €35,770.
Maxima Latvija appealed, and ultimately the matter was referred to the ECJ for a ruling, since the Latvian national competition legislation (as with UK domestic competition legislation) was drawn from EU law (Article 101(1) of the Treaty on the Functioning of the European Union).
In his excellent recent article (“Illegal competitions”, EG, 13 February 2016, p91) Matthew Hall analysed this decision and two other recent national cases to similar effect, and expressed the view that landlords and tenants need to be aware of these developments. I endorse that view.
Impact on the UK
The immediate impact of the ECJ decision in the Latvian case is relatively limited: the European court determined, contrary to the national court, that the object of the clause in question had not been the prevention, restriction or distortion of competition, on the footing that it was not clear that a sufficient degree of harm would automatically arise from the clause.
However, that was not the end of the matter for Maxima Latvija, since it was also relevant for the court to consider whether the effect of the clause was to prevent, restrict or distort competition. That was a matter for the national court to determine, having regard to such matters as the economic and legal context, the specificities of the relevant market, and whether the agreements make an appreciable contribution to the closing-off of that market. That remains sub judice.
The eventual impact of this challenge concerning what is in effect a familiar part of our retail landscape may yet therefore cause ripples on this side of the channel, where the drafting of the relevant legislation in Chapter I of the Competition Act 1998 (“the 1998 Act”) is similar.
The complacent among us may point to the fact that, although the Competition Act 1998 (Land Agreements Exclusion Revocation) Order 2010, which exposed land agreements (including most obviously leases) to the full glare of competition law, was brought into force as long ago as 6 April 2011, the cases of note that have been generated by that event have been very few and far between. Nevertheless, there are three factors to suggest that this may be about to change.
The first is the Latvian case itself. Although comparatively niche, this has received wide publicity and will have reawakened attention to a potentially active area of property law. Once the Latvian courts have studied the question of whether the effect of the relevant clause was to prevent, restrict or distort competition, their findings should make for instructive reading, particularly given that the relevant law is complex and more or less untested.
Secondly, the one recent case of note in this jurisdiction – the decision of Judge Dight in Martin Retail Group Ltd v Crawley Borough Council [2013] EW Misc 32(CC); [2014] 1 EGLR 42 – served to demystify the process, concepts and language involved in a competition claim, in the context of a retail shopping parade. The decision, which is limited to a consideration of whether the putative anti-competitive use clause in a proposed lease qualified for exemption, is readily understandable and provides a useful treatment of the guidance issued by the Office of Fair Trading in March 2011. With untested legislation of this kind, it is to be expected that parties will not rush to be the first to test the water, and this decision may be expected to lead the way for similar claims.
Thirdly, on 1 October 2015, the Consumer Rights Act 2015 came into force. Section 18 and Schedule 8 to that Act amend the 1998 Act to broaden the jurisdiction of the Competition Appeal Tribunal and to simplify and shorten the procedure for bringing claims for compensation for infringements of competition law. A purpose of this new legislation is to allow smaller enterprises (alone or collectively) to litigate claims quickly, with limited exposure to costs. The expectation is that the final hearing of a claim should take place within six months.
This new procedure is currently being tested in the course of a claim brought by a property developer, High Peak Developments Ltd, against Tesco, in which it is alleged that a restrictive covenant affecting the land surrounding a Tesco superstore is anti-competitive.
Brace for change
Competent and well-resourced owners of retail centres and their anchor tenants will have prepared for the possibility of challenges to their leasing structures by adapting the drafting of their leases, either to avoid any prevention, restriction or distortion of competition, or to take advantage of exemptions. Those who are not similarly prepared may find their tenants increasingly alert to the possibility of effective challenge.
Guy Fetherstonhaugh QC is a barrister at Falcon Chambers
