The Competition and Markets Authority (CMA) has imposed a fine for an anti-competitive clause in a land agreement, the first time it has done so since land agreements became subject to normal competition laws in 2011.

"Land agreements", defined in the relevant legislation as any agreement creating, altering, transferring or terminating an interest in land, had benefited from a block exemption until that point, but it has taken until now for anybody to be fined for using one to restrict competition.

In December 2017 the CMA launched an investigation into leases granted by airport operators, particularly leases to hotel groups operating from hotel land, and whether restrictive covenants in those leases breached competition laws by restricting how the tenant could use its car parking spaces.

In May the decision was taken to focus the investigation on certain parties. Both Heathrow and the operator of the Terminal 5 Sofitel, Arora, admitted infringing competition law. The breach was in a tenant's covenant which precluded Arora from charging non-guests using the Sofitel car park lower prices than those charged at Heathrow's own car parks.

The covenant was brought to the CMA's attention by Arora so it was granted immunity under the CMA's leniency programme, while Heathrow Airport was fined £1.6m.

Although airport car parking has been attracting interest from competition regulators for a while now, the CMA's decision to impose its first fine for an anti-competitive land agreement might indicate that they will be tougher on competition restrictions contained in leases and other land agreements going forward.

It is therefore important for those dealing with land, in particular landlords and tenants, to understand the risks of breaching competition law in the use of anti-competitive covenants. Not only will those clauses be unenforceable, but both parties will be exposed to potential fines up to 10% of worldwide group turnover and directors may face disqualification for up to 15 years. Agreements between competitors to set prices or limit supply can also carry significant criminal penalties for those involved, including prison sentences.

If you have any queries relating to competition law and land agreements, please contact Charles Livingstone or Jamie Dunne.

Contributor

Jamie Dunne

Senior Associate