Property agreements in the Competition Law spotlight – again


Author: Thomas Edwards, Alex Haffner


Alex Haffner, Partner, Fladgate LLP (ahaffner@fladgate.com)

Thomas Edwards, Trainee Solicitor, Fladgate LLP (tedwards@fladgate.com)


 

In September 2018, the Competition and Markets Authority issued its first ever fine (against Heathrow Airport Limited) in connection with a property agreement breaching the competition law rules (see ‘CMA decision on Heathrow Airport lease agreement infringement published’). A recent “fast track” application to the Competition Appeal Tribunal (CAT) looks to push the door further open to potential challenges to restrictions contained in property agreements. It also highlights the ability for SMEs to use the CAT as a forum for litigating competition law related disputes in a cost efficient and timely manner.

The claimant in the present case, Melanie Meigh, leases a premises from the owner of the Prinknash Bird and Deer Park in Gloucestershire, from which she sells food, drink and souvenirs.

Ms Meigh was granted a licence by the defendant to build two new buildings for an animal welfare centre and visitors centre. The claimant tried to amend this licence to build just one new building. The defendant refused to grant permission to amend the licence unless the claimant agreed not to sell food or drink in the new buildings. Eventually, after various proceedings, the parties reached a settlement agreement on essentially the terms requested by the defendant.

The claimant has now alleged that the terms of this settlement agreement are in breach of competition law because they restrict, prevent and/or distort competition in the following markets:

  1. the retail sale of food, drink and other refreshments from premises located on the Prinknash Estate (by object or effect);
  2. the retail sale of gifts, souvenirs and other goods from premises located on the Prinknash Estate (by object or effect);
  3. the provision to the public of wildlife parks within 45 minutes’ drive time of the Prinknash Estate (by effect).

The claimant is seeking an injunction to stop the defendant from enforcing this settlement agreement due to the alleged breaches of competition law.

It is worth noting that in this case, the purview of the alleged restrictions is very small, in that it only relates to the restrictions on the Prinknash Estate, and to wildlife parks within a 45 minute drive. However, if the competition law challenge is successful, there are possible far reaching effects for property owners who grant leases or licences with restrictions.

If the claim is successful, it may set the precedent that restrictions which prohibit the sale of a specific type of good are unlawful. For example, there could be effects in the leases of shops in a shopping centre, where certain leases may have restrictions on the type of goods they can sell due to competitors in the vicinity, or leases of cinemas, which often stop the freeholder from granting a lease to another cinema in the vicinity. If these types of restrictions are now held to be unlawful because they restrict competition then the value of these leases (which have traditionally protected the leaseholder from competition in the vicinity) will be severely lessened.

In 2015 the Competition Appeals Tribunal (CAT) introduced their fast track competition procedure. This procedure was introduced to facilitate competition law challenges with greater speed, ease and certainty as to costs in the bringing of private competition law actions. Prior to the fast track procedure, the competition procedure was widely perceived as being too complex and this was off-putting to any private competition law actions.

The Competition Appeal Tribunal Rules 2015 set out the rules of this fast track procedure. There are various rules to increase the efficiency of proceedings (in certain suitable cases), but the 2 headline provisions are that:

  1. All cases on the fast track must be heard within 6 months of the claim being submitted; and
  2. Fast track cases are subject to a cap on legal costs. This makes the process much more attractive to small and medium sized enterprises looking to bring private actions.

The present case, as described above, is currently in the application stage. It is not yet clear whether the CAT will accept this claim for the fast track procedure. They may reject it for a number of reasons, including that they may deem it inappropriate for the fast-track process.

It will therefore be important to monitor this case closely to see what impact it has on the developing law in this area. If Ms Meigh’s application is accepted to the CAT fast track, then we will not have to wait too long for a decision.

View by author:


Would you like to hear more?