Land Agreements Rise Up the CMA’s Agenda
In October, the UK’s Competition and Markets Authority (CMA) imposed a fine of 1.6 million GBP for a land agreement which it found to infringe competition law. This is the first time that the CMA has taken enforcement action and issued a fine in relation to a land agreement, despite such agreements having been covered by the Chapter 1 prohibition (the UK equivalent of Article 101 TFEU) since 2011. The imposition of the fine, together with increased activity by the CMA in this sector, suggests that undertakings with land agreements should carefully check their compliance with competition law. Whatever “grace to adapt” has been afforded to businesses by the CMA since the change in the law has clearly come to an end.
When the Competition Act 1998 came into force, land agreements were excluded from its scope. That exclusion came to an end with effect from 6 April 2011. Just before that date, the CMA’s predecessor issued Guidelines explaining how land agreements would be assessed under UK competition law.
– Land agreements are agreements which alter, transfer or terminate an interest in land, including transfers of freehold interests, leases and assignments of leasehold interests, agreements relating to easements, licences, interests under a lease and other heritable rights in or over land.
– The Guidelines confirmed that only a minority of restrictions in land agreements were likely to restrict competition law. Two main types of restrictions that were highlighted were:
(i) competitors agreeing to restrict the use of land with the aim of sharing or carving up markets, and
(ii) restrictions which make it more difficult for competitors to enter a market where land is used, or protects a party from competition from their rivals.
The Decision and Fine
The CMA opened an investigation in December 2017 into Heathrow Airport’s (Heathrow) agreement with Arora for the lease of Arora’s Sofitel hotel at Terminal 5. That agreement included a clause restricting how Arora should set parking fines for non-hotel guests. Arora had agreed with Heathrow that it would not charge non-guests using the T5 Sofitel hotel carpark lower rates than those charged at Heathrow airport’s car parks.
The parties admitted that the agreement infringed competition law and agreed to remove the restriction. The CMA’s final decision, which was the result of a settlement reached with the parties, fined Heathrow GBP 1.6 million (reduced from GBP 2 million on account of settlement). Arora, having been granted immunity under the CMA’s leniency programme (which rewards companies that come forward with evidence of competition law infringements), was not fined.
In parallel, the CMA sent out a number of warning letters to other airports and hotel operators where it considered there were reasonable grounds to suspect similarly restrictive agreements may have been in place.
Land agreement “Do’s and Don’ts” – and a timely reminder to regularly check compliance
To reinforce the seismic effect of having imposed a fine in respect of a land agreement, on the same day as it announced that fine, the CMA published some land agreement “Do’s and Don’ts”. Although these are most obviously relevant for undertakings in the airport/hotel operator market, they should be read by any undertaking that has any kind of land agreement (which is likely to be every undertaking doing business in the UK).
The land agreement checklist (which the CMA emphasises does not apply to specialist sectors like supermarkets) can be accessed here, and a summary of the CMA’s advice follows:
– Familiarise yourself with competition law
– Amend non-compliant land agreements
– Regularly review land agreements for compliance with competition law
– Set up a competition compliance programme
Don’t without first seeking legal advice enter into land agreements that:
– Restrict the prices at which the goods or services can be supplied on the land;
– Restrict how the land can be used, with the goal of sharing or dividing territories or customers; or
– Restrict how the land can be used, making it harder for other businesses to compete.
The CMA emphasised that businesses should not assume land agreements are legal simply because they have been drafted by and/or were reviewed by lawyers in the past. The law changed in 2011. The CMA’s activity in this area indicates that it considers that businesses have been given sufficient time to adapt to the change in the law and that going forward, it will scruitinise this sector carefully.