Court of Justice confirms that restrictions by ‘object’ in property lease should be interpreted narrowly

The Court of Justice has ruled that a non-compete restriction in a commercial property lease should not be construed as a restriction by ‘object’ under Article 101(1) TFEU.

The judgment concerns a request for a preliminary ruling from a Latvian court relating to the right of an anchor tenant to exclude competitors from adjacent units in a shopping centre. 

The Court confirmed that the concept of ‘by object’ restrictions “can be applied only to certain types of coordination between undertakings which reveal a sufficient degree of harm to competition that it may be found that there is no need to examine their effects”.

The Court was swayed by recent case law, in particular in Carte Bancaires (Case C-67/13, Groupement des cartes bancaires v European Commission) where it criticised the approach of the General Court in concluding that the ‘object’ category should not be construed narrowly.

The Court took note of the vertical relationship between the shopping centre and the anchor tenant and considered that the case was not one which could be characterised as ‘by its nature’ an object restriction. 

The referring court also asked what factors should be taken into account when determining the actual or potential effect on competition where a provision is not boxed as restrictive by object.  The Court indicated that relevant factors may include: the relevant retail market and size of the catchment area covered by the agreements; the level of real, concrete possibilities for a new competitor to establish itself elsewhere in the relevant catchment area, for example in other shopping centres, or outside the shopping centre area; the number and size of the operators on the relevant market in the catchment area and levels of concentration; the nature of customer habits and loyalty to existing brands; the degree of any other economic, administrative and regulatory barriers to entry; the nature and duration of the restriction; and the existence of any other agreements which may create a cumulative effect on competition.

The judgment will be welcome news to those who want to see a narrowing of the concept of restrictions by object. 

Beyond the direct relevance of the case to commercial property agreements, the ruling appears to send a wider policy message. In Cartes Banacaires the Court of Justice castigated the General Court for rejecting a narrow construction of restrictions by object.  In the Latvian ruling the Court appears to have shifted the emphasis a tad to say that the object category must be interpreted restrictively.  If the Court’s approach is applied more generally and outside the property sector it could see a stemming of the tide of more recent cases which have enlarged the category of infringements by object, including in relation to information exchange and online selling.

Case C-345/14, SIA Maxima Latvija v Konkurences padome