Real estate developer challenges Tesco in Competition Appeal Tribunal

Real estate developer challenges Tesco in Competition Appeal Tribunal

A property developer has brought proceedings in the Competition Appeal Tribunal (CAT) alleging that a 1997 land agreement with Tesco is in breach of competition law. 

High Peak Developments has requested a declaration from the CAT that a covenant restricting it from developing a bargain retail outlet adjacent to a Tesco store is void and unenforceable.  It has also claimed damages and an injunction preventing Tesco from enforcing the covenant.

Restrictive covenants over land were traditionally outside the UK competition law regime.  On 6 April 2011 that exclusion was removed with the result that restrictive covenants and other restrictions relating to land now need to be analysed for compliance with UK competition law.  It is also clear that covenants that may have been valid when they were entered into may no longer be enforceable due to changed market circumstances.

Up to now, competition law challenges to restrictive covenants have tended to be raised in commercial negotiations and have typically ended in a settlement.  The first reported litigated case was Martin Retail Group Ltd v Crawley Borough Council, a judgment of HHJ Dight at the Central London County Court on 24 December 2013. 

High Peak Developments has applied for the case to be treated under the new fast-track procedure in force since 1 October 2015, although the CAT has not yet confirmed that designation.  The property developer claims that the case merits fast track status because the issues are not overly complex and it is suffering substantial and continuing losses from the maintenance of the covenant.

The High Peak Developments case illustrates that commercial parties are prepared to litigate competition issues in land agreements.  The changes to UK competition law procedure brought about by the Consumer Rights Act 2015 and allowing for standalone actions to be brought in the CAT can be expected to provide further momentum. 

It remains to be seen whether the case will settle before judgment but it is a timely reminder that covenants and similar agreements relating to real property cannot escape competition law scrutiny.  Landlords and tenants will want to review existing restrictions in agreements (leases and purchase agreements) and consider the scope to negotiate more favourable terms.  Tenants will want to check that any protections from competition in existing agreements are in fact enforceable, for example, where an anchor tenant has been able to secure a commitment from the owner of a development that it will not grant leases to third parties for a specific user.