Retail surgery: What does the proposed repeal of the Land Agreements Exclusion Order mean to retailers?

Following its investigation into supermarkets, the Government has decided it wants to repeal the exclusion land agreements had from competition law. It plans to do this before the general election, with the repeal taking effect on the April 6, 2011.

Pam Jones, head of retail at law firm Hill Dickinson, explains that this is a significant move. “Retailers make extensive use of land agreements to restrict competition, most notably by imposing non-competition covenants on the disposal of surplus properties. The proposed repeal will subject all such agreements to the full force of competition law but it will not automatically render existing restrictions unenforceable or mean that new restrictions cannot be imposed,” she says.

She adds: “Enforceability will depend on whether the covenant has an appreciable effect on competition. Detailed guidance from the Office of Fair Trading is promised.”

Jones has a stark warning for retailers: “Retailers must become more circumspect in assessing the competition law implications of land agreements. The publicity surrounding the revocation of the Exclusion Order will raise awareness that land agreements are subject to competition law and may be challenged. Retailers and those advising them have a year or so to get themselves up to speed on competition law, or face the consequences.”

As well as any offending restriction being void and unenforceable, retailers may face significant fines (up to 10% of turnover) and damages claims, together with reputational damage from any adverse publicity.