Waitrose gets a slap on the wrist for breaching competition law in restrictive land agreements

For those of you living outside of the UK, Waitrose is an upmarket supermarket whose wares are indefinably better, or at least more expensive, than its competitors.  If an area hosts a Waitrose, then it proves that it is a good place to live, and property prices will leap with joy at the privilege.

Competition law rarely intrudes into land agreements.  Indeed, until 2011, when the Groceries Market Investigation (Controlled Land) Order 2010 (the ‘Order’) was introduced, most land agreements were not caught at all.  In the past eleven years there have been very few cases brought under the legislation, explicable by the softly, softly approach that the regulator, the Competition and Markets Authority (“CMA”), chooses to take. 

Last month, investors and their advisers alike were reminded that competition law is something that should concern them: the CMA wrote an open letter to Waitrose, requesting it to remove restrictive trading clauses from seven land agreements in different localities.  Waitrose has, of course, responded positively.

Grocery retailers, or at least the “Big 7” – M&S, Sainsbury’s, Tesco’s, Morrison’s, Waitrose, Asda and the Co-op – must comply with additional secondary legislation under the Competition Act 1999, namely the Order.   (Discount retailers, such as Aldi and Lidl, have not been included in the list, which has remained unchanged since 2011; this despite the fact that both Aldi and Lidl have more stores than Waitrose.)  The legislation resulted from a survey of the grocery market carried out by the Office of Fair Trading, the predecessor to the CMA, which found egregious abuse of market position by the Big 7.  The Order imposes a test to decide whether a grocer has achieved market dominance in a particular market and is calculated with reference to the number of units of a retailer operates within a ten minutes’ drive.  If the test is failed, then the grocer will not be able to open a new store within that area.    

In recent years, the CMA has also written to Tesco and to Morrison.  However, it is not just grocers who are liable to fall foul of competition law.  Airport car parking provision has come under the spotlight too, after the operators of Heathrow Airport were fined £1.6m for entering into a “price-fixing” agreement with an hotel on their land.  Subsequent investigations by the CMA revealed other anti-competitive arrangements in other regional airports, although these breaches were resolved less punitively. 

The CMA has made it clear in the past that land agreements which do fall foul of Chapter I of the Competition Act will, however, be the exception.  Section 9 of the Act allows such agreements if they benefit the consumer in addition to giving the trader a competitive advantage. An example of this would be a landlord’s policy of wide tenant mix in a shopping centre, or the early enrolment of an “anchor tenant” in a development to attract funding and wider tenant interest.  However, anchor tenants should not expect indefinite special treatment.  As a rule of thumb, five years seems to be acceptable, whereas 10 years – which was what the Waitrose stores had signed up to – is too long. 

Landowners should be wary of attempts by tenants to insert anti-competitive clauses into property documents.  Such agreements may fetter subsequent land management policies, whilst being open to future intervention by the CMA.  Competition law, largely ignored by the property world for so long, is another factor that needs to be considered in property transactions. 

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