In late 2018, the UK Competition and Markets Authority (CMA) for the first time took competition law enforcement action in relation to a lease.
Heathrow airport agreed to pay a fine of £1.6 million for restricting competition on parking prices in a lease with a hotel operator. The hotel operator was granted immunity for coming forward under the CMA's leniency programme.
Details of the case
Both Heathrow airport and hotel operator Arora admitted infringing competition law. The restriction in the lease precluded Arora from charging non-guests using the hotel car park lower rates than those charged at Heathrow's airport car parks.
While Arora was free to set its car parking charges to "resident guests of the hotel […] during their stay in the hotel or Property", charges for all other users of the car park could be "no lower than the equivalent rates from time to time charged elsewhere" at Heathrow airport. Arora was also prohibited from offering any form of holiday parking, whether to guests of the hotel or non-guests.
The CMA found that the agreement had as its object the prevention, restriction or distortion of competition in the UK. As a result, the parties agreed to vary the lease to remove the pricing restriction and Heathrow agreed to pay a fine of £1.6 million. It is noteworthy that the lease was initially entered into between three related Heathrow entities and was subsequently transferred to Arora under a sale and purchase agreement. It was this transfer which triggered the application of competition law.
The CMA also sent a number of warning letters to other airports and hotel operators where it had reasonable grounds to suspect that they may also be party to agreements containing price restrictions.
What should businesses be aware of?
The decision is a useful reminder that anti-competitive restrictions can be contained in many different types of agreements between businesses, including leases and other agreements relating to land. Restrictions on the price at which a reseller can price goods or services are of particular concern.
In addition, while agreements between wholly owned subsidiaries of the same group are not subject to the competition rules, care must be taken if one of the businesses is subsequently sold or, as was the case here, the interest in a lease or another asset is transferred to an independent business.
The application of competition law is continually evolving and businesses should take the opportunity to review their competition compliance programmes at regular intervals. Any due diligence undertaken as part of a sale of a business or asset should include a detailed review of agreements from a competition law point of view.
Similarly to the CMA, the Irish Competition and Consumer Protection Commission operates a cartel immunity programme in conjunction with the Director of Public Prosecutions. It allows a member of a cartel to avoid prosecution if they are the first member of a cartel to come forward and reveal their involvement in illegal cartel activity. If businesses become aware of a potential breach of competition law, they should carefully consider whether they meet the strict requirements of the immunity programme and may thus benefit from immunity from fines and imprisonment.