On the 3rd March 2015, the German Federal Cartel Office (“FCO” or Bundeskartellamt), held that a non-compete clause with a 150km radius in the leases for a German factory outlet centre as anti-competitive.
The key facts of the case are as follows:
- The clause in question banned any shop entering into a lease for the factory outlet centre in question to open another shop in a rival outlet centre within a 150km radius.
- A rival outlet centre 147km away had trouble securing tenants as a result of the non-compete clause.
- The FCO held that the relevant market was only a 100km radius around the outlet centre, this being the likely distance customers would travel.
- Given its decision on the relevant market, the FCO held the 150km radius to be anti-competitive and prohibited with immediate effect.
- The FCO considered in this particular case that the proportionate clause would have up to a 50km radius and a term of up to 5 years.
Why the case is important:
- Radius agreements in commercial retail leases are common. Retailers and commercial property providers alike should be cautious when drafting their leases, not to agree terms that too onerous.
- Independent, expert market and economic research may held persuade regulators and interested parties of the relevant geographic market in question.
- Does the case signal a growing regulatory response against the use of onerous non-compete clauses in commercial leases?
Similar English developments:
- We reported in May 2014 of a UK case that considered a hyper-local relevant market and held a similar non-compete lease as anti-competitive.
Please click here to access the FCO’s press release on the matter.