Non-compete clauses in property leasing contracts under scrutiny of the ECJ

Upon request of the Latvian Supreme Court for a preliminary ruling, the ECJ will review whether a non-compete clause at the expense of the property lessors complies with European antitrust law (case C-345/14).

Maxima, which is one of the three major retailers in Latvia, included in its contracts with property lessors a clause prohibiting the lessor to lease space to competitors of the company without Maxima’s permission. Similar clauses in lease contracts are common practise in this and other business sectors. Following a fine by Latvia’s antitrust regulator in January 2012, Maxima challenged the penalty before court. Key question in this case is whether these clauses have as their “object” or – only – as their “effect” a restriction of competition. In this regard, the Latvian Supreme Court asked the ECJ whether, as in cases of infringements by effect, the antitrust regulator needed to analyse the structure of the market and the nature of the contracts as well as to assess the market power of the companies involved in these agreements.

The ECJ has recently ruled on ‘infringements by object’ and ‘infringements by effect’ in its Expedia (case C-226/11) and Pierre Fabre (case C-439/09) judgments. The European Commission has provided some further guidance on infringements that are considered as “infringements by object” in its revised “De Minimis Notice” (C (2014) 4136 final) and the accompanying “Staff Working Document” (SWD (2014) 198 final). However, the scope of the concept of “infringements by object” has not been conclusively settled so far. It remains to be seen whether the ECJ will qualify such non-compete clauses as an infringement by object, effect or may even review such clauses as an ancillary restraint to a main non-restrictive property lease.