In the first legal case of its kind, Tesco are being sued by a property developer for a breach in competition law that prevents rival companies building stores near one of its own.
Property developers, High Peak Developments believe that by refusing to release a restrictive covenant on land surrounding its Whaley Bridge store, Tesco are acting illegally.
Tesco bought the land for their store in 1997, and during negotiations insisted that a covenant was put in place ensuring that the sale of food, convenience goods or pharmacy products could not be possible on the surrounding land.
In July of last year an agreement was made between High Peak Developments and the discount chain B&M Bargains to build a new shop on the land surrounding Tesco, on the basis that the covenant was released. The developer then agreed to pay Tesco for the release of the clause and solicitors for both sides exchanged papers on the issue.
Three months down the line however, Tesco refused to have the covenant released.
Gareth Birch of Pannone Corporate, the solicitor representing the developer explains:
“Our client firmly believes that Tesco has taken an anti-competitive stance”.
After the use of restrictive covenants had become popular in the 1990’s, an order by the Competition Commission in 2010 resulted in supermarkets having to remove certain clauses, as they explained then:
“Grocery retailers are engaging in landbanking as a strategy to impede the entry by rival retailers into local markets”.
As a result, Tesco were ordered to remove clauses in four sites, however it is thought that because the store at Whaley Bridge is smaller than regulation sites, the order does not apply.
A spokesman for Tesco says:
“We have been in commercial negotiations about a site next to our Whaley Bridge Superstore and remain willing to continue these negotiations to reach a mutually acceptable agreement.”
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