Croatian Competition Agency examines legality of exclusivity clauses in lease agreements

The Croatian Competition Agency (CCA) recently closed the infringement proceeding against Croatia osiguranje dd – Croatia's largest insurer – which had been opened ex officio. The proceeding concerned the exclusivity clauses in Croatia osiguranje's commercial lease agreements; the CCA's main concern was that the clauses prevented landlords from cooperating with other insurers and thus restricted potential competition in the insurance market.

CCA decision

The CCA found that a number of provisions in Croatia osiguranje's commercial lease agreements (where it was the lessee) were problematic from an antitrust perspective – namely, the provisions that the lessor could not:

• lease any business premises to any legal or natural person or any other undertaking at which the same business activities as those performed by Croatia osiguranje would be performed;
• lease any facility within the same business premises to other insurers; or
• allow other insurers to be present on the property or within the business premises.

Similarly, the CCA held that in lease agreements in which Croatia osiguranje was the lessor, the provision that the lessee could not sublease the business premises to Croatia osiguranje's competitors was problematic from an antitrust perspective.

Croatia osiguranje's commitments

At an early stage of the proceedings, Croatia osiguranje offered commitments to end the investigation and avoid penalties in case the CCA established infringement. Croatia osiguranje proposed that it would conclude a new standard commercial lease agreement which would contain no exclusivity obligation preventing lessors or lessees from entering into agreements with its competitors.

Croatia osiguranje also offered to send its business partners the proposed new agreement and give them 60 days to decide whether to accept its terms and conditions. In addition, Croatia osiguranje stated that immediately after receiving the CCA's decision, it would issue a revocation statement that would clearly and undoubtedly waive any possible right arising from the stated provisions contained in the concluded commercial lease agreements.

The CCA found Croatia osiguranje's proposed commitments to be sufficient to eliminate the possible competition concerns and restore effective competition in the insurance market.

Comment

Unfortunately, the decision contains no detailed assessment of the legality of exclusivity clauses in lease agreements as the investigation did not end with an infringement decision. Thus, it remains uncertain whether the CCA would take a formal approach and consider exclusivity as a restriction per se or whether it would follow the 'effect' approach (applied by the EU courts), under which such clauses would be deemed restrictive only if they have anti-competitive effects. In any case, this decision shows that exclusivity clauses in lease agreements could be subject to antitrust scrutiny – as such, market participants should carefully review such agreements. An assessment of the legality of such clauses should include:

• the parties' market power;
• the exclusivity's geographic scope;
• the obligation's duration; and
• the clause's ability to prevent the entry or expansion of competitors.

First published on ILO, 14.01.2021

authors: Ana Marjančić and Zoran Šoljaga