The battle of the tests: a Pyrrhic victory? A case note on the Supreme Court judgment in Peninsula Securities Ltd v. Dunnes Stores (Bangor) Ltd

Abstract

In Peninsula Securities, the Supreme Court held that a restrictive covenant, granted in a lease to an anchor tenant of a shopping centre not to allow any retail unit in the centre to be leased to competing shops, does not engage the doctrine of restraint of trade. The question of its enforceability therefore hinges on whether the relevant covenant breaches competition law, and specifically whether it is anti-competitive by object or effect. This relatively straightforward conclusion of the Supreme Court in Peninsula Securities masks over 50 years of conflicting judgments and uncertainty in the area. Prior to Peninsula Securities, the majority decision of the House of Lords in Esso Petroleum v Harper's Garage gave rise to a ‘battle of the tests’: the majority opined that the doctrine of restraint of trade would only be engaged if the covenantor contracts to give up a freedom they already had (what has come to be known as the ‘pre-existing freedom test’; Lord Wilberforce, dissenting, formulated what came to be known as the ‘trading society test’ which is basically a rule of reason test. In Peninsula Securities, the Supreme Court clearly sided with the latter, but in reality neither test is likely to be considered in future challenges to an anchor tenancy restrictive covenant – the key question is whether it is anti-competitive, something which only the relevant facts of the case will determine.