Restricting a commercial center from leasing to competing businesses is an invalid restrictive arrangement

September 9, 2019

Between a commercial center owner and a lessee, a lease agreement was signed to operate a mini-market. Under the agreement, exclusivity was granted to the operator of the mini-market. After 12 years, the commercial center’s owner allowed more stores to sell products that may compete with the mini market.
The Court held that it is a restrictive arrangement and therefore rejected the lessee’s demand to enforce it. In a situation where one of the parties to an agreement restricts itself or the other, in a way that may reduce competition, it is a restrictive arrangement that is illegal and unenforceable. The law allows a commercial center owner to restrict a tenant from engaging in certain areas, but prohibits an arrangement where a commercial center cannot lease assets to certain businesses. Here, as part of the lease agreement, the right of the commercial center owner was restricted from allowing other tenants to operate with competition with the mini-market and therefore this is an illegal and non-binding restrictive arrangement.