73/12    23 August 2012

The OFT has today issued a Short-form Opinion to the National Farmers' Union (NFU) and the Country Land and Business Association (CLA) clarifying how competition law applies to the recommendation of a rate to be charged by their members for allowing broadband cables to cross their land.

Wayleave rates are annual, or one-off, fees paid to landowners in exchange for a right to install, maintain and repair infrastructure, such as broadband cables on their land.

Both the NFU and CLA intend to specify a wayleave rate - at either below current commercial wayleave rates or for free - that they will recommend their landowner members charge in relation to broadband cables. This is in recognition of the wider benefits that will be brought to rural businesses and communities from faster broadband services. Their aim is to speed up the roll out of rural broadband services, where time-consuming negotiations between many individual landowners and broadband providers to agree wayleave rates have contributed to delays to rural broadband projects.

Before recommending a rate to members, the two associations approached the OFT for advice on whether their proposed approach was compatible with competition law.

The guidance published by the OFT notes that, in general terms, the recommendation of fixed prices by a trade association to its members is likely to restrict competition and breach competition law. However, on the basis of the information provided, the OFT considers that in this case the recommendation could meet the criteria for individual exemption from the Competition Act 1998. The OFT notes, in particular, that the recommendation is capable of generating benefits that outweigh the restriction of competition it creates, by speeding up the roll out of effective broadband to people living in rural areas.

Deborah Jones, Director in the OFT's Services, Infrastructure and Public Markets Group, said:

'The Short-form Opinion process allows the OFT to provide quick guidance to associations or firms planning innovative forms of collaboration.

'Through our recent work on Price and Choice in Remote Communities, we have developed our insight into the importance of access to effective broadband to people in these areas and the benefits that such access can generate for the rural economy. This is reflected in our guidance to the NFU and CLA.

'These associations and their members will be able to use the guidance in the Short-form Opinion to help them conduct their own self-assessment of the compliance of their actions with competition law.'

This is the second Short-form Opinion that the OFT has published since the process was introduced in April 2010. This process aims to provide guidance, within a prompt timetable, to businesses seeking clarity on how competition law applies to prospective collaboration agreements between competitors where these raise novel or unresolved competition law issues.

Download the Short-form Opinion: Rural Broadband Wayleave Rates (pdf 540kb).

See the Short-form Opinions page for further information.

NOTES

1. The NFU represents approximately 56,000 farmers and growers and 40,000 countryside members across England and Wales. The CLA represents approximately 34,000 members in England and Wales active in a range of areas from agriculture and tourism to renewable energy and the environment. 
2. Between 15 and 20 per cent of rural areas in the UK have little or no access to effective broadband. The Government has committed £530 million of funding to help stimulate investment in the provision of broadband in areas of the UK where there is a weak or non-existent business case for commercial investment by the main broadband infrastructure providers.
3. On 19 July 2012, the NFU and the CLA submitted a formal request for a Short-form Opinion on whether their proposed recommendation complied with competition law. The request was accompanied by a joint Statement of Facts which forms the basis of the OFT's Short-form Opinion. The parties requested guidance as to whether their proposed wayleave recommendation would fall within the scope of Chapter I of Competition Act 1998 (CA98), and if so, whether the recommendation was capable of meeting the criteria for individual exemption set out in Section 9 CA98.
4. The CA98 prohibits, among other matters, agreements, practices (Agreements) and conduct that may harm competition in the UK. The Chapter I prohibition covers anti-competitive Agreements that may prevent, restrict or distort competition in the UK or a part of it and which may affect trade in the UK or a part of it. Its European counterpart, Article 101 of the Treaty on the Functioning of the European Union (TFEU), covers equivalent Agreements which may affect trade between EU Member States.
5. An Agreement which falls within Chapter I CA98 will be prohibited unless the parties to the Agreement can prove that their Agreement satisfies the criteria for exemption. The four cumulative criteria are that the Agreement must:
   
   - contribute to improving production or distribution, or promoting technical or economic progress, and
   - allow consumers a fair share of the benefits created by the Agreement. 
   
   In addition, the Agreement must not:
   
   - impose restrictions which are not indispensable to the achievement of the objectives set out above or 
   - make it possible to eliminate competition for a substantial part of the products to which the Agreement relates.
6. The Short-form Opinion process falls within the OFT's general Opinions process. The OFT's Modernisation guideline sets out the circumstances in which the OFT will consider giving an Opinion and these general provisions also apply to Short-form Opinions. In addition to considering whether the conditions for a Short-form Opinion request are met in a particular case, the OFT will check that: there is not sufficient precedent in EU or UK case law, or decisions, practice or previously published opinions given by the European Commission's competition services or the OFT to answer the question posed; there is a need for a published Opinion; and the Opinion can be prepared on the basis of the information provided.
7. Short-form Opinions provide guidance to requesting parties on the basis of an agreed statement of facts to facilitate their self-assessment of the compatibility of the proposed Agreement with the Chapter I prohibition and/or Article 101 TFEU. It is in the parties' interests to provide a statement of facts that is accurate, complete and not misleading in order to maximise the relevance of the guidance given in the Short-form Opinion to carrying out their self-assessment exercise. The Short-form Opinion will not reach any definitive conclusions on the application of the Chapter I prohibition and/or Article 101 TFEU and is not binding on the OFT, European Commission or European or national courts.
8. The OFT intends to issue Short-form Opinions in a limited number of cases per year, which will be chosen by reference to its published prioritisation principles (pdf 121kb).