Competition Authority Decision No. 426 of 22 September 1995 relating to a proceeding under Section 4 of the Competition Act,1991.

Notification No.CA/21/95 - Lister Tubes Ltd/Jonava Properties Ltd.

Decision No:426

Introduction

1.	Notification was made by Lister Tubes Limited (Lister) on 31 May 1995 with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to issue a certificate, a licence under Section 4(2) in respect of an agreement relating to the sale of land. 

The Facts

(a)	The Subject of the Notification

2.	The notification concerns a sale agreement between Lister (as vendor) and Jonava Properties Ltd (Jonava) as purchaser and a Land Registry transfer agreement between Lister (as vendor), British Steel Plc, Jonava and Anthony, Mark and Conor Keoghan (as purchasers), and DFDS Transport (Ireland) Ltd (DFDS) as sub-purchaser relating to the sale of land containing a warehouse at Merrywell Industrial Estate, Ballymount, County Dublin.

(b)	The Parties Involved

3.	(i)	Lister, a subsidiary of British Steel plc, is engaged in the business of steel stockholder on a site adjacent to the property sold. British Steel Plc which is based in the UK, is one of the largest steel companies in Europe.  
	(ii)  Jonava is engaged in the business of property and entered into the agreement as trustee for itself and Anthony, Mark and Conor Keoghan who sold the property to the ultimate purchaser. DFDS which is the ultimate purchaser of the property, is engaged in the business of shipping agents and transport.

(c)	The Notified Arrangements

4.	The sale agreement was made on 28 March 1995 and provides for the purchase price for the property with the closing date set as 27 April 1995. The General Conditions of Sale are those set out by the Incorporated Law Society of Ireland, a copy of which was furnished. The Special Conditions to the sale relate largely to the transfer of title, planning permissions, compliance with the national building regulations, service charges etc.

 Clause 16 of the Special Conditions states:

"Subject to the Licence or Certification of the Competition Authority, the Purchaser will Covenant with the Vendor and British Steel Plc in the purchase deed that neither it nor its successors in title will use or cause or permit the premises in sale or any part thereof to be used for the purpose of steel stockholding for a period of two years from the date of the purchase deed without the prior written consent of British Steel Plc "

Under the Land Registry Transfer deed, DFDS enters into a similar covenant with Lister and British Steel Ltd and assents to its registration as a burden on the property. 

(d) Submission of the Parties

5.	Arguments submitted on behalf of the notifying party in support of a certificate were as follows:

"The applicant submits that the covenant does not prevent, restrict or distort competition in the State or any part of the State because of the jurisprudence of the Competition Authority. It is submitted that the case-law of the Competition Authority to the effect that an agreement between undertakings for the sale of land does not per se and that post-term restrictions per se are not in breach of Section 4(1) of the Act.

The applicant refers to the various cases of the Competition Authority on the sale of land in similiar situations where the Authority certified agreements where a non-compete covenant was imposed on a purchaser for a short period of time after the sale of land so as to protect the goodwill and reputation of the vendor where the vendor is continuing to operate in the same market."

Assessment

(a)	Applicability of Section 4(1)

6.	The Authority considers that Lister is an undertaking within the meaning of Section 3(1) of the Competition Act, 1991 as it is engaged in steel stockholding for gain. Jonava is engaged in the property business for gain and is also an undertaking. British Steel is engaged in steelmaking for gain while DFDS is engaged in transport for gain. The agreements are therefore agreements between undertakings and have effect within the State.

7.	In the Authority's view agreements for the sale of property per se do not come within the scope of Section 4(1) of the Competition Act. In addition, as indicated in its decision in relation to Fuel Distributors/J Enright1, the Authority considers that restrictions on the future use of property do not generally offend against Section 4(1). In this case the Authority considers that the notified agreement, including the restrictive covenant in clause 16, does not have the object or effect of preventing, restricting or distorting competition in the steel stockholding market in the State or in any part of the State. The restriction prevents the premises being used for the purpose of steel stockholding for a period of two years from the date of purchase without the prior written consent of the parent company of the seller. The purchaser, Jonava, or the ultimate purchaser, DFDS, are not engaged in the steel stockholding business but should they wish, they can do so in many other premises both in the vicinity or elsewhere in the State, and after two years, on the property the subject of this notification. Similarly, the agreement does not prevent any other person engaging in steel stockholding in any part of the State. The effect of the agreement is not, therefore, anti-competitive. The Authority considers that the notified agreement between Lister Tubes Limited and Jonava Properties Limited does not offend against Section 4(1) of the Competition Act, 1991. For purposes of clarity, however, the Authority wishes to make clear that, contrary to submisions made by the notifying party, it does not believe that such restrictions are necessary to protect the goodwill and reputation of the vendor in the case of a sale of land and it has not previously indicated that this was the case.  

The Certificate

The Competition Authority has issued the following certificate:

The Competition Authority certifies that in its opinion, on the basis of the facts in its possession, the agreement of 28 March 1995 between Lister Tubes Limited and Jonava Properties Limited in relation to the sale of land at Merrywell Industrial Estate, Ballymount, County Dublin, (notification no. CA/21/95), notified under Section 7 on 31 May 1995 does not offend against Section 4(1) of the Competition Act, 1991. 

For the Competition Authority

Des Wall
Member 
22 September 1995. 

1.  Decision No. 145, 18.11.1993.