Irish Competition Authority Decisions

COMPETITION AUTHORITY

1. On 26 November, 1991 ACT Group plc and Kindle Group Limited notified to the Competition Authority, under Section 7(2) of the Competition Act 1991, arrangements for the acquisition by ACT of the entire issued share capital of Kindle for the purpose of obtaining a certificate under Section 4(4) of the Act or, in the event of a refusal by the Authority to issue a certificate, a licence under Section 4(2) of the Act.

2. Notice of the intention of the Authority to take a favourable decision in relation to the arrangements was published in the Irish Times on 10 July, 1992. No observations were received from interested parties.

3. The notification concerns an agreement between ACT Group plc and Messrs. Kilduff, Nagle, Kinsella and Downey, DCC Ltd., and Elmbank Ltd., whereby ACT has acquired the full share capital of Kindle. The agreement also contains a number of non-competition provisions.

4. The individual companies which form ACT are based for the most part in the U.K. where they employ 1600 people. They are a publicly quoted company with an authorised share capital of 120m ordinary shares of 10p each. For the year ending 31 March, 1991, ACT achieved profits after taxation of £8.9m sterling on a turnover of £98m sterling. The employment figures and the authorised share capital also relate to the year ending 31 March, 1991. ACT has one subsidiary based in Ireland - DDT Maintenance (Ireland) Ltd. This company is active in the maintenance of computer systems and micro computers. One of ACT's subsidiaries - ACT Financial Systems Limited - is involved in the provision of applications software and associated services to the financial services sector, however, their products are not considered to be competitive with those of Kindle and no sales of these products have been made in Ireland.

5. Kindle has its registered offices in Dublin. It employs 183 people.

6. 'The Executives' are Mr. A. Kilduff, Mr. K. Nagle, Mr. C. Kinsella and Mr. R. Downey. These individuals each had shareholdings in Kindle before the acquisition. Mr. Kilduff was the Chairman of the Group and the combined shareholding of ´The Executives' exceeded 50% of Kindle Group shares.

7. DCC Limited are an investment company registered in Ireland. They held approximately 28% of Kindle's shares prior to the acquisition.

8. Elmbank Limited are a private investment holding company registered in the Isle of Man. They held approximately 4% of Kindle's shares before the acquisition.

9. ACT specialises in software solutions for the healthcare, financial and public sectors, and provides systems integration and support services for the wider computer market.

10. The principal activity of Kindle is the development and sale of an integrated range of software packages for the banking and financial services industry.

11. Companies in the financial sector may use main frame computers or a network of personal computers (PCs). Different software is necessary for these two computer environments. The majority of Kindle's sales within Ireland are to customers who use PCs. The cost of purchasing a mainframe machine is such that companies are unlikely to substitute PCs for a mainframe in order to obtain software products designed for use with a PC. Software for mainframes and software for PCs are not, therefore, substitute products. There are, in effect, two distinct markets for banking computer software. ACT do not compete in either of these markets in Ireland. Kindle operate largely in the market for PC banking software and this is the market involved in the present notification.

12. Sales of Kindle and ACT products on the Irish market represent a very small fraction of their total business. The majority of ACT's sales arise in the U.K. A significant part of Kindle's sales are also generated in the U.K. In addition, Asia, Africa, and Eastern Europe are important markets for Kindle.

13. A number of agreements giving effect to the acquisition of Kindle were submitted to the Authority. Under one agreement Kindle shareholders could opt to receive new ACT shares or to receive cash in lieu of any of these shares. A separate agreement was made for the acquisition of a block of Kindle's shares owned by DCC Limited. The consideration involved in this agreement was a combination of new ACT shares and guaranteed loan notes.

14. Additional consideration became due under each of the agreements if Kindle's profits for 1991/92 exceed certain levels.

15. By virtue of a deed of irrevocable undertakings and warranties ´the Executives' accepted a number of restrictions on their future business activities. The restrictions, with one exception, were for a period of three years. They are included in Clause 6.1 of the Deed under which the 'Executives' referred to above are obliged not to:

6.1.1 'canvass or solicit orders from any person who was a customer of any Group Member at any time during the twelve months preceding the date of this deed for the supply of relevant products.'

6.1.2 'deal for the purpose of supplying relevant products with any person who was a customer of any Group Member at any time during the twelve months preceding the date of this deed.'

6.1.3 'solicit or entice away from any Group Member any supplier to any Group Member who had supplied goods and/or services to any Group Member at any time during the twelve months immediately preceding the date of this deed if such solicitation or enticement causes or would cause such supplier to cease supplying, or materially to reduce its supply of those goods and/or services to any Group Member.'

6.1.4 'in relation to any relevant products work or be engaged or interested in any trade or business.'

6.1.5 'solicit or entice away from any Group Member any employee of any Group Member employed at the date of this deed in a senior managerial, supervisory, technical, sales or administrative post.'

6.1.6 'use, or reveal to any person any of the trade secrets (save to the extent required by the order of any court of competent jurisdiction), secret or confidential operations, processes or dealings or any other confidential information concerning any Group Member or any client or customer of any Group Member, including but not limited to customer lists and names, sales targets and statistics, market share statistics, surveys and reports and pricing information relating to sales and purchases by any Group Member until such time as the same fall into the public domain otherwise than by reason of a breach of this undertaking.' This restriction is not limited in terms of duration.

6.1.7 'use in connection with any trade or business any name which includes the name of any Group Member or any colourable imitation of it; or'

6.1.8 'attempt, or knowingly assist or procure any other person, to do any of the foregoing things.'

16. The deed also includes restrictions in Clause 7.1 on the disposal of new ACT shares by 'the Executives' and Elmbank Ltd. (the holders of 4% of Kindle's shares) whereby they gave an undertaking not to, for a period of twelve months from the date on which the shares are allotted, 'dispose of or create or agree to dispose of or create any interest in more than half of the number of' ACT shares allotted to them. Notwithstanding this undertaking, 'the Executives' and Elmbank Ltd. also agreed to notify ACT in writing of any intention to dispose of their shares in ACT. These restrictions relate to approximately 2m new ACT shares.

17. The parties have stated that Kindle will bring to ACT a new range of high value added products in a niche market of the financial sector, with little overlap with ACT's existing product range. Kindle should benefit from the opportunity for further international business made available to it as a result of its becoming part of ACT. In addition, Kindle's expertise in the emerging markets of Eastern Europe and the Far East should enable ACT's existing business to expand into these markets. Considerable scope should also exist for cross selling of products between the customer bases of both companies. The enlarged group represents a major financial software business in the U.K. and Europe.

18. It was also stated by the parties that the combined market share of Kindle and ACT in Ireland in banking industry software is negligible. The parties claimed that the limited restrictions imposed would not enable them post-completion to eliminate competition in a substantial part of the market.

19. The parties stated that the restrictions imposed on certain of the vendors were fair and reasonable given the nature of the transaction. They cited EC cases in support of their argument that restrictions on the sellers of business competing in that business were justified.

20. ACT sought to justify the restriction in 6.1.6 as follows:

"It is generally considered that an arbitrary time limit is not appropriate for such a restriction because if the information is still secret at the point where the time limit expires, its disclosure at that time is still capable of causing damage to the business acquired by the purchaser.

Furthermore, the restriction is limited only to the period during which the relevant information has not

fallen into the public domain. The persons accepting the restriction will not, therefore, be prohibited from using information once third parties are also entitled to use it.

To this extent, the parties consider that the restriction goes no further than is reasonably necessary to protect the legitimate business interest of the purchaser following its acquisition."

21. The following case was advanced by ACT in support of the restrictions outlined in Clause 7.1:

"The parties do not consider that the proposed restriction on the disposal of certain of the new ACT shares has either the object or effect of preventing, restricting or distorting such competition.

Given that the restriction applies to shares, the market relating to the provision of software and related services in Ireland will not be affected.

The parties consider that this restriction is common in transactions where the consideration is satisfied (in whole or in part) by the issue of shares in the purchasing company, its purpose being to prevent any de-stabilization in the market for those shares, such as might otherwise arise if all were to be sold immediately. They also consider that this restriction is fair and reasonable and is directly related to the transaction.

It might also be noted that the parties accepting the restriction did have a choice concerning the extent to which they would each accept shares rather than take a cash alternative."

22. At the request of the Authority, by letter dated 2 March, 1992, ACT agreed, by letter dated 28 May, 1992, to amend Clause 6.1.6 of the agreement (see para. 14). ACT now propose to apply the restriction in this clause for a period of five years. Effect was given to this amendment in the form of a Deed of Variation which was executed by the parties to the Agreement.

23. Section 4(1) of the Competition Act states that ´all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State are prohibited and void'.

24. The present decision concerns an agreement between ACT, ´The Executives', Elmbank Limited and DCC Limited. Section 3(1) of the Competition Act defines an undertaking as ´a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.' ACT is a public company quoted on the London stock exchange, engaged in the production and distribution of computer software. ACT is clearly an undertaking within the meaning of Section 3 of the Act.

25. DCC is a company which inter alia provides venture and development capital to small and medium sized enterprises in return for shares. This constitutes the provision of a service for gain and DCC is therefore an undertaking within the meaning of the Act. Elmbank being a private investment holding company is also an undertaking.

26. ´The Executives' were shareholders in Kindle and constituted the group's management team. Between them they effectively controlled Kindle. The Authority has decided in a previous case that individuals who either own or control a business are undertakings for the purposes of Section 3 of the Competition Act. [1] This decision was based on the fact that individuals are included in the definition of undertakings in Section 3 provided they are ´engaged for gain in the production, supply or distribution of goods or the provision of a service.' The Authority's approach in this respect is similar to that adopted by the European Commission in a number of cases under Article 85(1) of the Treaty of Rome on which Section 4(1) is based.

27. ´The Executives' owned more than 50% of the shares in Kindle between them and effectively controlled the company prior to its sale to ACT. They were, therefore engaged for gain in the supply and distribution of goods, namely computer software products designed for use in the banking industry, and the provision of support services for this software. Kindle was engaged in this business in a number of countries throughout the world.

28. ´The Executives' are therefore undertakings within the meaning of Section 4(1) of the Act. The notification relates to arrangements for the transfer of ownership of Kindle, an undertaking which operates within the State. These arrangements therefore represent an agreement between a number of undertakings within the meaning of Section 4(1) of the Act.

29. The arrangements notified are essentially concerned with the transfer of ownership of Kindle from ´The Executives' to ACT. Such arrangements constitute a merger within the meaning of the Mergers, Takeovers and Monopolies (Control) Acts. The present merger has already been approved by the Minister for Industry and Commerce under the terms of the latter Act.

30. The Authority considered the relationship between Section 4 of the Competition Act and the Mergers Act at some length in its decision on Woodchester Bank. [2] It concluded that mergers were not automatically exempt from the provisions of Section 4 of the Competition Act. It indicated its view that a merger might, on occasion, offend against Section 4(1) of the Competition Act. The Authority went on to state, however, that in its view a merger would only offend against section 4(1) if it resulted in, or was likely to result in, a diminution of competition in the relevant market. In particular, the Authority stated that it did not consider that a reduction in the number of competitors was, in itself, evidence of a reduction in competition as this would amount to a prohibition on mergers per se .

31. The Kindle group specialises in the development, marketing, installation and on-going support of a suite of computer software packages for banking. These software packages go under the tradenames ´Bankmaster', ´Branchpower' and ´Linkmaster'.

32. The notification states that the business of ACT and its subsidiaries is the supply of computer software and services. One of ACT's subsidiaries - ACT Financial Services Limited (ACT FS) - is primarily involved in the provision of applications software and associated services to the financial services sector.

33. There are several other international firms competing with Kindle in the PC software market. In addition it is argued by the notifying parties that a number of users, particularly banks, develop their own software and/or commission customised solutions, whereas others buy packaged solutions of the type offered by Kindle and its competitors. The market would appear to be a competitive one.

34. The notification states that, although ACT Computer Support Limited may have banking industry clients, it is concerned with providing hardware and operating systems maintenance. It is claimed that, while ACT FS has banking industry products, these are not considered to be competitive with Kindle's products and in any event no sales of these products have been made in Ireland. It is also stated that no other ACT Group company competes directly or indirectly in the market affected by the proposed arrangements. On that basis the transfer of ownership involves no diminution in the level of actual competition in the relevant market in Ireland.

35. The Authority indicated in Nallen/O'Toole that it interpreted ´competition' as including potential as well as actual competition in line with the views adopted by the European Commission. In general a restriction of competition arises if, in the absence of the restriction, there would have been a real likelihood of the restricted party engaging in the activity in question.

36. The question is whether there is a real likelihood that ACT would have entered the Irish market in competition with Kindle if this takeover had not arisen. It is submitted by the parties that ACT's products do not compete with those of Kindle. Kindle operates on a worldwide basis with only a small proportion of its business in Ireland. ACT is engaged in producing a different range of products. It is always possible that, in the absence of a takeover, ACT might, at some time, have developed products to compete with Kindle in the Irish market. There is no reason, however, to believe that there is a real likelihood that ACT would have entered the market. For this reason the Authority does not believe that the takeover of Kindle by ACT involves a restriction on competition within the State in accordance with Section 4(1) of the Competition Act.

37. The agreement contains a number of what may be termed non-competition clauses. These are contained in clause 6.1 of the Deed of Irrevocable Undertakings and Warranties. This clause requires ´The Executives' to give undertakings not to:

(i) solicit or deal with Kindle's customers or solicit Kindle's suppliers, (6.1.1, 6.1.2 and 6.1.3)

(ii) carry out business in competition with Kindle in relation to certain specified products and services, (6.1.4)

(iii) solicit Kindle's senior employees, (6.1.5)

(iv) reveal confidential information about Kindle other than as required by law, (6.1.6)

(v) commence business using any of the business names utilised by Kindle, (6.1.7) and

(vi) attempt, or knowingly assist or procure any other person, to do any of the foregoing things (6.1.8).

38. Restrictions (i) to (iii) apply for a period of three years from completion of the takeover arrangements. No limit was specified in respect of (iv) and (v) save that it is provided that it shall not apply in the case of information which has come into the public domain. At the request of the Authority clause 6.1.6 was amended by way of a deed of variation to provide for a time limit of 5 years from the date of the deed. In addition The ´Executives' are required to retain a proportion of the ACT shares which they are to receive as part of the consideration for the sale of their Kindle shares, for a period of 12 months following completion of the takeover.

39. The restriction in 6.1.7 is to the use of the Kindle name. The latter restraint does not involve any restriction on competition within the State or any part of the State. It is necessary to prevent ´The Executives' passing themselves off to Kindle's customers or suppliers as representing Kindle, in the event that they should decide to compete against ACT or Kindle.

40. The Authority has previously given its views on non-competition clauses in Nallen/O'Toole. These views were restated in a number of subsequent decisions. In Nallen/O'Toole the Authority stated that:

´In any case, on the specific issue of the non-competition clause, which is at the heart of this agreement, the Authority believes that such a clause is essential in the event of the sale of a business for the transfer of the goodwill of the business to the purchaser. Without such a restraint the purchaser could not be sure of obtaining all of the goodwill of the business and the seller would be unable to benefit by disposing of his share in a business which he had helped to build up. In the Authority's view therefore, such a clause is not in breach of Section 4(1) of the Competition Act provided that the restrictions contained in such a clause or clauses are limited in terms of time, geographical coverage and subject matter to those which are necessary to secure the adequate transfer of the goodwill.'

41. The Authority view is consistent with that adopted by the EC Commission and the European Court of Justice in similar cases. In particular the Court of Justice stated in the Remia case that:

´In order to determine whether or not such clauses come within the prohibition in Article 85(1), it is necessary to examine what could be the state of competition if those clauses did not exist.

If that were the case, and should the vendor and the purchaser remain competitors after the transfer, it is clear that the agreement for the transfer of the undertaking could not be given effect. The vendor, with his particularly detailed knowledge of the transferred undertaking, would still be in a position to win back his former customers immediately after the transfer and thereby drive the undertaking out of business. Against that background non-competition clauses incorporated in an agreement for the transfer of an undertaking in principle have merit of ensuring that the transfer has the effect intended. By virtue of that very fact they contribute to the promotion of undertakings in the market in question.

Nevertheless, in order to have that beneficial effect on competition, such clauses must be necessary to the transfer of the undertaking concerned and their duration and scope must be strictly limited to that purpose. The Commission was therefore right in holding that where those conditions are satisfied such clauses are free of the prohibition laid down in Article 85(1).' [3]

42. The Authority also indicated that it would tend to agree with the EC view that a period of two years would generally be sufficient for the complete transfer of the goodwill of a business.

43. The restraint on ´The Executives' in clauses 6.1.1 to 6.1.5 of the Deed of Irrevocable undertakings and warranties is for a period of three years. Clause 6.1.6 as amended provides for a time limit of five years. The Authority believes that in this instance the arrangements are concerned with more than just the transfer of goodwill. It is satisfied that the creation, development and application of computer software involves a degree of technical ´know-how'.

44. ´The Executives' who are parties to this agreement and the senior employees referred to in 6.1.5 possess this know-how, having themselves developed it. Possession of this know-how would allow them to attract Kindle customers if they were allowed to compete against Kindle or ACT. The period of three years specified in clauses 6.1.1 to 6.1.5 appears reasonable in the circumstances.

45. Clause 6.1.6, which prevents the disclosure of confidential information, appears to cover two types of information namely commercial information about Kindle Group companies, e.g. customer names, prices etc., and technical know-how e.g. trade secrets, processes. The Authority's only concern was in respect of the know-how aspects of the clause.

46. The arguments raised by the parties were quite similar to those raised in the Reuter/BASF case. In the latter case the European Commission in its decision argued as follows:

´It is further recognised that it may be necessary in certain cases to provide additional safeguards to ensure the effective performance of an agreement in cases where technical knowledge, constituting an important part of the value of a transferred undertaking, is placed at the disposal of the transferee. As in the case of goodwill, it must be possible to prevent the transferrer for a certain time from using such knowledge in a manner which would prevent the transferee from acquiring the undertaking with its market position undiminished.

Here too, the protection afforded to the transferee should be limited in time, since the transfer of legally unprotected know-how confers no exclusive rights on the purchaser. Contrary to the contention of BASF, the transfer of technical know-how in connection with the sale of an undertaking does not automatically preclude any further activity on the part of the seller based on such know-how. The opportunity of using such know-how which is unknown to competitors is, like goodwill, a competitive advantage. This advantage can be diminished by the development of third party competitors of their own know-how in the particular field of research. Unlike third parties the transferrer of an undertaking remains aware of the contents of any transferred know-how, since he cannot divest himself of his own knowledge. For this reason it appears legitimate to protect the transferee in order for a certain time to enable him to acquire the undertaking with its competitive position undiminished. This need to protect the competitive position of the undertaking provides the justification for and prescribes the time limits to any non-competition clause involved.' [4]

47. The Commission went on to state that:

´In no circumstances may an obligation to keep know-how secret from third parties, imposed on the transfer of an undertaking, be used to prevent the transferrer, after the expiry of the reasonable term of a non-competition clause, from competing with the transferee by means of new and further developments of such know-how.'

The Commission ruled in this case that 8 years was too long for a non-competition clause where a transfer of technical know-how was involved and that in fact the agreement which had been in existence for 5 years at the time of the decision was in breach of Article 85(1) and could not be exempted under Article 85(3).

48. The Commission subsequently indicated that:

´In the absence of circumstances which deviate greatly from those in the Reuter/BASF or Nutricia cases, these decisions, however, indicate as general guide that where the transfer of a business also involves the transfer of good-will and know-how, a period of approximately five years will normally be acceptable, whereas a period of approximately two years will normally apply if the sale involves only the transfer of good-will.' [5]

49. The present notification raises some question as to what might be regarded as technical know-how. The EC Regulation on know-how licensing states in Article 1(7)(1) that ´know-how means a body of technical information that is secret, substantial and identified in the appropriate form'. [6] Know-how is only protected as long as it is secret. The regulation provides that the know-how must be substantial to ensure that know-how licensing agreements and the restrictions contained in them are not a disguised way of restricting competition by licensing worthless and trivial know-how. Article 1(7)(4) provides that know-how must be ´described or recorded' in such a manner as to make it possible to verify that the first two conditions are fulfilled, and to ´ensure that the licensee is not unduly restricted in his exploitation of his own technology. In order to be identified the know-how can either be set out in the licence agreement or in a separate document or recorded in any other appropriate form.'

50. It is clear to the Authority that the ´trade secrets' and ´processes' referred to in clause 6.1.6 in so far as they relate to specifications of computer software packages, constitute know-how, and that the restriction in clause 6.1.6 applies both to technical know-how concerning products of the Kindle Group, as well as financial and other information. To afford the purchaser unlimited protection against the use of technical know-how by the seller would, in the Authority's view, restrict competition since such an unlimited restriction would go beyond what is necessary to secure the complete transfer of the business to the purchaser. As in the Reuter/BASF case it appears reasonable to limit such protection to the time required to allow the purchaser to obtain full control of the undertaking. Once such a reasonable time has elapsed, however, the purchaser is no longer entitled to be protected against competition by the seller. As pointed out, the European Commission has indicated that ´where the transfer of a business also involves the transfer of goodwill and know-how, a period of approximately five years will normally be acceptable'. The Authority could find no good reason to depart from EC guidelines on this first occasion on which it considered a non-competition clause relating to technical know-how.

51. The product market involved here, namely the market for PC banking software is constantly developing with the range and capabilities of products available growing at a rapid rate. As in the Reuter case, if the individuals concerned were excluded from the market for an excessive length of time, it might be very difficult for them to re-enter as viable competitors.

52. It is also relevant that the EC regulation on know-how licensing provides that where licensees modify or develop the know-how they are allowed to use such developed know-how themselves beyond the termination of the licence agreement, provided they give details of the modifications to the licensor.

53. Where the transfer of know-how is part of a sale of a business, the purchaser is entitled to protection for some length of time against the seller in order for the complete transfer of ownership to take place. As in the Reuter case, however, such protection cannot be any longer than is necessary for the completion of such transfer.

54. The Authority accepts that the software products developed by Kindle embody a substantial amount of detailed technical know-how and that some protection against competition from the ´executives' of Kindle who are familiar with such know-how is justified. It also accepts that in the case of a transfer of technical know-how such protection can be justified for a longer period than in a case where only goodwill is being transferred. At this stage the Authority agrees with the EC Commission view that a time limit of 5 years is acceptable where technical know-how is involved. It believes that technical know-how must satisfy the criteria set out in the EC know-how licensing regulation as outlined in para 49 above. It does not consider that knowledge concerning a particular line of business can be regarded as constituting technical know-how. The Authority believes the 5 year restriction contained in the amended clause 6.1.6 is reasonable in the present circumstances as being necessary for ACT to familiarise itself with the technical know-how involved.

55. The Authority indicated in Nallen/O'Toole that non-competition clauses in the sale of a business must also be restricted in terms of geographical coverage and subject matter to what was necessary to secure the complete transfer of the goodwill of the business. In this respect it was following the approach taken by the EC Commission in the Nutricia case and by Irish and UK courts at common law.

56. No specific geographical area is specified in the various clauses in the present agreement. The fact is that the Kindle Group operates on a worldwide basis. The fact that the restraints apply worldwide is, therefore, reasonable in the case of clauses 6.1.1 to 6.1.6. The restraints relate to the business of software development, marketing and sales. As this represents the market in which Kindle operates, the restraint is reasonable in terms of subject matter.

57. The restrictions contained in clauses 6.1.1 to 6.1.7 do not, in the Authority's view prevent, restrict or distort competition and do not therefore offend against Section 4(1) of the Competition Act. The restriction in clause 6.1.8 is in respect of the sellers knowingly assisting or procuring any other person to do any of the things covered in clauses 6.1.1 to 6.1.7. As those clauses do not, in themselves, offend against Section 4(1), clause 6.1.8 cannot be regarded as offending against that Section.

58. Clause 7 of the notified agreement restricts the amount of ACT shares which Kindle shareholders, who are due to receive them in part consideration for the sale of their Kindle shares, may sell within a period of 12 months of the completion of the sale. Clause 7.2.1 provides that this provision will not have effect until it has been notified to the Competition Authority in accord with Section 7 of the Competition Act and until any relevant licence has been obtained in respect thereof.

59. This clause of the agreement is not considered to be in breach of Section 4(1) of the Competition Act as it does not prevent, restrict or distort competition in trade in any goods or services in the State or in any part of the State.

60. ACT, ´The Executives', Elmbank and DCC are undertakings within the meaning of Section 3 of the Competition Act and the arrangements in question constitute an agreement between undertakings which applies within the State.

61. The Authority believes that the agreement for the purchase and sale of Kindle does not offend against Section 4(1) of the Competition Act.

62. The Authority has previously stated that, in the case of a sale of business, some restriction on the seller competing with the purchaser is normally justified in order for the purchaser to acquire the complete goodwill of the business. A non-competition clause which is limited in terms of duration, geographic coverage and subject matter to what is necessary to secure the complete transfer of the goodwill of the business does not prevent, restrict or distort competition within the meaning of Section 4(1) of the Competition Act. The Authority believes that similar considerations may apply where the sale of business involves the acquisition of technical know-how. While the Authority has accepted that a restriction for two years would generally be acceptable in the case of the transfer of goodwill, it agrees with the EC Commission that a restriction for five years is acceptable in a case where the sale involves the acquisition of technical know-how. In the Authority's view the restrictions in clause 6.1 of the present agreement, as amended by the letter of 28 May 1992 from ACT's solicitors, do not prevent, restrict or distort competition in the State or any part of the State.

63. The present agreement for the transfer of ownership of Kindle Group Ltd. between ACT Group Ltd. and Messrs Kilduff, Nagle, Kinsella and Downey, Elmbank Ltd. and DCC Ltd. does not, in the Authority's opinion offend against Section 4(1) of the Competition Act, 1991.

64. 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 between ACT Group Ltd. and Messrs Kilduff, Nagle, Kinsella and Downey, Elmbank Ltd. and DCC Ltd. for the transfer of the shares in Kindle Group Ltd., notified on 26 November 1991 under Section 7 and amended by letter of 28 May 1992, does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey

Member

4 September 1992.

NOTICE UNDER SECTION 4(6) OF THE COMPETITION ACT, 1991

Notification No. CA/9/91 - ACT Group plc/Kindle Group Limited

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 between ACT Group Ltd. and Messrs Kilduff, Nagle, Kinsella and Downey, Elmbank Ltd. and DCC Ltd. for the transfer of the shares in Kindle Group Ltd. notified on 26 November 1991 under Section 7, and amended by letter of 28 May 1992, does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey

Member

4 September 1992