Irish Competition Authority Decisions

1. Notification was made by The Square Management Ltd on 30 September, l992 with a request for a certificate under Section 4(4) of the Competition Act, l99l or, in the event of a refusal by the Competition Authority to issue a certificate, a licence under Section 4(2) in respect of agreements relating to the leases of shop units at The Square, Towncentre, Tallaght.

2. The notification concerns the leases relating to shop units in The Square, Towncentre, Tallaght, Dublin 24 between The Square Management Ltd as Freeholder, L&C Properties and others as Landlords, and the tenants. It also concerns associated agreements relating to the management of the centre.

3. The Square Management Ltd is the Freeholder of The Square, Towncentre, Tallaght, Dublin 24. Guardian Assurance plc and L & C Properties Ltd, were the holders of the long leasehold and the sub leasehold interest respectively in October 1990, and are landlords. Other landlords include Salix Trust Ltd, AIB Investment Nominees, IBI Nominees Ltd, IBI Property Nominees, Ricarton Ltd, Airspace Investments Ltd, Aviette Ltd and 13 other individuals or parnerships. The tenants of the 177 shop units involved are engaged in various retail and service activities at the shopping centre.

4.The agreements notified are as follows:-

- Shareholders Agreement dated 22 October 1990

- Deed of Assignment dated 19 October 1990

- Standard leases

The shareholders of The Square Management Ltd are the several landlords of units and the Shareholders Agreement was entered into on 22 October 1990 by the earlier landlords to regulate matters between them and to ensure an orderly provision of services and diversity of use within the shopping centre. Shares in the company may only be held by the initial shareholders (L&C Properties, Guardian Assurance, AIB Investment Nominees, IBI Nominees, IBI Property Nominees Ltd and Salix Trust Ltd) and future landlords of leased units (excluding owner occupied units). The agreement provides for the regulation of the company business including the following viz.

(i) " ....(the Boards) business shall include

6.1.3 The approval or otherwise by the Board of the permitted uses of the units in the centre and the approval or otherwise of any proposals to alter the said permitted uses or any subsequent variations ......

6.1.5 The approval of the annual Service Charge budget for the centre

(ii) The Shareholders hereby covenant with the company and mutually covenant with one another

13.2.6 Not to agree to a change of use of any Unit without first obtaining the companys consent and in particular not to agree to the establishment of a use (in respect of units unlet at the date hereof) or to the change of any use as disclosed by the Disclosure Booklet where such establishment or change of use would result in same being in conflict with any of the exclusivity undertakings granted to Tenants of Units as disclosed by the Disclosure Booklet."

The deed of assignment dated 19 October 1990 was made between The Square Management Ltd as Landlord and Guardian Assurance (holder of the lessee interest in the Superior lease) and L&C Properties Ltd (holder of the lessee interest in the Sub-Lease and Licence). Under this deed all the common parts of the shopping centre were assigned to The Square Management Ltd and the assignees as owners of all the lettable premises at that time covenanted to use each unit for a set use and inter alia covenanted to the covenants in the agreed standard lease set out at para.7 under.

The standard shopping centre lease furnished in draft form contains the following restricted user clauses viz.

(i) Under clause 3.2(3) the tenant covenants with the Freeholder and the landlord "Not without the prior consent in writing of the Landlord and the Freeholder or their respective Agents thereunto lawfully authorised, to use or permit or suffer to allow the Demised Premises or any part thereof, to be used for any purpose other than P ROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that upon any application by the Tenant, or any Undertenant of the Tenant, for liberty to alter or change the aforesaid permitted use of the Demised Premises the Landlord and the Freeholder shall not unreasonably withhold their consent..."

(b) Under clause 3.2(5) the tenant covenants with the freeholder and the landlord "Not to assign transfer, mortgage, charge or part with the possession or occupation of the Demised Premises or any part thereof or suffer any person to occupy the Demised Premises or any part thereof as a licensee or concessionaire except with the previous consent in writing of the Landlord and the Freeholder BUT SO THAT NOTWITHSTANDING the foregoing the Landlord and the Freeholder shall not unreasonably withhold its consent..."

In addition, there are a number of other standard restrictive covenants and obligations in the lease.

The Square Management Ltd has supplied details of the permitted user under clause 3.2(3) attaching to each lease whereby the tenant is restricted to particular specified retail or service activities. In addition particulars of exclusive user attaching to 36 tenancies have been supplied.

9. The Authority considers that The Square Management Ltd, the Landlords and the tenants are undertakings and that the notified leases and agreements are agreements between undertakings. The agreements have effect within the State.

10. The Authority considers that the notified leases, and their restricted and exclusive user clauses and the other standard restrictive clauses and obligations, do not have the object or effect of preventing, restricting or distorting competition in trade in any goods or services in the State or in any part of the State, for the reasons given in the Notice of the Authority of 2 September, l993 in respect of shopping centre leases (Iris Oifigiuil of l0 September, l993, pp. 665-667). The Authority therefore considers that the notified leases between The Square Management Ltd, the Landlords and the tenants do not offend against section 4(1) of the Competition Act, l99l.

11. The restricted user clauses in the Deed of Assignment are identical to those in the standard lease. The Authority would therefore take the view that these clauses do not offend against Section 4(1) of the Competition Act.1991.

12. As regards the Shareholders Agreement the Authority must take into consideration the fact that with over 170 shopping units The Square shopping centre is the largest in the State and that it has 22 separate landlords. The Authority in its notice on shopping centre leases stated

"The fundamental principle of a shopping centre is that it provides consumers with the opportunity of obtaining a wide range of goods and services in a single location. In order to do this it is essential that there should be a balanced mixture of different types of retail outlets in the centre. This implies that the Landlord tries at all times to ensure that there is a wide variety of outlets to satisfy consumer demand for different goods and services within the centre."

In fact, in this case, the arrangements provide for the location of competing outlets within the centre so no question of a restriction on competition arises.

With 22 landlords letting units at the centre it would seem essential that there should be a mechanism to ensure this diversity of use and this is achieved by means of the shareholders agreement. This agreement allows the application of permitted user and exclusive user clauses on a common basis throughout the shopping centre. The Authority considers that such clauses do not offend against Section 4(1). Similarly an agreement between landlords at the centre to enable common application of the clauses would not offend. The Authority therefore takes the view that the Shareholders Agreement does not offend against Section 4(1) of the Competition Act, 1991.

13. 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 agreements between The Square Management Ltd, and Guardian Assurance plc, L & C Properties Ltd, Salix Trust Ltd, AIB Investment Nominees Ltd, IBI Nominees Ltd, IBI Property Nominees Ltd, Riccarton Ltd, Airspace Investments Ltd, Aviette Ltd and other landlords and the tenants in relation to the lease of premises at The Square Towncentre, Tallaght, Dublin 24, notified under Section 7 on 30 September, l992 (notification no. CA/886/92E), do not offend against Section 4(1) of the Competition Act, l99l.

For the Competition Authority

Des Wall

Member

3 December 1993