Irish Competition Authority Decisions

Motor Fuels Category Licence

1. Under Section 4(2) of the Competition Act, 1991, the Competition Authority may grant a licence for the purposes of Section 4 of the Act to any category of agreements:

'which in the opinion of the Authority, having regard to all relevant market conditions, contributes to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and which does not -

(i) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives;

(ii) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.'

2. A number of agreements have been notified to the Authority concerning long-term exclusive purchasing arrangements for the resale of petroleum products in service stations. Since agreements have been notified, in accordance with Section 7(3) of the Act, the Authority may grant a licence, including a category licence, under Section 4(2) of the Act. The Authority has already granted licences in respect of the Esso solus and related agreements. [1] It has also carefully examined notifications from other companies relating to exclusive purchasing agreements for both independent dealer and company-owned outlets. The experience of the Authority enables it to define a category of agreements and concerted practices which can be regarded as normally satisfying the conditions laid down in Section 4(2).

3. Notice of intention to grant a category licence for motor fuels was published on 11 December 1992, and submissions were invited from interested parties. A number of submissions was received on the draft category licence, and full account was taken of these prior to finalising this decision.

4. This decision concerns the long-term supply and exclusive purchasing agreements between suppliers of motor fuels and their tied service station retailers, subsequently referred to as resellers. The majority of independent resellers operate under exclusive purchasing, or solus, agreements, which have a maximum term of ten years. Most company-owned outlets are operated under licence or in accordance with a lease. This decision applies only to such solus agreements, licences and leases. Some independent dealers, while tending to buy from a single supplier, do not do so in accordance with any formal long-term agreement, and consequently are not covered by this decision. Some company-owned outlets are operated, directly or indirectly, by the supplying companies. Since the relationship between supplier and reseller in these cases is that of parent/subsidiary or employer/employee, and the Authority has already indicated that, in such circumstances, any relevant agreements are not caught by Section 4(1) of the Act, they are also outside the scope of this decision. [2] This decision only covers agreements for the resale of motor fuel. It does not cover agreements for the sale of motor fuels direct to commercial users, or for the resale or sale of aviation, marine or other petroleum-based fuels.

5. The agreements with solus dealers are often accompanied by other agreements, which either contain an exclusive purchasing obligation for motor fuels or are dependent upon an agreement which contains such an obligation. These other agreements may also contain different restrictive provisions. The more important of these other agreements are in connection with:

(a) the loan of equipment to the dealer;

(b) the payment of rebates in advance by way of an interest- free loan to the dealer;

(c) the loan of money to the dealer;

(d) a deed of charge or mortgage, as security for a cash loan to the dealer;

(e) a hire purchase agreement for equipment purchased by the dealer.

Agreements relating to equipment may cover that for the sale of motor fuels (tanks, pumps, etc.), lubricating oil equipment, or civil construction at the service station (the forecourt, canopies, a service bay, a car wash, or a shop).

6. The products with which this decision is concerned consist of motor fuels, that is petrol and diesel for use in mechanically-propelled motor vehicles, and other petroleum-based motor fuels, such as liquefied petroleum gas (LPG) and kerosene. Insofar as they are supplied to motor fuel resellers, lubricants and related petroleum-based products, such as greases, additives and brake fluids, are also covered by this decision.

7. Motor fuels are imported into Ireland by a number of suppliers, usually from refineries in the UK, through various Irish ports where they have storage facilities. Each supplier must obtain 35% of its total product from the State-owned Whitegate refinery. The suppliers are primarily concerned in Ireland with the marketing of petroleum products, that is with the supply and distribution of motor fuels to the motoring public through a chain of retail outlets, though some product is sold directly to commercial customers. From the storage depots, retail outlets are supplied by road tanker. A number of the suppliers are subsidiaries of multi- national oil companies, while the newer entrants, which are small, are Irish-owned. The main suppliers of motor fuel to resellers are:

Burmah Castrol Ireland McMullan Bros. Ltd.

Campus Oil Limited Morris Oil Company Ltd.

Conoco Ireland Ltd. Statoil Ireland Ltd.

Esso Ireland Ltd. Tedcastle Oil Products Ltd.

Estuary Fuel Ltd. Texaco (Ireland) Ltd.

Irish Shell Ltd.

McMullans trades under the trademarks Maxol and Ola. B.P. Ireland Ltd was taken over by Statoil Ireland Ltd in mid-1992. There are a number of smaller companies which also supply small numbers of retail petrol outlets. They do not import the product but obtain it from one of the above-named suppliers. The retail outlets display their brand name. These companies vary from time to time, but among the small suppliers known to the Authority to be, or to have been recently, trading are the following: Delta (associated with Campus), Ryan Oil, Falcon, Togher, Primo, Phoenix, Torc and Amber.

8. Each supplier supplies motor fuel to resellers who comprise independent solus dealers, who have an exclusive purchasing agreement, non-solus dealers, without such an agreement, and, usually, company-owned outlets. Company-owned outlets may be operated in several different ways. They may be licensed to an operator on a short-term basis, or leased to an operator on, usually, a long-term basis, or managed by an employee of the company or by a commission agent. Licensees and lessees tend to have a greater degree of freedom in their commercial activities than managers or commission agents in company-operated stations. As stated in para 4, however, this decision only covers solus dealers, licensees and lessees. Dealer and company-owned stations are located throughout the State, but the latter tend to be located in the major centres of population. The sale of motor fuels through service stations may be combined with car repairs and servicing, car sales, or a shop selling, among other items, grocery products. (Motor fuels may also be sold from outlets ancillary to other businesses, such as grocery shops or public houses, though, because of their small sales, these tend not to have solus agreements with their suppliers).

9. According to the Report of Enquiry into the Supply and Distribution of Motor Fuels by the Fair Trade Commission in 1989 (PL. 7951), total sales of petrol through retailers in 1988 were 1,090 million litres, while total retail sales of autodiesel were 187 million litres. In 1988, there were 3,227 retail petrol outlets, of which 447 were company owned, or 13.9%, and 2,017 were solus outlets, or 62.5%. Non-solus dealers accounted for 23.6% of total outlets. The proportion of total petrol sales through company-owned outlets was, however, 41.6%, with 51.5% through solus outlets and 7.0% through non-solus outlets. 36.3% of dealer outlets sold less than 20,000 gallons of petrol per year (90,920 litres) and only 4.6% sold more than 200,000 gallons (909,200 litres). The respective figures for company stations were 4.1% and 57.2%. Company outlets had a higher average annual throughput than solus dealers, who had a higher average throughput than non-solus dealers. The average throughput of all outlets in Ireland was only about one-quarter of the EC average.

10. Since petrol outlets are located throughout the State, the appropriate geographic market in this case is the State.

11. Up to 30 September 1991, the motor fuels sector was subject to strict price control and to the provisions of the Restrictive Practices (Motor Spirit and Motor Vehicle Lubricating Oil) Order, 1981. Both the Order and price control were removed on the coming into force of the Competition Act on 1 October 1991.

12. EEC Regulation No. 1984/83, of 22 June 1983, is a block exemption regulation which applies Article 85(3) of the Treaty of Rome to categories of exclusive purchasing agreements. It includes special provisions for service station agreements, that is for solus agreements and for agreements relating to company owned stations. The regulation entered into force on 1 July 1983 and it expires on 31 December 1997. [3]

13. The regulation applies to agreements involving only two parties whereby one party, the reseller, agrees with the other, the supplier, to purchase specified goods only from the supplier, or from a connected undertaking or one entrusted by the supplier with the sale of his goods. The supplier may be obliged not to distribute the goods or competing goods in the reseller's principal sales area and at the reseller's level of distribution. For goods generally, the exclusive distribution agreement may be for no longer than five years.

14. In the case of agreements for the supply of petroleum-based motor vehicle fuels, or for these and other fuels, for resale in a specified service station, special commercial or financial advantages may be accorded by the supplier to the reseller. In such cases, the exclusive purchasing agreement may be for a period not exceeding ten years, and the reseller may be obliged not to sell fuels supplied by other undertakings. If the service station is let to the reseller by the supplier, the ban on dealing in competing products may be imposed for the whole period during which the reseller operates the station. The reseller may also be obliged not to use lubricating oil supplied by other firms where equipment is financed or made available by the supplier, but he may not be prevented from selling oil supplied by other firms. These exclusive purchasing agreements may refer to no other goods, nor to services (except in connection with the servicing of equipment owned or financed by the supplier). Where the reseller (in this case the independent dealer) sells his outlet, he may not be obliged to impose the exclusive purchasing obligation on his successor for a longer period than the reseller would remain tied to the supplier. Some general provisions of the regulation also apply, such as permitting the reseller to be obliged to purchase minimum quantities of goods, to sell the goods under trademarks and to advertise and promote the goods. The benefits of exemption may be withdrawn by the EC Commission in a particular case where it considers that the conditions of Article 85(3) are not satisfied, where, for example, effective competition is lacking. There are special transition provisions for existing service station agreements. Service station agreements cannot be combined with general exclusive purchasing agreements involving the same parties.

15. Section 4(1) of the Competition Act, 1991, prohibits and renders void all agreements between undertakings 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.

16. The suppliers of motor fuels, the independent solus dealers, and the licensees and lessees of company stations, are all engaged in the supply and distribution of motor fuels for gain, and they are therefore 'undertakings' within the meaning of Section 3(1) of the Competition Act. The solus and related agreements, the licences and the leases are all agreements between undertakings. The relevant product market is that of motor fuels and other petroleum-based products for resale to the public. The relevant geographical market is the State.

17. The primary feature of the basic solus agreement is that the solus dealer is obliged to purchase his requirements of motor fuels from one supplier, or a person appointed by the supplier, for a period not exceeding ten years. In the case of licences and leases, the exclusive purchasing requirement lasts for the full term of the agreement, which can be as long as thirty or more years for a lease. The solus dealer, licensee or lessee, therefore, is not permitted to purchase any motor fuels from a supplier other than the other party to the agreement (except in certain circumstances, see para 24) during the period of the agreement, and no supplier other than the other party may supply the dealer, licensee or lessee during that period. This limits the commercial freedom of the dealer or operator to obtain supplies, and the freedom of other suppliers to meet his requirements, and is a restriction upon competition which offends against Section 4(1) of the Competition Act.

18. While the effect of a single agreement between a supplier and an independent dealer or operator of a company station might be insignificant, each agreement must be considered in the economic context of the retail market for motor fuels. [4] As is clear from para 9, outlets subject to an exclusive purchasing tie - solus dealers and company stations - accounted for 76.4% of all retail petrol outlets, including almost all of the larger stations, and for 93.1% of total retail sales of petrol, petrol being the most important motor fuel sold by retailers. The vast bulk of petrol sales, therefore, is through tied outlets, which are precluded from purchasing motor fuels from any other supplier over a long period.

19. This tends to introduce a considerable degree of rigidity into the market, and makes it difficult for a new entrant to enter the market on any significant scale, since the most important potential customers are not available, at least in some cases until their solus agreements have expired. All company stations are tied indefinitely to the supplier who owns them.

20. The Authority considers, therefore, that the basic solus agreements, the licences and leases, have the object and effect of preventing, restricting or distorting competition in goods in the State, and thus they offend against Section 4(1) of the Competition Act, 1991. Agreements related to the solus agreement which either contain an exclusive purchasing commitment or are dependent on an agreement containing such an obligation, are also regarded by the Authority as coming within the prohibition of Section 4(1) of the Act.

21. The exclusive purchasing requirement in motor fuel agreements, particularly in solus agreements, may extend to include not only the designated service station but also any land or premises adjoining or in close proximity to the station. For the reasons given above, such a restriction also offends against the prohibition of Section 4(1) of the Act.

22. The exclusive purchasing requirement may also be extended to include the sale of motor fuels by the dealer at any premises within a given radius of the designated service station, for example, within a one-mile radius. This prevents the dealer from selling competing motor fuels at any premises within the specified area. At the public enquiry held by the Fair Trade Commission in 1989, it was widely held in evidence that the location of a service station was very important in attracting motorists, and that, because of the high price of petrol, it would not be economic for a motorist to drive very far in order to buy petrol cheaper in another service station, because any consequent saving would be offset by the cost of fuel consumed. Competition would therefore appear to be a localised phenomenon. The obligation not to deal in competing motor fuels within, say, a one mile radius of the designated station is a restriction on competition which is prohibited by Section 4(1). The Authority considers that any restriction on a dealer from dealing in competing fuels in any wider area, including a prohibition covering the whole State, is also a restriction on competition which offends against Section 4(1).

23. Agreements can contain restrictions upon dealers in relation to their activities after the agreement has terminated. These could involve, for example, a requirement that a further solus agreement should be concluded after the first agreement has terminated at the end of the ten-year period, or that exclusive purchasing continue after this period. There might also be some restriction upon the dealer, or a licensee or lessee, engaging in the sale of competing motor fuels after the agreement has terminated. Any such clauses interfere with competition, and offend against Section 4(1).

24. As a corollary to the obligation upon the dealer to purchase his total requirements of motor fuels from the supplier, there is an obligation upon the supplier to supply the dealer's total requirements. This obligation is usually qualified by a provision that the supplier is not bound to supply in certain circumstances, such as when it is prevented from supplying some or all of the requirements. It may be provided that the supplier will use its best endeavours to procure supplies from some other source. Should the supplier fail to meet the supply obligation, the dealer is permitted to seek and purchase from another supplier during the period when supply is disrupted. Such provisions do not constitute limitations upon competition and so they do not offend against Section 4(1).

25. Agreements might contain a requirement that the reseller sells at a price fixed by the supplier, or at a price not less than or not more than that indicated by the supplier. Alternatively, while not being specified in the agreement, it might be the practice of suppliers to issue price notices of this nature as part of the arrangements with their exclusive purchasers. Even if these are not binding, resellers might be of the belief that they were binding or that they should be followed. The Authority regards anything which enforces, or is conducive to, resale price maintenance as a serious restriction upon competition, and indeed to an elimination of price competition, and therefore as a serious infringement of the prohibition in Section 4(1).

26. As the Authority stated in its decision on the Esso solus agreements, 'In most circumstances, provided that independent resellers are free to set their own resale prices, and that they are aware of this, the informing of resellers by suppliers of recommended, or recommended maximum, resale prices does not, in the opinion of the Authority, amount to resale price maintenance, and is not therefore caught by the prohibition in Section 4(1). (This might not be the case, however, if a considerable degree of price similarity were observed in the market).' [5]

27. Where a supplier itself operates some of its company stations, however, the issuing of price recommendations may present some difficulties. This happens when the prices recommended in advance to dealers are known to be those which will be charged at the company-operated stations. The latter are in competition with solus and other dealers who are tied to the supplier, and the supplier is an operator on the market like these others. In BP Kemi/DDSF, the EC Commission condemned an information exchange agreement between a supplier and his distributor where the supplier himself competed in the distributor's territory. [6] As the Authority stated in its Decision concerning the Esso solus and related agreements:

'In effect, Esso, by informing its solus dealers of a maximum recommended price, was informing them of the price which would be charged in Esso company operated stations. Its action amounted to informing solus dealers in advance about the prices which would be charged by their competitors, competitors who accounted for a large proportion of total retail sales of Esso products. The Authority was concerned that this could have the effect of eliminating uncertainty and of distorting intra-brand competition between Esso outlets.' [7]

The Authority considers that, in general, the exchange of price information by competitors offends against Section 4(1) of the Act.

28. The suppliers of motor fuels also supply petroleum-based lubricating products, such as lubricating oils and greases, additives and brake fluids, which carry the supplier's brand name. There are some specialist oil products, admittedly

produced by suppliers of motor fuels, which are widely available outside the suppliers' networks of service stations. A requirement on the exclusive purchaser of motor fuels to purchase, stock and sell exclusively lubricants and related products supplied by the supplier is a restriction on competition which offends against Section 4(1).

29. An obligation in an agreement to give preference to the supplier's lubricants, provided it does not prevent the dealer from selling competing products, is not restrictive of competition and so does not offend against Section 4(1).

30. Agreements may contain obligations to stock and sell other products obtained exclusively from the supplier, such as tyres, batteries and other motoring products, or other products. On occasion, it may be a requirement of an equipment loan agreement that the equipment be purchased from the supplier, or not purchased from someone else without the supplier's permission. Such exclusive purchasing requirements offend against the prohibition of Section 4(1). Where there is merely a non-exclusive requirement or encouragement to stock and sell such products, or to purchase such equipment, this does not offend against Section 4(1). A restriction by suppliers on the types of motor fuel storage and dispensing equipment used by resellers, provided that this is on objectively justified qualitative grounds, does not offend against Section 4(1).

31. Suppliers of motor fuels almost invariably provide commercial and financial assistance to their exclusive purchasers. In the case of solus dealers, the assistance can take one or more of the following forms:

- payment of solus rebates on purchases of motor fuels;

- payment of the solus rebate in advance for up to ten years, by way of an interest-free loan;

- outright grants for the purchase of equipment or for construction work on the station (buildings, canopies, lubrication bays, car wash, a shop, etc.);

- long-term loans for the above purposes, at favourable rates of interest;

- the loan of equipment, such as storage tanks and petrol pumps, which may become the property of the dealer after some years;

- the arrangement of hire purchase financing for equipment;

- the provision of loan guarantees.

Where loans are made available, especially large loans, some security may be required from the dealer, such as the grant of a mortgage on the premises. Such financial assistance is often essential to the dealer in order for him to be able to erect, maintain or modernise his station, and to enable him to compete with other stations, particularly those owned by suppliers. Such assistance is both an encouragement to the dealer to become party to a long-term exclusive purchasing agreement, and a reward to him for doing so. While associated with the exclusive purchasing agreement, such financial assistance is not in itself restrictive of competition, and so does not offend against Section 4(1). It is essential, however, that no loan arrangement should be capable of extending the life of the exclusive purchasing agreement beyond a maximum period of ten years.

32. In the case of stations which are owned, but not operated, by the supplier, the granting of a licence or a lease to the operator is itself a valuable form of financial assistance, since it enables the operator to trade in the retail motor fuels business without having to provide the substantial amount of capital to erect a modern service station. Such arrangements do not offend against Section 4(1) of the Act.

33. Solus agreements may contain certain conditions relating to the dealer's freedom to sell his station. There may be, for example, a requirement that the dealer must first offer the station for sale to the supplier, or that any purchaser must be approved by the supplier. There may be a requirement that the dealer must procure that the purchaser enter into a new ten-year solus agreement with the supplier, or that the purchaser undertake to be bound for the remaining period of the solus agreement. Such obligations place restrictions upon the dealer's freedom to sell his premises, and upon the freedom of another person to buy the premises. They constrain exit from and entry to the trade in the retail sale of motor fuels, and they therefore affect competition in the trade. They offend against Section 4(1) of the Act.

34. Other agreements merely require the dealer to give the supplier the chance of introducing a purchaser to the dealer, and/or that the dealer use his best endeavours to try to ensure that any purchaser will continue to deal with the supplier. Such obligations do not impose any restriction upon the dealer or any potential purchaser, they do not limit exit from or entry to the trade, and so they do not offend against Section 4(1).

35. Since a licensee has no equity interest in the station which he operates under licence, he cannot dispose of any interest to another person, and no clauses restricting to whom he may sell are found in licence agreements.

36. In the case of lease agreements, however, the lessee does have an interest in the property, and he may normally dispose of this interest. He is usually required not to dispose of all or part of his interest without previously obtaining the consent of the supplier, who is the lessor, and he is required to ensure that the purchaser accept all the covenants in the original lease. It may be specified that the consent of the supplier will not be unreasonably withheld. The station is owned by the supplier, and he is exercising rights which are inherent in his ownership of the property. The Authority considers that the exercise of property rights by means of restrictions such as those described does not offend against Section 4(1). Mortgage agreements, where there is a loan to a solus dealer, also require that no lease or tenancy be created without the consent of the mortgagee (the supplier), and such requirements likewise do not offend against Section 4(1).

37. Minimum delivery. There is usually a minimum size of delivery of motor fuels specified in the exclusive purchase agreements. This is generally discussed with the reseller. Such a requirement does not in itself restrict the dealer from obtaining supplies from another supplier, which might happen in other circumstances, since he is already prevented from purchasing from another supplier by the exclusive purchasing requirement. A minimum delivery requirement, in these circumstances, provided that it is not discriminatory, is not restrictive of competition and does not offend against Section 4(1).

38. Opening hours. The agreement usually specifies the hours at which the station shall be open for the sale of motor fuels. Actual hours may be specified, differing on weekdays, Sundays and holidays, and are normally discussed with the dealer, or the requirement may be to 'open during normal business hours' or 'at reasonable hours'. Provided that the hours are agreed with the dealer, such requirements do not restrict the dealer in deciding upon his own opening hours and they are not restrictive of competition. They do not offend against Section 4(1).

39. Lease and licence agreements may also stipulate that the operator should not discontinue, whether wholly or in part, the business of selling motor fuels at the station. This is a consequence of the ownership of the station by the supplier, and does not offend against Section 4(1).

40. Advertising. Agreements may prohibit the advertising of competing motor fuels at the station. Since these may not be sold at the station, this restriction in itself does not limit competition, and so does not offend against Section 4(1).

41. Dealers may be required to advertise and engage in sales promotion. These requirements generally do not restrict the dealer in engaging or not engaging in his own forms of advertising and promotion. They do not restrain competition, and they do not offend against Section 4(1).

42. Licensees and lessees may be required to obtain the permission of the supplier for on-site advertising. The station is owned by the supplier, and such obligations cannot be regarded as unduly limiting the operator's freedom to advertise, provided such permission is not unreasonably withheld, and thus they do not restrict competition in a manner which offends against Section 4(1).

43. Certain agreements, particularly licences and leases, forbid the advertising of competing lubricating oils and other products on the premises. Such restrictions limit the ability of the reseller to advertise and compete, and so they offend against Section 4(1).

44. Termination and Expiry of Licences. In accordance with the provisions of the 1981 Restrictive Practices Order, (Articles 25 to 33), licence agreements had to contain provisions governing the termination of a licence during its currency or on its expiry, and requiring that licences should be for a term of three years. They had to provide that termination shall only be for specified reasons, and they had to deal with compensation, arbitration and notice of termination. The RPO was designed to give licensees a degree of security of tenure and certain rights, without giving them rights of assignment or an equity interest in the premises. The Authority considers that such clauses do not amount to restraints upon competition which offend against Section 4(1).

45. The repeal of the RPO, however, means that it is not mandatory to include such provisions in licence agreements any longer. Some suppliers have indicated their intention to remove these provisions in future. There would appear to be no grounds under the Competition Act, 1991 for making such provisions mandatory in licence agreements, since their omission would not prevent, restrict or distort competition.

46. Locking and sealing of tanks, sampling of contents, etc. Exclusive purchasing agreements usually contain clauses which require the reseller to allow the supplier to lock and seal storage tanks, to sample the contents of tanks, to inspect stocks and to take readings. These requirements are designed, among other things, to ensure that the exclusive purchasing requirement is not being breached. In themselves, they do not restrict competition, and so they do not offend against Section 4(1).

47. Identification signs and globes. Agreements often contain requirements to allow the company to erect an identification sign and to place identification globes on the petrol pumps. These requirements are designed to ensure that the reseller trades under the trademark of the supplier and that the consumer knows what brand of motor fuel is being sold at the premises. They do not restrict competition, and they do not offend against Section 4(1).

48. Adequate service and staff. Agreements usually contain an obligation for the reseller to provide adequate service at the station and to employ adequate and efficient staff. Since the reseller is largely free to determine his own levels of staffing and service, these obligations do not offend against Section 4(1).

49. Inspection of equipment. Agreements often require the reseller to permit the supplier to inspect equipment at the station, particularly where the equipment has been supplied or financed by the supplier. Since the supplier is entitled to inspect his own property, to ensure that it is installed where it should be and is being securely maintained, such requirements do not offend against Section 4(1).

50. Keep premises in good repair and insured. Licence agreements and leases oblige the operator to keep the premises in good repair and fully insured. Since the main purpose of such requirements is to secure the property owned by the supplier, they do not offend against Section 4(1).

51. Maintain the number of pumps. Licences and leases require the operator not to reduce the number of pumps nor to change the manner of operating the station. Since the supplier is entitled to ensure that the value of his property as a motor fuel station is not diminished, such requirements do not offend against Section 4(1).

52. Not to use the premises for other purposes. Licences and leases often forbid the operator from parking vehicles on the forecourt or from engaging in other motor-related businesses, such as car sales, car hire, taxi operator, or motor vehicle repairer (though some vehicle servicing is usually permitted). These are designed to prevent access to the pumps being blocked, or to ensure that the operator concentrates on sales of motor fuels rather than engaging in other activities. Since the station was made available by the supplier expressly for the purpose of selling motor fuels, such requirements do not restrict competition and do not offend against Section 4(1).

53. Keep records. The licensee may be required to keep such records as are required by the supplier. This is so that the licensee will control his business properly and to comply with the requirements of the Revenue Commissioners. It does not restrict competition, and so does not offend against Section 4(1).

54. Under Section 4(2), the Competition Authority may grant a licence in the case of any agreement or category of agreements which, 'having regard to all relevant market conditions, contributes to improving the production of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and which does not -

(i) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives;

(ii) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.'

55. In the opinion of the Authority, arrangements for the exclusive purchasing of motor fuels, in general, are likely to fulfil the conditions provided for in Section 4(2) and qualify for the grant of a category licence.

56. Solus agreements in the motor fuels sector differ from other exclusive purchasing agreements in that the supplier confers on the reseller special commercial or financial advantages by contributing to his financing, granting him a loan on favourable terms, and providing him with equipment, while the reseller enters into a long-term exclusive purchasing obligation which is accompanied by a ban on dealing in competing products and the supplier agrees to supply the reseller's total requirements of motor fuels. Another important difference between the distribution system for motor fuels and that for other products is that a large number of outlets, accounting for over 40% of total retail sales, is owned by the supplying undertakings. The licensee or lessee, not having to pay the capital cost of the station, is given even greater commercial or financial advantages than the solus dealer, in return for which the exclusive purchasing requirement lasts as long as the operator occupies the station, and indeed for as long as the supplier owns the station.

57. While recognising that exclusive purchasing agreements generally restrict competition, the Authority accepts that they may produce benefits which outweigh the detriments to competition. This is the case only if the exclusive purchasing obligation is limited in respect of the period of time for which it is imposed. Upon expiry of the period of exclusive purchasing, the reseller may seek supplies from another supplier, and others may attempt to win his custom, or he may enter into another agreement with the same supplier, possibly on better terms. At least at this time, competition is completely unfettered.

58. In the case of exclusive purchasing agreements in the motor fuels sector, however, where the reseller receives special commercial or financial advantages, the Authority considers that a longer, but still limited, period is justified for the exclusive purchasing requirement than otherwise would be the case. Under Regulation 1984/83, the EC Commission has indicated that five years is normally the maximum period for which an exclusive purchasing agreement is justified, but it has allowed a maximum period of ten years in the case of motor fuels. The Authority considers that, in the case of solus dealers, the maximum period of the agreement should not exceed ten years, but there should be no prohibition on the renewal of the agreement at the end of this period. (For company owned stations, see para 63). Indeed, the Authority considers that the making available of such special commercial or financial advantages is a necessary condition for the imposition of the long-term exclusive purchasing obligation. Without the provision of such advantages, exclusive purchasing agreements for motor fuels do not benefit from the exemption from the prohibition in Section 4(1) of the Competition Act conveyed by this category licence. At the same time, commercial and financial advantages, such as loans, should not be used to extend the exclusive purchasing obligation beyond 10 years, otherwise the category licence does not apply.

59. The exclusive purchasing agreements produce an appreciable improvement in distribution in which consumers are allowed a fair share of the resulting benefit. The commercial and financial advantages conferred by the supplier on the retailer make it significantly easier to establish, modernise, maintain and operate service stations. A high level of investment is needed to provide adequate facilities and to meet safety standards, and the suppliers have invested heavily in their company owned stations. Independent dealers would have insufficient resources for the necessary investment without substantial support from the supplier, otherwise company stations would become completely dominant. They are able to provide a range of services which they would otherwise be unable to offer. Most, if not all, licensees and lessees would not be able to enter the trade, and certainly not in such very expensive premises, unless the stations were provided for them by the suppliers.

60. The exclusive purchasing obligation and the ban on dealing in competing products imposed on the reseller encourage the reseller to concentrate on the sale of a particular brand of motor fuel, while retaining his independence and freedom to run the business as he sees fit. Exclusive purchasing agreements lead to durable cooperation between the supplier and the reseller, allowing them to improve or maintain the quality of the motor fuels and of the services to the customer and the sales efforts of the reseller. The investment by the supplier ensures security of supply by providing assured outlets for its product, and retailers are guaranteed regular supplies provided that they comply with the terms of the agreement. This allows long-term planning of sales and consequently a cost-effective organisation of production and distribution. It also allows suppliers to undertake the necessary investment in storage and shipping facilities. The costs of distributing motor fuels to a limited number of exclusive outlets which purchase in large quantities are lower than delivering smaller volumes to a large number of outlets selling two or more brands at the one service station. The pressure of competition between different brands of motor fuel obliges the undertakings involved to seek to design outlets in a way which attracts customers.

61. Exclusive purchasing agreements may include a clause extending the exclusive purchasing requirement to include the sale of motor fuels by the reseller at adjoining or adjacent premises, or at any premises within a one-mile radius of the designated service station. The Authority accepts that competition in the sale of motor fuels is to some degree a localised phenomenon. Motorists do not tend to travel any great distance to buy at a cheaper price, since the cost of so doing would soon eliminate any savings made. The dedication of the dealer to maximising sales of the supplier's motor fuels at the designated outlet would be likely to be adversely affected if he were permitted to sell another brand at a station owned or operated by himself within one mile of the designated station. Without such a requirement, the improvement in distribution would not be secured. The dealer is free, however, to sell competing motor fuels outside the one mile radius. Any greater geographical restraint, particularly one covering the entire State, would preclude the application of this category licence. (It should be noted that, since a restriction of this type is not specifically permitted under Regulation 1984/83, agreements which contain such a clause might not benefit from the exemption afforded by that Regulation).

62. Consumers benefit from these improvements especially because they are ensured supplies of motor fuel of satisfactory quality in a safe and environmentally secure environment while being able to choose between different brands. The exclusive purchasing system leads to more efficient distribution and to better facilities and services at dealer and company stations, to the benefit of consumers. They have a choice between stations offering differing degrees and types of service. The system should ensure both intra-brand and inter-brand competition, including price competition.

63. The advantages produced by exclusive purchasing agreements cannot be achieved to the same extent and with the same degree of certainty in any other way. The exclusive purchasing obligation on the reseller and the non-competition clause imposed on him are essential components of such agreements and are indispensable for the attainment of these advantages. These obligations are confined to the purchase of motor fuels and other petroleum-based products for resale, and do not extend to other products. The limitation of the period of the exclusive agreement to ten years for solus dealers is sufficient to produce the advantages, while maintaining the reseller's commercial freedom to change supplier and to ensure access to the retail level of distribution on the part of other suppliers. This is because, on average, roughly 10 per cent of solus agreements will expire in a given year, and new suppliers may seek to recruit some or all of these. Any shorter period would substantially lessen the incentive for suppliers to invest in dealer outlets, to the detriment of dealers and consumers. This is especially so when the average throughput in petrol stations in the State is only about one quarter of the EC average. In the case of company owned outlets which are licensed or leased, because of the substantial investment made by the company in the station which is its own property, and because of the generally long-term nature of the agreement between the supplier and the occupant of the station, it appears appropriate to permit the exclusive purchasing obligation to continue for as long as the operator occupies the station. In many cases, of course, there is a licence agreement, which, while it may be renewed, has a duration of much less than ten years.

64. There are large numbers of solus, non-solus and company owned outlets which sell motor fuels under the different brand names. There is a high degree of competition between outlets, both intra-brand and inter-brand, and, with the removal of price control, there is scope for price competition, in particular, since solus and non-solus dealers and most company outlets are free to determine their own selling prices. While the long-term nature of the exclusive supply contracts limits the possibilities for a new entrant to secure outlets, all solus dealers are free to change their supplier at the expiry of the contract, and this does occur, and agreements are expiring on a continuous basis. In addition, a new supplier entrant would be likely to want the security offered by long-term solus agreements before making the sizeable investment necessary to enter the market in the first place. There is thus no possibility of the undertakings being afforded the possibility of eliminating competition for a substantial part of the products in question, even though company outlets are tied to the supplier virtually indefinitely.

65. The Authority considers that the exclusive purchasing requirement should apply only in the case of the supplier's motor fuels. An exclusive purchasing obligation for the supplier's lubricants and related products, or a requirement that they be used exclusively in equipment owned by the reseller, cannot be shown to produce benefits in the distribution of motor fuels which could be shared with consumers. Such a restriction does not fulfil the conditions required under Section 4(2), and is therefore prohibited under Section 4(1).

66. Where lubricating equipment or a lubrication bay has been supplied or financed by the supplier, however, the Authority considers that a requirement on the reseller not to use competing lubricants and related products on the premises can benefit from the provisions of Section 4(2). The supplier has provided essential and costly equipment, and the reseller benefits from such installations, and these benefits can be shared with consumers. The possibility for the supplier to impose such obligations on the reseller acts as an incentive for the supplier to undertake such substantial investment, and thus may be regarded as indispensable to obtain the objectives. Nevertheless, in these circumstances, the reseller, whether a solus dealer, a licensee or a lessee, must be permitted to stock and sell competing lubricants at the premises, and to supply them for topping up on the forecourt when requested by customers, in order to ensure that competition is not eliminated.

67. Since the selling of competing lubricants must be allowed, and there are no discernable benefits from preventing the advertising of these at the service station, any provision which prevents such advertising does not fulfil the conditions of Section 4(2), and offends against Section 4(1). Such advertising, however, may be limited to the proportion which sales of competing lubricants bear to total sales in the station.

68. The same considerations apply in the case of other goods which may be sold by the reseller which are not subject to an exclusive purchasing obligation. A complete prohibition on advertising does not satisfy the conditions of Section 4(2), and advertising must be permitted in proportion to sales of other goods compared to total sales.

69. A requirement that a solus dealer who wishes to sell his station must procure that the purchaser undertake to be bound for the remaining period of the solus agreement is regarded by the Authority as being indispensable for the achievement of the benefits of the long term exclusive purchasing agreement. It ensures that, irrespective of the change in ownership, the supplier is assured of a ten year exclusive purchasing agreement, without which the supplier would not have provided the initial special commercial and financial advantages. The benefit of Section 4(2) can be accorded to such a requirement. Such purchaser may require to be approved by the supplier, but such approval should not be unreasonably withheld.

70. Where the requirement is that the supplier be given first option to purchase the station, or where the obligation would secure that the purchaser would be bound for a longer period than the reseller himself, there are no demonstrable benefits which could be shared with consumers, and such requirements are not indispensable. While this issue was raised in a number of submissions, the Authority is concerned that the implementation of first option to purchase clauses could lead to a situation where a significant number of important dealer outlets would be acquired by the suppliers, to the detriment of competition. This category licence does not therefore extend to such arrangements.

71. Any clause in an agreement which requires that a further solus agreement should be concluded after the end of the ten-year term, or that exclusive purchasing should continue after this period, or which restricts the freedom of the solus dealer, licensee or lessee from engaging in the sale of competing motor fuels after the agreement has terminated, falls under the prohibition of Section 4(1). Such clauses do not produce any benefit which could be shared by consumers, and they are not indispensable for the exclusive purchasing agreement. They do not satisfy the criteria specified for a licence in Section 4(2). This category licence does not therefore extend to such arrangements.

72. Any clause in an exclusive purchasing agreement, or any associated practice, which enforces or is conducive to the maintenance of resale prices, whether fixed, maximum or minimum resale prices, would not constitute an improvement in distribution. A restriction of this nature upon price competition would not convey any benefit upon consumers, but rather the reverse. It is not indispensable to the exclusive purchasing obligation, and it would tend to eliminate competition in respect of a substantial part of the products in question. No licence under Section 4(2) could be justified for anything which constitutes or amounts to resale price maintenance, and this category licence does not extend to such arrangements.

73. Where a company operates its own stations, and informs solus dealers in advance of price changes at those stations, this constitutes the exchange of price information between competitors. This activity, also, does not produce an improvement in distribution or benefit consumers, and it is not indispensable to an exclusive purchasing agreement. It cannot be granted a licence under Section 4(2), and this category licence does not extend to such arrangements.

74. Obligations to stock and sell products other than motor fuels and lubricants obtained exclusively from the supplier, or to purchase equipment only from the supplier, do not produce improvements in the distribution of motor fuels which can be shared by consumers, nor are they indispensable to the agreements. They cannot benefit from the exemption granted from the prohibition of Section 4(1) and this category licence does not extend to such arrangements.

75. This category licence applies to agreements to which only two undertakings are party - the supplier and the reseller. The benefit of the licence is not lost if the supplier enters into exclusive purchase agreements with many different resellers. The category licence also applies if the agreements do not contain some of the permitted restrictions, or if the arrangements are less restrictive than those specified, e.g. if the period of exclusive purchasing is less than ten years.

76. In accordance with Section 4(3)(b) of the Competition Act, where a licence covers a category of agreements, agreements within that category which comply with the terms of the licence need not be notified under Section 7 to benefit from the licence while it is in force. Nevertheless, where there is real doubt, in a particular case, an undertaking may request the Authority to declare whether its agreements comply with this category licence. This would have to be done by way of full notification under Section 7.

77. Any action by, or by agreement with, the supplier to prevent the reseller exercising his rights would entail the loss of the category licence. In these circumstances, it makes no difference whether the reseller's freedom is restricted by contract, informal understanding, economic pressures or other practical measures.

78. This category licence, being granted in accordance with Section 4(2) of the Competition Act, does not exclude the application of Section 5 of the Act.

79. This category licence applies only to agreements whereby the reseller undertakes with the supplier to purchase motor fuels and other petroleum-based products only from the supplier. Since some aspects relevant to exclusive purchasing of motor fuels may take the form of concerted practices rather than of agreements, the category licence applies to such practices as well as to agreements between undertakings. The licence does not apply where, in addition to the exclusive purchasing obligation on the reseller, the supplier undertakes with the reseller to supply only to the reseller certain goods for resale in the whole or in a defined part of the State. Such an agreement would constitute an exclusive distribution agreement rather than an exclusive purchasing agreement.

80. Section 8(3) of the Competition Act states:

'Where the Authority is of the opinion that, having regard to the requirements of Section 4(2) and to the basis upon which a licence under that subsection was granted -

(a) there has been a material change in any of the circumstances on which the decision was based,

(b) any party commits a breach of any obligation attached to the decision,

(c) the licence was based on materially incorrect or misleading information, or

(d) any party abuses the permission granted to it by the licence,

the Authority may revoke or amend the licence and, without prejudice to the generality of this subsection, may in particular insert in a licence conditions the effect of which is to prohibit specific acts by any party thereto which would otherwise be authorised pursuant to such a licence.'

The Authority considers that it also has the power, in accordance with Section 8(3), to withdraw the benefit of the category licence in individual cases. This would be the case where an individual agreement had effects incompatible with Section 4(2), particularly where:

(a) the motor fuels are not subject to effective competition;

(b) access by other suppliers to the different stages of distribution is made difficult to a significant extent; or

(c) the supplier, without any objectively justified reason:

(i) refuses to supply resellers who cannot obtain the motor fuels elsewhere on reasonable terms, or applies to them differing prices or conditions of sale;

(ii) applies less favourable prices or conditions of sale to resellers bound by an exclusive purchasing obligation as compared with other resellers at the same level of distribution.

The situations described above are meant as illustrations of the sort of situations in which the Authority can withdraw a category licence in the case of an individual agreement. There may well be other situations in which the Authority might exercise this power.

81. It is to be anticipated that suppliers of motor fuels who wish to benefit from this category licence in future will ensure that new exclusive purchasing agreements satisfy the conditions

specified in the licence. They will also presumably seek to amend existing agreements so as to satisfy the conditions of the licence, especially in the case of agreements which were in existence on the date of commencement of the Act, that is agreements which were entered into prior to 1 October 1991. Appropriate provisions are necessary in the circumstances.

82. In the case of agreements which were in existence on 1 October 1991, and which have been notified to the Authority before 1 October 1992, this licence shall have effect from 1 July 1993, where the agreements already fulfil the conditions of the licence or where they are amended so as to fulfil those conditions before 1 July 1993. Where such notified agreements do not fulfil the conditions of the licence, or where they are not amended to fulfil the conditions before 1 July 1993, they do not qualify for the benefit of the licence, and the grant of this licence constitutes a refusal to grant a licence to such existing agreements. Where such notified agreements are amended to fulfil the conditions of the licence, the licence shall have effect from the date when the conditions of the licence are fulfilled.

83. In the case of agreements which were in existence on 1 October 1991, and which were not notified to the Authority before 1 October 1992, this licence shall have effect from 1 July 1993, where the agreements already fulfil the conditions of the licence or where they are amended so as to fulfil those conditions before 1 July 1993. Where such non-notified agreements are amended to fulfil the conditions of the licence in the future, the licence shall have effect from the date when the conditions of the licence are fulfilled. Where such non-notified agreements do not fulfil the conditions of the licence, they do not qualify for the benefit of the licence until the date when the conditions of the licence are fulfilled.

84. In the case of agreements which came into existence after 1 October 1991, and which have been notified to the Authority before 1 July 1993, this licence shall have retroactive effect from the date of notification, if the agreements already fulfilled the conditions of the licence, or from the date, being not earlier than the date of notification, when the conditions of the licence were fulfilled. For other agreements which came into existence after 1 October 1991, and which have not been notified, or those which come into existence in the future, this licence shall have effect from the date, at or after the date of grant of the licence, upon which its conditions are fulfilled.

85. The sole requirement for motor fuel agreements to enjoy the benefit of the category licence is that they be brought into line with the provisions of the licence. It is left to the undertakings concerned as to how they do this. One way is for the parties to agree to amend the original agreement, while another is for the supplier unilaterally to release the reseller from all obligations that would prevent the application of the category licence after it comes into operation. The Authority considers that this category licence constitutes a refusal to grant a licence to agreements which have been notified but which do not fulfil the conditions of the licence.

86. Given that the maximum term of the exclusive purchasing agreement is ten years, the Authority considers that the specified period for the category licence should be fifteen years. At the end of this period, following a review by the Authority, the period of the category licence may be extended, with or without amendments to the licence, if it is considered by the Authority that the requirements of Section 4(2) continue to be fulfilled. The category licence shall enter into force on 1 July 1993. It shall expire on 30 June 2008. The category licence is at the end of this Decision.

87. This Decision and the category licence itself are based very largely upon Title III and the other relevant provisions of EC Regulation 1984/83, which grants a block exemption from the prohibition of Article 85(1) of the Treaty of Rome to certain categories of exclusive purchasing agreements for service stations. Given that most, if not all, such agreements in the State are within the scope of Article 85(1), motor fuels being largely imported from other Member States, it is desirable that exemptions from Article 85(1) of the Treaty and licences under Section 4(2) of the Act in respect of the same agreements should correspond to the greatest extent possible. Where divergences occur, the Authority does not consider that they are such as would frustrate the achievement of the objectives of Regulation 1984/83, nor would they prejudice the uniform application of Community competition law throughout the common market.

88. The main difference between this Decision and the Regulation is in its method of construction. The Regulation is in two sections, the Recitals, which give some justification for, and explanation of, the operative part, and the Regulation itself. There is also a subsequent explanatory Notice related to the Regulation. This Decision follows more closely the approach of the Authority in individual licence decisions. The justification and explanations are given in a form different from that in EC-type recitals, and they avoid the need for a separate explanatory note. As with the recitals, however, this part of the Decision is vital to the operative part of the licence, which is identical in form to the corresponding section of the Regulation.

89. Article 1.2 of this category licence makes clear that, where some or all of the special commercial or financial advantages are granted in the form of a separate contract or contracts, these are considered together with the exclusive supply agreement to form "the agreement" for the purposes of the category licence. Such a provision is not included in Regulation 1984/83, but the Authority considers that its approach is in accordance with EC precedents.

90. Articles 3 to 5 of Regulation 1984/83 relate mainly to situations where manufacturers of identical or equivalent goods enter into reciprocal or non-reciprocal exclusive purchasing agreements between themselves in respect of such goods. Such situations have not occurred in the State in respect of motor fuels, and the Authority does not consider that similar provisions are required in this category licence. The definition of 'connected undertakings' in Article 4 of the Regulation is deleted since references to 'connected undertakings' which appear elsewhere in the Regulation do not appear in the category licence. The Authority considers that the term 'another undertaking entrusted by the supplier' includes connected undertakings.

91. The Regulation extends the permitted exclusive purchasing requirement to other fuels, such as heating oil, bottled gas and paraffin. No such requirements have been found in agreements notified to the Authority, and it is not considered necessary to include them in this category licence, which is therefore confined to motor fuels.

92. In Article 11(d) of the Regulation, restrictions on equipment owned or financed by the supplier being serviced by an undertaking other than the supplier are exempted under Article 85(3). The agreements notified to the Authority have not contained such an obligation, and it is not considered necessary to include this requirement in the category licence.

93. Article 17 of the Regulation states that the exemption does not apply to agreements for the exclusive purchase of motor fuels and other non petroleum-based goods. No such agreements have been notified, and it is not considered necessary to include any reference to them in this category licence. Nevertheless, this category licence only applies to agreements for the exclusive purchase of motor fuels and other petroleum-based products.

94. For the sake of clarity, the Authority lists in more detail than is found in the Regulation provisions in agreements which do not offend against Section 4(1), and others which may or may not be permitted under Section 4(2). These are:

(a) not offending against Section 4(1)

(i) obligations on resellers to take minimum deliveries, to open during agreed hours and to allow the supplier to lock and seal the fuel storage tanks, and to take samples and readings from them, and to allow the supplier to inspect equipment supplied or financed by the supplier.

(ii) in the case of leased and licenced stations, obligations on the reseller not to discontinue the business of selling motor fuels, to keep the premises in good repair and fully insured, to maintain the number of pumps, not to change the manner of operating the station, not to use the premises for purposes other than the sale of motor fuels, not to allow access to the pumps to be impeded, and to keep adequate records.

(b) not permitted under Section 4(2)

(i) the supplier restricts the freedom of the reseller to sell the premises, articularly

by:

- requiring the reseller to give the right of first refusal to the supplier,

- requiring the reseller to secure the approval of the purchaser by the supplier, unless it is also provided that such approval shall not be unreasonably withheld;

(ii) restrictions on the reseller after the date of expiry of the agreement, and in particular obligations:

- to conclude a further exclusive purchasing agreement,

- not to engage in the purchase and resale of competing goods;

(iii) the supplier obliges the reseller to sell at a fixed price, or above a minimum price or below a maximum price;

(iv) the supplier recommends to the reseller a specified, or specified maximum, resale price, unless the reseller is informed that he is free to determine his own resale prices; and

(v) the supplier informs resellers in advance of changes in prices at service stations operated by the supplier.

(c) permitted under Section 4(2)

(i) obligations on resellers not to sell competing motor fuels adjoining or adjacent to, or within a one-mile radius of, the designated premises.

(ii) the obligation not to use competing lubricants in the station where a lubrication bay or other lubrication equipment has been made available or financed by the supplier is only allowed provided that the reseller is permitted to stock and sell such products and to supply them for topping up on the forecourt when requested by customers.

(References in the Regulation to obligations to maintain a sales network and to provide guarantee services have been omitted from the category licence since they are not relevant to the resale of motor fuels).

95. The arrangements for notified agreements differ between this Decision and the Regulation because of the different treatment of provisional validity for such agreements in the Competition Act and in Regulation 17/62, the regulation implementing Articles 85 and 86. In particular, the Authority cannot grant a licence which applies retrospectively to agreements which were in force on 1 October 1991 which have been duly notified before 1 October 1992. In addition, the Regulation was, in a sense, an extension of a previous block exemption, Regulation 67/67, while this category licence has not been preceded by any other.

96. Notwithstanding the fact that this category licence is closely based upon Regulation 1984/83, the fact that an agreement satisfies the conditions of this category licence does not necessarily mean that it benefits from the exemption afforded by the Regulation.

97. The Competition Authority considers that long-term exclusive purchasing arrangements for the resale of petroleum products in service stations constitute agreements between undertakings which have the object and effect of preventing, restricting or distorting competition in goods in the State, and thus they offend against Section 4(1) of the Competition Act, 1991. In the opinion of the Authority, having regard to all relevant market conditions, such agreements generally satisfy all the conditions required for the grant of a category licence under Section 4(2) of the Competition Act. Accordingly, the Competition Authority grants a licence to the specified category of agreements, subject to the specified period and specified conditions as required under Section 8(1) of the Competition Act, as follows:

1. Pursuant to Section 4(2) of the Competition Act, 1991, and subject to the provisions of this licence, the Competition Authority grants a category licence to agreements to which only two undertakings are party and whereby one party, the reseller, agrees with the other, the supplier, in consideration for the according of special commercial or financial advantages, to purchase only from the supplier, or another undertaking entrusted by the supplier with the distribution of his goods, certain petroleum-based motor-vehicle fuels specified in the agreement for resale in a service station designated in the agreement.

2. Where some or all of the special commercial or financial advantages are granted by the supplier in the form of a separate contract or contracts, these are considered together with the exclusive supply agreement to form "the agreement" for the purposes of this category licence.

No other restriction of competition shall be imposed on the supplier than the obligation not to distribute the contractgoods or goods which compete with the contract goods in the reseller's principal sales area and at the reseller's level of distribution.

Apart from the obligation referred to in Article 1, no restriction on competition shall be imposed on the reseller other than:

(a) the obligation not to sell motor-vehicle fuels which are supplied by other undertakings in the service station designated in the agreement;

(b) the obligation not to sell motor-vehicle fuel which is supplied by other undertakings in premises adjoining or adjacent to, or within a one-mile radius of, the service station designated in the agreement;

(c) the obligation to advertise goods other than motor fuel supplied by other undertakings within or outside the service station designated in the agreement only in proportion to the share of these goods in the total turnover realised in the service station.

(d) the obligation not to use lubricants or related petroleum-based products which are supplied by other undertakings within the service station designated in the agreement where the supplier has made available to the reseller, or financed, a lubrication bay or other motor-vehicle lubrication equipment, provided that the reseller is permitted to stock and sell such products and to supply them for topping up on the forecourt when requested by customers.

1. Article 1 shall apply notwithstanding that the reseller undertakes any or all of the following obligations:

(a) to purchase complete ranges of goods;

(b) to purchase minimum quantities, or to take minimum deliveries, which are subject to the exclusive purchasing obligation;

(c) to sell the contract goods under trademarks, or packed and presented as specified by the supplier;

(d) to take measures for the promotion of sales, in particular:

- to advertise,

- to maintain a stock of goods,

- to provide customer services,

(e) to allow the supplier to lock and seal the fuel storage tanks, and to take samples and readings from them, and to allow the supplier to inspect equipment supplied or financed by the supplier.

2. Where the agreement relates to a service station which the supplier lets to the reseller, or allows the reseller to occupy on some other basis, in law or in fact, Article 1 shall apply notwithstanding that the reseller undertakes any or all of the following obligations:

(a) not to discontinue the business of selling motor fuels;

(b) to keep the premises in good repair and fully insured;

(c) to maintain the number of pumps;

(d) not to change the manner of operating the station;

(e) not to use the premises for purposes other than the sale of motor fuels;

(f) not to allow access to the pumps to be impeded;

(g) to keep adequate records.

1. Article 1 shall not apply where:

(a) the supplier imposes on the reseller exclusive purchasing obligations for goods other than motor-vehicle fuels or for services;

(b) the supplier restricts the freedom of the reseller to obtain from an undertaking of his choice goods or services for which under the provisions of this licence neither an exclusive purchasing obligation nor a ban on dealing in competing products may be imposed;

(c) the agreement is concluded for an indefinite duration or for a period of more than ten years;

(d) the supplier obliges the reseller to impose the exclusive purchasing obligation on his successor for a longer period than the reseller would himself remain tied to the supplier;

(e) the supplier, without prejudice to paragraph (d), restricts the freedom of the reseller to sell his premises, and in particular by:

- requiring the reseller to give first refusal for the purchase of the premises to the supplier,

- requiring the reseller to secure the approval of the purchaser by the supplier, unless it is also provided that such approval shall not be unreasonably withheld;

(f) the supplier imposes any restriction on the reseller after the date of expiry of the exclusive purchasing agreement, and in particular imposes an obligation:

- to conclude a further exclusive purchasing agreement for a fixed or indefinite period, or

- not to engage in the purchase and resale of competing goods;

(g) the supplier obliges the reseller to sell at a fixed price, or at not less than a minimum price or at not more than a maximum price;

(h) the supplier recommends to the reseller a specified resale price or a specified maximum resale price, unless the reseller is informed that he is free to determine his own resale prices;

(i) the supplier informs resellers in advance of changes in prices at service stations operated directly or indirectly by the supplier.

2. Where the agreement relates to a service station which the supplier lets to the reseller, or allows the reseller to occupy on some other basis, in law or in fact, exclusive purchasing obligations or bans on dealing in competing products specified in this licence may, notwithstanding paragraph 1(c) of this Article, be imposed on the reseller for the whole period for which the reseller in fact operates the premises.

The Authority may withdraw the benefit of this category licence, pursuant to Section 8(3) of the Competition Act, 1991, when it finds in a particular case that an agreement which is exempted

by this licence nevertheless has certain effects which are incompatible with the conditions set out in Section 4(2) of the Competition Act, and in particular, but not only, where:

(a) the contract goods are not subject to effective competition from identical goods or goods considered by users as equivalent in view of their characteristics, price and intended use;

(b) access by other suppliers to the different stages of distribution is made difficult to a significant extent;

(c) the supplier, without any objectively justified reason:

(i) refuses to supply resellers who cannot obtain the contract goods elsewhere on reasonable terms, or applies to them differing prices or conditions of sale,

(ii) applies less favourable prices or conditions of sale to resellers bound by an exclusive purchasing obligation as compared with other resellers at the same level of distribution.

1.(a) As regards agreements which were in existence on 1 October 1991, and were notified before 1 October 1992, this category licence shall have effect from 1 July 1993, where the agreements already fulfil the conditions of the licence or where they were amended so as to fulfil those conditions before 1 July 1993.

(b) As regards agreements which were in existence on 1 October 1991, and were notified before 1 October 1992, and which do not fulfil the conditions of the licence, but which are later amended to fulfil the conditions of the licence, this category licence shall have effect from the date when those conditions were fulfilled.

2.(a) As regards agreements which were in existence on 1 October 1991, and were not notified before 1 October 1992, this category licence shall have effect from 1 July 1993, where the agreements already fulfil the conditions of the licence or where they were amended so as to fulfil those conditions before 1 July 1993.

(b) As regards agreements which were in existence on 1 October 1991, and were not notified before 1 October 1992, and which do not fulfil the conditions of the licence, but which are later amended to fulfil the conditions of the licence, this category licence shall have effect from the date when those conditions were fulfilled.

3. As regards agreements which came into existence after 1 October 1991, and which were notified before 1 July 1993, this category licence shall have retroactive effect from the date of notification where the agreements already fulfil the conditions of the licence, or from the date, being not earlier than the date of notification, when the agreements were amended so as to fulfil those conditions.

4. This category licence constitutes a refusal to grant a licence to notified agreements which do not fulfil its conditions.

This category licence shall not apply to agreements by which the supplier undertakes with the reseller to supply only to the reseller certain goods for resale, in the whole or in a defined part of the State, and the reseller undertakes with the supplier to purchase these goods only from the supplier.

This category licence shall apply mutatis mutandis to the categories of concerted practices defined in Article 1.

This category licence shall enter into force on 1 July 1993.It shall expire on 30 June 2008.

For the Competition Authority

Patrick M. Lyons

Chairman

1 July 1993.