Irish Competition Authority Decisions

1. Agreements between General Electric Capital Corporation(GE Capital) and GPA Group Plc (GPA) for the purchase by GE Capital of a number of aircraft from GPA and for certain deferred payments in respect of such aircraft were notified to the Competition Authority on 30 August, l993. The notification requested a certificate or, in the event of a certificate being refused, a licence. A number of other agreements between the parties were also notified. The present decision relates solely to the agreements described by the parties in the notification as "The Master Aircraft Sale Agreement" and "the Master Deferred Payment Agreement."

2. The notification relates to two related agreements dated 26 August, l993 between GPA and GE Capital whereby GPA agreed to sell certain commercial jet aircraft to GE Capital.

3. General Electric Company ("GE Company") is the ultimate parent company of the GE Group. It owns all the outstanding common stock of GE Capital Services, which in turn is the sole owner of the common stock of GE Capital, Employers Reinsurance Corporation and Kidder, Peabody Group Inc. GE Company is one of the largest and most diversified industrial corporation in the world.

4. GE Capital operates primarily in the asset management and financial services industry and, to a lesser degree, in the private mortgage insurance, financial (primarily municipal) guarantee insurance, life insurance as well as property and casualty insurance sectors. GE Capital's financing activities include a full range of leasing, loan and asset management services. GE Capital is an equity investor in a retail organisation and certain other financial services organisations. Two components of GE Capital, namely Polaris Holding Company ("Polaris") and Transportation and Industrial Funding Corporation ("T&I"), are responsible for GE Capital's commercial aircraft leasing business.

5. The worldwide turnover of GE Company during l992 was US$57,073 million. The worldwide turnover of GE Capital generally was US$12,250 million while its turnover in the relevant market worldwide was US$1,374 million. GE Capital's turnover in the State during l992 was US$22.4 million. GE Capital does not have any aircraft on lease in Ireland but derives its income from other unrelated activities.

6. GPA Group plc is the ultimate parent company of the GPA group of companies. GPA purchases commercial aircraft and leases them to airlines throughout the world. As an integral part of its core business, GPA sells aircraft with operating leases in place to investors. GPA also sells aircraft to air carriers as operating assets and provides a wide range of management and technical support services to investors and airlines. The worldwide turnover of GPA for fiscal year l992 was US$l,745 million.

7. The Master Aircraft Sale Agreement and the Master Deferred Payment Agreement ("collectively the "Master Aircraft Sale Agreement") involves the purchase by GE Capital of up to 44 aircraft owned, or contracted for, by GPA. A number of these 44 aircraft are expected to be sold to GE Capital prior to the end of September, l993, such sales to occur at any time on or after l3th September. Under the terms of the Master Aircraft Sale Agreement, GPA will receive an initial payment on closing of approximately 85% of GPA's net depreciated book value for each of the aircraft. In addition, GPA will be entitled to receive certain monthly payments plus certain deferred amounts which, together with the initial payment, would exceed GPA's current book value for the relevant aircraft. The deferred amounts would be payable solely out of the proceeds (or deemed proceeds) from a sale (or deemed sale) of the aircraft at the expiration or early termination of the operating lease for the applicable aircraft. Section 5.3 (a) of the Deferred Payments Agreement imposes certain restrictions on the possibility of GPA re-purchasing such aircraft itself. Under Section 7.1 GE Capital appoints GPA as its non-exclusive agent for any future sale of these aircraft.

8. 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'.

9. 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.'

10. GPA and GE Capital are corporate bodies engaged for gain in the provision of services and are therefore undertakings within the meaning of the Act. The notified arrangements for the sale of aircraft and for deferred payments in respect of some of these aircraft constitutes an agreement between undertakings. The Authority emphasises that the prohibition in Section 4(1) relates only to agreements between undertakings 'which have as their object or effect the prevention, restriction or distortion of competition within the State or any part of the State'.

11. The present arrangements relate to the sale by GPA of aircraft to GE Capital. They are related to a number of other agreements involving the parties which have been notified separately. The present agreements involve the sale of certain GPA assets to GE Capital. Only about l0% of GPA's aircraft fleet is involved.

12. In the Authority's opinion the mere sale of some of its assets by a firm to competitor has no effect on competition in the relevant market. (In contrast the transfer of all or most of a firm's assets to a competitior may be a means by which they agree to cease competing with one another). The sale of plant, machinery, equipment or vehicles by one firm to another is a normal commercial transaction and, in the absence of any provisions restricting the firms' freedom to compete with one another cannot be regarded as offending against section 4(1). The restrictions on GPA re-purchasing the aircraft at a future date do not, in the Authority's view, prevent, restrict or distort competition as aircraft are likely to be available from other sources. There are no other clauses in the agreements which cause any concern in respect of competition. Consequently the present arrangements do not, in the Authority's opinion, offend against section 4(1).

13. GPA and GE Capital are undertakings within the meaning of Section 3 of the Competition Act, and the notified arrangements constitute an agreement between undertakings. In the Authority's opinion the agreement for the purchase by GE Capital of certain aircraft from GPA do not have as their object or effect the prevention, restriction or distortion of competition within the State or any part of the State. The notified agreement does not therefore, in the Authority's opinion. offend against Section 4(1) of the Competition Act.

14. 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 General Electric Capital Corporation and GPA Group Plc. for the purchase of aircraft by the former party from the latter, and for making deferred payments in respect of such aircraft, (notification no. CA/45/93), notified on 30 August, l993 under Section 7, does not offend against Section 4(1) of the Competition Act, l99l.

For the Competition Authority

Patrick Massey

Member.

9 September, l993.