Irish Competition Authority Decisions

1. An agreement between Navenby Limited (Navenby) and Messrs. Ian Gracie and Roy Fearnley (the vendors) containing a non-compete clause pursuant to the sale of part of the issued share capital of Alpha Packaging Films Limited (Alpha) was notified to the Competition Authority on 30 September 1992. The notification requested a certificate or, in the event of a certificate being refused, a licence.

2. The notification relates to an agreement dated 28 April 1989 between the vendors and Navenby whereby the vendors agree to sell their share (55.556%) of the issued share capital of Alpha to Navenby. The agreement also contains a non-compete provision.

3. Alpha Packaging Films Limited is a limited company incorporated in England. Prior to its sale, the vendors, who were based in the U.K., held a combined shareholding of 55.556% in the company and were its only directors. Navenby is a limited company with registered offices at 41-45 St. Stephen's Green, Dublin 2. Under the terms of the agreement, the vendors received shares in Navenby by way of consideration for the sale.

4. The notification relates to an agreement, dated 28 April 1989, for the sale of 55.556% of the share capital of Alpha to Navenby. The agreement contained a non-compete clause preventing the vendors from becoming involved a business which competed with Navenby for a period of two years from the date of completion. This period expired on 28 April 1991.

5. Section 4(1) o f 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'.

6. 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.' The parties to the present agreement are the vendors and Navenby. Navenby is limited company with registered offices in Dublin. It is engaged for gain through its interest in Alpha, an English based company engaged for gain in the packaging business. The vendors, as directors and principle shareholders in Alpha, were similarly engaged for gain at the time of the agreement. They were therefore undertakings at the time of the agreement. This is consistent with the Authority's decisions in ACT/Kindle and Scully/Tyrrell [1].

7. As the sale of business was completed prior to 1 October, 1991, the date on which the Competition Act came into force, this element of the agreement had been discharged by performance before the Act commenced. The property which was the subject of the agreement had been transferred. In the Authority's view, the prohibition in Section 4(1) only applies to a current or continuing contractual commitment or one entered into subsequent to the coming into force of the Act [2]. As the merger or sale element of the 1991 transaction was discharged prior to the commencement of the Act, that aspect of the arrangements does not come within the scope of Section 4(1).

8. The non-compete clause had also expired before the Act came into force. Thus, in the Authority's view, there was not an agreement between undertakings in existence at, or since, the time the Act came into force. The notification is therefore invalid and the Authority is unable to grant a certificate or licence.

9. In the Authority's opinion, Navenby Limited, Ian Gracie and Roy Fearnley are undertakings within the meaning of Section 3(1) of the Competition Act. As the entire agreement had expired before 1 October 1991, the notified arrangements do not constitute an agreement which was in existence at the time, or since, the Act came into force; it cannot be validly notified under Section 7(1) or 7(2) of the Competition Act and the Authority cannot issue a certificate or licence in respect of the notification.

For the Competition Authority,

Patrick Massey

Member

24 September 1993

Notes:-

2. 'Notice in respect of Mergers and Takeovers which predate the Competition Act'- Competition Authority,Iris Oifigiuil,14 May 1993,P.367