Irish Competition Authority Decisions

1. Notification was made by Damien and Mary Bushe on 21 September, 1992 with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to issue a certificate, a licence under Section 4(2), in respect of a lease between Cecil and Bella and Ivor Elkinson and Adeline Jacob (the Elkinsons) and Damien and Mary Bushe (the Bushes).

2. The notification concerns the lease of a shop at 173 Lower Rathmines Road, Dublin 6 between the Elkinsons as Landlord and the Bushes as tenant.

3. The Elkinsons are engaged in the letting of shops at Lower Rathmines Road. The Bushes, under the name Bonanza Newsagents trade as newsagents at 179 Lower Rathmines Road.

4. The notified lease was made on 18 December 1984 for a term of 35 years from 4 June 1984. The restricted user clauses in the lease are as follows:

(a) Under clause 3.19 the tenant covenants

"Not to use or permit the demised premises or any part thereof to be used for any purpose other than as newsagency and light grocery and the sale of ice cream sweets confectionary and toys AND for no other purposes save with the Landlord's written consent which consent shall not be unreasonably refused ....."

while it is also stated in this clause

" The Landlords will not permit their adjoining premises to be used for the business of newsagency light grocery or sale of ice cream sweets and confectionary. On no account will the tenant use the premises for the sale of shoes as long as there is a shoe shop adjoining or the sale of secondhand clothes ....."

(b) Under clause 3.21 the tenant covenants

"Not to assign transfer or underlet or part with the possession or occupation of the demised premises or any part thereof or suffer any person to occupy the Demised Premises..... BUT SO THAT NOTWITHSTANDING the foregoing the Landlord shall not unreasonably withold its consent to an assignment of the entire or underletting of the entire of the demised premises subject to the following provisions ......."

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

5. The Authority considers that the Elkinsons and the Bushes are undertakings and that the notified lease is an agreement between undertakings. The agreement has effect within the State.

6. The Lease agreement contains standard restrictions and obligations on both landlord and tenant which are necessary for the maintenance of the landlord/tenant relationship in respect of the tenancies. These do not raise issues under the Competition Act. In addition each agreement also provides, by way of the permitted user clause 3.19, restrictions on the use of the premises and those adjoining but which effectively allows the premises to be used for the purpose of the business of the tenant. Such permitted user clauses are normally based on the user proposed by the tenant at the time the lease is first executed but are also governed by considerations such as the physical characteristics of the premises, the requirements of the Planning Acts and the landlord's own policy, when granting the lease, on how the premises should be used. The Authority considers that such user restrictions in the letting of premises do not have the object or effect of preventing, restricting or distorting competition in the State or any part of the State.

7. The very act of leasing the premises to a particular tenant prevents competitors of the tenant from using those premises to compete with the tenant. Clearly this cannot be regarded as preventing, restricting or distorting competition since it would imply that the leasing of a commercial premises in order to carry on a business therein was prohibited unless licensed under section 4(2) of the competition Act. Clause 3.19 also prevents the landlords from leasing their adjoining premises to anyone for the purposes of operating a business in competition with that of the tenant. In the Authority's opinion, however, this also cannot be regarded as preventing, restricting or distorting competition within the State or any part of it. Anyone wishing to operate a business in competition with the tenants may do so by occupying any other premises within the same catchment area. The tenants are prevented from operating a business which would compete with those operating from the landlord's adjoining premises. Again such a restriction would not prevent the tenant or anyone else from operating such a business from another premises within the same catchment area. In taking up the lease the tenant negotiates the permitted user required for his business. This is reflected in the lease but if he were subsequently to seek a change of user he could in most instances have recourse to the provisions of the Landlord and Tenant Act 1980 which provide that a Landlord cannot unreasonably withold consent to a change of user requested by a tenant. The object or effect of such permitted user clauses in lease agreements are not therefore anti-competitive. The Authority therefore considers that the notified agreement between Cecil, Bella and Ivor Elkinson and Adeline Jacob and Damien and Mary Bushe does not offend against section 4(1) of the Competition Act, l99l.

8. 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 Cecil, Bella and Ivor Elkinson and Adeline Jacob and Damien and Mary Bushe in relation to the lease of premises at 173 Lower Rathmines Road, Dublin 6 notified under Section 7 on 21 September 1992 (Notification No CA/99/92E), does not offend against Section 4(1) of the Competition Act, l99l.

For the Competition Authority

Des Wall

Member

4 February l994.