Irish Competition Authority Decisions

1. Notification was made by Power Leisure Ltd on 30 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 Michael and Veronica Grant (the Grants) and Power Leisure Ltd.

2. The notification concerns the lease of shop premises at Duffry Hill, Enniscorthy, Co. Wexford between the Grants as Landlord and Power Leisure Ltd as tenant.

3. The Grants are engaged in the letting of shops at Duffry Hill. Power Leisure Limited (trading as Paddy Power) is a licensed bookmaker with over 70 outlets throughout the country.

4. The notified lease was executed on 1 November 1986 for a term of 10 years from 1 November 1986. The restricted user clauses in the lease are as follows:

(a) Under clause 8.1 of Schedule IV the tenant covenants "To use the premises as a Betting Office...." while under clause 8.5 the tenant covenants "Not to use the demised premises for the sale of new or second hand hardware, plumbing or building supplies ......."

(b) Under clause 13.1 of Schedule IV the tenant covenants "Not to assign, charge underlet ....part only of the Premises" while under clause 13.3 he covenants "Not to assign, charge underlet nor part with possession of the whole of the premises except with the previous written consent of the Landlord which shall not be unreasonably witheld....."

(c) Power Leisure has also advised that the Landlords have covenanted with the tenant not to allow the Landlord's adjoining

premises to be used as a bookmaking office.

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

5. The Authority considers that the Grants and Power Leisure 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 tenancy. These do not raise issues under the Competition Act. In addition the notified agreement also provides, by way of the permitted user clause 8.1 and 8.5 of Schedule IV and a landlord covenant restrictions on the use of the premises and those adjoining but which effectively allow the premises to be used for the purposes of the business of the tenants. 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. 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 provides that a Landlord cannot unreasonably withhold 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 Michael and Veronica Grant and Power Leisure Ltd do 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 Michael and Veronica Grant and Power Leisure Ltd in relation to the lease of premises at Duffry Hill, Enniscorthy, Co. Wexford notified under Section 7 on 30 September 1992 (Notification No CA/313/92E), does not offend against Section 4(1) of the Competition Act, l99l.

For the Competition Authority

Des Wall

Member

4 February 1994