Irish Competition Authority Decisions

1. Notification was made with a request for a certificate or licence by Conoco Ireland Limited on 7 September 1992 in respect of its standard agreement with consignees.

2. Notice of intention to take a favourable view of the agreement was published in the Irish Times on 14 January 1994. A submission was received from the Jet Retailers Association.

3. The decision concerns the standard consignee agreement between Conoco and the consignees at a number of its company owned petrol stations. Each agreement consists of a licence to operate the petrol station on behalf of Conoco and to sell only Jet motor fuel on the premises, and there are special provisions in the agreement in respect of a shop on the premises in which are sold products other than motor fuels and other Jet branded products, such as grocery goods, confectionery, cigarettes, newspapers, etc. The two parts of the agreement are dealt with separately in this decision.

4. Conoco is a wholly owned subsidiary of Conoco Inc., which is a wholly owned subsidiary of E.I. Du Pont de Nemours and Company, Inc., both being US companies. Conoco is involved, inter alia , in the supply and distribution of motor fuels and other petroleum products to the motoring public through a chain of retail outlets, most of which are owned by independent dealers, the remainder being owned by Conoco. 23 of its company outlets are occupied by so called consignees, who operate the petrol station and a convenience shop. The consignees sell motor fuels for Jet Oil's account, but they operate the shop on their own account.

5. The product with which the main part of the notified agreements is concerned consists of motor fuels, that is petrol and diesel for use in mechanically propelled road vehicles. The market was described in detail in the motor fuels category licence [1].

6. The convenience shop primarily sells grocery goods, confectionery, newspapers, cigarettes, etc. The market consists of all retail outlets selling goods of a similar character.

7. The introduction states that the premises comprise and are adapted and intended for use wholly or mainly for the carrying on of the business of a retail petrol filling station and convenience shop. The consignee, referred to in the agreement as a licensee, has agreed to operate the premises for the purposes and in furtherance of Conoco's business objective of the sale by retail at and from the premises of the company's motor fuels and other products. For the purposes of such operation, the company has agreed to licence and permit the licensee to occupy and make use of the premises subject to the terms of the agreement.

8. Appendix V describes the relationship between the licensee and Conoco and sets out some of the licensee's responsibilities in respect of motor fuels. Regarding the product, it states as follows:

'6. All the Company's Motor Fuel and the Company's products delivered by the Company to the Company to the Premises and entrusted to the custody of the Licensee for sale shall remain the property of the Company until sold in the way of normal retail trade from the Premises and the Licensee shall not charge, pledge or part with possession of the same save for the purposes of sale as aforesaid'.

Notwithstanding para 6, it is stated in para 7 that 'all products delivered to the Premises shall be held at the sole and absolute risk of the licensee who shall be liable to pay the Company for the same ....' in certain circumstances.

9. Appendix V also provides for the handling of receipts from the sale of motor fuels as follows:

'1. The amount for which the Licensee shall be accountable and which shall be payable by the Licensee to the Company in respect of "the Company's motor fuel" to be sold at the premises shall be the price which the Company shall from time to time notify to the Licensee as the price at which the same is/are to be sold by retail at and from the Premises and applicable at the date of such sale less the amount which the Licensee is authorised to deduct and retain by way of commission and Value Added Tax thereon as hereinafter provided and shall be computed and paid as provided below.

2. For the purposes of ascertaining the total amount to be paid by the Licensee and received by the Company and of accounting between the Company and the Licensee:

2.1 The quantity of each Motor Fuel sold each day shall be ascertained by provisional stock assessment each of which shall be recorded by the Licensee in the manner and form required by the Company, which shall have the right to inspect and to take copies of such records whenever so required'.

According to para 2.2, the licensee has to pay the amount payable under para 1 in respect of the quantity sold into a bank account nominated by Conoco on each day it is open for business. A full reconciliation is made each month between the lodgments made and the amount due to be paid, on the basis of stocks and purchases during the month. Sufficient details to allow this must be furnished to Conoco. The commission rate, in terms of pence per gallon on minimum sales, and percentage of the retail margin on sales above a specified level, is included in the agreement.

10. Appendix V also provides that the quantity of motor fuels and the turnover value of the other products shall not fall below specified monthly values. If the quantity of motor fuels sold falls below that specified, an agreed sum of liquidated damages has to be paid by the licensee.

11. The body of the agreement provides that the licence does not create any relationship between the parties of landlord and tenant (clause 8.5), or any partnership or any contract of agency or service, and it is expressly agreed that, for all purposes, the licensee is an independent contractor (para 8.6).

12. Appendix 1 describes the obligations on the licensee in respect of the premises, some of which are as follows:

(a) to pay and discharge all outgoings of the type described (labour and insurance costs, losses of motor fuel, telephone and postage costs, and consumable items such as cleaning materials and shop bags) (clause 1 and Appendix VII);

(b) to keep the premises open during normal business hours as agreed (clause 2);

(c) to use every endeavour and due diligence to sell and promote the products (clause 3);

(d) to keep adequate stocks (clause 4);

(e) to be responsible for the conduct and operation of the premises, and to engage, at licensee's own expense, sufficient and satisfactory staff (clause 5);

(f) not to exhibit posters or signs on the premises without the company's approval (clause 12); and

(g) not to carry on or to be concerned or interested in any manner whatsoever directly or indirectly in the conduct or management of any business in or through which competing products are sold or offered for sale by retail at or from premises situate within the radius shown.

13. The agreement also makes provision for the duration of the licence, the obligations of Conoco (delivery of motor fuels, subject to ability to supply, and repairs), early termination, and minimum insurance requirements to be met by the licensee.

14. The agreement also contains obligations on the licensee in respect of the shop. The licensee is permitted to sell 'other products' in the shop, 'other products' being defined as 'such goods and products (not being the Company's motor fuel or Company's products) as the Product Supplier (as hereinafter defined) may from time to time provide or procure to be provided at and for the purpose of sale by retail from the premises'. The term 'Product Supplier' means 'such Supplier of the 'other products' as may be approved of from time to time by the Company'. (Clause l)

15. Appendix 1 of the agreements deals with the shop in more detail, the main provisions being as follows:

1. The Licensee shall be free to obtain supplies of 'the other products' from any supplier approved of by the Company in writing.

1.1 Pay to the Company by monthly direct debit a fee equal to the aggregate of [ ] % of the wholesale price of all cigarettes and tobacco products and [ ] % of the wholesale price of all 'other products'.

1.2 At all times keep full and accurate records of all 'other products' purchased and sold by it (and furnish monthly a certificate certifying the gross turnover, and permit the company to inspect the books and records to verify the gross turnover).

2. Present and merchandise 'The Products' in accordance with the initial layout configuration and merchandising presentation implemented by or on behalf of the Company, at the shop.

3. Properly and effectively merchandise and promote "The Products" with advice and selective assistance of the Company or its authorised representative.

4. Maintain point of sale and window material and introduce no additional material except with the approval of the Company.

6. Conduct physical stock-takes as directed by the company or its authorised representatives with or without the assistance of the Company or its authorised representatives.

13. Pay the Company annually in arrear the fee specified. (This fee is not payable if the annual turnover is equal to or greater than the specified minimum turnover, but the fee increases the lower is the turnover compared to the specified minimum turnover).

The licensee is also obliged to maintain adequate stock levels, to maintain a retail environment, to ensure that the premises are kept clean and that the attendants are properly attired, to complete and return all relevant documentation to the company, and to try to ensure that petrol customers pay in the shop, and to pay the amounts due to the other product suppliers.

16. Appendix V contains certain other provisions relating to the shop, as follows:

1. the licensee and appropriate employees shall if so required by the company participate in any training and support programme in retail shop sales and interior systems which the company may arrange whether directly or by other parties on its behalf.

It is also stated that the company shall have no liability to the licensee in respect of the other products, and that the company is not the agent of the product supplier; that the licensee will indemnify the company in respect of the other products; and that, if the company terminates the agreement, the licensee shall remove the other products from the premises. (Similar provisions are included in Conoco's licence agreements, where the operator of the Conoco station is independent, and also in certain agreements for the operation of a Jet shop on premises owned by dealers who have a solus agreement for the sale of Jet motor fuels. These are the subject of separate notifications).

17. In its initial submission, Conoco stated that the consignee stations were operated by Conoco/Jet Oil for its own account and under its operational control and direction. Other licensees, however, operated company stations in a way which enabled them to conduct their own independent businesses for their own account, in much the same way as an independent dealer buying exclusively from Conoco. It went on to say that, in respect of the consignees, which it refers to as licensees:

'Conoco/Jet Oil engages the Licensee to undertake and perform services required by Conoco/Jet Oil for the purpose of operating a Company station in its own name and for its own account and in a manner in which it retains full ultimate control over the sale of motor fuels by retail to the motorist direct.

In this situation:

(i) Conoco/Jet Oil is the retailer and the entity from which the motorist purchases his/her motor fuel; and

(ii) the Licensee is a provider of services, for the purposes of which he is authorised and licensed by Conoco/Jet Oil to enter upon and to use the Company station on and subject to the terms of the LA [licence agreement].

For his services, the Licensee is remunerated by payment of a commission at a rate which is negotiated and agreed with each Licensee individually. However, an additional, integral and synergistic feature of the arrangement is that the Licensee is permitted to use the Shop for the sale of goods (other than motor fuels and Conoco/Jet Oil's other products, such as vehicle lubricants and anti-freeze) for his own account and separately from and independently of the business of the sale of Conoco/Jet Oil's motor fuels and other products. For this, Conoco/Jet Oil receives the benefit of a licence fee ......'

While such licences in the past were subject to a Restrictive Practices Order and were usually granted for three years, the period for this licence was unlikely to exceed ten years.

18. Conoco also presented the following arguments for a certificate or a licence:

'Contract operation of Company stations enables Conoco/Jet Oil to engage in inter-retailer competition, and thereby to develop and pursue its own ideas for innovative and creative marketing more effectively than would be possible if its role were restricted to that of a wholesaler supplying petroleum products to retail operators. In particular, it enables and provides an incentive for Conoco/Jet Oil to develop and pursue and, by its own conduct and example, to influence and enhance within the retail sector generally standards and practices which

(a) promote efficiency;

(b) benefit the consumer by ensuring availability of quality assured products at competitive prices through attractive, well-maintained premises and facilities and providing a level of services dedicated to total customer care; and

(c) better recognise and address topical operating issues, particularly those concerned with health and safety and with protection of the environment.

The arrangement under notification is considered to have no material or perceptible effect on competition in trade within the relevant market and a certificate under section 4(1) is requested on that ground. The position resulting from this arrangement is that Conoco/Jet Oil maintains and exercises full and complete control of the marketing of the motor fuels which are being offered for sale at the contract operated station. The effect of this on competition is no different from that which would arise if the station was operated by Conoco/Jet Oil's direct employees'.

Conoco also claimed that this was not affected by the restriction on the Licensee's engaging in a competing business within a specified radius, which was necessary in principle and reasonable in extent for the purpose of safeguarding Conoco/Jet Oil's interests in the Station.

19. Conoco made the following remarks about the shop:

'On a number of contract operated stations, the Shop facility has been upgraded and re-equipped to the high quality, modern standards established by Conoco/Jet Oil for its Jet Shops concept ..... This has been undertaken as part of Conoco/Jet Oil's ongoing programme for enhancement of the scope and quality of customer services at Jet Oil branded service stations; and has required (and will continue to require) substantial investment. In these cases, the licence fee which Conoco/Jet Oil receives as consideration for the use of the Shop facility ("the Shop fee") is related to turnover of "other products" but with a mechanism to ensure attainment of an agreed minimum annual fee. The level of the minimum fee is agreed with each Licensee individually and reflects the mutually agreed expectation of the profit earning potential for the Licensee of the separate business for which the Shop is to be used. Relating the fee to turnover also provides Conoco/Jet Oil with a reasonable opportunity to receive a fair return on its investment'.

Conoco also stated that the obligation on the licensee to purchase other products from approved suppliers was:

'necessary and reasonable in order better to ensure that products are purchased only from reputable and reliable suppliers, thereby

(i) better assuring the consumer availability of supply and of the quality and range of goods on offer for sale; and (ii) safeguarding the proprietary interests of Conoco/Jet Oil by avoiding any erosion of the reputation and good standing, as perceived and identified by the consumer, of the brand name "JET" and of the "JET Shop" identity where applicable'.

20. In response to questions posed by the Authority concerning the status of the consignee under the consignee agreement, Conoco replied as follows:

'1. Jet Oil remains the retailer of, and the entity from which the motorist purchases, motor fuels supplied at the contract operated station.

2. The Licensee is engaged to conduct the physical operation of that station and, as such, is a provider of services to Jet Oil on terms which authorise and license him to use the contract operated station not only for the purpose of fulfilling his obligations as a provider of services but also for the sale, through the Shop which is part of the station, of goods (other than motor fuels and Jet Oil's other products, such as vehicle lubricants and antifreeze; collectively "Jet Oil products") for his own account and separately from and independently of the sale of Jet Oil products which the licensee undertakes in his capacity as a provider of services.

3. Thus, the Licensee operates in two capacities: as a provider of services in relation to the sale of Jet Oil products; and as an independent business man acting on his own account in relation to the sale of other goods through the station Shop.

4. In both capacities, the Licensee is an independent contractor, as is expressly recognised in Clause 8.6 of the Licence Agreement.

5. In relation to the sale of Jet Oil products (where, for emphasis, ownership and financial risks remain with Jet Oil, which also retains complete control over the determination of selling prices), we can readily agree and confirm that:

(a) the Licensee sells in the name and for the account of Jet Oil;

(b) The Licensee is obligated to carry out Jet Oil's instructions; and

(c) In these circumstances, the Licensee is but an intermediary between Jet Oil and the consumer and, as such, may be regarded as forming an integral part of Jet Oil's undertaking in much the same way as would be the case if the relationship were one of employer and employee.

This leads us to conclude and accept that, for the purposes of the sale of Jet Oil products, the Licensee is a trade representative or commercial agent for Jet Oil rather than an independent trader.

6. However, in relation to the Licensee's activities relating to the sale of the "other goods" for the purpose of which he is authorised to use the Shop:

(a) The Licensee is clearly an independent trader.

(b) If, as we would submit, the majority and "essential thrust" of the restrictions which are imposed upon the Licensee are properly to be regarded as relating to and arising from the services which he agrees to undertake and perform for the purpose of the sale of Jet Oil products and the general operation on behalf of Jet Oil of the contract operated station then the only remaining "extraneous" restrictions (i.e. those which affect his activities as an independent trader) would appear to be those which are to be found in Part II of Appendix 1 of the Licence Agreement.

(c) Of those restrictions, the only one which might be regarded as being of any consequence is that which arises from paragraph 1: and then only if this was to be interpreted as a requirement that supplies of "other products" were to be obtained only and exclusively from suppliers approved by Jet Oil'.

Conoco pointed out that this issue had been covered in the initial submission, as set out in para 19.

Finally, Conoco stated that:

'If, in these circumstances, it is your considered view that the Consignee Licensee is not an "undertaking" within the meaning of Section 3 (1) and/or that our arrangements do not otherwise need to be notified under Section 7 then, we would not wish to argue to the contrary'.

21. The Authority wrote to Conoco on 5 October l993 expressing concern in relation to clause l of Appendix l, which required the consignee to obtain supplies of 'the other products' from suppliers approved of by Conoco in writing. It stated that its concern would be removed by the addition of the following sentence: 'Approval will be withheld only for objectively valid reasons which shall be disclosed to the licensee'. The Authority considered that this would still adequately safeguard the legitimate interests of the company, while not impinging on the commercial freedom of the independent operator. By letter dated 29 November l993, Conoco agreed to amend the agreement by adding the wording above and to notify all their consignees of the amendment.

22. The EC Commission first gave its views on exclusive dealing contracts with commercial agents in a Notice published in 1962 [2]. In this it stated that it considered that contracts made with commercial agents, who acted on behalf of an enterprise, did not fall under the prohibition in Article 85(1) of the EC Treaty. It was essential that the commercial agent should not engage in activities proper to an independent trader. The decisive criterion, according to the Commission, was that the commercial agent should not assume any risk resulting from the transaction.

23. It has long been recognised, by the Commission and others, that the 1962 Notice is limited in scope, and that it no longer reflects economic reality and is also legally obsolete. It also needed revision in the light of the 1986 harmonisation Directive relating to self-employed commercial agents [3]. The Commission has been preparing, therefore, a revised Notice on commercial agents, which has not yet been finalised.

24. The EC Court of Justice considered the question of agency in the Suiker Unie case, where it stated:

'If such an agent works for his principal he can in principle be regarded as an auxiliary organ forming an integral part of the latter's undertaking bound to carry out the principal's instructions and thus, like a commercial employee, forms an economic unit with this undertaking' [4].

(h) Submission by Jet Retailers Association.

25. Following the publication of the Authority's intention to take a favourable view of the agreement, a submission was received from the Jet Retailers Association, which is comprised of 26 Jet licensees. The general view was that the Association supported the issue of a certificate, but that the agreement did not accurately describe the relationship between the parties and it should be modified before a certificate was granted. It was stated that the notion of 'licensee' accurately described the relationship under land law, but it did not accurately describe the commercial relationship between the parties under competition law. The Association considered that its members were non-exclusive distributors for the shop products, but that they were effectively commercial agents of Conoco for motor fuels. It claimed that the agreement, in clause 8.6, denied this reality. It maintained that either this clause should be redrafted to state positively that there was a relationship of commercial agency subsisting between the parties, or that the phrase 'or any contract of agency or service' should be deleted. The Association stated that this was very important since, as agents, its members were entitled to rely on the EC Directive on Commercial Agents, including the right to compensation on termination of the agency in certain circumstances. The Association objected to the issue of a certificate for the agreement as currently drafted. The Authority has taken full account of the views of the Association in the following assessment of the agreement. It does not consider, however, that, for the purposes of the Competition Act, it is necessary to require that the position of the licensees as commercial agents should be specifically recognised in the agreement.

26. 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.

27. Conoco and the consignees are engaged in the sale of motor fuels for gain, and the consignees are also engaged in the sale of other products for gain, and they are therefore undertakings within the meaning of Section 3(1) of the Competition Act. The standard consignee agreement is an agreement between undertakings. The relevant product markets are those for (a) motor fuels, and (b) the products sold in the shop on the petrol station premises. The relevant geographic market is the State.

28. In operating the petrol station premises and selling motor fuels, the consignee is not an employee of Conoco and there is no contract of employment or service between them. He is a self-employed contractor. At the same time, while the consignee is stated to be an independent contractor, the consignee does not purchase motor fuels from Conoco for resale to the public. Unlike the Conoco licensee or independent dealer, the consignee sells motor fuel, not on his own account, but on behalf of Conoco. He does not pay for the motor fuels, and the motor fuels remain the property of Conoco until they are sold at retail, even though they are held at the consignee's risk. All receipts from the sale of motor fuels, less the agreed commission, must be lodged daily to Conoco's bank account. Out of his commission, the consignee must pay for certain outgoings, such as labour and insurance costs, the balance representing the consignee's remuneration. The consignee is responsible for employing staff. Conoco determines the prices at which the motor fuels are to be sold. The petrol station is effectively under the operational control and direction of Conoco, and is operated for Conoco's own account, and the consignee is obliged to obey Conoco's instructions. The relationship between Conoco and the consignee is an ongoing one, and the agreement may have a duration of up to ten years.

29. The Authority considers that the question of agency is quite complex, and that each case must be examined on its own merits in relation to the Competition Act, in the light of certain general considerations. In the first place, it is not conclusive that one party is referred to as an 'agent' in the agreement, since he may not perform the functions of an agent in any real sense. Conversely, it does not matter if the agreement states that there is no relationship or contract of agency between the parties. This may be done, for example, to limit one party's ability to undertake binding obligations on behalf of the other, without the latter's knowledge or consent. From the point of view of the Competition Act, the Authority is concerned with whether the relationship between the two parties is such that one of them may be termed a 'commercial agent' of the other. It is not intended that the views of the Authority about whether a person is a commercial agent or not should have any implications for the legal relationship between the parties.

30. The Authority considers that a commercial agent is a self-employed intermediary between the principal and a purchaser or seller. The commercial agent concludes the sale or purchase of goods and services on behalf of the principal, on a continuing basis. The commercial agent is an auxiliary organ, forming an integral part of the principal's business, and is bound to carry out the instructions of the principal, and his position is similar to that of an employee. Being integrated into the principal's business, the commercial agent can undertake no autonomous commercial behaviour, under the agreement, and certain restrictions on him are fundamental to the relationship. The Authority considers that profits or losses essentially accrue to the principal and not to the commercial agent.

31. The relationship between Conoco and its consignees has been summarised in para 28. The agreement also states that there is no contract of agency between the parties. Conoco has argued that, in respect of the sale of motor fuels, the consignee is an intermediary, and forms an integral part of Conoco, like an employee. They said that the effect on competition was no different to that which would have occurred if the station had been run by a direct employee of Conoco.

32. The consignee is a self-employed intermediary between Conoco and the purchasers of Jet motor fuels. He concludes the sale of goods on behalf of Conoco, on a continuing basis, for up to ten years. He does not own the stocks, the resale prices are set by Conoco, and the consignee lodges the proceeds of sale, less the commission, to the credit of Conoco's bank account. While the consignee accepts some risk, in relation to stock and cash losses, and is responsible for hiring and paying employees, the profits and losses of the motor fuels business as a whole accrue to Conoco, and the consignee must obey Conoco's instructions and may undertake no autonomous behaviour in respect of the operation of the petrol station. The Authority considers that the consignee, in operating the petrol station and selling Conoco products, is an auxiliary organ, forming an integral part of Conoco's distribution business, and it concludes that he can be considered to be a commercial agent. This conclusion is not affected by the fact that the consignee also operates the shop supplied by Conoco on the same premises, since the operation of the petrol station constitutes a significant proportion of the whole business, and there is also a relationship between the consignee and Conoco in relation to the shop.

33. The consignee sells products other than motor fuels and Jet products in the shop for his own account and separately from and independently of the sale of Jet Oil products. Although he pays a commission on sales to Conoco, and is bound by certain obligations imposed by Conoco regarding the operation of the shop, he is in no sense a commercial agent of Conoco in respect of the shop on the petrol station premises. He is an independent trader in the shop.

34. The Authority considers that undertakings are entitled to decide how to operate their distribution systems, and, in particular, to appoint commercial agents to sell their goods on their behalf. Suppliers of motor fuels are free to choose to sell their products through independent dealers or through company-owned outlets; these latter may be operated by lessees, licensees, employees or by consignees and commercial agents. Since the commercial agent is an auxiliary organ, similar to an employee, the agreement between a principal and a commercial agent does not, in principle, offend against Section 4(1) of the Competition Act.

35. In the present case, the Authority has concluded that the consignee is a commercial agent. It considers that the agreement between Conoco and the consignee, insofar as it creates a relationship between the principal and a commercial agent, does not offend against Section 4(1).

36. Even though the basic arrangement of commercial agency might not offend against Section 4(1), certain clauses in the agreement might occasionally do so. In the case of motor fuels agreements, the Authority has published a category licence, which permits the imposition of certain obligations upon resellers of motor fuels and upon their suppliers. The Authority considers that the obligations which are not regarded as offending against Section 4(1) in the case of independent traders would equally not offend in the case of commercial agents. More fundamentally, the Authority recognises that there are certain features of commercial agency agreements which define and confirm the relationship, and are intrinsic to the commercial agency. Since the commercial agent is closer to being an employee than an independent trader, the Authority considers that certain restrictions may be imposed upon a commercial agent without offending against Section 4(1), whereas they would offend against Section 4(1) if they were imposed on an independent trader. In the Authority's opinion, none of the provisions in the notified agreement offend against Section 4(1).

37. In the opinion of the Authority, all but one of the relevant provisions regarding the shop in the notified agreement do not have the object or effect of preventing, restricting or distorting competition. They reflect the fact that the shop is owned by Conoco, and is licensed to the consignee for the purpose of enhancing earnings at the station, for the mutual benefit of the owner and the consignee, while ensuring that the reputation of Conoco and the Jet brand name is not damaged. Since a fee which is related to the turnover of different classes of goods is payable by the consignee, it is essential for accurate and detailed records to be furnished to Conoco, and for Conoco to have power to verify these. Such provisions do not interfere with the freedom of the consignee to operate the shop and they do not interfere with competition. In the view of the Authority, they do not offend against Section 4(1) of the Act.

38. The Authority was concerned, however, with the clause which stated that 'the licensee shall be free to obtain supplies of 'the other products' from any supplier approved of by the company in writing.' The Authority considered that this clause could be used to limit the freedom of the consignee to determine what products to sell and from whom he might obtain supplies. This could affect the ability of the consignee to compete with other retailers in the area. It could also limit competition between suppliers to obtain the custom of the consignee. The consignees would have no voice in deciding which suppliers they should deal with for their purchases. While the effect of this requirement to obtain Conoco's approval of every supplier might have little effect upon competition in the case of an individual consignee, the cumulative effect of this obligation in respect of all Conoco's consignees, licensees and dealers with a Jet shop, who are similarly bound, might not be insignificant. Since this practice might also be followed by other petrol companies in convenience shops attached to their company and dealer outlets, and since such convenience shops are growing rapidly in number and importance, the overall effect was thought likely to be considerable. The Authority considered that this clause offended against Section 4(1) of the Act. (The Authority also considered that this clause would not satisfy, at least, the indispensability requirement of Section 4(2) of the Act, and so would not qualify for the grant of a licence).

39. At the suggestion of the Authority however, as stated in para 21, Conoco have agreed to provide that approval of a supplier 'will only be withheld for objectively valid reasons which shall be disclosed to the licensee.' The Authority considers that this would adequately ensure the reputation and good standing of Conoco and of the Jet and Jet Shop tradenames, as required by Conoco, but in a less restrictive way. The Authority considers that the part of the agreement relating to the shop no longer offends against Section 4(1).

40. In the Authority's opinion, Conoco and its consignees are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified standard consignee agreement for the operation of a Conoco-owned petrol station and associated shop constitutes an agreement between undertakings. In the Authority's opinion, the consignee is a commercial agent of Conoco in the petrol station, and an independent operator in the shop, and the arrangements, as amended, do not have, as their object or effect, the prevention, restriction or distortion of competition. The standard Conoco consignee agreement, as amended by the letter of 29 November l993, does not, in the Authority's opinion, offend against Section 4(1) of the Competition Act, l99l.

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 standard agreement between Conoco and its consignees for the operation of a Conoco-owned petrol station and shop (notification no CA/71/92E), notified on 7 September l992 under Section 7, and amended by Conoco in its letter of 29 November l993, does not offend against Section 4(1) of the Competition act, l99l.

For the Competition Authority

Patrick M. Lyons

Chairman.

25 February 1994.