Irish Competition Authority Decisions

1. Notification was made by Rowe Mark Holdings and Peter Holdings (RPH) 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 RPH and Bally London Shoe Company Limited (Bally).

2. The notification concerns the lease of a shop at 43 Grafton Street, Dublin 2 between RPH as Lessor and Bally as lessee.

3. Rowe Mark Holdings and Peter Holdings are the owners and landlord of 43 Grafton Street. Bally is engaged as a retailer of footwear.

4. The notified lease was made on 25 May,1989 for a term of 35 years from 1 May,1989. The restricted user clauses in the lease are as follows:

(a) Under clause D(18) the lessee covenants " Not without the consent in writing of the Lessor to use or suffer the demised premises or any part thereof to be used for residential purposes or for any purpose other than as a retail shop for the sale of footwear, handbags, leather goods and ancilliary thereto, luggage, jewellery, toiletries, ladies and gentlemans and children's clothing and accessories and for such other retail trade or business as may from time to time be approved in writing by the Lessor such approval not to be unreasonably withheld and shall not use the demised premises or any part thereof at any time as a hairdressing Saloon or a beauty treatment saloon."

(b) Under clause D(33) the lessee covenants " Not to assign transfer or underlet or part with or share the possession or permit the occupation by a licensee or permit any underletting or sub-letting or any assignment of any underlease or sub-lease or any parting by any sub-lease with possession (a) of the whole of the demised premises without the previous consent in writing of the Lessor (but so that such consent shall not be unreasonably withheld) or (b) of any part of the demised premises under any circumstances whatsoever."

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

5. The Authority considers that RPH and Bally Shoe Company 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. 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 tenant may do so by occupying any other premises within the State.

7. In addition the agreement also provides, by way of the permitted user clause D(18), restrictions on the use of the premises but which effectively allows the premises to be used for the purposes 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. 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 withhold consent to a change of user requested by a tenant. In addition the tenant is free to undertake other businesses in many other premises, both in the vicinity or elsewhere in the State. 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 RPH and Bally Shoe Company Ltd does not offend against Section 4(1) of the Competition Act,1991.

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 Rowe Mark Holdings and Peter Holdings and Bally London Shoe Company Ltd in relation to the lease of premises at 43 Grafton Street, Dublin 2, notified under Section 7 on 30 September,1992 (notification no. CA/1009/92E), does not offend against Section 4(1) of the Competition Act,1991.

For the Competition Authority

Des Wall

Member

21 April,1994.