Irish Competition Authority Decisions

1. Notification was made of six agreements by Campus Oil Ltd/Delta Fuels Ltd on 30 September 1992 with a request for certificates under Section 4(4) of the Competition Act, 1991 or in the event of a refusal by the Competition Authority to issue certificates, a request for licences under Section 4(2).

2. The decision concerns four types of documents signed by Campus/Delta and some of their exclusive distributors namely a Guarantee Agreement, a Licence Agreement (two forms), a Debenture Agreement (two forms) and an Equipment Agreement.

3. The suppliers involved in the notified agreements are Campus Oil Ltd/Delta Fuels Ltd, two companies in the Clashfern Group. These companies are limited companies which supply petroleum products. The other parties to the arrangements are distributors of oil used for home heating purposes, agricultural oil and oil for commercial purposes (fuel oils). In the case of the guarantee agreement the other parties involved are the owners of the distribution companies.

4. The products involved are fuel oils. The oil companies involved in this market generally use distributors to deliver to final customers and do not use their own staff as in the past.

5. The arrangements notified are those between two companies in the Clashfern Group of companies (namely Campus Oil Ltd and Delta Fuels Ltd) and their distributors of fuel oils. These arrangements are embodied in a standard distribution agreement for a term of ten years, which every distributor has executed. The Authority has already concluded that the standard distribution agreement ( CA/765/92E ) satisfies the conditions of the category licence for exclusive distribution agreements (decision no. 144 of 5 November 1993). In addition to the exclusive distribution agreement, there are four other documents, which are the subject of this decision, namely, an equipment agreement, a debenture, a guarantee and a licence. The details of these are given below.

(a) Guarantee. In return for Campus having agreed to supply petroleum products to the distributor, the individual owner (or owners) guarantees payment to Campus by the distributor for all goods supplied. The guarantee has been executed by 17 persons.

(b) Licence 1. Campus or Delta owns a site, and it licences the distributor to use the site for the business of oil distribution. The owner licences the non-exclusive use of the property and the assets, but the owner retains full access to and rights to use the property and the assets at all times, for any purpose whatsoever. The licence is of even date with the exclusive distribution agreement, and lasts for a set number of years or until the distribution agreement is terminated, whichever is the sooner. The licence is stated not to be a landlord/ tenant relationship, nor a partnership. Two such licences are in existence.

(c) Licence 2. Under this agreement, the distributor owns the site and grants Campus a licence to use the site, in consideration for Campus having spent a specified sum in construction works on the site. Campus is granted an exclusive licence to enter on and use the site in the event of the distributor failing to use the site in accordance with the exclusive distribution agreement of even date. The distributor is entitled to use the site until the termination of the distribution agreement, and the licence is granted for ten years, but the distributor is not entitled to use the site for the period between the expiration of the agreement and the expiration of the licence. There is one such licence in existence.

(d) Debenture 1. This debenture creates a first floating charge on all assets of the company, and it takes the form of a resolution to the effect that the company will pay on demand to Campus all such sums as are or will be due whether in respect of monies advanced or paid to or for the use of the company or in respect of goods sold and delivered by Campus to the company. This debenture agreement has been obtained from six distributors.

(e) Debenture 2. This debenture states that all monies owing now or in the future to Delta shall be secured in a manner and on the terms specified. The company covenants with the supplier that it will pay all sums of money which are or may become due under the distribution agreement. There is one such debenture in existence.

(f) Equipment loan agreement. In order to enable the distributor to carry out his obligations under the exclusive distribution agreement, Campus agrees to provide the distributor with certain machinery and equipment by way of lease at a nominal rent. The equipment remains the property of Campus, and the distributor is obliged to keep it in good repair, pay for servicing, ensure it is operated by competent persons, keep it in the distributor's possession and not remove it from the premises, allow Campus to inspect it, indemnify Campus and insure the equipment, and allow Campus' name to be affixed to the equipment. The distributor is not permitted to sell or assign the equipment, nor to sell the premises without giving Campus prior notice and allowing Campus to repossess the equipment, nor to alter the equipment without permission. The agreement terminates on the expiration of the exclusive distribution agreement, or on Campus giving one month's notice to the distributor. There are nine such agreements in existence.

6. 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.

7. 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." Campus/Delta and the distributors are engaged in the sale of oil products for gain, and are therefore undertakings within the meaning of Section 3(1) of the Competition Act. In the case of the Guarantee Agreements, the owners of the distribution companies own and control the business and, in line with previous Authority decisions, they are also undertakings.

8. All the notified agreements are connected with, and dependent upon, the exclusive distribution agreements, they form part of the exclusive distribution arrangements and, in some cases, they strengthen those arrangements. In the opinion of the Authority, while the agreements might contain some provisions which by themselves could offend against Section 4(1), all the notified agreements offend against Section 4(1) of the Competition Act because they underpin an exclusive distribution agreement which itself offends against Section 4(1) of the Competition Act for the reasons given in the category licence for exclusive distribution agreements.

9. Under Section 4(2), the Competition Authority may grant a licence in the case of any agreement or category of agreements which, "having regard to all relevant market conditions, contributes to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and which does not-

(i) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives;

(ii) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question."

10. The Authority has decided that the basic Campus/Delta standard exclusive distribution agreement satisfies the conditions of the category licence. It is of the opinion that the notified related agreements also satisfy the conditions of the category licence, for the same reasons, and thus they also satisfy the requirements of Section 4(2) of the Competition Act. This applies also to any exclusivity provisions specifically included in the notified agreements. A licence may therefore be issued in relation to each of these agreements. The licences come into effect on 21 April 1994. They will expire on the date of expiry of the category licence for exclusive distribution agreements, that is on 31 December 1998.

11. In the Authority's opinion, Campus/Delta and the other parties to the agreements are undertakings . The notified agreements between the parties are agreements between undertakings. The Authority considers that the notified agreements offend against Section 4(1) of the Competition Act, 1991. The Authority considers that the notified agreements satisfy the conditions of Section 4(2) of the Competition Act. It has therefore decided to issue a licence to each of the notified agreements, and these licences shall apply from 21 April 1994 to 31 December 1998. It is not considered necessary to attach any conditions to the licences.

12. The Competition Authority has issued the following licences:

The provisions of Section 4(1) of the Competition Act, 1991 are declared inapplicable to the following agreements notified to the Competition Authority by Campus Oil Ltd/ Delta Fuels Ltd on 30 September 1992, on the grounds that, in the opinion of the Authority, all the conditions of Section 4(2) of the Competition Act, 1991 have been fulfilled:

(a) Distributor Agreement (Guarantee)................CA/759/92E

(b) Distributor Agreement (Licence)....................CA/760/92E

(c) Distributor Agreement (Licence)....................CA/761/92E

(d) Distributor Agreement (Debenture)................CA/762/92E

(e) Distributor Agreement (Debenture)................CA/763/92E

(f) Distributor Agreement (Equipment)...............CA/764/92E

These licences shall apply from 21 April 1994 to 31 December 1998.

For the Competition Authority

Patrick M. Lyons

Chairman.

21 April 1994