Irish Competition Authority Decisions

1. Notification was made of 2 agreements by Maxol Limited on 17 September 1992 with a request for a licence under Section 4(2) of the Competition Act, 1991 in respect of its Licence Agreement and its Deed of Charge Agreement with distributors.

2. The decision concerns two types of documents signed by Maxol and some of its exclusive distributors namely a Licence Agreement and a Deed of Charge Agreement.

3. Maxol Limited is a limited company which supplies petroleum products. The other parties to the arrangements are the company's distributors of the petroleum products.

4. The products involved are fuel oil products. 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. Maxol notified its exclusive distribution agreement for fuel oils (CA/91/92E) and the Authority considered that the agreement, as amended, satisfied the conditions of the category licence for exclusive distribution agreements (decision no. 144 of 5 November 1993). Maxol also notified two other agreements which are associated with the exclusive distribution agreement, which are the subject of this decision.

This agreement is used where Maxol owns a distribution depot and licences it to a distributor for 2 years and 9 months. There are said to be 10 such licences in existence. Maxol is entitled to share the use of the premises. Maxol agrees to hire to the licensee specified equipment and articles, and the licensee agrees to pay Maxol a stated sum for the use of the depot and the hire of the equipment. The licensee agrees to use the depot solely for the purpose of storage and distribution of Maxol petroleum products, and not, without consent, to use the depot for any other purpose, and to leave on the equipment identification signs placed by Maxol. The licensee is required to insure the depot and Maxol's fixtures and fittings, and to keep proper books and accounts, and allow these to be inspected by Maxol. The licence may not be transferred, and the agreement does not establish any partnership or joint venture between Maxol and the licensee.

This agreement is used for security where Maxol provides a loan for an authorised distributor. There were said to be eight such agreements in existence. The agreement is not in standard form. One particular deed of charge was notified, with Mr. John Kennedy (the dealer) and Mohill Fuel Oils Ltd, Finiskil, Mohill, Co. Leitrim (the borrower), and this decision is confined to that agreement. The agreement is dated 17 December 1991. The dealer and the borrower agree to repay the loan, and the dealer conveys the premises in favour of Maxol, subject to the provision for redemption. The borrower agrees to maintain an adequate staff for the sale of Maxol products, and to purchase motor fuels and other oil based products exclusively from Maxol for five years, and not to buy or sell such products on the premises or any adjoining premises of the borrower unless they have been purchased from Maxol. The borrower also agrees to purchase minimum annual quantities of motor spirit and to accept minimum deliveries.

6. In support of its application for a licence, Maxol stated that the licence enabled Maxol to offer rentals at terms well below the appropriate commercial rates for such facilities. It also justified the expenditure involved in developing the site and its facilities. In respect of the deed of charge, Maxol stated that, without such sureties, the advancement of loan facilities could not be commercially justified.

7. 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.

8. 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." Maxol Limited and the distributors are engaged in the sale of petroleum oil products for gain, and are therefore undertakings within the meaning of Section 3(1) of the Competition Act.

9. 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.

10. 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."

11. The Authority has decided that the basic Maxol 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.

12. In the Authority's opinion, Maxol 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.

13. 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 Maxol Limited on 17 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) Maxol Limited/Distributor Licence Agreement - CA/95/92E

(b) Maxol Limited/John Kennedy/Mohill Fuel Oils Ltd (Deed of Charge) -CA/96/92

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

For the Competition Authority

Patrick M. Lyons

Chairman.

21 April 1994