Irish Competition Authority Decisions

1. Notification was made of two agreements by Statoil Ireland Limited on 30 September 1992 with a request for a licence under Section 4(2) of the Competition Act, 1991 in respect of its Cash Advance Agreement and its Loan Agreement with distributors.

2. The decision concerns two types of documents signed by Statoil and some of its distributors namely a Cash Advance Agreement and a Loan Agreement.

3. Statoil Ireland Limited is a limited company engaged in the supply of oil products, both retail and commercial. The other parties to the arrangements are exclusive distributors of petroleum products.

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 own staff as in the past.

5. Statoil notified its exclusive distribution agreement for fuel oils (CA/448/92E), and the Authority considered that the agreement satisfied the conditions of the category licence for exclusive distribution agreements (decision no. 144 of 5 November 1993). Statoil also notified two other agreements which are associated with the exclusive distribution agreement, which are the subject of this decision.

This relates to a standard agreement between Statoil and its distributors whereby Statoil advances to the distributor a cash sum to be applied by the distributor in improving, enhancing and developing the distributorship. The distributor is required to expend the cash advance for the purposes of enhancing and improving the distributorship. If the distributor should cease, during a specified period, from distributing Statoil products exclusively, the advance must be repaid, less one-tenth for each year of exclusive supply by Statoil.

This relates to a standard loan agreement between Statoil and its commercial distributors for the development of the distributors' premises. Two agreements provide for a repayment period of ten years, and one of seven years. The distributor agrees to purchase products exclusively from Statoil during the period of the agreement, and not to purchase from any other person. Where appropriate, an illuminated Statoil sign is to be kept in a prominent position. No part of the premises may be conveyed or parted with, unless Statoil's consent is obtained.

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." Statoil Ireland Limited and the distributors are engaged in the sale of motor fuels for gain, and are therefore undertakings within the meaning of Section 3(1) of the Competition Act.

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 Statoil 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, Statoil Ireland Limited 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 Statoil Ireland Limited 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) Statoil Ireland Limited - Distributor Agreement (Cash Advance).......................................CA/449/92E

(b) Statoil Ireland Limited - Distributor Agreement (Loan).... ......................................................CA/452/92E

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

For the Competition Authority

Patrick M. Lyons

Chairman.

21 April 1994