Irish Competition Authority Decisions

1. Notification was made of an agreement by Burmah Castrol (Ireland) Limited 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 its Loan Equipment Agreement with its distributors.

2. The decision concerns a document signed by Burmah Castrol and some of its distributors namely a Loan Equipment Agreement.

3. Burmah Castrol (Ireland) Limited is a limited company which is engaged in the manufacture, importation, supply and distribution of various petroleum products and other products. The other parties to the arrangements are the company's exclusive distributors of the petroleum products.

4. The products involved are various petroleum products such as Gas Oil, Road Diesel (DERV) and Kerosene. 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 agreement notified formed part of a series of agreements between Burmah Castrol and its exclusive distributors. The exclusive distribution agreements (CA/900/92E, CA/902/92E and CA/903/92E) were considered by the Authority to satisfy the conditions of the category licence for exclusive distribution agreements (Decision No. 144, of 5 November 1993), in two cases after amendments had been made. Under the loan agreement which is the subject of this decision, Burmah Castrol lends specified equipment to the distributor (the Hirer) for a period of ten years at a yearly rent of £1. The Hirer must keep the equipment in good order and compensate the owners for any damage. The owners must be allowed to inspect the equipment at all reasonable times. The agreement may be terminated by the owners on giving seven days' notice. In addition:"The Hirer agrees that during the continuance of this Agreement the equipment shall be used exclusively for petroleum products supplied by the Owners. Should the Hirer, for any reason, cease to purchase his requirements of petroleum products exclusively from the Owners, the value of the equipment shown in the Schedule hereunder, shall be paid to the Owners by the Hirer".

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

8. The notified agreement is connected with, and dependent upon, the exclusive distribution agreement, it forms part of the exclusive distribution arrangements and, in some cases, it strengthens those arrangements. In the opinion of the Authority, the agreement contains provisions which offend against Section 4(1), as they effectively amount to an exclusive purchase arrangement. The notified agreement offends against Section 4(1) of the Competition Act in any case because it underpins 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 Burmah Castrol standard exclusive distribution agreements, after amendment in some cases, satisfy the conditions of the category licence. It is of the opinion that the notified related agreement also satisfies the conditions of the category licence, for the same reasons, and thus it also satisfies the requirements of Section 4(2) of the Competition Act. This applies also to the exclusivity provisions specifically included in the notified agreement. A licence may therefore be issued in relation to the agreement. The licence comes into effect on 21 April 1994. It 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, Burmah Castrol and the other parties to the agreement are undertakings . The notified agreement between the parties is an agreement between undertakings. The Authority considers that the notified agreement offends against Section 4(1) of the Competition Act, 1991. The Authority considers that the notified agreement satisfies the conditions of Section 4(2) of the Competition Act. It has therefore decided to issue a licence in respect of the notified agreement, and this licence shall apply from 21 April 1994 to 31 December 1998. It is not considered necessary to attach any conditions to the licence.

12. The Competition Authority has issued the following licence:

The provisions of Section 4(1) of the Competition Act, 1991 are declared inapplicable to the loan equipment agreement between Burmah Castrol (Ireland) Limited and its distributors (notification no. CA/901/92), notified under Section 7 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.

This licence shall apply from 21 April 1994 to 31 December 1998.

For the Competition Authority

Patrick M. Lyons

Chairman.

21 April 1994