Irish Competition Authority Decisions

1. Notification was made by Thomas Wixted on 30 September,1992 with a request for a certificate under Section 4(4) of the Competition Act,1991 or, in the event of refusal by the Competition Authority to issue a certificate, a licence under Section 4(2) in respect of a lease between Thomas Wixted and Patrick Healy.

2. The notification concerns the lease of a premises at 20a Lower Main Street, Arklow, Co. Wicklow between Thomas Wixted as landlord and Patrick Healy as the tenant.

3. Thomas Wixted is the owner and landlord of the premises at 20a Lower Main Street. Patrick Healy trades as a victualler and is the tenant of the above premises.

4. The notified agreement was made on 28 August,1987 for a term of 35 years from 1 September,1986. The restricted user clauses in the lease are as follows:

(a) Under clause 10 the tenant covenants with the landlord:

" To use and occupy the said demised premises as a Victuallers or Butchers Shop only for purpose ancilliary thereto and for no other purpose and not to carry on any noisy or offensive trade or business and to ensure that nothing shall be done at any time during the term hereby granted that might be or grow to be in annoyance damage or inconvenience to the Lessor or the owners or occupiers of adjoining or adjacent properties."

(b) Under clause 11 the tenant covenants with the landlord:

" Not to assign sub-let or part with with the possession of the said demised premises or any part thereof without the prior consent in writing of the Lessor PROVIDED HOWEVER and it is hereby mutually agreed by the and between the parties thereto that in consideration of the Lessor not having received any sum or the Goodwill of the business carried on in the said demised premises the Lessee shall and will in the event of his leaving the said premises surrender all his estate and interests in herein to the Lessor without payment of any compensation to the Lessee AND FURTHER that in the event of the Lessee becoming incapaciated through ill-health he shall be entitled to surrender all his estate and interest in the premises to the Lessor and remove all his equipment from the premises without paying any compensation to the Lessor AND in the happening of either of the events hereinbefore specified then these premises shall absolutely cease and determine."

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

5. The Authority considers that Thomas Wixted and Patrick Healy are undertakings and that the notified lease is an agreement between undertakings. The agreements have 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 locality.

7.In addition the agreement also provides, by way of the permitted user - clause 10 - restrictions on the use of the premises but which effectively allowed the premises to be used for the purpose 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 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 negotiated 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 provides that a Landlord cannot unreasonably withold 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 Thomas Wixted and Patrick Healy 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 Thomas Wixted and Patrick Healy in relation to the lease of a premises at 20a Lower Main Street, Arklow, Co. Wicklow notified under Section 7 on 30 September, 1992 (CA/226/92E), does not offend against Section 4(1) of the Competition Act, 1991.

For The Competition Authority

Des Wall

Member

14 June, 1994.