Irish Competition Authority Decisions

1. Notification was made by the Trustees of Telecom Eireann Superannuation Fund 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 a lease between the Trustees of Telecom Eireann Superannuation Fund and Bord Telecom Eireann.

2. The notification concerns the lease of an office block at nos. 5 and 6 Lapp's Quay,Cork between the Trustees of Telecom Eireann Superannuation Fund as lessor and Bord Telecom Eireann as lessee.

3. Telecom Eireann Superannuation Fund is engaged in the investment of funds and as successor in title is the owner and landlord of the office block at Lapp's Quay. Bord Telecom Eireann is involved in the provision of telecommunications networks and services in Ireland.

4. The notified lease was made originally on 25 November,1982 for a period of 35 years from 1 May,1981. The restricted user clauses in the lease are as follows:

(a) Under clause 2.5 the tenant covenants with the landlord :

" Not at any time to use the premises or carry on or permit to be used exercised or carried on at the demised premises or any part thereon any noxious, troublesome, or offensive trade or business whatsoever and will not use the demised premises other than as in an office and shall obtain all necessary Town Planning Permission and Bye-Law approval and all other (if any) necessary consents to such user ....."

(b) Under clauses 2.12(i) and 2.12(ii)(b) the tenant covenants with the landlord:

" Except in the case of a Government Department, Semi-State Body, Board, Company or Corporation not to assign part only or share possession of the demised premises and not to underlet or part with possession of part only of the demised premises without the consent in writing of the Lessor first obtained such consent not to be unreasonably withheld.

.......not without prior consent of the Lessor (which shall not be unreasonably withheld in the case of a respectable or responsible assignee or undertenant) assign or underlet the whole of the demised premises ..."

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

5. The Authority considers that Telecom Eireann Superannuation Fund and Bord Telecom Eireann are undertakings and that the notified agreement is an agreement between undertakings. The agreement has effect within the State.

6. The lease agreement contains standard restrictions and obligations on both the 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, to the extent that this is permitted by legislation, 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 2.5, restrictions on the use of the premises but which effectively allow 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 the 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 in any part of the State. In taking up the lease the tenant negotiates 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 provide that a landlord cannot unreasonably withhold consent to a change of user requested by the 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 the lease agreement is not therefore anti-competitive. The Authority therefore considers that the notified agreement between the Trustees of Telecom Eireann Superannuation Fund and Bord Telecom Eireann 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 the Trustees of Telecom Eireann Superannuation Fund and Bord Telecom Eireann in relation to the lease of an office block at 5/6 Lapp's Quay, Cork notified under Section 7 on 30 September, 1992 (notification no. CA/536/92E ), does not offend against Section 4(1) of the Competition Act,1991.

For The Competition Act

Des Wall

Member

14 June,1994.