Irish Competition Authority Decisions

1. Notification was made by Adrian Elkinson 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 an Assignment agreement between Ethel and Ann Gorman and Adrian Elkinson.

2. The notification concerns an agreement relating to the assignment of a superior leasehold in premises described as the Frankfort Garage, 168 Upper Rathmines Road, Dublin 4 between Ethel and Ann Gorman as Vendors and Adrian Elkinson as Purchaser.

3. Ethel and Ann Gorman were the landlord of the premises at 168 Upper Rathmines Road under a superior lease dated 14 March 1882 for the remainder of a 150 year term from 20 September 1881 and were engaged in the letting of the premises. Adrian Elkinson held a sub -lease on the garage for a term of 20 years from 1 April 1967.

4. The notified agreement was made on 15 July 1983. The agreement provides for the assignment of the interest of Ethel and Ann Gorman in the superior lease to Adrian Elkinson. The Agreement also provides for access to the premises and contains covenants by the purchaser to observe the covenants applicable to the premises under the superior lease, observe the additional covenants set out in the Third Schedule and keep the vendors indemnified against all actions arising from breaches of the covenants in the superior lease and in the Third Schedule. The covenants in the Third Schedule are as follows:-

"A. To use the demised premises for the purpose of carrying on therein the business of General Motor Body Repairers (including panel beating, welding and spraying thereof) only.

B. Not to carry on or permit or suffer to be carried on or about the demised premises or any part thereof the business of Garage Proprietor.

C. Not to carry on or permit or suffer to be carried in on about the demised premises or any part thereof the business of General Repairers to mechanically propelled Vehicles.

D. Not to sell or permit or suffer to be sold in or from the demised premises or any part thereof more than 24 mechanically propelled vehicles of any description in any one year ....

E. Not to sell or permit or suffer to be sold in or about or from the demised premises or any part thereof motor fuel including oils of any description.

F. To keep proper and accurate books of account to record all purchases and sale of mechanically propelled vehicles of every description from the demised premises and to permit the Lessors or their duly authorised agent to inspect and take note of entries therein from time to time."

Assessment - The applicability of Section 4 (1)

5. The Authority considers that Ethel and Ann Gorman and Adrian Elkinson were undertakings and that the notified agreement is an agreement between undertakings. The agreement has effect within the State.

6. As the assignment of the premises was completed prior to 1 October 1991, the date the Competition Act came into force, that element of the agreement was discharged by performance before the Act came into force. The leasehold interest which was the subject of the agreement has been transferred. In the Authority's view, the prohibition under Section 4(1) only applies to a current or continuing contractual commitment or one entered into subsequent to the coming into force of the Act. As the sale element of the 1983 transaction was discharged prior to the commencement of the Act, that aspect of the arrangements does not come within the scope of Section 4(1).

7. The agreement also contains continuing contractual obligations or commitments in relation to the occupation of the premises which are listed in the Third Schedule to the agreement. Effectively these provisions require that the premises may only be used as a motor repair shop and for the sale of a limited number of motor vehicles. The premises may not be otherwise used as a garage such as for the sale of motor fuels.

8. In the Authority's opinion, the inclusion of restrictive and exclusive user clauses in agreements for the sale of a particular premises cannot be regarded as preventing, restricting, or distorting competition within the State or any part of it. The purchaser acquired the superior leasehold interest in the premises for the purpose of his existing business, i.e. car body repairs. If the purchaser seeks to enter the business of petrol retailing or any other business he is free to do so at other premises in the near vicinity or elsewhere in the State. Similarly any other undertaking wishing to operate a business in competition with either the purchaser or the vendor is not restricted by the agreement from doing so in the immediate vicinity or elsewhere in the State. The Authority therefore considers that the notified agreement does not offend against Section 4 (1) of the Competition Act, 1991.

9. 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 Ethel and Ann Gorman and Adrian Elkinson in relation to the sale of a leasehold interest in premises at 168 Upper Rathmines Road, Dublin 4 notified under Section 7 on 30 September, 1992 (notification no. CA/872/92E ), does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Des Wall

Member

14 June 1994