Irish Competition Authority Decisions

1. Notification was made jointly by Mount Juliet and David Leadbetter Golf Academy Inc on 31 March 1994 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 agreement between Mount Juliet and David Leadbetter Golf Academy Inc relating to the establishment of a golf school at Mount Juliet, Thomastown, Co. Kilkenny.

(a) Subject of the notification

2. The notification concerns an agreement for the establishment by the David Leadbetter Golf Academy Inc of a golf instruction school at Mount Juliet.

(b) The parties involved

3. Mount Juliet is an unlimited company and is the owner and operator of a hotel, leisure centre and golf course at Mount Juliet. David Leadbetter Golf Academy Inc (DLGA) is an Ohio corporation and operates golf schools in many countries world wide. David Leadbetter, who is an employee of the corporation, is regarded as probably the best known golf teacher in the world and numbers many of the top ranking professional golfers among his students.

(c) The Market

4. The David Leadbetter Golf Academy is engaged in the provision of golfing instruction. Most club golfers have probably had little or no formal instruction by way of golfing school but those that require instruction generally have recourse to their club professionals, golf driving ranges or golf instructors outside clubs. The Yellow pages list 17 such instructors in the greater Dublin area. Up to the middle 1980s, the vast majority of golf courses were those owned by golf clubs whose use was largely confined to club members most of whom resided within a reasonable distance of the course. In more recent years there has been substantial investment in over 70 new golf courses many of which cater primarily for the tourism and corporate visitor sector. Mount Juliet falls into this latter category with its extensive hotel and leisure and golfing complex, some distance from the more densely populated areas in the State. The Mount Juliet golf course is considered to be among the best in Europe and hosted the 1994 Irish Open Golf Championship which attracted 80,000 spectators. Since the mid 1980s the number of golfing tourists have doubled with over 120,000 annually now visiting Ireland.

(c) The notified arrangements

5. The notified agreement was made on 8 February 1994 between Mount Juliet and DLGA to provide the arrangements for the opening of a separate golf instructional academy at Mount Juliet to be operated by DLGA. The agreement provides for the consultancy/advisory services to be provided by DLGA both for the preopening/development stage and the operational stage, the appointment of DLGA employees as chief instructor (Director) and other instructors and the financial arrangements relating thereto. Mount Juliet is to provide premises for the academy, specific numbers of golf holes and practice tees, covered areas, equipment and accommodation for employees. The agreement provides for the financial arrangements between the parties including remuneration and revenues. DLGA agrees to procure that David Leadbetter subject to availability shall provide his services personally at Mount Juliet for a specified maximum number of days annually. Mount Juliet is permitted to use DLGA trademarks in promoting the academy subject to specific approval of DLGA in each instance. The trade mark remains the sole and exclusive property of DLGA. The agreement contains confidentiality and competition clauses set out under. The agreement is stated specifically not to be a joint venture and neither party can bind the other in that regard. The agreement is effective from date of signature and will terminate 5 years from the date the academy opens with provision for earlier termination in the event of default on money payments or other conditions of the agreement or insolvency of either party. The further performance of the agreement is contingent on the parties applying for and getting a licence for the exclusivity arrangements in clause 6.1 and 9 of the agreement. The exclusivity provisions and confidentiality provisions of the agreement are as follows:

"6.1 DLGA shall be the sole provider of golf tuition at Mount Juliet"

"9. EXCLUSIVITY During the term DLGA will not provide the services specified herein to any third party located within Ireland and Northern Ireland"

"6.2 ..... The company (Mount Juliet) agrees that, upon termination of this agreement, it will not engage the services of any of the Academy Directors, or any of the Academy Instructors for a period of 18 months from the date of such termination .....".

"6.3 .... If any of the Company's employees (i.e. employees of Mount Juliet) are trained in the "Leadbetter Method", the Company (Mount Juliet) agrees to procure that such employees sign declarations of confidentiality .... such employees undertake to keep confidential, and not use for their own benefit or for the benefit of any third party, the information that they have been provided with and the method of tuition that they have been taught in relation to the "Leadbetter Method".

"21. The Company (Mount Juliet) shall treat as confidential all information supplied by DLGA which is designated as confidential by DLGA or which is by its nature clearly confidential. The Company agrees not to divulge any of DLGA's confidential information to any person or body unless authorised by DLGA. In the event of termination of this Agreement, the Company shall return any confidential information and all copies thereof (including all database information) to DLGA at its registered office".

(e) Submission by the Parties

6. The parties accept that the notified agreement contains two exclusivity arrangements in clauses 6.1 and 9. However, they maintain that the agreement does not have as its 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. The parties argue that the restriction in clause 6.1, whereby DLGA Inc will be the sole provider of golf tuition at Mount Juliet, does not offend against Section 4(1) of the Competition Act because it would clearly be impractical to have two different operations providing golf tuition in what is a relatively small area. The parties also argue that the restriction in clause 9, whereby DLGA Inc. is prevented from providing its services to any third party within Ireland or Northern Ireland during the term of the notified agreement, does not offend against Section 4(1) because it would be unreasonable to Mount Juliet that the David Leadbetter Golf Academy would be entitled to set up another academy in a country as small as Ireland in view of the investment being made by Mount Juliet. The David Leadbetter organisation has opened an academy in England and academies in a number of European countries and in one or two Asian countries.

7. Section 4(1) of the Competition Act 1991 prohibits and renders void all agreements between undertakings, decisions by associations of undertakings and concerted practices 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.

8. 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".

9. Mount Juliet is engaged for gain in the provision of a service i.e. the operation of a hotel and leisure facilities including golf, at Mount Juliet. DLGA is also engaged for gain in the provision of a service i.e. golf tuition. The notified agreement is an agreement between undertakings and has effect within the State.

10. The Authority accepts that there is nothing anti competitive in Mount Juliet, the owner and operator of tourism/leisure facilities, to choose to enter into an agreement with a supplier of services to provide services at Mount Juliet rather than supply them itself. As the agreement is largely concerned with regulating the contract for the supply of those services its general provisions, per se, do not raise issues under the Competition Act.

11. Clause 6.1 ensures that for the duration of the agreement David Leadbetter Golf Academy Inc will be the sole provider of golf tuition at Mount Juliet. This will prevent the possibility of any professional golfer, qualified tutor or any other golf academy from providing tuition at Mount Juliet on a commercial basis. However, it would not prevent the possibility of them establishing a golf tuition service nearby to Mount Juliet in competition to the DLGA. Members and patrons are not forced to use the services of David Leadbetter Golf Academy at Mount Juliet. They are free to avail of similar services provided by other golf clubs. The Competition Authority accepts that it would be impractical to have more than one golf tuition operation in any golf club. In the opinion of the Competition Authority the provisions of Clause 6.1 do not therefore offend against Section 4(1).

12. Clause 9 provides that for the duration of the Agreement the David Leadbetter Golf Academy will not provide golf instruction services to any third party located within

Ireland or Northern Ireland. This is an arrangement which has been equally accepted by both parties to the agreement. Mount Juliet is supplying exceptional facilities to attract a world name, the DLGA, to Mount Juliet. It seems unlikely that DLGA would locate their academy at Mount Juliet in the absence of such facilities but the capital investment by Mount Juliet would not have proceeded without some assurance of exclusivity from DLGA. The DLGA organisation has only one academy in the UK and it seems improbable that, considering the much smaller size of the Irish market, they would wish to dilute their custom at Mount Juliet or the international standing of their name by establishing other academies within the State, at least in the relatively short term of 5 years which is covered by the agreement. In any event, because of the personal services of David Leadbetter to be supplied at Mount Juliet under the contract, it would appear that the completion of similar agreements by DLGA elsewhere in the State would not be very practicable. The agreement does not prevent other golf courses establishing golf tuition centres elsewhere in the State. It merely prevents DLGA from participating in such activities. The Competition Authority, therefore, considers that clause 9 of the agreement does not offend against Section 4(1).

13. Under clause 6.2 Mount Juliet agrees not to engage the services of any of the Academy directors or instructors for a period of 18 months from the date of termination of the agreement while clause 6.3 and clause 21 prevent the disclosure of confidential information relating to DLGA or its tuition methods by Mount Juliet or its employees. The Authority does not regard these restrictions as being restrictive of competition as they do not prevent Mount Juliet, or another party, from operating its own golfing school within the Mount Juliet facilities after termination of the agreement. The purpose of the restriction is to protect know-how which is the property of DLGA and without this protection DLGA would not be prepared to enter into such arrangements. In these circumstances the Competition Authority considers that clause 6.2, clause 6.3 and clause 21 of the notified agreement do not offend against Section 4(1).

14. Mount Juliet and David Leadbetter Golf Academy Inc are undertakings within the meaning of Section 3(1) of the Competition Act, 1991 and the notified agreement is an agreement between undertakings. In the Authority's opinion the notified agreement between Mount Juliet and David Leadbetter Golf Academy Inc does not offend against Section 4(1) of the Competition Act, 1991.

15. 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 dated 8 February 1994 between Mount Juliet and David Leadbetter Golf Academy Inc. notified under Section 7 on 31 March 1994 (notification no. CA/8/94) does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Des Wall

Member

19 September, 1994.