Irish Competition Authority Decisions

1. Notification was made by FBD Developments (Cork) Ltd 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 leases between FBD Developments (Cork) Ltd and the Southern Health Board.

2. The notification concerns the lease of premises at the Cork Farm Centre, Wilton, Cork between FBD Developments (Cork) Ltd as lessor and the Southern Health Board as lessee.

3. FBD Developments (Cork) Ltd, a subsidiary of FBD Insurances PLC, is the owner and landlord of the Cork Farm Centre, Wilton, Cork. The Southern Health Board is a statutory corporate body responsible for the administration of health services in the counties of Cork and Kerry and is also engaged in the provision of hospital services through over 30 hospitals within this area. Its accounts for 1990 show that it had a revenue of £163.8m in that year of which £149m was represented by Government grants and the balance represented by receipts from hospital and other charges as well as other income.

4. Three leases were notified. One was made on 28 February 1977 for a term of 25 years from 1 January 1976, another was made on 23 September 1977 for a similar term and the other lease was made on 23 December 1982 for a term of 20 years from 1 January 1981. Each notified lease is in similar terms and each contains a restricted user clause 12 as follows:

" Not to use the premises for any purpose other than that of offices and for meetings in connection with the business of the Lessee with ancillary staff canteen and not to use the said parking spaces for any purpose other than the parking of private motor vehicles and light commercial vehicles."

In addition, there are a number of other standard restrictive covenants and obligations in the leases including a restriction on the lessee from assigning or sub-letting the premises, without the consent of the lessor, which consent shall not be unreasonably withheld.

5. 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.

6. The term "undertaking" is defined in Section 3(1) of the Act, 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". FBD Developments (Cork) Ltd is engaged in the letting of premises for gain and is therefore an undertaking. While the main activities of the Southern Health Board are State funded, the Board is also engaged for gain in the provision of hospital and other services for which charges are made to the general public. It is therefore an undertaking engaged for gain in the provision of a service. The notified leases are agreements between undertakings. The agreements have effect within the State.

7. The lease agreements contain standard restrictions and obligations on both the lessor and lessee 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 State.

8. In addition the agreements also provide, by way of the permitted user clause 12, 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 agreements are not therefore anti-competitive. The Authority therefore considers that the notified agreements between FBD Developments (Cork) Ltd and the Southern Health Board do 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 agreements between FBD Developments (Cork) Ltd and the Southern Health Board in relation to the lease of premises at Cork Farm Centre, Wilton, Cork notified under Section 7 on 30 September 1992 (notification no. CA/311/92E) do not offend against Section 4(1) of the Competition Act, 1991.

For The Competition Authority

Des Wall

Member

12 October 1994.