Irish Competition Authority Decisions

1. Notification was made of an agreement for the distribution of goods between United Drug plc and Kodak Ireland Ltd. (Kodak) 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 request for a licence under Section 4(2). Notice of intention to issue a certificate was published in the Irish Times on 16 September 1994. No submissions were received from interested parties.

2. The notification relates to an agreement signed in June 1989 whereby United Drug was appointed on an exclusive basis to deliver orders for pharmacy and wholesale pharmaceutical customers of Sterling-Winthrop Ireland Ltd (Sterling) and some orders for customers of Kodak.

3. United Drug is a publicly quoted company, having its registered office in Ballina, Co. Mayo. The principal activities of the company include the wholesaling and distribution of pharmaceutical products, the marketing and distribution of consumer products and the supply of medical equipment and consumables. At the time of notification, Sterling was a wholly owned subsidiary of Kodak, whose parent is the US owned Eastman Kodak company. Both companies are engaged in the manufacture and sale of ethical and over-the-counter pharmaceutical products. In August 1994, it was announced that Sterling had been sold to the British company SmithKline Beecham.

4. The products covered by the notified agreement are ethical and over-the-counter pharmaceutical products produced by Sterling. The service involved is the delivery of these products to the customers of Kodak/Sterling.

5. The notified agreement relates to terms and conditions for the delivery by United Drug of orders for retail pharmacy and wholesale pharmaceutical customers of Sterling and some orders for customers of Kodak. The Kodak customers are retail pharmacy and photographic dealer customers beyond an area defined approximately by a thirty mile radius of Dublin city. Orders from pharmaceutical wholesalers are to be collected from Kodak for delivery once a week, or are to be consigned to the Limerick and Ballina depots of United Drug. There is a daily collection from Kodak of certain orders. A charge is specified for each type of service rendered. The agreement came into effect on 1 May 1989, for an initial period of 24 months. At the end of the initial period, it was to be reviewed annually, and, if agreed, to be renewed for a further 12 month period. Kodak has the right at any time to terminate the agreement for unsatisfactory performance. The agreement can be terminated at any time by either party on giving three months' notice.

6. In its initial submission with the notification, United Drug stated that the agreement did not restrict the parties in their freedom to take independent commercial decisions. It did not have as its object or effect the prevention, restriction or distortion of competition. If the Authority, however, considered that the agreement, or certain aspects of it, infringed Section 4(1), United Drug submitted that it should grant a licence under Section 4(2). United Drug considered that the agreement satisfied the listed criteria, and in particular that it should be permitted under Section 4(2) by analogy to EC Regulation 1983/83. It promised to provide further supporting arguments in due course, but has not done so.

7. In response to a query by the Authority on 13 August 1993, United Drug stated, in a letter of 9 September 1993, that the agreement was a pure delivery agreement, without purchase for resale, and that it was not an exclusive distribution or a commercial agency agreement.

8. Section 4(1) of the Competition Act, 1991 prohibits and renders void all agreements between undertakings 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.

9. 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". United Drug is engaged in the distribution of goods for gain and Kodak and Sterling are engaged in the supply of goods for gain, and they are therefore undertakings within the meaning of Section 3(1) of the Act. The agreement is an agreement between undertakings, and it has effect within the State.

10. The essential feature of the notified agreement is that United Drug collects products from Kodak for delivery to Kodak's customers; in return for the performance of this service United Drug is paid a fee by Kodak. The agreement does not involve the purchase and resale of the products by United Drug. The Authority considers that the agreement involves merely the delivery of Kodak products by United Drug, on an exclusive basis. It considers that undertakings are entitled to decide how their products shall be distributed to their customers. In general, distribution agreements involving delivery only do not, in the Authority's opinion, offend against Section 4(1) of the Competition Act. While certain clauses in a delivery agreement might offend against Section 4(1), none of the clauses in the notified agreement, in the opinion of the Authority, do so offend.

11. In the Authority's opinion, United Drug, Kodak and Sterling are undertakings The notified agreements are agreements between undertakings. The Authority considers that the delivery agreement does not have, as its object or effect, the prevention, restriction or distortion of competition. It does not, in the Authority's opinion, offend against Section 4(1) of the Competition Act, 1991.

12. 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 delivery agreement between United Drug plc and Kodak Ireland Ltd (notification No. CA/561/92E), notified on 30 September 1992 under Section 7, does not offend against Section 4(1) of the Competition Act, 1991.