Irish Competition Authority Decisions

1. Notification was made of an agreement between Johnson Brothers Ltd. (Johnson) and Campbell Grocery Products Ltd. (Campbell) 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 concerns a distribution agreement whereby Campbell appoints Johnson as distributor of its products in the State.

3. Johnson is a private limited company based in Walkinstown, which warehouses and distributes fast-moving consumer goods to the grocery, confectionery and allied trades. Campbell is a UK company which manufactures grocery products in England.

4. The products specified in the agreement are foodstuffs such as canned soups, meatballs, stews, sauces and vegetable juice which are sold to grocery retailers.

5. The arrangement notified is an agreement dated 24 March 1983 between Campbell and Johnson. Under the agreement Campbell agrees to supply products for resale in the State to Johnson, the distributor. It is stated in clause 1(b), however, that:

'Campbell reserves to itself the right notwithstanding anything to the contrary herein contained to sell directly or indirectly to any persons firms or bodies corporate in the Territory'.

In addition, under clause 2(a)(v), the distributor is required to indicate that it is acting as distributor for Campbell 'provided that the Distributor shall not have the right to describe itself as "Sole Distributor" or "The Distributor" of Campbell'. The distributor is required to promote sales, to maintain stocks, to sell the goods under the trademarks, to act as principal, to purchase its requirements of the products only from Campbell, and to assist in protecting Campbell's intellectual property. Campbell is responsible for certain advertising. The distributor is to review with Campbell the advertising and promotional plans, which are subject to the approval of Campbell, but this does not apply to the distributor's pricing policy. The distributor must not alter trademarks or numbers on the products. Under clause 9(a), 'The distributor shall not have the right to handle competitive products without prior written consent from Campbell's - this is not to be withheld unreasonably - and is not now handling such products'. The agreement is of indefinite duration, subject to 12 months' notice of termination. By letter of 10 September 1993, Johnson stated that 'other distributors for resale can be appointed in the territory but none have been so appointed'.

6. 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.

7. 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". Campbell is engaged in the production and distribution of grocery products for gain, and Johnson is engaged in the distribution of grocery products for gain, and they are undertakings. The agreement is an agreement between undertakings, and it has effect within the State.

8. The distribution agreement is for the purchase and resale of grocery goods. The Authority considers that it is not the object of the agreement to make Johnson the exclusive distributor within a specified territory, since the supplier reserves the right to supply into the territory directly or indirectly, and because Johnson may not refer to itself as 'sole distributor' or 'the distributor'. Neither does the Authority consider that the agreement has the effect of giving the distributor exclusivity. Even if Johnson is the only distributor at present, the supplier is at liberty to appoint another, and it is open to other distributors to approach Campbell at any time for supplies. The agreement is not, in the opinion of the Authority, an exclusive distribution agreement as defined in the category licence for exclusive distribution agreements (Decision No. 144, of 5 November 1993).

9. The notified agreement, however, commits Johnson to a form of exclusive purchase from Campbells. Johnson has an obligation not to deal in competing goods without the supplier's consent, which will not be unreasonably withheld. In the opinion of the Authority, this requirement does not in itself restrict competition. It does not prevent resellers from obtaining supplies of Campbell products from a source other than Johnson, nor does it prevent the suppliers of competing products from gaining access to the grocery market in the State. In the circumstances, the Authority considers that the agreement does not offend against Section 4(1).

10. In the Authority's opinion, Campbell and Johnson are undertakings. The notified agreement is an agreement between undertakings. The Authority considers that the distribution 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.

11. 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 distribution agreement between Campbell Grocery Products Ltd and Johnson Brothers Ltd (notification no. CA/290/92E) notified on 30 September 1992 under Section 7, does not offend against Section 4(1) of the Competition Act, 1991.