Irish Competition Authority Decisions

1. Notification was made on 14 April 1993 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 grant a certificate, a licence under Section 4(2) in respect of an Agency Agreement between Rotterdamsche Margarine Industrie (Romi) and Betco Marketing Ltd (Betco). Notice of intention to issue a certificate was published in the Irish Times on 14 October 1994. No submissions were received by the Authority.

2. The notification concerns an agreement dated 18 August 1992 whereby Romi, as principal, appoints Betco to be its sole agent for the sale of certain Romi edible oil products in Ireland.

3. Betco Marketing Ltd, which was established in 1991, is an Irish company based in Cork with an issued share capital of £100. Its turnover in 1993 was £279,000. In addition to the sole agency agreement with Romi, Betco also holds a sole agency from Cerestar UK Ltd, which comprises 95% both of Betco's activities and turnover, and a sole agency from Holland Sweetener Company. The products involved in the 3 agencies are stated not to be in competition with one another.

Romi is a Dutch company based in Vlaardingen which is engaged in the manufacture of refined/hardened edible oils and fats. It is a 100% subsidiary of Royal Smilde B.V. of the Netherlands which is a privately owned company with a large number of subsidiaries divided into two corporate divisions viz., consumer goods and edible oil/fats. Romi belongs to the edible oil/fats division of Royal Smilde and is an independent operating unit of the Royal Smilde Group. Romi is the only company within the Royal Smilde Group operating in the Irish market.

4. The products which are the subject of the notified agreement are Romi refined bulk products (palm oil, coconut oil, corn oil, ground nut oil, blends, and high oleic safflour oil). These products are all edible oil products. Palm oil and coconut oil are the principal products sold in Ireland by Betco under this agency agreement. Betco estimate that sales of palm oil negotiated by them represent approximately 8% of the palm oil market in the State, which is valued at approximately £2m, while sales of coconut oil negotiated represented 1% of the Irish market which is valued at approximately £2.5m. The principal customers of Betco for these edible oil products are Irish manufacturers of food products.

5. Under the notified agreement Betco has been appointed sole agent for certain Romi products for all Ireland. The relevant market for the purpose of this decision is the State.

6. The notified agreement is a sole agency agreement dated 18 August 1992, under which Romi, as principal, appoints Betco as its sole agent for the sale of certain refined Romi bulk products in Ireland for a one year period from 1 July 1992 to 30 June 1993. The agreement declared the intention of the parties, if satisfied with its operation, to extend its term and in fact it has been renewed for a further indefinite number of years. Under the agreement, Betco is authorised to negotiate and enter into contracts on behalf of Romi for the sale of the products to Irish customers, excluding one major Irish manufacturer specified in the agreement, but only within the general guidelines and instructions notified by Romi and in line with their conditions of sale. All prices are set by Romi and Betco merely acts as Romi's agent by arranging and entering into contracts on behalf of Romi. The quantity of goods to be distributed will be determined by customer demand. Betco must submit any request for a quotation or an order to Romi who may respond to Betco or the customer. The transaction is finalised by Romi sending the products direct to the customers who pay Romi direct. Betco are not responsible for the collection of any payments due from customers but they may assist Romi in its efforts to secure payments. The agent is paid commission based on a percentage of the invoice price of the contract. The agent is responsible for certain general agency expenses with Romi providing all assistance necessary to promote the product. Romi may remove products from the agreement if it has good grounds for doing so but may not appoint another agent in the territory for such products.

Clause 3 provides that "The sole agent agrees to sell the products exclusively for the principal and not to sell directly or indirectly a similar product for other manufacturers provided that this clause shall not apply to ground nut oil and corn oil".

Clause 4 provides that "The principal hereby agrees it shall not offer the products directly or indirectly (to) any person or firm in the territory except the companies mentioned in the Schedule hereto, and except for ground nut oil and corn oil".

7. The parties have submitted that the notified agreement is an agency agreement between them for the sole and exclusive agency of Betco to Romi. They maintain that the agreement will not prevent, restrict or distort competition in the State or in any part of the State. According to the parties the agreement merely restricts who Romi can appoint as its agent for the sale and marketing of the products in question and also regulates Betco's obligations and rights under the agreement. The parties maintain that the restrictions in the agreement which are imposed on the parties are necessary to attain the objectives of selling Romi products in Ireland by means of a sole agent. The purpose of the restrictive covenants in the agency agreement is not to eliminate competition in Ireland vis-a-vis the sale of the Romi products but to regulate the actions necessary to achieve the objective of selling the Romi products in Ireland via a sole agent.

8. The parties also claimed that agency agreements are subject to a block exemption under Article 85 of the Rome Treaty. They added that the (EU) Council stated "that in its view contracts made with commercial agents in which those agents undertake for a specified part of the territory of the Common Market to negotiate transactions on behalf of an enterprise or to conclude transactions on behalf of an enterprise whether in their own or the enterprise's name are not covered by the prohibition contained therein".

9. On the question of other agencies Betco has indicated that:

"(i) The three Agency Agreements with Cerestar, Rotterdamsche and Holland Sweetener Company are the only Agencies held by the Company. Notification has been made to the Authority in respect of each Agreement.

(ii) The products covered by the Agency Agreements are non-competing products. The Agency Agreement with Holland Sweetener Company is for Aspartame which is a specific type of sweetener commonly used in soft drinks. The Agency Agreement with Cerestar covers starches and different types of sweeteners e.g. Glucose which are complementary to the Asparatame supplied under the Holland Sweetener Company Limited Agency Agreement. In addition some small quantities of edible oils are sold on behalf of Cereol a Cerestar Group Member under that Agency Agreement. The types of oil supplied are sunflower oil, rape seed oil and ground nut oil which are complementary to the oils supplied under the Rotterdamsche Agency Agreement i.e. palm oil and coconut oil.

(iii) Betco Marketing Limited does not engage in any other business apart from these agencies."

10. The situation regarding the application of EU Competition law in relation to commercial agents has been set out in the Authority's decision no. 374 (Cerestar/Betco).

11. 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.

12. 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". Romi is a body corporate engaged for gain in the production, supply and distribution of edible oils and fats. Betco is a body corporate engaged for gain in the provision of a service associated with the same goods, i.e. the marketing and promotion of the sale of the goods in the State. The Authority considers that both companies are undertakings and that the notified agency agreement is an agreement between undertakings. The agreement has effect within the State.

13. The relationship between Romi and Betco has been summarised in para 6. Both parties have argued that the agreement is a commercial agency agreement and that the agreement does not offend against Section 4(1).

14. Given the terms of the agreement and the relationship between Romi and Betco, the Authority considers that Betco is an intermediary between Romi, the principal, and the purchaser of the goods and is, therefore, a commercial agent of Romi. For the reasons indicated in the Authority's decision in relation to Cerestar/Betco the Authority considers that the agreement between Romi and Betco insofar as it creates an exclusive agency relationship between the principal and the commercial agent, does not offend against Section 4(1).

15. The Authority also stated in its decision on Cerestar UK Ltd/Betco Marketing Ltd that even though the basic arrangement of commercial agency might not offend against Section 4(1), certain clauses in the agreement might occasionally do so. In the Authority's opinion many of the clauses in the notified agreement, which might otherwise raise issues under the Competition Act, arise from this basic arrangement and therefore do not offend against Section 4(1). These include the arrangements for the exclusivity of Betco's appointment and the setting of prices and contract conditions by Romi.

16. Rotterdamsche Margarine Industrie (ROMI) and Betco Marketing Ltd are undertakings within the meaning of Section 3(1) of the Competition Act, 1991 and the notified agency agreement is an agreement between undertakings. In the Authority's opinion the notified agreement between Romi and Betco Marketing Ltd does not offend against Section 4(1) of the Competition Act, 1991.

17. 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 Agency Agreement between Rotterdamsche Margarine Industrie and Betco Marketing Ltd dated 18 August 1992 and notified on 14 April 1993 under Section 7 (notification no. CA/13/93) does not offend against Section 4(1) of the Competition Act 1991.

For the Competition Authority.

Des Wall

Member

21 November 1994