Irish Competition Authority Decisions

1. Notification was made by Carlow Developments 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 a sale agreement between Carlow Developments Ltd and Naas Holdings Ltd.

2. The notification concerns the agreement for the sale of a plot of land, which was part of an area being developed as a shopping centre, at Burrin Street, Carlow between Carlow Developments Ltd as transferor and Naas Holdings Ltd as transferee.

3. Carlow Developments Ltd and Naas Holdings Ltd are both engaged in the business of the development and letting of commercial properties.

4. The notified sale agreement was made on 14 September 1982. Apart from the standard matters relating to the transfer of the property, the agreement provides for access through and car parking facilities for customers of the transferee on the part of the remainder of the site retained by the transferor. It also provides for access for customers of the transferor through the premises of the transferee as well as the use of electrical, telephone, water and sewer connections through the transferees land. The Fourth Schedule to the Agreement contains the following restricted user clauses which are binding on the transferee and his successors to the property viz.

"The transferee doth hereby for itself and its assigns and, to the intent and so as to bind not only itself personally but also all persons deriving Title under it and all further owners and tenants for the property in the First Schedule or any part thereof and to bind such property into whosoever hands the same may come, covenants with the Transferor its successors and assigns the owner or owners for the time being of the property comprised in Folio 9859F County Carlow retained by the Transferor as follows:-

1. Not to use or permit or suffer to be used the premises described in the First Schedule hereto or any buildings erected thereon or the area edged green on the Map annexed hereto or any buildings erected thereon for the purposes of carrying on the following:-

(a) Sale of meat, pork and bacon.

(b) Sale of fruit and vegetables.

2. Not to erect or suffer or permit to be erected any Retail Units on the property hereby transferred or the property edged green on any other lands in the Town of Carlow in the ownership of the Purchaser exceeding 1100 square feet and not to grant convey assign lease or let or permit to be granted conveyed assigned leased let sub- leased or sub- let or permit to be used as any one or more Retail Units or any part or parts either adjoining each other or otherwise of the property hereby transferred the property edged green on the Map annexed hereto or any other property in Carlow acquired by the Transferee as retail shopping outlets with a gross area containing or totalling more than 1100 square feet to any person."

5. Followings concerns expressed by the Authority, the Solicitors for Carlow Developments confirmed, by way of letter dated 1 November 1994, that the company had agreed to inform Naas Holdings that they would not seek to enforce the covenant in paragraph 2 of the 4th schedule insofar as it purports to affect lands in Carlow other than the properties edged green and red in the map attached to the Transfer. A letter to this effect was issued by Carlow Developments Ltd to Naas Holdings Ltd on 29 November 1994.

6. 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 distrotion 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".

8. The Authority considers that Carlow Developments Ltd and Naas Holdings Ltd which are both engaged in the letting of property for gain, are undertakings and that the notified sale agreement is an agreement between undertakings. The agreement has effect within the State.

9. As the sale of the premises was completed prior to 1 October 1991, the date the Competition Act came into force, that element of the agreement was discharged by performance before the Act came into force. In the Authority's view, the prohibition under Section 4(1) only applies to a current or continuing contractual commitment or one entered into subsequent to the coming into force of the Act. In any event the Authority would not consider the sale, per se, of a property as raising any issues under the Competition Act.

10. The sale agreement contains a continuing contractual commitment on the part of the purchasers and their assigns in that they have covenanted not to use or permit any of the premises transferred to be used for the purposes of the sale of meat, fruit or vegetables. They have also covenanted not to erect or allow to be erected any retail units on the site with an area greater than 1,100 square feet or use or permit to be used more than 1 unit as a retail outlet with a joint area in excess of 1,100 square feet.

11. In the Authority's opinion the inclusion of restrictive users clauses in agreements for the sale of a particular property cannot normally be regarded as preventing, restricting or distorting competition within the State or in any part of the State. The purchasers acquired the property, which in this case was mainly land, for a particular purpose i.e., the erection of smaller shop units. Where the restriction applies to the particular property sold, but only to that property, the Authority takes the view that it does not offend against Section 4(1)of the Competition Act. The purchaser gets what he pays for i.e. premises whose use is subject to some restriction. Such a purchase does not prevent him acquiring other property in the vicinity, which can be used for other purposes. Neither does it prevent any other undertaking from competing with the purchaser or the vendor.

12. In this instance a construction of the agreement could suggest that the restriction on the purchaser extended not only to the property sold, and its immediate environs, but also to any other property in Carlow owned or acquired by the transferee. This, in the Authority's opinion offended against Section 4(1) of the Competition Act. As the transferor has agreed by way of letter dated 1 November 1994 not to enforce this element of the covenant, and has so advised the transferee by letter dated 29 November,1994, the restriction no longer offends against Section 4(1) of the Competition Act. The Authority therefore considers that the notified agreement between Carlow Developments Ltd and Naas Holdings Ltd, as amended by way of letter dated 1 November 1994, does not offend against Section 4(1) of the Competition Act, 1991.

13. 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 between Carlow Developments Ltd and Naas Holdings Ltd in relation to the transfer of property at Burrin Street, Carlow notified under Section 7 on 30 September, 1992 (notification no. CA/458/92E), and amended by way of letter dated 1 November 1994, does not offend against Section 4(1) of the Competition Act,1991.

For the Competition Authority

Des Wall

Member

16 December 1994.