Irish Competition Authority Decisions

1. Notification was made by Belfield Management Ltd on 15 October, 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 premises management agreement between Belfield Management Ltd (Belfield) and USIT Ireland Ltd (USIT).

2. The notification concerns an agreement between Belfield and USIT whereby Belfield appoints USIT as manager for the management and letting of a student apartment complex on the UCD campus at Belfield during the 3 month summer vacation.

3. Belfield is engaged in the management and letting of 197 residential apartments for students as well as an office, a shop unit and a launderette comprising the complex on the campus of University College Dublin at Belfield. The complex is owned by Ammonite Ltd. USIT is engaged in the provision of services on a commercial basis for students and in particular travel agency services. USIT has a number of branches, including one located on the Campus at UCD.

4. The notified agreement was made on 27 August, 1992 for a term of 19 years and 3 months from 22 June, 1991 to provide for the delegation by Belfield, with the consent of Ammonite Ltd and UCD, of management of the complex during the summer vacation i.e. between 21 June and 22 September annually. Under the agreement USIT is required to market and promote the complex and guarantee the minimum rent receipts annually set out in the agreement. USIT has full power to negotiate the rents payable and rent receipts are to be lodged to the credit of Ammonite Ltd. USIT is responsible for the expenses incurred in running the complex but, subject to rent revenue being sufficient, USIT will be reimbursed its permitted expenses and be paid a percentage of the revenue excess in accordance with a formula set out in the agreement. Clause 20 provides for inspection of the premises by Belfield while clause 22 provides for early termination of the agreement in the event of a material breach of its terms by either party, if either goes into liquidation, if the superior agreement between Ammonite and Belfield is terminated or if the premises are so damaged as to be unusable for over one year. The agreement also contains the following restrictive clauses:

(a) Under clause 28 USIT covenants with Belfield "...not to build, manage, control, support either directly or indirectly and other buildings for residential accommodation in an area within one mile of the Complex during the Term save with express prior agreement of Belfield in writing and in consideration thereof Belfield hereby covenants that subject to compliance by USIT with all of the terms and conditions herein contained and to the provisions contained in clauses 20 and 22 USIT shall have the exclusive right to manage the Complex."

(b) Under clause 29 USIT covenants with Belfield "Not to use the Complex or any part thereof except for residential accommodation complex with shop and launderette facility."

In addition, there are a number of other standard restrictive covenants and obligations in the agreement.

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. 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".

7 . Belfield is engaged in the management of an apartment complex with shop units for gain and is an undertaking. USIT is engaged in the provision of travel and other services to students for gain and is also an undertaking. The notified agreement is an agreement between undertakings. The agreement has effect within the State.

8. Under the notified agreement Belfield, which manages the complex on behalf of Ammonite, has agreed, with the consent of the owners and UCD, to delegate the management and letting of the apartments in the complex to USIT during the 3 month academic summer break each year. While the agreement may run for almost 20 years, the short term nature of the lettings involved. which are primarily directed at visitors from abroad, would require long term planning to be effective. The Authority takes the view that undertakings are quite entitled to choose whether to perform all the functions of their business themselves or to buy in services or assign certain of their functions to other undertakings. In this instance they have chosen to appoint a specialist student travel organiser, USIT, to promote and manage the complex for the annual 3 month summer break when the apartments in the complex do not have their normal UCD student occupants. The very act of assigning this function to a particular specialist student travel firm prevents competitors of the firm from using the premises to compete with them. Clearly this cannot be regarded as preventing, restricting or distorting competition since it would imply that the delegation or assignment of the management functions for a particular business was prohibited unless licensed under section 4(2) of the Competition Act. Anyone wishing to operate a business in competition with the firm may do so by providing similar services within the locality.

9. In addition the agreement also provides, by way of the permitted user - clause 29 - restrictions on the use of the premises but which effectively allow the premises to be used for the purpose for which they were built, residential accommodation with shop and launderette service. The agreement is concerned with the delegation of a management and letting function of the complex for residential purposes for a limited period each year. The manner of use of the premises is a matter laid down by the owner and not one for the letting agents. In any event, considering its campus location, and the fact that the premises were designed as apartments and are used as such during the rest of the year, the Authority, therefore, does not consider that this clause offends against Section 4(1).

10. Under clause 8, USIT is prevented for the term of the agreement from engaging in the provision of residential accommodation within 1 mile of the complex without the consent in writing of Belfield. The Authority could accept that some restriction on USIT's activities in this regard is necessary to safeguard the position of Belfield and the owners of the complex and prevent a diversion of business from the complex to another competing premises nearby . The area covered by the restriction is a suburban area with more limited availability of alternative suitable premises compared to centre city areas. In view of the limited extent of the area involved and the ready access to the campus by public transport, the Authority does not believe that the restriction on USIT from competing with the complex within the area results in any restriction of competition. Outside the 1 mile radius USIT is free to compete from any other part of Dublin City. The Authority therefore considers that this restriction does not offend against Section 4(1).

10. In the Authority's opinion Belfield Management Ltd and USIT Ireland Ltd are undertakings within the meaning of Section 3(1) of the Competition Act, 1991 and the notified management agreement is an agreement between undertakings. In the Authority's opinion the notified agreement does not offend against Section 4(1) of the Competition Act, 1991

10. 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 Management Agreement between Belfield Management Ltd and USIT Ireland Ltd notified under Section 7(2) on 16 October 1992 (notification no. CA/1126/92E) does not offend against Section 4(1) of the Competition Act, 1991

For the Competition Authority.

Des Wall

Member.

22 December 1994