Irish Competition Authority Decisions

1. Notification was made by Conoco Ireland Ltd on 7 September 1992 of its standard distributor agreement. Notification was also made by Conoco on 24 September 1992 of two related standard agreements - the bulk storage loan agreement and the distributor depot licence. The first notification was made with a request for a licence under Section 4(2) of the Competition Act, 1991. In the other two cases, notification was made with a request for a certificate under Section 4(4) of the Act or, in the event of a refusal by the Competition Authority to issue a certificate, a request for a licence under Section 4(2). Following the issue of a statement of objections, Conoco offered to amend the agreements in a manner which satisfied the concerns of the Authority. Notice of intention to grant a licence was published in the Irish Times on 9 June 1995, but there were no submissions from interested parties.

2. The decision concerns three standard agreements between Conoco and the distributors of its petroleum products. Under the first agreement, the distributor is appointed as authorised distributor of the company's products, and is required not to deal in competing products. The second agreement relates to the loan of bulk storage equipment to the distributor, and it provides that the equipment shall be used solely for the storage of products supplied by Conoco. Under the third agreement, Conoco licences a depot, which it owns, to be used by the distributor solely for dealing in Conoco products.

3. Conoco is a wholly owned subsidiary of Conoco Inc., which is a wholly owned subsidiary of E.I. Du Pont de Nemours and Company Inc., both being US companies. Conoco is involved in the supply and distribution of motor fuels and other petroleum products throughout the State. The other parties to the agreements are independent distributors who are located throughout the State.

4. The products involved in the distribution agreements are mainly fuel oils, that is diesel, gasoil and kerosene, although some distributors also deal in small amounts of petrol. Most oil companies in the State deal in similar products. Conoco, while having a not insignificant share of this market, is not one of the largest suppliers. The distributors supply, inter alia , diesel fuel to commercial customers and central heating oil to domestic customers. In common with other fuel oil suppliers, Conoco uses distributors to deliver to final customers and does not use its own staff, as in the past, although large customers may be supplied directly. According to Conoco, based on 1991 statistics, the commercial market (as opposed to the retail motor fuels market) comprised sales of 1.84 billion litres, of which 59% was accounted for by gasoil, 28% by auto diesel, 10% by kerosene and 3% by petrol. Conoco stated that there were 14 primary distributors (oil companies or large distributors) in the State, and between 250 and 300 secondary (smaller) distributors.

5. The distributor agreement is a standard form agreement between Conoco and about 30 of its distributors. Conoco appointed the distributor to act as authorised distributor for the products within the area specified, for an initial period, and thereafter unless determined by not less than one year's notice of termination. The period was stated not to exceed 10 years. Originally, the appointment of each distributor was related to a specifically defined, discrete area within the State, which was identified by reference to a map, and the distributor undertook not to sell, supply, offer, deliver or solicit custom or orders for products outside that area. In all cases, however, the arrangements have since been modified so as to remove the concept of area, and to remove any restriction on the distributor's freedom to sell and supply the products wherever he wishes.

6. Given that the distributor is no longer the exclusive distributor of the products in a defined area, the essential remaining feature of the notified agreement is that the distributor shall not:

´Buy, acquire, sell, supply, dispose of, deal in, store, transport, distribute or handle any petroleum products and/or related or allied products of any kind whatsoever save those which the Distributor shall from time to time purchase from the Company or otherwise engage in any business or activity involving transactions of the kind set forth above or which is calculated or might tend or be likely to prejudice the sales, business or goodwill of the Company.' (Clause 6.16(c) of Schedule 2).

The distributor is, therefore, an exclusive purchaser of the products for resale.

7. Reflecting the fact that the distributor was originally an exclusive distributor, the agreement contains a number of obligations which are common to exclusive distribution agreements, including the following obligations on the distributor:

(a) to take delivery in minimum loads;

(b) to promote sales;

(c) to maintain stocks;

(d) to maintain a storage depot;

(e) to provide sufficient vehicles to provide an efficient delivery service;

(f) to provide any additional storage tanks, vehicles, etc., as the supplier considers necessary;

(g) to paint vehicles in specified colours, displaying specified markings;

(h) to maintain accounts and records for inspection;

(i) to furnish annual accounts to the supplier;

(j) to supply returns, reports and other information to the supplier;

(k) to send to the supplier, if requested, copies of invoices to customers;

(l) to secure prior approval of advertising material;

(m) to sell only under appropriate trademarks, and not to adulterate the products; and

(n) to indemnify the supplier against actions and liability.

8. The agreement states that the products shall be paid for at Conoco's wholesale price, subject to applicable rebates. The distributor is entitled to terminate the agreement on one month's notice if the rebates are reduced by an amount which exceeds the reduction in the wholesale price. If Conoco considers that the distributor's performance is inadequate or unsatisfactory, it may require the matter to be remedied, failing which the agreement may be terminated. Conoco is also entitled to supply products to customers itself or to appoint other distributors in the area (the area now being the State). The agreement is stated not to constitute a partnership or agency. Conoco may also make a contribution towards advertising by the distributor.

9. The distributor is obliged, under clause 9.1 of Schedule 2, not to charge or part with possession of the depot or the distributor's facilities. Clause 9.2 requires that, if the distributor wishes to dispose of its interest in the depot or facilities, it shall offer these to Conoco for the same consideration as the proposed purchaser is willing to give. If Conoco does not accept the offer within 28 days, the distributor may dispose of the depot or facilities to that person for not less than the consideration specified.

10. Clause 11 of Schedule 2 as notified prevented the distributor, for a period of nine months after termination of the agreement, within the area (which is now the State):

(a) from engaging in a competing business; and

(b) from soliciting business or interfering with or influencing any customer of the distributor or of Conoco.

This clause also prevents the distributor from divulging or using, at any time except in the course of fulfilling its duties and obligations, any secret or confidential information relating to the products or Conoco's business affairs.

11. This standard agreement, with some 20 distributors, provides for the loan to the distributor of bulk storage equipment. It is co-terminous with the distributor agreement. The equipment remains the property of Conoco throughout the term, and it shall be used solely for the storage and/or handling of Conoco products (Clause 3.02). The distributor agrees : to keep the equipment in good repair; to keep it insured; not to dispose of, or create any charge upon the equipment; and not to dispose of any land or building on or in which the equipment is kept, without giving advance notice to Conoco, while respecting Conoco's rights under associated agreements. Conoco has the right to place identification marks on the equipment; to lock and seal the equipment; to take samples of the contents; to repossess the equipment on termination; and to enter the premises and inspect the equipment.

12. Under this standard agreement, Conoco makes available to the distributor certain oil storage depot premises and facilities, which it owns. There are nine such agreements. It is made for a term which is co-extensive and co-terminous with the distribution agreement. The distributor is obliged not to deal in any products other than those specified in the distribution agreement. In addition, the distributor is required: to exercise due and proper care in management; to provide sufficient and satisfactory staff; to permit only advertising agreed by Conoco; to maintain proper records and allow inspection by Conoco; not to charge or assign the agreement or allow anyone else to occupy or use the premises; and to maintain insurance. It is stated that the agreement does not create any relationship of landlord and tenant, partnership, agency or service.

13. Conoco stated that entry to the market was not a difficult process. The requirements in terms of investment were low compared to those in the retail market, and handling and storage of distillate were considerably less complicated than for petrol. The relative ease of operation in this sector was reflected in the presence of primary distributors who did not engage in the retail market and the substantial market share secured by new entrants.

14. In support of its request for a licence, Conoco presented the following arguments:

´The distributor is essentially a reseller, operating and conducting his own business for his own account. His position in the commercial market in which he operates is thus analogous to that of the retailer who resells products in the retail market. The existence and effect of, and the justification for, exclusive purchase arrangements are substantially similar to both sectors; and the reasoning which led the [Fair Trade] Commission to conclude in its report on the 1988 enquiry into petrol retailing that the existence of such arrangements was justified in the retailing sector are thought to apply equally to the arrangements now under notification (1).

Specifically, the benefits which the Commission summarised in Paragraph 11.34 of its Report as being applicable to solus arrangements in the retail market may be adapted and restated for the purpose of applying them to the exclusive purchase arrangements which operate between primary suppliers and secondary suppliers in the commercial sector in the following terms:

1. The level of investment by the primary suppliers enables secondary suppliers to provide better equipment and facilities. It also enables secondary suppliers to maintain standards and to comply with requirements relating to health and safety and environmental protection.

2. The ability of secondary suppliers to compete inter se and with primary suppliers operating in the same market is enhanced. This contributes to avoidance of a situation in which primary suppliers may become dominant.

3. Investment by primary suppliers ensures security of supply by providing assured outlets for their products. Secondary suppliers also have guaranteed suppliers.

4. Secondary distributors are independent and can run their business as they see fit, the only condition being that they must buy their products exclusively from one particular primary supplier.

5. Secondary distributors are enabled better to provide the range of products and services which their customers require and which, without support from the primary supplier, they may be unable to offer.

6. Assistance is provided to secondary distributors with training and business management.

An integral feature of the relationship between Conoco/Jet Oil and its distributors is the tangible and other support which is provided to the distributor. This extends in particular to the provision of:

(a) physical facilities from and/or with which to operate, ranging from the availability, under licence, of a complete depot installation to the loan of bulk storage tanks and associated equipment.

(b) Technical and other specialised skills and knowledge in relation to (i) the construction by the Distributor of his own similar facilities; (ii) operation of facilities and vehicles, with particular reference to matters relating to health and safety and protection of the environment; and (iii) to the application and suitability for particular customer needs for products within the Jet brand range.

(c) Advice and guidance on and training in a range of business related issues, including financial management and means for effective marketing, including quality assurance and customer care programmes.

Conoco/Jet Oil arrangements with its distributors :

(a) contribute to the provision of improved and more efficient means for distribution of products;

(b) provide the distributor with technical and economic benefits;

(c) enable the distributor to focus on development of, and better to compete in, his local market;

(d) benefit the consumer through

(i) the provision of a localised, cost effective supply source responsive and sensitive to individual needs;

(ii) assured availability of high-quality products, clearly identified with the Jet Oil brand.

(e) do not impose terms which are not directly material to attainment and maintenance of the above.

(f) do not result in any limitation on the consumer's freedom of choice of supplier or interfere with the availability of comparable products.

Said arrangements are analogous to those to which EC Block Exemption Regulation 1983/83 is intended to apply, save only that it was never a feature of the arrangements that Conoco/Jet Oil undertook expressly to supply products in the territory designated as the Distributor's Area solely to the Distributor. In practice, Conoco/Jet Oil rarely supplied products to a second Distributor operating in (or in part of) the same Area; and the concept of appointing a Distributor for a defined, discrete Area is no longer applied.

Specifically in relation to paragraph 9 of Schedule 1 to the ADA, [Authorised Distributor Agreement] under which the ADA is made inalienable without Conoco/Jet Oil's consent (9.1) and Conoco/Jet Oil is given the right of first refusal for the purchase of a distributor's premises (9.2):

(a) Neither its object or its effect prevents, restricts or distorts competition in trade.

(b) The benefits deriving from the overall arrangements with distributors, of which this provision is but an incidental and largely contingent part, outweigh any disadvantage which might arise if and to the extent that it has the capability and effect of preventing, restricting or distorting competition.

(c) In the circumstances as they pertain to the overall arrangements between Conoco/Jet Oil and its distributors, such provisions are reasonable between the parties, necessary for the protection of Conoco/Jet Oil's business interests arising from those arrangements and have no significant or perceptible effect on competition or on any other considerations which may affect the interests of the public.

The fundamental objectives of the arrangements between Conoco/Jet Oil and a distributor are (a) on Conoco/Jet Oil's side, to ensure that, for the agreed duration of the arrangements, (i) JET brand petroleum products are marketed effectively through the outlet afforded by the distributor's business undertaking and (ii) the distributor's premises are available to support his activities and to enable him better and more effectively to conduct his business as an authorised distributor; and (b) on the distributor's side, to ensure that his business assets and resources, including his storage premises and facilities, are utilised and exploited to optimum advantage. Thereafter, the common objective, for Conoco/Jet Oil and the distributor alike, is to ensure the successful development of the resultant partnering relationship and of the distributor's business.

From the Conoco/Jet Oil side, attainment of these objectives demands significant investment. This extends to and includes not only the direct, "up-front" investment which is needed when a new distributor is appointed but also continued, on-going devotion of time, effort and resources needed to promote, cultivate and sustain an understanding, harmonious and durable business relationship. In this context, Conoco/Jet Oil is careful to select and assess each prospective distributor individually; and, once the relationship has been established, to deal with him in a manner which recognises and is responsive to his individual needs and circumstances. Essential considerations in the selection and the assessment process are (a) the individual characteristics of the prospective distributor, his perceived attributes and his suitability as a business partner of Conoco/Jet Oil upon appointment as a distributor; and (b) the location of his business and the suitability of his premises for the purposes described above.

In pursuit of the first of these considerations, Conoco/Jet Oil devotes considerable time, effort and resources to advising and assisting a distributor in the successful development and management of his business and in promoting and cultivating levels of confidence, understanding and harmony. This creates a special, individual relationship with each distributor, to which Conoco/Jet Oil attaches great importance.

The location of each distributor and his premises will have its own, unique significance in the overall context of Conoco/Jet Oil's network of Authorised Distributors. This is particularly so in locations which Conoco/Jet Oil is able to supply economically and efficiently through its primary distribution network and in locations in which there are other, market-related considerations for securing representation of the JET brand.

Thus it becomes important for Conoco/Jet Oil to seek safeguards in relation to both the identity and location of the distributor as its chosen business partner; and, for emphasis, to avoid a situation in which, in the event that the distributor wishes to dispose of or otherwise to alienate his business and premises, Conoco/Jet Oil is exposed to the risk of either (a) having foisted upon it as successor to the outgoing distributor a party who would not have passed the initial selection process and with whom Conoco/Jet Oil would prefer not to do business; or (b) by the disposal or other alienation, jeopardising or losing the secondary distribution outlet established under valid contractual arrangements and the benefit of the distributor's premises as a support facility.

The purpose and objective of Paragraph 9 are to provide just such safeguards by affording Conoco/Jet Oil with the opportunity (a) to decline consent to alienation where the alienation would jeopardise effective continuation of valid contractual arrangements with the distributor; and (b) to acquire the distributor's premises if either or both the above situations were to arise during the currency of the distribution arrangements originally negotiated and agreed. The distributor would not be prejudiced by the right which is given to Conoco/Jet Oil to acquire his premises, for this is exercisable only at "the same consideration as [the prospective third party buyer] shall be willing to give".

Nor is competition affected, for proper observance of the contractual arrangement would result in the distributor's premises being available in support of the distribution of JET brand petroleum products for the duration of the original commitment; and this would not be affected by Conoco/Jet Oil's purchase of them.

Paragraph 9.2(b) is effectively reciprocal to 9.2(a): and is aimed at preventing a distributor from seeking from Conoco/Jet Oil under 9.2(a) a consideration which is in excess of that which is genuinely on offer from elsewhere. However, if this requirement is satisfied, there is no restriction on the distributor's ability thereafter to sell, subject only to his procuring from Conoco/Jet Oil the consent required under Paragraph 9.1, the purpose and effect of which have already been alluded to. None of these situations prevents, restricts or distorts competition. Refusal of consent would not affect the terms of the arrangement originally negotiated and freely entered into on terms which provided from the outset that the distributorship and other rights and benefits bestowed by the ADA were subject to restrictions on assignability and other forms of alienation; and, in practice, consent would likely be refused only where the disposal or alienation was considered, on reasonable grounds, to jeopardise Conoco/Jet Oil's legitimate interests. In the case of acquisition, this would be pursued only if the distributor's premises were assessed to be a key factor in the maintenance of representation of the JET brand in the area in which the distributor had conducted his distribution activities, in which event their operation would be continued after acquisition.'

15. The Authority wrote to Conoco on 23 September 1994 expressing its view that the notified agreement concerned exclusive purchasing, and that its ten-year duration would appear to be caught by Article 85(1) of the Treaty of Rome. It did not satisfy the terms of block exemption Regulation No. 1984/83, and had not been granted an individual exemption, and appeared to be prohibited and void under Article 85(2) of the Treaty. Conoco replied on 28 October, accepting that the agreement related to exclusive purchasing, and stating that, if the agreements had not been amended so as to remove the defined territories, the ten-year duration would not have been a problem under the exclusive distribution category licence. Conoco accepted the consequences of what it regarded as its endeavours to liberalise the agreements, and that a problem was created by the duration. It expressed concern that any reduction in the ten-year duration should not lead to the creation of a situation in which it and its distributors might be put at a competitive disadvantage in this sector of the market. Conoco also mentioned the interplay between the principal agreement and the depot licences, which opened up the possibility of the latter continuing beyond the expiration of the former to its eventual competitive disadvantage.

16. The Authority issued a statement of objections to Conoco on 19 December 1994. Conoco responded by agreeing to delete the post-termination non-compete clause. Conoco also offered to restrict the exclusive purchasing of Conoco products to five years, while retaining a ten-year agreement. Following further discussions, Conoco confirmed to the Authority, by letter of 28 March 1995, that it intended 'as soon as practicable to take all necessary steps to ensure that:

1. All such agreements that have already run for five years or more will be terminated forthwith and any new agreements entered into to replace them will be limited to a maximum term of five years;

2. All such agreements as have not yet run for five years will be amended to reduce their respective terms to a period of no more than five years;

3. All current agreements will be amended to delete the restrictions on competition following termination and no such restrictions will appear in any new agreement.'

Conoco submitted two replacement agreements with existing distributors, Rustic Oil Products Ltd of Mullingar, Co. Westmeath, and Breffni Oil Distributors of Killeshandra, Co. Cavan, dated 26 July 1995. The former operates from a Conoco-owned depot, and the latter from their own depot. The term of the agreements was limited to five years in the first case and three years in the second. Clause 11 of the agreements was amended to remove the restrictions on competition following termination. A clause was added to provide that any depot licence operated by the distributor would be co-terminous with the distribution agreement. Conoco also submitted a replacement bulk storage loan agreement with Breffni Oil Distributors, dated 16 August 1995. This provided that the agreement would continue in force no longer than five years from the commencement date.

17. The EU Commission considers that both exclusive distribution agreements and exclusive purchasing agreements come within the scope of Article 85(1) of the Treaty of Rome, which prohibits anti-competitive agreements, but that both types of agreement generally satisfy the requirements of Article 85(3) for exemption. The Commission has therefore produced block exemption regulations for exclusive distribution agreements (2) and exclusive purchasing agreements (3). These formed the basis of the Authority's category licences for exclusive distribution agreements (4) and for exclusive purchasing agreements for motor fuels (5). The Authority had also previously issued licences for the Esso motor fuels solus and related agreements (6).

18. Under Regulation 1983/83, the Commission granted a block exemption to exclusive distribution agreements whereby one party agrees to supply only to another party certain goods for resale within the whole or a defined area of the common market. (The Regulation is described at length in the category licence). An essential feature of such agreements is that they allocate a specific territory to the exclusive distributor. Certain obligations may be placed upon the exclusive distributor, it must not be allowed absolute territorial protection, and the agreement may be of indefinite length. The Regulation does not permit any restriction upon competition after termination of the agreement.

19. Regulation 1984/83 is similar to Regulation 1983/83, but it relates to exclusive purchasing, which does not allocate a territory to the exclusive purchaser. (It is described in part in the Esso decision, and at length in the dealer LPG category licence (7)). It permits the same obligations on the exclusive purchaser as on the exclusive distributor, but agreements must not be of indefinite duration nor for a period in excess of five years (though they can be renewed). Restrictions upon competition after termination of the agreement are again not permitted.

20. 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.

21. 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". Conoco is engaged in the supply and distribution of petroleum products for gain and the distributors are engaged in the distribution of those products for gain, and they are all therefore undertakings within the meaning of Section 3(1) of the Competition Act. The agreements are agreements between undertakings. The agreements have effect within the State.

22. The essential feature of the distribution agreement as notified was that the distributor was obliged to purchase his total requirements of petroleum products from Conoco, for a period of ten years. Under the amended agreements, the distributor is obliged to purchase exclusively from Conoco for a period of five years. The distributor, therefore, is not permitted to purchase any petroleum products from a supplier other than Conoco during the period of the agreement, and no supplier other than Conoco may supply the distributor during this period. This limits the commercial freedom of the distributor to obtain supplies, and the freedom of other suppliers to meet his requirements. While a single exclusive purchasing agreement between Conoco and one of its distributors might have only a negligible effect on competition, each agreement forms part of a network whereby all Conoco distributors are subject to exclusive purchasing requirements. Another oil company is known by the Authority to have exclusive purchasing agreements with its distributors. Of much greater significance, however, is that most, if not all, of the other oil companies operate by way of long-term exclusive distribution agreements in this sector, under which distributors, who are appointed for specific territories, are required to purchase their supplies exclusively from a particular supplier. Thus distributors generally are subject to long-term exclusive purchasing requirements, and the Conoco agreement, even as amended, as part of this market structure, restricts or distorts competition, and so offends against Section 4(1) of the Competition Act.

23. The notified agreement provided that the distributor must not engage in a competing business or solicit or influence any customer of the distributor or of Conoco within the area, which is now the State, for a period of nine months after termination of the agreement. This prevented competition during this period, and offended against Section 4(1) of the Act. Since this clause has been deleted, it no longer offends against Section 4(1).

24. The distributor is obliged not to dispose of the depot or facilities without offering these to Conoco at the same price as a proposed purchaser is willing to pay. While this places some constraint upon the distributor's freedom to sell his business, it does not prevent any person from entering the trade in petroleum products. Unlike shops, where there is a local custom within the immediate area, oil distribution depots can be sited anywhere, and lack of access to a particular depot does not represent a barrier to entry by a competitor. This requirement, in the Authority's opinion, does not offend against Section 4(1). The distributor is also obliged not to use or divulge any secret or confidential information after the agreement has terminated. Provided this obligation is not used to prevent the distributor from competing with Conoco after termination, it does not offend against Section 4(1). In the opinion of the Authority, none of the other clauses in the distributor agreement offend against Section 4(1) of the Act.

25. The bulk storage loan agreement is connected with, and dependent upon, the exclusive purchase agreement, it forms part of the exclusive purchase arrangements, and it strengthens those arrangements. It requires that the equipment supplied be used exclusively for Conoco products. Since the agreement underpins the exclusive purchase agreement, it also offends against Section 4(1) of the Act.

26. The depot licence is also connected with, and dependent upon, the exclusive purchase agreement, and it strengthens those arrangements. It specifically requires that the distributor exclusively purchases Conoco products, and it also offends against Section 4(1) of the Act.

27. Under Section 4(2), the Competition Authority may grant a licence in the case of any agreement or category of agreements which, ´having regard to all relevant market conditions, contributes to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and which does not -(i) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives;

(ii) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.'

28. The Authority considers that the exclusive purchasing agreements with distributors produce an appreciable improvement in distribution in which consumers are allowed a fair share of the resulting benefit. The supplier is able to concentrate his sales activities and he does not need to maintain numerous business relations with a large number of customers. The agreements facilitate the promotion of sales of the product and lead to intensive marketing and to continuity of supplies while at the same time rationalising distribution. They stimulate competition between the products of different suppliers. The appointment of the distributors, who engage in sales promotion, customer services and carrying of stocks, is an effective way for the supplier to enter the market and to compete with other suppliers. The exclusive purchasing obligation and the ban on dealing in competing products imposed on the distributor encourage the distributor to concentrate on the sale of Conoco products, while retaining his independence and freedom to run the business as he sees fit. The agreements lead to durable cooperation between the supplier and the reseller, allowing them to improve or maintain services to customers and the sales efforts of the distributor. The investment by the supplier ensures security of supply by providing assured outlets for its product, and distributors are guaranteed regular supplies provided that they comply with the terms of the agreement. This allows long-term planning of sales and consequently a cost-effective organisation of production and distribution. It also allows the supplier to undertake the necessary investment in storage and shipping facilities.

29. These distribution agreements also allow consumers a fair share of the resulting benefit as they gain directly from the improvement in distribution, and the economic and supply position is improved as they can obtain products more quickly and more easily. Consumers are assured supplies of petroleum products, while being able to choose between different brands. The distribution system of Conoco, which operates alongside exclusive distribution systems of most other suppliers of these products, allows some degree of intra-brand as well as inter-brand competition, including price competition.

30. The exclusive purchasing obligation on the reseller and the non-competition clause imposed on him are essential components of such agreements and are indispensable for the attainment of these advantages.

31. Exclusive purchasing obligations, however, need to be limited in duration. The EU Commission has drawn a distinction between exclusive distribution agreements, where the distributor is allocated an exclusive territory (but without absolute territorial protection), and where exclusive purchasing is involved, and exclusive purchasing agreements, where no exclusive territory is allocated. In the former case, the EU Regulation imposes no time limit for agreements, while the exclusive purchasing Regulation does not apply if the agreement is of indefinite duration or for a period in excess of five years, although agreements of up to ten years are permitted for certain motor fuel agreements, or even longer when the service station is owned by the supplier. The Authority has taken a similar approach in its category licences for exclusive distribution agreements and for exclusive purchasing agreements for motor fuels. The Conoco distributor agreement was stated to be originally an exclusive distribution agreement, but it is in fact an exclusive purchasing agreement, since there is no exclusive territory allocated to the distributor. The Conoco agreement as notified had a duration of ten years.

32. The Authority did not consider that the ten year duration of the Conoco exclusive purchasing agreement was indispensable to achieve the benefits described above. The Authority did not believe that Conoco could not effectively distribute its products by means of exclusive purchasing agreements whose duration did not exceed five years. The Authority was also conscious of the fact that the Conoco agreements did not satisfy the requirements of Regulation 1984/83, and that they might be void under Article 85(2) of the Treaty of Rome.

33. Conoco initially proposed that the exclusive purchasing requirement be limited to five years, while retaining a ten-year agreement. The Authority considered, however, that this would still involve exclusive purchasing for a period of up to ten years. In addition, the Authority considered that the exclusive use requirements in the equipment and depot agreements represented exclusive purchasing requirements, a view which it had previously taken in its decision on certain Burmah Castrol agreements (8). While these other Conoco agreements were in existence, they would require exclusive purchasing for a period beyond the initial five years. The Authority considered that these requirements, since they involved exclusive purchasing for more than five years, were not indispensable. The requirements have now been limited to five years in all the agreements, and this is regarded as indispensable by the Authority.

34. Restrictions in the notified agreements which prevented the distributor from competing after termination of the agreement produced no benefits which could be shared by consumers, and were not indispensable, and so they failed to fulfil the conditions of Section 4(2) of the Act. As stated above, these restrictions have now been deleted, and so they no longer offend against Section 4(1).

35. There are in existence long-term exclusive distribution agreements operated by other suppliers of petroleum products, which have been found to be acceptable under the category licence for such agreements. In addition, Conoco distributors are not afforded territorial protection from each other. In the circumstances the Authority considers that the agreements do not afford any possibility of eliminating competition in respect of a substantial part of the products in question.

36. The agreement as notified did not, in the opinion of the Authority, satisfy all the conditions of Section 4(2), and a licence could not be granted in respect of it. The Authority considers, however, that the amended agreement with Rustic Oil Products Ltd and with Breffni Oil Distributors, dated 26 July 1995, does satisfy all the conditions of Section 4(2), and a licence may be granted.

37. The Authority considered that the basic Conoco exclusive purchase agreement as notified did not satisfy the conditions for a licence under Section 4(2). It was of the opinion that the related bulk storage loan agreement, which underpins the basic agreement, also failed to satisfy the conditions of Section 4(2), because it regarded the obligation to use the equipment, which has been supplied and is owned by Conoco, exclusively for Conoco products as being an integral part of the exclusive purchasing agreement. The amended agreement with Breffni Oil Distributors, dated 16 August 1995, is considered to satisfy the requirements for a licence under Section 4(2).

38. The Authority also considers that, where the distributor occupies a depot which is owned by Conoco, the depot licence is also related to, and underpins, the basic Conoco exclusive purchase agreement. The agreement, and the requirement that the distributor exclusively purchases Conoco products, failed to satisfy the conditions of Section 4(2) for the same reasons as the basic exclusive purchase agreement. The agreement as amended by the replacement distribution agreement with Rustic Oil Products Ltd, dated 26 July 1995, is considered to satisfy the requirements for a licence under Section 4(2).

39. In the Authority's opinion, Conoco and the distributors are undertakings, and the three notified standard agreements are agreements between undertakings. The Authority considers that the agreements offend against Section 4(1) of the Competition Act, 1991. The Authority considered that the ten-year duration of the three notified agreements, and the restrictions in the distributor agreement which prevented the distributor from competing for a period after termination of the agreement, did not fulfil the conditions of Section 4(2) of the Act. The Authority considers, however, that the agreements, as amended by the replacement agreements with Rustic Oil Products Ltd, dated 26 July 1995, and with Breffni Oil Distributors, dated 26 July 1995 and 16 August 1995, fulfil all the conditions of Section 4(2) of the Act.

40. The Authority therefore grants a licence under Section 4(2) in respect of the amended Conoco standard distributor and bulk storage loan agreements and the standard depot licence. The licence shall apply from the date of this decision, that is 25 August 1995. It appears appropriate that the period specified for the licence should be ten years, that is until 24 August 2005. It is not considered necessary to attach any conditions to the grant of the licence.

41. The Authority therefore grants the following licence:

The Competition Authority grants a licence to the following standard agreements notified by Conoco Ireland Ltd to the Competition Authority on 7 and 24 September 1992, as amended by the replacement agreements with Rustic Oil Products Ltd, dated 26 July 1995, and with Breffni Oil Distributors, dated 26 July 1995 and 16 August 1995, on the grounds that, in the opinion of the Authority, all the conditions of Section 4(2) of the Competition Act, 1991 have been fulfilled:

(a) Conoco distributor agreement.......... CA/73/92E

(b) Conoco bulk storage loan agreement........ CA/110/92E

(c) Conoco distributor depot licence ......... CA/111/92E.

This licence shall apply from 25 August 1995 to 24 August 2005.

This licence shall also apply in respect of the Conoco distributor agreement, the bulk storage loan agreement and the distributor depot licence where each has been amended to accord with the replacement agreements with Rustic Oil Products Ltd or with Breffni Oil Distributors.

1. Fair Trade Commission, Report of Enquiry into the supply and distribution of motor fuels, 1990, PL. 7951.

2. Regulation No. 1983/83, OJ L173, 30.6.83, p.1.

3. Regulation No. 1984/83, OJ L173, 30.6.83, p.5.

4. Decision No. 144 of 5 November 1993.

5. Decision No. 25 of 1 July 1993.

6. Decision No. 4 of 25 June 1992.

7. Decision No. 364 of 28 October 1994.

8. Decision No. 361 of 13 October 1994.