Irish Competition Authority Decisions

1. Notification was made 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 grant a certificate, a licence under Section 4(2) in respect of a licence agreement between Carroll Products and Designs Ltd (Carroll) and Kleerex Licensing Ltd (Kleerex L).

2. The notification concerns a licence agreement dated 15 February 1991 under which Carroll grants to Kleerex L an exclusive licence to manufacture or have manufactured acrylic merchandising systems for which Carrolls hold intellectual property rights.

3.(i) Carroll is primarily engaged in R&D in relation to acrylic merchandising systems. According to its abridged financial statements filed with the Company's Registration Office the company is connected to the Kleerex International Ltd group of companies and Kleerex L through commonality of shareholders. The company's financial statements reflect the effects of this relationship. The abridged financial statements for the year ended 31 January 1994 show that Carroll's current assets of include £908,857 owed by connected companies while the financial statements carry the note that Carroll has guaranteed the borrowings of connected companies without limit.

(ii) At the end of February 1991 Carroll had an issued share capital of £1,950 in 16,500 ordinary shares of 10p each and 300 B ordinary shares of £1 each which were held as follows:

10p ordinary £1 B ordinary

Frank Carroll 5,700 100

Gerard Higgins 1,900 100

Aidan Mc Morrow 1,900 100

Kieran Comerford 500

ICC 3,000

Gokin Ltd 3,500

total 16,500 300

Frank Carroll, Gerard Higgins and Aidan McMorrow were also directors of Carrolls

(iii) Kleerex L was incorporated within the State in June 1987. According to its abridged financial statements filed with the Company's Registration Office the company is connected to Carrolls and to the Kleerex International Ltd group of companies and its financial statements reflect the effects of this relationship. The company is engaged in licensing on a world wide basis of patents developed by Carrolls.

(iv) At the end of February 1991, Kleerex L had an issued share capital of £165 in 16,500 ordinary shares of 1p each which were held as follows:

1p ordinary shares

Frank Carroll 5,700

Gerard Higgins 1,900

Aidan Mc Morrow 1,900

Kieran Comerford 500

ICC Bank plc 6,500

total issued 16,500

Frank Carroll, Gerard Higgins and Aidan McMorrow were also directors of Kleerex L.

(v) Share subscription agreements involving investments by ICC Bank plc in Carroll, Kleerex L and Kleerex International Ltd, all of which were executed on 15 February 1991, were also notified and will be dealt with separately.

4. Under the notified Licence agreement of 15 February 1991 Carroll agrees under clause 2.1 to grant to Kleerex L, "an exclusive licence to manufacture, have manufactured on terms contained herein, sell lease or otherwise dispose of the products in the Territory under each and every patent as may be granted for the term of this licence agreement." The licence also applies to products where a patent is pending. Under clause 2.4 Carroll undertakes, on request after the grant of a patent, to execute formal licences which incorporate full and non-exclusive licence and authority to make use of the invention for which the patent has been granted. Under clause 2.5 Carroll grants to Kleerex L full and non-exclusive rights to each and every invention in the field of acrylic display and merchandising systems together with the right to apply for letters patent anywhere in the territory if Carroll decide not to apply themselves. Kleerex may grant non assignable sub-licences on the same terms as the agreement but may not assign rights to particular inventions without the consent of Carroll and Eolas. There are provisions for a once off royalty payment to Carroll and annual royalty payments to Eolas which relate to amounts due to be paid by Carroll to Eolas under earlier agreements. Kleerex L agrees to keep secret for the period of a patent, and 2 years thereafter, all information acquired from Carrolls pursuant to the licence except for information in the public domain. Non-exclusive rights to similar inventions which may come into Carroll possession after the commencement of but during the term of the agreement are also granted to Kleerex L.

The products covered by the licence are inventions in the field of acrylic display and merchandising systems e.g.racks, shelves, risers, dividers and pick and mix units, the duration of the agreement is 5 years with provision for an extension and the Territory is defined as every country in the world apart from the State and the UK.

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. Carroll is engaged for gain in research and development of products and is therefore an undertaking. Kleerex L is engaged for gain in the exploitation abroad of patents and inventions and is also an undertaking. The notified agreement is an agreement between undertakings. The agreement has effect within the State.

8. The notified arrangements constitute an agreement between two companies which have common shareholders, common directors and are engaged in a similar business which involves research and development and its exploitation for gain. As indicated in its decision on AGF-Irish Life Holdings plc [1] the Authority does not normally regard subsidiaries of the same company as independent of one another but rather as separate arms of the same undertaking and considers that agreements between them do not normally offend against Section 4(1). A similar view is taken in this case because of the extent of the common relationship between Carrolls and Kleerex L. Neither company has effectively full freedom to determine its own course of action independent of the other and they are not therefore in competition with one another. The agreement itself relates to activities within the territory, which specifically excludes the State. The notified agreement therefore does not affect competition within the State and does not offend against Section 4(1) of the Competition Act.

9. In the Authority's opinion Carroll Products and Designs Ltd and Kleerex Licensing Ltd are undertakings within the meaning of Section 3(1) of the Competition Act, 1991 and the notified licence 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 licence agreement dated 15 February 1991, between Carroll Products and Designs Ltd and Kleerex Licensing Ltd, notified under Section 7 on 30 September 1992 (notification no. CA/858/92E) does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority.

Des Wall

Member

23 October 1995