Irish Competition Authority Decisions

1. This decision involves an agreement for the exclusive supply and purchase of corporate clothing for the Bank of Ireland. The agreement which is between Careerline Ltd and The Governor and Company of the Bank of Ireland (Bank of Ireland) was notified on 9 June 1994 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).

2. The notification concerns an agreement dated 9 September 1993 between Careerline Ltd and the Bank of Ireland for the management, sale, distribution and administration of a special and exclusive collection of corporate clothing for the employees of the Bank of Ireland.

3. (i) Careerline Ltd, an Irish registered private company, incorporated on 21 October 1992, was set up specifically for the purposes of the agreement, namely the provision of corporate clothing for the Bank of Ireland. In addition to the Bank of Ireland contract, Careerline caters for a number of other corporate clients both in Ireland and abroad.

(ii)The Bank of Ireland is the second largest commercial bank in Ireland with a network of 285 full time branches within the State, with total Group assets of IR£17.1 bn (as at 31 March 1994). It is the parent of a Group of subsidiary companies operating in the financial services sector, as well as a merchant bank, a finance company, a life assurance company, a building society and a stockbroking firm. The Group also has subsidiaries overseas. The Group employs over 12,000 of which over 9,000 are employed in Ireland.

(c) The service and the market

4. The service involved in this decision concerns the management, distribution, warehousing and administration of an exclusive collection of corporate clothing, including both men’s and women’s clothing and accessories, for staff of the Bank of Ireland. The market involved in this decision concerns the provision of corporate wear. There are several firms involved in the provision of corporate wear and uniforms in Ireland. The corporate identity that a firm portrays has become an important aspect of its marketing and overall image and corporate wear has become an integral part of a firm's image. Careerline provides this service to a number of different clients but the corporate wear collections are unique to each client. The geographical market in this case is the State.

5. The company - Careerline - was incorporated for the specific purpose of taking over the management, administration and development of "The Collection" that is the corporate outfit of the employees of the Bank of Ireland. The agreement commenced on 1 January 1993 for a term of two years but clause 9 provides that the agreement shall not automatically determine on completion of that term but shall subsist until terminated under certain conditions i.e. either party may terminate by serving 2 months notice no earlier than 2 months before the end of the term or at any time thereafter. There is also provision for summary termination by the Bank in the event of Careerline going into receivership etc. and termination by either party in the event of serious breaches of the agreement which remain unremedied.

6. Under the agreement Careerline is paid a basic annual fee, commission and other expenses by the Bank of Ireland. In return the company is required to take over the administration of the bank's corporate clothing collection, maintain adequate stock levels and make The Collection exclusively available to the bank's staff. The prices of the garments are agreed between the company and the bank, the fabrics must be approved in advance by the bank, and the company is required to contract out the manufacture of the collection. The company is required to provide a mail order service, maintain quality control, liaise with the designers, deal with staff queries, operate a garment returns policy, keep adequate books and records for inspection by the bank, provide monthly reports to the bank,etc.

7. The company is obliged to remit all profits to the Bank on the sale and supply of The Collection to the staff of the Bank of Ireland (clause 6.15). Under clause 7.1 the Bank agrees to "deal exclusively with the Company in relation to the Collection". The Bank also agrees, under clause 7.2 to make certain payments to Careerline including an annual management fee, a Sales Commission and distribution expenses. For sales outside the country the Bank will re-imburse the delivery charges to the company. The Bank pays agreed subsidies in connection with launch packs and all packaging costs too.

8. In support of its request for a certificate, Careerline submitted that the arrangements represented a method of administration of the Bank's existing corporate clothing collection. The company was established for the specific purpose of taking over the management, administration and development of The Collection and it was a fully independent entity in which the Bank of Ireland had no interest, shareholding or control. They stated that the scope of the agreement was strictly limited and the only "consumers" affected by it were the staff members of the Bank of Ireland or its related companies. The exclusivity provisions included clause 7.1 which stated that the Bank would deal exclusively with the company in relation to the Collection, namely the particular range of corporate clothing and accessories in question. They maintained that the Bank was free, if it wished, to deal with other suppliers of corporate clothing who would be marketing a different range. Similarly the company itself was only constrained and constricted in its administration of The Collection with the Bank and it was free to enter into other similar arrangements with other clients or to market corporate clothing, other than The Collection, generally. They also submitted some arguments in support of their request for a licence but these are not considered here.

9. Section 4(1) of the Competition Act states that '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 are prohibited and void'.

10. 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.' Careerline Ltd is engaged for gain in the management, sale, distribution and administration of an exclusive collection of corporate clothing for the Bank of Ireland and for other clients as well. The Bank of Ireland is engaged for gain in the provision of banking and other financial sector services to the public. Consequently, they are both undertakings within the meaning of Section 3(1) of the Competition Act. The agreement is therefore an agreement between undertakings.

11. The present arrangements constitute an agreement between undertakings whereby the Bank of Ireland agrees to deal exclusively with Careerline concerning the acquisition of a collection of corporate wear for their staff, called “The Collection”. The Bank of Ireland granted Careerline a loan and certain credit facilities for the purpose of setting up the company in order to carry out this service. Under the terms of the agreement the Bank is committed to dealing exclusively with Careerline in respect of “The Collection”. The Bank is not restricted from entering into arrangements for the procurement of alternative corporate wear, other than “The Collection”, from another source. The company is also free to enter into arrangements with other clients to supply a similar service provided it does not include “The Collection”, which is the subject of the present arrangements, as part of any other contracts. In effect, Careerline is providing a service to the Bank of Ireland by acting as an intermediary between the Bank and the manufacturers and designers for the provision of its corporate wear. The present arrangements may be terminated at any time by giving two month’s notice to the other party. Thus any firm wishing to provide equivalent services to Bank of Ireland may approach the Bank with a proposal which the bank could accept and the Bank could terminate the notified agreement. The arrangements do not restrict either party from obtaining or providing the same services elsewhere and competition is not restricted in any way. Careerline has several other large clients both within the State and outside of it as well, therefore their ability to market their services is not affected by the present arrangements. Prior to this, the Bank had carried out this service in-house and the contracting out of this service to another firm does not prevent, restrict or distort competition.

12. The company is paid a basic annual fee, a commission and other expenses in return for the services provided by them concerning the administration of “The Collection”. The Bank has imposed other obligations on the company including reporting conditions, the use of certain bank accounts in connection with the arrangements and the payment of all profits on the sale of “The Collection” to the Bank. These arrangements do not affect competition, but are related to the financial terms entered into between the company and the Bank for the establishment of the company and for its acceptance of the task of the administration of the Bank's corporate wear collection. The prices are agreed between the company and the Bank, although they are being purchased by the Bank’s employees. In the Authority’s opinion there is nothing anti-competitive in the Bank agreeing the prices of the clothing with the company. It is not a supplier or distributor and this does not constitute resale price maintenance. None of the provisions in the notified agreement have as their object or effect the prevention, restriction or distortion of competition in the State. Therefore the agreement does not offend against Section 4(1) of the Act.

13. In the opinion of the Authority the Bank of Ireland and Careerline Ltd are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified agreement constitutes an agreement between undertakings. In the Authority's opinion the agreement does not have, as its object or effect, the prevention, restriction or distortion of competition.

14. 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 of 9 September 1993 between Careerline Ltd and The Governor and Company of the Bank of Ireland, notified on 9 June 1994 under Section 7, (notification no. CA/15/94), does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey

Member

3 April 1996.