Irish Competition Authority Decisions

1. Cannon Hygienic Products (Ireland) Limited (“Cannon”) notified an agreement to the Authority for the provision and service of disposal units and vending machines on 30 September 1992. The notification requested a certificate under Section 4(4), or in the event of a refusal by the Authority to issue a certificate, a licence under Section 4(2).

2. The subject matter of the notification is the provision of sanitary and medical disposal units together with the provision of sanitary towel and tampon dispensing machines to the public.

3. Cannon is a subsidiary of O.C.S. Group Limited which has its registered office in Sanderstead, Surrey, UK. Cannon has no subsidiary companies. O.C.S. Group Limited is primarily engaged in the provision of property support services together with the provision of sanitary towel and tampon dispensing machines.

4. Initial Services (Ireland) Limited (“Initial”) is part of BET plc, a public company registered in England. The main activities of Initial are the supply of toilet paper, soaps, hand towels and related products. At the same time that Initial changed its name to Springrove Services (Ireland) Limited, it was acquired by the Davis Service Group plc, a public company registered in England.

5. The relevant product market for purposes of the notified agreement is the sanitary disposal services market. Particular products which form part of this relevant market are sanitary and medical disposal units and sanitary towel and tampon dispensing machines. The units and machines necessary to provide this service are available to end users and service providers in a variety of different configurations from a large number of manufacturers, both inside and outside the State. As the services are freely traded and the units do not require constant monitoring, the relevant geographical market is at least as large as the State.

6. The purchasers of the services subject to the notified agreement include any premises which have toilets open for general use. This includes premises open to the public, such as pubs, restaurants, cinemas, and shops as well as other premises which service larger numbers of people, such as offices and schools.

7. The relevant market is easy to enter. The required inputs are freely traded and the demand side of the market is dispersed among a multiplicity of purchasers. The supply side of the market is not concentrated and 34 suppliers in the State of the relevant product have been identified. The three largest suppliers include Cannon, Rentokil Ltd., and Dublin Sanitary Disposal Services. In addition, Cork Public Hygiene and Midland Hygiene are identified as significant competitors in regional submarkets. No published figures exist in relation to the size of the relevant market or to the respective market shares of the existing competitors. Cannon estimates that the three largest competitors each have approximately a 20% share of the relevant market. Cannon estimates that the subject matter relevant to the notified agreement is less than 5% of the relevant market.

8. In the agreement notified, Initial appoints Cannon to be its sub-contractor for the purpose of providing sanitary and medical disposal units together with the provision of sanitary towels and tampon dispensing machines throughout the State to customers of Initial. Cannon is to service and maintain the units. The units supplied by Cannon carry the name “Initial Services”. The agreement, dated July 1988 had an initial term of three years and may be terminated by either party on six months notice.

9. Clause 4 of the agreement provides that Initial is to sub-contract all of its requirements for sanitary disposal services to Cannon and Clause 5 of the agreement provides that Cannon is to provide such services. Clause 10.1 provides that the parties are not to disclose confidential information acquired about the other party during the term of the agreement. Such a confidentiality provision is to apply after the termination of the agreement. Clause 10.2 provides that during the term of the agreement the parties will not solicit the customers of the other. Clause 12 provides that during the term of the agreement Initial will not enter into any arrangement with a third party to supply the services which are subject to the agreement with Cannon.

10. Cannon stated that the agreement did not restrict competition. It noted the short term nature of the agreement (initial term of three years, now terminable by either party on six months notice), the small market share affected by the arrangement (less than 5%) and the number of competitors in the market place (34). Cannon also noted the pro-competitive affects of the arrangements as they allow Initial to offer a new service, quickly, to its existing customers.

11. 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.”

12. 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.” The parties to the notified agreement are corporate bodies engaged in the provision of services for gain and are therefore undertakings with the meaning of the Act.

13. The agreement does not restrict competition. The agreement does restrict the conduct of the parties, as do all contracts. Here, the parties are entering into an arrangement with continuing obligations and with the prospect of continuing benefits to be gained by both parties. The continuing nature of the arrangement requires that both parties are able to rely on the other keeping their respective obligations. Therefore, legally binding restrictions and obligations, of the type contained in the agreement notified, allow the parties to enter into voluntary arrangements which they hope will be mutually beneficial. Such restrictions on conduct should not be confused with restrictions on competition which are prohibited by Section 4(1).

14. The particular restrictions on conduct contained in the agreement do not restrict competition in the market. The other suppliers and purchasers in the relevant market are able to adjust their behaviour to whatever changes in the market are brought about by the agreement between Cannon and Initial. In this way, the market will be effective in rewarding or punishing the eventual results of the notified agreement and the Authority has no grounds to pre-emptively intervene in the market at this point.

15. Clauses 4, 5 and 12 form the basis of the continuing relationship between the parties and allow the parties to rely upon the conduct of the other. Such reliance is necessary for continuing relationships to be economically viable. Clause 10.2 is a restriction ancillary to the basic relationship and protects each party from conduct by the other which may be of unilateral advantage but to the detriment of the other. Similarly, Clause 12.1 is an ancillary restriction. Such a clause facilitates the exchange of confidential information which is necessary if both parties are to work together to maximise the benefits of their collective knowledge of the market. Therefore, the Authority considers that the agreement does not offend against Section 4 (1).

16. In the Authority’s opinion Cannon and Initial are undertakings within the meaning of Section 3(1) of the Competition Act. The Authority believes that the agreement notified by Cannon on 30 September 1992 does not have as its object or effect the prevention, restriction or distortion of competition and does not offend against Section 4 (1).

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 Cannon Hygienic Products (Ireland) Limited and Initial Services (Ireland) Limited, notified on 30 September 1992 under Section 7 (notification no.CA/919/92E), does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

William J. Prasifka

Member

5 February 1998