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Cite as: [1998] IECA 496

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Omnitron / Cryptovision A/S /Cablelink Ltd. / Tandberg A/S [1998] IECA 496 (1st April, 1998)

Competition Authority Decision No. 496 of 1 April 1998 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/801/92E - Omnitron Ltd/Cryptovision A/S/Cablelink Limited/Tandberg A/S

Introduction

1. Notification was made of a supply agreement between Omnitron Limited, Cryptovision A/S, Cablelink Limited and Tandberg A/S 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 issue a certificate, a request for a licence under Section 4(2).

The Facts

(a) The subject of the notification

2. The notification covers security for a supply arrangement. Under a separate agreement, Omnitron has agreed to supply Cablelink and Cablelink has agreed to purchase certain products from Omnitron. Omnitron obtains these products from Cryptovision under an exclusive distribution agreement which was notified separately to the Authority and granted a licence (Decision No. 393, Notification No. CA/799/92E). The arrangements notified here provide Cablelink with some security of supply for the relevant products in the event of Omnitron or Cryptovision becoming insolvent.

(b) The parties involved

3. Omnitron is a privately owned Irish company, located in Athlone, which is a turnkey manufacturer of electronic equipment. Cryptovision A/S is a wholly owned subsidiary of Tandberg A/S, which is a publicly quoted Norwegian communications company. Cablelink Limited is an Irish company and the largest provider of cable television services in the State.

(c) The products and the market

4. The product is an encryption system for use in cable television and MMDS networks. Omnitron also manufactures decoders for the system. According to Omnitron, there are five suppliers of encryption and decoder systems on the Irish market. Four of these market and support their own products directly. The product which Omnitron manufactures and distributes is based on advanced technology developed by Tandberg and sold through Cryptovision. The product is sold to cable and MMDS operators who provide satellite television services and these include Cablelink.

(d) The notified agreement

5. The notified agreement between Cryptovision, Tandberg, Erictron Ltd (now Omnitron) and Cablelink Limited was made on 15 August 1990. It provides Cablelink with certain rights in the event of the insolvency of Cryptovision or Omnitron. Such rights include the right to demand supplies of the relevant products from any court appointed receiver of Cryptovision or Omnitron and the right to demand performance from the suppliers of components of the relevant products which such suppliers have undertaken to Cryptovision or Omnitron.

6. In addition, the agreement provides that Tandberg shall indemnify Cablelink for any losses it may incur by the failure of Cryptovision or Omnitron to perform their obligations under the Agreement.

Submissions of the parties

7. The parties note that the arrangement notified here contains no clauses which restrict competition or involve any element of exclusivity of supply. The only reason this agreement was notified was because this agreement forms part of the business arrangements between the parties which are the subject of agreements notified separately (CA/799/92 and CA/800/92).

Assessment

Applicability of Section 4(1)

8. 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.

The Undertakings and the agreement

9. 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." Omnitron, Cryptovision, Tandberg and Cablelink are corporate bodies engaged in the manufacture and distribution of products for gain, and are therefore undertakings. The agreement is an agreement between undertakings and it has effect within the State.

Applicability of Section 4(1)

10. The Authority believes that the notified arrangements do not prevent, restrict or distort competition. The arrangements give Cablelink some security for the obligations of Omnitron and Cryptovision. The relevant obligations relate to the supply of specialised equipment which, presumably, in the event of an interruption of supply from these parties, Cablelink would find it difficult to obtain from other sources in the short run. The consideration for these security arrangements is contained in the other agreements entered into between the parties. The obtaining or providing of security for contractual obligations in the circumstances as outlined here do not restrict competition. Such arrangements contribute to the commercial viablility of the relationship between the parties. None of the provisions of the notified arrangement offend against Section 4(1).

The Decision

11. In the Authority’s opinion Omnitron, Cryptovision, Tandberg and Cablelink are undertakings within the meaning of Section 3(1) of the Competition Act and the notified arrangements constitute an agreement between undertakings. In the Authority’s opinion the arrangements do not have, as their object or effect, the prevention, restriction or distortion of competition within the State or any part of the State.

The Certificate

12. 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 security for supply arrangements between Omnitron Limited, Cryptovision A/S, Tandberg A/S and Cablelink Limited (CA/801/92), notified on 30 September 1992 under Section 7 do not offend against Section 4(1) of the Competition Act.

For the Competition Authority

William Prasifka

Member

[ ] April 1998