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First Rate Bureau De Change Ltd. /Minister for the Marine. [1998] IECA 511 (17th June, 1998)

Competition Authority Decision of 17 June 1998 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/8/97 - First Rate Bureau De Change Ltd., / Minister for the Marine.

Decision No. 511

Introduction.

1 Notification was made by First Rate Bureau De Change Limited (“First Rate”) on 27 May, 1997 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 licence under Section 4(2), in respect of a Concession Agreement between First Rate Bureau de Change Limited and the Minister for the Marine ( the Minister )

The Facts

(a) Subject of the Notification

2 The notification concerns an exclusive concession and licence agreement (“the Concession Agreement”) dated the 8 July 1996 which has been entered into between First Rate and the Minister for the operation of a Bureau de Change and automated teller machine facility at Shop Unit No. 3, the Ferry Terminal, Dun Laoghaire Harbour. The arrangements continue in force until 25 November 2000 in accordance with Clause 2 of the Concession Arrangement.

(b) The Parties Involved

3 The parties to the Agreement are First Rate Bureau De Change Limited and the Minister for the Marine. First Rate is a wholly owned subsidiary of the Bank of Ireland (BOI) having its registered offices at Lower Baggot Street, Dublin 2. The Bank of Ireland is the second largest commercial bank in Ireland with network of about 290 branches within the State. In 1996, the Bank of Ireland had a total operating income of IR£994.8m and a profit on ordinary activities before taxation of IR£315.6m. The Minister is a member of the Irish Government whose offices are at Leeson Lane, Dublin 2.

(c) The Product and the Market

4 In its submission to the Authority accompanying the notification, First Rate claimed that it is primarily engaged in the provision of bureau de change and ATM facilities and, consequently, it competes directly for bureau de change and ATM business with other financial institutions. In addition, First Rate sells telephone cards and related items.

5 First Rate stated that the market for the supply of Bureau de Change and ATM services is highly competitive and offers considerable consumer choice due to the number of financial institutions and franchise agencies offering these services under Central Bank regulations and control. It stated that there were a number of other providers of Bureau de Change and ATM services active in the State and in particular in the Dun Laoghaire harbour region as follows:

14 institutions selling such services in the State comprising licensed banks and other credit institutions.
20 branches of competing financial institutions providing Bureau de Change facilities and 24 ATM machine sites within a two mile radius of Dun Laoghaire harbour
12 branches of competing financial services institutions providing Bureau de Change facilities and 13 ATM machine sites within a one mile radius of Dun Laoghaire harbour
9 branches of competing financial services institutions providing Bureau de Change facilities and 11 ATM machine sites within one half a mile radius of Dun Laoghaire harbour.

6 There is considerable interchangeability between other methods for payment, that is other financial instruments, such as, traveller cheques, euro-cheques, credit cards, money orders and bank drafts and cash in Irish currency which is provided as a result of the provision of the services. Emerging card technology and the pan European linking of Automated Teller Networks (ATN) are providing consumers with increased choice over and above traditional instruments of foreign exchange such as currencies and cheques.

7 In this instance the Authority considers that the relevant market is the provision of Bureau de Change services and automated teller machine facilities.

(d) The Notified Arrangements

8 The notified arrangement was made on the 8 July 1996 for a period of 4 years 9 months from the 26 February 1996. Under the agreement the Minister for the Marine agrees, in consideration for the payment to the Minister of certain fees, to grant to First Rate an exclusive concession for providing exchange rate and ATM facilities at the ferry terminal, Dun Laoghaire Harbour. The Minister also agrees to allow First Rate to use and occupy Shop Unit No. 3 at the ferry terminal for the sole purpose of providing such services. The agreement also provides for the calculation of transaction fees in respect of Bureau de Change and ATM services as well as several clauses relating to the occupation and maintenance of the premises. Under the agreement the licence granted “shall not be capable of being assigned or parted with to third parties”. Moreover, the parties agree that the agreement shall be deemed to be a licence only and not a lease or letting agreement within the meaning of the Landlord and Tenant Act: “nothing herein contained shall create or be deemed to create the relationship of landlord and tenant between the Minister and the Licensee. The agreement also contains the following clauses:

Clause 3: The licence will be exclusive to First Rate and the Minister will not be entitled to appoint another person, persons, concern or concern(s) to provide similar services at the ferry terminal apart from the sale of telephone cards.
Clause 4: First Rate shall use or, permit the BOI to use, the terminal area only for the provision of bureau de change and ATM facilities. No new services shall be introduced by First Rate or BOI without the prior written consent of the Minister.
Clause 7: First Rate is not permitted to display advertisements in the terminal area except those in connection with the services being provided. First Rate must also agree not to employ any person whom the Minister or Dun Laoghaire Harbour sees as being unacceptable.

(e) Submission of the Parties

Arguments in support of issuing a certificate

9 First Rate submits that the Concession Agreement contains standard restrictions and obligations on both parties which are necessary for the maintenance of a proper relationship in relation to the operation of a concession and the occupation of a premises. It further submits that the Agreement’s terms are consistent with earlier Authority decisions relating to the provision of exclusive banking facilities (Decision no. 288, 289,). [1] As such First Rate believes that the provisions are reasonable and do not prevent, restrict or distort competition in the supply of the services within the meaning of section 4(1).

10 First Rate believes that the market for the provision of Bureau de Change and ATM services is a highly competitive one given that all of the major banks, building societies and financial institutions maintain offices offering similar services only a short distance from the ferry terminal. As such there is ample opportunity to compete for the business of persons arriving to and embarking from the ferry terminal. Moreover, considerable customer choice is available due to the number of financial institutions offering Bureau de Change and ATM facilities.

11 First Rate also submits that the unit it leases is one of three shops at the ferry terminal and without an exclusive concession it would be impossible for the Minister to attract one of the major financial institutions to provide Bureau de Change and ATM services at the ferry terminal.

12 Finally, First Rate believes that there are no significant barriers to entry to the provision of Bureau de Change and ATM facilities.

Arguments in support of issuing a licence

13 The notifying party also made arguments in support of granting a licence. As these are not considered relevant to the decision, they are not reproduced here.

The Assessment

(a) Section 4(1)

14 Section 4(1) of the Competition Act, 1991, as amended, 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 goods or services in the State or in any part of the State are prohibited and void.”

(b) The Undertakings and the Agreement.

15 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.”

1. The parties to the notified agreement are First Rate Bureau de Change Limited and the Minister for the Marine. First Rate, a subsidiary of the Bank of Ireland, is an undertaking engaged in the provision of Bureau de Change and ATM facilities generally, and additional services, such as, the sale of telephone cards and related items for a fee and is an undertaking. In exchange for the payment of a fee to the Minister for the Marine, First Rate is permitted to use and occupy a premises at the ferry terminal for the provision of such services. In addition, the Minister receives a fee of £0.70 for each Bureau de Change transaction and a separate fee in respect of each ATM transaction corresponding to that laid down in schedule 1 of the agreement.

16 In the case of Carrigaline CTV v. Minister for Transport, Energy and Communications, [2] Mr Justice Keane considered the extension of the definition of an undertaking to a Minister, and concluded that a Minister,

“whether as an individual or as an undertaking, is an undertaking within the meaning of Sections 4 and 5 of the 1991 Act, if he is engaged for gain. That expression is interpreted by the Supreme Court in dealing with the VHI. It appears from that decision that if a body such as the Minister supplies a service in return for a charge or payment, he will be engaged for gain, and hence within the ambit of Sections 4 and 5.”

2. On the facts of the case Mr. Justice Keane also found:

“It is also clear, however, that if the Minister in granting licences for transmissions is engaged in no more than a regulatory or administrative function then the fact that he imposes a charge for the granting of the licence does not in itself mean that he is engaged for gain.”

17 The Authority has considered the question of whether the Minister for the Marine is an undertaking in this instance. The Harbours Act, 1996 [3] (Section 104, sub-sections 2 and 3) refers to the activities of the Minister of the Marine prior to the establishment of Dun Laoghaire Harbour as a private company, as follows,

(2) “The Minister shall, with the concurrence of the Minister for Finance, pay to the Dun Laoghaire Harbour Company an amount equal to advance payments received by the Minister before the relevant vesting day in respect of goods or services to be provided by the company on or after the said day less the amount of any costs incurred by the Minister in collecting such payments.”

(3) “Dun Laoghaire Harbour Company shall pay to the Minister an amount equal to sums collected by it on or after the relevant vesting day in respect of goods or services provided by the Minister before the said day in the performance of a function of the Minister in relation to Dun Laoghaire Harbour corresponding to a function of the company.”

18 It is clear from sub-sections 2 and 3 of the Act that the Minister for the Marine is engaged for gain in the provision of goods and services. The Authority considers, therefore, by virtue of the provisions of the 1996 Harbours Act, the Minister is an undertaking within the meaning of Section 3(1) of the Competition Act, 1991. The notified agreement is therefore an agreement between undertakings. The agreement has effect within the State.

(c) Applicability of Section 4(1)

19 The agreement notified contains standard restrictions and obligations on both parties which are necessary for the maintenance of a proper relationship in regard to the operation of the concession and the occupation of the premises. These do not raise issues under the Competition Act. The agreement also provides for exclusivity in relation to the operation by First Rate (Bank of Ireland) of the concession. In a number of earlier decisions and, in a Notice of 2 September 1993 in respect of shopping centre leases, [4] the Authority has already indicated its view that exclusive user clauses in the letting of premises in a particular shopping centre or building complex do not contravene Section 4(1) of the Competition Act. It noted that the principal object of the development of a shopping centre is to ensure that shops comprise a balanced range of outlets offering different goods and services in order to attract the maximum amount of custom. This assured mix of outlets encourages tenants to lease the units without which the units would be less likely to be leased. Moreover,

“where only one unit in a shopping centre is permitted to engage in a particular line of business, competing traders may not operate in the same centre. There is no restraint, however, save that of planning permission, on competing traders from setting up anywhere else in the whole State, including location in the vicinity of the centre.”

20 For similar reasons these views also apply in relation to the grant of an exclusive concession to use premises in a building complex for the purposes of a business.

21 In this instance, while First Rate has an exclusive licence to provide Bureau de Change and ATM facilities within the ferry terminal, they are restricted to operating and advertising only such services within the terminal and as such cannot gain any competitive advantage in the provision of other financial services. Moreover, while First Rate has the only Bureau de Change and ATM facility situated within the ferry terminal at Dun Laoghaire harbour, all of the major banks and financial institutions maintain offices offering the services only a short distance away. For example, there are 20 branches of competing financial institutions providing Bureau de Change facilities and 24 ATM machine sites within a two mile radius of Dun Laoghaire Harbour; 12 competing branches provide Bureau de Change facilities and 13 ATM machine sites within a one mile radius while most importantly 9 competing branches provide Bureau de Change facilities and 11 ATM machine sites within one half a mile radius of the ferry terminal. All the major banks and financial institutions can, therefore, compete for the business of persons arriving to and embarking from the ferry terminal. Having regard to the location of these other banks and financial institutions, the Authority does not regard the exclusive right of First Rate to operate Bureau de Change and ATM facilities within the ferry terminal as having any effect on competition.

(d) The Decision

22 In the Authority’s opinion, First Rate Bureau de Change and the Minister of the Marine are undertakings within the meaning of Section 3(1) of the Competition Act, 1991, as amended, and the notified agreement is an agreement between undertakings. In the Authority’s opinion, the notified agreement between First Rate and the Minister for the Marine does not prevent, restrict or distort competition and thus does not contravene Section 4(1) of the Competition Act.

The Certificate

3. The Competition Authority has issued the following certificate:

4. The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, the Concession Agreement between First Rate Bureau De Change Limited and the Minister for the Marine notified under Section 7 of the Competition Act on 27 May 1997 (notification no.CA/8/97) does not contravene Section 4(1) of the Competition Act, 1991, as amended.

5. For the Competition Authority

Isolde Goggin

Member

17 June 1998

[1] University College Dublin/Bank of Ireland; University of Limerick/Bank of Ireland.

[2] Carrigaline Community TV and others v. Minister for Transport, Energy and Communications, High Court, unreported, Keane J, 10/11/95.

[3] No 11 of 1996.

[4] Published in Irish Oifigiuil 10 September 1993, pp. 665-667.