Irish Competition Authority Decisions

1. Notification was made of a standard loan agreement between Rover Ireland Ltd. (“RI”), Rover Ireland Finance Ltd. (“RIF”) and a distributor on 17 September 1992. RI requests a licence under Section 4(2) of the Competition Act.

2. This notification concerns an agreement between RIF and a distributor for a loan for the purchase of vehicles by the distributor from RI. The vehicles are security for the loan.

3. RI is a company incorporated in the State. It is a subsidiary of British Aerospace PLC a UK registered company engaged in the manufacture and marketing of aircraft, equipment and motor vehicles. RI is engaged in the marketing of motor vehicles, spare parts and after-sales service in the State.

4. RIF is a company incorporated in the State engaged in the business of assisting distributors of RI financing the purchase of motor vehicles. The shareholding of RIF is held by RI (24.4%) and Barclays Bank (Ireland) Ltd (75.6%).

5. The distributor is a distributor of RI motor vehicles who operates in the State under a RI motor vehicle distribution agreement.

(c) The Product and the Market

6. The market for the products notified here is the market for the financing of motor vehicles. As the Authority noted previously in Decision No. 521, Fiat Auto Financial Services Ltd./Bank of Ireland Finance Ltd. (CA/9/98), this “market is only moderately concentrated ... In addition, the Authority considers that the market is highly contestable, as the degree of supply-side substitutability and the increasing integration of European financial markets tends to limit ability to gain market power in this sector.”

7. The notified agreement is a standard agreement between RIF and a distributor whereby RIF advances a loan to the distributor and secures the loan by taking an interest in the motor vehicles purchased by the distributor from RI. The loan is only advanced to distributors who have entered into a separate motor vehicle distribution agreement with RI and then only to finance vehicles purchased pursuant to the terms of that agreement. The ownership of the motor vehicle passes from RI to RIF upon collection by the distributor of the motor vehicle. The ownership of said motor vehicle passes to the distributor upon payment in full to RIF.

8. The notified agreement contains no restrictions on the operations of the distributor other than those necessary to protect the security interest of RIF. The distributor is not restricted in dealing with any other suppliers. The distributor is not restricted in marketing the motor vehicles.

9. Section 4(1) of the Competition Act, 1991 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 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, 1991 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.” RI, RIF and the distributor are persons engaged for gain in the supply and sale of motor vehicles/motor vehicles finance in the State and are undertakings. The agreement is an agreement between undertakings. The agreement has effect within the State.

11. This notification is a standard commercial loan agreement. The Authority has issued a category certificate on vertical agreements [1] and the notified arrangement does not contain any provisions which fall within the prohibitions contained therein. The arrangement provides financing for the operation of the distributor’s business which is the purchase of motor vehicles from RI for resale. Commercial loan agreements do not offend against Section 4(1) of the Competition Act.

12. In the Authority’s opinion RI, RIF and the distributors who are parties to the arrangements are undertakings within the meaning of Section 3 (1) of the Competition Act, 1991, as amended, and the notified agreements are agreements between undertakings. In the Authority’s opinion, the notified agreements do not prevent, restrict or distort competition and thus do not contravene Section 4(1) of the Competition Act.

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 agreements between Rover Ireland Ltd., Rover Ireland Finance Ltd and the distributor relating to a loan for use by the distributor to purchase motor vehicles from Rover Ireland Ltd notified under Section 7 of the Competition Act on 17 September 1992 (Notification No. CA/82/92) does not contravene Section 4(1) of the Competition Act, 1991, as amended.

For the Competition Authority,

William Prasifka

Member

15 December 1998

[1] Category Certificate / Licence in respect of Agreements between Suppliers and Resellers. Decision No. 528. 4 December 1998.