Irish Competition Authority Decisions

Introduction.

1. Notification was made by TCDSU on 24 October, 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 an Agency and Exclusive Dealing Agreement between TCDSU and STA Travel.

2. The notification concerns an exclusive dealing arrangement dated the 20 June 1996 between TCDSU and STA Travel. Under the proposed arrangements STA Travel will provide TCDSU with travel related services (airline tickets, ferry tickets, train tickets, car hire etc.) for onward sale to students and staff at Trinity College.

3. The parties to the Agreement are TCDSU and STA Travel. TCDSU is a private company limited by guarantee. TCDSU acts as a travel agency for students and staff at Trinity College Dublin and trades under the name Dublin University Student Travel (DUST). STA Travel is an English company having its registered offices at 6 Wrights Lane, London, W8 6TA. It provides student and youth travel services to UK based agencies.

4. The market in this notification is the provision of travel services to full-time third level students and youths (under 26) in Ireland. In its submission to the Authority, TCDSU stated that it is primarily engaged in the provision of ‘discounted travel services’ for full time third level students and for persons under 26 years of age and that these two categories of travellers represent a market which is distinct from the market encompassing the services for the general travelling public.

5. According to TCDSU there are three companies that specialise in student travel in the State: USIT Ireland Limited (USIT), SAYIT and DUST. USIT Ireland is the largest firm in the youth travel market with a network of 17 shops and a turnover of £42m in 1997. DUST has one outlet and a turnover of less than £200,000 for the period up to the 30 of June 1997. DUST provides ‘discounted travel services’ to the Trinity College Community including campus staff. It competes directly with USIT in the provision of such discounted services and in the provision of travel/work packages for students visiting the US. SAYIT provide student travel related services in Cork.

6. The market for discounted youth travel services is represented by firms providing services directly to persons under the age of 26 by (such as airlines, ferries, rail companies, etc.) as well as general travel related service providers. A large number of airlines have published student/youth fares which may be accessed by every travel agency in Ireland. Student travel agencies, therefore, compete with general purpose travel agencies which sell to students and non-students alike. Students and staff on the Trinity Campus are free to shop around other travel agents by telephone or otherwise for better deals that may be offered.

7. The Authority considers that the relevant market is the provision of travel services to students and persons under the age of 26 in this case. Such services may be provided by dedicated student travel operators or by other firms in the general transport and travel services market. The geographic market is the State.

8. The notification concerns an Agreement whereby STA Travel will provide TCDSU with travel related services on an agency basis for onward sale to students and staff at Trinity College.

9. The Agreement is contained in two documents entitled ‘Agency Agreement’ and a ‘Partnership Agreement’. The Agency Agreement details arrangements between the parties for the processing of passenger tickets and other sales by TCDSU acting as agent for STA Travel Ltd. Under that agreement STA Travel appoints TCDSU as its agent for the sale of its products in the territory (UK and Eire). TCDSU undertakes to promote and market STA products in the territory and to carry on the sale of STA products at the relevant premises.

10. The Partnership Agreement provides that STA Travel will give TCDSU an interest free loan repayable over three years. TCDSU agrees not to sell any directly competing alternative student and youth travel services to its customers. The agreement is for five years.

11. TCDSU submits that the exclusive arrangement between the parties does not prevent, restrict or distort competition in the supply of travel services within the meaning of section 4(1). Trinity students are free to use the services of USIT travel or any other service provider. Furthermore, TCDSU submits that although the arrangement is a vertical restraint affecting inter-brand competition for discounted travel services within the campus, its net effect is to introduce competition into the market by offering Trinity students a choice between TCDSU on campus or USIT off campus.

12. Arguments made by TCDSU here are not relevant as in the view of the Authority the arrangement qualifies for a certificate.

13. In a letter to the Authority dated the 13 January 1998, USIT indicated that they wished to be given an opportunity to make a submission prior to any decision being made by the Authority. USIT made such a submission to the Authority on 3 December 1998 following the publication by the Authority of a notice of its intention to issue a certificate to the notified agreement. USIT stated in its submission that it "had no objection in principle to the agreement by TCDSU not to sell products which compete directly with those of (STA Travel). It is of the opinion, however, that there is an understanding between the parties to the agreement which consists of an undertaking by TCDSU to prevent the sale or promotion of products to Trinity students which compete with those offered by (STA Travel) on the TCD campus." USIT urged the Authority to only grant a certificate to the notified arrangement provided it receive an undertaking that USIT not be denied access to sell its own products on the TCD campus.

14. The Authority addressed the concerns raised by USIT with TCDSU by letter dated 13 January 1999. TCDSU replied to the Authority by letter dated 8 February 1999. TCDSU stated that "there is no understanding, implicit or explicit, between TCDSU and STA Travel to attempt or hinder the sale or promotion of competing products and/or services to students of Trinity College. . . . TCDSU cannot and does not prohibit the advertisement of competing products and/or services on campus, whether by posting, distribution or publication." The letter enclosed a copy of a recent campus publication featuring advertisements from SAYIT, USIT and other travel related companies. Furthermore, the letter stated that representatives of TCDSU and USIT had met to discuss the issues raised by the Authority and that TCDSU had "confirmed to USIT that we (TCDSU) were not and could not prevent them from coming on campus. They could, if they wished, team up with any club or society and have their material distributed as part of the club or society's activities."

The Assessment

15. 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.”

16. 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.”

17. The parties to the notified agreement are TCDSU and STA Travel. STA Travel is an undertaking engaged in the provision of travel services, including discounted travel services to full-time third level student and youth markets. TCDSU provides products and services to students and staff at Trinity College Dublin. Accordingly, TCDSU and STA Travel are undertakings 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.

18. 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 Agency and Exclusive Dealing Agreements. These do not raise issues under the Competition Act.

19. The Partnership Agreement provides that TCDSU may not offer services which directly compete with services offered by STA Travel. In effect, STA Travel have a five year arrangement to be the only travel agent with a physical presence exclusively dedicated to selling its products on the Trinity campus.

20. The Agreement does not permit TCDSU to sell on campus any services which directly compete with services offered by STA Travel. However, students and staff at Trinity College are free to avail of travel services from other travel agencies and service providers. Many such outlets are nearby. USIT is located on Aston Quay. There are approximately 300 general purpose travel agencies operating in the State (many of whom operate in Dublin’s city centre). These agencies compete with travel agencies who specialise in student travel and fares. Furthermore, by its letter of 8 February 1999, TCDSU have informed the Authority that it will take no action to restrict USIT from having access to Trinity campus and that they are currently free to do so. Therefore, competitors may solicit business on campus eventhough they do not have a physical premise there. Having regard to the availability of alternative service providers, the Authority does not regard the exclusive right of STA Travel to have its travel products distributed by TCDSU on the Trinity campus as foreclosing the market.

21. The effect of the arrangement notified here is to introduce competition in this market. It increases the choice of discounted travel services available to Trinity students and staff. Prior to the establishment of DUST and SAYIT (based at UCC campus), USIT was the only dedicated provider of discounted travel services to students. By this arrangement, STA Travel and TCDSU enter this market.

22. In the Authority’s opinion, TCDSU and STA Travel 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 TCDSU and STA Travel does not prevent, restrict or distort competition and thus does not contravene Section 4(1) of the Competition Act.

The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, the Agency and Exclusive Dealing Agreement between Trinity College Dublin Students’ Union and STA Travel Limited notified under Section 7 of the Competition Act on 24 October 1997 (notification no. CA/21/97) does not contravene Section 4(1) of the Competition Act, 1991, as amended.

For the Competition Authority,

William Prasifka

Member

24 March 1999