Irish Competition Authority Decisions

1. Notification was made by Gilbeys of Ireland Limited 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 grant a certificate, a licence under Section 4(2) in respect of a trade-mark and exclusive purchase agreement.

2. This notification concerns a trade-mark and exclusive purchase agreement , dated 1st September, 1988 between Pedrotti Interdrink S.A.S.(Pedrotti) of 38060 Nomi (Trento) Italy and Gilbeys of Ireland Limited (Gilbeys). The Licence Agreement takes the form of a trade mark licence granted by Pedrotti to Gilbeys, whereby Pedrotti agreed to grant a licence to Gilbeys to use certain of its trademarks in relation to the distribution of wines, spirits and liqueurs in the State, and amendments to the Licence Agreement. The Licence Agreement and the Amendment Agreement should be read together.

3. Gilbeys is part of the Gilbeys of Ireland Group whose principal activities are the manufacturing and world-wide marketing of cream liqueurs, manufacturing, selling and distribution of Smirnoff Vodka and the selling and distribution of imported wines and spirits within Ireland. Gilbeys' ultimate parent company is now Diageo (it was Grand Metropolitan plc at the time of the notification). As Pedrotti is not party to this notification, Gilbeys is not in a position to provide details on the group structure of Pedrotti.

4. The Authority is of the view that the relevant market for the purposes of this notification is the wine market in the State. This is a market that is characterised by many brands from the following countries, Australia, Chile, France, Germany, Italy, New Zealand, Portugal, Spain and the USA, among others. The brands are imported by many competing importers and distributors in the State. The Authority has estimated that Gilbeys share of the wine market in the State is approximately [ ].

5. Gilbeys have estimated that the total market in 1995 in volume terms was approximately [ ] million 9 litre cases (i.e.12 x 75 cl bottles per case). In addition to supplying the Pedrotti brand in Ireland, Gilbeys also supply the following brands, namely:-

Lindemans (Australian)

Piat (French)

Black Tower (German)

Faustino (Spanish)

Blossom Hill (USA)

6. With respect to turnover in the relevant market, the volume of Pedrotti sold by Gilbeys in 1995 was approximately [ ] 9 litre cases. On the basis that the total estimated volume of wine sold in the Irish market in 1995 was [ ] million 9 litre cases, the market share represented by sales of Pedrotti was approximately [ ].

7. Gilbeys does not have any substantial interests falling short of control (more than 25% but less than 50 %) in any other company competing in a market affected by the Agreement.

8. The purpose of the Agreement (Licence Agreement and Amendment Agreement) is to allow Gilbeys to have the sole and exclusive licence to use the Pedrotti trademark in Ireland in accordance with the terms of the Agreement which among other things provides for a payment of a sum of money from Gilbeys to Pedrotti which sum of money was paid over to Pedrotti in accordance with the terms of the Amendment Agreement. In general, the parties do not believe that the Agreement restricts the parties in their freedom to take independent commercial decisions.

9. Under Clause 1 of the Licence Agreement, as confirmed by Clause 2 of the Amendment Agreement, Gilbeys was granted the sole and exclusive licence to use the Pedrotti trademark in Ireland in accordance with the terms of the Licence Agreement;

10. Under Clause 4 of the Licence Agreement, Gilbeys will not purchase wine or sparkling wine which they market under the Pedrotti label from any supplier other than Pedrotti for the period of five years from the date of the Licence Agreement. However, Clause 5 of the Licence Agreement provides that during the said five years period Gilbeys can be released from its obligations under Clause 4 on payment to Pedrotti of a further sum of [ ] and on giving six months notice at the time of making such payment. Furthermore, Clause 4 of the Licence Agreement was revoked by Clause 4 of the Amendment Agreement;

11. Clause 7 of the Licence Agreement provides that goods for which the Pedrotti trade mark is used shall not be sold outside Ireland; Clause 8 of the Licence Agreement provides that if, after the five years period, Gilbeys intend to market under the Pedrotti label sparkling wines or wines with denominations of origin of the Province of Trento bought from or bottled by suppliers other than Pedrotti Gilbeys shall seek authorisations from Pedrotti;

12. Clause 9 of the Licence Agreement provides that the licence is granted in perpetuity unless determined by reason of breach of the terms of the Licence Agreement as provided for in the Licence Agreement; Clause 6 of the Amendment Agreement provides that Pedrotti agrees not to directly or indirectly use the existing Irish Pedrotti bottle label, or any design resembling it, anywhere; Clause 7 of the Amendment Agreement provides that Pedrotti has not or will not grant any licence of the Pedrotti trade mark in Ireland to any person or entity other than Gilbeys.

13. The parties stated that they did not believe that the agreement, or any aspects of the agreement, restrict the parties in their freedom to take independent commercial decisions. Without prejudice to the foregoing the parties drew the Authority’s attention to some provisions of the agreement.

14. The notifying party claimed that neither the provisions nor the Agreement itself had 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 within the meaning of Section 4(1) of the Competition Act.

15. The provisions of the Agreement noted above did not restrict Gilbey from normal commercial conduct or activity other than in the use of the Pedrotti trademark. In particular, Gilbeys was not restricted from distributing any competing products. Rather, Gilbeys distributes many other brands of wine in the Irish market which was a competitive market. Reference was made to the Competition Authority's Decision No. 284 in support of the grant of a certificate.

16. The party submitted that, concerning the provisions of the Agreement, Clause 1, Clause 6 (Amendment) and Clause 7 (Amendment) the notified Agreement was a licence from Pedrotti, the owner of the trademark, to allow Gilbeys to use the Pedrotti trademark for the purposes of marketing wine under the Pedrotti name in Ireland. Gilbeys submitted that the exclusive character of the licence did not take the Agreement within the scope of Section 4(1) of the Competition Act as the market for wine in Ireland was a very competitive market with many brands. They claimed that the share of the market represented by sales of Pedrotti was only approximately [ ].

17. The notifying party submitted that the 5 year period referred to in the agreement had now elapsed. Accordingly, this provision was no longer in force. They further submitted that the licence should not be considered as an agreement constituting an offence against Section 4(1) of the Competition Act, particularly as the relevant market was a competitive market where the share of the market represented by sales of Pedrotti is only approximately [ ].

18. The notifying party submitted detailed arguments in support of the granting of a Licence. However, the Authority is of the opinion that the grant of a Licence does not apply in this particular instance.

19. Gilbeys has not notified the Agreement to the European Commission and no notice has been received by Gilbeys of any proceedings before the EC Commission in relation to the Agreement. Gilbeys is not aware of any proceedings under the competition law of any country or state relating to or arising from the Agreement or any appurtenant matter.

20. There were no submissions by third parties.

21. 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 goods or services in the State or in any part of the State are prohibited and void”.

22. Section 3(1) of the Competition Act defines an undertaking as ‘a person, being an individual, a body corporate or an unincorporated body engaged for gain in the production, supply or distribution of goods or the provision of a service’. Gilbeys of Ireland Limited and Pedrotti Interdrink S.A.S. are corporate bodies engaged for gain in the production and distribution of drinks. They are therefore undertakings and the agreement is an agreement between undertakings. The agreement has effect within the State.

23. The notified agreement concerns an exclusive trade mark licence agreement, whereby a licence from Pedrotti, the owner of the trademark, to allow Gilbeys to use the Pedrotti trademark name in Ireland. The agreement did not benefit from the Category Certificate & Licence (in respect of agreements between suppliers and resellers), Decision No 524, December 4, 1998, as the agreement is not about resale.

24. The Authority is of the view that the market for wine [1] in the State is one that is characterised by ease of entry. The product affected by the agreement represents approximately 2.55% of the market in Ireland. Consequently, the agreement only has a negligible impact on competition in Ireland.

25. Although the agreement is an exclusive trade mark licensing agreement, Gilbeys is not precluded from selling any other wine product in the Territory. It is therefore the view of the Authority that inter-brand competition is not restricted and with so many other wine suppliers in the market, the level of competition is not diluted.

26. Licensing in this case, for example, where market shares are relatively small and where there is effective competition, simply allows Pedrotti to transfer their trade mark to Gilbeys and no aspects of the agreement restrict the parties in their freedom to take independent commercial decisions.

27. It is the view of the Authority that the agreement does not have as its object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or any part of the State within the meaning of Section 4(1) of the Competition Act.

28. The Authority is of the view that the terms of this trade mark Licensing Agreement are necessary in order to ensure good relations between the parties in the award of an exclusive license for introduction of a product into a competitive market.

29. Therefore in the opinion of the Authority, given the facts in its possession, the exclusive trade mark licence agreement notified by Gilbeys does not contravene section 4(1) of the Competition Act.

30. Gilbeys and Pedrotti are undertakings within the meaning of the Competition Act, and the exclusive trade mark licence agreement notified on 30 September 1992 (notification no. CA/15/92E) is an agreement between undertakings. The Authority considers that the agreement does not contravene section 4(1) of the Competition Act. Therefore it grants a certificate to the notified agreement.

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 Gilbeys of Ireland Limited and Pedrotti Interdrink S.A.S. notified under Section 7 of the Competition Act on 30 September 1992 (Notification No. CA/544/92E) does not contravene Section 4(1) of the Competition Act, 1991, as amended.

[1] The notifying party drew the Authority’s attention to extracts from a report prepared by Canadean World Alcohol concerning the wine market in Ireland.