Irish Competition Authority Decisions

1. Notification was made by J Donohoe Ltd on 30th 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 an exclusive bottling and distribution agreement.

2. The Notification is an exclusive bottling and distribution agreement where Bubble Up International Ltd. have given exclusive licence and right to J Donohoe Ltd to manufacture bottle and distribute Bubble-Up beverages in the counties of Carlow, Wexford, Waterford, Kildare and Wicklow.

3. J Donohoe Ltd is the parent company in a group of companies, several of which also distribute drinks products in the geographic area affected by the arrangements. Other companies in the group are involved in other trades (motor sales, computer services) and are unaffected by these arrangements.

4. The subsidiary companies also involved in the drinks trade are:

Patrick Keily & Sons (1957) Ltd, 100% owned Wholesale Drinks distributor

Waterford

Thomas Power & Co Ltd, 100% owned Wholesale Drinks distributor

Dungarvan, Co Waterford

M J Keane & Co Ltd, 100% owned Wholesale Drinks distributor

Dungarvan, Co Waterford

South East Beer Sales Ltd, 100% owned Wholesale Drinks distributor

Enniscorthy, Co Wexford

5. The Monarch Company Inc. of Atlanta, Georgia, U.S.A. is the parent company of Bubble Up International Inc., a corporation of the State of Illinois, USA.

6. The notifying party submitted that the goods affected by the arrangements are various packaged soft drinks in the lemon-lime flavour brand "Bubble-Up”. The product is an internationally known brand, [ ]. The lemon-lime market accounts for in the region of [ ]% of the total soft drinks market, and 7Up has over [ ]% of the national lemon-lime market. [ ]. A number of own-label alternatives also sell in the lemon-lime market, produced for sale by major supermarket chains and symbol groups.

7. [ ]

8. The Bubble-Up brand is manufactured for sale in both the licensed trade (180ml and 70ml) returnable glass packages and in the grocery/TSN/supermarket sector (250mI, 500ml, 1.5 litre, and 2 litre PET bottles and has been produced in 330ml cans).

9. The audited turnover of the J Donohoe Ltd group in the year ended 31 December 1997 was IR£[ ]. In 1998 the turnover, which has not yet been audited, was IR£[ ]. The turnover in Bubble-Up by the J Donohoe Ltd Group (i.e. J. Donohoe Limited and the subsidiaries listed above) in 1998 was IR£[ ], or [ ] hl (hectolitres).

10. [ ]. Notwithstanding the possible existence of a wider soft drinks market, even with the narrowest possible definition of the market, namely, the lemon lime soft drinks market, the market share of Bubble-Up in this area is estimated at [ ]%.

11. The purpose of the arrangement is the appointment by Bubble-Up International Limited of J. Donohoe Limited to manufacture, bottle and sell Bubble-Up beverages in the counties specified in the agreement.

12. [ ].

13. [ ].

14. [ ].

15. The notifying party submitted that the agreement is an agreement between a supplier (Bubble-Up) and a re-seller (Donohoe) whereby Donohoe is given the exclusive right, licence and franchise by Bubble Up to bottle and sell Bubble Up beverages. Pursuant to the Agreement, Donohoe is given the right to exploit intellectual property rights relating to the Bubble-Up trade mark and know-how which is divulged to Donohoe in the Agreement. Bubble-Up has provided J Donohoe with specific written instructions as to the use of the Bubble-Up trademarks and know-how in addition to instructions regarding the recipe itself. The trademarks and know how must be used correctly; for example, only certain colours and sizes can be used in bottling the product.

16. The notifying party submitted that the Agreement is a franchise agreement within the terms of the Category Certificate & Licence in respect of agreements between suppliers and re-sellers issued by the Competition Authority on the 4th December, 1998.

17. The notifying party further submitted that J Donohoe benefits from the arrangements by being able to manufacture, to a strictly defined and confidential recipe, the Bubble-Up product, to use the Bubble-Up logos and branding on corporate documents/truck sides, and promotional material in accordance with instructions from Bubble Up International Limited.

18. It is noted by the notifying party that the Competition Authority does not agree with its assessment that the agreement is a franchise agreement within the terms of the Category Certificate & Licence . It is however submitted that even if the Competition Authority does not so agree, such an agreement is very similar to those described in the said Category Certificate & Licence and must by analogy benefit from the reasoning in the Category Certificate & Licence.

19. The notifying party also submitted that Bubble-Up's market share is small and, therefore, the arrangements notified cannot have the object or effect of preventing restricting or distorting competition in the State or in any part of the State. The notifying party submitted that to the contrary it provides competition in a sector otherwise dominated by one brand.

20. The notifying party submitted 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.

21. During the course of the assessment of this notified agreement, the Authority was in correspondence with the notifying party on the merits of whether or not the agreement was a franchise agreement as defined by the Authority’s 1994 Category Licence and by its 1998 Category Certificate & Licence . The notifying party submitted a detailed Annex on 29 April 1999. The notifying party also confirmed by letter, dated 11 February 1999, that the agreement, dated 9 February 1966, “is still in existence and that no amendments have been made to it”.

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’. Both J. Donohoe Limited and Bubble Up International Limited are engaged in the production and distribution of goods for gain, and they are therefore undertakings within the meaning of the Act. The agreement is an agreement between undertakings. The agreement has effect within the State.

23. It is the view of the Authority that this is not a franchise agreement as defined in the Category Licence for Franchise Agreements , November 17, 1994 and as defined in its new Category Certificate & Licence (for agreements between suppliers and resellers), December 4, 1998.

24. The agreement is an exclusive bottling and distribution agreement where Bubble Up International Ltd. have given exclusive licence and right to J Donohoe Ltd to manufacture , bottle and distribute a lemon-lime beverage in the area specified in the agreement under the Bubble-Up trademark.

25. In its assessment of the conditions of competition, the Authority draws particular attention to the fact that the market shares are small and that the likely impact on competition is negligible. Although the agreement is an agreement between potential competitors, vide Authority Decision No. 545 , the Authority has concluded, that the products in question are exposed to significant competition in the relevant market.

26. The Authority is of the view that the agreement does not restrict or distort competition in the relevant market. Therefore the Authority is of the opinion that the agreement does not contravene Section 4(1) of the Act.

27. In the Authority’s opinion J. Donohoe Limited and Bubble Up International Limited are undertakings within the meaning of Section 3(1) of the Competition Act and the notified arrangement constitutes an agreement between undertakings. In the Authority’s opinion the bottling and distribution agreement dated 9th February, 1966 does 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 bottling and distribution agreement dated 9th February, 1966 between J. Donohoe Limited and Bubble Up International Limited notified under Section 7 of the Competition Act on 30th September 1992 (Notification No. CA/768/92E), does not contravene Section 4(1) of the Competition Act, 1991, as amended.

For the Competition Authority,

Professor Patrick McNutt

Chairperson

27 May 1999