Irish Competition Authority Decisions

1. Notification was made 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 arrangements relating to the establishment and operation of a joint venture company, Combined Performance Measurement Services Ltd, [CPMS, henceforth]. A copy of the shareholder’s agreement which was eventually executed on 21 March 1994 between Mercer, IPT and CPMS, was subsequently furnished to the Authority in 1994.

2. The notification concerns the agreement(s) between William M. Mercer Fraser Ltd (Mercer), Pension and Investment Consultants Ltd (PICL), Irish Pension Trust Ltd (IPT) and Combined Performance Measurement Services Ltd (CPMS) in relation to the establishment in May 1990 of the joint venture company, Combined Performance Measurement Services Ltd, to produce reports on the performance of investment funds. The agreements notified included a 1992 Shareholders Agreement in draft form, and the Memorandum and Articles of Association of CPMS.

3. CPMS, the joint venture company, is an Irish company incorporated on 28 May 1990 and is engaged primarily in the production of reports constituting actuarial assessments of the performance of investment funds. The company has no employees of its own, with the use of premises and staff provided by its shareholders to whom it pays management charges. At the time of the establishment of the joint venture each of the 3 founding parties, Mercer, IPT and PICL held a one third interest in the company. Following the acquisition of PICL by Mercer the issued share capital of CPMS of £300 in £1 shares is now held as follows: Ordinary shares: Mercer Ltd 100, Irish Pension Trust Ltd 100; Deferred shares: Pension and Investment Consultants Ltd (subsidiary of Mercer Ltd) 50 and Irish Pension Trust Ltd 50.

4. William M. Mercer Fraser Ltd. now named Mercer Ltd (Mercer) is an Irish company engaged in the provision of actuarial services and pension administration and consultancy services. It is a wholly owned subsidiary of the US based William M. Mercer Inc. which in turn is owned by Marsh & McLennan Companies, Inc., New York. Mercer's turnover in 1991 was £1.9m. Pension and Investment Consultants Ltd (PICL) was an Irish company engaged in the provision of employee benefit and pension related financial services with an income from fees and commissions of £3m in 1991. Its business was merged with that of Mercer following a take-over by PICL's US parent by Mercer's US parent company in April 1992.

5. Irish Pension Trust Ltd is an Irish company engaged in the provision of employee benefit and pension related financial services. At notification, it was part of the Noble Lowndes group owned by the UK based TSB Group. The Noble Lowndes group of companies was acquired by the UK based Sedgewick Group plc in August 1993 and Irish Pension Trust Ltd is now owned by a Sedgewick subsidiary, Sedgewick Europe BV.

6. The Authority notes that in August 1998 the US based Marsh & McLennan, the parent of William M. Mercer Fraser Ltd (Mercer), had launched an agreed take-over of the UK based Sedgwick Group Ltd, the parent of Irish Pensions Trust Ltd. The proposal, Marsh & McLennan/Sedgewick, was notified to the EU Commission in September 1998 in accordance with the EU Merger Regulation and cleared under Phase 1, Article 6(1)(b), in October 1998.

7. The service provided by CPMS is an industry-wide analysis of the investment performance of pension funds and the comparison of funds with one another and the provision of reports to clients. At the time of notification, some 240 portfolios involving £3.5 billion in funds were being monitored and analysed. The service includes the provision of individual client reports, investment manager reports, investment bulletins and general annual reports. The clients or purchasers of these services are trustees of large occupational funds and their sponsoring employers. A large number of investment managers including subsidiaries of banks and insurance companies participate in the CPMS service. While trustees of pension funds receive reports from their own investment manager on the progress of their funds, CPMS provides the analysis on their performance relative to other funds.

8. The Authority is of the view that the relevant market is the market for the provision of a comprehensive portfolio monitoring, measurement and advice on the investment performance of Irish pension funds. The geographic market is the State.

9. The shareholders agreement was executed between Mercer, IPT and CPMS on 21 March 1994 to regulate the relationship between Mercer and IPT as the holders of the entire share capital of the company. Clause 3.1 provides that the business, as defined in Clause 2(1)(1) of the Memorandum of Association shall be conducted on sound commercial principles and shall not be altered or extended without the consent of the majority of the shareholders. Restrictions are placed on the conduct of the company of its internal affairs without the consent of the majority of shareholders. Under Clause 8 the parties recognise that the company should not require additional financing but if circumstances change finance will be raised by way of loans, or loan guarantees equally from each shareholder. Clause 9 provides that in the event of a change in ownership of a corporate shareholder, the other shareholder may require, if it is demonstrably in the best interest of the company or business, the transfer to him of the corporate shareholders shares.

10. Under Clause 6, neither the Shareholders nor the Company shall divulge or communicate to any person (other than those whose province it is to know the same or with proper authority) or use or exploit for any purpose whatever any of the trade secrets or confidential knowledge or information or any financial or trading information relating to the other Shareholders and/or the Company which the relevant Shareholder or the Company may receive or obtain as a result of its shareholding in the Company, and each Shareholder shall use its reasonable endeavours to prevent its employees from so acting. This restriction shall continue to apply for a period of three years after the expiration or sooner termination of this Agreement but shall cease to apply to information or knowledge which may properly come into the public domain within such period through no fault of the Shareholder so restricted.

11. Under Clause 7.3 it will not either on its own behalf or on behalf of any person, firm, company, or corporation competing or endeavouring to compete with the Company directly or indirectly solicit or endeavour to solicit or obtain the custom of any person, firm, company or corporation that is a customer of the Company or which at any time in the three years preceding the date of his ceasing to be a Shareholder in or employed by the Company was a customer of the Company provided that this restriction shall not operate so as to prevent any Shareholder from offering or providing services of a type which do not compete with the Business.

12. The notifying party claimed that, in general, neither the provisions nor the agreement itself have as their 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 Act. They submitted that the establishment of CPMS had neither affected competition between the parent companies or the position of third parties

13. 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.

14. 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”.

15. 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’. William M. Mercer Fraser Ltd (Mercer), Pension and Investment Consultants Ltd (PICL), Irish Pension Trust Ltd (IPT) are corporate bodies engaged for gain primarily in the production of reports constituting actuarial assessments of the performance of investment funds. They are therefore undertakings and the agreement is an agreement between undertakings. The agreement has effect within the State

(c) Applicability of Section 4(1)

16. In its Decision No. 2 of 14 May 1992 [1], the Competition Authority decided that two companies which were wholly-owned subsidiaries of the same holding company were not independent undertakings but were in fact separate arms of the same organisation and were not therefore in competition with each other. The Authority held that the agreement did not contravene Section 4(1) because ICI and CG had no real freedom to determine their course of action on the relevant market, and the proposed arrangements merely involved a reallocation of functions within the group. Similarly, in its Decision No. 5 of 30 June 1992 [2], an agreement between Performing Right Society (PRS) and Irish Music Rights Organisation (IMRO), which at that time had a parent-subsidiary relationship, was found by the Authority not to contravene Section 4(1) for the same reasons. In the case of AGF-Irish Life/NEM Insurance [3], the agreement involved a subsidiary which was not wholly-owned. Nevertheless, the Authority concluded that “there is no question of the members of the group having sufficient commercial autonomy for them to decide to compete with one another in their respective markets. Consequently the Authority has come to the same conclusion as in AGFI and PRS/IMRO that such an arrangement does not prevent, restrict or distort competition.” The Authority re-affirmed its position on parent and subsidiaries in Decision No. 542.

17. The Authority is of the view that the merger between parents Marsh & McLennan and Sedgwick Group plc, is sufficient to bring the parties to this notified agreement under common control, according to the criteria of the Mergers Act and the Authority’s Category Certificate for Mergers . As the undertakings involved are not competitors, the Authority considers that the notified agreement does not have the object or effect of preventing, restricting or distorting competition and therefore does not contravene Section 4(1).

18. In the Authority’s opinion William M. Mercer Fraser Ltd (Mercer), Pension and Investment Consultants Ltd (PICL), Irish Pension Trust Ltd (IPT) are undertakings within the meaning of section 3(1) of the Competition Act and the notified arrangement constitutes an agreement which applies within the State This agreement does not contravene Section 4(1) because the companies are under common control and are not in competition with each other.

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 joint venture agreement dated 28 May 1990 between William M. Mercer Fraser Ltd, Pension and Investment Consultants Ltd, Irish Pension Trust Ltd and Combined Performance Measurement Services Ltd notified under Section 7 of the Competition Act on 30 September 1992 (Notification No. CA/279/92E), does not contravene section 4(1) of the Competition Act, 1991, as amended.

[1] CA/7/91 - AGF- Irish Life Holdings plc

[2] CA/1/91E - Performing Right Society and Irish Music Rights Organisation

[3] Decision No. 18 of 9 June 1993: CA/12/93 - AGF-Irish Life/NEM Insurance