Competition Authority decision of 22 December 1994 relating to a proceeding  under Section 4 of the Competition Act, 1991                             
                               
Notification No:CA/588/92E ‑ Power Supermarkets Limited/Town and County Investments plc

Decision No: 386

Introduction

1.       Notification was made by Power Supermarkets Limited on
30 September, l992 with a request for a certificate under Section 4(4) of the Competition Act, l99l or, in the event of a refusal by the Competition Authority to issue a certificate, a licence under Section 4(2) in respect of a lease between Power Supermarkets Limited (Powers) and Town and County Investments plc (Town and County).

The Facts

(a)  Subject of the notification

2.      The notification concerns a lease relating to the sale of premises at 67/68 William Street, Limerick between Powers as landlord and Town and County as tenant.

(b)  The parties involved

3.    Powers trades as a supermarket with outlets throughout the State including one at Arthurs Quay Shopping Centre in Limerick which is 288 yards from the William Street premises. Town and County is engaged in property investment and in the letting of commercial premises.

(c)  The notified arrangements

4.       The notified sale and lease agreement was made on l9 December, l989 to provide for restrictions and covenants following an agreement for the sale by way of lease of the property at William Street by Powers to Town and County.   Under the notified agreement, in consideration of the purchase price paid, the premises are demised to Town and County for a term of 900 years from 25 March, l989 subject to a small rent.  Clause 3 contains the following  restricted user clause

 "The Tenant hereby covenants with the Landlord as the owner of the Supermarket in the Arthurs Quay Centre in the City of Limerick .....not at any time during the period of ten years from the lst day of November, l989 to sell or permit or suffer the sale of groceries, food, foodstuffs or food products in an area exceeding five hundred square feet in the demised premises and not to make any subletting or grant any licence to use or part with or share the possession of the said demised premises or any part thereof save on the basis that any such subtenant licensee or possessor shall first covenant under seal with the Landlord in manner similar to this ..."

In addition, there are a number of other standard restrictive covenants and obligations in the lease.

Assessment ‑ The Applicability of Section 4(1)

(a)  Section 4(1)

5.   Section 4(1) of the Competition Act 1991 prohibits and renders void 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 any goods or services in the State, or in any part of the State.

(b)  The Undertakings.

6.   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".

7. Powers is  engaged in the business of supermarket at a large number of outlets throughout the State and is an undertaking. Town and County is engaged in the investment in and letting of property for gain and is therefore an undertaking. The notified lease agreement is an agreement between undertakings. The agreement has effect within the State.

8.  As the sale of the premise was completed prior to 1 October 1991, the date the Competition Act came into force, that element of the agreement was discharged by performance before the Act came into force. The property that was the subject of the agreement has been transferred. In the Authority's view, the prohibition under Section 4(1) only applies to a current or continuing contractual commitment or one entered into subsequent to the coming into force of the Act.  In any event the Authority would not consider the sale, per se, of a property as raising any issues under the Competition Act.

9.   The sale agreement contains a continuing contractual commitment on the part of Town and County, as tenant, in that it has covenanted for a period of 10 years not to sell or permit the sale of groceries, food, foodstuffs or food products in an area exceeding 500 square feet in the premises demised nor to let any part without obtaining a similar covenant on the part of the tenant. The restriction does not extend to restaurant or fast food sales.

10.    The Authority  does not consider that the restrictive user clause in the notified agreement, which applies to the use of the William Street premises, could be regarded as preventing, restricting or distorting competition within the State or in any part of the State. Both Dunnes Stores and Roches have supermarkets in the near locality.  In addition, because Limerick City is relatively small there are several suburban shopping centres with supermarkets within a few minutes drive. The purchasers acquired the property for their particular purposes in the knowledge of the restrictive covenant applying to the premises.  If the purchasers wished to acquire properties which could be used for the sale of groceries, food etc in an area exceeding 500 square feet, they were free to do so elsewhere in Limerick City or its environs, subject to the grant of planning permission. Similarly any other undertaking, wishing to compete with either the vendor (whose nearest place of business is 288 yards away) or with the purchaser, is not restricted by the agreement from doing so in the vicinity or elsewhere .  The Authority believes however that where it is not feasible for competitors to obtain alternative premises to those affected by restrictive user clauses, the position would be rather different, and that in those circumstances such restrictions could have the effect of restricting competition.   The Authority therefore considers that the notified agreement between Power Supermarkets Ltd and Town and County Investments plc does not offend against Section 4(1) of the Competition Act, 1991.

The Certificate

11.    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 Power Supermarkets Limited and Town and County Investments plc in relation to the lease of the premises at 67/8 William St, Limerick, notified under Section 7 on 30 September 1992 (notification no. CA/588/92E), does not offend against Section 4(1) of the Competition Act, l99l.

For the Competition Authority

Des Wall
Member
22 December 1994