Notification No. CA/694/92E ‑ Shamrock Foods Limited/Brookline  Limited

Decision No. 32

Introduction

1.	An agreement between Brookline Limited (Brookline) and  Whitworth Holdings Limited (Whitworths), an English‑based company, for the purchase and sale of Shamrock Foods Limited (Shamrock Foods) and Shamrock Foods (Distributors) Limited (Shamrock Distributors) containing a non‑compete clause was notified to the Competition Authority on 30 September 1992.  The notification requested a certificate or, in the event of a certificate being refused, a licence.

The Facts

(a)	The Subject of the Notification

2.  	The notification relates to an agreement dated 13 October 1989 between Whitworth and Brookline whereby the Whitworth Group agrees to sell its 75% interest in Shamrock Foods and 100% interest in Shamrock Distributors to Brookline.  The agreement also contains a non‑compete provision.

(b)	The Parties

3.	Shamrock Foods and Shamrock Distributors are limited companies incorporated in the State.  Shamrock Foods was 75% owned and Shamrock Distributors wholly‑owned, by Whitworths.  Whitworths is an English‑registered company based in Northampton.  

Brookline is a limited company registered in the State.  It is jointly‑owned by Mr. John Francis Deignan, Mr. Sean Patrick Deignan (the Deignans) and IAWS Group plc (IAWS).

(c)	The Arrangements

4.	The notification relates to an agreement, dated 13 October 1989, for the sale of Whitworth's interest in Shamrock Foods and Shamrock Distributors to Brookline.  Clause 9.1 of the agreement prevents the vendors from becoming involved in a competing business for a period of three years from the date of completion.  In addition, clause 9.3.1 provides that in the event of the Whitworth Group acquiring at least a 20% interest in a company which competed with Brookline, it was obliged to offer that interest for sale to Brookline.  The parties indicated by letter dated 5 July 1993 that it was intended that this clause be of the same duration as that contained in clause 9.1. The three‑year period expired on 13 October 1992.

Assessment

(a)	Section 4(1)
5.	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 trade in any goods or services in the State or in any part of the State are prohibited and void'.

(b)	The Undertakings and the Agreement

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.'  Both Brookline and Whitworths are corporate bodies engaged for gain and are, therefore, undertakings.

(c)	Applicability of Section 4(1)

7.	As the sale of business was completed prior to 1 October, 1991, the date on which the Competition Act came into force, this element of the agreement had been discharged by performance before the Act commenced.  The property which was the subject of the agreement had been transferred.  In the Authority's view, the prohibition in 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. As the merger or sale element of the 1991 transaction was discharged prior to the commencement of the Act, that aspect of the arrangements does not come within the scope of Section 4(1).

8.	The agreement contained a three‑year non‑compete clause.  In the Authority's opinion, this did not have the object or effect of preventing, restricting or distorting competition.  

The Decision

9.	In the Authority's opinion, Whitworths Holdings Limited and Brookline Limited are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified arrangements for the purchase and sale of Shamrock Foods Limited and Shamrock Foods (Distributors) Limited  constitute an agreement between undertakings. 

10.	The Authority believes that as the sale element of the transaction was discharged prior to the commencement of the Competition Act, the agreement for the purchase and sale of Shamrock Foods Limited and Shamrock Foods (Distributors) Limited does not come within the scope of Section 4(1) of the  Act.  The non‑compete clause was ancillary to the main agreement and did not offend against section 4(1).

The Certificate

11.	The Competition Authority has issued the following decision:

The Competition Authority certifies that in its opinion, on the basis of the facts in its possession, the agreement between Whitworths Holdings Limited and Brookline Limited for the purchase and sale of Shamrock Foods Limited and Shamrock Foods (Distributors) Limited (notification no. CA/694/92E), notified on 30 September 1992 under Section 7, did not offend against Section 4(1) of the Competition Act, 1991, during the period in which it operated.

For the Competition Authority

Patrick Massey
Member
9 September 1993