Notification No. CA/327/92E ‑ Hotel and Motel Enterprises Limited/The Governor and Company of the Bank of Ireland

Decision No. 292

Introduction

1.	Notification was made by The Governor and Company of the Bank of Ireland (Bank of Ireland) 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 issue a certificate, a licence under Section 4(2), in respect of a lease between Hotel and Motel Enterprises Limited and the Bank of Ireland.

The Facts

(a)	The subject of the notification

2.	The notification concerns the lease of a premises adjoining the Montrose Hotel, Stillorgan Road, Dublin 4 between Hotel and Motel Enterprises Limited as the lessor and Bank of Ireland as the lessee.

(b)	The parties involved

3.	The Bank of Ireland is the second largest commercial bank in Ireland with a network of 290 branches within the State.  Hotel and Motel Enterprises Limited were the owners and landlords of the premises occupied by the Montrose Hotel and the adjoining premises.

(c)	The notified arrangements

4.	The notified agreement was made on 3 June, 1964 for a period of 997 years from 25 March 1964.  The restricted user clauses in the lease are as follows:

(a)	Under clause 2(i) the tenant covenants  "To use the demised premises only for the purpose of carrying on the business therein of Bankers and businesses usually or normally or conveniently conducted in connection with said business (including business carried on by any associate or subsidiary of the Lessee)."

(b)	Under clause 2(p) the tenant convenants "Not to assign, sub‑let or otherwise part with or share the possession of the demised premises or any part thereof without first obtaining the written consent of the Lessor which consent shall not be unreasonably withheld."

(c)	Under clause 5(e) the lessor covenants with the lessee "Not to let or demise or assign to any person, party, Company or Corporation all or any portion of the remainder of the Lessor's premises as described in the Schedule hereto (not hereby demised) or any part of the entire site or grounds thereof for the purpose of carrying on the business of banking or allied businesses."
In addition, there are a number of other standard restrictive covenants and obligations in the lease.

Assessment ‑ The applicability of Section 4(1)

5.	The Authority considers that Hotel and Motel Enterprises Limited and the Bank of Ireland are undertakings and that the notified lease is an agreement between undertakings. The agreement has effect within the State.

6.	The Lease agreement contains standard restrictions and obligations on both landlord and tenant which are necessary for the maintenance of the landlord/tenant relationship in respect of the tenancy. These do not raise issues under the Competition Act. In addition the agreement also provides, by way of the permitted user clause 2(i) a restriction on the use of the premises by the tenant for anything other than banking and under the exclusive user clause 2(p), a restriction on the use of other premises on the site for banking purposes. The permitted user clause is normally based on the use proposed by the tenant at the time the lease is first executed but is also governed by considerations such as the physical characteristics of the premises, the requirements of the Planning Acts and the landlord's own policy, when granting the lease, on how the premises should be used. The Authority considers that such user restrictions in the letting of premises do not have the object or effect of preventing, restricting or distorting competition in the State or any part of the State.

7.	The very act of leasing the premises to a particular tenant prevents competitors of the tenant from using those premises to compete with the tenant.  Clearly this cannot be regarded as preventing, restricting or distorting competition since it would imply that the leasing of a commercial premises in order to carry on a business therein was prohibited unless licensed under section 4(2) of the competition Act.  Clause 2(p) also prevents the landlords from allowing the remainder of the site to be used for the purposes of operating a business in competition with that of the tenant.  In the Authority's opinion, however, this also cannot be regarded as preventing, restricting or distorting competition within the State or any part of it.  Anyone wishing to operate a business in competition with the tenant may do so by occupying any other premises within the same catchment area.  In this instance there are 3 competitor bank branches and 3 building society branches situated within a radius of 1 kilometre of the premises.  On the other hand the tenant is restricted to using the leased premises for banking purposes and is thereby prevented from operating a business which would compete with those operating from the landlord's adjoining premises.  Again such a restriction would not prevent the tenant or anyone else from operating such a business from another premises within the same catchment area. In taking up the lease the tenant negotiates the permitted user required for his business. This is reflected in the lease but if he were subsequently to seek a change of user he could in most instances have recourse to the provisions of the Landlord and Tenant Act 1980 which provide that a Landlord cannot unreasonably withold consent to a change of user requested by a tenant. The object or effect of such permitted user clauses in lease agreements are not therefore anti‑competitive. The Authority therefore considers that the notified agreement between Hotel and Motel Enterprises Ltd and the Bank of Irelan does not offend against section 4(1) of the Competition Act, l99l.

The Certificate

7.	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 Hotel and Motel Enterprises Limited and The Governor and Company of the Bank of Ireland in relation to the lease of a premises in the Montrose Hotel, Stillorgan Road, Dublin 4, notified under Section 7 on 30 September 1992 (notification no. CA/327/92E), does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Des Wall
Member
10 March 1994