Notification nos. CA/534/92E and CA/535/92E ‑ Trustees of Telecom Eireann Superannuation Fund/Bord Telecom Eireann.

Decision No. 338

Introduction

1.  Notifications were made by the Trustees of Telecom Eireann Superannuation Fund 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 leases between the Trustees of Telecom Eireann Superannuation Fund and Bord Telecom Eireann.

The Facts

(a) Subject of the notification

2.  The notifications concern the lease of offices at 1 and 2, Gaiety Green, South King Street, Dublin 2 between the Trustees of Telecom Eireann Superannuation Fund as lessor and Bord Telecom Eireann as the lessee.

(b) The parties involved

3.  Telecom Eireann Superannuation Fund is engaged in the investment of funds and is the owner and landlord of offices at Gaiety Green. Bord Telecom Eireann is involved in the provision of telecommunications networks and services in Ireland.

(c) The notified arrangements

4.  The notified leases were made on 10 October,1984 for a period of 35 years from 15 October,1984. The restricted user clauses in the leases are as follows:

(a) Under clause D(18) the tenant covenants with the landlord:
  "  Not without the consent in writing of the Lessor to use or suffer the demised premises or any part thereof to be used for residental purposes or for any purpose other than as offices in relation to the businesses of the Lessee (save as required by the Planning regulations)."

(b) Under clause D(33) the tenant covenants with the landlord:
  " Not to assign transfer or underlet or part with or share the possession or permit the occupation by a licensee or permit any underletting or sub‑letting or any assignment of any underlease or sub‑lease or any parting by any sub‑lessee with possession (a) of the whole of the demised premises without the previous consent in writing of the Lessor ( but so that such consent shall not be unreasonably withheld) or (b) of any part of the demised premises under any circumstances whatsoever..."

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

Assessment ‑ The applicability of Section 4(1)

5.  The Authority considers that Telecom Eireann Superannuation Fund and Bord Telecom Eireann are undertakings and that the notified agreements are agreements between undertakings. The agreements have effect within the State.

6.  The lease agreements contain standard restrictions and obligations on both the landlord and tenant which are necessary for the maintenance of the landlord/tenant relationship in respect of the tenancies. These do not raise issues under the Competition Act. 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. Anyone wishing to operate a business in competition with the tenant, to the extent that this is permitted by legislation, may do so by occupying any other premises within the State.

7.  In addition the agreements also provide, by way of the permitted user clause D(18) , restrictions on the use of the premises but which effectively allow the premises to be used for the purpose of the business of the tenant. Such permitted user clauses are normally based on the user proposed by the tenant at the time the lease is first executed but are 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 in any part of the State. 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 withhold consent to a change of user requested by the tenant. In addition the tenant is free to undertake other businesses in many other premises, both in the vicinity or elsewhere in the State. The object or effect of such permitted user clauses in the lease agreements is not therefore anti‑competitive. The Authority therefore considers that the notified agreements between the Trustees of Telecom Eireann Superannuation Fund and Bord Telecom Eireann do not offend against Section 4(1) of the Competition Act,1991.

The Certificate

8.  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 agreements between the Trustees of Telecom Eireann Superannuation Fund and Bord Telecom Eireann in relation to the lease of premises at nos.1 and 2, Gaiety Green, South King Street, Dublin 2 notified under Section 7 on 30 September,1992 (notification nos. CA/534/92E and CA/535/92E), do not offend against Section 4(1) of the Competition Act,1991.

For The Competition Authority

Des Wall
Member
14 June,1994.