Irish Competition Authority Decisions

1. This decision concerns an exclusive purchasing and revolving credit agreement, notified on 31 May, 1995, between Balladeer Limited (Balladeer) and Carlton Cards Limited (Carlton). The notification requested a certificate under Section 4(4) or, in the event of a refusal to issue a certificate, a licence under Section 4(2) of the Competition Act, 1991.

2. The notification concerns an agreement which was signed on 6 October 1993. Under the terms of the agreement Balladeer undertakes to purchase exclusively greeting cards from Carlton and Carlton agrees to grant Balladeer a substantial and revolving credit facility in respect of such purchases.

3. Carlton is a limited company located at Unit 4, Carriglea Industrial Estate, Naas Road, Dublin 12. Its parent company is an English company, Carlton Cards Limited, but, the ultimate holding company is American Greetings Corporation of Cleveland, Ohio, U.S.A. Carlton is engaged in the importation, distribution and sale of greeting cards. Balladeer is based at Unit 3, Merchant's Quay, Cork and is a retail outlet involved in the business of selling greeting cards. Balladeer's turnover for the financial year ending June 1994 was £[ ].

4. The product concerned in this notification is greeting cards. The Authority considers that the greeting card market is a separate product market. According to the parties, there are approximately 3,000 manufacturers and distributors of such cards and there is a wide range and variety of brands of greeting cards available.

5. There are no substantial barriers to entry to the greeting card market. No special legal authorisations or permits are required. According to the parties there are 3,000 retailers of greeting cards in Ireland with 400 of these in the Cork area. Products are available from a variety of sources. Retailers may obtain greeting cards from suppliers in Ireland or overseas. In fact a great number of greeting cards sold in Ireland are manufactured abroad. There are many retail outlets available for letting in Cork city and county and new shopping centres are providing different opportunities for card shops. The Authority considers that the relevant geographical market is Cork city. It is simply incorrect to argue that the geographical market involved is the English-speaking world as has been indicated by the parties.

6. The notified arrangements concern a purchasing and revolving credit agreement dated 6 October 1993 between Carlton and Balladeer. The agreement provides that Balladeer shall, for a period of six years, purchase greeting cards exclusively from Carlton and Carlton agrees to afford Balladeer a credit facility of up to a maximum of £[ ]. The agreement was concluded because Balladeer owed Carlton a debt of £[ ] and rather than let Balladeer cease trading with Carlton remaining unpaid this arrangement was put in place.

7. Clause 2.1 provides that for the period of six years from the date of the Agreement (i.e. from 6th October, 1993) Balladeer would:-

"2.1.1 purchase direct from Carlton exclusively and from no other person, firm, company, all of its Basic Every Day Stock Control;

2.1.2 exhibit Products purchased from Carlton within the Premises in such a way that predominance is not given to any other goods over the Products of Carlton;

2.1.3 use all reasonable endeavours to promote the sale of Products purchased from Carlton;

2.1.4 produce to Carlton on demand, full and complete details of the retail sales throughout the Premises by product type in order that Carlton may satisfy itself that the terms of this Clause 2 above have been observed."

In the Agreement, the term "Basic Every Day Stock Control" means "Balladeer's Basic Every Day Stock Control requirements of Products which would be required to fill a display of not less than 15 and not more than 17 linear metres of display racking filled with greeting cards." In the Agreement, the term "Premises" means Unit G3, Merchants Quay Shopping Centre, Cork. Clause 3 of the Agreement provides that with effect from the date of the Agreement, Carlton agrees to afford to Balladeer a revolving credit facility of up to a maximum of IR£[ ] in respect of Products supplied by Carlton to Balladeer under the Agreement.

8. The parties submitted, in support of their request for a certificate, that the agreement did not adversely prevent, restrict or distort competition in Ireland or in any part of Ireland. It was designed to maintain a competitor in the market which might otherwise be eliminated due to the debt owing to Carlton. It was argued that Carlton and Balladeer were not operating an exclusive purchase agreement, but a priority purchasing agreement which would subsist only for the period necessary to clear the debt involved. Balladeer was entitled to purchase products for its premises from other manufacturers or suppliers. In addition Balladeer may purchase products for other premises (which it may have now or in the future) from manufacturers or suppliers other than Carlton. The existence of many competing outlets in the relevant geographical area meant that the consumer had a choice in regard to the purchasing of products concerned. Finally, it was submitted that it was not in Carlton's interests to let Balladeer become insolvent and therefore it was unlikely that Carlton would act anti-competitively in its dealings with Balladeer. The parties also submitted a number of arguments in support of a licence but these are not relevant in this case and are not dealt with here.

9. Section 4(1) of the Competition Act states '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.'

10. 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.' The parties to the present agreement are Carlton and Balladeer. Carlton is a corporate body engaged for gain in the importation, distribution and sale of greeting cards. Balladeer is a retail outlet which is engaged for gain in the business of selling greeting cards. Therefore the notified agreement is an agreement between undertakings.

11. The present arrangements constitute an agreement between undertakings whereby Balladeer agrees to purchase greeting cards exclusively from Carlton and Carlton grants Balladeer a credit facility of up to £[ ] in respect of such purchases. In the Authority's opinion this amounts to an exclusive purchase agreement, in spite of the claims made by the parties, since clause 2.1.1 specifically requires Balladeer to purchase exclusively from Carlton and from no other person, firm or company. The Authority accepts that the object of the agreement was to prevent the collapse of Balladeer and not to prevent or restrict competition. It does not believe however that the agreement will have any significant impact on competition in the greeting card market in Cork city. This restriction on purchasing applies to one outlet only while there is a very large number of retail outlets in the Cork area selling greeting cards. Given the existence of such a large number of competing retail outlets, the fact that one shop is restricted to purchasing only from Carlton does not prevent , restrict or distort competition. Consequently, in the Authority's opinion the agreement does not offend against Section 4(1) of the Act.

12. In the Authority's opinion Carlton and Balladeer are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified agreement constitutes an agreement between undertakings. In the Authority's opinion the agreement does not have, as its object or effect, the prevention, restriction or distortion of competition.

13. 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 of 6 October 1993 between Carlton Cards Limited and Balladeer Limited (notification no. CA/22/95), notified on 31 May 1995 under Section 7, does not offend against section 4(1) of the Competition Act.

For the Competition Authority

Patrick Massey

Member

20 October 1995