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1. Notification was made by Business and Trading House Investment Company Ltd (BTHIC) 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 grant a certificate, a licence under Section 4(2) in respect of a Share Subscription and Shareholders Agreement dated 26 July 1990 relating to the subscription for new shares in Tara Meats (Kilbeggan) Ltd (Tara). Following the issue of a Statement of Objections on 19 May 1995 details of a further agreement amending the notified agreement was furnished to the Authority.

2. The notification concerns the share subscription and shareholders agreement between Anthony and Rita Dunne, Barry Sturgeon and John Mullan (the covenantors), BTHIC and Tara in relation to the acquisition by a designated investment fund, managed by BTHIC, of new shares in Tara .

3. The parties to the agreement are as follows:

(i) Tara was a private company incorporated in 1978 and is engaged in the processing and distribution of meat products. At the date of the agreement it had an issued share capital of £138,900 made up 889,000 A ordinary shares and 500,000 B ordinary shares all of 10p each. The shareholders of Tara at the date of the agreement were as follows:

A ordinary shares B ordinary

Anthony S. Dunne 250,000

Rita Dunne 283,400

John R Mullan 177,800

Barry G Sturgeon 177,800

*BTHIC 1989 Fund 500,000

889,000 500,000

(* This relates to a 1989 designated investment fund managed by BTHIC)

(ii) Messrs Dunne, Mullan and Sturgeon were directors and owners of Tara. These 3 directors and Rita Dunne are covenantors under the agreement.

(iii) BTHIC is engaged in the business of corporate finance and in the promotion and management of designated investment funds. It is manager of the Business and Trading House Investment Fund whose trustee subscribed for 500,000 new B ordinary shares in Tara in 1989 and the Tourism and Business Expansion Fund (TBE Fund) which subscribed for 250,000 C ordinary shares of 10p each in Tara under this agreement.

4. (a) The notified agreement was made on 26 July 1990 for the purposes of providing for the subscription by the TBE fund for 250,000 C ordinary shares in Tara and regulating the future conduct of the business of the investee company and the relationship between all the shareholders.

(b) The agreement provides for the preconditions for the investment, completion arrangements and warranties/indemnities by the covenantors. Each party undertakes to ensure that the company will carry on the business to best advantage and that the business will be controlled by the company board. The agreement provides for the nomination of a director by BTHIC on behalf of the TBE fund, the frequency of board meetings and the regular supply of financial and other data to each party. The BES status of the company will be safeguarded. Restricted transactions (including changes in the company's business, issue of shares, making of loans, borrowings or capital expenditure above limits, onerous contracts) which require the prior consent in writing of the BTHIC are listed. There are also provisions for the exercise of Put and Call options after 5 years whereby the covenantors may be required or may opt to purchase the fund investors' shares.

(c) The agreement terminates in relation to each party to the agreement when he disposes of his shares in the investee company except in relation to those provisions of a nature capable of being enforced after termination. Termination may also be sought by the manager in the event of a serious breach of the agreement by the covenantors.

(d) Clause 7.1 of the agreement contains the following competition covenants viz.

"Each of the Covenantors hereby undertakes and covenants with the Manager (on behalf of itself and the Subscriber and as trustee for all others the beneficial owners for the time being of the C Ordinary shares subscribed for pursuant to this Agreement and on whose behalf the Manager manages the investment made in the Company hereunder) and the Company as follows:

(i) that otherwise than through the medium of the Company he will not for a period commencing on the date hereof and terminating five years from the date hereof or eighteen months from the date of his ceasing to be a shareholder in, a director of or employed by the Company whichever is the later either as principal, partner, agent, servant, assistant director or otherwise howsoever whether directly or indirectly carry on or help or assist in carrying on within the Republic of Ireland the Relevant Business ;

(iv) that he will not either on his own behalf or on behalf of any person firm company or corporation competing or endeavouring to compete with the Company directly or indirectly solicit or endeavour to solicit or obtain the custom of any person firm company or corporation that is a customer of the Company or which at any time in the three years preceding the date of his ceasing to be a shareholder in or employed by the Company was a customer of the Company.

(v) that he will not at any time either on his own behalf or on behalf of such persons aforesaid directly or indirectly solicit or endeavour to solicit or obtain the services of any person employed by the Company or use his personal knowledge or influence over any such customer or employee or any person firm company or corporation known to him as contracting with or having dealing with the Company to or for his own benefit or that of any other person, firm, company or corporation in competition with the Company;"

Relevant business is defined in the agreement as "the business of meat processing, distribution and selling".

5. Following the issue of a Statement of Objections on 19 May 1995, Solicitors for Dairy Gold Co-Operative Society Ltd advised the Authority that that company had purchased the majority of the issued share capital in Tara Meats in December 1993. Under clause 10 of a Shareholders Agreement made on 22 December 1993 between Dairygold, Tara Meats, BHTIC and the promoters (Messrs. Dunne, Sturgeon and Mullan and Ms Dunne) Tara Meats and BTH agreed to release the promoters from their obligations under the notified agreement (save in respect of warranties/indemnities given in relation to the companies BES status)

6. 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.

7. 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".

8. Tara is engaged for gain in meat processing and is therefore an undertaking. Three of the covenantors, Anthony S Dunne, Barry G Sturgeon and John R. Mullan were directors of Tara and with Rita Dunne collectively held a majority holding of the company's equity. As owners of Tara they are also regarded as undertakings. BTHIC is engaged in corporate finance and acts as manager of designated investment funds for which it is in receipt of fees and commission. It is therefore an undertaking. The notified agreement is an agreement between undertakings. The agreement has effect within the State.

9. The Share Subscription and Shareholders Agreement constitutes an agreement whereby a designated investment fund has agreed to make a venture capital type investment to obtain a minority shareholding in Tara. This, in effect, involves an investment by a large number of small personal investors for a combined minority stake in the company. Such an agreement is not per se anti-competitive and does not offend against Section 4(1) of the Competition Act.

10. The agreement provides for a number of provisions relating to the management of the company and for standard restrictions on transactions which the company may not undertake without the consent of BTHIC. The Authority has decided in a number of its decisions that such provisions, which are designed to protect the minority shareholding position of the investor and are concerned with the internal running of the company, do not offend against Section 4(1).

11. Clause 7.1 of the agreement imposed non-compete and non-solicit restrictions on the covenantors which prevented any of them from

- other than through the medium of the company, being in any way involved in the relevant business (meat processing, distribution and selling) within the State. This restriction applies for a period of 5 years from the date of the agreement or 18 months after each covenantor ceases to be a shareholder in, or a director of or employed by the company, whichever is the later (non-compete clause 7.1(i)).

- either on his own behalf or on behalf of any competitor, soliciting customers or employees of the company. This restriction appears to apply for an indefinite period (non-solicit) clauses 7.1(iv) and 7.1(v)).

In its decision on Cambridge-ACT/Imari (1) the Authority indicated that, in general, a restriction on parties in a business competing with it for so long as they remain part of the business, does not offend against Section 4(1). Insofar therefore as the non-compete and non-solicit restrictions applied to the period when the covenantors remained as shareholders, directors or employees of Tara, these provisions did not offend against Section 4(1) of the Competition Act.

12. The non-compete clause 7.1(i) was to apply for a period of 5 years from the date of the agreement or 18 months from the date each covenantor ceased to be a shareholder in, or director of or employed by the company, whichever was the later. Taking into account the particular nature of the BES investment involved, the Authority considers that the setting of a 5 year non-competition period on the owners and majority shareholders of the investee company, where the duration of the non-compete clause equates with the estimated duration of the Fund's subscription to the company, does not for the reasons given in its Decision No. 396 (2) offend against Section 4(1).

13 As indicated in para. 11, the Authority does not consider the non-compete restriction for the period that the covenantors continue to hold shares in the company as offending against Section 4(1). A similar view would be taken in relation to non-compete restrictions which apply for a period after a disposal of shares provided that the restrictions do not exceed what is necessary to enable the purchaser to secure the goodwill of the business which would, effectively, be sold by the disposal of shares. In considering these restrictions the Authority would have regard both to the duration of the restriction, and its scope, including its geographic scope. Under the notified agreement the non-compete restrictions were to apply for a period of 18 months after disposal of shares which is within the period which the Authority generally finds acceptable.

14. The scope of the restriction related to the business of meat processing, distribution and selling within the State but in the light of the countrywide market for meat products, with all similar meat companies within the State competing for supplies and customers, the Authority accepts that the scope of the restriction insofar as it was to apply for a period of 18 months from date of disposal of shares did not offend against Section 4(1).

15. Under the notified agreement the non-compete restrictions were also to apply for 18 months after the date any of the covenantors ceased to be a director of, or employed by, the company if this had been later than the events considered in paras. 12 and 13 above. In effect, if any of the covenantors were to continue as a director or employee of the company beyond the end of those periods, the non-competition provisions of the agreement would have continued to apply until 18 months after he eventually ceased his directorship or employment, whichever was the later. This had the object and could have had the effect of extending the non-competition period far beyond the period necessary for the transfer of the business and this provision therefore offends against Section 4(1) of the Competition Act, 1991. As this requirement has now been waived under the shareholders agreement dated 22 December 1993, this clause no longer offends against Section 4(1).

16. Clause 6.1 (iv) of the agreement prohibited each covenantor from soliciting custom from persons who were customers of the company during the 3 years preceding the date of their ceasing to be a shareholder or employee of the company. While for the reasons explained in paras. 12 and 13 above the Authority would accept such a restriction for the 5 year period for the BES investment or for 18 months after cessation of the shareholding, if later, the restriction applied for an indefinite period of time and therefore offended against Section 4(1). A similar situation applied to the restriction at clause 6.1 (v) of the agreement in relation to the soliciting of employees which was also of indefinite duration and therefore also offended against Section 4(1). As the covenantors were released from these obligations under the shareholders agreement dated 22 December 1993 this clause no longer offends against Section 4(1).

17. In the Authority's opinion Tara Meats (Kilbeggan) Ltd, Anthony and Rita Dunne, Barry Sturgeon and John Mullan and Business and Trading House Investment Company Ltd are undertakings within the meaning of Section 3(1) of the Competition Act, 1991 and the Share Subscription and Shareholders Agreement dated 26 July 1990 is an agreement between undertakings. In the Authority's opinion the notified agreement, as amended by the Shareholders Agreement dated 22 December 1993 between Dairygold Co-Operative Society Limited, Tara Meats (Kilbeggan) Limited, Anthony S. Dunne, Barry G. Sturgeon, John R. Mullan and Rita Dunne and Business and Trading House Investment Company Limited, does not offend against Section 4(1) of the Competition Act, 1991.

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 Share Subscription and Shareholders Agreement dated 26 July 1990 between Tara Meats (Kilbeggan) Ltd, Anthony and Rita Dunne, Barry Sturgeon and John Mullan and Business and Trading House Investment Company Ltd notified under Section 7(2) on 30 September 1992 (notification no. CA/1065/92E), as amended by the Shareholders Agreement dated 22 December 1993, between Dairygold Co-Operative Society Limited, Tara Meats (Kilbeggan) Limited, Anthony S. Dunne, Barry G. Sturgeon, John R. Mullan and Rita Dunne and Business and Trading House Investment Company Limited, does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Des Wall

Member

8 September 1995

(1) Decision No. 24, 21 June 1993

(2) Prince of Wales Hotel Ltd/Share Subscription and Shareholders Agreement 1991, Decision No. 396, 25 April 1995.