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First Rate Bureau De Change Ltd. /Minister for the Marine. [1998] IECA 511 (17th June, 1998)
Competition
Authority Decision of 17 June 1998 relating to a proceeding under Section 4 of
the Competition Act, 1991.
Notification
No. CA/8/97 - First Rate Bureau De Change Ltd., / Minister for the Marine.
Decision
No. 511
Introduction.
1 Notification
was made by First Rate Bureau De Change Limited (“First Rate”) on
27 May, 1997 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
Concession Agreement between First Rate Bureau de Change Limited and the
Minister for the Marine ( the Minister )
The
Facts
(a)
Subject of the Notification
2 The
notification concerns an exclusive concession and licence agreement (“the
Concession Agreement”) dated the 8 July 1996 which has been entered into
between First Rate and the Minister for the operation of a Bureau de Change
and automated teller machine facility at Shop Unit No. 3, the Ferry Terminal,
Dun Laoghaire Harbour. The arrangements continue in force until 25 November
2000 in accordance with Clause 2 of the Concession Arrangement.
(b)
The Parties Involved
3 The
parties to the Agreement are First Rate Bureau De Change Limited and the
Minister for the Marine. First Rate is a wholly owned subsidiary of the Bank
of Ireland (BOI) having its registered offices at Lower Baggot Street, Dublin
2. The Bank of Ireland is the second largest commercial bank in Ireland with
network of about 290 branches within the State. In 1996, the Bank of Ireland
had a total operating income of IR£994.8m and a profit on ordinary
activities before taxation of IR£315.6m. The Minister is a member of the
Irish Government whose offices are at Leeson Lane, Dublin 2.
(c)
The Product and the Market
4 In
its submission to the Authority accompanying the notification, First Rate
claimed that it is primarily engaged in the provision of bureau de change and
ATM facilities and, consequently, it competes directly for bureau de change and
ATM business with other financial institutions. In addition, First Rate sells
telephone cards and related items.
5 First
Rate stated that the market for the supply of Bureau de Change and ATM services
is highly competitive and offers considerable consumer choice due to the number
of financial institutions and franchise agencies offering these services under
Central Bank regulations and control. It stated that there were a number of
other providers of Bureau de Change and ATM services active in the State and in
particular in the Dun Laoghaire harbour region as follows:
- 14
institutions selling such services in the State comprising licensed banks and
other credit institutions.
- 20
branches of competing financial institutions providing Bureau de Change
facilities and 24 ATM machine sites within a
two
mile
radius of Dun Laoghaire harbour
- 12
branches of competing financial services institutions providing Bureau de
Change facilities and 13 ATM machine sites within a
one
mile
radius of Dun Laoghaire harbour
- 9
branches of competing financial services institutions providing Bureau de
Change facilities and 11 ATM machine sites within
one
half a mile
radius of Dun Laoghaire harbour.
6 There
is considerable interchangeability between other methods for payment, that is
other financial instruments, such as, traveller cheques, euro-cheques, credit
cards, money orders and bank drafts and cash in Irish currency which is
provided as a result of the provision of the services. Emerging card
technology and the pan European linking of Automated Teller Networks (ATN) are
providing consumers with increased choice over and above traditional
instruments of foreign exchange such as currencies and cheques.
7 In
this instance the Authority considers that the relevant market is the provision
of Bureau de Change services and automated teller machine facilities.
(d)
The Notified Arrangements
8 The
notified arrangement was made on the 8 July 1996 for a period of 4 years 9
months from the 26 February 1996. Under the agreement the Minister for the
Marine agrees, in consideration for the payment to the Minister of certain
fees, to grant to First Rate an exclusive concession for providing exchange
rate and ATM facilities at the ferry terminal, Dun Laoghaire Harbour. The
Minister also agrees to allow First Rate to use and occupy Shop Unit No. 3 at
the ferry terminal for the sole purpose of providing such services. The
agreement also provides for the calculation of transaction fees in respect of
Bureau de Change and ATM services as well as several clauses relating to the
occupation and maintenance of the premises. Under the agreement the licence
granted “shall not be capable of being assigned or parted with to third
parties”. Moreover, the parties agree that the agreement shall be deemed
to be a licence only and not a lease or letting agreement within the meaning of
the Landlord and Tenant Act: “nothing herein contained shall create or be
deemed to create the relationship of landlord and tenant between the Minister
and the Licensee. The agreement also contains the following clauses:
- Clause
3: The licence will be exclusive to First Rate and the Minister will not be
entitled to appoint another person, persons, concern or concern(s) to provide
similar services at the ferry terminal apart from the sale of telephone cards.
- Clause
4: First Rate shall use or, permit the BOI to use, the terminal area only for
the provision of bureau de change and ATM facilities. No new services shall be
introduced by First Rate or BOI without the prior written consent of the
Minister.
- Clause
7: First Rate is not permitted to display advertisements in the terminal area
except those in connection with the services being provided. First Rate must
also agree not to employ any person whom the Minister or Dun Laoghaire Harbour
sees as being unacceptable.
(e)
Submission of the Parties
Arguments
in support of issuing a certificate
9 First
Rate submits that the Concession Agreement contains standard restrictions and
obligations on both parties which are necessary for the maintenance of a proper
relationship in relation to the operation of a concession and the occupation of
a premises. It further submits that the Agreement’s terms are consistent
with earlier Authority decisions relating to the provision of exclusive banking
facilities (Decision no. 288, 289,).
[1]
As such First Rate believes that the provisions are reasonable and do not
prevent, restrict or distort competition in the supply of the services within
the meaning of
section 4(1).
10 First
Rate believes that the market for the provision of Bureau de Change and ATM
services is a highly competitive one given that all of the major banks,
building societies and financial institutions maintain offices offering similar
services only a short distance from the ferry terminal. As such there is ample
opportunity to compete for the business of persons arriving to and embarking
from the ferry terminal. Moreover, considerable customer choice is available
due to the number of financial institutions offering Bureau de Change and ATM
facilities.
11 First
Rate also submits that the unit it leases is one of three shops at the ferry
terminal and without an exclusive concession it would be impossible for the
Minister to attract one of the major financial institutions to provide Bureau
de Change and ATM services at the ferry terminal.
12 Finally,
First Rate believes that there are no significant barriers to entry to the
provision of Bureau de Change and ATM facilities.
Arguments
in support of issuing a licence
13 The
notifying party also made arguments in support of granting a licence. As these
are not considered relevant to the decision, they are not reproduced here.
The
Assessment
(a)
Section 4(1)
14
Section
4(1) of the
Competition Act, 1991, as amended, 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 goods or services in the State or
in any part of the State are prohibited and void.”
(b)
The Undertakings and the Agreement.
15
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.”
1. The
parties to the notified agreement are First Rate Bureau de Change Limited and
the Minister for the Marine. First Rate, a subsidiary of the Bank of Ireland,
is an undertaking engaged in the provision of Bureau de Change and ATM
facilities generally, and additional services, such as, the sale of telephone
cards and related items for a fee and is an undertaking. In exchange for the
payment of a fee to the Minister for the Marine, First Rate is permitted to use
and occupy a premises at the ferry terminal for the provision of such services.
In addition, the Minister receives a fee of £0.70 for each Bureau de
Change transaction and a separate fee in respect of each ATM transaction
corresponding to that laid down in schedule 1 of the agreement.
16 In
the case of Carrigaline CTV v. Minister for Transport, Energy and Communications,
[2]
Mr Justice Keane considered the extension of the definition of an undertaking
to a Minister, and concluded that a Minister,
“whether
as an individual or as an undertaking, is an undertaking within the meaning of
Sections 4 and
5 of the 1991 Act, if he is engaged for gain. That expression
is interpreted by the Supreme Court in dealing with the VHI. It appears from
that decision that if a body such as the Minister supplies a service in return
for a charge or payment, he will be engaged for gain, and hence within the
ambit of
Sections 4 and
5.”
2. On
the facts of the case Mr. Justice Keane also found:
“It
is also clear, however, that if the Minister in granting licences for
transmissions is engaged in no more than a regulatory or administrative
function then the fact that he imposes a charge for the granting of the licence
does not in itself mean that he is engaged for gain.”
17 The
Authority has considered the question of whether the Minister for the Marine is
an undertaking in this instance. The
Harbours Act, 1996
[3]
(Section 104, sub-sections 2 and 3) refers to the activities of the Minister of
the Marine prior to the establishment of Dun Laoghaire Harbour as a private
company, as follows,
(2) “The
Minister shall, with the concurrence of the Minister for Finance, pay to the
Dun Laoghaire Harbour Company an amount equal to advance payments received by
the Minister before the relevant vesting day in respect of goods or services to
be provided by the company on or after the said day less the amount of any
costs incurred by the Minister in collecting such payments.”
(3) “Dun
Laoghaire Harbour Company shall pay to the Minister an amount equal to sums
collected by it on or after the relevant vesting day in respect of goods or
services provided by the Minister before the said day in the performance of a
function of the Minister in relation to Dun Laoghaire Harbour corresponding to
a function of the company.”
18 It
is clear from sub-sections 2 and 3 of
the Act that the Minister for the Marine
is engaged for gain in the provision of goods and services. The Authority
considers, therefore, by virtue of the provisions of the 1996
Harbours Act, the
Minister is an undertaking within the meaning of
Section 3(1) of the
Competition Act, 1991. The notified agreement is therefore an agreement
between undertakings. The agreement has effect within the State.
(c)
Applicability of Section 4(1)
19 The
agreement notified contains standard restrictions and obligations on both
parties which are necessary for the maintenance of a proper relationship in
regard to the operation of the concession and the occupation of the premises.
These do not raise issues under the
Competition Act. The agreement also
provides for exclusivity in relation to the operation by First Rate (Bank of
Ireland) of the concession. In a number of earlier decisions and, in a Notice
of 2 September 1993 in respect of shopping centre leases,
[4]
the Authority has already indicated its view that exclusive user clauses in the
letting of premises in a particular shopping centre or building complex do not
contravene
Section 4(1) of the
Competition Act. It noted that the principal
object of the development of a shopping centre is to ensure that shops comprise
a balanced range of outlets offering different goods and services in order to
attract the maximum amount of custom. This assured mix of outlets encourages
tenants to lease the units without which the units would be less likely to be
leased. Moreover,
“where
only one unit in a shopping centre is permitted to engage in a particular line
of business, competing traders may not operate in the same centre. There is no
restraint, however, save that of planning permission, on competing traders from
setting up anywhere else in the whole State, including location in the vicinity
of the centre.”
20 For
similar reasons these views also apply in relation to the grant of an exclusive
concession to use premises in a building complex for the purposes of a business.
21 In
this instance, while First Rate has an exclusive licence to provide Bureau de
Change and ATM facilities within the ferry terminal, they are restricted to
operating and advertising only such services within the terminal and as such
cannot gain any competitive advantage in the provision of other financial
services. Moreover, while First Rate has the only Bureau de Change and ATM
facility situated within the ferry terminal at Dun Laoghaire harbour, all of
the major banks and financial institutions maintain offices offering the
services only a short distance away. For example, there are 20 branches of
competing financial institutions providing Bureau de Change facilities and 24
ATM machine sites within a
two
mile
radius of Dun Laoghaire Harbour; 12 competing branches provide Bureau de Change
facilities and 13 ATM machine sites within a
one
mile
radius while most importantly 9 competing branches provide Bureau de Change
facilities and 11 ATM machine sites within
one
half a mile
radius of the ferry terminal. All the major banks and financial institutions
can, therefore, compete for the business of persons arriving to and embarking
from the ferry terminal. Having regard to the location of these other banks
and financial institutions, the Authority does not regard the exclusive right
of First Rate to operate Bureau de Change and ATM facilities within the ferry
terminal as having any effect on competition.
(d)
The Decision
22 In
the Authority’s opinion, First Rate Bureau de Change and the Minister of
the Marine are undertakings within the meaning of
Section 3(1) of the
Competition Act, 1991, as amended, and the notified agreement is an agreement
between undertakings. In the Authority’s opinion, the notified agreement
between First Rate and the Minister for the Marine does not prevent, restrict
or distort competition and thus does not contravene
Section 4(1) of the
Competition Act.
The Certificate
3. The
Competition Authority has issued the following certificate:
4. The
Competition Authority certifies that, in its opinion, on the basis of the facts
in its possession, the Concession Agreement between First Rate Bureau De Change
Limited and the Minister for the Marine notified under Section 7 of the
Competition Act on 27 May 1997 (notification no.CA/8/97) does not contravene
Section 4(1) of the Competition Act, 1991, as amended.
5. For
the Competition Authority
Isolde
Goggin
Member
17
June 1998
[1]
University College Dublin/Bank of Ireland; University of Limerick/Bank of
Ireland.
[2]
Carrigaline Community TV and others v. Minister for Transport, Energy and
Communications, High Court, unreported, Keane J, 10/11/95.
[4]
Published in Irish Oifigiuil 10 September 1993, pp. 665-667.
© 1998 Irish Competition Authority
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