Main Features of the Act
Restrictive Agreements, Decisions, Concerted Practices
Abuses of Dominant Positions
Investigation and Enforcement by the Competition Authority
The Competition Authority
The Competition Act
The Competition Act, 1991 (the 'Act'), introduced a radical departure from previous Irish restrictive practices law by replacing a 'control of abuse' regime with a general prohibition regime modelled on Articles 85 and 86 of the EC Treaty. The Act was amended by the Competition (Amendment) Act, 1996 (the 'Amendment Act'). This Act gave the Competition Authority extensive enforcement powers and made infringements of the Competition Act criminal offences.
The Act prohibits all arrangements (including cartels, concerted practices and other agreements) which restrict or distort competition in Ireland or any part of Ireland. The abuse of a dominant market position in Ireland or any part of Ireland is also prohibited. Parties adversely affected by anti-competitive activity may seek injunctive relief or damages (including exemplary damages) in the courts. In addition, parties engaged in anti-competitive activity may be guilty of a criminal offence and subject to investigation and prosecution by the Competition Authority.
- All agreements, decisions and concerted practices which have the object or effect of restricting or distorting competition in Ireland or in any part of Ireland are prohibited and void. (This provision follows very closely the wording of Article 85 (1) of the EC Treaty.)
- The Competition Authority has power to grant an individual licence permitting a restrictive arrangement which would otherwise be prohibited. A licence is of limited duration and may be subject to conditions. To obtain a licence, the parties must notify their arrangement to the Authority. The licensing procedure is similar to the Article 85(3) exemption procedure administered by the European Commission.
- The Authority also has power to licence certain categories of agreements, decisions and concerted practices. Individual agreements, decisions or concerted practices which conform with such a general licence need not be notified individually in order to obtain the benefit of the licence. This mirrors a power which has been widely used by the European Commission to exempt various categories of agreements from the prohibition contained in Article 85(1).
- The Authority may also certify that, in its opinion, an agreement, decision or concerted practice is not prohibited. This corresponds to the 'negative clearance' issued by the EC Commission in relation to Article 85(1).
- The Authority also has power to certify that specified categories of agreements, decisions and concerted practices are not prohibited. An arrangement which comes within the terms of such a category certificate will be covered by it without the need for individual notification.
- The abuse of dominant market position is prohibited.
- Aggrieved parties adversely affected by restrictive agreements, decisions or concerted practices or by abuses of dominant positions have the right to seek relief in the High Court. This may take the form of either injunctive relief or damages. In appropriate cases, the court may award exemplary damages.
- The Authority has wide power to investigate (on its own initiative) anti-competitive behaviour. It also has the right to seek injunctions or declarations to prevent anti-competitive behaviour.
- Criminal sanctions apply to companies (and their officers) which engage in anti-competitive behaviour.
Restrictive Agreements, Decisions, Concerted Practices
Section 4(1) of the Act prohibits agreements, decisions or concerted practices between undertakings or associations of undertakings which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in Ireland or in any part of Ireland. The Act lists as examples of such agreements, decisions or concerted practices, those which
- fix purchase or selling prices or other trading conditions;
- limit or control production, markets, technical development or investment;
- share markets or sources of supply;
- impose discriminatory trading conditions; and
- impose 'tie-in' obligations.
These provisions follow closely the wording of Article 85 of the EC Treaty (but do not, of course, include the requirement that the prohibited activity should affect trade between EU member states). In interpreting these provisions, the Authority and the Irish courts are likely to pay close attention to the decisions of the European Commission, the EC Court of First Instance and the EC Court of Justice in relation to competition law matters.
Examples of arrangements which have been found by the European Commission or the EC Court to fall within the prohibition in Article 85(1) are:
- market sharing arrangements;
- certain types of joint ventures;
- price fixing agreements;
- arrangements for the exchange of prices and similar information between competitors;
- production or sales quotas;
- certain types of exclusive dealing agreements;
- selective distribution systems and certain agreements relating to intellectual property rights such as patents, trade marks and copyright.
These agreements may also fall within the prohibition in Section 4(1) of the Act.
In principle, an agreement, decision or concerted practice prohibited by Section 4(1) is void and the parties to any such arrangement will therefore not be able to enforce its terms against any other parties involved. However, Section 4(7) of the Act makes it clear that an Irish court considering the enforceability of any such arrangement will be entitled to sever the restrictive provisions from the agreement, decision or concerted practice involved and enforce the other terms if the court considers it appropriate to do so. An Irish court will only do this where it is satisfied that the severance of the restrictive provisions would not render the arrangements inoperable.
The licence possibility
The Act recognizes that some arrangements, although restrictive, produce beneficial results. Section 4(2) introduces the possibility of licences being granted for agreements, decisions or concerted practices which, in the opinion of the Authority, promote certain specified social or economic objectives. These objectives are expressed in very general terms. They permit the Authority to licence restrictive agreements, decisions and concerted practices which contribute either to improving the production or distribution of goods or the provision of services or to promoting technical or economic progress, provided they also allow consumers a fair share of the resulting benefit. However, the Authority must be satisfied that the restrictions concerned are indispensable to the attainment of those objectives and do not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products or services in question.
Individual exemptions may be obtained only where the agreement, decision or concerted practice concerned has been notified to the Authority. The notification must be accompanied by a fee as may be prescribed (at present IR£250).
The Act provides that a licence will be granted for a specified period (which may be extended) and may be made subject to conditions. The Authority may revoke or amend a licence where there has been a material change in circumstances, or any party commits a breach of an obligation attached to the licence or the licence was based on materially incorrect or misleading information or any party abuses the permission granted by the licence.
A list of the agreements, decisions or concerted practices notified to the Authority is published regularly in the daily newspapers. Before it takes a decision on a notification the Authority publishes in the daily newspapers a notice of its intention to do so. This enables third parties to make submissions to the Authority before it takes its final decision. On the granting of a licence, the Authority gives notice to the parties concerned and also publishes a notice of the granting of the licence in Iris Oifigiuil (the Official Gazette) and in at least two daily newspapers.
The text of the decision is available to the public and will set out in detail information relating to the parties, relevant markets, terms of the agreement and legal arguments justifying the Authority's decision.
The Authority has indicated that in publishing decisions it respects confidentiality of secret business information supplied by the parties (eg financial information and possibly detailed market share information). The Authority reserves to itself the right to decide whether information should be regarded as secret or not.
Any party concerned or any other person aggrieved by a licence may appeal to the High Court within 28 days of its publication and the court is empowered to either confirm, amend or revoke the licence. This provision will permit a party to whom a licence is granted to seek to have any conditions amended by the High Court, but it does not permit the High Court to grant a licence where the Authority has refused to grant one. It is notable that this provision permits "any other person aggrieved" by a licence to apply to the High Court to have the licence amended or revoked. This category of plaintiff includes a competitor of the party or parties to whom a licence has been granted, but it could be interpreted much more widely. An appeal will also lie to the High Court against revocation or amendment of a licence by the Authority.
The Act also permits the Authority to licence categories of agreements, decisions and concerted practices. This corresponds to the provisions of the EC competition regulations which permit the Commission to grant what are commonly known as 'block exemptions'. These exempt certain common types of agreements from the general prohibition of restrictive agreements where the conditions set out in the relevant block exemption regulation are fulfilled. Individual agreements which conform with those conditions benefit from an exemption without the need to go through an individual notification procedure. Such regulations have been adopted to exempt a wide range of agreements, including: exclusive distribution agreements; exclusive purchasing agreements; technology transfer arrangements; and exclusive franchising agreements
The Authority has granted category licences in respect of:
- exclusive distribution agreements;
- franchising agreements; and
- agreements for the purchase and supply of motor fuels and cylinder liquid petroleum gas.
'Negative Clearance' Certificate
The Act also provides that the Authority may certify that in its opinion, on the basis of the facts in its possession, an agreement, decision or concerted practice notified to it does not come within the prohibition contained in Section 4(1). This corresponds to a similar procedure under the EC competition regulations whereby the European Commission is authorized to issue a similar opinion in relation to the prohibition contained in Article 85(1). Such an opinion of the European Commission is known as a 'negative clearance'.
The Authority follows the same publicity procedures in relation to such certificates as it does in relation to licences.
Such a certificate may be revoked by the Authority where it is of the opinion that there has been a material change in the circumstances on which it was based or where it was issued on the basis of materially incorrect or misleading information. As in the case of a licence, the Act permits a party concerned or "any other person aggrieved" by a negative clearance certificate to appeal to the High Court within 28 days of its publication to have the certificate cancelled.
It is unlikely that the party concerned, as opposed to "a person aggrieved" would wish to make such an application. An appeal will also lie to the High Court against revocation of a certificate by the Authority.
Since the enactment of the Amendment Act, the Authority may adopt category certificates by which it may certify that a category of agreements falls outside the Act's prohibition of anti-competitive arrangements. It is not necessary for the parties to an arrangement falling within the terms of a category certificate to submit an individual notification to the Authority in order to benefit from the category certificate. The Authority has issued one such certificate to date (in respect of agreements involving a merger and/or a sale of business).
Certificate -v- Licence
A certificate provides a good deal less legal security than a licence. This is because the certificate is merely the opinion of the Authority (albeit a reasoned and considered opinion) and could be overruled by a court. However, even if the court did disagree with the Authority, the benefit of the certificate is that the parties to the agreement are immune from damages in any proceedings taken for loss suffered in consequence of the agreement in respect of the period for which the certificate has been in force.
A licence on the other hand 'permits' the doing of acts otherwise void under the Act. This 'legalisation' of the agreement by the grant of a licence cannot be overturned by the courts once the statutory appeal procedure referred to above has expired.
Prohibition of Abuse
Section 5(1) prohibits any abuse by one or more undertakings of a dominant position in trade in the state or in a substantial part of the state for any goods or services. Examples of such abuses are given in the Act, but these are without prejudice to the general nature of the prohibition. These are:
- the imposition of unfair purchase or selling prices or other unfair trading conditions;
- the limiting of production, markets or other technical developments to the prejudice of consumers;
- discriminatory treatment of different trading parties; and
- tie-in obligations.
These provisions reflect the wording of Article 86 of the EC Treaty. The European Commission and the EC Courts have found the following practices to constitute abuses of a dominant market position under Article 86:
- refusals to supply;
- abusive or discriminatory pricing;
- predatory pricing; and
- tie-ins, loyalty rebates and discounts, exclusive dealing arrangements.
It is important to note that it is the abuse of a dominant position which is prohibited, not the existence of a dominant position. The Act does not provide for the granting of licences or exemptions permitting or exempting abuses from the prohibition contained in Section 5(1). This also reflects the structure of Article 86 of the EC Treaty, which contains an unconditional prohibition of such abuses where they affect trade between member states.
Application to Court
Section 6 of the Act permits any person (for example a customer or supplier or competitor) aggrieved by an agreement, decision or concerted practice prohibited under Section 4 to apply to the High Court for relief. Those aggrieved by the abuse of a dominant position prohibited under Section 5 may apply for relief to either the High Court or the Circuit Court. Aggrieved parties may initiate actions against the firm engaged in anti-competitive activity. They may also sue or join in the proceedings the corporate officers of the firm in question. Applicants may seek either an injunction or damages, or both. The court may order exemplary damages, where it considers this appropriate.
Effect of Court's decision
A final decision of the court under these provisions in relation to an agreement, decision or concerted practice will override, with effect from the date of the court order, any certificate of 'negative clearance' which may have been issued by the Authority. However, a claimant who starts proceedings after the issue of such a certificate will not be able to claim damages in respect of the period during which the certificate was in force (unless he succeeds in proving that the agreement, decision or concerted practice also constituted an abuse of a dominant position).
Action by the Minister or the Competition Authority
In addition to the right of private parties to take action in respect of anti--competitive activity, the Competition Authority or the minister may also initiate action against parties involved in anti-competitive activity. Both the minister and the Competition Authority are limited by the Act to claiming injunctions and declarations in respect of anti-competitive activity. They may not claim damages.
Fines and imprisonment
The Amendment Act introduced criminal sanctions to punish anti-competitive activity. Section 2(1) of the Amendment Act provides that it is a criminal offence to enter into or implement any anti-competitive agreement, decision or concerted practice. Section 2(7) of the Amendment Act provides that the abuse of a dominant position is a criminal offence.
On conviction on indictment, a firm which has engaged in criminal anti-competitive activity may be liable to a fine of up to IR£3 million. However, the fine imposed cannot exceed 10% of the firm's turnover in its most recent financial year.
Where the corporate officers of a firm have authorized or consented to criminal anti-competitive activity, they may also be guilty of a criminal offence. The Amendment Act provides that corporate officers are presumed to have authorized or consented to criminal anti-competitive activity of a firm which occurred during their period of office. Corporate officers guilty of offences under the Amendment Act may be liable to fines of up to IR£3 million and to imprisonment for a term of up to two years.
The Amendment Act's criminal sanctions do not apply to firms which implement arrangements which benefit from a Competition Authority licence provided that the implementation of the arrangement has been in strict compliance with the terms of the licence. A firm may also have a defence to charges or criminal anti-competitive activity if it can show that it did not know or could not reasonably have been expected to know of the anti-competitive consequences of its activity.
At the time of writing, (July 1999), there have been no criminal prosecutions under the Amendment Act. It has been observed by some commentators that it may be difficult for the authorities to secure a criminal conviction under the Amendment Act, because of the lack of clarity on precisely which activities amount to criminal behaviour in the context of competition law. In many instances, opinion may validly differ as to whether an impugned course of commercial conduct has anti-competitive effects. Furthermore, the prosecution of criminal offences under the Amendment Act will involve a non-expert jury being required to engage in complex economic assessments in order to establish whether or not an offence has been committed.
Investigation and Enforcement by the Competition Authority
Investigation requested by the Minister
Where the minister is of the opinion that there is an abuse of a dominant position, she may request the Authority to carry out an investigation. The Authority must report to the minister as to whether, in its opinion, a dominant position exists and, if it does, whether that dominant position is being abused. The minister may then, by order, either prohibit the continuance of the dominant position except on specified conditions or require the adjustment of the dominant position by a sale of assets or otherwise. An order must be confirmed by a resolution of each House of the Oirechtas.
In addition, the minister may request the Competition Authority to study and analyse any practice and method of competition affecting the supply and distribution of goods or the provision of services. In conducting this research, the Authority is not limited to Ireland; the scope of its study and analysis may encompass developments abroad.
Investigations at its own initiative or on complaint
Since the enactment of the Amendment Act, the minister has been empowered to assign to a member of the Competition Authority, the title of Director of Competition Enforcement. The Director's functions include the investigation of allegedly anti-competitive activity, either at his own initiative or as a result of a complaint. The Director may recommend that the Authority take action against parties engaged in the anti-competitive activity he has investigated or may make recommendations concerning the criminal enforcement of the Act against parties engaged in anti-competitive activity.
The Authority consists of a chairman and four other members. The chairman and the members are appointed by the minister for such period not exceeding fiveyears as the minister may fix.
As already explained, the principal functions of the Authority are the power to grant licences and certificates and the power to carry out investigations into the existence and abuse of dominant positions. In addition, the Authority may, at the request of the Minister, study and analyse any practice or method of competition affecting the supply and distribution of goods or the provision of services.
Powers of Inspection
The Act gives the Authority extensive powers, on production of a warrant issued by a District Justice, to enter and inspect premises, require production of documents and obtain information. The Authority has availed of these powers and conducted a number of so called 'dawn raids' with a view to collecting evidence of the existence of anti-competitive agreements or practices.
For further information on this topic please contact Gerald FitzGerald at McCann Fitzgerald by telephone (+353 1 829 0000) or by fax (+353 1 829 0010) or by e-mail [email protected].
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