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1. On 25 October, 1991, Mr. Timothy O'Neill, Cambridge Investments Limited, Imari Limited and Allied Combined Trust Limited (ACT) entered into a Share Subscription and Shareholders Agreement to regulate the terms on which the Cambridge Equity Fund would acquire approximately 19% of the entire issued ordinary share capital of Imari Limited and the terms on which ACT's previous investment in the Company would be regulated. The arrangements were notified to the Authority on 6 March, 1992. A certificate was sought in respect of the notification. In the event of a refusal by the Authority to grant a certificate, a licence was sought. Following discussions with the Authority certain aspects of the notified arrangements were amended. These amendments were notified on 1 March, 1993.

2. Notice of the intention of the Authority to take a favourable decision in relation to the arrangements was published in the Irish Times on 14 May, 1993. No submissions were received from third parties in response.

3. This notification concerns the investment by Cambridge Equity Fund and Allied Combined Trust Limited in Imari Limited, a company dealing mainly in the shipping transport business. Under the arrangements a number of restrictions were placed on Mr. Timothy Joseph O'Neill, the managing director of Imari.

4. The parties to the agreement are Mr. Timothy Joseph O'Neill, Cambridge Investments Limited (Cambridge), Allied Combined Trust Limited (ACT) and Imari Limited (Imari).

5. Mr. O'Neill is the Managing Director of Imari and is responsible for the day to day management of the company. He has been with the company since its foundation in 1987. He is referred to as "the covenantor" in the agreement. Mr. O'Neill holds approximately 23% of the issued ordinary share capital and 19% of the entire issued share capital of Imari.

6. Imari is a private limited holding company incorporated and managed in Ireland with a number of subsidiaries and an associated company which operate in the shipping, transport, freight forwarding and port services industries. The number of people employed by the company in 1990 was 88. Imari is referred to as "the Company" in the agreement.

7. Cambridge is a private limited company incorporated and managed in Ireland and involved in the business of fund management. It is the manager of the Cambridge Investment Equity Fund referred to as "the Fund" in the agreement and is a wholly owned subsidiary of Cambridge Group plc., the core business of which is asset financing (leasing and hire) and confirming (financing the working capital requirements of small to medium sized companies) but which is also involved in corporate finance and international financing activities. Cambridge is referred to as "the Manager" in the agreement.

8. ACT is a private limited investment holding company incorporated and managed in Ireland and involved in providing venture and development capital to companies in Ireland and the UK. 60.8% of the company is owned by Allied Irish Banks plc. ACT's profits are derived principally from dividends from investments and from gains made on the disposal of investments.

9. Cambridge Investments act as providers of venture capital to small businesses which they believe have development potential, usually by acquiring a shareholding in such businesses, in the hope of being able to sell their shareholding and make a capital gain. In the absence of such a source of capital the development of such businesses may be hindered by a lack of capital. The existing owners may lack the resources to provide additional equity capital so that the only alternative source of finance would be by way of loans from a bank. By obtaining funds from a venture capital firm the business avoids the interest costs associated with loan finance. A key factor in the venture capital firm's assessment of the development potential of the business will be the managerial and entrepreneurial skills of the owner of the business.

10. In simple terms the venture capitalist provides a source of equity capital to the owner of a small business to enable him to develop the business. The owner retains a significant degree of control subject to restrictions designed to protect the investment of the venture capitalist, with the payback to the latter coming about through the realisation of a capital gain on the subsequent disposal of its shareholding in the business. Where the venture capitalist raises funds from investors it pays a proportion of the capital gains to them and retains some proportion for itself.

11. The Imari Group is engaged in the shipping, transport, freight forwarding and port services businesses. The following companies in Imari are involved in servicing the following markets:-

- James Scott & Co. (Dublin) Ltd. (JSC) and Bestglen Shipping Limited Agencies Limited (Bestglen) operate in the "lo-lo" business (i.e. loading on and off shipping containers) between Ireland and continental Europe. The Imari Group estimate the size of this market to be approximately £40m. The principal competitors to JSC and Bestglen are B&I, BEU Lines, Dublin Maritime and Rhine Tainer. This market was claimed to be extremely competitive by the notifying parties.

- Dublin Container and Transport Services Limited (DCATS)is involved in the storage, repair and manufacture of containers in Ireland. The principal users of the service include shipping lines and container leasing companies. The Irish market is estimated to be worth £3m. The principal competitors to DCATS are Storecon, FSK and Container Specialists. This market was claimed to be extremely competitive and to be very sensitive to price adjustments.

- Donesk Limited (Donesk) is in the road haulage business in Ireland focusing on the provision of driver accompanied trailer services and also using subcontract services. There are a very large number of small operators in this market and Donesk is in this category. Major competitors are CIE, Murphy International Limited, Frank Barrett and Nestor.

- Tanktrans Limited (Tanktrans) is a bulk-tank operator between Ireland and the UK offering a specialist bulk liquid/powder service. It is a highly specialist market with considerable emphasis on quality and customer service. Market value is approximately £20m. The major competitors to Tanktrans include Haulage Services Limited, Hoyer Ireland Limited and Tank Freight (Ireland) Limited. In order to compete effectively in this market, an operator requires high specification specialised tanks and specialist market knowledge.

- Wildcoast International Limited (Wildcoast) operates as a consolidator (a company which makes up loads for groups) operating between Ireland and The Far East and between Ireland and Finland. Turnover in these markets is estimated to be £13m and £2m respectively. The notifying parties claim that the Far Eastern market is particularly competitive. P&O and Mersk are major competitors in this market. The only other Irish competitor in the Finnish market is Meadows Freight Limited. It is claimed that there is substantial competition between the two principal competitors.

- TSS Translink Shipping Services Limited (TSS), Translink USA Inc. (TSA) and Translink Air (TA). TSS and TSA are specialist freight service companies operating in the Irish/US freight forwarding market. They are involved in air and sea freight services to and from the US and arrange transportation from door to door between Ireland and the US. TA provides air freight services to TSS. This is a highly specialised market with an important emphasis on flexibility and customer service. It is estimated that the turnover of the US to Ireland market is £6m. Others engaged in this business include IPS, Aseco and National Coa's.

- Roadferry Limited (Roadferry) operates as a trailer operator in the door to door dry freight unit load market between Ireland and the UK. The value of the market is estimated to be £256m. Pandoro, Dukes, Woodside, Riley Transport and Montgomery are the major competitors to Roadferry.

12. On 25 October, 1991, Mr. O'Neill, Imari, Cambridge and ACT entered into a Share Subscription and Shareholders Agreement to regulate the terms of the investment by the Cambridge Equity Fund ('the Fund') and the terms on which ACT's previous investment would be regulated.

13. The agreement is stated to be of a form commonly used in Ireland for investments by venture or development capital funds in private companies with growth potential.

14. By virtue of the agreement, the Fund now holds 19% of the ordinary share capital of Imari with ACT holding approximately 35%. Shareholdings in Imari before and after the Cambridge Investment are set out in the following table:

No. of shares held No. of shares held

Cambridge - 24000 (19%)

ACT 44000 (44%) 44000 (35%)

Mr. O'Neill 29000 (29%) 26000 (21%)

Sidarta Inv.Ltd. 13000 (13%) 16000 (13%)

Maunsell Regus Co.Ltd. 14000 (14%) 14000 (12%)

15. The agreement contains certain restrictions on Imari and on Mr. O'Neill. The relevant parts of these clauses are detailed below:

The business of the Company shall be controlled by the Board and the Company shall not enter into any contract arrangement or transaction whereby any of its business would be controlled otherwise than by the Board.

(a) The Board shall be constituted in accordance with the provisions of this clause 6.5.

(b) Each of the Manager and ACT shall during the continuance of this Agreement be entitled to appoint one person as a director of each company in the Imari Group and to remove and/or replace any such person from time to time."

It is specified that the directors appointed by Cambridge and ACT are non-executive directors.

(i) The Company hereby covenants with and undertakes to the Manager that for so long as the Subscriber and/or any Permitted Transferee of the Subscriber holds in aggregate 10% or more of the ordinary shares in the capital of the Company in issue from time to time the Company shall not without the prior consent in writing of the Manager:-

(a) Carry on any business other than the Business or make any material change in the scope or nature of its business or operations which would or would be likely to have a material adverse effect on its assets, business or financial condition;

(b) (except in respect of loans or credit provided to any member of the Imari Group) make any loan or provide any credit (other than normal trade credit given in the ordinary course of business);

(c) create or issue or agree to create or issue any share or loan capital or instrument carrying rights of conversion into any share or loan capital or give or agree to give any option in respect of any share or loan capital or redeem, purchase, re-issue or convert or agree to redeem, purchase, re-issue or convert any of its share or loan capital;

(d) consolidate, divide, sub-divide or alter in any respect any of the rights attaching to any of its shares or reduce its share capital or capital reserve account or repay any amount standing to the credit of any share premium account or credit redemption reserve or otherwise reorganise its share capital in any way or create any new class of shares;

(e) incur or permit to subsist any borrowings of any nature whatsoever in excess of an amount equal to 100% of Shareholder Funds.

(f) otherwise than for borrowing permitted by Clause 6.9(e) hereof create or permit to subsist any mortgage or charge whether floating or specific on the whole or part of its undertakings, property or assets or give any guarantee or indemnity or enter into any arrangement guaranteeing or securing the obligations of any person or become surety for any person;

(g) enter into any contract, transaction or arrangement otherwise than in the ordinary course of its business and upon an arms length and commercial basis or whereby it would receive less than a fair commercial price for any of its goods or services or would pay more than a fair commercial price for any goods or services supplied to it (less customary trade discounts and allowances in each case);

(h) pass any resolution amending or altering its memorandum or articles of association.

(ii) The Company hereby covenants with and undertakes to ACT that for so long as ACT and/or any Permitted Transferee of ACT holds in aggregate 10% or more of the ordinary shares in the capital of the Company in issue from time to time the Company shall not (and shall procure that each company in the Imari Group shall not) without the prior consent in writing of ACT (which consent shall not be unreasonably withheld) do, permit, suffer or enter into any of the transactions or matters specified in clause 6.9(i)(a) to (h) inclusive.

6.10 (i) The Company hereby covenants with and undertakes to the Manager that for so long as the Subscriber and/or any Permitted Transferee of the Subscriber holds in aggregate 10% or more of the ordinary shares in the capital of the Company in issue from time to time the Company shall not without the prior approval of the Board:-

(a) enter into any onerous contract, arrangements or understanding or any contract materially affecting its business or assets;

(b) incur any capital expenditure which would result in the capital expenditure of the Imari Group exceeding in aggregate in any one Financial Year of the Company;

(c) change its auditors or the date of the end of its Financial Year;

(d) alter the basis of the accounting principles upon which its accounts have been consistently prepared for all prior years; or

(e) incur expenditure which would result in the expenditure incurred by the Imari Group exceeding in aggregate within any twelve month period in acquiring any share or loan capital of any company or entering into any partnership, joint venture or profit sharing arrangement with any person.

(ii) The Company hereby covenants with and undertakes to ACT that for so long as ACT and/or any Permitted Transferee of ACT holds in aggregate 10% or more of the ordinary shares in the capital of the Company in issue from time to time the Company shall not (and shall procure that each company in the Imari Group shall not) without the prior approval of the Board do, permit, suffer or enter into any of the transactions or matters specified in clause 6.10(i)(a) to (e) inclusive."

(a) The Company shall fully enforce the provisions of any contract of employment with the Covenantor and all other subsisting service agreements for executives of the Imari Group and shall not rescind, terminate or make any change in any of the material terms thereof without the prior written consent of each of the Manager and ACT.

(b) The Covenantor hereby covenants with and undertakes to each of the Company, the Manager and ACT during the continuance of this Agreement to (unless prevented by illness) devote substantially the whole of his time attention and abilities to the promotion and development of the business of the Imari Group."

8.1 In further consideration of, and as a further inducement to, the Manager and ACT entering into this Agreement the Covenantor hereby covenants with and undertakes to each of the Manager and, as a separate covenant and undertaking, to ACT that:-

(i) he shall not during the period commencing on the Completion Date and expiring on the fifth anniversary of the Completion Date or the second anniversary of the date upon which he ceases to be employed by the Company (whichever is the later), either alone or jointly or in conjunction with or on behalf of or through the agency of any person and whether as principal, agent, partner, shareholder, director, manager, adviser, consultant, employee or otherwise howsoever and whether directly or indirectly:-

(a) carry on or participate or assist to be engaged or concerned or interested in any business in Ireland which competes with any business carried on by any company in the Imari Group at the time of such expiry;

(b) procure or seek to procure orders from or to do business with or procure directly or indirectly any other person to procure orders from or do business with any person who has been at any time during the period of two years immediately preceding his cessation of employment with any company within the Imari Group a customer of or supplier to any company in the Imari Group;

(c) interfere or seek to interfere or take such steps as may interfere with the continuance of supplies to any company in the Imari Group (or the terms relating to such supplies) from any suppliers who have been at any time during the period of two years immediately preceding his cessation of employment with any company within the Imari Group supplying materials, components, products, goods or services to any company in the Imari Group;

(d) solicit or entice away or offer employment to or endeavour to solicit or entice away or offer employment to any person who has at any time during the period of two years immediately preceding his cessation of employment with any company within the Imari Group been an employee, officer or manager of any company in the Imari Group whether or not such person would commit a breach of contract by reason of leaving the employment, office or service of any company in the Imari Group;

(e) enter into partnership with or appoint as a consultant or adviser any person who has been at any time during the period of two years preceding the Completion Date an employee, officer or manager of any company in the Imari Group;

(f) use or adopt or purport to use or adopt the name of any company or trade name of the Imari Group for any purpose other than for the benefit of the Imari Group in the proper performance of his duties under his Service Agreement.

(ii) he shall not knowingly at any time after Completion disclose or cause to be disclosed to any person or use for his own purposes or for any purposes other than those of the Imari Group any Confidential Information and he shall use all reasonable endeavours to prevent the publication or disclosure of any such Confidential Information.

8.2 Each of the parties hereto hereby acknowledge and agree that each of the undertakings contained in clause 8.1 constitute entirely separate and severable and independent restrictions and that the duration, extent and application of the respective restrictions in clause 8.1 hereof are no greater than is reasonable and necessary for the protection of the legitimate interests of the Manager and of ACT respectively but that if any such restriction shall be adjudged by any court or regulatory authority or agency of competent jurisdiction to be void or unenforceable but would be valid if part of the wording thereof was deleted and/or the period thereof was reduced and/or the geographical area dealt with thereby was reduced, the said restriction shall apply within the jurisdiction of that court or regulatory authority or agency with such modifications as may be necessary to make it valid, effective and enforceable to the greatest extent permissible within the jurisdiction of such court or regulatory authority or agency.

9.1 The Covenantor hereby covenants with and undertakes to each of the Manager and ACT that he shall not transfer or otherwise dispose of any interest (whether legal or equitable) in or create any Encumbrance over any of his shares in the capital of the Company except with the prior consent in writing of the Manager and ACT and in compliance with the provisions of this Agreement and the Articles of Association PROVIDED ALWAYS HOWEVER that:

(a) the consent of the Manager and ACT to any such transfer or disposal shall not be taken as a waiver of any pre-emption rights to which the Subscriber or ACT or any Permitted Transferee may be entitled in respect of such transfer; and

(b) the Covenantor shall be entitled, without requiring the prior consent of the Manager or ACT, to transfer or otherwise dispose of any interest (whether legal or equitable) in up to, in aggregate:-

(i) 5,800 ordinary shares in the capital of the Company; or

(ii) (in the event that the Covenantor has subscribed for 7,000 ordinary shares in the capital of the Company pursuant to an Option Agreement on 16 February 1990 between the Covenantor and the Company) 7,200 shares in the capital of the Company;"

16. The notifying parties have advanced a number of reasons why a certificate should be issued by the Authority in respect of this agreement. Some of these points relate to the agreement as a whole, others relate to specific clauses.

17. The notifying parties have asserted that the agreement is tantamount to a concentration or concentrative joint venture. In this context, they submit that

´It is well established in the EC that as regards Article 85(1) of the Treaty of Rome, being the equivalent of Section 4 CA 91, restraints ancillary to the establishment of a joint venture which is not itself anti-competitive do not fall within Article 85(1) (Elopak/Metal Box (Odin) OJ 1990 L209/15). Accordingly, to the extent that any provisions of the agreement are construed as restraints they are ancillary to the investments constituting the concentration or concentrative joint venture and by analogy do not therefore infringe Section 4 CA 91.

This proposition is further supported by analogy with the policy of the EC Commission in respect of mergers, acquisitions and joint ventures as illustrated by the Commission Notice and the EC Commission's Notice (90/C 203) regarding restrictions ancillary to concentrations ("the Ancillary Restraints Notice") which clearly provide that restrictions which are ancillary to a concentration between undertakings, including non-competition clauses, do not fall within Article 85(1) and therefore by analogy do not fall within the ambit of Section 4 CA 91.'

18. They also submit that any undertakings associated with the notifying parties do not

'carry on business directly or indirectly in competition with any business of any Irish member of the Imari Group.'

In these circumstances, it is submitted that

'the investments by the Fund and ACT in the Company, both of which are now regulated by the Agreement, do not and could not foreseeably prevent, restrict or distort competition in any of the markets in which any of the parties operate as the Agreement is not an agreement between competitors or potential competitors and does not provide a framework for co-operation or coordination of market behaviour between competitors or potential competitors. Section 4 CA 91 does not therefore apply to the Agreement.'

19. The notifying parties have submitted that Clause 8 of the agreement, which imposes restrictions on Mr. O'Neill, does not fall within Section 4 of the Act for the following reasons:-

'(a) Mr. O'Neill is not an "undertaking" within the meaning of Section 3(1) CA 91 since he is not engaged for gain in the production, supply or distribution of goods or the provision of a service.

Mr. O'Neill is a director, employee and only a minority shareholder in the Company and is not engaged or interested in any other business which directly or indirectly competes with any business carried on by any member of the Imari Group.

Mr. O'Neill is simply an auxiliary organ forming an integral part of the Company's undertaking bound to carry out the Company's instructions and thus forms an economic unit with the Company (See, for example Cases 40/73 etc. Suiker Unie v Commission [1974] ECR 1663, 1007 at paragraph 539).

(b) Without prejudice to our submission under paragraph (a) above, the restrictive covenants in clause 8 are ancillary restraints of a nature, duration and scope which is reasonable in all the circumstances to protect the value of the Fund's and ACT's substantial investments in the Company and their legitimate interests as minority shareholders. The provisions of clause 8 are legitimate means of ensuring the performance of Mr. O'Neill's contractual obligations to protect the goodwill of the Company and its customer relations and loyalty, the expertise and know-how of the Company and the full commercial value of the Fund's and ACT's investments in the Company.

(c) Without prejudice to our submissions under paragraphs (a) and (b) above, the restrictive covenants in clause 8 of the Agreement do not have the "object or effect" of preventing, restricting or distorting competition since the covenants are given only to the Manager and to ACT neither of whom are competitors or potential competitors of Mr. O'Neill (the Covenantor) or indeed of the Company which employs Mr. O'Neill. The restrictive covenants in clause 8 are not enforceable by the Company.

(d) Without prejudice to our submissions under paragraphs (a), (b) and (c) above, even if the restrictive covenants in clause 8 could be construed as potentially affecting competition within the meaning of section 4 CA 91, they do not infringe Section 4 since by analogy with the decision of the ECJ in Volk v Vervaecke (Case 5/69 [1969] ECR 295), they are unlikely to have any effect or any appreciable or significant effect on competition in any market where the Company or any other party to the Agreement operates.'

20. The parties indicated by letter dated 21 May, 1992, that clause 8.1(ii) would not be invoked to prevent Mr. O'Neill entering the business only to stop him using any confidential information. In particular, they have stated that:

'We confirm that the only restriction accepted by Mr. O'Neill under Clause 8.1(ii) is that he will not use or abuse information that is confidential to the Imari group for his own or for any other purposes. Clause 8.1(ii) is expressly limited to the use or disclosure of "Confidential Information" as defined in Clause 1.1. This does not prevent Mr. O'Neill using his general knowledge of the relevant business for his own or any other purposes to the extent that such knowledge is not strictly confidential to the Imari Group.'

21. The Authority's concerns in relation to clause 8 of the Agreement were conveyed at a meeting with the notifying parties on 7 October, 1992. An amendment to the Share Subscription and Shareholders Agreement was submitted to the Authority on 1 March, 1993. The amendment related to the duration of the non-compete provisions contained in clause 8 and a new clause 8.1 was included with minor consequential changes in the rest of the clause. The full revised clause is as follows:

8.1 For the purposes of this clause 8 the expression "Relevant Period" shall mean the period commencing on the Completion Date and expiring on the later of:-

(i) the nine hundred and fifteenth day after the day upon which the Covenantor ceases to hold or beneficially own or be entitled to any shares in the capital of the Company; and

(ii) the date upon which the Covenantor ceases to be an employee of the Company.

8.2 In further consideration of, and as a further inducement to, the Manager and ACT entering into this Agreement the Covenantor hereby covenants with and undertakes to each of the Manager (on behalf of itself on behalf of the Subscriber as trustee of the Fund) and, as a separate covenant and undertaking, to ACT that:-

(i) he shall not during the Relevant Period either alone or jointly or in conjunction with or on behalf of or through the agency of any person and whether as principal, agent, partner, shareholder, director, manager, adviser, consultant, employee or otherwise howsoever and whether directly or indirectly:-

(a) carry on or participate or assist to be engaged or concerned or interested (except as the holder or beneficial owner for investment purposes of not more than 5% in nominal value of any class of securities listed or dealt in on a recognised stock exchange) in any business in Ireland which competes with any business carried on by any company in the Imari Group at the time of such expiry;

(b) procure or seek to procure orders from or to do business with or procure directly or indirectly any other person to procure orders from or do business with any person who has been at any time during the period of two years immediately preceding his cessation of employment with any company within the Imari Group a customer of or supplier to any company in the Imari Group;

(c) interfere or seek to interfere or take such steps as may interfere with the continuance of supplies to any company in the Imari Group (or the terms relating to such supplies) from any suppliers who have been at any time during the period of two years immediately preceding his cessation of employment with any company within the Imari Group supplying materials, components, products, goods or services to any company in the Imari Group;

(d) solicit or entice away or offer employment to or endeavour to solicit or entice away or offer employment to any person who has at any time during the period of two years immediately preceding his cessation of employment with any company within the Imari Group been an employee, officer or manager of any company in the Imari Group whether or not such person would commit a breach of contract by reason of leaving the employment, office or service of any company in the Imari Group;

(e) enter into partnership with or appoint as a consultant or adviser any person who has been at any time during the period of two years preceding the Completion Date an employee, officer or manager of any company in the Imari Group;

(f) use or adopt or purport to use or adopt the name of any company or trade name of the Imari Group for any purpose other than for the benefit of the Imari Group in the proper performance of his duties under his Service Agreement.

(ii) he shall not knowingly at any time after Completion disclose or cause to be disclosed to any person or use for his own purposes or for any purposes other than those of the Imari Group any Confidential Information and he shall use all reasonable endeavours to prevent the publication or disclosure of any such Confidential Information.

8.3 Each of the parties hereto hereby acknowledge and agree that each of the undertakings contained in clause 8.2 constitute entirely separate and severable and independent restrictions and that the duration, extent and application of the respective restrictions in clause 8.2 hereof are no greater than is reasonable and necessary for the protection of the legitimate interests of the Manager and of ACT respectively but that if any such restriction shall be adjudged by any court or regulatory authority or agency of competent jurisdiction to be void or unenforceable but would be valid if part of the wording thereof was deleted and/or the period thereof was reduced and/or the geographical area dealt with thereby was reduced, the said restriction shall apply within the jurisdiction of that court or regulatory authority or agency with such modifications as may be necessary to make it valid, effective and enforceable to the greatest extent permissible within the jurisdiction of such court or regulatory authority or agency."

22. Section 4(1) of the Competition Act 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 trade in any goods or services in the State or in any part of the State are prohibited and void'.

23. In this instance the Authority considered arrangements involving (i) Cambridge Investments Ltd., (ii) ACT, (iii) Imari and (iv) Mr. Timothy O'Neill. 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.'

24. Cambridge Investments is a private limited company incorporated in Ireland and engaged in the business of fund management and the provision of venture and development capital. It is engaged in the management of funds on behalf of investors. It uses such funds inter alia to provide venture and development capital to small and medium sized businesses, specifically by acquiring equity in such businesses with a view to earning a capital gain by selling such equity at a future date. Such gains accrue to investors and to Cambridge Investments itself. Fund management and the provision of funds to small and medium sized businesses constitute the provision of services in which Cambridge is engaged for gain.

25. ACT is a private limited investment holding company incorporated and managed in Ireland and involved in providing venture and development capital to companies in Ireland and the UK. ACT is effectively engaged in the provision of funds to small and medium sized firms for gain and is therefore an undertaking.

26. Imari is a private limited holding company incorporated in Ireland with a number of subsidiaries and an associated company which operate for gain in the shipping, transport, freight forwarding and port services industries. The Authority decided in AGF-Irish Life that a holding company, although not directly ´engaged for gain in the production, supply or distribution of goods or the provision of a service', was an undertaking by virtue of its being engaged for gain in such activities through subsidiary firms which operate for gain and which it controls [1]. Imari is therefore an undertaking within the meaning of the Act since its subsidiary companies are engaged in the provision of services for gain.

27. The parties have submitted that Mr. O'Neill is not an undertaking as he is an employee. Section 3 of the Act clearly provides that an individual is an undertaking if he/she is ´engaged for gain in the production, supply or distribution of goods or the provision of a service'. The Authority has previously indicated that, in its view, employees as such, are not undertakings, since they normally act on behalf of an undertaking and do not, therefore, constitute an undertaking themselves [2]. The Authority has also taken the view, however, that individuals who either own or control a business are undertakings for the purposes of Section 3 of the Competition Act [3]. Similarly it has indicated that once an employee pursues his own economic interests and these differ from his employer's interests, he may well become an undertaking within the meaning of Section 3(1) [4]. Such views are consistent with the EC Commission decision in Reuter/BASF [5].

28. Mr. O'Neill is a shareholder in the Imari Group as well as being employed as managing director of the firm. The mere fact of being a shareholder in a company is not, in the Authority's view, sufficient grounds for regarding an individual as an undertaking. In ACT/Kindle, however, the Authority decided that as a group of individuals who were parties to the agreement had held between them the majority shareholding in Kindle and had effectively controlled that business, they were undertakings [6]. In Scully/Tyrrell, the Authority concluded that individuals who between them held a minority shareholding, were nevertheless undertakings, since the agreement in question afforded them a significant degree of control over the business and their interests differed from those of the company.

29. Some consideration of relevant EC cases under Article 85(1) of the Treaty of Rome on which Section 4(1) is based is also relevant to this question [7]. In Reuter/BASF the EC Commission decided that Dr. Reuter was an undertaking by virtue of engaging in economic activity through firms which were under his control, by exploiting the results of his own research and as commercial adviser to third parties. Similarly in the Nutricia case the Commission decided that an individual was an undertaking by virtue of being the future proprietor of a business. That decision was the subject of an appeal to the European Court of Justice. The Court, in its decision, upheld the view that the individual concerned was an undertaking but went somewhat further than the Commission in setting out the reasons for this view.

30. The applicants had argued that Article 5 of the Commission decision should be declared void on the grounds that Mr. de Rooij was not an undertaking either in his private capacity or in his capacity as a signatory to the agreement in question. The court ruled that:

´That argument cannot be accepted. As the Commission rightly points out, Mr. de Rooij was a contracting party to the agreement, which grants him, particularly in clauses 5 and 7, rights peculiar to him and distinct from those of Remia.'

The Court pointed out that the applicants themselves had previously referred to Mr. de Rooij as an undertaking. It went on to state that:

´It must therefore be inferred that Mr. de Rooij played a part in his own right both in the conclusion of the transfer agreement and as a signatory of the non-competition clause and that that justified his being made an addressee of the contested decision.' [8]

31. Mr. O'Neill is the managing director of Imari and prior to the conclusion of the present agreement he held approximately 29% of the shares in the businesses. As a result of the issuing of additional shares to Cambridge and other transactions arising out of this agreement he retains a 21% shareholding in Imari. Mr. O'Neill cannot be regarded as controlling the business by virtue of his holding the majority of the shares. It is widely recognised, however, that it is not essential for an individual or firm to hold the majority of shares in a business in order to enjoy some degree of control over that business. The Mergers Acts, as amended by the Competition Act, provide that the acquisition of more than a 25% shareholding in an enterprise constitutes control. The European Court of Justice recognised in its decision in the Philip Morris case that the acquisition of a minority shareholding in an undertaking could allow the purchaser to exercise control over that undertaking [9].

32. In practice individuals who do not hold a majority shareholding in a business may effectively control that business if, for example no other shareholder or allied group of shareholders holds any significant block of shares, or if the majority of shares is held by institutional investors. For example, in its report on the proposed takeover of Tribune Group Newspapers by the Independent Group the Authority noted that, although Dr. A.J.F. O'Reilly owned less than 28% of the total shares in the latter group, ´He is widely regarded as having the controlling interest in the Independent' [10].

33. The Imari group began when Mr. O'Neill took over the business of James Scott, which is now one of the Imari group of companies. Mr. O'Neill is the managing director of Imari. ACT provided much of the financial backing necessary for Mr. O'Neill to acquire and develop this business and it, in return, acquired a sizeable shareholding in the organisation. With the financial support of ACT, Mr. O'Neill has developed the business to its present stage. The object of the present agreement is to obtain additional funding to allow for the further expansion and development of the Imari Group, the hope being that it will eventually become a publicly quoted company. The acquisition of the business was essentially Mr. O'Neill's idea and he, with the financial backing of ACT, has built it up to its current position. Apart from the restrictions imposed to protect themselves against a dilution of the value of their investment, both ACT and Cambridge are content to allow Mr. O'Neill along with the rest of the board of Imari to run the business.

34. Clause 6.4 of the agreement provides that the business of Imari will be controlled by the Board. Clause 6.5 allows ACT and Cambridge to each appoint one non-executive director to the Board. There are four directors including Mr. O'Neill in addition to those appointed by ACT and Cambridge. Two of these are employees of Imari. To the extent that the business of Imari is controlled by the board Mr. O'Neill enjoys the same degree of control as both Cambridge and ACT. The Authority believes that in the case of Imari it is reasonable to conclude that Mr. O'Neill is able to exercise a significant degree of control over the business. Indeed if he was, in fact, only a minority shareholder with little control, clauses 6.9 and 6.10 of the agreement, restricting what the company can do without the prior approval of Cambridge and ACT, would not be necessary.

35. The provision of venture and development capital to small businesses in return for the acquisition of a shareholding in the business essentially involves an arrangement between the venture capitalist and the owners of the business to engage in a particular business venture together. The owners provide the necessary expertise and knowledge of the business, while the venture capitalist provides funds necessary for the development of the business. It is not a partnership arrangement, nor is it a joint venture. It is nevertheless an arrangement to participate together in a particular business venture. Such an arrangement is not akin to that between an employer and an employee. Mr. O'Neill has a considerable stake in the business and has a major say in the control of the business.

36. Mr. O'Neill is party to the agreement by virtue of his being part owner of Imari. As in the case of Mr. de Rooij, Mr. O'Neill ´played a part in his own right both in the conclusion of the transfer agreement and as a signatory of the non-competition clause'. The agreement imposes a series of obligations on Mr. O'Neill in respect of the other parties. These obligations arise under a number of other clauses besides clause 8. The agreement confers no explicit benefits on Mr. O'Neill. It is clear, however, that he is a beneficiary of the agreement by virtue of the fact that the agreement provides him with the opportunity to further develop the Imari Group. His interest in the development of the business is primarily as a joint owner rather than as an employee. This view is supported by the parties' statement in a letter dated 21 May 1992 that ´the investment by the Cambridge Equity Fund in the Imari Group is as much an investment in Mr. O'Neill as it is an investment in the Imari Group.' The position of Mr. O'Neill is, in the Authority's view, similar to that of Mr. de Rooij.

37. In sum Mr. O'Neill is an undertaking by virtue of the fact that he is a part owner and managing director of Imari, he exercises considerable de facto control over the business and is therefore engaged for gain in the provision of services.

38. The present notification constitutes a series of arrangements involving Cambridge, ACT, Imari and Mr. O'Neill, whereby Cambridge has invested funds in Imari. These arrangements constitute an agreement between undertakings. Imari is engaged in providing international freight, transport and other services within the State and between the State and other countries, so that the relevant market is that for the provision of such services throughout the State.

39. The parties have submitted that the present agreement does not come under section 4 of the Competition Act on the grounds that the arrangements are analogous to a concentration or concentrative joint venture and that, as EC precedents indicate such arrangements are outside the scope of Article 85(1), then they should also be outside the scope of section 4(1) which is based on 85(1). In addition they argued that as restrictions which are ancillary to a concentration between undertakings, including non-competition clauses, do not come within the scope of Article 85(1) by virtue of the EC's ancillary restraints notice, they are also outside the scope of section 4(1) [11].

40. Article 3 of the EC Merger Regulation [12] defines a concentration as arising where:

´(a) two or more previously independent undertakings merge, or

(b) - one or more persons already controlling at least one undertaking, or

- one or more undertakings

acquire, whether by purchase of securities or assets, by contract or by other means, direct or indirect control of the whole or parts of one or more other undertakings.'

Section 1(3)(a) of the Mergers Act as amended provides that:

´a merger or takeover shall be taken to exist when two or more enterprises, at least one of which carries on business in the State, come under common control.'

Section 1(3)(c) as amended by Section 15(2) of the Competition Act provides that where an enterprise holds more than 25 percent of the voting rights in another enterprise the enterprises are deemed to be under common control.

41. The present notification does not, in the Authority's view, involve a concentration within the meaning of the EC Merger Regulation nor does it constitute a merger within the meaning of the Mergers Act. Two or more previously independent undertakings are not coming under common control. The proportion of shares being acquired by Cambridge is below the level at which enterprises are deemed to have come under common control under the Mergers Act 1978, as amended by the Competition Act. Cambridge has acquired a minority shareholding in Imari. The European Court of Justice decision in Philip Morris indicates that the acquisition of a minority shareholding may come within the scope of Article 85(1). The analogy with a concentration under the EC Merger Regulation does not therefore apply. The Authority has already indicated, however, that it does not regard a merger agreement as being automatically outside the scope of Section 4(1) of the Competition Act [13].

42. The Authority does not consider that the arrangements in this case can be regarded as a concentrative joint-venture. ACT and Cambridge have invested funds in Imari in order to enable Imari to expand and develop, in the hope that they will be able to resell their shareholdings and secure a capital gain. Cambridge's only link with ACT and Imari is as a minority shareholder and provider of development funds. The Authority does not believe that such an arrangement can be regarded as constituting a concentrative joint-venture. As pointed out the arrangement involves the parties participating together in a particular business venture. It is clear, however, that the motivation for participating in such a venture on the part of Cambridge is for purely investment purposes, although the expectation is that it may be some time before any return on this investment is realised.

43. The parties have also argued that the restrictive provisions relating to Mr. O'Neill contained in clause 8 of the agreement do not offend against section 4(1) of the Act by virtue of the fact that Mr. O'Neill is not an undertaking. They claimed that clause 8 in fact constitutes a separate agreement solely involving Mr. O'Neill and Cambridge which, given their view that Mr. O'Neill is not an undertaking, is not an agreement between undertakings. The fact that the overall agreement is an agreement between undertakings does not, in their view, alter the fact that clause 8 is a separate agreement which is not an agreement between undertakings.

44. For the reasons given in paras 27-37 above the Authority believes that Mr. O'Neill is an undertaking and therefore rejects the argument advanced by the parties. In addition the Authority believes that no agreement could have arisen between Mr. O'Neill and Cambridge, restricting Mr. O'Neill's rights to engage in the transport business, other than as part of the broader agreement by which Cambridge has agreed to invest in Imari. It is equally clear to the Authority that the restrictions being imposed on Mr. O'Neill by clause 8 were a central element in Cambridge agreeing to invest in Imari. This is evident from reading clause 8.1 which states that it is ´In further consideration of, and as a further inducement to, the Manager [Cambridge] and ACT entering into this agreement...' In addition the rationale behind such restrictions is that they are necessary to protect Cambridge's investment in Imari. Clause 8 cannot therefore be regarded as constituting a separate agreement, even if it was deemed to constitute a separate agreement the Authority notes that in applying Article 85 of the Treaty of Rome on which the Competition Act is based, the EC Commission and Court of Justice have accepted that: ´A series of connected agreements will be read together as one agreement' [14].

45. As already pointed out the Authority does not consider that the share purchase arrangements give rise to a concentration. The parties have submitted that neither Cambridge, nor any member of Cambridge Group plc, nor any company in which any member of Cambridge Group plc has a significant shareholding, nor, so far as the directors of Cambridge Group are aware, any investor in the Fund, carry on business directly or indirectly in competition with any business of any Irish member of the Imari Group. Similarly, neither ACT, nor any member of the AIB Group, nor any company in which any member of the AIB Group has a significant shareholding, carry on business directly or indirectly in competition with any business of any Irish member of the Imari Group.

46. The acquisition of a minority shareholding in an undertaking of itself cannot be viewed as preventing, restricting or distorting competition. This view is consistent with the European Court of Justice decision in the Philip Morris case. The primary object of venture capitalists in acquiring shares in small and medium sized businesses is investment, while the object of the business is to obtain additional funding to enable it to expand further. While such an arrangement is not akin to a partnership, it nevertheless represents an arrangement by two or more parties to participate together in a business venture, with one providing the necessary capital, and the other the entrepreneurial skills and business knowledge. Thus the object of such an arrangement is not, in the Authority's view, to prevent, restrict or distort competition. In the absence of indications to the contrary the Authority also believes that such arrangements generally do not have the effect of preventing, restricting or distorting competition. Indeed to the extent that they assist the development of small and medium sized businesses, their long term effect may be pro-competitive. The investment by Cambridge Investments in Imari by means of the acquisition of a minority shareholding in the Imari Group, does not therefore, in the Authority's opinion, offend against Section 4(1).

47. While the agreement is not of its nature anti-competitive, the Authority nevertheless must also consider whether any of the provisions of the agreement have the object or effect of preventing, restricting or distorting competition. In considering such provisions, the Authority believes that the correct approach is to consider whether they are essential in order to achieve the main purpose of the agreement. Where the provisions are ancillary to the main purpose of the agreement, then the Authority believes that they should not be considered to offend against Section 4(1). The Authority believes that this approach is consistent with that taken by it in considering restrictive clauses in sale of business agreements. It is also consistent with the view taken by the EC Commission and the European Court of Justice in such cases. In the case of restrictions in sale of business agreements the European Court of Justice stated in its decision in Remia that:

´In order to determine whether or not such clauses come within the prohibition in Article 85(1), it is necessary to examine what would be the state of competition if those clauses did not exist. [15]'

Such an approach has long been adopted by the US courts in competition cases.

48. In order to decide whether the individual clauses of an agreement should be properly regarded as merely ancillary to the main purpose of the agreement the Authority believes that it must be established that they are necessary, but no more than is absolutely necessary to achieve such ends. Where individual restrictive clauses in an agreement go beyond what is absolutely necessary to achieve a legitimate end, then, in the Authority's view, they can no longer be regarded as merely ancillary to that end, but must be considered as having the object of seeking to prevent, restrict or distort competition. As Judge Taft noted in the Addyston Pipe case in the United States almost a century ago:

´no conventional restraint of trade can be enforced unless the covenant embodying it is merely ancillary to the main purpose of a lawful contract, and necessary to protect the covenantee in the enjoyment of the legitimate fruits of the contract, or to protect him from the dangers of an unjust use of those fruits by the other party. [16]'

49. Under clause 6.9 of the agreement Imari has agreed with Cambridge and ACT that, for so long as either Cambridge or ACT hold 10% or more of the ordinary share capital of Imari, Imari, (and each of the companies included in the Imari Group), will not do certain things without the prior consent of Cambridge or ACT. Such consent cannot be unreasonably withheld.

50. Cambridge and ACT are in the business of providing venture and development capital to companies. They undoubtedly need to take some steps to protect their investment and to ensure that the money provided is not used for a quite different purpose to what they had intended. Without such protection it is difficult to see how venture and development capital companies could operate, as the risks involved would greatly increase. In such circumstances it may also prove difficult to attract the necessary funds from investors given the higher risk which would attach to such investments. It is clear that the absence of such venture/development capital would seriously hinder the development of many small and medium sized businesses within the economy and that this would restrict the strengthening and development of competition in many sectors of the economy. The Authority believes, therefore, that providers of venture/development capital are entitled to take some steps to protect their investment.

51. Given that neither Cambridge nor ACT have any other involvement either directly or indirectly in the markets in which Imari operates, it is clear that the restrictions in clause 6.9 are designed to protect their investment. In other words the provisions contained in clause 6.9 may be regarded as no more than is necessary to achieve the aims of the overall agreement. Therefore the Authority does not regard the provisions in clause 6.9 as offending against Section 4(1) of the Competition Act.

52. Clause 6.10 restricts Imari from carrying out certain activities without the prior consent of the Board. As in the case of 6.9 these apply for so long as either Cambridge or ACT hold 10% or more of the share capital of Imari. The Authority considers these restrictions to be similar in nature to those contained in clause 6.9 and for the same reasons believes that they do not offend against Section 4(1).

53. Clause 6.14 requires that Imari fully enforce the provisions of any contract of employment with Mr. O'Neill, that no changes can be made to that contract without the prior written consent of Cambridge and ACT, and that Mr. O'Neill devote substantially the whole of his time, attention and abilities to the promotion and development of the business of the Imari Group. Clause 6.14 is designed to ensure that Imari retains the services of Mr. O'Neill, that he continues to devote his efforts to the promotion of Imari's interests and that he does not compete with it, so long as he remains involved with the company. Again this clause is considered by the Authority as a legitimate means for Cambridge to protect their investment and it cannot be said to offend against Section 4(1).

54. Clause 8 involves various restrictions on Mr. O'Neill which are set out in para. 15. As originally notified, the restrictions applied for a period of 5 years from the Completion Date or the second anniversary of the date upon which he ceased to be employed by Imari, whichever was the later. Under these restrictions Mr. O'Neill was prohibited for that period of time from:

(a) carrying on or being engaged in any business in Ireland which competes with any company in the Imari Group;

(b) doing business with any person who was a customer or supplier of any company within the Imari Group during the 2 years preceding his cessation of employment;

(c) interfering with the continuance of supplies to any company in the Imari Group from any undertakings which supplied any company in the Imari Group during the 2 years preceding his cessation of employment;

(d) soliciting or offering employment to any person who was an employee of the Group during the 2 years preceding his cessation of employment;

(e) entering into partnership with or appointing as consultant or adviser any person who was an employee of the Group during the 2 years preceding the Completion Date;

(f) using or adopting the name of any company in the Group other than for the benefit of the Group in the proper performance of his duties under his Service Agreement.

55. The restriction in 8.1(i)(f) relates to the use of the Imari name or the name of any member of the Group. The Authority has already indicated in previous decisions that such a provision does not involve any restriction on competition within the State or any part of the State. It is necessary to prevent Mr. O'Neill passing himself, or any undertaking under his control, off to Imari customers or suppliers as representing Imari, in the event that he should decide to go into business in competition with Imari. It therefore does not offend against Section 4(1).

56. The parties have argued that the businesses of the Imari Group rely heavily on the considerable degree of loyalty which has been built up over the years. Mr. O'Neill's connection is seen as critical in this regard. The parties have argued that such ancillary restraints do not infringe Section 4(1) as they are in pursuit of legitimate commercial objectives which are not per se anti-competitive. They have cited a series of EC Commission and Court of Justice decisions in support of this argument [17].

57. The Authority has already indicated in para. 47 above that it accepts, as a broad principle, that restrictive clauses which are merely ancillary to a legitimate agreement should not be regarded as offending against section 4(1). It has also stated, however, that to be regarded as ancillary to a legitimate agreement such clauses should be no more than is absolutely necessary to facilitate the object of that agreement. In Nallen/O'Toole it accepted that, in the case of a sale of business, some restriction on the seller's ability to re-enter the market is necessary in order to ensure the complete transfer of the goodwill of the business to the purchaser. It decided that such restrictions must be limited in terms of their duration, geographical coverage and subject matter to what is necessary for the complete transfer of the goodwill of the business and indicated that it would normally regard a restriction of two years as sufficient to secure the transfer of the goodwill. In Woodchester Bank and Budget Travel/Phil Fortune [18] the Authority accepted that, in the case of a sale of business, some restriction on the ability of the seller to solicit key employees was legitimate in order to secure the complete transfer of the goodwill of the business. Again such a restriction had to be limited in duration to what was necessary to secure the complete transfer of the goodwill. In addition the restriction in that instance only prevented the seller from soliciting such staff, who were of course free to obtain employment with another undertaking competing in the business, to set up in the business themselves, or to obtain employment with the vendor provided the vendor had not solicited any application for employment from them.

58. The Authority has accepted that restrictions which are necessary to protect the investment by Cambridge in Imari should be regarded as ancillary. In the absence of such protection, such an investment, which may be desirable, might not have taken place. The issue then is simply whether a non-competition clause is necessary to protect that investment and, if so, whether its content and duration goes beyond what is necessary for that purpose.

59. As already stated the agreement constitutes an arrangement between the parties to engage jointly in a particular business venture. Such an arrangement could not operate if the parties were free to compete with the business or with each other. For example, when two or more individuals come together to form a partnership, they agree not to compete with one another. The Authority indicated in Nallen/O'Toole that it did not ´regard partnerships per se as being in contravention of the Act.' [19] Where individuals agree to engage in business together and not to compete with one another the Authority does not regard such arrangements of themselves, as offending against Section 4(1). Indeed such arrangements may be pro-competitive in that the combined entity may be in a better position to compete with other undertakings in the relevant market. The Authority believes that, in general, a restriction on the parties involved in a business competing with it for so long as they remain part of the business, does not offend against Section 4(1). The position changes, however, if the parties are prevented from withdrawing from such arrangements. If a party wishes to withdraw from such arrangements then measures designed to prevent him doing so may restrict competition.

60. Mr. O'Neill retains a significant shareholding in, and is employed as managing director of Imari. The Authority believes that, for so long as that remains the case, there is no question of Mr. O'Neill competing with Imari. Indeed it would not appear to be in his interest to set up in competition with Imari so long as he retains a significant shareholding in that business. It is also relevant that clause 6.14 provides further protection to Cambridge inasmuch as it requires that Imari fully enforce the provisions of any contract of employment with Mr. O'Neill, that no changes can be made to that contract without the prior written consent of Cambridge and ACT, and that Mr. O'Neill devote substantially the whole of his time, attention and abilities to the promotion and development of the business of the Imari Group.

61. If Mr. O'Neill were to sell his shareholding in the business then, given the Authority's previous decisions concerning sale of business agreements, some restriction on his competing with Imari would almost certainly be acceptable. The Authority has stated in all its previous decisions involving such arrangements that it would generally regard two years as the appropriate duration for such a restriction on competition.

62. In the Authority's view the restrictions in clause 8.1(i)(a), (b), (c), (d) and (e) went beyond what was necessary to protect the value of Cambridge's investment in Imari. It is relevant that some protection is afforded to Cambridge by clauses 6.9, 6.10, 6.14 and 9.1. The latter clause prevents Mr. O'Neill from disposing of his shareholding in Imari without the prior consent of Cambridge and ACT. In addition the Authority considers that a restriction on Mr. O'Neill competing with Imari for so long as he remains an employee and/or shareholder of the business is necessary to protect the interest of Cambridge. It also believes that a restriction on Mr. O'Neill competing with Imari for a period after he had disposed of any shareholding in the business is necessary to protect Cambridge. Taking all of these factors into account, the Authority believes that the restrictions originally included in clause 8.1(i), which were for the later of 5 years from the completion date and 2 years after Mr. O'Neill ceased to be employed by Imari, went beyond what was absolutely necessary to protect the investment by Cambridge in Imari and could not be regarded as merely ancillary to the primary purpose of the agreement.

63. The Authority accepts the arguments advanced by the notifying parties that Mr. O'Neill has played a major part in developing the business of Imari in the past, and that, as a result, Imari's future prospects will be enhanced if it retains Mr. O'Neill's services in the future. It could reasonably be argued that Mr. O'Neill's undoubted expertise in the business was a factor behind Cambridge's decision to invest in Imari and that the retention of his services would enhance the prospect of Cambridge making a capital gain on this investment. For these reasons it may be considered logical that the parties would seek to ensure that Mr. O'Neill remains with Imari and that measures designed with this end do not prevent, restrict or distort competition.

64. Investment in a business is, by its very nature, a risky undertaking subject to considerable uncertainty. In deciding whether or not to invest in a company an investor will be influenced by a number of considerations, including the company's past performance, his assessment of its future prospects, of the overall economic outlook and of the quality of the company's management. The company may not perform in line with the investor's prior expectations for a number of reasons. The economy may not develop as he had anticipated, the company may perform poorly, key staff, including management may be enticed away to a competing firm or may set up in business for themselves.

65. Increased competition in the relevant market could have adverse consequences for Imari in terms of profitability, its long-term development and attractiveness to investors, thereby reducing the potential gain on the investment made by Cambridge and ACT. To the extent that this is so, both Cambridge and ACT would benefit if a potential competitor were prevented from competing. All anti-competitive agreements are designed to benefit those participating in them, and by extension, their shareholders, largely by securing higher profits for the participants than would otherwise accrue. The benefits expected to accrue to the participants cannot be accepted as justifying restrictions on competition. If Cambridge or ACT were to enter into an agreement with a competitor of Imari whereby it agreed not to compete against Imari, then this would constitute an anti-competitive agreement and would be both prohibited and void under Section 4(1). The same would apply to an agreement between them and a potential competitor.

66. The Authority rejects the parties claim that the restrictions in clause 8.1(i) did not prevent, restrict or distort competition on the grounds that neither Cambridge nor ACT is either directly or indirectly in competition with any member of the Imari Group, as irrelevant. It has previously indicated in Nallen/O'Toole that competition is to be interpreted as meaning potential as well as actual competition. The Authority's interpretation of competition in this respect is in line with that of the European Commission. [20] The part played by Mr. O'Neill in the development of Imari and the claim by the parties that they see Mr. O'Neill as having a key role in the group's future development indicates that they clearly believe that he would provide strong competition to the Imari group, were he to take up employment with a competing firm, or to set up in business on his own account, or in partnership with someone else. Clause 8.1 by seeking to prevent Mr. O'Neill from working for another company or setting up in business either alone or in partnership for a minimum of five years from the completion of the notified agreement seeks to restrict potential competition in the markets in which Imari operates. The fact that Cambridge and ACT are not engaged directly in the market concerned does not alter the fact that the object or effect was to restrict competition. Such a restriction offends against Section 4(1) of the Competition Act since it went beyond what was necessary to protect the investment made by Cambridge in the Authority's view.

67. The parties have also claimed that the arrangements notified ´are unlikely to have any effect or any appreciable or significant effect on competition in any market where the company or any other party to the Agreement operates.' They cited the European Court of Justice decision in Volk v Vervaecke in support of this argument [21].

68. The Authority indicated in Nallen/O'Toole that the prohibition in Section 4(1) of the Act should not, in its view, be interpreted literally. It went on to state that the agreement notified in Nallen/O'Toole would have no effect on the actual level of competition in the market and that in the absence of barriers to other new entrants, (besides Mr. O'Toole), the agreement could not be regarded as having any real effect on competition in the relevant market.

69. The Authority does not believe that such arguments are valid in the case of the present agreement. It is true that in some of the markets in which Imari operates e.g. road freight, there are a large number of competitors, that many of these are small scale operators and owner-drivers, and that entry to the market is relatively easy. In such circumstances the views expressed by the Authority in Nallen/O'Toole, that it would not regard a restriction on a single individual competing in the market as preventing, restricting or distorting competition, would apply.

70. Other markets in which Imari is involved, namely the provision of international freight and shipping services, are, by the parties own admission, highly specialised businesses. The number of undertakings in Ireland with the knowledge and resources to enter such businesses is, in the Authority's view, quite limited. It is again significant in this regard that Mr. O'Neill's proven track record in the business is a key factor behind Cambridge's decision to invest in the business. The amount of money being invested by Cambridge for a minority stake in Imari indicates that the cost of getting into this business for a new entrant would be quite high. The risk of losing most or all of such monies would be equally high. It is well recognised in economic theory that where the costs of entry to a market are high and the threat of losses are significant, the prospect of new firms entering a market is greatly reduced. Mr. O'Neill with his proven track record constitutes a significant potential competitor in the market. While it could be argued that foreign firms could always enter the market, the Authority does not regard the likelihood of such entry as sufficiently strong to outweigh the restriction on competition entailed by the restriction on Mr. O'Neill.

71. The restrictions contained in clause 8.1(i) must be considered in a wider context. The effect of the restrictions cannot be considered in isolation as, if all such agreements were considered in isolation, it could be argued that their effects were minimal. If such restrictions were to apply generally throughout the economy, however, their combined effect on competition would be considerable. There are indications from reported court cases and from other notifications to the Authority that they are fairly widespread. Certainly if the Authority were to decide that such a restriction was acceptable in isolation, then the likelihood is that they would become a standard feature of such arrangements.

72. In the Authority's view the restrictions in clause 8.1(i)(a),(b),(c),(d) and (e) went further than was necessary to protect Cambridge's investment in Imari since:

(i) Clauses 6.9 and 6.10 already restricted the ability of Imari to engage in a number of activities without Cambridge's approval, thereby reducing the risk of Cambridge suffering a loss as a result of poor management decisions;

(ii) Clause 6.14 provided that Imari shall not alter or rescind any of the material terms of Mr. O'Neill's contract of employment without the prior written consent of Cambridge and ACT and that Mr. O'Neill would devote substantially the whole of his time attention and abilities to the promotion and development of the business of the Imari Group and thereby prevents him competing with Imari so long as he remains involved with the company;

(iii) Clause 9.1 provided that Mr. O'Neill could not dispose of his shareholding in Imari without the prior consent of Cambridge and ACT;

(iv) If Mr. O'Neill were to sell his shares in Imari either to the other shareholders or to a third party, some restriction on his competing with Imari would appear to be justified, given the Authority's previous decisions;

(v) The proposed duration of the non-competition clause, namely the later of 5 years from the completion date or two years from the date of cessation of employment, is designed to prevent Mr. O'Neill from leaving Imari and seeking to establish himself as a competitor to it and were he to attempt to do so such restrictions would be excessive.

73. In addition it was admitted that ACT and Cambridge could jointly decide to terminate Mr. O'Neill's employment at any time. If, in fact, ACT and Cambridge should decide to terminate Mr. O'Neill's employment with the Imari group they could hardly expect to be protected against his competing with Imari.

74. The effect of clause 8.1(i) (a),(b),(c),(d) and (e) was to prevent Mr. O'Neill leaving and setting up in competition with Imari either on his own or in partnership with someone else or from taking up employment with another competing company for an unduly long period of time. These provisions, in the Authority's view, had the object or effect of preventing, restricting or distorting competition in certain transport services within the State and offended against Section 4(1) of the Act [22].

75. Clause 8.1(i)(d) in addition restricted Mr. O'Neill from soliciting or offering employment to any person who was an employee of Imari during the two years prior to Mr. O'Neill leaving the business. In Budget Travel and Woodchester the Authority accepted a restriction on the vendor of a business soliciting the employment of its former employees. Thus a restriction on Mr. O'Neill offering employment to a former employee, where the offer was initiated by Mr. O'Neill, would not in the Authority's view offend against Section 4(1), but this would not apply to an offer of employment where the request for employment was originated by the employee. The Authority does not believe, however, that an absolute prohibition on offering employment to former employees is normally justified and it would regard such a restriction as offending against Section 4(1).

76. The parties have amended clause 8.1(i) by an amending agreement dated 4 February 1993 which was submitted to the Authority on 1 March 1993. The amended agreement provides that the restrictions originally contained in clause 8.1 shall apply from the completion date until the later of, (a) the 915th day after the date upon which Mr. O'Neill ceases to hold or beneficially own or be entitled to any shares in the capital of Imari, or (b) the date upon which he ceases to be an employee of Imari.

77. As already stated, the Authority believes that a restriction on an individual competing with a business for so long as he remains an employee and/or shareholder in that business is essential to enable individuals to engage in business together and such a provision does not offend against Section 4(1). The Authority indicated in Scully/Tyrrell that it would take a different view if the individual held only a nominal shareholding for investment purposes, or if the shareholding or employment arrangements were an artificial arrangement, designed to escape the provisions of Section 4(1). It does not believe that this is the object of the amended arrangements. The Authority has also accepted in Nallen/O'Toole that a restriction on a party to a business competing with it for a period after he has disposed of his interest in the business does not offend against Section 4(1). It has stated, in a number of cases that it would generally regard a restriction of two years as sufficient for this purpose. The arrangements as amended provide for a restriction of 2.5 years from the date of a sale of shares in the business. The Authority believes that, given the importance of Mr. O'Neill to the business, the size of the investment by Cambridge, a period of 6 months longer than the general norm is acceptable in this instance. Therefore clause 8.1 does not offend against Section 4(1) of the Act. While 8.1(i)(d) could be interpreted as preventing Mr. O'Neill offering employment to a former Imari employee where the employee had sought such employment, the Authority believes that such a restriction could only be regarded as anti-competitive inasmuch as it prevents Mr. O'Neill from competing with Imari by employing individuals whom he knows to be familiar with the businesses in which Imari operates. As Mr. O'Neill is prevented from competing with Imari for the period during which clause 8.1(i)(d) is effective, the Authority does not believe that clause 8.1(i)(d), as amended, restricts competition or offends against Section 4(1).

78. Clause 8.1(ii) is designed to prevent Mr. O'Neill from disclosing or making use of, for his own purposes, any confidential information. Confidential information is defined in clause 1.1 as ´any information relating to the organisation, business, finances, prices, customers, suppliers, transactions or affairs of any company in the Imari Group.' The Authority has accepted in ACT/Kindle and Budget Travel/Phil Fortune that a restriction on disclosure of confidential information is not generally regarded as in breach of Section 4(1). It has also decided in those cases that a restriction on making use of information cannot be employed to prevent the seller of a business re-entering the market once sufficient time has passed for a purchaser to have acquired the complete goodwill of the business. The parties have indicated by letter of 21 May, 1992, that the clause would not be invoked to prevent Mr. O'Neill entering the business only to stop him using any confidential information. The Authority believes that in the light of this commitment, clause 8.1(ii) does not offend against Section 4(1).

79. As pointed out clause 9.1 prevents Mr. O'Neill from disposing of his shareholding in Imari without the consent of Cambridge and ACT. The Authority believes that such a restriction can be justified to protect the interests of Cambridge. Cambridge has invested in Imari partly on the assumption of Mr. O'Neill's continued involvement with the company. The Authority is concerned, however, that such consent may be withheld in order to prevent Mr. O'Neill leaving Imari and thereby prevent him competing with it. It would regard the withholding of consent in such circumstances as restricting competition.

80. In the Authority's opinion, Cambridge Investments Ltd., ACT, Imari and Mr. Timothy O'Neill are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified arrangements for the acquisition by Cambridge of shares in Imari, constitute an agreement between undertakings which applies within the State.

81. The Authority believes that the agreement for the purchase of shares in Imari by Cambridge Investments Ltd. does not prevent, restrict or distort competition within the State, since it merely represents an arrangement by a number of parties to engage in a particular business venture together, whereby certain parties agree to invest money in the business.

82. The Authority believes that, where the primary purpose of the agreement is legitimate under the Competition Act, any restrictive clauses contained in such an agreement do not offend Section 4(1), provided they are ancillary to the main purpose of the agreement. To be regarded as ancillary the Authority believes that such restrictions should be necessary, but no more than is absolutely necessary to achieve the primary purpose of the agreement. Restrictions which go beyond what is absolutely necessary for the achievement of that purpose would offend against Section 4(1).

83. The restrictions contained in clause 8.1(i) of the agreement as originally notified, in the Authority's opinion, went beyond what was absolutely necessary to protect the investment being made in Imari by Cambridge and therefore went beyond what was necessary to enable the parties to engage in the business venture together. The Authority believes that the restrictions contained in clauses 6.9, 6.10, 6.14, 8.1(i), as amended by the agreement of 4 February 1993 and with the undertaking given in the letter of 21 May 1992, and clause 9.1 are ancillary to the main purpose of the agreement which is to engage in a form of joint business venture. Consequently such restrictions, in the Authority's opinion, do not prevent, restrict or distort competition in the State or any part of the State.

84. The agreement of 25 October, 1991 for the acquisition of shares in Imari Ltd. between Cambridge Investments Ltd., ACT Ltd., Imari Ltd. and Mr. Timothy O'Neill, as amended by the agreement between the parties of 4 February 1993 and with the undertaking given in the letter of 21 May 1992, does not, in the Authority's opinion, offend against Section 4(1) of the Competition Act, 1991.

85. 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 25 October 1991 for the acquisition of shares in Imari Ltd. between Cambridge Investments Ltd., ACT Ltd., Imari Ltd. and Mr. Timothy O'Neill, (notification no. CA/8/92E), notified on 6 March 1992 under Section 7 and amended by the agreement between the parties of 4 February, 1993 and with the undertaking given in the letter of 21 May, 1992 does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey

Member

21 June, 1993.