COMPETITION AUTHORITY

Competition Authority Decision of 1 July 1994 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/12/94 ‑ Dairygold Trading Limited/Suttons Limited

Decision No. 347

							

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Competition Authority decision of 1 July 1994 relating to a proceeding under section 4 of the Competition Act, 1991

Notification No. CA/12/94 ‑ Dairygold Trading Ltd. / Suttons Limited.

Decision No. 347

Introduction

1.	Arrangements for the acquisition of the assets and property, including the goodwill of certain businesses by Dairygold Trading Limited, (Dairygold) from Suttons Limited (Suttons), were notified to the Competition Authority on 13 May 1994.   Dairygold is a subsidiary of Dairygold Co‑operative Society Limited (Dairygold Co‑op) and Suttons is a subsidiary of the IAWS Group plc. (IAWS) The notification requested a certificate, or in the event of a refusal by the Authority to grant a certificate, a licence.

The Facts

(a)	The Subject of the Notifications

2.	The notification relates to an agreement, dated 18 April 1994, between Dairygold, and Suttons for the sale by Suttons of the assets and property, including goodwill, of Suttons distribution businesses located at Fermoy, Middleton and Blarney  Co. Cork, to Dairygold.

(b)	The Parties

3.	Dairygold is a subsidiary of Dairygold Co‑op, a cooperative society engaged in a wide range of activities including dairy and meat processing, the sale of dairy and meat products on domestic and export markets, the processing and sale of liquid milk and fresh dairy products, the manufacture and sale of animal feed, grain trading, shop retailing and the supply of farm inputs and farm requisites.  According to Dairygold's annual report for the year ended 31 December 1993 it had a turnover of £516.5m.

4.	Suttons is a limited company which is engaged in the distribution and supply of energy and hardware products, seed, fertilisers and animal feedstuffs.  It operates primarily in the South West and, prior to this agreement, had nine outlets located in Munster.

5.	IAWS is a public limited company quoted on the Irish Stock Exchange.  It has through its subsidiaries, been a major supplier of materials and services to the Irish agricultural and food industries for over 90 years.  The group's principal operating businesses consist of fish processing, fertiliser, animal feed, energy products and food.  Its accounts for the year ended 31 July 1993 shows its turnover as £402m.

The Product and the Market

6.	Suttons is engaged in the distribution and sale of seed, fertiliser, animal feedstuffs, farm hardware, such as fencing materials, baler twine, gates etc., general hardware such as paint and electrical accessories and energy products, mainly bagged coal and briquettes.  Its customers are farmers and, in the case of certain products, the general public. The relevant markets are those for the products concerned.  The relevant geographic market for most of these products is the towns where the businesses being sold are located and their environs, given the bulky nature of many of the products, and the high cost of transporting them over long distances relative to their retail price.

7.	The Census of Services shows that there were 276 wholesale outlets for grain, forage and fertilisers in Munster.  The Golden Pages indicates that there are a number of agricultural merchants and coal merchants located in the towns where the businesses which are the subject of this agreement are located.

The Arrangements

8.	The agreement relates to the sale by Suttons of its retail and distribution businesses in Fermoy, Middleton and Blarney, to Dairygold.  Under the terms of the sale Dairygold purchased the property, business assets and goodwill of the businesses.  The business assets essentially consist of the plant and equipment of the businesses and these are specified in part one of the schedule to the agreement.  There are no restrictive provisions in the agreement.

Submissions of the Parties

9.	The parties submitted that there were no restrictive provisions in the agreement and, as the agreement itself did not have the object or effect of preventing, restricting or distorting competition, it did not offend against section 4(1) of the Competition Act.  They argued that there were a number of competitors including other co‑ops as well as firms and sole traders engaged in the relevant business in each of the towns concerned.  They also submitted a number of arguments in support of a licence but these are not considered here.

Assessment

(a)	Section 4(1)

10.	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.'

(b)	The Undertakings and the Agreement

11.	Section 3(1) of the Competition Act defines an undertaking as `a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.'  The parties to the present agreement are Dairygold, and Suttons.  These are both corporate bodies engaged in the provision of goods and services for gain and are therefore undertakings within the meaning of the Act.

(c)	Applicability of Section 4(1)

12.	The present arrangements therefore constitute an agreement between undertakings whereby Dairygold has purchased certain businesses from Suttons.  The Authority has indicated in previous decisions that such an object per se does not offend against Section 4(1).  The parties have indicated that Suttons has only a relatively small share of the overall market which suggests that the agreement is unlikely to lead to an increase in market concentration to an extent that would threaten competition.  In such circumstances the Authority believes that the agreement for the sale of the businesses to Dairygold does not have the effect of preventing, restricting or distorting competition within the State or any part of the State and thus does not offend against Section 4(1) of the Competition Act.

The Decision

13.In the Authority's opinion, Dairygold and Suttons are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified arrangements for the acquisition by Dairygold of certain businesses from Suttons constitute an agreement between undertakings.  The agreement of 18 April 1994 for the acquisition by Dairygold Trading Limited from Suttons Limited of certain businesses located at Fermoy, Middleton and Blarney, County Cork, does not, in the Authority's opinion, offend against Section 4(1) of the Competition Act, 1991.

The Certificate

14.	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 18 April 1994 between Dairygold Trading Limited and Suttons Limited for the acquisition by Dairygold Trading Limited from Suttons Limited of certain businesses located at Fermoy, Middleton and Blarney, County Cork, (CA/12/94), notified on 13 May 1994, under section 7, does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey
Member
1 July 1994.