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Introduction.

1 Notification was made by Irish Life Assurance plc on 30 September 1992 with a request for a Certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to issue a certificate, a licence under Section 4(2), in respect of an Agency Agreement between Irish Life Assurance plc and all registered Irish Life Insurance Brokers.

2 The notification concerns an Agency Agreement entered into between Irish Life Assurance plc and all registered Irish Life Insurance Brokers. This agency agreement formalises a prior verbal agreement in operation between Irish Life Assurance plc and its brokers.

3 The notifying party, Irish Life Assurance plc, has its registered offices at Lower Abbey Street, Dublin 1. The company transacts all forms of individual life assurance, group pension schemes, pensions for the self employed, annuities and investment savings. Irish Life’s total assets in 1997 were £6.4bn and its gross premium income was £520m.

4 The other parties to the Agency Agreement are all insurance brokers registered by ILAC with the Intermediary Compliance Bureau under the Insurance Act 1989. An insurance broker is defined by the Insurance Act 1989 as an intermediary who holds appointments from at least 5 Life Assurance Companies.

12 Irish Life submits that there are 1,517 brokers who have concluded agency agreements with Irish Life Assurance plc. It maintains that the total market turnover for all companies in 1993 was £240.4m. Irish Life submits that its sales figure in respect of the product/services affected by this agreement for 1993 is £61.7m. The market share which the aggregate turnover of all the insurance brokers with whom Irish Life has concluded the notified agreements represents is estimated at 17% of the total market for all companies in these services in Ireland.

13 The agreement is one whereby an insurance broker, as defined by the Insurance, Act 1989, enters into an agency agreement with Irish Life Assurance plc to sell its products. The insurer’s products include life assurance and other financial products. There is no ‘exclusivity’ involved in the arrangements. A broker must hold appointments in writing for a least 5 life companies.

14 The provisions of the agreement relate for the most part to obliging the insurance broker to comply with the requirements imposed on insurance brokers under the Insurance Act 1989. Other provisions in the agreement relate to maintaining the image and integrity of Irish Life products and to the importance of honesty and ethical behaviour.

15 Under the agreement the broker has certain obligations. It may not procure any person to complete proposals in relation to life assurance or financial agreements unless these agreements are issued by a life office with which the broker has a written letter of appointment; it may not advertise in relation to the insurer or the insurer’s products or use any sales or marketing techniques which may bring the insurer in to disrepute; the broker undertakes to act in accordance with the law and bring to the attention of the insurer any breach of the act, code of conduct or this agreement itself. Moreover, the broker agrees to comply fully with bonding and professional indemnity insurance requirements and keep a separate bank account, designated a “Section 48 - Life Assurance Account” as defined in the Act. It undertakes not to change its status as an insurance broker without informing the insurer. The broker takes responsibility for the proper training and supervision of all employees or agents.

16 Clause 2(d) provides that the broker shall not pass as an agent of the insurer as follows,

“the broker shall not act as or hold himself out to be an agent of the insurer but shall be deemed to be acting on his own account in all dealings with policy holders or other members of the public.”

17 Clause 3 provides that the insurer shall pay commission to the broker in accordance with the terms and conditions of the insurer relating to the sale by the broker of the insurers products,

“subject always to the maximum levels of commission allowable under the current version of the Irish Insurance Federation’s Agreement on maximum rates of remuneration for life business”.

18 The insurer may terminate the agreement at any time with 72 hours’ notice to the broker. On termination of the agreement all documentation and contracts (complete or incomplete) shall be handed back to the insurer. The insurance broker agrees not to assign or transfer any rights conferred under the agreement. In the case of any conflict the provisions of the 1989 Act are to prevail.

19 There are two separate agency agreements for insurance brokers (a) one for members of the Irish Brokers Association (IBA) and (b) one for non-members. Provisions in both agreements are the same save as follows. For brokers who are members of the IBA, Irish Life agrees to

“provide prior written notice to the insurance broker of any changes to the rates of commission.” (clause 2k)

20 Clause 3(f) provides that “if the agreement is terminated in accordance with Clause 3(b), commission will continue to be paid after the termination date and in accordance with the terms and conditions of the insurer relating to the sale by the insurance broker of the insurer’s products provided that at all times the insurance broker continues to be a member of the IBA.”

21 The parties stated that the agreement created a relationship of agency for distribution purposes and had neither the object nor the effect of preventing, restricting or distorting competition in the State.

22 On 10 December 1998, the Authority issued a Statement of Objections to the notifying party indicating its intention to refuse to issue a certificate or grant a licence to the notified arrangements because these arrangements required that the parties adhere to the Insurance Industry Federation agreement on maximum rates of remuneration for life business. By letter dated 14 January, the notifying party stated that it no longer adhered to the IIF agreement and it was fully aware of its obligation not to do so. Accordingly, on 31 March 1999, Irish Life Assurance plc. issued a letter to its Insurance Brokers stating that “on 5 February 1998, Decision No. 495 of the Irish Competition Authority found the Irish Insurance Federation’s Agreement on maximum rates of remuneration for life business (the IIF Agreement) to be anti-competitive and in contravention with Section 4(1) of the Competition Act 1991 and that it did not satisfy the provisions of Section 4(2). Clause 3 of the terms currently states the insurer shall pay commission to the insurance broker in accordance with the terms and conditions of the insurer relating to the sale by the broker of the insurer’s products, subject always to the maximum levels of commission allowable under the current version of the IIF Agreement. As a result of the Decision No. 495 of the Competition Authority stated above, Irish Life will not enforce the provision relating to maximum levels of commission allowable under the IIF Agreement as contained in Clause 3 of the terms and waives all rights thereunder. The terms and conditions of your agreement with Irish Life are not affected in any other way.”

23 Section 4(1) of the Competition Act, 1991, as amended, states that “all agreements between undertakings, decisions by associations of undertakings and concerted practices, which have as their object or effect the prevention, restriction or distortion of competition in goods or services in the State or in any part of the State are prohibited and void.”

24 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.”

25 The parties to the agreement are Irish Life Assurance plc and all registered Irish Life Insurance Brokers. Irish Life Assurance plc is involved in the transaction of life assurance and pension business in Ireland and the provision of investment management services. It is also involved in other areas of personal financial services. Irish Life , therefore, is an undertaking within the meaning of Section 3(1) of the Competition Act. Registered Irish Life insurance brokers are also undertakings by virtue of the fact that they are contracted to act as self employed representatives for Irish life and are conducting their own business in doing so. The Agreement is an agreement between undertakings having effect within the State.

26 The Authority considers that insurance brokers are self employed intermediaries between Irish Life and the purchasers of life assurance and pension schemes. They conclude the sale of products on behalf of Irish Life. The Authority does not consider that the relationship is one of commercial agency, in the sense, for instance, in which the term is used in the Conoco consignee agreement [2]. The insurance broker is not an auxiliary organ forming an integral part of Irish Life’s distribution business. Instead, as described in Paragraph 9, it provides a combination of services to the insurance company and to the retail customer, and is not clearly, or exclusively, or continuously, the agent of either the insurer or the customer. The broker can offer a service of information provision about the insurance products of a number of different insurers, and cannot therefore be said to form an integral part of the business of any one insurer. The Authority considers that the relationship between Irish Life and its brokers does not in itself prevent, restrict or distort competition and therefore does not, per se, contravene Section 4(1).

27 Even though the basic arrangement of insurance broking may not contravene Section 4(1), certain clauses in the agreement might occasionally do so. The individual clauses of this agreement do not offend save as follows.

28 The agency agreement (Clause 3) provides that the insurer,

31 The agreement under consideration here is a vertical agreement between Irish Life and its brokers. Insofar as its vertical aspects are concerned, the Authority considers that the agreement does not contravene Section 4(1). However, the agreement requires the parties to adhere to the IIF Agreement, a horizontal industry-wide agreement which the Authority has already found to be in breach of Section 4(1). The Authority considered that this requirement contravened Section 4(1). On 31 March 1999, Irish Life confirmed to its brokers that it had waived all rights to and would not enforce any provisions of the agreement which related to the IIF Commission’s agreement. A copy of this letter has been sent to the Authority. In the opinion of the Authority, therefore, the agreement between Irish Life and its brokers does not prevent, restrict or distort competition within the meaning of Section 4(1) of the Competition Act, 1991.

32 The Competition Authority considers that Irish Life Assurance plc and its registered brokers are undertakings and the notified agreement is an agreement between undertakings. In the opinion of the Authority the agreement as amended by letter of waiver dated 31 March 1999 does not contravene Section 4(1) of the Competition Act, 1991, as amended.