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1. Arrangements for the purchase of approximately 20% of the issued share capital of Sedgwick Dineen Group Limited (SDGL) by Sedgwick Overseas Group Limited (Sedgwick) from Mr. P.J. Dineen were notified to the Competition Authority on 7 June 1994. The notification requested a certificate or, in the event of a certificate being refused, a licence.

2. The notification concerns an Option Agreement dated 25 February 1994 between Sedgwick and Mr. Dineen whereby Sedgwick obtained an option to acquire from Mr. Dineen his shareholding (about 20%) in SDGL to Sedgwick. Sedgwick already held 80% of the shares, a shareholding which had been built up since its first involvement in 1973. The notification also contained an Employment Agreement pursuant to SDGL's retention of Mr. Dineen as an employee following completion of the sale. Both agreements contain non-compete provisions.

3. Sedgwick Overseas Group Limited is a limited company with registered offices in London. It is engaged in the business of risk consultancy, insurance broking, employee benefits schemes, consultancy and financial services. Sedgwick Dineen Group Limited is its Irish subsidiary which is engaged, primarily, in the provision of pensions, life assurance and disability benefits services for employees of corporate bodies. Mr. P.J. Dineen was one of the founding members of Sedgwick Dineen. Prior to the agreement, he was the owner of approximately 20% of the share capital of SDGL.

4. The arrangement relates to the financial services sector, in particular, the personal financial services and employee benefits markets. The personal financial services market refers to the provision of advice to individuals (as opposed to corporate bodies) on the purchase of life assurance and investment products. In its submission to the Authority the parties explained that the products falling into this category would include term assurance, whole life and endowment policies, permanent health insurance, personal accident insurance, personal pensions, unit linked funds, unit trusts and, annuities. According to the parties, the size of the market is difficult to quantify. In its Annual Report the Department of Industry and Commerce indicated that the total single premiums amounted to IR£662 million with total annual premiums of IR£861 million for 1991. These amounts would include employer-sponsored pension schemes which should properly be excluded to arrive at a relevant assessment of market size. In addition, it would be necessary to add the amount invested in unit trusts. Statistics are not readily available but according to the parties these items may reduce the annual premium market to IR£550 million (approximately) and the single premiums market to IR£700 million (approximately).

5. The services in the employee benefits sector which SDGL provide relate mainly to pensions, life assurance and disability benefits for employees of corporate bodies. Advice is occasionally rendered on profit-sharing schemes. According to the parties, other services which may be considered to be part of the employee benefits market are the remuneration and fringe benefits provided to employees. In general, Sedgwick Dineen Group does not advise on these; the main purveyors of these services would be accountancy firms, management consultants, and recruitment consultants. It is difficult to quantify this market but the parties estimated that it is between £30 million and £40 million in terms of fees/commissions.

6. There is a significant number of sellers in the personal financial services market in Ireland including banks and building societies as well as insurance and pension brokers. The buyers are mainly corporate bodies who would have a very high level of sophistication in terms of their understanding of the market, knowledge of the available services and purchasing power. Individuals rarely use these services.

7. According to the parties, it is difficult to estimate the turnover of the Irish financial services market but they indicated that it is in excess of IR£1 billion. The employee benefits market is worth between IR£30 million and IR£40 million.

8. According to the parties the market is extremely competitive. There are many competitors in the market including many new entrants such as the banks which have established separate divisions for these areas of business.

9. There are no significant barriers to establishment in this market. No actuarial valuations are required nor are government licences normally required. There is no equivalent in Ireland to the UK's Financial Services Act.

10. The notification relates to an agreement, known as the Option Agreement, dated 25 February 1994, between Sedgwick and Mr. Dineen. Under the terms of the agreement Sedgwick obtained an option to acquire from Mr. Dineen his shareholding (approximately 20%) in SDGL. The option had to be exercised between 10 April and 10 July 1994. The option was exercised on 18 April 1994. Clause 4.2 of the agreement prevents Mr. Dineen, for a period of two years from completion, from acquiring an interest in, or becoming engaged or employed by persons or companies with an interest in, any activity which operates in the insurance business in competition with SDGL. The agreement also prevents Mr. Dineen, for the same period, from soliciting the business of any client of SDGL on his own behalf or that of any other party and also from seeking to entice or persuade any employee of SDGL to take up employment with any person or company operating in competition with SDGL. The restriction also prevents Mr. Dineen from collaborating with any other employees of SDGL to leave the group and become involved in the activities outlined above.

11. The notification also contained a related Employment Agreement pursuant to Mr. Dineen's post-sale employment with SDGL. Under the conditions of the employment agreement, Mr. Dineen is prevented, for the duration of his employment and for a period of one year after the cessation of employment, from soliciting the business of any client of SDGL on his own behalf or that of any other party and also from seeking to entice or persuade any employee of SDGL to take up employment with any person or company operating in competition with SDGL. The restriction also prevents Mr. Dineen from collaborating with any other employees of SDGL to leave the group and become involved in the activities outlined above.

12. The parties made lengthy submissions justifying both the acquisition of the shares and the non-compete clauses. The arguments made in support of the acquisition of the shares were not considered to be relevant by the Authority. In support of the request for a certificate the parties referred to a number of EC decisions and previous decisions by the Authority under the Competition Act that non-compete clauses in sale of business agreements were not anti-competitive.

13. 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 goods or services in the State or in any part of the State are prohibited and void".

14. 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.' Sedgwick Overseas Group Limited is a limited company engaged for gain in the business of risk consultancy, insurance broking, employee benefits schemes, consultancy and financial services and is therefore an undertaking within the meaning of the Act. Sedgwick Dineen Group plc is its Irish subsidiary which is engaged, primarily, in the provision of pensions, life assurance and disability benefits services for employees of corporate bodies. Mr. Dineen was the owner of approximately 20% of the shares in the business at the time of the agreement, having previously held a much larger shareholding in the business. He owned a sizeable stake in the business and had a significant influence on its day-to-day operations. He is also involved in a number of other business activities. In the Authority's view his position is not analogous to that of an employee, as described by the ECJ in the Suiker Unie case, who is an auxiliary organ bound to carry out his employer's instructions. Indeed as Van Bael and Bellis point out from the moment an employee pursues his own economic interests, and where they are different from his employer's interests, he might well become an undertaking within the sense of Article 85. Thus in the Authority's view, Mr. Dineen is not merely an auxiliary organ bound to carry out his employer's instructions. He is clearly in a position to pursue his own economic interests and indeed the sale of his shares clearly is an example of his doing just that. Thus, in the Authority's opinion, he is an undertaking.

15. The present arrangements constitute an agreement between undertakings whereby Sedgwick has secured an option to purchase from Mr. Dineen his 20% shareholding in SDGL. As Sedgwick already owns 80% of the shares in the business the acquisition of the remaining shares has no implications from a competition perspective and does not offend against section 4(1).

Non-Compete Clause

16. Clause 4.2 of the Option Agreement prevents Mr. Dineen from competing with SDGL for a period of two years from the date of completion of the agreement. The Authority has indicated in a number of previous decisions that in the case of the sale by a partner in a business of his interest in the business to the other partner(s), it normally regards a restriction on the vendor competing with the business following completion as necessary to secure the complete transfer of the goodwill of the business. It has stated that provided the restriction on the vendor is limited in terms of duration, geographic scope and subject matter to what is necessary to achieve that purpose, it would not, in the Authority's view, offend against section 4(1). The Authority has indicated that it generally regards a period of two years as sufficient to secure the transfer of goodwill in such circumstances. As the duration of the non-compete period in this notification does not exceed this accepted period, the Authority does not consider that the non-compete provision of the agreement offends against Section 4(1) of the Act.

17. The employment agreement between Sedgwick and Mr. Dineen was entered into as part of the sale agreement. It was expressly included as part of the notified arrangements. The Authority's views on notification of employment agreements as part of wider sale of business agreements were expressed in its decision in Carroll Catering/Sutcliffe. In the Authority's view the employment agreement between Sedgwick and Mr. Dineen was an essential part of the overall agreement and it must be regarded as part of that agreement between undertakings.

18. Under the conditions of the employment agreement, Mr. Dineen is prevented, for a period of one year, from soliciting the business of any client of SDGL on his own behalf or that of any other party and also from seeking to entice or persuade any employee of SDGL to take up employment with any person or company operating in competition with SDGL. The restriction also prevents Mr. Dineen from collaborating with any other employees of SDGL to leave the group and become involved in the activities outlined above. In Carrolls Catering/Sutcliffe, the Authority acknowledged that where the vendor agrees to become an employee of the business, he should not compete with it for so long as he remains an employee. However, a restriction on his competing after he has ceased to be an employee is not acceptable. On this occasion, however, Mr. Dineen is not prevented from competing with the business after the cessation of his employment. He is prevented from soliciting customers and other employees of the business for one year after cessation of employment. The Authority indicated in APEX/Murtagh that it does not regard a restriction on soliciting customers for one year after termination of employment as offending against section 4(1). It would take a different view if soliciting customers was essential in order to enter the market. The Authority takes a similar view of the restriction on soliciting employees and, in this instance, does not consider that it would prevent Mr. Dineen from competing in the market following cessation of his employment. Therefore, this aspect of the notified arrangements does not offend against section 4(1).

19. In the Authority's opinion, Sedgwick Overseas Group Limited and Mr. P.J. Dineen are undertakings within the meaning of section 3(1) of the Competition Act and the notified arrangements for the purchase by Sedgwick of Mr. Dineen's 20% shareholding in Sedgwick Dineen Group Limited constitutes an agreement between undertakings. In the Authority's opinion, the arrangements do not have, as their object or effect, the prevention, restriction or distortion of competition. The Option agreement of 25 February 1994 between Sedgwick and Mr. Dineen does not, in the Authority's opinion, offend against

section 4(1) of the Competition Act, 1991.

20. 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 Option Agreement between Sedgwick Overseas Group Limited and Mr. P.J. Dineen whereby Sedgwick Overseas Group Limited obtained an option to acquire Mr.Dineen's shareholding in Sedgwick Dineen Group Limited (notification no. CA/14/94), notified on 7 June 1994 under section 7, does not offend against section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey

Member

6 September 1994