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1. Notification was made of a standard loan agreement (CA/702/92E) and mortgage (CA/701/92E) between Gallic Distributors Ltd. (“Gallic”) and a distributor on 30 September 1992. Gallic requests 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).

2. This notification concerns an agreement between Gallic and a distributor for a loan and mortgage for the purchase and sale of Citroen motor vehicles by the distributor. The mortgage is security for the loan.

3. Gallic is a company incorporated in the State. It is the importer of Citroen motor vehicles, spare parts and after-sales service in the State.

4. The distributor is a distributor of Citroen motor vehicles who operates in the State under a motor vehicle distribution agreement with Gallic.

(c) The Product and the Market

5. The market for the products notified here is the market for the financing of motor vehicles and the business of motor vehicle distribution. As the Authority noted previously in Decision No. 521, Fiat Auto Financial Services Ltd./Bank of Ireland Finance Ltd. (CA/9/98), the market for motor vehicle financing “is only moderately concentrated ... In addition, the Authority considers that the market is highly contestable, as the degree of supply-side substitutability and the increasing integration of European financial markets tends to limit ability to gain market power in this sector.” The market for the financing of the business of motor vehicle distribution is effectively the market for commercial lending in the State and distributors may seek custom from a wide arrange of banks and financial institutions.

6. The notified agreements are a standard agreement and mortgage between Gallic and a distributor whereby Gallic advances a loan to the distributor and secures the loan by a mortgage. The loan is only advanced to distributors who have entered into a separate motor vehicle distribution agreement with Gallic and then to finance improvements in the premises from which vehicles are sold pursuant to the terms of that agreement.

7. The notified loan agreement provides that the monies advanced become outstanding should the distributor terminate its distribution agreement with Gallic. The loan agreement also provides that certain interest charges on the loan do not become due if the distributor meets certain sales targets.

8. Section 4(1) of the Competition Act, 1991 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 goods or services in the State or in any part of the State are prohibited and void.”

9. Section 3(1) of the Competition Act, 1991 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.” Gallic and the distributor are persons engaged for gain in the supply and sale of motor vehicles in the State and are undertakings. The agreements are agreements between undertakings. The agreements have effect within the State.

10. Notification is made of a standard commercial loan agreement and mortgage. The agreements provide the financing for the distribution arrangement put in place by separate agreement between the parties. The Authority has issued a category certificate on vertical agreements [1] and the notified arrangements do not contain any provisions which fall within the prohibitions contained therein. The arrangement provides financing for the operation of the distributor’s business which is the purchase of motor vehicles from Gallic for resale. Commercial loan agreements and mortgages generally do not offend against Section 4(1) of the Competition Act.

11. In the Authority’s opinion Gallic and the distributors who are parties to the arrangements are undertakings within the meaning of Section 3(1) of the Competition Act, 1991, as amended, and the notified agreements are agreements between undertakings. In the Authority’s opinion, the notified agreements do not prevent, restrict or distort competition and thus do not contravene Section 4(1) of the Competition Act.

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 agreements between Gallic Distributors Ltd and the distributor relating to a loan agreement and mortgage notified under Section 7 of the Competition Act on 30 September 1992 (Notification Nos. CA/701/92E and CA/702/92E) do not contravene Section 4(1) of the Competition Act, 1991, as amended.

For the Competition Authority,

William Prasifka

Member

15 December 1998

[1] Category Certificate/Licence in respect of Agreements between suppliers and Resellers. Decision No. 528. 4 December 1998.