Celtic International Insurance Company Ltd and Stellar International Ltd and Dotinga Investments B.v

 
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COMPETITION AUTHORITY

CA/6/95

Celtic International Insurance Company Ltd./Stellar International Ltd./Dotinga Investments B.V.

Abstract:

Motor insurance - Computer program - Software development - Intellectual property rights - Section 4 Competition Act 1991

The parties sought a certificate or licence for a 30-year licence by Stellar to Celtic of a computer program to produce motor insurance quotations. The parties claimed that other insurers could commission software houses to develop such programs if they wished.

The Authority, granting a certificate, said the licensing by a company of its intellectual property to third parties was socially beneficial. The establishment of patent rights over the computer program was necessary to encourage Stellar to undertake research and development. As long as entry barriers for innovation were not prohibitive, intellectual property rights only conferred short-lived market power. The Authority said the impact of the arrangement on the motor insurance market was not anti-competitive.

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Competition Authority Decision of 15 September 1998 relating to a proceeding under Section 4 of the Competition Act, 1991.

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Notification:CA/6/95:

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Celtic International Insurance Company Ltd./Stellar International Ltd./Dotinga Investments B.V.

Decision No 519
Introduction
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1. Notification was made on 28 February 1995 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 Supplemental Licence Agreement between Stellar International Limited/Dotinga Investments B

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N.

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And Celtic International Insurance Limited.

  1. (a)Subject of the Notification

    2. The notification concerns a Supplemental Licence Agreement between Stellar International Limited (Stellar)/Dotinga Investments B.V. (Dotinga) and Celtic International Insurance Limited (Celtic) relating to the licensing by Stellar to Celtic of a method for programming a computer (the Invention) and a computer programme (the Program) to generate quotations for motor insurance and the communication of such quotations for potential customers.

  2. (b) The Parties Involved

    3. Celtic International Insurance Company Limited has its registered offices at Celtic House, Salthill, Galway. The Ultimate Parent of Celtic is Eureko B.V. Eureko B.V. is a holding company with interests in a number of companies involved in the financial services industry, mainly insurance. Eureko Ireland is a holding company for Celtic and Friends Provident. Celtic is involved in the business of non-life insurance. At the end of 1997 Celtic sold its commercial insurance lines business to Hibernian. Celtic is still involved in the car and household insurance sectors. As of the 27 April 1998, Friends Provident was rebranded as Friends First.

    4. Stellar International Limited is an investment company with registered offices at 15 St Mary’s Road, Galway. The parties stated that the ultimate parent of Stellar is Jaques. Dotinga Investments B.V., a wholly owned subsidiary of Stellar, has its registered office at Stravinskylaan 1725 1077, Amsterdam, The Netherlands. The group’s main business is software development and licensing. Stellar International Limited is the sole shareholder in Dotinga which is in turn owned by Jaques (an unlimited liability company). Stellar’s turnover in Ireland during the financial year ending 31st December 1992 was nil. For the financial year ending 31st December 1993 its turnover was [ ]. Celtic’s turnover in Ireland during the financial year ended 31st December, 1992 was IRLI 9,864,000. The parties

    claimed that neither Celtic, Stellar nor Dotinga1 control any other company in the relevant market (as defined) in the State.

  3. (c) The Products and the Market

    5. The parties claimed that there is a significant number of sellers on the Irish computer software market. The parties stated that their belief was that it was not only Irish companies but also overseas software houses and writers who could and do operate in this market. The parties claimed that it is therefore impossible to quantify the exact number of participants but they believed that was correct to say that was a very large number. The parties claimed that the buyers would be mainly those persons (legal or natural) who require computer programs in the non-life insurance sector. This would include not only existing but also potential insurers. The parties further claimed that the potential market is the world because of the easy availability of programs from elsewhere in the world, particularly, the USA.

    6. The parties claimed that the relevant market is the market for the production of computer software as applied to insurance quotes in the motor insurance industry and that the relevant Territory is the world. The Authority considers that the relevant (upstream) market is the market for the provision of computer programmes to obtain insurance quotes in the motor car insurance trade (in the world). As there are many potential buyers of such programmes and many different providers, and potential providers, of such programmes the market is global and is characterised by effective competition worldwide.

    Table 1 IIF Motor Insurers’ Net Written Premium 1997

    Company

    Premium

    Market

    Income (IR£000)

    Share (%)

    Guardian/PMPA

    206,936

    29.20

    Hibernian Insurance Co. Ltd

    78,096

    11.02

    Church & General

    63,736

    8.99

    FBD

    61,951

    8.74

    Royal Sun Alliance

    44,588

    6.29

    Norwich Union General

    43,588

    6.15

    Eagle Star Ireland

    36,458

    5.14

    Friends First (formerly Celtic)

    15,090

    2.13

    Others (12)

    158,228

    22.33

    TOTAL

    708,671

    100

    ...

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