Competition Authority v O'Regan and Others

• Jurisdiction: Ireland
• Judge: Kearns J
• Judgment Date: 22 October 2004
• Neutral Citation: [2004] IEHC 330
• Court: High Court
• Date: 22 October 2004

[2004] IEHC 330

THE HIGH COURT

[No. 8680P/2003]

COMPETITION AUTHORITY v. O'REGAN & ORS

BETWEEN

THE COMPETITION AUTHORITY

PLAINTIFF

AND

JOHN O'REGAN, MICHAEL GORMLEY, CARMEL DOWLING, SAMUEL ADAIR, MARK BAILEY, JEROME DAWSON, DAVID EASTMENT, GERRY FOLEY, KAY GEOGHEGAN, SELENA GILEECE, MARY GRIFFIN , ANN LLOYD, JIM McMAHON, CON O'BRIEN, ANN BYRNE AND TOMMY WEIR

DEFENDANTS

Abstract:

Competition - Injunction - Declaration - Credit unions - Dominant position - Meaning of 'essential facility' - Whether rules and decisions of defendants are contrary to Competition Act 2002 - Whether regulations made by defendants are void - Whether the operations of credit union resulted or amounted to a 'tying' case or 'double-tie' in the workplace - Whether union could qualify for exemption under section 4 (5) of Act - Competition Act, 2002 sections 4 (1), (5), 14 (7) - Council Regulation (EC) No. 1/2003 Articles 2, 3

The Competition Authority investigated the Irish League if Credit Unions (ILCU) regarding compliance of the Competition Act, 2002. They sought a declaration that the rules and or the decisions of ILCU, which provide for the loss of access and lack of refund from ILCU's Saving Protection Scheme upon disaffiliation of a credit union from ILCU, are contrary to section 4 (1) of the Competition Act, 2002. Further, it sought an injunction to restrain the ILCU from implementing or introducing any scheme or arrangement which has the objective in effect of supporting the rules and or decisions on ILCU relating to the loss of access and lack of refund from the Savings Protection Scheme or the disaffiliation of a credit union of ILCU. The plaintiff contended that the ILCU held a dominant position in the marketplace. In Ireland there were 437 credit unions of which 428 were members of ILCU and 21 to another group called CUDA.

Held by Kearns J in acceding to the injunction application:

1. The defendants (ILCU) were dominant in both the market for union representation services and the market for the provision of savings protection. United Brands v Commission [1978] ECR 207 and Hoffman-LaRoche v Commission [1979] ECR 461 adopted.

2. The Commission decision in the Microsoft case (24 March 2004) addressed the issue of prohibited tying in stating:

" Tying prohibited under Article 82 of the Treaty requires the presence of the following elements: (i) the tying and tied goods are two separate products; (ii) the undertaking concerned is dominant in the tying product market; (iii) the undertaking concerned does not give customers a choice to obtain the tying product without the tied product; and (iv) tying forecloses competition".

The competition policy objection to tying is that a firm that has market power in relation to the tying product that uses that market power - or 'leverages' it - to induce the buyer also to buy the tied product. The evidence is that the tying of the Savings Protection Scheme to the provision of credit representation had the effect of reducing the opportunity for competitors to entry to the market.

3. In regard to the section 4 case the plaintiff has the burden of showing that the agreement between the credit unions in the shape of the rules of ILCU and their decisions to disaffiliate those members who did not comply with the rules (a) have either the object or effect of preventing, restricting or distorting and (b) appreciably restrict competition in the relevant market. No case had been made that the credit unions had an anti-competitive object in making the agreement, the matter for consideration was the effect in the market. The court found that the market effect did distort and restrict competition and restricted competition. Volk v Veraceke [1969] ECR 295; Gottrup-Klim v Dansk Landrugs [1994] ECR 1-5641; P & I Clubs

(O.J. L125/12 19.05.1999);

European Night Services v Commission [1998] ECR 11-3141; Oude Luttikhuis v Verenigde Co-operative Melkindustrie Coberco BA [1995] ECR 1-4515; Re Rennet [1980] CMLR 402 referred to.

4. The court granted the injunction against ILCU from disaffiliating credit unions who have threatened with disaffiliation and consequential loss of access to the Savings Protection Scheme but declined to make a declaration to the effect that rules which permit ILCU to disaffiliate a credit union are per se viod.

Reporter: BDD

First Law Note : Diagrams p 6 and 7 have been excluded due to reproductive difficulties

1 Kearns J.) made and adopted on the 22nd day of October, 2004 .

Background

2 These proceedings were brought by the Irish Competition Authority and were heard before the High Court in Dublin over the period of 11 days from 29 ^th June, 2004.

3 The plaintiff is a body corporate with perpetual succession the functions of which, inter alia, include investigations into any breach of the Competition Act, 2002, that may be occurring or which has occurred.

4 Article 3 of Council Regulation (EC) No. 1/2003 provides:

"Where the competition authorities of the Member States or national courts apply national competition law to agreements, decisions by associations of undertakings or concerted practices within the meaning of Article 81(1) of the Treaty which may affect trade between Member States within the meaning of that provision, they shall also apply Article 81 of the Treaty to such agreements, decisions or concerted practices. Where the competition authorities of the Member States or national courts apply national competition law to any abuse prohibited by Article 2 of the Treaty, they shall also apply Article 82 of the Treaty."

5 Article 3 of the European Communities (Implementation of the Rules on Competition laid down in Articles 81 and 82 of the Treaty) Regulations 2004 ( S.I. No. 195 of 2004) provides that the High Court, is, as regards the State, designated as a competition authority for the purposes of Article 5 of the Council Regulation.

6 Article 5 of the Council Regulation provides that a competition authority of a Member State shall have power to apply Articles 81 and 82 of the Treaty in individual cases and for that purpose may take decisions which include requiring that an infringement be brought to an end, and, where appropriate, ordering interim measures.

7 In these proceedings, the Competition Authority seeks a declaration that the rules and/or decisions of the Irish League of Credit Unions (hereinafter called "ILCU"), which provide for the loss of access and lack of refund from ILCU's Savings Protection Scheme (hereinafter called "SPS") upon the disaffiliation of a credit union from ILCU, are contrary to s.4(1) of the Competition Act, 2002. The plaintiff further seeks an injunction to restrain the defendants and/or ILCU from introducing or implementing any scheme or arrangement which has the object or effect of supporting the rules and/or decisions of ILCU relating to the loss of access and lack of refund from the SPS on the disaffiliation of a credit union from ILCU.

8 The plaintiff further contends that the defendants occupy a dominant position in the market for credit union representation services and seeks an order pursuant to s.14(7) of the Competition Act, 2002, requiring either that the dominant position be discontinued unless conditions specified in the order are complied with, or, alternatively, the adjustment of the dominant position in a manner and within a period specified in the order by a sale of assets or otherwise as the court may specify.

9 ILCU is an unincorporated association which has its place of business at 33/41 Lower Mount Street in Dublin. The defendants are sued in their representative capacity as officers of the ILCU, having been nominated as defendants on behalf of ILCU to represent their members.

10 Credit unions are individual autonomous savings and credit co-operatives established by individuals who have a "common bond". The most usual type of common bond is that of living or working within a particular community, with over 90% of all credit unions being based in a particular local community. The main objectives of credit unions are:

11 • The promotion of thrift,

12 • Helping members accumulate savings,

13 • Providing loans at reasonable rates of interest, and,

14 • The control of members' finances for their own benefit.

15 As set out in the 2003 Annual Report of ILCU, the vision of credit unions is:

"That ILCU, as an advocate of the credit union ethos of mutuality, volunteerism, self help, and a not-for-profit philosophy, will influence and inspire our movement and our society to achieve its social, economic and cultural objectives in a manner that respects the rights and dignity of everyone."

16 The mission of ILCU is expressed as being:

"To provide effective leadership for all credit unions on the island of Ireland,"

17 • By fostering and maintaining unity and cooperation between credit unions,

18 • By developing a full range of top quality, safe and sound financial produts and services,

19 • By recognising the dignity of credit unions and their members and their value to the community, and,

20 • By recognising the value and role of both credit union volunteers and staff to the movement and to society".

21 In 1960, four credit unions came together for the purpose of trying to ensure that credit unions would conduct their affairs on the basis of a set of agreed operating principles and of presenting a united front to government and state agencies in relation to the legislative problems of credit unions. The unions who thus came together became known as the Irish League of Credit Unions. In 1966, the Credit Union Act was passed, by which time there were approximately 339 credit unions in ILCU. That Act provided that credit unions should have a set of operating rules in a form approved by the Registrar of Friendly Societies, who was to regulate credit unions under the Act. Pursuant to this requirement, the members of...