Donovan v Electricity Supply Board

JurisdictionIreland
JudgeMr. Justice Barrington
Judgment Date03 July 1997
Neutral Citation1998 WJSC-SC 1287
CourtSupreme Court
Docket Number[S.C. Nos. 265 of 1994 and 61 of 1995]
Date03 July 1997
DONOVAN v. MARSHALL (KILLARNEY) LTD & ESB
Between/-
DERMOT DONOVAN, LIAM KILEEN, JOHN CURTIN, JOHN O'LOUGHLIN, JOHN CAHILL, THOMAS LENIHAN, BRIAN KELLY

and

M J MARSHALL (KILLARNEY) LTD.
Plaintiffs/Respondents

and

ELECTRICITY SUPPLY BOARD

and

ESB INDUSTRIAL HOLDINGS LTD.
Defendants/Appellants

1998 WJSC-SC 1287

Hamilton, C.J.

Barrington, J.

Keane, J.

Murphy, J.

Barron, J.

265/94
61/95

THE SUPREME COURT

Synopsis:

Competition

Abuse of a dominant position; relevant market; damages; whether trial judge correctly identified market; ESB dominant in the market for the supply of electricity; whether trial judge correct in finding defendant abused a dominant position in a sub-market; whether damages should be awarded where abuse unintentional Held: Appeal dismissed; damages awarded in respect of period prior to introduction amended system of Supreme Court: Hamilton CJ, Barrington J, Keane J., Murphy J., Barron J. 03/07/97 - [1997] 3 IR 573

Donovan v E.S.B.

Citations:

COMPETITION ACT 1991 S5(1)

TREATY OF ROME ART 85

TREATY OF ROME ART 86

TREATY OF ROME ART 85(1)

TREATY OF ROME ART 85(3)

EEC REG 17/62 ART 2

TETRAPAK RAUSING V COMMISSION 1990 2 ECR 309

COMPETITION ACT 1991 S4(2)

COMPETITION ACT 1991 S4(4)

COMPETITION ACT 1991 S6

COMPETITION ACT 1991 S4

COMPETITION ACT 1991 S5

COMPETITION ACT 1991 S6(6)

RTE V COMMISSION 1991 2 ECR 485

COMPETITION ACT 1991 S5(2)(a)

1

JUDGMENT of Mr. Justice Barrington delivered the 3rd day of July, 1997. [NEM DISS]

2

This is an Appeal from the Order of the learned President of the High Court made herein on the 12th day of May, 1994.

3

The case turns upon two net points of law.

4

The background to the case is set out in the Judgment of the learned President of the High Court delivered herein on the 5th day of May, 1994. It is not necessary to repeat the facts here except insofar as may be required to make intelligible the points of law which the Court has to decide.

SUMMARY OF RELEVANT FACTS.
5

The Respondent, the Electricity Supply Board (or ESB) is the sole producer of electric power in this country. As such it totally controls the supply side of the market for electric power.

6

The ESB is naturally concerned with the safety of installations to which it is asked to supply power. The Government also was concerned with safety standards in relation to electrical power but was opposed to a formal statutory system, preferring a system of self regulation. As a result, in the year 1989 a Working Group was established with the view to setting up a body which would promote and protect the interests of the public as users of electrical services. This led in turn to the establishment on the 18th June, 1991 of the "The Register of Electrical Contractors of Ireland Ltd." commonly known as "R. E. C. I.". RECI set about organising the establishment of a register of Electrical Contractors and as part of the new self regulatory regime it appointed Inspectors. These were to fulfil two functions:-

7

(a) To carry out spot check inspections on the work of registered contractors and

8

(b) To inspect installations carried out by non-registered contractors and certify (if such were the case) their compliance with the relevant wiring rules.

9

In 1992 the ESB announced changes in its conditions of supply of electricity. From the 1st September 1992 it stated that it would supply electrical power to installations carried out by electrical contractors on production of a completion certificate signed either by (a) an electrical contractor on RECI's register or (b) an Inspector employed by RECI, in the case of installations completed by non-registered contractors.

10

The Plaintiffs/Respondents are a group of electrical contractors who carry on business in the southwest of Ireland. They were not registered with RECI. Their work involves the installation of a variety of electrical plant equipment; the carrying out of wiring of new and old houses and other premises and the installation and wiring of electrical equipment in factories farms and elsewhere. They are not in a big way of business but trade in a sub-market for the supply of electrical contracting services to "low voltage installations". These would usually be electrical installations in private dwellinghouses or farms.

11

The Plaintiffs are not opposed to a system of self regulation. They claimed that "the RECI regime" which was the situation brought about the combined operation of the ESB's conditions of supply, it's agreement with RECI, RECI'S Memorandum and articles of association and RECI'S rules relating to it's register, imposed unfair trading conditions on them and amounted to an "abuse" contrary to the provisions of Section 5 of the Competition Act 1991.

12

Immediately after the introduction of the ESB's new conditions of supply in September 1992 the Plaintiffs (in October 1992) issued a Plenary Summons and applied for an interlocutory injunction to restrain the implementation of the new regime. The Plaintiffs were successful in this application and on the 2nd November 1992 Mr. Justice Lardner granted the interlocutory injunction requested. Thereafter amendments were made to RECI'S Memorandum and Articles of Association and also to it's registration rules. These amendments appear to have had the effect of removing the Plaintiffs substantial complaints.

13

The case therefore became concerned with the situation as it existed between the introduction of the ESB's new conditions on the 1st September, 1992 and the granting of the interlocutory injunction on the 2nd November, 1992.

14

During this period the learned trial Judge held that the Plaintiffs were the victims of an unintentional abuse of a dominant position by the ESB contrary to the provisions of Section 5.1 of the Competition Act, 1991. He also held that the Plaintiffs should recover such damages as they had suffered in respect of their losses arising from the said abuse during the period from the 1st September, 1992 until the 2nd day of November, 1992.

15

On this Appeal the complaint of the ESB was not that the learned trial Judge was wrong in his finding of fact that the Plaintiffs had been subjected to unfair trading conditions but that the decision of the learned trial Judge could not stand because the learned trial Judge failed to identify correctly the market in which the ESB was alleged to be dominant. They also alleged that this was not a proper case in which to award damages.

THE LAW.
16

The Competition Act, 1991, in it's long title, describes itself as an Act to prohibit "by analogy with Articles 85 and 86 of the Treaty establishing the European Economic Community" the restriction or distortion of competition.

17

Article 85 of the said Treaty provides as follows:-

18

1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

19

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

20

(b) limit or control production, markets, technical development, or investment;

21

(c) share markets or sources of supply;

22

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

23

(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

24

(2) Any agreements or decisions prohibited pursuant to this Article shall be automatically void.

25

(3) The provision of paragraph 1 may, however, be declared inapplicable in the case of:

26

• - any agreement or category of agreements between undertakings;

27

• - any decision or category of decisions by associations of undertakings;

28

• - any concerted practice or category of concerted practices; which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not;

29

(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;

30

(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

31

It is clear therefore that an agreement which violates Section 1 of Article 85 may be granted an exemption under Section 3 if, in the opinion of the European Commission, it fulfils the characteristics therein described. The exemption granted by the Commission under Section 3 may be an individual exemption in respect of a specific agreement or a block exemption in respect of a certain type of agreement. It also follows that an agreement, to be granted an exemption under Section 3 must first be caught by the provisions of Section 1.

32

The European Commission found that it could not, in practice, cope with the number of agreements notified to it under Article 85 or in respect of which an exemption was sought under Article 85 Section 3. If therefore, after a preliminary examination, the agreement appeared not to offend Article 85 Section 1 or...

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