Hampden Group and Homebase

• Jurisdiction: Ireland
• Judgment Date: 24 March 1999
• Docket Number: Decision No. 542
• Date: 24 March 1999
• Court: Competition Authority (Ireland)

COMPETITION AUTHORITY

Decision No. 542

Competition Authority Decision of 24 March 1999 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/23/96 - Hampden Group I Homebase

Abstract:

Competition Law – Franchise Agreement – Application for a certificate, or in the alternative, a licence – The Competition Act 1991, Section 4

By agreement Homebase granted Hampden the exclusive right to use Homebase trade names throughout the State in the sale of DIY products. Homebase have 23% of the market share and Hampden have .42%. J. Sainsbury plc is the parent company of Homebase but also owns 29% of Hampden and both companies are under the common control of J. Sainsbury. The agreement is not one between separate undertakings but is, in fact, an assignment of functions between different parts of the same organisation. The Competition Authority so held in certifying that the agreement did not contravene section 4(1) of the Competition Act, 1991.

Introduction

1 Notification was made of a Franchise Agreement between Homebase Limited and Hampden Group PLC on 1 July 1996 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).

1. (a)The Facts

   2. The notification concerns a franchise agreement. dated 18 March 1996 between Homebase Limited, “the Franchisor” and Hampden Group Plc, “the Franchisee”, relating to “the products” which are defined as “all goods from time to time retailed by Homebase in the Homebase Stores and also substitute products”. The Franchise Territory is Northern Ireland and the Republic of Ireland.

2. (b)The Parties Involved

   3. Homebase, a UK based company, is a wholly owned subsidiary of J. Sainsbury PLC. It is the master franchisor of a number of stores involved in DIY goods, kitchens, lighting and gardening tools and equipment. In the State, the Homebase franchise is operated through Texas Homebase (Ireland) Limited, a wholly owned subsidiary of Hampden Group Plc.

   4. Hampden Group Plc, whose registered office is in Belfast, is a company which was originally formed to trade a DIY franchise in Ireland for "Texas”, a well known DIY retailer. The Texas franchise has now been replaced by the Homebase franchise which is ultimately owned by J Sainsbury Plc. J. Sainsbury has a 29.9 % shareholding in Hampden. Through its subsidiary, Homebase Ltd, J Sainsbury has the right to nominate Directors to the Board of Hampden Group Plc under the terms of a Subscription Agreement dated 31 October 1985. At its current level of shareholding, Homebase has the right to nominate two directors (out of seven) to the Board of Hampden. Other substantial interests in the ordinary shares of the company as at 12th March 1996 were as follows:

   Scottish Amicable Nominees Limited	7.3%
   State Street Nominees Limited	7.2%
   Britel Fund Nominees Limited	6.0%
   Bishopsgate Nominees Limited
   E P Coppel	4.0%
   Possfund Nominees Limited	3.9%
   J P Goldstone	3.5%

   For the year ended 31 December 1995 the turnover of the Hampden Group Plc was £36.8m. Included in this figure is £7.8m turnover in respect of the Republic of Ireland. The profit of the company before tax was £1 .5m.

3. (c)The Product and the Market

   The products according to the definition in the franchise agreement are all goods from time to time retailed by Homebase in Homebase stores and also substitute products. The market information furnished in the Annex states that the Franchise Agreement relates to DIY goods, kitchens, lighting and gardening tools and equipment. This is a large market with a large number of retailers both large and small. Products are readily substitutable. The market share for Homebase is stated to be 1300 and...