COMPETITION AUTHORITY

Competition Authority Decision of 16 April 1999 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/990/92E: Green Science & Micro-Bac International

Decision No. 547

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Competition Authority Decision of 16 April 1999 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/990/92E: Green Science & Micro-Bac International

Decision No. 547

Introduction

1. Notification was made by GreenScience Ltd & Micro-Bac International Inc., on 30th September 1992 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 grant a certificate, a licence under Section 4(2) in respect of an agreement for the purchase of technology and exclusive manufacture and distribution of bacterial products.

The Facts

(a) Subject of the Notification

2. This notification concerns an agreement dated  June 27th 1990, for the purchase of technology and exclusive manufacture and distribution of bacterial products, between GreenScience and Micro-Bac International. Under the agreement, Micro-Bac International grants exclusive rights to Green Science to the technology and know-how of the products, relating to the production and marketing of commercial products composed of (naturally occurring) bacteria.

(b) The Parties Involved

3. GreenScience Ltd, with a registered address at Broomhill Road, Tallaght, Dublin 24, is 82.5% owned by The Cross Group.  The Cross Group is a privately owned Irish holding company with interests in human and veterinary pharmaceuticals.  The parties stated that no other company in The Cross Group is engaged in the relevant market served by GreenScience Ltd.  Micro-Bac International Inc. is a private US corporation with a registered address at 9607 Gray Boulevard, Austin, Texas, USA.

(c) The Products and the Markets

4. The products, the subject of the technology being purchased, are based on naturally occurring bacteria and have an application in the degradation of organic matter (e.g. grease in grease traps in hotels and restaurants, slurry in pig and poultry farms and sewage in local authority sewage works).  The products are manufactured in Dublin by GreenScience Ltd based on the US technology.

5. The parties claimed that the products were somewhat novel and had not yet gained any significant acceptance in the Irish market place over chemical (substitute) products.  The parties further claimed that the Irish market for the products was small with sales of the products at less than 1% of the market.   

(d) Structure of the Market

6. The parties claim that there are a number of competing firms in the relevant market: Inter-Bio Ltd being the only one of significance in Ireland.  The parties claimed that there are many substitute products, mainly chemically based, commanding the major market share (probably in excess of 99%).

7. The Authority is of the view that the relevant product market is the market for the degradation of organic compounds.  Within that market, there are both chemically-based and the newer more naturally occurring bacterial products available for commercial application.  This notification concerns the latter.

(e) The Notified Arrangement

8. The purpose of the notified arrangement is to give GreenScience Ltd the rights to manufacture the listed products based on Micro-Bacs technology and to distribute the products in the State and certain parts of the world, excluding North and South America.  The agreement prevents MicroBac giving its technology or distribution rights in the State and elsewhere to any other company.  The agreement obliges GreenScience to purchase the nutrients used in the manufacture of the products from Micro-Bac.

9. Under Clause 2, Micro-Bac International appoints GreenScience Ltd as its sole licensee for the Territory and under Clauses 3.3 Micro Bac International agree to supply GreenScience Ltd with whatever bacteria they require for all its production of the products.  Under clause 5.1 the parties are to inform and make available to each other any improved or altered version of the products, technology and know-how. Under Clause 5.2 GreenScience Ltd agree not to compete with MicroBac outside the Territories in the production or sale of the products.

(f) Submissions by the Notifying Parties

10. The parties submitted that they do not believe that the agreements, or any aspects of the agreements, restrict them in their freedom to take independent commercial decisions.   

Arguments in Support of a Grant of a Certificate 

11. The parties claim that the  products and the technology relating to them are novel and give the consumer a choice.  Without the technology, GreenScience could not manufacture the products in Ireland and without the protection of distribution rights GreenScience would not have the confidence to invest in the project.  The notifying parties further claimed that competition is not affected as there are other producers of similar products based in the Irish market.

Assessment

(a) Applicability of Section 4(1)

12. Section 3(1) of the Competition Act defines an undertaking as ‘a person, being an individual, a body corporate or an unincorporated body engaged for gain in the production, supply or distribution of goods or the provision of  a service. GreenScience Ltd & Micro-Bac International Inc., are therefore undertakings and the agreement is an agreement between undertakings.  The agreement has effect within the State.
 
(i) The status of the exclusive agreement

13. The parties notified the agreement as an agreement for the purchase of technology and the exclusive manufacture and distribution of bacterial products.  It is, in many respects, a know-how licensing agreement (incorporating a right in Clause 2 to use the trademarks, if desired) whereby the licensee, GreenScience Ltd is granted an exclusive right to exploit the licensed technology within the State.

(ii) The exclusive agreement

14. The Notification concerns an agreement for the purchase of technology and exclusive manufacture and distribution of bacterial products and, in effect, provides for the licensing by Micro-Bac International of GreenScience Ltd of certain know-how, marketing information and to manufacture and distribute the products in the State.  The Authority has set out its economic assessment on intellectual property rights, vide Decision No. 506.

15. It is the view of the Authority that the Clauses in the agreement do not restrict competition. Clause 5.2, which requires GreenScience Ltd not to compete with MicroBac outside the Territories in the production or sale of the products, does not affect competition in the State or in any part of the State.  Therefore the Authority is of the opinion that the clauses in the agreement do not constitute restrictions on competition within the meaning of Section 4(1) of the Act.

(b) The Decision

16. In the Authority’s opinion, GreenScience Ltd and Micro-Bac International Inc., are undertakings within the meaning of Section 3(1) of the Competition Act and the notified arrangement constitutes an agreement between undertakings.  In the Authority’s opinion the exclusive agreement dated 27th June 1990 does not contravene Section 4(1) of the Competition Act.

The Certificate

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 agreement between GreenScience Ltd and Micro-Bac International Inc. notified under Section 7 of the Competition Act on 30th September 1992 (Notification No. CA/990/92E) does not contravene Section 4(1) of the Competition Act, 1991, as amended.

For the Competition Authority

Professor Patrick McNutt
Chairperson
16 April 1999