Dáil Éireann debate -
Thursday, 28 Feb 2002

Vol. 550 No. 1

Competition Bill, 2001 [ Seanad ] : Second Stage.

Tánaiste and Minister for Enterprise, Trade and Employment (Ms Harney):

I move: "That the Bill be now read a Second Time."

The purpose of the Bill is to reform and modernise our current legislation relating to competition and mergers. The Bill retains what is best of the existing arrangements and introduces new features, in particular, a more focused approach towards the penalisation of anti-competitive activities, more sensible arrangements for how we handle mergers and acquisitions, and a strengthened Competition Authority capable of making a real impact in its core task of enforcing competition law.

The Bill is the culmination of a process of consideration extending over a five year period. That work commenced during the term of the previous Government with the establishment in 1996 of the competition and mergers review group. The final report of that group, published in May 2000, forms the main background to the Bill.

This is a time of modernisation also for the competition law of the European Union. Articles 81 and 82, formerly Articles 85 and 86, of the EU treaty set out the basic EU competition rules applying to undertakings. The practical appli cation and enforcement by the European Commission of these rules are mainly provided for in Regulation 17 of 1962. In September 2000 the Commission proposed a draft Council regulation to replace Regulation 17. This proposal, which is under consideration in a Council working group, involves the complete recasting of the existing arrangements for the implementation of Community competition law.

Two proposed EU changes are of specific relevance to the Bill. First, it is proposed to abolish the EU notification system and make the whole of Article 81 directly applicable. Second, the Commission proposes that the competent authorities in member states, in our case the courts and the Competition Authority, shall be empowered to apply Articles 81 and 82 using national procedures and remedies. While the draft regulation is still under discussion in Brussels, these two specific changes are likely to be included in the final version and appropriate account has been taken of them in the Bill.

I will outline the principal features of the Bill, drawing attention to the main policy innovations which it contains. The Bill will repeal and replace the three main statutes which deal with merger control and competition generally in the State. These are the Mergers, Takeovers and Monopolies (Control) Act, 1978, the Competition Act, 1991, and the Competition (Amendment) Act, 1996.

Part 2 makes provision for the rules and procedures which will govern the prohibition of activities which prevent, restrict or distort competition in trade in the State or which constitute an abuse of a dominant position in such trade. The 1991 Act, which first introduced these prohibitions and rules, relied for enforcement mainly on private civil actions and a system of voluntary notification of agreements to the Competition Authority. By 1996, it was considered that this approach was not achieving the desired results, and the Competition (Amendment) Act of that year introduced two important enforcement changes. First, infringements of the competition rules were made criminal offences in addition to being civil wrongs and, second, the Competition Authority was empowered to initiate or recommend civil or criminal proceedings in appropriate cases.

In general terms, it can be said the current system of competition rules and enforcement is working well. While the availability of private civil remedies for breaches of the competition rules may not have had the widespread impact envisaged in 1991, they have nevertheless produced a useful, if small, body of Irish jurisprudence in competition law. The notification system introduced in 1991 led to the establishment of a substantial body of Competition Authority decisions which has produced much certainty and given much guidance to business enterprises.

Regarding enforcement changes made in 1996, it may be too soon to reach a definitive verdict, but the initial results are reasonably encouraging. Certainly, the introduction of criminal sanctions for breaches of competition law has greatly increased the deterrent value of the competition regime and may have helped to change attitudes towards anti-competitive behaviour generally.

The most important policy change proposed in Part 2 is the rebalancing of the imprisonment penalties in section 8 to reflect the gravity of different types of anti-competitive behaviour. The current statutory provisions relating to penalties for offences under competition law are set out in section 3 of the 1996 Act. These provide for penalties or fines up to a maximum of £3 million or 10% of annual turnover and of imprisonment up to a maximum of two years. The new maximum fine provided for in section 8 will be €3.8 million, slightly less than the level of 1996. No change is proposed in the penalty relating to turnover.

Regarding the imprisonment penalty, the Bill introduces a new distinction in sections 6 and 8 between two categories of infringement, increasing the imprisonment penalty from two to five years in the case of the more serious category, such as price fixing, and abolishing it for the less serious category. The new five year maximum penalty, which also makes the offence an arrestable one, sends the clearest possible signal that blatantly anti-consumer activities such as price fixing will not be tolerated.

Part 2 also makes a number of important technical changes relating to criminal procedure for competition offences. These relate to presumptions, defences, fines, provision of information for juries and evidence. These changes, in conjunction with the new approach to penalties, are primarily designed to facilitate the prosecution of serious competition offences while taking due account of the rights of accused persons.

Part 2 also provides for the abolition of the notification system. The number of notifications has declined considerably in recent years suggesting that the level of understanding of the substantive rules regarding anti-competitive agreements, decisions and concerted practices among the business community and its advisers is now quite high. A second reason for abolishing the notification system is, as I indicated, that there is every likelihood that the comparable EU system of notification will be abolished when the EU draft Council regulation for the modernisation of EU competition law is adopted. The current system of notification will be replaced by the direct application of the relevant statutory provisions. The Bill retains in section 4(3) a power for the Competition Authority to issue category declarations which will be broadly similar to the category licences under the 1991 Act.

Two important and related changes are provided for in Part 3. First, it is proposed to transfer from the Minister to the Competition Authority responsibility for examining and deciding upon mergers generally based on competition criteria only. Second, it is proposed in the case of mergers in the newspaper and media sectors to retain a right to intervene where the protection of certain stated public interests requires such intervention.

Under existing legislation the Minister is responsible for merger control and, while he or she can refer a merger proposal to the Competition Authority for investigation and report, it is the Minister who makes the final decision on all mergers notified. The competition and mergers review group considered at length the question of who should control mergers. While the group was divided on the issue, a majority recommended that merger proposals should, in the first instance, be notified to the Competition Authority with the final decision resting with the Minister on stated public policy grounds. I was concerned that a two-tier approach would create a more cumbersome regulatory system than the existing one. At present more than 95% of merger notifications are cleared following an initial assessment and without referral to the authority.

In considering the CMRG's recommendation, I also questioned whether a reformed mergers regime should rely on non-competition criteria in the assessment procedure. Most competition experts maintain mergers should be assessed by reference to competition criteria only and while I believe there is a theoretical justification for the use of non-competition criteria, decisions have very rarely been influenced by such considerations. In light of that fact and to provide as simple and speedy a regulatory procedure as possible, I have formed the view that merger notifications should be determined by reference to competition criteria alone.

Furthermore, I believe the Competition Authority, as the specialist body, is the appropriate forum for undertaking the required competition examination and analysis. Its personnel are well placed to assess mergers expertly, impartially and free from party or lobby affiliations. In light of these facts, I propose to de-politicise the merger control system and transfer the function to the independent authority so that in future mergers will be examined and decided upon using competition criteria alone.

The second policy change, which arises out of the first, concerns the treatment of mergers and acquisitions in the newspapers-media sector. In September 1995, my immediate predecessor established the Commission on the Newspaper Industry. This was against the background of various difficulties in the newspaper industry, including the events which led to the cessation of the Irish Press titles. The commission, under the chairmanship of the former Chief Justice, Mr. Justice Thomas Finlay, reported in June 1996 making 16 recommendations, three of which were relevant to merger control over newspapers. The essence of these three recommendations of the Commission on the Newspaper Industry, as adapted by the CMRG, was, first, that certain public interest criteria, including the competitiveness of the indigenous newspaper industry, plurality of ownership and titles, maintenance of cultural diversity and cross-media interests should be taken into consideration in the case of newspaper-media mergers, and, second, that the scope of merger law should be extended to include the acquisition of control over newspapers-media by means other than the acquisition of shares or assets.

The basic issues we must address in deciding how to legislate for these difficult areas are as follows. First, should any special arrangements be made relating to the control of mergers and acquisitions in the media sector? If so, what form should those arrangements take? Specifically, what substantive tests or criteria should be applied in the examination of media mergers. Who should apply these criteria and how do we ensure appropriate accountability? To those questions I suggest the following answers. The products or services offered by the mass media of newspapers, radio and television are different from the generality of consumer products and services in at least one vital respect. We depend on them significantly for information and views about the world in which we live. The material they provide influences how we see the world, how we interpret events and, to a significant extent, our attitudes and even our behaviour. This has a particular relevance to the operation of our political system. The proper functioning of our democratic system depends ultimately on liberty of expression and all that entails. Excessive concentration of media ownership and control involves risks that go beyond those involved in the case of ordinary goods and services.

The test proposed in the Bill for the examination of ordinary mergers and acquisitions is whether the result of the merger or acquisition would be to substantially lessen competition in markets for goods or services in the State. Neither the Commission on the Newspaper Industry nor the Competition and Mergers Review Group found themselves able to recommend a purely economic criterion of this kind for the media sector. The approach they took was to seek to identify specific public interests that should be considered and taken into account in the case of media mergers and to have those interests enshrined in legislation. This is done in section 22(9) of the Bill in the definition of "relevant criteria". This sets out five considerations which address concerns that are specific to the media sector.

On the issue of who should regulate media mergers, that should follow from the nature of the tasks involved. The Bill, in effect, proposes a sharing of responsibilities between the Competition Authority, the courts, the Minister and, ultimately, the Houses of the Oireachtas. Media mergers which do not raise public interest concerns will, in practice, be controlled by the Competition Authority acting on the basis of the competition criterion and subject to the normal right of appeal to the court. I expect this will dispose of the great majority of cases. In those cases where there are reasons for concern on broader public interest grounds, the Minister will be able to require a full investigation by the authority and, no doubt exceptionally, to overturn a final determination of the authority. This power of the Minister will be subject to parliamentary scrutiny under section 24. This arrangement of responsibilities reflects the competences and responsibilities of the institutions concerned and provides for desirable checks and balances. It could work well and prove sufficient to safeguard the public interest in this difficult area. However, I am open to any new suggestions or proposals on the subject and will give careful consideration to any that come forward in the context of this debate. One possibility could be to confine the ministerial power to positive decisions of the authority, that is, that a decision of the authority prohibiting a media merger on competition grounds could not be overruled by the Minister on public interest grounds.

The Bill as drafted covers all existing technologies for the transmission and re-transmission of radio or television. However, it is possible that future technologies will enable radio and-or television to be transmitted or re-transmitted in ways which might not be covered by the current definitions in the Bill. In order that there should be no doubt as to what is covered by the Bill, I intend introducing on Committee Stage an amendment which will make it clear that all technologies for the transmission and re-transmission of radio or television will be covered by the Bill.

Part 3 also contains a considerable number of technical changes. In general terms, the effect of those changes is to bring our merger control regime closer to that of the EU merger regulation following the recommendations of the CMRG report.

Part 4 continues in being the Competition Authority and makes new provision about its functions. The authority is now just ten years old and it is possible to form a view of its performance. The authority has established itself as a competent professional executive agency carrying out its statutory functions to a high standard. It has gained widespread respect both in Ireland and internationally.

I have decided not only to retain the current collective nature of the authority, as a body comprising a number of persons, but to enhance the role of the chairperson broadly in line with the CMRG report. The collective nature of the authority is emphasised, in particular, by section 28(4) which requires the authority not to delegate certain key functions in the Act. These functions include the power to initiate proceedings for an offence under sections 6 and 7 or to make a determination in merger cases following a full investigation.

The Bill includes provision in section 28(1) for a new advocacy function for the authority. I place particular importance on this as an instrument for bringing about change in business culture. Some attitudes towards the notion of competing, or rather of not competing, are rooted deep in tradition and culture. Many of the problems have to do with the interface between business and Government itself. An example of this is the era of price control which may have contributed to a sense of "not rocking boats" within particular business or trade communities. The authority is already playing a very valuable advocacy and educational role and the Bill recognises and provides for this.

Part 4 also includes a number of changes which will strengthen the independence of the authority. Section 27(3) makes express provision for the first time for the independence of the authority. Increased autonomy in financial and staffing matters is provided for in sections 36, 37, 39 and 41.

Section 32, co-operation between the authority and certain statutory bodies, provides a statutory framework for practical co-operation between the authority and the sectoral regulators listed in schedule 1. This provision, which is wholly new, and is based on the advice of the CMRG, will underpin and enhance existing levels of co-operation between the relevant bodies. The inclusion of the Broadcasting Commission is particularly relevant to the media merger area and it should contribute to greater coherence in the overall monitoring of the media sector.

Part 5 provides for miscellaneous matters such as repeals, expenses and saving and transitional provisions. I should comment specifically on section 46 which empowers the Minister to amend or revoke the 1987 groceries order. The purpose of this provision is simply to allay any doubts as to whether the order could be amended or revoked subsequent to the repeal of the Competition Act, 1991. As I indicated in the Seanad, I have no proposals at present to amend or revoke the order.

The Bill is the result of a process of careful preparation, as befits a policy area of this complexity and importance. It takes account of the best independent advice available to Government, relevant EU developments and experience in implementing the current arrangements. If enacted, it will sharpen the focus on serious competition wrongdoing; take merger control out of the political arena; foster a new approach for handling competition problems in the media sector; and strengthen the Competition Authority.

The Bill will provide a sound modern framework for the promotion of competition throughout the economy over the coming years and I commend it to the House.

Mr. Flanagan:

I thank the Tánaiste for her general outline of the Bill's provisions. Rarely have I heard such a ministerial contribution with which I almost wholeheartedly agree. I would find it very difficult to take serious issue with any of the points made by the Tánaiste. I hope that, given the broad welcome from my party and this side of the House, we can ensure that we proceed to Committee and Report Stages as speedily as possible. Notwithstanding the current time con straints being experienced by the House and the rush of legislation on the part of many Ministers, all of whom appear to have more than one eye on certain events that will take place later on in the spring, I hope we can reach agreement on this Bill. It is important that all stages be passed before the dissolution of the Dáil.

The Competition Bill before us represents an important policy plank towards the building or maintaining of an enterprise economy. The object we all have is to ensure that Ireland is one of the best places in the world in which to carry out business, trade and commerce. Enterprise and productivity should comprise the cornerstone of all economic policy. That is reflected in the changing, revamping and modernisation of our competition law.

Promoting enterprise will boost Irish business and improve our own productivity. The Bill strengthens competition and the power of consumers by reforming our competition law, smashing cartels and restrictive practices and promoting the concept of new protections for consumers. The promotion of enterprise will foster the business skills of Irish people. Vigorous competition between firms is the lifeblood of strong and effective markets. Competition helps consumers achieve a good deal. It drives innovation, incentive and productivity.

Decisions on competition should be taken by a strong, proactive, independent authority which should have the power to tackle all forms of anti-competitive behaviour. There should be a strong deterrent package, which we have in the Bill, and injured parties should have a right to redress. The basic objective should be for greater international consistency and co-operation throughout the EU and even beyond its borders.

As we know, cartels are highly damaging to the economy in general and consumers in particular. Competition between businesses protects consumers. In markets that lack effective competition, firms realise that consumers have little or no choice but to buy from them, so customers can be treated in an unfair manner. With strong competition, firms are forced to work hard to win and keep their clients. As a result, it drives down prices and drives up choice and quality. This is most noteworthy in areas which have moved from monopolies to more open markets, as we have in this State over the past ten years. Productivity is the main factor that determines our living standards. Raising productivity holds the key to long-term prosperity in any state, our own included.

Competition is not the only driver of productivity. Enterprise, innovation, skills and investment are also important. A vibrant competition environment and regime is vital to ensuring that our enterprise is moving in top gear. Strong competition regimes encourage open dynamic markets and, through them, innovation and value for consumers.

The Bill, as the Tánaiste has said, can be divided into four main parts: the application of articles 81 and 82 of the EU treaty, the criminal sanctions in respect of hard-core and other offences, the mergers and beefing up of the office of the Competition Authority. All these parts have been very much welcomed by my party.

One area that I feel we should dwell on now, although we will have an opportunity to discuss it on Committee Stage, concerns criminal sanctions. The object of the exercise is to ensure that criminal sanctions are present in the Bill to discourage cartels and restrictive practices and to ensure there is a stick approach. Criminal sanctions have always been the bulwark in ensuring matters are above board. Where competition, enterprise and commerce are concerned, I wonder what will be the effect of the criminal sanctions we have in our competition law which will be strengthened by the current legislation. The 1996 Act included a strong criminal deterrent as does this Bill which distinguishes between serious criminal offences and less serious offences.

The position from which the Tánaiste and her Department are coming is that a perpetrator of a crime in the area of business, commerce and competition should suffer the same fate as, for example, as tax evader, burglar or somebody engaged in the commission of a criminal offence as we know it. This Bill, with its strong criminal deterrent, seems appropriate and within reason. However, we should ask whether it such deterrents work. We should examine the criminal sanctions of 1996 and ask what the track record on criminal prosecutions has been like since then. In all, we have seen over 100 dawn raids by the Competition Authority. Resources have been sought and, ultimately, provided.

One can never achieve a set of circumstances in which sufficient resources are available to anybody, but I acknowledge the Tánaiste's efforts, particularly in the past six or eight months, to ensure that the Competition Authority has the necessary tools of the trade to allow it exercise the functions it was designed to have. However, even with increased resources, the 100 dawn raids and campaign undertaken by the authority do not appear to have achieved the objective set out in the 1996 Bill and reinforced in this one.

The number of successful criminal prosecutions are few and far between, in spite of the existence of such strong deterrents. What we have witnessed is largely a procedural difficulty. Many cases appear to proceed by way of documentary evidence, video evidence and witness statements, all of which are submitted to the Office of the Director of Public Prosecutions. However, the evidence does not appear to come out at the other end. We must acknowledge that a difficulty exists in terms of the criminal sanctions not achieving their ultimate objective. Many of the cases that have proceeded tended to be long, tedious, labyrinthine sessions which went on for weeks on end.

It is interesting to note some of the comments of the eminent judges charged with the responsibility of hearing these cases. They have spoken of the difficulties involved when expert is pitted against expert and economists give counter evidence to colleagues until it is almost impossible to achieve a result. If this is to continue to be the case, we could arrive at a situation where the law would be in disrepute. It is important, therefore, that we look for an alternative if the criminal sanctions are not working.

If the criminal sanctions are merely in place to act as a deterrent and unworkable, we must look instead at the possibility of applying economic sanctions. Fines are effective when imposed on businesses. However, I would like to see the Competition Authority initiating proceedings and imposing fines. There may be a constitutional barrier to this, but the matter should be teased out and tested. Other jurisdictions, albeit with different codes of civil and criminal law, seem to have no difficulty in empowering the appropriate regulatory bodies with the power to engage in the process of prosecution. If we can, we should proceed and give the Competition Authority the power to initiate a prosecution. While there is a strong argument in favour of criminal sanctions and jail sentences being ultimately imposed by the court, the reality is different. The civil remedy of injunction and the economic remedy appear to be more realistic, as well as being far more practical.

The Bill is particularly weak on redress of an injured party. Similar legislation proposed in Britain opens the way for injured parties, or those affected by unlawful anti-competitive behaviour, to seek redress. Previously, damages were only possible where a firm had failed to comply with certain legal obligations, not for anti-competitive behaviour which in consumer markets can be particularly difficult to detect. Where there are large numbers of consumers and most firms operate in a similar way, consumers often will not know whether they are getting a raw deal. Individual consumers rarely have access to the information necessary to sustain a complaint. Therefore, we should consider empowering consumer groups which have a crucial and important role to play.

The Bill may have missed an opportunity to strengthen the voice of the consumer. A group such as the Consumers Association of Ireland could be empowered to act on behalf of individual consumers and bring what might be described as a super complaint to the Competition Authority. The authority, in response to this super complaint, could establish a fast-track mechanism of ensuring priority was given to a complaint made by a recognised body, such as the Consumers Association of Ireland. These cases would be brought when people suspect that there are market structures or practices working against the individual consumer. The Consumers Association of Ireland would be an appropriate body to be empowered to put super complaints concerning situations where markets fail to work for consumers, rather than the activities of particular companies. The Competition Authority would be empowered to fast-track these super complaints and undertake preliminary work to establish whether there was sufficient evidence to support a complaint. Where there is a prima facie case, the authority would proceed directly to the use of competition and consumer powers.

There must be a special focus on implementing the law and ensuring consumers and the public are familiar with the terms of the legislation. In this regard I acknowledge the attitude of the recently appointed chairman of the Competition Authority, Mr. John Fingleton, a fellow Laois man. He has done something to improve the public persona of the Competition Authority. Many consumers do not know of its existence. It does not have a high public profile. It is important, particularly in the context of this new reforming legislation, that we engage in a public campaign explaining the importance of competition to the consumer and the citizen. We must explain the significance of decisions giving rise to increased competition and the powers of the Competition Authority. I am sure the Minister would facilitate the adoption by the authority of a high profile advocacy role where competition could be promoted and the functions and role of the Competition Authority made well known, perhaps by taking the authority to the streets in a public information campaign to let the people know of its existence, powers and functions. People must be made aware that we have a body of legislation on a par with anything in the European Union and beyond.

The Bill represents a consolidation of existing legislation. I welcome the greater enforcement powers given to the authority, in line with the report of the competition and mergers review group, which reported a year ago. This was an expert body representing interested parties in the competition area, chaired very well by Mr. Michael Collins, SC. The group engaged in a substantial and significant review of existing legislation and made important recommendations, although not all have been included in the Bill. A number of these omissions have been highlighted by the Irish Business and Employers Confederation. I share the concern of that group regarding the power of the Minister to veto mergers that might be contrary to the public interest. The Minister is aware that the CMRG recommended that the Minister should exercise such a veto in cases considered contrary to the public interest. Under the new Bill, the Minister does not retain this power of veto. Mergers will be decided by the Competition Authority, solely on economic grounds. The only mergers in which the Minister will have any input will be media mergers, as she pointed out in her opening address.

I share the concern that the public or national interest is not sufficiently protected. If a merger is proposed which might be sound from an economic point of view, but damaging to the national interest, neither the Government, the Minister nor the authority would have power to intervene to protect the public interest. Public interest can mean different things to different people in different circumstances. However, most OECD countries have allowed for the protection of the public interest or national security in their legislation. This situation was illustrated by the Woodside case in which an Australian company which owned the Australian gas reserves was the subject of a takeover bid by Shell. The Australian Government prohibited the merger on the grounds that to allow a multinational company to take ownership of the Australisn gas reserves would be contrary to the Australian national interest. If a similar scenario were to arise in this country, under the Bill the merger would go through.

The Tánaiste, in the Seanad, made reference to an amendment which would allow the Competition Authority to adjudicate in secret on a merger if there was a question of public interest. Such an amendment would be designed to accommodate the fears of the Central Bank and the Department of Finance that if the Government wished to rescue a failing bank or insurance company by having it taken over by a sound insitution before the public realised the problem and might cause a run on a bank, it might be prevented from doing so. I refer to the rescue of the ICI by the Government in 1985 or a potential problem in a bank such as the AIB, should it reveal another rogue trader.

Whether deals put together in secret by senior executives are the only way of dealing with this matter and whether the deals should be made exclusively in secret are issues that can be teased out on Committee Stage. I am not sure that not having such a public interest test is something that will produce a body of law that will best serve the people and the State. If we deal with strict, hard nosed economic criteria alone, we might not be acting in the public interest. There should always be a public interest clause and if it were under the guise of national security, that would be preferable.

The Bill makes no provision for consumers or competitors of a firm that is merging or being acquired to appeal to the High Court if they feel the authority has not acted fairly. The best informed watchdog of anti-competitive practices by a company must surely be its competitors. The Bill appears to have no place in the appeal process for those who have a trading relationship with the merged company. There is no alarm procedure for notifying clients or competitors of a proposed merging company that the Competition Authority has received notification in accordance with the legislation that the merger is to be proposed. That is something we can look at again. The Bill requires the authority to give public notice within seven days of receiving the merger request but it does not say if they are working days. This could give rise to difficulty over the Christmas period or in August when the seven day notice might not be sufficient.

Neither does the Bill provide that the notice given by the authority should be accessible by a normal business person without unnecessary expense and inconvenience. The chance of missing a merger notice at some time during the year must be high but the penalty for missing such a merger notice might be severe and there appears to be no grounds for appeal afterwards.

The Bill gives the right of a private action to aggrieved or injured persons but the Bill has no application if one is aggrieved over a merger. Only businesses performing the merger can be categorised as being aggrieved if their wishes are in some way frustrated. This should be looked at again with a view to providing for some form of third party procedure.

I am pleased that in the course of the debate in the Seanad the Tánaiste attempted to accommodate a number of ideas put forward by Opposition Senators. They were that appeals should be capable of going to the Supreme Court, that there should be open competition for membership of the Competition Authority and that the authority's independence should be bolstered by giving it the right to publish its annual report, rather than submitting it to the Minister who would publish it at a later stage. I note that other amendments were accepted in principle by the Tánaiste and that she will proceed to have them drafted for Committee Stage in the Dáil, which I expect to take place early next month.

One aspect of the Bill that gives rise to concern is the reversal of the burden of proof in favour of the prosecution, which is inserted at various stages in the Bill. This will surely act to the detriment of the defendant. It goes against one of the fundamental tenets of our criminal law, that it is up to the person making the case to prove the point. One of the justifications for this change in approach is the difficulty for an applicant in discharging the high burden of proof. The presumption of anti-competitive behaviour obliges the court to presume, unless the defendant can prove otherwise, that the object or effect of the agreement, decision or concerted practice is to prevent, restrict or distort competition.

This issue has arisen in other areas of the criminal and taxation law but it must only be in the most rare circumstances that this House should transfer the burden of proof by discarding a presumption of innocence until proven guilty, which presumption represents a fundamental principle of our criminal justice system. The provision is included to make it easier to secure prosecutions but if this basic principle were applied across the board, it would alter to the detriment of our people one of the fundamental pillars of our democratic system. This reversal or change in the burden of proof is intended to relate to hard core offences where there is an agreement or decision or concerted practice. However, any law which provides for a fundamental change in the burden of proof should be met with concern. Perhaps we can discuss this issue further on Committee Stage.

There has been much discussion on media mergers. I listened with interest to the Tánaiste's explanation of the reasons for retaining power to herself and her successors with regard to media mergers. I was a little surprised, having regard to the public interest involved, that the Valentia Eircom acquisition was not referred to the Competition Authority. It appears the Minister is relying on some whistleblower informing her Department if there is a breach of the commitments given as a condition for her permitting the acquisition of Eircom by Valentia. The undertakings given appear to be grounded in secrecy. The secret dealings or undertakings entered into behind closed doors appear to be unique. It is extraordinary that the terms of the commitment were not published.

Some questions were answered but the information was given in a drip feed manner rather than being volunteered. Some of the undertakings were outlined in the Official Report but the information was not so much volunteered as extracted. The commitments relate only to the cable TV firm, Chorus, in which Independent News and Media has a substantial financial interest, but the major player involved has a substantial financial interest in Independent newspapers. Were Chorus, for example, to set up a telecom business using its Chorus cables, it could take telephone traffic away from Eircom. There appeared to be no commitment given in relation to a potential clash between the Independent group and Eircom. If Eircom were to launch into the publishing, news or entertainment business across the telephone lines, as many phone companies have done in the US and Europe, it would attain political and cultural power as an important media player. The major shareholder would then be in a position to influence both a nationwide electronic publisher and his existing Irish newspaper group.

In general, I welcome the fact that the Minister proposes to retain to herself and successor Ministers the right to determine the outcome of media mergers. However, it is at odds with putting all other industries under the sole jurisdiction of the Competition Authority. I welcome the Minister's assertion that the media merger must overcome two hurdles, the Competition Authority and the public interest clause. She suggested that the ministerial power should perhaps only be exercised in relation to positive decisions of the Competition Authority. I agree with that; it is probably more appropriate in the circumstances.

I welcome the launch by the Competition Authority before Christmas – a launch which was not widely heralded – of the new concept of immunity against criminal prosecution for a cartel member who blows the whistle. This is good for businesses who are victims of cartels and for the consumers who ultimately pay for cartel profits. It is also good for the Competition Authority, if it can make its threat of prosecution of cartel members a reality rather than an aspiration. The Office of the Director of Public Prosecutions collaborated substantially in the arrangement. It is an interesting concept. The immunity from prosecution is applicable to the first member to come up with the information the Competition Authority needs to prosecute other cartel members.

I am pleased the Competition Authority has identified the pursuit of cartels as a top priority. The immunity programme outlines the policy and procedures involved in applying for immunity and makes transparent the policy of both the authority and the DPP in considering applications for immunity in cases of self reporting of cartel activities. Applications must be made to the designated officer within the Competition Authority. It is important that people know exactly with whom they are dealing.

One point that is not referred to in the Bill is the matter of whether other regulators, such as the telecoms regulator, should be given powers to pursue their own regulated bodies, for example, Eircom, Esat, Vodafone, ESB, Bord Gáis and Aer Rianta, for abuses of dominant positions. This could be done by incorporating an amendment into the Bill which would give equal rights of prosecution with the Competition Authority to the regulators. It is a controversial issue, which I do not have time to go into, but I will return to it on Committee Stage.

Shared jurisdiction exists in the UK where the various regulators of water, energy and telecommunications can pursue abuses of dominance under British law, which is modelled closely on EU law. However, we are putting everything under the umbrella of the Competition Authority. The relationship between the Department of Enterprise, Trade and Employment and the Department of Public Enterprise probably produces an element of conflict and that should be examined. The Competition Authority has not been active in this area. For example, no abuse suits are being pursued against the ESB or Eircom despite repeated complaints from new entrants to their markets. The appropriate regulator should be considered an ideal candidate for a measure of power.

Overall, I welcome the Bill, which sets about redressing the need to update competition law and I look forward to Committee Stage, where the definition of "hard core offences", for example, can be tightened. The definition is broad, as drafted, and open to misinterpretation. We will also be able to examine the difficulties between the Office of the Director of Public Prosecution and the Competition Authority. When the authority completes its work, a file is sent to the DPP's office, which then disappears into a black hole, never to return. I welcome the beefing up of the authority in terms of additional resources to provide more staff and, more importantly, to provide for the enforcement of this legislation. It will be of little value unless it is workable and enforceable.

Mr. Rabbitte:

I apologise to the Tánaiste and to the House for being late. This is the third competition Bill in 11 years promising the introduction of tough legislation to stamp out anti-competitive behaviour. I welcome the legislation in so far as it sets out to codify competition law in a single accessible Bill. However, it is fair to measure the rhetoric with the performance in assessing it. What firms have seen is that little or no serious effort has been made to enforce existing legislation. The original Competition Act, 1991, provided no effective means of enforcement. The experience with the 1996 Act is that almost as soon as the authority demonstrated its intention to apply it vigorously, it was stopped from doing so.

On the criminal side, three files have been sent to the DPP. The authority's chairman, Dr. Fingleton, has been referred to by Deputy Flanagan and I concur with his view that his appointment by the Tánaiste has given a higher profile to competition. I regret that the relevant committee of the House, the Oireachtas Joint Committee on Enterprise and Small Business, has not given Dr. Fingleton an opportunity to appear before it, despite requests from myself and others, to present the case of the Competition Authority in terms of its role and so on. As Deputy Flanagan stated, Members know little about the authority.

The chairman is committed to attaining a higher profile for the authority in the future. However, his address to the Bar Council on 26 January was reported in the Competition Press. He stated: “We have sent some very serious files to the Director of Public Prosecutions three years ago. It's a concern that he has not been resourced to deal with them expeditiously.” I do not know for certain, nor for the purposes of this debate am I required to know, the subject matter of the files in question, but the chairman's conclusion is instructive. There is something wrong somewhere if three year old files have not been progressed. Given the nature of the issues involved, the question must now arise as to whether they can still be progressed. I do not know what the Tánaiste will say on this matter.

A file on milk was sent to the DPP at the end of 1998 and the DPP directed that the Garda undertake further investigations, which it did. I do not know what has happened since to the file and again the Tánaiste may be able to help the House on this matter. I also believe that the DPP directed that the authority should prepare books of evidence in respect of its investigation into enterprises related to the drinks trade at the end of 2000. I do not know how far this has progressed or what the Tánaiste can tell the House about the delay.

Surely it must be open to defendants in these circumstances to argue for dismissal on grounds of undue or unreasonable delay. The authority chairman's comments to the Bar Council conference are even more stark as they relate to civil cases. He indicated that cases that were instituted as a result of previous investigations are likely to be dropped. I would like the Tánaiste to comment on his statement: "It is a huge burden to resurrect files from 1997 to 1999. A lot of stuff eventually can't be brought forward because of lack of continuity. It shows a large policy cost for the savings that were made in resources a number of years ago." This must be hugely frustrating for the staff of the authority and hugely comforting for those being investigated.

I can trace eight cases where the authority decided to institute civil action during that period, but which are still outstanding. These are proceedings against the Licensed Vintners' Association, announced in an authority press release dated 22 May 1998; proceedings against the Vintners' Federation of Ireland, announced in the same press release – according to the authority's 1998 annual report, the proceedings allege that both organisations and their members "had engaged in agreements, decisions and/or concerted practices to increase drink prices by a set amount in summer 1996 and November 1997 and to fix margins in respect of certain alcoholic beverages on an ongoing basis". Proceedings were taken against a number of dairies and supermarkets in respect of milk prices – a file on this case was sent to the DPP, according to the authority's 1998 annual report. Proceedings were taken against a number of licensed beer and soft drink wholesalers in Cork, Kerry and Tipperary alleging they had directly or indirectly fixed prices of packaged beers and soft drinks, announced in the authority's 1999 annual report – a file on this case was sent to the DPP. Proceedings were taken against the Soft Drinks and Beer Bottlers' Association alleging that it had directly or indirectly fixed prices of packaged beers and soft drinks, announced in the authority's 1999 annual report. Proceedings were taken against a number of licensed beer and soft drink wholesalers in Dublin and Wexford alleging they had directly or indirectly fixed prices of packaged beers and soft drinks, announced in the authority's 1999 annual report – a file was also sent to the DPP. Proceedings were taken against three bakery firms alleging they had directly or indirectly fixed bread prices, announced in the authority's 1999 annual report, and proceedings were taken against Eircom alleging that it abused a dominant position by refusing to grant unbundled access to the local loop, announced in the authority's 1999 annual report.

I would like to know where these actions stand now and how many are encompassed by the chairman's speech to the Bar Council on 26 January.

In how many cases have proceedings issued and how many are intended to be progressed to finality? What is the real commercial world with which we are dealing in developing competition policy? What is the attitude of businesses to competition policy and to enforcement agencies such as the European Commission or the Irish Competition Authority? The answer may well depend on factors such as businesses' market position at a particular time, whether they are small or large, buyers or sellers, established or fledgling, dominant in one market and weak in another, national or trans-national, etc. As sellers, some businesses may want the maximum possible market power. As buyers of goods and services or employers of labour, the weaker their counterparts, the better.

Economists have developed concepts of monopoly, oligopoly, perfect competition, imperfect competition, contestable markets and market failure, some of which have relevance to the real world. In a contested case, lawyers and economists will, for a fee, be used as advocates by businesses that have no interest in any objective merits of competition policy.

We must be concerned with efficiency arguments and with giving due regard to market signals as often promoting both general equity and consumer welfare, but we must also consider non-market factors and modifying market forces in the interest of a broader philosophy of society embracing choices about social justice, the role of local communities, the desired pace of technological change, increased private consumption or public services and various other issues.

Legislation on competition policy, mergers and control of monopolies reflects broader choices about social and economic policy and seeks to ensure that the legal profession, big business and powerful bureaucracies are democratically accountable. This brings me to the public interest dimension. At the competition conference before Christmas and in brief exchanges with the Tánaiste's helpful officials, I expressed the view that the Bill's definition of the media – the business of production of newspapers or magazines or radio or television broadcasting – is disappointingly narrow. Surely new platforms of transmitting information should be included, either specifically or by using language sufficiently wide to include them.

The Bill allows the Minister to have a final say in relation to media mergers and to apply certain criteria, which, presumably because they have public policy implications, are not considered to be properly the concern of the technocrats at the authority. These include the diversity of views in society, the maintenance of cultural diversity and other matters referred to by the Tánaiste in her contribution. At least, that seems to be the reasoning behind the Minister, not the authority, making the decision in these cases. Even in the normal cases left to the authority, it is disabled from taking into account considerations of the public interest and must instead apply a mechanical test as to whether the merger would result in a substantial lessening of competition. The oddity is that people call for special rules in relation to media cross-ownership because of the special influence capable of being exerted by those in a position of dominance, not least influence over the political process.

Most objective observers would say that the managers, editorial people or whoever calls the shots at Independent News and Media are gearing up to support the two parties they supported at the last election. I am not sure if that is the wish of many of the journalists working on the group's newspapers. If the coverage from Christmas is anything to go by, they will have reached quite a crescendo of unanimity by the time the general election is called. I do not suppose that constitutes abuse of dominant position as it is something that goes on in other countries. On the island adjacent to us, it is not unusual for a newspaper group to line up behind one or other political party although this has not happened so blatantly in this country. It is not desirable from the point of view of democracy.

Going back to the origins of this democratic State, a particular newspaper was self-avowedly the voice of one political party and everybody knew where it stood. The newspaper developed a vigorous independence as time went on and some of the more remarkable political writers wrote for it, irrespective of its editorial line. I fear that will not continue to be the case in some of the newspapers in the Independent stable. Many journalists may continue to be objective reporters of what they see in the political arena but there is a manifest editorial bias. It is not necessary to be partisan, as I avowedly am, to acknowledge that. The question then raised is whether it is adequate in response to put the decision making process in the hands of a politician liable to be subjected to precisely the excessive influence we seek to curb. That is problematic. However, I want to come back to that point because I have a view on what is the answer to my own question.

The Bill does not contain a straightforward ban on cross-ownership beyond a specific percentage figure. I should not accuse the Tánaiste of suggesting she would put in a specific figure for cross-ownership, but from her answers to parliamentary questions etc., I inferred that might be the case. This would not of course deal with cases of indirect control but I see no reason why the Oireachtas should not legislate to the effect that a concentration of media ownership, beyond fixed limits, is wrong in principle and prohibited, regardless of whether there is proof of a lessening of competition in the market place. There is no reference in the Bill to the role of the Minister for Arts, Heritage, Gaeltacht and the Islands. In terms of wider cultural diversity, there seems to be an argument to have enshrined in the Bill some structured reference to, at least, a consultative role for the Minister for Arts, Heritage, Gaeltacht and the Islands.

I welcome the fact that the definition of "control" set out in the Bill, for the purposes of establishing whether a merger or acquisition is taking place, seems to be sufficiently broad to include a case where one newspaper proprietor acquires control over another title by extending loans to it on what is clearly not an arm's length commercial basis.

The argument apparently relied on by the Tánaiste in the case of the media raises interesting questions about handing over to the authority all aspects of merger control, lock, stock and barrel, with the exception of the media. I hope we will have the opportunity on Committee Stage to tease out whether this is just fashionable or ideological and whether it is in the interest of equitable economic and social development in Ireland that only competition criteria may be taken into account even in the largest and most sensitive mergers. If one looks back over the history of competitions pioneered in the United States from Rockerfeller and Standard Oil to Microsoft and the Bush Administration there is, whether the technocrats like it or not, a political and public interest dimension to the issue. Fashions come and go and a different fashion seems to have been applied to Microsoft and Bill Gates compared to the Rockerfeller Standard Oil case.

I note the work of the Competition and Mergers Review Group in the report referred to by the Minister. She referred in the Seanad to its work as "one of the most extensive ever carried out into competition in this country or possibly anywhere". It is worth noting that the review concluded that the "final decision on public policy grounds ought, however, to rest with the Minister". Paragraph 6.3.3 of the CMRG report states

The Group also continues to be of the view that the final decision should lie with the Minister. The basis for this is that while the primary substantive criterion for the review of a merger should be its likely impact on competition, the Group believes that it should also be possible for a merger control regime to take account of other public interest considerations. The Minister, rather than the Competition Authority, is competent to take decisions on public interest grounds and it is for this reason that the Group recommends that the final decision on mergers notified under the Act should rest with the Minister. The Minister's review of mergers should, however, be limited to such public policy grounds only.

Paragraph 6.3.7 states:

The Group proposes that notifications should be made to the Competition Authority and that the Competition Authority should be required to decide on the basis of competition criteria only. It is in this realm that it is a specialist body. The issue of whether or not the public good, for stated reasons, requires competition considerations to be departed from is an inherently political one and is one that is best taken by a politically accountable person. The Group is satisfied that a certain political element is inherent in any merger control system.

That is my view. The Minister may disagree with it if she is not the Minister, but the principle is not divisible in that way. We may have views on how our predecessors made decisions against those criteria, but there is an impeccable democratic and accountability argument which says that there is an inherent political element in any merger control system. Paragraph 6.3.7 also states:

While the Minister will of course be open to political lobbying, the decision of the Minister, which the Group believes should be fully reasoned and published, will permit full public scrutiny of the Minister's decision. Lobbying the Minister appears to the Group to be a corollary of the democratic process. [Perhaps we should send that line to Mr. Justice Flood as it might be helpful.] Consequently, the Group considers that the structure to be put in place should provide that notification should be to the Competition Authority. The latter body should make the initial recommendation. The final decision on public policy grounds ought, however, to rest with the Minister.

I am not sure we have heard sufficient from the Minister as to why she chose to reject that advice and decided instead that these matters should be decided solely on competition criteria by a technocratic authority which is not accountable to Parliament, except for its use of public money, with the exception of the media.

Like Deputy Flanagan, I am concerned that we are taking this important Bill late in the parliamentary lifetime of the Dáil. I appreciate it is a priority for the Minister and we, on this side of the House, have indicated our willingness to facilitate it. We are restricted to speaking for 30 minutes, although we could probably go on longer because few of our colleagues are lining up to make researched contributions to the Bill. Committee Stage will probably be dealt with by four or five Deputies. Notwithstanding that, it deserves more attention than it will get on Committee Stage in a general election environment. That is a pity because some of the concepts are difficult and are judgment calls. There are differences in the House in terms of philosophical outlook and values of competition policy. In view of the hurried manner in which the Bill will be put through the House, I am not sure we will be able to adequately tease out why the Minister praised the work of Mr. Michael Collins and his colleagues on the review group and yet rejected a cardinal recommendation to which it gave a lot of thought. I do not have any doubt that the authority, including its staff, is comprised of conscientious expert and dedicated people who will come to their demanding tasks with their own values, prejudices and professional expertise. The Minister may believe she has depoliticised merger control, but there is no such thing as a pure technocratic position which is devoid of social and public interest.

I welcome the Minister's intention to provide a modern legislative framework for the promotion of competition policy in Ireland. It is valuable that key features of the law relating to competition, monopolies and mergers are brought together in a single statute. I am also persuaded that in so far as we are ambitious for economic growth, it is important that our economy is competitive in the trading sense and that we are enabled to generate growth by increases in exports, which we have managed to do in the past decade in particular. We are one of the most open economies in the world in terms of ratio of foreign trade to GNP and the freedom of movement of capital. I suspect we may differ as to the extent that reformulation and extension of competition law has contributed to that economic growth over that decade. However, competition policy and sectoral regulatory issues have gradually come more to the forefront in Ireland and in the future, due to the further diminution in the status of national economic policy decision-making arising from economic and monetary union and the reduction of national policy instruments, that will continue to be the case. There is a pro-consumer dimension in a country where, until relatively recently, there was not any consistent resourced consumer voice.

In spite of the Minister's frequent protestations of her pro-competition stance, there has been a failure by the Minister to provide the necessary resources. Criminal prosecutions have been delayed, the authority chairman has indicated that civil actions may have to be dropped and several investigations have been halted. The Minister will now claim that she has at last ensured the authority will have adequate staff. I would, however, be confident, without knowing this, that the authority must have warned her of the implications.

It is appropriate to have much tougher penalties for what the Minister describes as "hard core cases" than for other types of anti-competitive behaviour. Most economists and competition lawyers would make a clear distinction between two broad classes of anti-competitive behaviour. The first category is blatant cartels, which involve price fixing – including agreements on margins, price increases or maximum discounts; bid rigging; market sharing. The assessment of such practices is clear and unambiguous. There is no evidence that they have any beneficial effects, in fact, quite the opposite – they reduce efficiency and clearly harm consumers because, effectively, they are a rip-off.

The second category involves everything else. This includes what are called vertical agreements – exclusive distribution, franchises, etc., and alleged abuse of dominance. The point is that the distinction between abuse of dominance and aggressive competition can be very fine. While vertical agreements may be anti-competitive in a particular set of circumstances, they are often beneficial in the sense of promoting efficiency, etc. Logically, such behaviour should be treated less severely, even when it is actually anti-competitive. It may not be possible for firms to know in advance whether they have crossed the line. If the penalties are too severe, it might actually discourage people from competing strongly for fear of prosecution.

In the United States, for example, cartels are, per se, illegal under the Sherman Act. In other words, in a cartel case the prosecution is required to prove that those involved agreed to fix prices pure and simple. There is no bringing in a raft of economists or experts to argue whether that is good or bad. The law states it is bad.

The authority chairman, in his address to the Bar Council conference, reportedly stated the new Bill did not give a good definition of hardcore offences and did not make these offences, per se, as they are in the United States. I quote, “In the US you can't offer the sorts of defences under section 6(4) of the Bill.”

It is also worth noting the comments of the current Attorney General, Mr. Michael McDowell, at a seminar in TCD in June 1995:

Price-fixing, bid rigging and market sharing offences would have to be specifically created. One cannot simply criminalise all anti-competitive agreements or practices as such. Still less could one imagine criminalising all behaviour which amounted to abuse of dominant position.

In short, the offence has to be one which any Joe or Josephine Soap sitting in a jury box can easily see falls on the wrong side of a clearly established line. We can't have the situation in which companies are in perpetual conclave with their legal advisors as to what aspect of their behaviour does or does not fall within the ambit of any proposed offence. Any new offences must be simple, obvious, and generally understood.

He proceeded to state:

It seems to me that if modern procedures, rules of evidence and evidential presumptions are introduced, it should be possible to simplify serious offences of price fixing, bid rigging or market sharing into a form that can be easily prosecuted, easily understood by the jury and the public, and in which the court is not weighed down with a mass of documentation and technical evidence which makes the trial unduly long or cumbersome.

Not all observers would agree that the current Bill could be described as meeting the requirements outlined by the Attorney General. I would like the Tánaiste to indicate the reason she decided against simply making the operation of cartels a criminal offence. In the United States, if individuals can be proved to have fixed prices, there is no need to hear long, complex economic and expert advice that this is a bad thing to have done. In practice, trying to prove beyond a reasonable doubt that a firm abused a dominant position is at least problematic. The authority chairman acknowledged this when he stated non-cartel cases would "only rarely achieve the burden of proof for criminal fines".

I regret that I do not have time available to contribute further to the debate on this major Bill. I have a number of other points to raise and hope I will get the opportunity to do so on Committee Stage.

Mr. Perry:

I am delighted for the opportunity to comment on this important legislation which will repeal existing competition legislation and should codify our national competition laws into one item of legislation. This is a welcome development.

As someone with a background in business and commerce, I am keenly aware of the role and importance of competition in ensuring consumers get the best value, best choice and are empowered to make decisions about the choice of goods and services they wish to use. If consumers do not have a competitive choice, there is a greater possibility that they will suffer poor service, pay higher prices and obtain inferior goods. Clearly, a competitive market is the best safeguard to ensure consumer welfare.

The State has a vital role to play in ensuring the environment for business encourages risk and enterprise, because without enterprise there is no competition. It is important that the State removes obstacles to the enterprise culture, which has played such a vital role in building the vibrant and successful economy we have today. Achieving a competitive environment for the conduct of business and the provision of goods and services involves much more than just enacting legislation to establish or reinforce the powers of a Competition Authority. Government legislation and policy in a range of areas must not just pay lip-service to competition policy, they must strive to create and sustain an enterprise culture that encourages entrepreneurs to take risks and invest. That is the key to growth in any business. Government policy must be focused on removing obstacles, increasing efficiencies and rewarding risk-takers. Unless this is central to policy, we will not encourage budding business people to take risks to provide consumers with competitive choice in a range of goods and services. The only way to encourage competition is to have many people operating in the same area of business.

The Bill is a result of a long-term review of competition policy by the competition and mergers review group. It confers considerable additional powers and responsibility on the Competition Authority and quite extensive powers in the pursuit of its statutory functions. I understand it will give the authority power to enter people's homes to search for records, documents and materials. It is important that we constantly review and assess the conferral of such extensive powers on statutory or public bodies. Providing such extensive powers confers an enormous responsibility on the authority to conduct itself in an effective, efficient and honourable manner. Any organisation with such powers and responsibilities must prove its worth and not become a self-perpetuating bureaucracy. It must justify its existence and confer benefit on consumers. It is also important that it does not add to the burden many businesses face on a daily basis and that its procedures, objectives and goals contribute to the achievement of greater efficiencies in the economy.

I know that some business people believe that the authority, which has been established since 1991, has yet to prove its worth. The authority and the entire regime of competition legislation were not born out of any pressing demand in the early 1990s for a new all-powerful body to tackle perceived cartels, abuses of dominance or anti-competitive agreements in the economy. It emanated from proposals produced by the Progressive Democrats which achieved prominence when Deputy O'Malley became Minister for Industry and Commerce under the then Taoiseach, Charles Haughey. The authority's powers were strengthened in 1996 by my colleague, Deputy Richard Bruton, and the competition and mergers review group carried out a further analysis, issuing a final report in the year 2000.

I am not sure if we have ever carried out a cost benefit analysis on the Competition Authority to see whether the considerable powers and responsibilities it received from the Oireachtas have been justified. Has the consumer benefited from the work the authority has carried out? Has it assisted in the removal of any barriers to trade or reduced any inefficiencies in business? Is the authority and the procedures it adopts an additional burden on developing an enterprise culture? Does it adopt a practical and consumer focused approach to the conduct of its affairs? It is difficult to recall an individual instance where the consumer has benefited from direct intervention by or activity on the part of the authority. However, I am aware of many situations where large businesses have benefited from its involvement and intervention in specific commercial disputes. I suspect the authority may yet have to earn its spurs when it comes to securing respect from consumers and wider business interests for its functions.

In order to earn this respect, it is vital that the authority operates and acts in an environment that recognises the commercial realities of the marketplace. I know that its members are fine and expert people and that it has individuals of the highest calibre among its staff. However, I wonder if the authority might sometimes be over-academic and narrowly focused in the way it conducts its business. From my own first hand experience, I believe the authority has sometimes looked at issues solely through the eyes of economists and shown little regard for the real commercial world of business and consumers.

Over a number of years, the Joint Committee on Enterprise and Small Business carried out detailed studies on the grocery and distribution sector in Ireland and issued a number of considered and researched reports. However, someone in the Competition Authority took it upon themselves to criticise us publicly in intemperate and unbalanced terms. There was a failure on the part of the authority to recognise that our function as policy makers is not just to look at issues through the eyes of economists but also to address issues in the round. However, a robust session with the authority cleared the air somewhat. I acknowledge the Minister's influence in relation to the grocery order, which has facilitated a balanced approach to trade activities.

I would welcome greater interaction and communication between the authority, the business community and consumer groups. The current chairman of the authority has taken some important steps in this regard, but I suggest more can be done by the authority to establish its worth to business and consumer interests. I would also welcome greater interaction between the authority and policy makers as we can each learn from effective engagement. I hope the Tánaiste will take account of the benefit of having the authority come before an Oireachtas committee each year to outline its work programme and strategic objectives over the ensuing year. It is also important that the authority should focus on its basic role and some level of parliamentary accountability would assist in that regard.

I refer to an issue which the Tánaiste might address in her reply on Second Stage and also on Committee Stage. The regime established by the Competition Acts confers a considerable advantage on large businesses and has a disproportionately negative impact on smaller businesses. A large business can take a decision that has a negative impact on smaller businesses or individual operators. If smaller businesses combine to respond to such an initiative, the likelihood is that the Competition Authority will be down on them like a ton of bricks. There are many instances where the authority has gone after representative and trade associations that have responded to actions taken by larger or more dominant players in the marketplace. The IFA, the licensed vintners, the veterinary profession and travel agents have all come under the focus of the authority in circumstances where they have tried to represent their members' interests in disputes with larger companies.

There is an important balance to be struck in such cases. Representative and trade associations should not act to restrict competition, but it is equally important that they are allowed to represent their members in issues that affect their livelihoods. Representative organisations, such as IBEC, have played a central role in achieving social partnership and it is critical that the regime established by this Act does not restrict that role. The law confers certain benefits on trade unions to represent the rights of workers in collective negotiations. It is worth examining whether the role of representative and trade organisations should be recognised and encouraged in this Bill. It should be possible for those organisations to operate effectively, without fear of incurring the wrath of the authority and perhaps the interaction between such representative associations and the authority might be addressed on Committee Stage.

I am concerned that representative organisations might be so restricted in their roles that they lose their credibility and relevance. I am not talking about permitting representative organisations to arrange cartels or anti-competitive agreements, but there must be cases where such organisations are justified in having collective negotiations on commercial or trade issues with larger companies. The absence of effective representative organisations is not in the national or public interest and it is important that the regime established by this Bill facilitates their continued role.

I wish to mention a number of specific comments on key issues in the Bill. The aim of the Bill is to improve efficiency and remove obstacles to the conduct of business, but I am concerned that some aspects of it might restrict innovation or enterprise. One such area relates to the current requirement of large Irish companies that are conducting business abroad to notify transactions to the authority. An increasing number of Irish firms are seeking to expand their export capacity through acquisitions in overseas markets. At present, the acquisition by an Irish firm of a business abroad is subject to the prior notification obligation of the Acts if the Irish acquirer and the business being acquired meet the thresholds specified in the Acts. The notification requirement even applies where the business being acquired has no activity in Ireland and where the acquisition has no effect on competition in the State. This is nonsensical and amounts to an unnecessary imposition on Irish enterprises and on the authority.

Another issue relates to the time limits the authority applies for the consideration of mergers and notifications under the Act. I understand that 98% of transactions are cleared by the Minister at the first stage of the review process and it is expected this will continue to be the case. However, the 2% of cases that go for further review are likely to be extremely significant in terms of their complexity, scale and economic impact. I am concerned that any Irish company operating in an international environment might have to wait up to 120 days to learn if a proposed merger is likely to be acceptable. This would be a particularly onerous burden in the case where a company is a plc and is obliged to underwrite any offer for the period when a deal is being considered by the authority. Of course, such transactions merit detailed and serious consideration by the authority, but can it be done any quicker than the current four months time scale in the Bill.

I would see merit in allowing companies a procedure that facilitated a fast-track approach to the second stage. Perhaps the Bill might contain some provision that allowed parties to elect to bypass the initial 30-day investigation of the transaction by the authority and move directly to the three months consultative phase. Bearing in mind that the Bill is concerned with increasing efficiencies, reducing costs and enabling business to be done in a competitive environment, I would have thought this suggestion might find some favour with the Minister.

I think the Minister needs to provide for some formal interaction between the authority and the Oireachtas and I hope she will bring forward proposals in this regard on Committee Stage. I suggest the Committee on Enterprise and Small Business would be an excellent committee with which the authority could interact. I also see considerable advantage in the Minister providing for a statutory competition advisory council that would include representatives of consumer groups, business interests, her Department and the authority. This body should have an advisory role to the authority and the Government on competition policy issues and it would not have any function in dealing with individual cases. Such a body would certainly assist the authority in convincing business and consumer interests of its worth and would sharpen the commercial focus of the authority.

I urge the Minister to ensure that the Competition Authority has sufficient resources to fulfil its statutory functions and to prove its worth over the years ahead. There is no point in our providing a legislative framework if we do not give adequate resources to allow the authority to perform its functions. Up to now, the authority was seriously underfunded and had relatively little capacity to deal with competition issues. Consumers are entitled to expect a free and open economy and an enterprise culture should be strongly encouraged. This Bill has been discussed by an expert group that was set up five years ago and reported in March 2000. It was chaired by Michael Collins SC and engaged in a comprehensive review of our existing competition legislation and made intelligent, sensible and well received recommendations. Not all of these recommendations have been taken on board in this Bill; indeed some have been rejected or abandoned. Perhaps that Tánaiste could indicate why each recommendation was abandoned. I would like a report on what was excluded from the initial review by Michael Collins SC and why. It is important I receive this information.

Ms Harney:

One example is the groceries order. I was well aware of the Deputy's lobbying on that.

Mr. Perry:

That is a good example. We have to give the Minister credit for that. I have already mentioned it. The report also recommended that the Minister should veto mergers contrary to the public interest. Under the Competition Bill, 2001 the Minister does not retain that power and mergers will be considered by the Competition Authority solely on economic grounds. The only mergers into which the Minister will have any input will be media mergers. This does not protect the public or national interest because if a merger was proposed which might make economic sense but would be damaging to our social or national fabric then, almost uniquely in OECD countries, there would be no power for the Government to intervene in the public interest. Most of our European counterparts have this protection built into their own legislation and we would be unique in abandoning this right. A recent Australian case uniquely illustrated the danger.

Not enough attention to the powers of authorised officers has been given in this Bill and significant problems will arise unless these powers are specified in legislation, particularly those of the gardaí who will accompany members of the Competition Authority in dawn raids and other authorised activities. This point needs to be examined.

Merger thresholds will be increased by the Bill, however mergers which involve multinational companies based here but not involving an Irish branch should not be the subject of Irish competition legislation. For example, if Elan acquired a company outside Ireland, there would be no direct impact on competition law here and they should therefore not have to notify the competition authority. This is something the legislation should address given the high level of foreign investment and the large number of multinationals based here.

The Bill is draconian in the extent and effect of its investigative provisions. I am concerned with the reversal of the onus of proof which requires the accused to do the Competition Authority's work for them and disprove the case against them rather than have it proven, as is the norm in criminal matters. Not only does this potentially raise constitutional matters but it will be unworkable in practice, clog up court time and prove expensive given the complexity and length of cases that would result. Such an effect will ultimately damage the reputation of Irish competition law and enforcement agencies. For example, a defendant must prove that the action being pursued did not have as its object or effect the prevention, restriction or distortion of competition. This means that the defendant must provide heavy economic evidence to prove that the effect and not the execution of the alleged offending action did not harm competition. Invariably this means having economic evidence to analyse in considerable detail the relevant market. This should be the role of the Competition Authority and not the defendant.

I am delighted I have had time to speak on this important legislation. It has been debated for five years under review and the Tánaiste has in many respects brought a level playing field to competition which is welcome. I hope she will come back on some of the issues I have raised because it is important they are raised on Committee Stage.

Mr. Durkan:

I am delighted to have an opportunity to comment on this legislation and in general I welcome it. However, I remind the Tánaiste of the things we have said and done in this area in the past. At the time legislation was enacted supposedly to end all dispute and debate in certain areas. Obviously, that is not the case because this proposal is to amend relatively new legislation. That said, I recognise the need for doing that regularly and I support it.

I recognise there is a need for the Competition Authority and the job it does, but after this legislation the Minister will have less responsibility and the Competition Authority will have more. That is fine, but it is also part of the progress towards removing the responsibility of the Minister to the House. This has come up in almost every Bill that has come before this House since I was elected. We have handed over responsibility to fine, well structured and necessary authorities but along side that, when we ask a parliamentary question, we are told the Minister has no official responsibility to the House. I can already see the replies to the parliamentary questions which worries me because competition, responsibility and authority relate to accountability and when one hands over responsibility, in whatever shape or form, the authority given the responsibility should be accountable to the Minister and the House.

I mention that particularly in the aftermath of the debate we had on the Treaty of Nice when it was clearly identified that while there was accountability to Government and to the Minister in almost every area of legislation, with every passing day there is a decreasing amount of responsibility and accountability to the Houses of Parliament. We live in a democracy and the further we go down that road, the more dangerous it becomes. I ask that the Minister tries to ensure that, notwithstanding the proposals in the legislation, we at least in this House have the privilege of raising questions and asking the Minister to give an account of their stewardship and ultimately the stewardship of the agency concerned. That would be good for democracy, accountability and for the House in terms of not handing over responsibilities to other agencies. I cannot over emphasise that issue, which I and other Members have raised many times.

For example, in relation to questions about FÁS throughout the country, a typical answer is that the Minister has no responsibility to the House. I can think of countless other agencies to which that applies.

The Tánaiste correctly mentions the newspaper industry. She raises three questions, namely, whether any special arrangement should be made in relation to the control of mergers and acquisitions in the media sector; if so, the form these arrangements should take and specifically the substantive tests or criteria that should be applied to the examination of the media; and the question of accountability. In unique fashion, the Minister sets about answering her own questions. It is a good technique and I fully appreciate what she is trying to do.

As the global economy expands there is an increasing need to be vigilant in the areas in question. In the first part of her reply, the Minister refers to that, the major moguls who operate world-wide and the service they provide. However, there is grave danger built into that also. There is a necessity for the Minister to recognise that some of the major players in smaller countries may be swallowed up by powerful multi-national corporations in the media industry with the power and influence that comes from playing in the international arena. One or two companies in the electronic and print media come to mind. I do not know to what extent such organisations have any regard for competition or democracy or anything else. I am quite certain there are countless incidents where complete and absolute disregard is shown for these concepts. I do not know to what extent the Minister can exercise control in that area, particularly if the responsibility is to be handed over to the Competition Authority. How will the authority be able to hack it with some of the bigger players in that field? News, information and the means of disseminating that information is power and the Minister would do well to have a closer look at the degree to which that power could be abused. I do not want to go into particular instances at this time but the Minister knows well that I am referring to the huge power and authority that runs alongside the major players in that field.

How much, if at all, has the consumer benefited from competition in the insurance industry and does competition even work in this area? If cartels are being operated for quotations through all the aspects of the insurance sector, is it not a coincidence that all the so-called competitors in the field seem to have the same answers regarding their costs, higher outgoings and higher costs of claims which in turn justifies the right not to quote at all or to quote exorbitantly. To what extent have the competition laws in the past been invoked or enforced to encourage the people who have control in that area. The Minister will say her Department has no direct responsibility, but her Department does have some responsibility in this regard. Whether the competition forces the prices upward or downward should be a matter of concern to the Department with overall responsibility, even though the Department does not fund it directly. It is extraordinary that people here should have higher premium costs than those in other EU countries. The arguments we have heard from the industry do not stand up to scrutiny. The same criteria should apply to competition here as it does in other countries and if that is the case then the consumer does not get the benefit of it. The only ones benefiting from it are the various corporations that are in the business of providing the services and that is not the way it was intended to work. It is recognised that whatever competition laws apply in regard to that industry throughout Europe, they are not applied here. The Minister and her Department need to get directly involved, to knock heads together where necessary to encourage those who are providing the services to also provide competition in a meaningful way, as opposed to the semblance of competition.

The benefits to the consumer would be reflected in the economic performance of the country. Powerful corporations are in the business of imposing a penalty on consumers in particular countries, above and beyond that which prevails in other jurisdictions and, accordingly, the producer in that jurisdiction will be less competitive than its competitors in other jurisdictions. It is of critical importance that that would be dealt with as a matter of course. The Minister may well say that is a issue that will be dealt with in other legislation but we have been a long time waiting for action in this area and nothing has happened to date and the legislation in hand is unlikely to impinge on this area.

The need for competition, other than predatory competition, in all aspects of business enterprise and provision of services is obvious to everyone. The consumer is the one who pays at the end of the day. Some practices that on face value may appear to be competitive, could have anti-competition undertones. Predatory pricing and below cost selling are two areas I wish to highlight. The Minster has already referred to this in the Minimum Prices Groceries Orders over the years.

We all recognise that the provider of a service, the wholesaler or major corporation who is in a position to impose stricter penalties on the producer, forcing the prices downwards will ultimately lead to benefit for the consumer in the short-term. The bigger the corporation buying the product from the producer the greater its influence to force the price down and ultimately put itself in a better position economically. It can either pass the benefits on to the consumer or can retain it. The bigger the corporation the greater the danger of abuse in this area. In recent years, and despite continuous probing by Members of the House, the degree to which that practice is being used has increased.

Many people will refer to various products that are being used as loss leaders in the supermarkets and shops simply to encourage people into the premises to sell other products that are more highly priced. The product of choice for loss leader changes from week to week and the result is not beneficial to the customer, but hugely beneficial to the provider of the service, in that case the retailer.

Debate adjourned.