Deputy Browne has given notice that, on the motion for the adjournment, he wishes to raise the subject matter of Questions Nos. 17 and 18, on to-day's Order Paper.
Adjournment Debate. - Sale and Distribution of Medicinal and Toilet Preparations.
I raise this matter because I was disturbed by the answers I got to my questions from the Minister for Industry and Commerce. I was particularly disturbed for the reason that the questions dealt with restrictive trade practices, with special reference to restrictive trade practices in the manufacture, distribution and sale of patent medicines, proprietary preparations and, in particular, infant foods and toilet preparations. I was disturbed by a number of features. One was the fact that the Minister had considered the report of the Fair Trade Commission. The report, which was submitted in December, 1956, lay in the Department of Industry and Commerce through the term of office of the former Minister for Industry and Commerce for a period of two and a half months. It is clear he sat on it and did nothing about it until the present Minister took over. My complaint is that he also did nothing, on the one hand, about the implementation of the recommendations which were made there or, on the other hand, about an explanation to the public as to why he did not accept those recommendations. May I point out that Section 9 (5) of the Restrictive Trade Practices Act, 1953, lays down that the Minister must either accept the recommendations of the commission or, if he does not do that, give an explanation as to why he is not prepared to accept their recommendations?
This commission sat for three years, admittedly interrupted for a High Court action, following which there was an appeal to the Supreme Court, attempted obstruction by the Pharmaceutical Society. This was overruled and, as I say, the commission eventually sat for a total period of three years. It cost a considerable amount of public money. It interviewed 113 witnesses and disclosed certain very disturbing features in relation to this trade, the main features being that there was a pernicious practice of resale price maintenance exercised by the wholesalers, particularly by the Irish Druggists' Association, in relation to the distribution of medicines and toilet preparations.
There was disclosed that a system of boycott was used in order to enforce the maintenance of a particular price. Membership of the association entailed that the member must give a certain undertaking to the association. The undertaking largely boiled down to this, that he would take 50 per cent. profit on the cost of articles sold by him. Rule 12 disclosed that membership of the association implied adherence to the rules, agreement to adhere strictly to the price condition in the sale of goods and loyalty to members. Page 31 of the commission's report showed that one of the objects of the I.D.A. was "the achievement of the position in which a gross profit margin of 33? per cent. of the selling price (i.e., 50 per cent. on cost) would be accepted as normal or uniform in the trade."
Up to 1952, the I.D.A. was particularly strict and made it clear in no uncertain terms that these rules must be adhered to, that is, the rules as to resale price maintenance and the profit margins to be taken by chemists in the disposal of these goods. In spite of the fact that the tone has changed in recent years in regard to the exhortation to the members to take nothing less than a certain profit, the rules remain unchanged that the prices shall be binding on all members. As far as I know also, the punishment by the I.D.A. of recalcitrant members or recalcitrant suppliers is still the same. I quote from paragraph 58, page 31, in relation to a circular which was sent around to the members:—
"As the margin of profit is not to the satisfaction of the committee, members are reminded to keep..."
—a particular product—
"...in the background where it will not be seen. Any line that does not show an adequate and fair profit margin..."
that is, 50 per cent. on cost—
"...should not be stocked in any prominent part of a pharmacy where it may be observed by a customer but should rather be stowed away from the eyes of potential customers."
The commission considered all these restrictive trade practices and it made six or seven very deliberate recommendations which aimed at ending these practices. It must be remembered that the restriction in regard to price maintenance is directed towards medicines for the sick and foods for infants in their first years of life. They recommended that minimum resale price maintenance in respect of toilet preparations and infant foods should be abolished.
Paragraph 86, page 44, says:—
"It would, in the commission's view, be contrary to the public interest that a boycott of a supplier's goods should be instituted by an association or combination of persons because of a supplier's failure to confine goods.... The commission are of opinion that such actions would involve unreasonable restraint of trade and constitute unfair discrimination against the supplier concerned and should be prohibited."
It prohibited the chemists using the present method of recording by means of a code or otherwise on any medical prescription the prices charged to the customer, a way in which the chemist can ensure that the price is maintained, no matter who dispenses the medicine.
Again, they said that, in the opinion of the commission, a collective arrangement or understanding between the wholesalers relating to the prices to be charged by them is contrary to the public interest in that it involves an unnecessary and unreasonable limitation of free and fair competition, and accordingly it should be prohibited. Now the I.D.A. makes no bones about it. Its function is to maintain these prices—first of all, to get this profit of 50 per cent. on cost and then 33 per cent. and to penalise members, wholesalers, suppliers or chemists, who do not accept its rulings. The members can be fined £50, if they break the rules and fail to charge a certain price for their products.
This rejection by the Minister of the recommendation of a commission is a significant and dangerous departure from the precedents he himself established. The commission sat for three years and gave the whole matter the most meticulous and careful consideration. The Minister, in these days at any rate, appears to be a most fervent believer in the idea of private enterprise in our economic system. He has said on many occasions, and I think he believes it, that it is the best system because, with free competition within the private enterprise system, one gets competitive pricing and, with competitive pricing, the inefficient business in put out of operation and one is left with the most efficient. If the Minister believes that is so, why has he made an exception in this case? Inquiry was made into various other restrictive trade practices—wireless dealers and builders' providers, to name two of them—and fair trading rules were drawn up in respect of them. I understand that was for the benefit of the consumer.
Does this new departure by the Minister represent a change in policy? Does he now no longer believe in free competition and competitive pricing? Does he not realise that if the recommendations of this Fair Trade Commission are ignored, restrictive trade practices will not only persist but will increase, since it will be possible for those who are interested to act with impunity? Can we have a statement from the Minister to-night as to whether or not he intends to maintain this Fair Trade Commission? If he is not prepared to accept their recommendations, should the commission not be wound up, thereby saving the taxpayer the cost of an expensive and elaborate hoax, facade or front?
There is another consideration. One of the important functions of this Fair Trade Commission is that witnesses come forward to give evidence and assist the commission. If people are permitted to carry on restrictive trade practices and there is fear of penalty and punitive measures of one kind or another, such as have been clearly disclosed in this commission's report, witnesses will be victimised in future and the effectiveness of the Fair Trade Commission will be completely negatived. I can give the Minister one well-documented case of this having happened already in relation to the particular inquiry about which I am speaking. There is certainly a prima facie case for believing that one individual has been victimised because of the evidence he gave before the commission.
Will the Deputy tell us who the man is?
I shall tell the Deputy privately. I hope he will be able to do something about it. This is a most important branch of our economy. It is a branch in which a certain section of our people is rendered particularly vulnerable—mothers, infants and the sick. Surely the Minister cannot remain callously indifferent to the effects of these restrictive trade practices. Is he not aware that if he permits these restrictive practices to continue in this instance, the natural corollary is that such practices will spread into other parts of our economy? Indeed, the arguments the Minister has so eloquently advanced over the years in support of the benefits and merits of a private enterprise economy will be completely frustrated and rendered absolutely futile.
I appeal to the Minister to reconsider this matter. It seems absurd that he should ask the commission to reconsider it inasmuch as he has rejected the recommendations of a commission.
Is the Deputy mindful of the clock?
There is only one further point. The Minister mentioned that it is possible for the commission to make fair trading rules. Will the Minister say if these rules will be binding to the same extent as an Order? It is a most retrograde step on the part of the Minister to reject these recommendations and his rejection will have a most deleterious effect on many people, not only in this trade but in other trades as well because of iniquitous and pernicious restrictive trade practices widespread throughout the country.
With regard to the provision of the Act which requires that a statement of intention should be submitted to the Dáil within three months of the submission of the report, my predecessor must make his own defence, if he thinks that necessary, as to why he did not do so. We are all aware that his Government were in certain political difficulties for part of the time and fighting a general election for the rest of the time. I came into office on the 20th March. The statutory period within which a statement should be made to the Dáil expired on the 29th March. By the 29th March I had not even read the commission's report. When I did read it I decided an Order as recommended by the commission was not necessary. I think it would be ridiculous to allow myself to be coerced by such rule of procedure into making an Order I did not think was needed.
I read the report carefully and objectively. I think Deputy Dr. Browne read it carefully but not quite so objectively. I decided, as I said in the statement submitted to the Dáil, that the making of an Order such as recommended by the commission would not entail any marked alteration in the manner in which the trade was carried on. I want the significance of these words to be appreciated. My conclusion on reading the report was that the Order, if made, would have no practical effect. That is why I decided not to make an Order. There was no question of any change of policy. As a general principle, in my view, laws to regulate the conduct of any trade should not be made except where there is clearly and obviously a necessity for them. I am disposed against State regulation in any trade. I certainly do not believe in enacting legislation to provide for State interference in commercial operations just because there is a pretext for doing so. In this case I do not think there was even a good pretext.
What evidence should the Fair Trade Commission seek when proving that there are undesirable restrictive practices in operation? It should, I think, seek to show that excessive profits were being made; that contrary to the public interest there were efforts to limit the number of retail outlets or to confine trade to members of a particular association either wholesalers or retailers; or it should seek to show that contrary to the public interest there was resale price maintenance in operation.
Let us see what the commission said about these matters. As far as profits are concerned, on page 42 the commission states:—
"The net profits earned on the average are moderate having regard to the chemist professional training."
As far as the confining of outlets so far as medicinal preparations are concerned, the commission says:—
"It may be accepted that the sale of preparations of this kind outside the chemist trade could be undesirable from the standpoint of public health."
As far as confining the sale of non-medicinal preparations normally purchased from chemists is concerned, the commission says:—
"The policy of the I.D.A. does not appear to have been very effective as far as the bulk of toilet preparations are concerned; many of the principal manufacturers of these goods do not confine distribution to chemists."
As far as resale price maintenance is concerned, the commission says on page 45:—
"The commission consider that resale price maintenance by the individual manufacturer should be permitted in respect of proprietary medical preparations and that, acting solely on his own initiative, he should be permitted to withhold supplies, if this course is necessary, for the purpose of maintaining wholesale and retail prices for his proprietary medical preparations."
The commission stated that it was undesirable that there should be collective action to enforce resale price maintenance but in fact they said no coercive collective action was taken by the organisation. It is true, as Deputy Dr. Browne stated, that the organisation circulates a list of suggested prices to their members. In that regard the commission says on page 48:—
"There is justification for price lists as a guide to retail chemists, provided that, where pricing is done by retail association, the prices are expressly stated to be suggested prices, and that efforts are not made to enforce them as minimum prices."
Those are my reasons for deciding that an Order was not necessary. In respect of all the matters regarding which the commission were seeking evidence of the existence of restrictive practices which were contrary to the public interest, they found in fact that they did not operate to any serious extent and therefore I decided that the making of an Order as recommended by them would not alter the present practices in this trade in any important respect. I recognise that the making of an Order might have beneficial consequences in so far as it would operate to prevent the emergence of undesirable restrictive practices at some future date.
Deputy Dr. Browne is quite wrong in saying that as a result of my decision chemists can now embark on such restrictive practices with impunity. I made it quite clear in my statement to the Dáil that the Fair Trade Commission will keep the position in this trade under review; that they will make fair trading rules in respect of any class of goods dealt with by chemists if the need for them should be established and they will hold another inquiry if circumstances should appear to require it. The effect of making fair trading rules is not to put statutory authority behind these rules, but it does open up a procedure by which, on there being evidence that the rules are not being kept in the trade, an Order can be made giving them statutory effect without a formal official inquiry.
I do not propose to wind up the commission. I think it has done a great deal of useful work directly and indirectly and that it has more useful work to do in the future. I do not think my decision on this recommendation of theirs has in any way impaired their utility. I want to make it quite clear, however, that at all times responsibility for the submission of proposals for legislation to the Oireachtas rests with the Government and does not rest with this commission or any other commission. While the Government will always give full weight to the recommendations of a body of this kind which has carried out an exhaustive inquiry, it does not necessarily mean we must automatically act on recommendations contrary to our own judgment. I will admit that there must be a predisposition towards accepting their recommendations but the final decision must in all circumstances rest with the Government.
Deputy Loughman rose.
The Deputy may ask a question only.
Only a question?
The Dáil adjourned at 11 p.m. until 10.30 a.m. on Thursday, 21st November.