I notice that in his opening remarks the Minister said that the Irish nation has opted on the whole for a private enterprise economy. I stress the words "on the whole" because they could be read out of context. The Irish nation has opted very definitely for a mixed economy, a philosophy that I was behind. Our whole approach to industrialisation is that both public authorities and the private sector need to complement each other if the maximum social benefit is to be attained. I fear that the particular phrase used by the Minister might be misinterpreted as suggesting some kind of bias against State enterprise. When one reads the Bill, one finds a strong bias in favour of State enterprise by exempting various State enterprises from the provisions of the Bill. There is a certain ambivalence here between the tone of the Minister's initial remarks and the Bill as introduced.
Regarding the post of examiner, the Minister has not explained the reason for this change. The only reason given is that it would lead to a decided increase in the speed with which matters are handled. In the use of the adjective "decided", I detect a certain hint of frustration with the inadequate pace of work of the existing Fair Trade Commission, congested as they are perhaps by an excessive number of matters before them and tied as they are by a rather cumbersome procedure of inquiries which necessarily is slow. I do not suggest any criticism of the Fair Trade Commission in this respect but I can see that the Minister has found probably that, as constituted at present, they cannot cope with the volume of problems coming before them. However, the Minister could have developed this a little more than by merely giving us a hint of frustration. Usefully, he could have told us something about the problems that have arisen and why he has concluded that this is the best answer. I am not challenging the matter but pointing out that, when a change of this kind is introduced, it is important that it be justified fully. I wonder whether in this instance as in so many others, the Minister intends to say as little as possible at the outset and to explain everything at the end, thereby making sure that nobody could answer back, a practice to which this Government have been particularly inclined. Maybe it has been the practice of previous Governments also but, at any rate, it is one which I, as a relatively recent entrant to this House, has noticed as a way in which so many Bills pass.
I thought there was a certain lack of clarity at one point in the Minister's speech. I was misled until I read more carefully what he had said. I refer to that part of his speech regarding an important change, that is, that the commission may not hold an inquiry on their own initiative but must do so on the recommendation of the examiner. At first I read that as meaning that the commission may not hold an inquiry on their own initiative but only on the recommendation of the examiner. Of course, that is not what was meant, although it could be read that way. We see from the Bill that while the Fair Trade Commission may not initiate an inquiry it may be initiated either by the examiner or, alternatively, by somebody who has been frustrated by the failure of the examiner to recommend the initiation of the inquiry. While at first sight it might appear from the phraseology used by the Minister that nobody but the examiner can initiate an inquiry, the position is that if the examiner should refuse to do so there is another channel of direct access to the commission but the commission can act on their own initiative. It is important to clarify that lest the account of the phraseology of the Bill in the papers tomorrow, and as used by the Minister, should mislead people in that respect. I think I have got the correct interpretation as a result of reading what is contained in the Bill.
I notice, too, with regard to the examiner that there is a reference to his having certain competence in examining any abuses of a dominant position by firms outside the State. The Minister went on to say that Deputies would appreciate that the exercise of the examiner's powers in the conduct of such investigations must be confined to the area within the jurisdiction of the State. I take it that the exercise of the power means very strictly the power to summons witnesses or to require the production of documents and that it is not to be interpreted in a looser sense as in any way inhibiting his ability to make inquiries outside the State or to invite people from outside the State to come and discuss the matter with him.
On this particular point I am puzzled by the extra ordinary lack of any direct reference in this document to the EEC. I do not take the view that the EEC should be dragged in holus-bolus to every discussion simply because it happens to be topical. Indeed, there is a danger of people being misled into thinking that everything in the future will be influenced by the EEC. However, in this particular area with which we are dealing there is a direct relationship between the EEC cartel legislation under Articles 85 and 86 of the Rome Treaty as operated by the Commission, subject to an appeal to the European Courts of Justice which has very direct implications for this country. One of the matters with which we must concern ourselves, and I am rather surprised that the Bill does not attempt to do so, is the demarcation of responsibility between the EEC cartel jurisdiction and that of the Fair Trade Commission. This is a delicate and narrow border and one in respect of which I would have thought the Minister would have taken this opportunity to tell us something. Instead he referred to the EEC in terms of remarkable delicacy as if he believed he might offend the House's sense of modesty by using the word. He tells us that he thought it necessary to lay statutory obligations on the Fair Trade Commission and the examiner with regard to these matters because of the existence today of international co-operation in the elimination of harmful restrictive practices. He said he believed that such co-operation would increase as we establish closer relationships with other countries in the interests of the economic well-being of our people.
Is there any reason why he should have been so extraordinarily coy in referring to the EEC cartel legislation and jurisdiction of the EEC? It seems to me to be a curious approach at this moment to refer to the EEC in these terms. Perhaps there are other bodies concerned in this matter but the fact is that we are to find ourselves, if we join the Community, in the position where the jurisdiction of the EEC cartels legislation will extend to us from the 1st January next. That jurisdiction, while concerned necessarily and properly, with aspects of cartels or restrictive practices which influence international trade, is not necessarily, by virtue of that, confined to cartels which involve people of more than one country.
Let us be quite clear that a cartel or restrictive practice in this country, involving only nationals of this country but having implications for trade, affecting trade in some way while in some way restricting exports or changing the terms under which exports are sold or under which imports are sold, would be entirely within the jurisdiction of the European Commission and at least some of the work of the Fair Trade Commission will in future be undertaken by the European Commission even where there is no involvement of anybody or firm outside the country. This should have been made clear. It is odd to produce legislation of this kind without indicating at this point in time the kind of relationship that would exist. The House should have been told precisely how the competence of the Commission would extend to affairs involving firms in this country, whether they be firms of this country together with other firms or whether they be firms solely of this country. We should have been told how the demarcation lines within the jurisdiction of the European Commission are to be drawn. Also, we should have been told something of the extent to which the jurisdiction of the European Commission will take precedence over that of the Fair Trade Commission where an overlap of jurisdiction may appear to occur. To speak on this subject not only without telling us about these aspects of the problem, but also suppressing all reference to the EEC and introducing such guarded terminology, almost suggests a guilty conscience. I do not know what the Government are guilty about. The Minister when replying should tell us something about this aspect of the problem. It is right that we should understand the implications of membership. In this country there may be cases of restrictive practices which, for some reason, the Fair Trade Commission do not investigate, but which the European Commission cartel group will not be prepared to tolerate. Complications of that kind can occur. I have reason to believe that there may be one such case. There is a case which I have in mind in which the Fair Trade Commission could well take one view in the near future and in respect of which the European Commission could move in and reverse that view after 1st January next. The Minister should have told us more about all this. I do not understand why he has failed to do so.
I am in favour of the extension of the powers of the Fair Trade Commission to services. I was a member of the relevant committee of the NIEC which made this recommendation. I could not be a member today, because in an effort to clamp down on parliamentarians, they are excluded by this liberal Government from such activities, even though they might learn something useful to Parliament. The Government abolished this council and refused to replace it. Before this plan was introduced by this liberal Government, I was a member of the relevant committee and we made this recommendation. I am entirely in favour of this recommendation. I am puzzled as to why services have been excluded from the ambit of the Fair Trade Commission until now. Restrictive practices in services can be very dangerous. In some cases, there are great opportunities for such practices in services. Legislation in this respect is overdue.
I recognise that there are areas of sensitivity in the professions. In particular, I can understand the sensitivity of the legal profession because of the unremitting campaign waged by the Department of Justice under various Ministers against the legal profession and some aspects of it. This has appeared most recently in relation to price control, where a curious arrangement has been made under which it will be possible for the Department of Justice to control the rates of fees charged by the legal profession. This is a most undesirable development. I can understand the sensitivity of the legal profession, and I must say that I know they have good reason to be sensitive in view of the record of this Government in pursuing them in aspects of their work where they could reasonably have been left alone. They should be brought within the ambit of control of restrictive practices. The members of every profession are convinced that some restrictive practices are essential and necessary for the purposes of carrying on their business. In many instances this is true. The maintenance of professional standards requires, in many cases, some system of control of the activities of people purporting to carry on the profession in question. At the same time, once a profession introduces some form of restriction on entry and on the practices in that profession, then such restriction should come under public scrutiny to ensure that it does not go beyond what is essential for the maintenance of standards, and that the public interest is served by the profession which does not exploit the advantages accruing from this closed approach.
It is right that the professions should be brought within the ambit of the Fair Trade Commission. I understand the feelings of the members of the legal profession. My sympathies were with them on previous occasions. In this instance there is a case for bringing them, as well as other bodies, within the scope of this Bill. This is my personal view. I have not heard fully the arguments against this. There are arguments for the exclusion of the legal profession which comes under the control of the courts. The courts should show that as a whole they exercise their functions in the public interest. I am not convinced that the courts alone are likely to control the legal profession in a manner that would be necessarily conducive to the public interest. They would be concerned to ensure, above all, the maintenance of standards. They would pursue that aim without having to apply their minds to the broader question of the public interest. They could be so concerned about preserving the profession they might overlook some aspects of public interest. The courts consist of elevated lawyers with a certain loyalty to their own profession. Some kind of external review is desirable. This is certainly a sensitive area. Perhaps some proposals could be put forward to ensure that in intervening in this area the Fair Trade Commission will have due regard to the functions of the courts in regard to the control of the legal profession and that the sensitivities involved here will be taken into account fully.
When we move away from the legal profession, I am not sure that I see any argument for excluding any other profession or Service. I am puzzled about the list of exclusions in the Bill and the fact that the Minister has not explained these exclusions. They cannot be taken as being obviously desirable. I am particularly perturbed about the exclusion of banking. It seems to me that the banking system involves many practices of a restrictive character, having enormous impact on the economy of this country. A case can be made for these practices. I have heard the case made in favour of maintaining a single agreed level of interest rates between the associated banks and for having no competition in interest rates. I have not been convinced by that case. The fact that such competition has existed in Britain for a long time in a very similar environment makes me certain that this practice should at least be examined.
The Central Bank vis-à-vis banks, is in a position somewhat similar to that of the courts vis-à-vis the legal profession. One of the functions of the Central Bank is to ensure the stability of the banking system and to ensure that the money of the people is safe and that the banks operate in a manner which is beneficial to the public interest. The Central Bank is not necessarily concerned with the competitiveness of the banks. I am sure this is part of the concern of the Central Bank and that it is considered. But other considerations may be uppermost in the minds of those in the Central Bank. An external review of the banking system and of its practices would be desirable. In recent times in this country there have been signs of a tendency towards a further exercise of this cartel power. Far from moving towards liberalisation of interest rates which makes for competition, we have the proposed introduction of term loans and the widening of the margins between the deposit rates and overdraft rates, out of which come the profits of the banks.
We have had no indication as to what criteria are applied by the Central Bank in determining whether these are sound or not. Up to now there has been no adequate information as to the profits of the banks. We are now told something about them but in all the years up to now we have had no facts about such profits. The figures they publish are figures which of course they are allowed by law to invent, generally for the purpose of not disclosing their position to the public. Anyone who would think that, by looking at the published profit figures of the banks over the years past, he would get guidance as to whether the banks are making excessive profits through the maintenance of their cartel arrangements would be naïve indeed, because any resemblance between the profit figures published by the banks and actual profits is coincidental. I have been told in the past that there was a convention under which the bank profits as published always moved in the same direction up or down as the real trend. I do not know whether that is true or not, that even if that were true, the fact that one knew no more than that profits were going up or down, as the case might be, certainly is an insufficient basis on which to judge the competitiveness of any system. Moreover, the banks, because of the proliferation of branches, which they have been slow to do anything about, are prima facie an institution involving a degree of duplication which could only be justified by the most intense competition.
There are other areas as well as the banks in which this system of agreed control of rates without any control of the volume of production of the service in question can create grave problems. We have this in air transport. It is a very similar situation. In air transport the airlines decide together what rates are to be charged. There can be no competition between them in terms of rates to be charged. Because this is an area in which, through technical progress, greater efficiency arises as time goes on, if rates are fixed by the airlines the airlines tend to hold them at a certain level, and as the benefits of increased competition accrue, in the form of lower costs, as they have at certain periods of rapid technical advance, what we have got are emptier planes, not cheaper air transport.
It is only because of the intervention of the Civil Aeronautics Board of the United States with IATA and with the airlines in 1952 and again in 1959 that this extraordinary process, under which the fares and rates remained at the same level despite reducing costs and the planes got emptier and emptier, was brought to an end. It is almost the inevitable consequence of the way the monopoly system operates, that if you give to any group the power to fix what rates they charge, if there is no control over the output they are providing, and if there is any increase in efficiency occurring, you can get this problem of overproduction, over-provision of air transport capacity.
This is very much against the public interest, and clearly the proliferation of bank branches when there has not been competition in rates seems to be against the public interest. I recognise the banks are now doing something about rationalisation, rather belatedly, but nevertheless the cost of banking in Ireland is, and I think can be shown to be, a good deal higher than it need be, and one of the reasons it is so is that it is cushioned by the absence of competition of this kind. If the banks had to compete in interest rates and if this cartel were broken, you would get a very different position and there would not be much wasteful provision of services beyond what the community required. Therefore, there is a very strong case for including banking within the provisions of this Bill. This has been strengthened by recent developments. The proposed terms for loans which involve higher interest rates for lending money, the way in which in the past two years deposit rates have not fallen in keeping with the decline in interest rates generally, and the way in which the margin between deposits and advance rates has risen — all of this suggests the necessity for an inquiry into the profitability and efficiency of the banking system. Yet this is to be excluded.
If it were the case that the Central Bank were going to hold a public inquiry and publish reports on what they found, you might make a case for leaving the matter with the Central Bank. However, I do not think this is proposed, and I do not believe this matter, which is so much a matter of public concern, can satisfactorily be dealt with behind closed doors by the Central Bank because, first of all, people would not be satisfied with the simple statement by the Central Bank : "We have looked into it and all is well," because the Central Bank have other preoccupations which must influence to some degree their judgement in the matter. They cannot look at the question of competition in banking with the single-minded concern for efficiency and the provision of credit as cheaply as possible, which will be the sole concern of the Fair Trade Commission. For these reasons, without any reflection whatever on the Central Bank, I think that the ommission of banking is a mistake.
I think the same is true for shipping services. There has been a long tradition of cartels in shipping. One of the most enlightening reports ever published in this country on the secret practices of trading concerns was the 1959 report on shipping freight practices. In this report which never got the publicity I thought myself it should have got — I did my best to help it along with a few articles at the time— it was demonstrated by virtue of the quotation of extracts from the minutes of the relevant traffic conference that not alone was there over a period of something like 30 years a successful attempt to prevent any kind of innovation such as the introduction of containerisation, which kept up the cost of sea transport between Ireland and Britain for three decades beyond the time when it was technically possible to reduce them, but moreover some of the concerns in question, sitting down together, discussed the desirability of putting out of business competitors by unfair trading practices, deliberately bankrupting them, so that competition could be eliminated and a cosy high level of rates could be maintained.
I am not alleging anything that is not public knowledge. I am merely quoting loosely from the report of this committee of inquiry. These practices were affecting adversely the interests of shipping companies operating here. Even by that extraordinary roundabout route through Scotland and Northern Ireland, these companies could provide cheaper transport, and the horrifying thought that cheap transport could be provided by such a roundabout route resulted in an agreement to put a stop to it by the most objectionable practices. I am glad to say that the Government of the day appointed an inquiry which examined the matter and reported very fully on it, and I do not think that situation could recur today. Nevertheless, in view of the fact that the whole shipping business has traditionally for centuries been riddled with these practices, again I find it puzzling that shipping companies should be excluded.
Wherever we look here we find State bodies cropping up: the ESB are to be excluded. CIE, Irish Shipping and B & I are to be excluded. Local authorities are to be excluded. What is the rationale of this? As I said at the outset, I myself favour a mixed economy, but I am puzzied by the Minister's apparent commitment to one leg only of that mixed economy in his reference to a private enterprise. I favour a mixed economy in which public enterprises are seen to operate in the public interest and are secured to operate in the public interest. I am not convinced you do that by exempting them from the normal requirement to show that their trading practices are fair.
There have been in the past allegations that the ESB have adopted unfair trading practices, that they have used their power as a monopoly producer of electricity to raise money more cheaply than private enterprise can do and have used the money thus raised to go into, say, the hire purchase business in a manner unfairly competitive with private traders. My sympathies, on the whole, would tend to be with the ESB in this, in so far as there is a bias, but I must say that when such a suggestion is made it should be investigated. It is in the public interest that we should know whether there has been any abuse, and the truth is that many of our State enterprises are engaged in multifarious activities; they may have a monopoly or close to it in a certain area which may enable them to make monopoly profits which they may then apply unfairly to the detriment of private enterprise in another area of competition and this could be against the public interest. It is not that private enterprise should be sacrosanct. Any distortion of competition, whether achieved through the activities of a State body or private enterprise, has adverse effects and should not be allowed to take place without being exposed to the full glare of publicity and without the public knowing and having shown to them that this distortion of competition is, on balance, in the public interest. Here we find all the State bodies protected from any glare of publicity, from any investigation, and allowed to continue any practices they may have which may be unfair. The only point in putting them in here is because they may have unfair practices which would not stand up to the light of day. If they have no such practices, if we are, in fact, to be told by the Minister that there is no question of Irish Shipping, of the ESB, the B & I and so on engaging in unfair trading practices, then what is the point in exempting them?
The only reason for exempting them is because they may be engaged, and the Minister may suspect they are, in unfair practices, objectionable practices, and he does not want them investigated. There is no other purpose in putting in these exemptions. If they are not or could not be engaged in such practices, then the Minister would not bother mentioning them at all. The only purpose in exempting them is in some way to prevent the light of day being thrown on activities which they may have engaged in or may engaged in in the future and, for that reason, I think it is wrong that they should be protected.
As someone interested in the public sector, as someone who has a strong commitment to the public enterprise sector, I want to see it operate in fair competition because, apart from any other consideration, so long as it can be alleged against the public enterprise sector that it is not operating in fair competition, that it has some unfair advantage, that it is sheltered and protected from competition in some way, so long as that is the case the private enterprise lobby will secure by pressure that there shall not be an expansion of public enterprise. One of our difficulties here is that the over-zealous concern of this Government to protect State bodies from any kind of inquiry or study of their activities, whether by this House, through a committee, or otherwise, has built up a picture in the public mind of bodies which cannot stand the glare of publicity, bodies which are not competitive, and this is often unfair and untrue. It certainly creates a position in which it is possible for those in the private sector to argue that they are unfairly treated, that there is a sheltering of the public sector versus the private sector, and that therefore it would be against the public interest to allow any expansion of the public sector which would be to the detriment of the private sector.
It is the policy of my party, as put forward in our public enterprise policy several years ago, that what we should do is try to put the public enterprise as far as possible on a commercial basis and, if they are required by public policy to take part in some social activity in the social interest, or, indeed for political reasons, then they should be paid a fee for doing so. The same should be true of any private concern the Government might wish to undertake some social service on its behalf; but that having been done, the rest of their activities should be on a commercial basis and they should be put on an equivalent basis to the private sector as regards the raising of capital and as regards the manner of carrying on their trading activities and as regards their competitiveness. When that is done the argument against the expansion of public enterprise, so often and so effectively used in this country, that public enterprise has unfair advantages, would no longer exist and the inhibitions which exist at present to the expansion of the public sector, which very often could be expanded to the benefit of the public interest, would disappear.
In putting forward that policy several years ago the Fine Gael Party gave a great deal of thought to this question and felt that this approach would be the one most conducive to the public interest and, in commenting on the Bill, I must comment that the Bill seems to go in the opposite direction. It seems to me that, whatever may have been the intentions of the drafters of the Bill in seeking to exclude public enterprise from its ambit, by so doing they are perpetuating the legend of the uncompetitiveness of the public sector and they are strengthening the power of private enterprise to use propoganda against the expansion of the public sector. The whole approach to this Bill is, I think, in that respect inimical to the public sector and, therefore, I believe inimical to the public interest generally which can best be served by freeing the public sector and the private sector to compete with each other and serve the nation fully by so doing.
I notice in section 12 provision for inquiry into mergers and takeovers. The wording is rather vague and I should like the Minister to expand on this when he comes to reply. To what extent is it intended, or to what extent does this section indeed permit of an inquiry by the commission into specific takeover proposals, specific merger proposals, which may be against the public interest? It sounds rather like a benevolent attempt to finance academic research into an interesting topic of business management studies rather than a practical proposal that this commission should be able to tackle problems of take-overs and mergers where they may be against the public interest. Is it the case that the wording is such that, in fact, only the most general studies will be carried out or is the wording such that it will permit the commission, given that there is a takeover proposal announced, immediately to intervene and investigate and report on it and put it up to the Government to take action? We need clarification of this. I do not think the Minister said much, if anything, about this. I may be doing him an injustice. He did, in fact, refer to it but not in a manner which enlightened me very much as to what the intentions were. We could, I think, hear more from him about this. His reference to section 12, as I recall it, was merely to the fact that section 12 would enable the commission to investigate the operation of international firms, but he did not say anything more about what kind of activities of national or international firms could be investigated under the section.
I note with interest section 9 which I have in my own mind, dubbed the "Luddite" section. It enables the commission, whenever so requested by the Minister, to cause an inquiry to be held into "the refusal or alleged refusal by employers or employees (or any combination of employers or of employees or of employers and employees) to use particular materials or particular methods for manufacturing or construction purposes". This seems to be directed against groups of people, workers or management, who may agree together not to be competitive, not to introduce new methods and, in some way, to restrict competition for that purpose. This seems useful but I note that the commission have to be asked by the Minister to inquire. Why is that? Why can the commission not be trusted to investigate these matters on its own initiative? There is no objection to giving the Minister the power to ask them. It is quite proper that he should have that power and quite proper that the commission, if asked by the Minister, should be obliged to investigate, but why should the commission not be able on its own initiative, or on the initiative of the examiner, to examine and investigate these kinds of practices, which may hold up progress and be detrimental to the public interest?
