I move: "That the Bill be now read a Second Time."
The purpose of this Bill is to provide for the control of mergers, take-overs and monopolies. One of the most remarkable features of the last ten years has been the growth in the number of large-scale take-overs of industrial and commercial businesses. In fact, as a result of the euphoria of that decade of world-wide economic expansion, a kind of merger mania seemed to gain ground in many countries. The arguments in favour of a judicious merger of undertakings are valid, and indeed weighty. Leaving aside the somewhat doubtful concept of synergy, mergers can achieve important economies of scale; resources which have accumulated in a sector in which there is limited scope for further development can be switched to another where better use can be made of them; inefficiency or unenterprising managements can be stiffened up; rationalisation of production and marketing can be achieved.
There can be no doubt that in respects such as these, the amalgamation of enterprise can be beneficial, and I would like to make it clear that I recognise and welcome the contribution which mergers and take-overs can make in these and other ways to the well-being of our economy. In this era of free trade, industries which are too fragmented will not be able to cope with growing competition from abroad. The circumstances of Irish industry are such that more groupings of firms— especially small and medium-sized firms—by way of mergers and take-overs are necessary and will be further encouraged. It is not my intention that the present proposals should inhibit in any way such necessary restructuring of Irish industry.
But it is notorious that not all concentrations of businesses are so admirably motivated. The motive can simply be the elimination of competition. It may be to milk quick profits from a conservatively-run business which has built up large reserves, or even to rundown a perfectly viable business by asset-stripping. In some cases a take-over bid seems to have little object other than the aggrandisement of an aggressive management. Take-overs so motivated can do great harm, and there is a duty on Government to restrain them in the interests of the common good. This Bill provides that take-overs or mergers adjudged to be in this category shall be invalid.
Since some take-overs or mergers can be as desirable as others are undesirable, the problem in the first place becomes one of deciding in which category a particular proposal should be placed. This decision is one which I feel must rest with the Minister for Industry and Commerce of the day. By keeping the decision in a single pair of hands, I think we can go a long way to answer one objection which must almost inevitably be raised against a Bill of this sort, namely, that the delays which the procedures may impose would have the effect of discouraging even the most desirable of mergers.
I would not ask for, and I am sure the Opposition would not wish to give me, arbitrary powers of prohibiting commercial decisions, and there are several provisions in the Bill which guard against an unreasonable denial of permission to merge. First, the criteria which are to determine the decision are set out in the Schedule to the Bill. Further, a proposed merger or take-over can be prohibited only if the Restrictive Practices Commission have inquired into the proposal, examined it in the light of the scheduled criteria and made their report to the Minister, thus ensuring that his decision is taken in a full knowledge of the facts. Finally, should he decide to make an order prohibiting the proposal, it can be annulled by a resolution of either House of the Oireachtas within the next 21 sitting days.
I think that by this machinery I have managed to steer a course between on the one hand a diffused scheme of responsibility with its resultant uncertainty and delay, and on the other hand the danger of arbitrary or inconsistent judgments.
I should say something at this stage about the criteria by which proposed take-overs and mergers are to be judged. The extent to which they would be likely to restrict competition must of course be considered, and their possible effects in endangering future essential supplies or services. Deputies will recognise these two criteria as features of the draft control Bill which lapsed with the dissolution of the last Dáil. Their likely effect on future employment must also be considered and as there is also a further criterion which requires the interests of the present employees of the firms concerned to be taken into account, it will be clear that future employment prospects on a wider scale are in mind here. The impact on regional development is also mentioned, for it could clearly be understandable that, for example, a merger should lead to the closing down of a factory in the west and transfer of production to some area already well provided for.
Two more headings will require a proposed take-over or merger to be examined to see how it fits in with rationalisation plans for an industry, or how far it conduces to increased efficiency, and merits which the proposal may possess in these respects must be put into the scales against demerits which it may have in others. The interests of the shareholders or partners in the firms concerned and, as I have already said, of the employees, are of course matters which must be very much borne in mind— they may, according to circumstances, tell either for or against the proposal —but there are already provisions in the Companies Act, 1963, which provide certain protection for shareholders.
I mentioned earlier that I am conscious that an objection to the Bill may be that even the most desirable merger may be discouraged by the prospect of delays attendant upon the procedures laid down in the Bill. Study of the detail of the Bill will show that I have provided certain short-cuts to approval, and, where these cannot be availed of and the full procedure must be followed, it is my intention to pursue them with urgency so that decisions can be taken in less than the time-limits, in themselves quite short, which are provided for.
Before leaving the subject of merger control, I must say something of EEC proposals in this connection. As Deputies will know, the EEC Commission have pursued a particularly vigorous line in defence of the freedom of competition. The first objective of EEC competition policy is to do away with cartels or the abuse of dominant positions which are in conflict with the establishment of the Common Market and are, therefore, described as "inconsistent with the Common Market". Article 85 of the Rome Treaty prohibits agreements, decisions and concerted practices which have the object or effect of preventing, restraining or distorting competition within the Common Market. Article 86 prohibits the abuse by one or more firms of a dominant position in the Common Market.
The EEC Commission hold the view that a merger of enterprises which has the effect of establishing a monopoly in a substantial part of the Common Market and thereby compromising the freedom of action of suppliers, purchasers and consumers would constitute abuse of a dominant position and should be prohibited. The validity of the Commission's view has been upheld by the European Court. The court observed that the prohibition of cartels laid down in Article 85 of the Rome Treaty would be meaningless if Article 86 allowed these practices to become lawful when they took place within a concentration of enterprises. A draft EEC regulation on mergers and take-overs is now under discussion. It proposes to give the EEC Commission power to declare certain concentrations to be incompatible with the Common Market. It would require that proposals for concentrations of a certain size would have to be notified in advance to the Commission.
This draft regulation, to which I have given my support in principle, is still subject to discussion and negotiation in Brussels, and it is not yet possible to say what its final form will be. It will, however, affect only the merger of very large enterprises indeed, so large in fact that few, if any, of the take-overs or mergers which have occurred in Ireland in recent years would have come within its scope. It is, therefore, necessary that we should on the national front supplement the measures to which we shall be party on the international front. I should make it clear that, at the higher levels of size at which the EEC Regulation is to operate, our national legislation will still be operative alongside it.
So far, I have been talking of take-overs and mergers but the Bill deals also, of course, with monopolies. A monopoly is not, necessarily and of itself, undesirable, and in an economy the size of ours it is inescapable that there should be many undertakings which are monopolies within the meaning of the Bill, that is to say, which provide more than half of the goods or services of a particular kind in this country. In the Restrictive Practices Act, 1972, we already have legislation which can curb undesirable practices by monopolistic concerns, but it is the experience everywhere that statutory controls may be rendered at least partially ineffective where a particular market is dominated by one, unitary concern or undertaking. It is, therefore, necessary to take power, not only to preserve competition by prohibiting mergers and take-overs, but to create or restore competition by breaking up monolithic undertakings. This Bill would thus amend the Restrictive Practices Act, 1972, by adding to the powers conferred by it the power to require the break-up of a monopoly. This power is conferred on the Minister but, like other powers under the 1972 Act, it is subject to confirmation by an Act of the Oireachtas.
The proposals now put forward are non-discriminatory as between Irish and foreign companies and I am satisfied, therefore, that they cannot be considered to be at variance with the right of establishment provisions of the Rome Treaty or with the EEC industrial policy to harmonise the legal systems of the member states so as to facilitate co-operation and mergers between companies across national frontiers, provided such measures do not infringe the rules of competition. However, I have provided in the Bill that before making an order relating to any merger, take-over or monopoly, I will have to specifically consider any relevant international obligations of the State. This will make it clear that any present or future commitments in relation to the EEC will be complied with.
I have already referred to the Bill dealing with certain aspects of mergers and take-overs which had been introduced by my predecessor, but which lapsed on the dissolution of the last Dáil. I am glad to have been able to incorporate certain features of my predecessor's Bill, as also of certain other proposals which he had in preparation, in the Bill which I now recommend to the Dáil. The Bill is now a consistent and effective measure, and while I look forward to receiving the suggestions of Deputies as to its improvement in detail I hope that the principles which inspire it will receive approval on all sides of this House.