When my colleague, Minister of State, Deputy Meaney, spoke to this motion last night, he was outlining the legislative framework which applied to the distribution of grocery goods. Time did not, however, allow him to deal with more recent events in this area and the manner in which the existing legislative regime can be availed of to deal with developments. It was acknowledged by the Opposition speakers that there was in existence a code of legislation but it was suggested that this was not working. I propose now to resume where my colleague was forced by pressure of time to stop last night and to demonstrate that the present regime has been successful and where because of various innovations and other developments the specific law is found to be wanting the overall framework provides the facility with which to tackle the problems arising.
In early 1978 an alliance of wholesalers and independent retailers was formed. In its early activities the alliance sought
(a) to compel manufacturers to take steps to end the sale of their products below cost by supermarket multiples, and
(b) to win a "functional" discount for wholesalers from manufacturers.
This alliance gave to its members a collective negotiating strength comparable with that of the multiples and in so doing brought about a significant change in the balance of bargaining power in the trade.
As a result of conflicting pressures arising from the activities of the alliance one Irish supplier found itself faced with considerable difficulties and there appeared to be a possibility that other suppliers could be similarly effected. At the request of the Minister, the Examiner of Restrictive Practices held discussions with representatives of the manufacturers and the alliance, which resulted in a suspension for three months of the action which had been taken. Subsequently, at the Minister's request, the commission held informal discussions with representatives of all the interests in the trade. In November 1978 the commission made to the Minister a non-statutory report in which they recommended that the grounds on which goods might be withheld from a retailer by a supplier should be altered from selling below wholesale price to selling below net invoice price plus VAT. They also recommended that this provision, which since 1973 had not applied to foodstuffs, and the prohibition on below cost advertising, which had not applied to non-foods, should be extended so that each covered both foodstuffs and non-foodstuffs subject only to the exception of the foodstuffs specifically exempted.
In their report to the Minister on the outcome of their informal discussions the commission also indicated that they had reached an understanding with the multiples that they would refrain from selling below cost for a number of months, while the alliance for their part agreed to continue their moratorium on further action for a similar period. The commission expressed the hope that the intervening months would be used to seek a solution to the basic problem of terms and conditions. The Minister accepted generally the recommendations and gave effect to them in the Restrictive Practices (Groceries) (Amendment) (No. 2) Order 1978.
It was evident that great unease continued to affect the relationships between suppliers, the multiples and the wholesalers and retailers. Certain discussions took place at that time with parties involved and it became clear that the continuing unease was largely centred on the question of below cost selling. The Minister for Industry, Commerce and Tourism accordingly requested the Restrictive Practices Commission to hold an inquiry into the retail sale of grocery goods below cost.
The commission's report of this inquiry has been submitted to the Minister and is the subject of most urgent attention. The Minister expects to be very shortly in a position to publish this report and to indicate the action to be taken on foot of the commission's recommendations. In view of the proximity of these matters it is not the intention to indicate now the type of action which is to be taken, but I would consider it desirable to recall that the aim of policy must be to foster competition wherever possible. This policy is clearly one which recognises — but not exclusively — the importance of the consumer interest and it has underlain all of our actions in this area down through the years. These actions have seen the dismantling of a large range of restrictions which have been of great benefit not alone to the consumer but also, to varying degrees, to the manufacturer and distributor.
It will be acknowledged from the foregoing that there is in existence the facility to deal with problems which exist in the supply and distribution of goods; a facility under which developments can be subjected to most exhaustive scrutiny, generally in public, and having regard to the special concerns of the various elements involved, as represented at inquiries, and to the interests of the common good, which allows of the making of recommendations to the Minister for Industry, Commerce and Tourism for remedial action where such is considered warranted. That this machinery is availed of adequately by the Minister requires little testament over and above the evidence provided in this sector by the frequency of interventions by the Minister both by way of bringing the relevant statutory bodies into action and by way of legislative action.
It will be acknowledged that this machinery is of little use if the legislation which flows from it is not strictly enforced. To this end the Restrictive Practices Act, 1972, created the position of Examiner of Restrictive Practices, who is charged with the responsibility, inter alia, of monitoring the operation of orders made under the Act. If in the exercise of this role the examiner carries out an investigation into the operation of a particular aspect of an order and expresses the opinion in his report of such investigation that there has been a breach of an order, he is required to furnish his report to the Minister, who is enabled by the Act to prosecute offences.
For the past number of years the provision in grocery orders which has been of greatest concern has been that which prohibits the advertising of grocery goods for retail sale at a price which is below net invoice. When the Bill to confirm the 1978 Order, which amended the provision relating to advertisements of grocery goods for sale below net invoice price, was being debated in this House, the Minister indicated that it was his intention to enforce the provision vigorously. In this regard the House will wish to note that to date the Minister has obtained convictions in seven cases and a further three cases, about which he has received reports from the examiner, are pending. In considering these figures one should bear in mind the fact that promotions involving the sale of items below cost are not generally maintained over a lengthy period and that, accordingly, the need to advertise in a manner which would be in breach of the 1978 Order does not always exist.
Apart from the prosecuting function, the Restrictive Practices Act, 1972, also provides for another sanction which can be availed of by the Minister or other interested persons. This is a provision under which an injunction can be obtained from the High Court to ensure compliance by a person with the provisions of an order. In so far as the groceries orders are concerned, this machinery has been availed of on one occasion when an injunction restraining a person from advertising of goods for sale below net invoice price was obtained. That case also had the additional benefit of confirming the interpretation of the phrase "net invoice price" which was being used for the purposes of enforcement.
Reference was made by Deputy O'Toole last night to the 1973 Groceries Order when he accused my colleague that "he avoided the crunch issue, which is article 8, section 2...". The Deputy later stated this provision requires wholesalers and retailers to furnish details of grocery goods imported within 14 days and that this was: "to ensure that they import reasonably and do not go beyond what is allowed." Continuing, the Deputy implied that an effect of paragraph 2 of article 8 was, "that there is no restriction on the volume or amount I import".
Great importance is being attached to this provision and I believe that this reflects a serious misunderstanding of the provision, the reasons for it and what can be achieved by it. For this reason, I propose to deal with this matter in some detail in the hope that the position can be clarified in everyone's mind for once and for all. As my colleague indicated last night, the 1973 Groceries Order was made following a full inquiry by the then Fair Trade Commission in 1971.
The commission in their report did not make any recommendations in relation to imports. However, before the 1973 order was made representations were made to the Minister that Irish suppliers would be adversely affected by the operation of the then proposed order because the various requirements proposed in relation to terms and conditions of supply would not apply to manufacturers outside the State sending goods into the country. In particular it was considered discriminatory against Irish suppliers that they should be required to lodge with the Examiner a statement of terms and conditions upon and subject to which they supplied goods while the same was not required in respect of imported goods. It was subsequently decided that it would be desirable to provide as in article 8 as it would eliminate this discriminatory aspect of the proposed order and the requirement to notify was, accordingly, included in the order.
It is to be stressed that the requirement is that a statement containing the terms and conditions upon and subject to which goods imported were purchased should be lodged within 14 days. Such a statement does not necessarily reveal the quantity of goods imported or, indeed, indicate clearly the specific item which is being or has been imported. Furthermore, the provision does not allow of the exercise of any control over a person's freedom to import nor does it allow of the imposition of any quantitative restriction. It was never the intention that it should allow of such. In this regard, I am sure Deputies are aware of our various international obligations which would not permit of the imposition of such restrictions.
Finally, in regard to this requirement, I should like to remind the Deputies that the actual provision in the 1973 order which gave rise to the inclusion of article 8 was removed from that order by the Restrictive Practices Order, 1978. The present legal position is, therefore, that Irish suppliers are required to lodge a statement of terms and conditions with the Examiner only when the Examiner requests them to do so but the person importing is still subject to the requirement of article 8.
I trust that this explanation of the background to and meaning of this provision will serve to clear up any misconceptions that exist.
Reference was also made last night to the level of concentration in the groceries sector being very high and it was suggested that this level was one which had not been attained in other European countries and, also, that the legislative regimes in other countries were such that increases in concentration would not be permitted. I am sure Deputies will agree that we could embark upon exercises which would adequately support that view or disprove it. I do not intend to embark on such an exercise but, nonetheless, the following pieces of information will I am sure be noted by Deputies.
The recent trend in the Federal Republic of Germany has been towards greater vertical and horizontal concentration in food distributions with the trade becoming increasingly oligopolistic as a result of mergers and take-overs. A recent report on competition in that country, which was suggested last night as an example for us, shows that the three groups recording the largest turnover in food retailing hold a market share of 41.7 per cent the six largest firms 63.8 per cent and the ten largest 71.7 per cent. Figures from the United Kingdom suggest that the seven largest retailers control over 50 per cent of the market, while the Danish trade is represented as being the most highly concentrated in the Community with only five groupings accounting for all sales of food. Our own situation, where the multiples share is believed to be somewhat higher than 40 per cent, does not appear to compare badly.
As regards tackling the alleged monopolistic situation in this country, I will be referring shortly to the Minister's powers under the Mergers, Take-overs and Monopolies (Control) Act, but in this regard it should be noted that a monopoly situation as defined in that Act does not exist here in that no one enterprise, or enterprises under common control, supplies 50 per cent of the services in this sector.
Finally, in relation to the legislative regime which operates at present in relation to competition, it is pertinent to refer to the Mergers, Take-overs and Monopolies (Control) Act, 1978. There are two aspects of this Act which are of relevance to the area under discussion. The first of these is the role of the Minister for Industry, Commerce and Tourism in relation to proposed take-overs. Any proposed merger or take-over to which the Act applies must be notified to the Minister and, in general, his consent to the proposal must be received by the enterprises involved before they may proceed with the proposal. When a proposal is notified the Minister, having examined the notification, may either decide to allow the proposal to proceed or may refer it for more detailed investigation by the Examiner of Restrictive Practices. If a proposal is referred to the examiner, he must report to the Minister whether in his opinion it would be likely to operate against the common good in relation to the criteria in the Act. The Minister, having considered the examiner's report, may then decide either to allow the proposal to proceed or to prohibit it absolutely, or allow it to proceed subject to certain conditions. The criteria to which I refer include such consideration as the extent to which the proposal would be likely to prevent or restrict competition or to restrain trade or the provision of any services: the extent to which the proposal would be likely to endanger the continuity of supplies, and the extent to which the proposal is in harmony with the policy of the Government relating to the rationalisation, in the interests of greater efficiency, of operations in the industry or business concerned.
This Act therefore enables the Minister to exercise control over proposed mergers or take-overs and, when he considers that the exigencies of the common good so warrant, to prohibit a proposal. The last proposal arising in this area which was notified to the Minister was allowed to proceed only after most thorough examination, including an investigation by the Examiner of Restrictive Practices. The House may be assured therefore that the controls which the Minister has available to him in this area will be speedily exercised and prohibitive action taken if circumstances so warrant.
The second aspect of this Act is that part relating to monopolies. The Act enables the Minister to request the Restrictive Practices Commission to carry out an inquiry to determine whether in the opinion of the commission a monopoly exists, and, if it does, whether it prevents or restricts competition, or endangers the continuity of supplies or is likely to do any of these things, and whether such interference or restraint of trade is or would be unfair or would operate against the common good. Having considered a report of such an inquiry by the commission, the Minister may, if he thinks the exigencies of the common good so warrant, prohibit the continuance of the monopoly except on conditions specified or require the division of the monopoly by a sale of assets or as otherwise specified. In this regard I can assure the House that the Minister will not hesitate to use the powers available to him, including the power to break up a monopoly, if such a situation is achieved.
In summary, therefore, the House will note that there is already in existence a code of legislation which is aimed at ensuring the existence of healthy competition with consequential benefits for those involved from the manufacturer to the consumer, the initiatives taken by the Minister for Industry, Commerce and Tourism in relation to the groceries sector and his intention to publish very shortly the report of the Restrictive Practices Commission on below-cost selling and to take appropriate action on the commission's recommendations.
As has been mentioned by a number of speakers, the Labour Party motion before us tonight is a two-barrelled affair. It is noticeable from some of the Opposition contributions that the spokesmen on the other side of the House find it difficult to come to grips with the inherent conflict between the two parts of their motion. Their contributions in relation to price control have been of a significantly low key nature. That is not at all surprising, given that this House on a number of occasions in the recent past has clearly supported the Government's price control policies in debates on similar motions from the Labour Party.
It has been emphasised repeatedly that price increases are the symptoms of inflation and not its causes. The causes of inflation are in part external — for example, increases in import prices — and in part internal — for example, increases in money incomes. The external causes lie beyond the control of any agency in this country. All that is possible is action to limit their effects on the Irish price levels. The strength with which the internal causes operate can be influenced by the Government, employer and industry organisations and trade unions.
Firms apply for price increases after they have incurred higher costs. The job of price control is to consider each application and decide what price increase is justified by the cost increases that the applicant has incurred, taking all relevant circumstances into account. As my colleague, the Minister of State, Deputy Meaney, said last night, if all applications for price increases were rejected while the external and domestic causes of inflation continued to operate, the consequence would be highly predictable. If firms were not allowed to recoup the increased costs of imported materials from higher prices, redundancies would occur and in many cases supplies of imported goods or materials to the Irish market could cease. If all applications based on increased wages and salaries were rejected, the result would again be redundancies and bankruptcies. If price control were applied in this manner, it would indeed soon become irrelevant, because no products would be available at the controlled prices and the social costs inflicted on the community would soon become intolerable. Price control cannot be operated without reference to the general objectives of both economic and social policy.
Since price increases are granted under the price control system all price control authorities tend to be identified with price increases. Attention is invariably focused on the price increases which are recommended because they are regarded as newsworthy. We are invariably treated to lengthy statements of despair from Opposition spokesmen — statements which as a rule, totally side-step the relevant economic facts. Attention is rarely directed towards that part of the price increases which is prevented from occurring due to the proper operation of the price control procedures. Since the establishment of the National Prices Commission by Fianna Fáil in October 1971 until the end of December 1980, the commission have dealt with 5,237 applications for price increases. Of these, 112 applications were refused totally. There were two main reasons for these refusals — the cost increases that were claimed were not adequately supported by documentary evidence or were not significant when compared to the applicants' total costs or current profits. Of the 5,237 applications considered, 2,545, nearly 50 per cent were allowed in part only by the Commission. There were a number of reasons why these firms were not granted the full increases sought: the increases sought in materials and other costs were not supported by satisfactory documentary evidence or were not unavoidable, in which cases it would have been unreasonable to have expected the consumer to bear the expense; the firms sought price increases to cover increases in pay costs over and above the Government guidelines; or the applicants could reasonably have been expected to offset a part of the cost increases by improvements in efficiency.
In conclusion, I would like to reiterate the Government approach to the problems of rising costs and rising prices — strict control on price increases coupled with major social welfare improvements. It is undeniable that the increases which the Government have provided in health and welfare benefits since taking office in 1977 have been substantial, increases in some cases of up to 130 per cent. This is the mechanism which the Government have used for the transfer of purchasing power via the Exchequer to those who are most in need. This policy, together with the strict control of prices which my colleague and I have outlined is, I am sure, the policy which the House supports and I am confident that the House will accept the Government's amended motion.
