Vol. 328 No. 3
I move: "That the Bill be now read a Second Time."
I have sponsored this Bill on behalf of the Fine Gael Party to draw attention to the current state of play in regard to the retail grocery trade and to express my party's commitment to the retail grocery industry.
Last week we discussed the Bill confirming the order in relation to the Restrictive Practices Commission report on below cost selling. Later on I will refer to below cost selling.
The Chair does not intend to curtail the Deputy, although I should, because last week we had a full debate on the Bill on below cost selling. However, the Chair will give the Deputy every latitude.
I was careful to point out last week during that debate that I would not go into below cost selling in depth as I would have an opportunity of doing so this week in the House and the Chair concurred.
The Chair recalls that. That does not mean that the Chair should allow a full debate.
We are all aware of considerable changes that have taken place in the retail grocery trade in the past 20 years. The pattern of retailing has changed enormously and, while some changes have been good, some have damaged the industry and individuals involved in it. Much of what has happened has been due to the evolutionary process of modern attitudes in relation to the retail industry. My party are watching closely the development of the retail industry and we know that in the past number of years certain damaging things have happened. I expressed concern last July that, if these trends were allowed to continue, we would reach a stage where the concentration of power would be in the hands of a few to the detriment of many, including the consumer. More recent activity in the industry has convinced me that this development has quickened and that we are now much nearer a situation where that concentration will come into the hands of a few unless some restraint is placed in their way.
The so-called price war now raging and the intemperate trends which emanate from certain quarters gives cause for concern. One cannot but express disappointment at the order which was discussed last week in that it did not take account of the ominous signs of the quickening imbalance in the retail grocery trade. We have now reached the stage where between 45 per cent and 50 per cent of turnover in the grocery trade is in the hands of five companies. Worse still, in the greater Dublin area between 70 per cent and 75 per cent of the turnover in the trade is in the hands of these five companies. At the same time we have diminishing numbers in the independent sector due to the methods adopted by these people to up their market share. This trend is unhealthy and it must be stopped because of the serious long-term implications for the many thousands of shopkeepers, the consumers, the manufacturers and the economy as a whole. The Parker report entitled "The Effect of Supermarket Development on Independent Retailers" gives graphic expression to the position in which independent retailers have found themselves and will continue to find themselves and it shows the necessity for the introduction of some kind of legislation that will curb to some degree the uncontrolled expansion of multiple retail outlets. The Restrictive Practices Commission Report on the Enquiry into the Retail Sale of Grocery Goods below Cost at paragraph 2.21 says:
Most of the multiples indicated that they planned continued expansion. Where one multiple opens a new store in an area already served by another, the trade which the former gains may be largely at the expense of the latter, but overall it is to be expected that the opening of new multiple branches will bring about a further transfer of trade from the independent to the multiple sector.
That is a statement of fact by a commission who took evidence from informed sources and who are convinced that this is the position. We are talking about a market which is worth something like £900 million per annum. We are talking about an industrial sector which caters for between 35,000 and 40,000 employees at a time when employment levels are as we know them to be and we are obliged to take steps to ensure in so far as we can that no further jobs will be lost for whatever reason.
This Bill deals with some aspects of the grocery trade. Section 2 deals with the controlled expansion of multiples. The kind of power proposed in this section exists already in section 2(1)(a) of the 1978 Act dealing with mergers, takeovers and monopolies. That Act has very positive powers which, if they had been used, would have had a favourable effect on certain developments over the past few years. The word "enterprise" is used in this Bill. Again, that is taken from the Act of 1978 which defines "monopoly" as an "enterprise". The control to be exercised by the Minister in section 3 of this Bill is also to be found in section 11, 12 and 13 of the 1978 Act.
Section 4 deals with licences. This is a new concept in the retail trade here but it is not unique. Indeed, our uniqueness lies in the fact that we have not this kind of control, as have other countries. In looking at legislation enacted by other countries one cannot but be struck by the action taken by them and the time that action was taken. For example, in West Germany there are restrictions on developments in excess of 1,500 square meters of retail floor space. Those restrictions have existed for some years. There are further restrictions in relation to location and so on that have been implemented by local chambers of commerce. In Holland, where the multiples have not the share of the market they enjoy here there are similar location and spatial restrictions. In Italy where only 10 per cent of the total market is in the hands of multiples, the licensing system has been applied for a number of years and the same situation exists in France. In Britain the same kind of movement is taking place. The policy adopted in the UK stresses the necessity for local planning authorities to take into account matters such as the convenience of existing shopping centres, the effect that out-of-town developments would have on existing shopping centres and the effects on community life generally.
All of these restrictions have been in operation in most western European countries for a number of years for the simple reason that they saw that the degree to which multiples or multinationals controlled or were seen to control the retail market was unhealthy for the trade generally and was not favourable to shopkeepers or consumers. There is reference to this throughout the report of the Restrictive Practices Commission on below cost selling. In one section in particular there is reference to the fact that we have not yet reached the stage where, in opinion of the commission, there should be interference. One must ask the question, at what stage do the Commission consider that interference is warranted? The multiples have a 45 per cent market share. Does that have to rise to 50 per cent or 60 per cent before interference is warranted? In other countries they moved to control the situation when 25 per cent or 30 per cent of the market was in the hands of a few multiples.
The restrictions in this Bill are designed to control the uncontrolled expansion of multiples. The Bill should not be interpreted as a multiple-bashing piece of legislation. Far from it. It is envisaged that if this Bill is implemented the industry as a whole will benefit in that there will be proper, controlled expansion providing the kind of competition that is needed to facilitate the consumers.
Last week we had the spectacle in this city of a major multiple announcing the closure of seven retail outlets. They used that most abused term "rationalisation"— a word that is used in this House ad finitum. What it means bluntly is that this company having purchased retail outlets from another multiple some time ago in a takeover that should not have been allowed in the first instance found that their business was not of the volume they expected and they were not prepared to continue trading. Of course while they traded other outlets with less muscle went to the wall. These people have no social responsibility to consumers in any area, so they just up and go, having caused the damage. I understand this is called “mining” in the industry. It is something synonymous with an open-cast miner going into an area and decimating the face of a locality. Having done his job, having extracted whatever money or anything of value there was in the area, he just leaves the place decimated, its face ruptured and fractured.
That is what is happening now. Indeed, one will find that the whole concept of future rationalisation will be along those lines, getting bigger and bigger units, covering larger catchment areas in a widening circle, having no concern at all for the mobility of people who have to travel distances to shop in these centres. There are sectors of the community who are not as mobile as others. For example, there are people who do not own cars; there are old people; people who are at a disadvantage in other ways. These people do not have the kind of access to these out of town centres that I or you have, a Leas-Cheann Comhairle. If we allow this uncontrolled development to continue more and more of the independent type outlet will close its doors. Since 1961 we have seen the number of retail outlets in this country in the independent sector cut by half, from approximately 17,500 to 8,500. It must be regarded as a serious situation in which that kind of thing is allowed to happen.
The restrictions incorporated in this Bill are meant to curtail that expansion, not to stop it, to curtail it and ensure there will be orderly development and expansion of the retail trade both for multiples and for the independent sector. One must assume that one of the reasons the retail sector has not been able to compete with the multiples in the past is that they see no future in the business. Investment by them in their private business is not worth while, in particular in country towns and rural areas because of the ever-present threat that a multiple will apply to the local authority — be it an urban council or county council, whether in Mayo, Kerry, Galway, Donegal or Monaghan — and proceed to build a monster of 10,000, 15,000 or 20,000 square feet beside them. In no way can they compete with that kind of pressure. Therefore the restrictions on the uncontrolled expansion of multiples would, I hope, be an incentive to the independent sector to invest in their own business because they would now see a future for themselves and be guaranteed that niche of the market.
In no way should this Bill be seen as bolstering up inefficient independent grocers. It is meant for the progressive, positive approach that is needed if these people are to compete with the multiples in the interest of the consumer and for the common good. Section 4(9) gives the Minister power to withhold a licence in the event of information given to him not being adequate in his opinion. That is a fair requirement. Indeed, it is incorporated already in the Casual Trading Act. It would appear the Minister is of the opinion that the current state of the industry does not warrant any intervention or interference by means of any form of legislation to curb the expansion of the multiples. He contends this on the basis that the multiples do sell many staple foods at a lower cost to the consumer. Therefore, he sees himself as pro-consumer at a time when, as I have said before, we have nearly half our total trade in the hands of five multiples, some of them multinationals.
I read with interest today the contribution of the Minister of State in relation to the retail petrol outlets. Perhaps I might be permitted to quote from what he said in relation to the uncontrolled expansion of company retail outlets:
The second important recommendation in the report which is provided for in the order relates to the ban on additional company stations which has been in force for about nine years. The restriction is in the public interest because otherwise the overall share of the retail market held by the petrol companies would be much greater with the undesirable results of increased rigidity in the market and the danger of restrictive or discriminatory practices.
That is today's story in relation to retail outlets in petrol. We have the very opposite approach being applied here in relation to the grocery trade. For the life of me I cannot see the logic of this approach today as against that applied in relation to the grocery trade.
I mentioned the recent price war. I should like to say a few words in relation to section 7, which concerns itself with below cost selling. I expressed the opinion in this House last week that the attitude adopted by the commission in reporting on this phenomenon is probably fairer than might be accepted today, because at the time that report was compiled there was no hard experience of a price war or below-cost selling. It was spasmodic, peripheral to the issue, it was not causing any great trouble. But the Minister comes along and confirms an order which accepts the recommendations in that report despite the fact that he has had the experience of having lived through the current price war. In the Irish Independent of Thursday, 29 January last there was a heading: Tesco Admits War (to wipe out our opposition). This is very intemperate language from a multinational and we know that that company has the resources to wipe out the opposition. Once the opposition is wiped out we are aware of the consequences because in the past we have had the experience — it is in the Parker Report — of what happened in Arklow and New-bridge when a multiple store moved in.
Many retail grocery businesses have had to fold up. Why was that? Because they were squeezed out by the competition. One might have said then that that was to the benefit of the consumer, but we know now that that is not the case. Once one creates a monopoly and once the opposition are lying down dead, it is very easy to call the tune, and the tune is being called in different areas of this city and country at present by multiples, who know that nobody can compete with them.
The Minister made great play of the fact that both the Consumers' Association of Ireland and the Irish Housewives' Association were in favour of below cost selling; according to their evidence at the Commission's hearing. This is a factual statement, they were. However, neither the CAI nor the Irish Housewives Association had experience then of the kind of price war which is now being waged. To be fair to them, both organisations, in the light of their experience of the current price war, have come out publicly and stated that they are opposed to it because it is not in the interests of the consumer.
As one would expect, the multiples who gave evidence were naturally in favour of below cost selling because it suited their sales policy and methodology for squeezing the opposition. Amazingly, again in the light of the experience of the current price war, one multiple has come out publicly and appealed to the Minister to intervene and stop the price war and a second multiple — as is no secret around the city — while not coming out publicly, have used channels to the Minister asking him to intervene and stop this below cost selling because it is damaging to them and they will not be able to persist in it. The opposition is too hot for them. We are now talking about a different situation altogether. In this Bill, my party have suggested that below cost selling be prohibited. The effect this will have in the market place will be beneficial, not only in the mid-term and long-term, but also in the short-term, to consumers in this country.
The fact that we are now hurtling towards a situation where monopolies are being set up here is something which warrants immediate attention. I have mentioned already the retail trade and below cost selling in relation to the consumer. I now come to the manufacturer. It is an open secret that multi-nationals here, while they pay lip service to the "buy Irish" campaign in many cases are importing vast amounts of foreign manufactured foods. Recently a figure was mentioned of 10,000 tonnes of chips. The idea of importing that quantity of chips into Ireland, if it were not so serious for the economy, would be a huge joke. Multinationals use manufacturers, squeeze from them terms which are not available to the small, independent grocer. It is well known that multiples in this city cover shop-lifting by adding 4¼ per cent to the price, when the normal is 1¼ per cent. It is also well known, that multiples with many outlets squeeze three monthly terms from manufacturers who are eager to sell large quantities of goods to them, even at the moment. In the meantime, who keeps the manufacturer going? The legitimate wholesaler and the small retailer do. They pay cash on the nail, while the multiple is using its cash flow, through its investment bank or its self-owned finance company, to make extra millions per year. The end result is that the cost to the manufacturer increases, with the result that he makes an application to the National Prices Commission to increase his price.
These are hidden costs. I wonder if manufacturers applying for an increase in price to the National Prices Commission, in telling the commission the reasons for the application — the normal running cost, overheads, heat, lighting, wages, salaries, petrol and oil costs — also mention the terms they give to multinationals. In the long run, that kind of increase is detrimental to the consumer for whom the multinational is shedding crocodile tears. These are the questions which should be asked. This Bill is designed to provide the kind of competition in the industry that the independent sector will rise to, that the consumer and also the manufacturer can benefit from, that will retain employment and a high level of usage of Irish goods.
Finally, we are a small economy. We are dependent on Irish people in most cases, to do their utmost to ensure the health of this economy. I have no gripe against international companies, multi-nationals or multiples. In relation to any category of business, the moment one allows a monopoly to be created, one is heading for trouble. This is happening in this area of industry, the retail trade. The proof has been staring us in the face for a number of years, yet nobody has taken adequate action. The chance arose last week in relation to the report of the Restrictive Practices Commission. The Government failed to take action on that. There is, on our statute books at present, adequate provision to do what this Bill is proposing to do — in the Restrictive Practices Acts and in the Mergers, Take-overs and Monopolies Act of 1978.
The only new proposals in this Bill are in relation to the curtailment in relation —to licensing and the provision in relation to below cost selling. Fine Gael and I feel that the intervention by legislation at this time is warranted to save this industry from falling into the hands of people who have no obligation to consumers or to anybody else. They are there to make large sums of money once they have created a monopoly. They can call the tune, and the day when we can walk round to the corner of our street at 7.30 or 9.30 p.m. to get a loaf or a packet of cigarettes from a small grocer is fast disappearing. That type of trader is on his way out unless we take immediate steps to safeguard him.
This Bill has been introduced in response to what its promoters would describe as a crisis situation in the retail distribution of grocery goods, or more particularly in the retailing of grocery goods by the non-multiple sector. The Bill proposes far-reaching measures of a type which demand that the need therefor should be justified beyond a shadow of doubt and that, assuming there is evidence that a need for corrective action exists, the remedy is in the interests of the common good.
The Bill's promoters would justify their proposal with reference to the number of closures of retail grocery outlets over the past number of years, to the expansion of the multiple sector and the implications of such expansion for the independent outlets, to the involvement of externally based enterprises in the multiple sector and the implications that this has for Irish industry.
It is not denied that there have been significant reductions in the number of retail outlets. Unofficial statistics for the years 1966 to 1977 show a decline in that period in what could be described as ‘all grocery outlets' from 17,500 to 11,600 approximately. The fall off in one category included in these figures — grocery with public house — could be substantially explained by conversions of these establishments solely into public houses, either in situ or through the sale of the liquor licence for a new outlet.
There is no reason to assume that the decline in numbers has since been halted, but it should be noted that this trend is by no means confined to this country. With one exception, in all EEC countries there has been a steady expansion of market share by multiple chains accompanied by a fall in the number of outlets. While statistics are not always comparable, the decline in some other countries in somewhat comparable periods is recorded at percentages as high as 38.
While I accept, therefore, that there has been a reduction in the number of outlets, I do not accept that the reasons for such decline arise solely, or mainly, from the practices of multiple outlets.
The changes in the grocery trade over the last two or three decades, sweeping enough indeed to justify being described as a revolution, are the result of a variety of influences, technological, social and organisational. The most basic change, on which the others to some extent depended, was the rapid growth of prepackaging to the point where nearly all the items in a grocery store are prepackaged. This facilitated the development of self-service. By transferring the tasks of cutting, measuring, weighing and wrapping to the factory, and of selecting and collecting goods to the customer, these twin developments took away from the shop assistant a considerable part of his or her former duties.
Other developments, such as the introduction of weighing machines which indicated the price of odd amounts not prepackaged, further reduced the assistant's work. Such changes brought a substantial reduction in the amount of work to be done in grocery shops which resulted in time in a decline in the workforce.
That this decline in the numbers engaged was reflected in time in a reduction in the number of shops was ensured by certain other developments. The spread of car ownership meant that many shoppers who had been accustomed to shop on foot locally now found it more convenient to commence one-stop shopping, and transferred their custom from a small local shop to a larger shopping centre where they could satisfy more of their needs in one visit. This led to, and in turn was stimulated by, the development of grocery supermarkets, whether multiple or individually owned, any one of which could handle the trade which had formerly sustained a number of smaller, traditional shops. Much modern shop equipment and lay-out which facilitated goods handling and customer movement could be accommodated only in larger establishments and gave these a further advantage in efficiency. With rising standards of income, a number of small neighbourhood groceries which had afforded a subsistence to their owners came to be no longer regarded as providing an acceptable living and gradually went out of business, often on their owners' retirement.
Shifts in population naturally also had an effect on the distribution pattern. The overall increase in population did not lead to an increase in shop numbers because it was greatly outweighed by the factors just mentioned, but it must be assumed that without it the decline in shop numbers would have been even steeper.
The fall in the numbers of shops in some rural areas where the effect of supermarket competition is very limited is no doubt attributable in part to the decline of the rural population. The areas where population has grown fastest, newly urbanised areas on the perimeters of cities and large towns, are precisely those which have been most attractive to the supermarket multiples, and for planning or other reasons the extent to which these new areas have been serviced by newly opened independent grocery shops is notably limited. Smaller shops, run by the proprietor with little or no help, are today largely confined to rural areas and to the central areas of cities and towns.
While these developments had the effect of bringing about a substantial reduction in the number of shops, it is generally agreed that they have been to the considerable benefit of consumers, bringing in their train the advantages of wider choice, one-stop shopping and, on the whole, lower prices. It will be seen therefore that the decline in retail outlets was due more to normal forces of change, which entailed the development of the multiple chains, rather than to any specific abusive practices by multiples.
The effects of these normal forces of change were not confined to the area of grocery distribution alone. Many areas have been affected and, indeed, many have disappeared, not because of any practices engaged in by competitors but because demand for services provided had changed or disappeared. At an early stage in this revolutionary process it was recognised that there was a need for a policy framework within which the various economic sectors would develop in accordance with the interests of the common good. One reflection of this policy was the enactment in 1953 of the Restrictive Trade Practices Act which facilitated the tackling of various undesirable practices which existed.
Under the Restrictive Trade Practices Act, 1953, the Fair Trade Commission were established and given the powers to carry out inquiries into the supply and distribution of goods and to make recommendations to the Minister for Industry and Commerce for action to deal with any abuses identified. Shortly after their establishment, the commission noted that there was creeping paralysis of price competition in large areas of distributive trading and a tendency towards the freezing of distributive arrangements without allowance for economic change.
Among the practices which were recognised as being widespread were limitation or regulation of entry to trade, resale price maintenance by manufacturers, price fixing and margins fixing by trade associations, punitive action against traders who have not observed such fixed prices or margins and various other devices which were alleged to restrain or suppress competition unfairly or to the disadvantage of the public.
One of the first areas which received attention by the commission was the grocery sector and in view of the clear importance of this sector this was not surprising. This was the first reflection of a concern that competition in this sector should be fostered but that such competition should be fair and healthy, a concern which has been evident up to the present.
The first inquiry was held in 1955, at a time when the extent of price competition was quite limited, a number of products were still subject to price control while others had their resale price fixed by the suppliers, and the modern type of supermarket had not yet emerged. The main issue at the inquiry was whether resale price maintenance was contrary to the public interest. In their report, the Fair Trade Commission concluded, inter alia, that price competition at retail level would be beneficial to the public and they recommended that individual or collective action designed to secure the maintenance of resale prices should, therefore, be prohibited. On the other hand, they deemed it necessary to have certain safeguards against excessive price cutting; it was recommended, for example, that a supplier should be permitted to withhold goods from a retailer who was selling the goods to the public at a price lower than the wholesale price charged to retailers for the goods. The commission also examined and made recommendations in relation to terms and conditions. In essence, they sought to maintain as much flexibility as possible —and their recommendations were designed to ensure that terms and conditions of supply would be reasonable and would be applied equitably to all persons seeking supplies. The Minister for Industry and Commerce gave effect to the commission's recommendations in the Restrictive Trade Practices (Groceries) Order, 1956, which he subsequently amended in 1958.
This order established, in effect, a framework within which the grocery sector could develop to meet the changing demands of an increasingly sophisticated consumer as efficiently as possible, while, at the same time it prohibited any practices which might have unjustly or unreasonably enhanced or adversely affected the position of parties involved. In order to ensure that the objects of this legislation were achieved, it was subjected to review on a number of occasions and the primary legislation was replaced by the Restrictive Practices Act, 1972, which, among its new provisions, created the post of Examiner of Restrictive Practices, whose duties include the investigation of any aspect of the supply and distribution of goods and the monitoring of the operation of orders made under the Act. At the initiative of both the examiner and the commission the specific legislation applying to the grocery sector was reviewed on a number of occasions and the legislation amended to cater for changed conditions.
Probably the greatest area of concern in these reviews related to the operation of the provisions concerned with the terms and conditions upon and subject to which goods were supplied and the ability of persons to obtain improvements in those conditions. This reflected a recognition of the changing structure of the trade entailing expansion of the multiple sector and changes in the traditional role of the wholesaler. The object of the legislation which was enacted following those reviews was to ensure that suppliers made goods available in accordance with standard terms and conditions which they were required to maintain and that where supplementary terms were made available, their application should be in accordance with specific guidelines established.
The most recent full-scale review in this area was ten years ago, in 1971 and, while some of the legislation enacted on foot of that review has subsequently been amended in an effort to bring it into line with more modern conditions, it must be acknowledged that the basic changes that have occurred in the structure of the sector since 1971 must lead us to ask the question, "Are the conclusions reached in the context of grocery distribution in 1971 valid in the conditions prevailing to-day?" For example, there is at present a widescale campaign by certain parties representing wholesalers and retailers for the introduction of a mandatory allowance by suppliers to wholesalers to reflect the economies achieved by suppliers because of the wholesale function. This question had been considered by the commission in inquiries in 1956 and 1971. In their report of the 1971 inquiry the commission reported that while functional differences in terms existed in a substantial number of cases on paper, it emerged in the course of the inquiry that supermarket multiples were usually in receipt of best terms from the great majority of suppliers, so that in practice functional discounts did not provide a net benefit to the wholesaler compared with the multiple. It was suggested in the course of the inquiry that the wholesalers should receive an additional discount over and above those available to retailers in recognition of the services they perform for retailers. The suggestion was opposed by manufacturers, the multiples and one wholesaler. In the circumstances of the trade then pertaining, the commission outlined their conclusions generally, as follows:
they had serious reservations whether functional discounts were any longer appropriate to the structure of the trade;
a wholesale differential could help to maintain inefficient wholesalers in operation;
allowing slightly lower discounts to multiples and slightly higher discounts to wholesalers would be likely to create a highly unstable situation because different suppliers would apply the differential differently;
conceding the differential could lead to multiples establishing wholesale warehouses to qualify as wholesalers;
manufacturers could not bear the cost of granting a wholesale discount without increasing prices, possibly ultimately leading to imports;
changing distribution channels might be decided on by manufacturers, including, in particular, own delivery if the differential were to be conceded.
The commission concluded that they did not consider that a supplier who does not provide a differential for wholesalers in his terms of supply is discriminating unfairly against them, or offering terms that in their effect are contrary to the public interest. On the other hand a supplier, who believed that a differential for wholesalers would contribute to the efficient and economical distribution of his goods, should be at liberty to provide for it in his terms of supply. In effect, the commission consider that the giving or withholding of a wholesale differential is a matter for the individual supplier in his judgment of his requirements. The mandatory allowance was not, therefore, provided for in law.
It is considered now, however, that there have been developments in the meantime which could make it necessary to re-examine whether conclusions reached in 1971 remain valid in today's circumstances. Chief among those developments are:
(1) the change in the structure of the grocery trade, notably the growth of the market share held by the multiples, the change in the traditional wholesale function in that part of the wholesale trade now represented by cash and carry establishments and the disappearance in large part of direct delivery by suppliers to non-multiple retailers,
(2) the growth in buying power, a consequence of which is that, whereas at an earlier time a supplier might have decided to allow or not to allow a wholesale differential in particular cases primarily in the light of the respective costs involved, he is more likely today to be influenced by pressures from one or other group of his customers, and,
(3) the increased facility today with which Irish goods can be replaced with imports.
It will be seen, therefore, that circumstances have so changed in the trade since the last full inquiry that there appears to be, at least, a case for re-examining the considerations relating not alone to the question of the wholesale differential but to the general question of terms and conditions upon, and subject to which, goods are supplied. It is also pertinent to refer at this stage to the impact of structural change on suppliers in their application of terms and conditions. Much has been said and written about the level of concentration in the ownership of multiples and the effect this has on suppliers. In this regard it is noted that buying on behalf of the independent outlets has, for the greater part, been concentrated in the hands of one body representing independents. It will be acknowledged, accordingly, that there appears to have been a concentration in buying points to a figure of six. While not all increases in buyer concentration and buying power are undesirable, it would seem appropriate that the extent of buyer concentration should be ascertained, with a view to considering the need to prevent the accretion of unacceptable levels of buying and selling power.
It would also seem appropriate that the merits of introducing a system of preventing the abuse of buying power which might be practised by dominant firms should be considered. It is also desirable that forms of price discrimination which systematically favour powerful buyers or threaten to eliminate small firms from the market — whether suppliers or retailers — should be investigated, especially when the price differences are not based on differences in cost.
It is because of concerns in these areas in particular that it has been decided to request the Restrictive Practices Commission to hold a full-scale inquiry into the supply and distribution of grocery goods. The promoters of the Bill we are now discussing will probably ask why, if we acknowledge the existence of problems in this area, we are not pressing ahead at this stage with legislative proposals to remedy them. The answer to such a question is, yes, we acknowledge the existence of problems but it would be foolhardy to rush in with purported solutions without first examining in the greatest detail, and in the light of today's changed conditions, the extent of the problems and their causes and, in the light of the conclusions of such examinations, determine the course of action which is in the interest of the common good.
I am absolutely satisfied that such investigations should be carried out within the framework of the appropriate law, the Restrictive Practices Act. We have seen over the years the benefits of availing of the facility afforded by this Act, and its predecessors, to deal with unfair and unjust practices, and the freedom of trade enjoyed, and consequent benefits which accrued to all from the supplier to the consumer, are a fitting return for those who strove against many entrenched interests to achieve a healthy, competitive, internal market. The appropriate body under the Act to carry out such an inquiry is the Restrictive Practices Commission and I have the utmost confidence in their ability to isolate the practices which operate against the common good and to recommend courses of action which while dealing with the problems identified will best serve the common good.
Before I proceed to consider the Bill, I should like to refer briefly to a number of matters which have been suggested as justifications for introducing the Bill. Great emphasis is being laid by many persons on the influence of foreign-owned chains in the Irish market and the implications of this involvement for Irish industry. It is also being suggested that the alleged high level of imports of foodstuffs is in some way attributable to the presence of these foreign-owned companies in the Irish market.
As regards the level of imports, a pretty dismal picture is being painted by different persons of the volume of imported foodstuffs. In considering these statistics, it should be borne very much in mind that the volume of imports of products which compete directly with home produced goods is nowhere near the figure being tossed about. If one is to express concern about the level of imports, it is surely misleading to include in statistics in support of figures for imports of products such as bananas, oranges, grapes — including sultanas, raisins and so on — and other fruits and vegetables which are not and could not be grown in this country. Notwithstanding the fact that the statistics can present a picture which is misleading, it is of course acknowledged that there is a problem in relation to food imports. But the way to tackle this problem is not to proceed in the manner proposed in the Bill, that is, to impede the development of the types of outlets which are accused, in large part, of responsibility for the level of imports. In this regard, it should be noted that there is strong support in the multiple sector for Irish products and, indeed, one of the foreign-owned multiples which has been subjected to much criticism is recognised as being one of the strongest supporters of Irish goods.
As I have said, there is a problem in this area and, in order to deal with this, among others, a Working Party on Import Substitution was established in August 1980 under the chairmanship of the Minister of State at the Department of Industry, Commerce and Tourism — in fact, I am the present chairman of the working party. At that time it was acknowledged that the volume of competing imports of food products represented, by any standard, a considerable volume of goods and, prima facie, should provide considerable opportunities for the expansion of manufacture and employment in Ireland. It was considered that, for example, there were promising manufacturing opportunities in fast-food products, fruit juices and processed fish products, if backed by effective marketing. So that any opportunities could be exploited, the Irish Goods Council, in liaison with the Industrial Development Authority, have been examining the situation with a view to identifying those areas offering possibilities for substitution. Industry is also being encouraged to pay greater attention to new product development particularly more specialised products away from the “main stream” products as these offer some of the best future growth prospects for certain sectors of the Irish food processing industry. Additionally, renewed approaches are being made by the IDA to food firms to take up the attractive 50 per cent grants available towards salary, materials and consultancy costs of developing food products.
As regards the role of the food distribution sector, agreement was reached in September last at a meeting of representatives of wholesale, retail and manufacturing interests, under the chairmanship of the chief executive of the Irish Goods Council, that for an initial six month period, the wholesale and retail trade would:
—initiate no new importation of primary food lines
—enter into discussion with Irish manufacturers with a view to substitution of lines currently imported
—where imported products are sold by an Irish manufacturer, procure those products from that manufacturer rather than through external sources
—undertake special steps to ensure that the Irish-made products are highlighted on their shop shelves.
Based on the outcome of a recent survey, the following are some results of this initiative:
—with the exception of a growth in importation of chickens and eggs from Northern Ireland, there is no evidence of other primary food lines having been imported since the agreement was negotiated
—one major multiple, and two groups, have initiated discussions with a number of manufacturers with a view to substitution of Irish for imported products and with regard to new product development
—the practice of "parallel imports" has been discontinued,
—in the main an effort has been made by the multiples to highlight Irish products.
Finally, there were fears expressed in some quarters that the so called "price war" would lead to an increased volume of imported food products by the various multiples but there is no real indication that this has occurred. In fact, it has been noted that the relationship between home manufacturers and the multiples has improved.
It will be seen, therefore, that there is ample scope for action to deal with the problem of imports without resorting to the introduction of controls over the operation of types of retail outlets who are accused of being largely responsible for the high level of imports.
As regards the implications of foreign ownership of some multiples, it has been suggested that the controls proposed in the Bill are necessary to curtail development by these companies, which, it is suggested, is possible only because of the availability of external finance which allows either subsidisation of price cutting campaigns to enhance the success of developments or direct subsidisation of expansion.
In conclusion, I am opposed to the proposals contained in the Bill which I regard as constituting an interference with our long held belief in freedom to trade. Accordingly it has been decided to request the body established by law to carry out such inquiries — the Restrictive Practices Commission — to hold a full scale inquiry into all aspects of the supply and distribution of grocery goods.
The reaction of the people engaged in the grocery trade was evident last week when every county sent their representatives to parade before us, indicating very clearly that they were conveying the sentiments of the people in the grocery trade around the country. Their voices cannot be ignored and it would be foolish if the Government ignored their legitimate objections.
The Government appear to be giving their approval to below cost selling.
Nobody is suffering from delusions. We all know what below cost selling means. I do not think any consumer could be deceived by this practice which we all know, is not for the benefit of the consumer. Its long-term aim is to exterminate competitors and having done that, they will increase prices. Short-sighted people will not look to the future.
Supermarkets give a service in areas only where there is a relatively high population, possibly not lower than 17,000 or 20,000. They open up in these areas because the pickings are relatively high. They are not interested in more sparsely populated areas. The small grocers provide a very good service in those areas. In the past week we have seen the disappearance of six or seven multiple stores because there were not lucrative pickings in those areas.
If the Government do not preserve the grocery trade by helping the small trader they will be doing the consumers a disservice. The grocery trade employ about 40,000 people. In recent years many small family concerns have closed because of supermarket takeovers. The people must decide now whether to support the family grocer or the large supermarkets.
Before the cost of petrol and transport had reached such a high figure, there was a tendency to travel long distances for bargains. In the years ahead I hope the people will be sensible and recognise the people who stood by them in their very lean days. We had economic wars and recessions but the family grocer provided the goods needed by large families and carried their debts until those families were in a position to repay them. There is some recognition and some goodness in every family, I hope it will be applied properly in determining what the people need.
There are many aspects of trading to be considered when the multiple enterprise — foreigners in many cases who come here not to serve the people but to make profit — and the local small grocer are compared. The retail grocery trade will only be preserved if we all recognise that it is not possible to continue if the big concerns are permitted to take the good pickings while the small trader is left to make a living by working irregular and long hours. I hope the evidence displayed by the grocers last week is properly digested by the Minister and the Government. They should come to a wise decision and give the small retailers the recognition they deserve.
I support the motion which relates to a matter which is causing great concern throughout the country. Deputy Taylor has referred to the many changes that have taken place in the retail grocery trade in the last decade. We have all seen tremendous changes taking place. We all remember the traditional family business in towns or the small shops in rural areas, but in many cases that scene has changed dramatically. The small-scale operator has been replaced by the multinational combines. To a certain extent that change was inevitable but the time has come when we must take stock of the trend of this development. The growth of monopolies is a dangerous thing. Appropriate legislation is necessary to ensure the survival of the independent retailer and the traditional family concerns.
I should like to congratulate Deputy O'Toole on initiating this debate and on the understanding he has shown of the situation. The proposals he has put forward are reasonable. I hope there will be a similar response from the Government. I was disappointed at the attitude adopted by my constituency colleague, the Minister for Industry, Commerce and Tourism. His initial reaction to this case when it was put to him some time ago was over-rigid. He appeared to be totally inflexible. There are many social arguments in favour of the case put forward by the representatives of the independent grocers last week. Those representatives protested, in an orderly and responsible way, outside Leinster House and subsequently held discussions with many Members. I had a long meeting with the group from Limerick while Deputy Taylor met the representatives from Clare. I was very impressed by the case they made.
We are fast approaching a monopoly situation here. That is bad economically and commercially. It is also bad from the social point of view. The constituency I represent here and the province I represent in the European Parliament is the most important food producing region in Ireland and it is for that reason that I am alarmed at the enormous increase in food imports. The figures are growing dramatically weekly. It is common to find food products from other countries on display in many of the big stores. The growth of the combines has contributed to an increase in imports of food products. That is disastrous from the point of view of our economy and our balance of payments. It is ludicrous to think that such products are imported when we are producing them at home. Foreign food imports are being dumped here through the channels operated by the large multinational combines while we must spend a lot of time and money in search of foreign markets for our products.
The approach of Deputy O'Toole to this problem is the correct one and this has been accepted by the representatives of the independent grocery trade. While I am not an expert on the situation in Europe in this respect I have some knowledge of the legislation that exists in some countries. The Belgian Government some time ago, when faced with a similiar problem to that which exists here, introduced appropriate legislation to deal with the matter. Legislation catering for the orderly development of the retail trade is to be found in West Germany, Holland, Italy, France, Britain and Belgium. The Belgian experience in the past two decades was similar to ours, increased market share by multi-nationals and the resultant drop by over 50 per cent in small retail outfits, and the Belgian Government sought to apply corrective action through legislation when the independent outlets held 77 per cent of the market share.
