Dáil Éireann debate -
Tuesday, 7 Feb 1989

Vol. 386 No. 7

Private Members' Business. - Enterprise (Competition and Consumer Protection) Bill, 1989: Second Stage.

Mr. Cullen

I move: "That the Bill be now read a Second Time."

I am obviously delighted to move the Second Reading of this Bill on behalf of the Progressive Democrats. We have for some time been giving this whole area serious consideration and we realise that there is a great need for a wide range of new legislation. We have taken the first step in introducing the Enterprise (Competition and Consumer Protection) Bill, 1989, because of the urgent need to outlaw anti-competitive practices. As long ago as 1975 the Restrictive Practices Commission first called for this type of legislation, yet 14 years later no such legislation has been passed. If we want our economy to develop at a rate comparable with that of our partners in Europe, we cannot simply rely on the business community to make all the progress. The Oireachtas failed over many years to keep legislation up to date and this has hindered may areas of business from developing. This is not a desirable state of affairs, particularly when one considers that the Irish economy is one of the most open in the world.

I am convinced that the lack of proper legislative planning has hindered job creation by not creating the necessary environment for a competitive economy to grow and prosper. Our legislation tends to protect restrictive practices and anti-competitive conduct in many sectors of industry, trade and professional services. This Bill will for the first time introduce into our law a general prohibition on anti-competitive practices in all sectors of the economy. The lack of competitive forces operating in many sectors has caused areas of industry and business to be run very inefficiently. This has been the case simply because businesses have not had to compete at the same level as many companies in other countries. This factor has caused many job losses and has led to lack of growth in areas of job creating potential.

This Bill will also have major benefits for the Irish consumer, who for many years in a whole range of areas has not had freedom of choice in the purchase of goods and services because of restrictive practices and anti-competitive forces. The consumer is entitled to a much better deal and it is up to us in the Oireachtas to put right the wrongs that we allowed to happen by not keeping up to date with an imaginative legislative programme. The operation, for instance, of scale fees across the whole range of professional services is extremely restrictive and does not give a fair range of choice of service or price to the consumer.

The provision of goods from suppliers to purchasers can operate in a very restrictive way. There are many instances of purchasers being able to get exclusivity in relation to certain goods coming into the marketplace. This is often done to the exclusion of all others. This in many cases puts the purchaser in a very powerful position with regard to the supplier and he is eventually able to dictate terms and price, which many suppliers have to accept if they are not to be forced out of business. This is a very serious abuse and such practices must be outlawed. Unfortunately the Restrictive Practices Acts of 1972 and 1987 contain no general prohibition on anti-competitive practices. The Minister can from time to time, under section 8 of the 1972 Act, make a restrictive practices order relating to particular areas of the economy. While, for example, the Restrictive Practices (Grocery) Order of 1987 prohibits price fixing in the retail grocery sector, there is no general ban on such anti-competitive behaviour. Under our domestic law price fixing and price collusion, which is especially prevalent in the professional services sector, is not unlawful. I am not trying to point the finger exclusively at one area because the professional services sector in general are operating quite rightly within the terms of our domestic law as it stands. Because of this there is no onus on them to change their ways. This Bill should have a major impact in this area and should encourage a much more competitive environment which would benefit everybody.

The Director of Consumer Affairs and Fair Trade, who is an autonomous official, is charged with enforcing the present statutory provisions. While one can make a complaint to the director and he can take certain action on behalf of the complainant, including seeking injunctive relief in the High Court, the director is not a judicial personage and therefore he is not in a position to award damages to a trader or an individual who has been seriously injured by the anti-competitive practices of another. The major principle established by this Bill is the provision that the courts may award damages to a person aggrieved by anti-competitive practices. The power of the courts to award damages in such cases will without doubt be the most effective way of ensuring that the competition laws are fully adhered to.

It has already been seen in the European Court of Justice, under articles 85 and 86, and also in the United States under the Sherman anti-trust legislation, that the powers to award damages are the most effective way of ensuring that these laws are adhered to. We have given lengthy consideration to this aspect of the Bill and we are convinced that without the ability of the courts to award damages in such cases it would be much more difficult for this legislation to be effective. Companies or individuals who seek to ignore this legislation will have a very strong deterrent because of the possibility of an injured party receiving damages if the courts rule that anti-competitive practices are in operation. This legislation is strengthened greatly by this provision, which will have a direct bearing on its successful application.

We have deliberately modelled this Bill on the provisions of articles 85 and 86 of the Treaty of Rome, which are framed in general terms. Their objective is to render illegal all anti-competitive behaviour. Irish companies which trade internationally are subject to the provisions of the Treaty of Rome under articles 85 and 86. We have seen an example during the recent take-over bid for Irish Distillers, when the European Commission intervened. This was only possible because this company traded on the international market. These provisions do not apply to companies which trade on the domestic market but do not engage in inter-state trade. This is a very serious flaw in our legislation. The companies who are trading abroad on the international market probably represent the most dynamic aspect of our economy, the area which is showing most growth and the greatest potential for job creation. This is occurring because they are subject to the full rigours of competition. Competition in a legal framework is only the means to allow competitive forces to operate. The business community and the industrial world will take up the opportunities given to them if they can be more competitive. That means companies competing with one another and a much more efficient sector operating in the economy. The companies operating in the competitive area are also up to date and their forward planning and streamlining of their operations are much better. This is all brought about simply because they must keep ahead of the posse. They know if they do not maintain their position in the marketplace inevitably they will fall by the wayside.

Why is this not in operation in our own domestic economy? It is in this area we are seriously falling down. The European economy is booming yet our economy is not expanding or showing the growth which is occurring in other economies. The reason for this is the operation on the Irish domestic scene of such restrictive practices and anti-competitive operations as to render many areas of the economy useless because there is no growth. The reason for this is that they are not subject to full competition or the type of operation in the international sector which has shown this country what that means, where the growth and the expansion are coming from. This is a serious handicap on the Irish domestic scene and we must face up to it in terms of our legislation.

We — particularly the Government — have been informing Irish business of the advent of the single market which will be created in Europe. It is wrong to think of this market in terms of the future as we have already seen the benefits to some extent. We must, in our legislative programme, put measures in train now that will help our companies to face the rigours of competition which will undoubtedly come in the not too distant future. We cannot on the one hand dictate to Irish business about what will happen if on the other hand this House does not implement the kind of legislation necessary to allow them to be open to the type of forces which will be in operation. Because of the failure to put that legislative programme in train we are introducing this Bill.

Another drawback in relation to the present restrictive practices legislation is that the legality of certain practices is not judged solely by reference to their anti-competitive effect. For example, professional bodies can still arrange to fix fees and exclude price competition on the grounds that this is not unreasonable because, in their view, such price fixing arrangements are in the public interest and are required by a professional code of practice. It would not be possible under our proposals to justify a restrictive practice according to such extraneous and subjective criteria. In this country the full weight of these kind of practices should be outlawed by bringing in the necessary legislation. The competition provisions of the Treaty of Rome are in operation in most of the economies throughout Europe but they are not fully operational in this country.

Under this Bill all sectors of the Irish economy will be subject to broadly the same competition irrespective of whether there is an international dimension to that trade. That is a fundamental point because, as I said, it is wrong that certain sectors of the Irish domestic business community should be subject to one set of rules while others are subject to a different set. This country is too small to operate on such a basis. The economy is not that well spread — the same applies to the business community — in respect of such a huge, wide and diverse range of activities. It is wrong, therefore, that there should be such different areas operating under different legislation.

For many years the public sector has been in a privileged position and their monopoly has not allowed them to grow efficiently, to prosper and ultimately to provide the best possible service for the consumer. A very good example of this was the deregulation in relation to air transport. The position of Aer Lingus was very seriously questioned and it was pointed out quite forcefully that if any changes occurred the company would be in serious jeopardy. However, the result was the full weight of competitive forces and the irony is that it has greatly benefited the State company involved. They have increased their capacity and prices to the consumer have dropped substantially. There are many new companies — mainly Ryanair — in operation who have also grown, providing employment for people who would otherwise have emigrated. That is one example of the type of forces that should be brought to bear on companies.

We have also introduced a saver in the Bill for the statutory position of State monopolies but it does not cover the whole area. There are many State monopolies, Dublin Bus, Bus Éireann, the ESB and many others who operate under licence and it is in the Minister's area of responsibility to take this legislation into consideration. It is not in the consumer's interests to allow State monopolies. When there is competition there is a demand for the consumer for the services. It is our contention that the full weight of competition should be allowed to operate in these areas because otherwise there will not be an efficient State sector or an efficient service in other areas because they are not subject to competition. For that reason, they do not feel the weight of change in the marketplace or do not necessarily have to react to it because their position is protected. Is that a desirable state of affairs?

I accept that changes are occurring at present in the area of broadcasting, for instance——

Mr. R. Burke

MMDS.

Mr. Cullen

That should not be the end of it, it should just be the beginning. Why do we have to wait so long to make these changes when we have witnessed at first hand the great opportunities that have been created? The reaction in the State sector has not been detrimental; there has been active growth and an improvement in the services provided. The introduction of this legislation will allow for competition. The Government should have done this long ago because the Restrictive Practices Commission asked for this type of legislation as long ago as 1975. We do not have to wait continually until such time as some Department or Minister sees fit to suddenly decide to go down this road. This should be an ongoing legislative programme from the Minister for Industry and Commerce and indeed from many other Departments. It should not be once-off legislation.

Our intention in introducing the Bill is to make it known that we have other areas of legislation which we want to introduce which will be in keeping with this development, with trying to get our economy on an equal footing, not just in the European context but on a world scale. The Irish economy is very open and this legislation is probably most beneficial to it in that it will allow us to compete with companies who will come to this country and who will compete on an equal footing with our companies in the not too distant future. However, we are not putting in train the necessary legislation to allow this to happen. We urgently need to do this and I sincerely hope that the Government and the Opposition parties will support this Bill because we have drawn it up in a very specific way. We have not ranged over a huge area of domestic law as we thought it would be better to be specific and deal with a specific area. That is the issue of restrictive practices and anti-competitive forces which operate here.

I am happy to have the opportunity to introduce this Bill and, with the permission of the House, I will share my time with Deputy Michael McDowell.

An Ceann Comhairle

I would have preferred if the Deputy had indicated that fact earlier when he rose to speak. The Chair is now presented with a difficulty.

Mr. R. Burke

I have no objection to the Deputy sharing his time.

An Ceann Comhairle

I would have much preferred if the Deputy had said that earlier.

Mr. Cullen

I apologise for not doing so.

An Ceann Comhairle

Is it agreed that the Deputy share his time with Deputy McDowell? Agreed.

Mr. McDowell

At the outset I wish to congratulate Deputy Cullen for introducing a Bill of this kind for debate in this House, and I thank the House for giving me the opportunity to speak at this stage. As Deputy Cullen said, the 1972 and 1987 restrictive practices code is of its nature limited in its operation. It is limited by virtue of the fact that the initiative in relation to its operation has to come from an official source — such as the Examiner or Director of Consumer Affairs and Fair Trade. It has to go through the cumbersome process of inquiry; it has to go through the process of making orders, some of which may have to be ratified by this House. In a sense, it is a code which brings about in particular areas to remedy anti-competitive problems, individualised measures which arise from a complex, legal and legislative process. In my view, that process is cumbersome and gives rise to undue delay. To a person who has been adversely affected by an anti competitive practice, it offers no hope of individual relief.

The Irish economy is small; it is not the same as the American or European Community economies and in that sense different considerations come into play. I do not believe for one minute that the introduction of legislation of this kind would give rise to multi-million pound suits along the lines of anti-trust law in America or that we will see the volume of litigation as occurs within the European Economic Community, or that our courts will be flooded with complaints of a malicious or a tactical kind from persons who merely wish to use the law as an adjunct to their competitive market strategies in order to get at their competition.

What is commendable about this Bill is that it introduces into Irish law a new area of economic civil liability. At present we have a system of law in which certain rights are protected — goodwill and the like through passing off law and through trade mark law, property rights and inventions through the patent law. Curiously we have inherited from the 19th century a Manchester school based economic theory in our law which states that anything which is competitive, as long as that is described in terms of cutting price, is necessarily good, but there is no legal liability on anyone who builds a monopoly.

As against that we have the restrictive practices code. The Minister also has powers under the mergers and monopolies code to prevent the emergence of over-sized or over dominant companies, or an aggregation of businesses. What is lacking is day to day legal liability for anti-competitive practice designed in the long run to damage the free market. Because of the way the economic aspects of our civil law has developed, the courts do not have any philosophy or guidance from this Legislature in recent times as to how they should interpret the needs of a complex society and the long-term needs as opposed to the short-term needs of competition.

The anti trust legislation in the USA is designed to prevent the over domination of any market by any combination of companies or individual company. They have very wide powers, including the power to break up concerns which have grown too large or become too dominant. This legislation, introduced by Deputy Cullen, is not concerned with the same thing, but with something different. It is concerned primarily, and I think practically, with the remedy that is available to someone who is adversely affected by anti-competitive practices. Deputy Cullen referred to the professions and the introduction of scaled fees. As he pointed out, it is open to a profession to defend their scale fees as reasonable under present law and to speak in terms of the interests of the profession in relation to such scaled fees but what is not there is a view that those who are adversely affected by the maintenance of the scaled fees structure have a remedy against a profession which is doing them damage.

This does not only apply to the professions. We should also take a look at the variety of circumstances to which this particular code, if enacted, will apply. It applies just as much to newspapers in so far as they tend to control the outlets through which their product can be purchased and restricts them to a small number of newsagents in any given town or any given suburb. I know of people who want to run shops and sell newspapers but who cannot do so because they run into a restrictive practice of this kind. That in my view is in many cases unjustified but it is very easy to demonstrate occasions when there are justifiable restrictions of that kind. For instance, the price fixing arrangements which apply to the sale of books through bookshops are justifiable because the purpose is to prevent the best seller of the week being sold through the local supermarket and the elimination of specialist book stores. There are circumstances where the public good can be shown to justify what on the face of it appears to be price fixing or an anti-competitive measure. This Bill has the advantage that there is a presumption that an anti-competitive practice is void, that it is not in the public interest, and that those who engage in price fixing or restrictive trade cartel agreements are indulging in anti-competitive activity which they must justify. The obligation to register price fixing agreements and agreements of an anti-competitive kind would place a duty on these people to justify their particular measures as being compatible with competition and designed in the last analysis to bring about an improvement in the economic well being of the State.

The powers given to the director of Consumer Affairs under this legislation are designed to dovetail with his existing powers under the Restrictive Practices Act. The purpose is not to create another quango of another body involving another layer of bureaucracy in Irish industry and commerce, but on the contrary, to give to an individual who has already some responsibility under the restrictive practices code and who has experience of the consumer interest as opposed to the trade interest a general role to police the price fixing and anti-competitive practices in trade and industry.

Deputy Cullen is absolutely right when he says the best means of enforcement is to provide a remedy which is available to anyone who is affected adversely and to provide that person with a legal remedy, that is a remedy in damages. As he says, the greatest possible deterrent to somebody who is contemplating a collusive arrangement, a price-fixing arrangement or an abusive dominant position is to realise that if he pushes someone to the wall, forces somebody into liquidation, or by the steps he has taken pushes somebody into insolvency to the detriment of the common good, the consequence will rebound against him; it will cost him money out of his own pocket. Therefore, people who engage in these anti-competive practices within the context of free enterprise know they take on themselves and carry with their activities certain risks and effectively have to police themselves in relation to the ethics of the marketplace.

There are thousands of different ways in which this legislation will have effect if enacted. The thing about it that impresses me most is that it gives to the courts general principles which they are to apply. It spells out where necessary instances of what amount to anti-competitive practices and in general terms it leaves, for instance, the jurisprudence of the EC in relation to abuse of dominant position available to the Irish courts to interpret and use as they like. Clearly, "dominant position" means one thing in Europe and a different thing on the Irish market, but there are all sorts of ways in which dominant positions manifest themselves as potential opportunities for abuse of the market.

One only has to instance the power of wholesales in, say, the liquor trade tied house agreements which are much less prevalent here than in say, Britain, because of the action of the trade itself in resisting the efforts of breweries some ten or 20 years ago to indulge in vertical expansion into the retail trade. Those kinds of agreements may or may not be in the best interests of the consumer. There is a strong argument for the proposition that in many cases they are designed to resist competition to nibble away at competitive forces and price competition in public houses. The structure of benefits to publicans which the breweries and distilleries have at their disposal as a means of attempting to dominate that trade, while at the moment have not had gross effects, have had a considerable effect in undermining the Minister's commendable efforts to bring down prices for the tourist trade. It is a factor we must take into account.

We live in a rapidly changing world. In 1992 why should British breweries not decide that what is available to them in terms of tied houses on the British mainland would be a very suitable arrangement in terms of the Irish market? We live in a world where money talks and one only has to look at the betting trade to see where money really talked in terms of the way in which the Irish market was substantially invaded by British interests. That may well be in the interest of the punter in terms of the betting market and I am not suggesting it is wrong, but if we allow huge resources to become available and to play on the Irish market we must have in place some better protection than is available under the Restrictive Practices Acts. We must have some better protection against abuse of a dominant position.

Any British brewer could buy and sell the Irish market. They could buy and sell the entire publican trade in this country if they put their minds to it and could buy substantial slices of that trade if they were willing to pour money into the Irish market. I am not saying that is wrong and it may be inevitable to some extent unless there is some mechanism whereby those who are adversely affected by it, those who feel tied houses are contrary to the public interest, can take effective action not simply on a direction from the Minister but operating on the basis of a clearly understood law which prohibits anti-competitive law or the abuse of dominant positions.

There are many other ways in which this Bill, if enacted, could have a substantially improving effect on the quality of services available. For instance, where an Irish semi-State company is at the moment in competition with licensed competitors, as happens as Deputy Cullen said in the road transport area, there is huge potential for competition to bring down prices and push up the quality of service. However, if we allow our semi-State sector to be virtually immune from adherence to a fair competitive code, then we always face the difficulty, and it is not a novelty, that private enterprise in competition with the State sector will claim that where prices are brought down, when the State sector begins to act commercially and aggressively in the market, the taxpayers' money is being used to compete unfairly.

One very interesting thing in Deputy Cullen's Bill is the proposal that State enterprise of a commercial kind, identified as I understand it by reference to worker participation as a code in order to identify what are and what are not commercial State enterprises, should in their dealings with their licensed competitors be subject to the same code of ethics and the same law relating to what is and is not fair competition. This measure as proposed by Deputy Cullen is one which this House should consider. Maybe people feel the wide-ranging nature of sections 1 and 2 of the Bill is such as to create problems, but the principle is undoubtedly right. If there are problems, small print qualifications or hesitations on the part of some parties in this House in regard to the legislation as introduced, the remedy surely is to consider this on Committee Stage. It would do enormous good if the Dáil were to signal to Irish business that the era of the unnecessary middleman, the unnecessary commercial flab, is ending, not simply because of competitive forces coming in 1992 but because it is harmful to the Irish consumer as well. If we were to signal unequivocally that those who want to compete fairly and to take on the existing structure of Irish industry and commerce will get a charter of fair trading which is enforceable, that would be an immense benefit.

I do not want the Minister, his Department or his officials to take the view that this is an attack on the restrictive practices code; it is not. It is an effort to transform it into something much more dynamic within the economy. It is an effort to change the whole emphasis of competition legislation in Ireland to one which is automatic, which invades every sector of Irish life, which does not depend on executive interference to activate it, which works automatically to sustain competition. Perhaps a national failing is that so often we feel there must be an agency to do this or that, that the Government or the totally shapeless "they" should do something about this or that. That spirit is so often embodied in legislation which has come from this House. The Bill seeks to change our basic economic civil law and introduce a new principle of competition as a matter of law. It seeks to put into the business of market transactions an ethic which is not anti-business but pro-competition.

Deputy Cullen is to be commended on introducing the Bill. Would the Minister address himself to the whole issue of embedding in every aspect of Irish law the spirit of competition? He should agree with Deputy Cullen that the time has come for a legislative mechanism which works by itself, which is effective in its own right and which has the effect of breaking down restrictive practices whether they are in the professions, in the retail trade, in industry, importing or in the economic realms of middlemen. Wherever there is inhibition to low price and to real value there should be some automatic element in our law working and fighting in the other direction. Deputy Cullen's Bill marks the first occasion that the House has been invited to give serious consideration to how that revolution for competition and enterprise can be brought about. The Minister should support it on Second Stage and send it to a committee of the House. He should not give us the stock answer that he has some ideas for reform in the area. He should send the Bill to a committee which will, as happened in relation to Deputy Shatter's Bill, produce quicker than we could otherwise expect a worthwhile reform in our law.

Minister for Industry and Commerce (Mr. R. Burke)

Deputy Cullen's proposed Bill involves a very fundamental proposal which would, if accepted, change the basis of Irish competition legislation from the control of abuse system which we currently have to a "prohibition" system modelled on the provisions of Articles 85 and 86 of the Treaty of Rome.

At the outset I think it would be helpful if I were to outline to the House the approach of Articles 85 and 86 and then to compare with these the present Irish competition legislation. Article 85 generally prohibits all agreements or concerted practices which are likely to distort competition in trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the Common Market. Generally the prohibitions under Article 85 do not apply to agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which do not have an appreciable effect on trade between member states or on competition.

A number of block exemption regulations have, however, been made by the EC Commission covering several areas such as exclusive dealing agreements, special vehicle distribution agreements, patent licensing agreements, motor vehicle distribution and servicing and research and development. Each block exemption regulation has a fixed period of validity, but it can be extended in its original or amended form. If an agreement satisfies a particular block exemption, that is, it contains what is allowed and does not contain clauses which are prohibited, then the agreement benefits from exemptions under Article 85 without the need for notification.

Under Article 86 any abuse by one or more undertakings of a dominant position within the Common Market or in a substantial part of it where it may affect trade between member states is prohibited as incompatible with the Common Market. The mere possession of a dominant position, however, is not prohibited. The Article outlines a list which is not exhaustive, of ways in which a dominant position may be abused. They are: imposing, directly or indirectly, unfair prices or other trading conditions; limiting production, markets or technical development to the detriment of consumers; placing other trading parties at a competitive disadvantage by applying dissimilar conditions to equivalent transactions; and making other trading parties accept supplementary conditions which, by their nature or commercial usage, have no connection with the subject of the main contract. There are no provisions or possibilities for exemptions from the prohibitions under Article 86.

Control of trade practices in Ireland is covered by the Restrictive Practices Act, 1972, as amended by the Restrictive Practices (Amendment) Act, 1987. In the mergers and take-overs area the relevant legislation is the Mergers, Take-overs and Monopolies (Control) Act, 1978, which was also amended by the Restrictive Practices (Amendment) Act, 1987. Irish legislation permits the investigation by the Director of Consumer Affairs and Fair Trade and the Fair Trade Commission of trading practices to determine whether they are unfair. If it is considered that the practices examined operate against the common good, the practices may be prohibited by ministerial orders, which come into effect on confirmation by Acts of the Oireachtas.

The Schedule to the Restrictive Practices Act, 1972, contains a list of unfair practices to which the Director of Consumer Affairs and Fair Trade and the Fair Trade Commission must have regard when they are carrying out investigations into practices to determine whether they are unfair. Both of these Acts were amended by the Restrictive Practices (Amendment) Act, 1987, which came into effect on 25 January 1988. The effect of this Act was to streamline operations in the institutional arrangements in the areas of competition and consumer protection by merging the functions of the Examiner of Restrictive Practices with the Director of Consumer Affairs. The Act by assigning the Examiner's functions under the Restrictive Practices Act, 1972, to the director was intended to result in greater efficiency and a reduction in the number of State bodies and has helped towards the more coherent and integrated administration of related policy resources.

In addition to the above-mentioned basic Acts there are Ministerial Orders in respect of the following trades: grocery, carpets, motor spirits, jewellers, motor cars, radios, cookers and ranges, electrical goods, building materials, hand knits, intoxicating liquors and non-alcoholic drinks. The Restrictive Practices Act, 1972, and the Mergers, Take-overs and Monopolies (Control) Act, 1978, as amended by the Restrictive Practices (Amendment) Act, 1987, together with the 11 Ministerial Orders which I have mentioned represent collectively the body of Irish statute law on competition.

The suggestion that Irish competition should be changed from a control of abuse system to a prohibition system was among other things considered by the Restrictive Practices Commission, which is now called the Fair Trade Commission, in a 1977 study of legislation on competition policy in Ireland. More recently during the passage of the Restrictive Practices (Amendment) Bill, 1987, which dealt with some of the aspects of that report the same suggestion was made. My predecessor at the Department of Industry and Commerce, Deputy Albert Reynolds, accepted the suggestion at that time to exercise his powers under section 12 of the Restrictive Practices Act, 1972, to have the Restrictive Practices Commission carry out an investigation of the case for and against the introduction of the prohibition type of legislation similar to that in Articles 85 and 86 of the Treaty of Rome. Accordingly on 20 January 1988 the Commission were requested to carry out such an investigation. This investigation is currently in hands and I expect their report to be available to me within the next few months. The Commission in fact invited submissions from interested parties, representative bodies or undertakings in relation to the proposed study in March 1988, but due to the increased work load faced by the Commission in carrying out their new functions under the Mergers, Take-overs and Monopolies (Control) Act, 1978, as amended, it has not been possible for them to complete the study earlier. In addition it has been necessary to obtain legal opinions on certain aspects of the study.

Before providing my own views in this regard I would point out, however, that the Government, by virtue of promoting the Restrictive Practices (Amendment) Act, 1987, successfully through Dáil Éireann have already undertaken extensive amendment of our national competition legislation, the effect of which, as I have pointed out, was to streamline operations in the institutional arrangements in the areas of competition and consumer protection. I would like to take this opportunity to remind the House of the change brought about by the 1987 Act.

The Act provided for a Fair Trade Commission to replace the present Restrictive Practices Commission. The new commission was given greater powers to inquire into anti-competitive and unfair trading practices. In addition it was given the function of investigating any proposed merger or take-over referred to it by the Minister under the Mergers, Take-overs and Monopolies (Control) Act, 1978. Previous to this such investigations were carried out by the Examiner of Restrictive Practices whose office was abolished. The remit of the Director of Consumer Affairs was widened to include fair trade and additional functions in the area of consumer protection, including the enforcement of prices and other consumer-related legislation. The title of the Office of Director was accordingly changed to the Director of Consumer Affairs and Fair Trade. The director took over the role of the Examiner of Restrictive Practices under the Restrictive Practices Act, 1972. The director was also given new powers to take civil legal proceedings in relation to the Sale of Goods Act, 1893 and the Sale of Goods and Supply of Services Act, 1980. Finally, the scope of competition legislation is being extended to include banks, communications and electricity services which had been previously excluded.

In considering the need for new measures in the regulation of competition, it is important to bear in mind the purpose of competition legislation and, indeed, the function which competition itself fulfils in the economy. When operating fairly, competition is a healthy element in the market. It should not be viewed as an aim in itself but rather as an essential means towards the improvement of production so as to encourage an efficient economy and to benefit the consumer. Restrictive practices reduce the choice open to the consumer and can lead to higher prices than might otherwise prevail in an unrestricted market. Also, an informed consumer is a valuable stimulus to industry, requiring producers to remain efficient and in touch with consumers' requirements.

I will turn now to a comparison of the various advantages and disadvantages of the "prohibition" and "control of abuse" systems. While the "prohibition" system may be more desirable than the "control of abuse" system contained in our existing legislation, the "prohibition" system has many disadvantages attached to it in practice. Under the "prohibition" system, in theory it gives greater legality security to EC companies as they are obliged under the EC system to seek legal clearance in advance for any general agreement or undertakings which they may enter into with others because of the blanket ban on all restrictive practices.

In practice, however, it has in the past given rise to huge volumes of agreements notified to the Commission with resulting long delays in dealing with individual cases and has resulted in temporary "negative clearances" being granted along with letters of comfort which have no legal standing, to the companies involved. Were this system to be introduced here the same problems may be anticipated. In response to this, the EC Commission have, in recent years, embarked on a course of exempting whole sectors from the scope of the general prohibition by means of special regulations which have been adopted in respect of, inter alia, exclusive purchasing agreements, exclusive distribution agreements, specialisation agreements and motor dealerships, and the afore-mentioned “comfort” letters on individual cases giving provisional sanction to agreements although, as has been pointed out by UNICE, these letters have no legal basis and are, therefore, of little practical use to the company concerned.

The process of notifying agreements to the European Commission, then exempting certain agreements, or issuing comfort letters in other cases, has resulted in great delays in establishing whether or not agreements are in breach of Articles 85 or 86. Experience has shown that the inflexibility inherent in a prohibition system can be a major disadvantage in economic terms whereas a control of abuse system can be used in a more satisfactory fashion using existing resources and having regard to particular priority areas at any given point in time.

Having said that, I do not wish to rule out the possibility of accepting the EC's "prohibition" system for the regulation of competition in the longer term. The FTC is currently undertaking a detailed study of the respective merits and disadvantages of the prohibition and control of abuse systems. This investigation, among other things, is addressing the constitutional question of whether it would be possible to grant the FTC for example the kind of judicial powers similar to those already vested in the EC Commission. Other questions which are being addressed are: which of the EC Commission's existing powers could be exercised by the FTC; which of the powers which could not be exercised by the FTC could be exercised by the Minister for Industry and Commerce and subject to what conditions for example subject to approval by the Oireachtas and if neither the FTC nor the Minister could exercise any of the EC's present powers what body could exercise them?

Furthermore, the EC's prohibition system would be likely to be extremely costly in terms of its operation and enforcement and would be likely to entail a significant burden on scarce resources if the system was to be properly policed. In countries which operate such a system, particularly where there is no procedure for block exemption, a large staff is required to ensure that agreements can be examined and decisions given. The absence of an efficient and adequately staffed authority would result in an extremely onerous and expensive burden of litigation being placed on business. At a time of constrained resources I cannot guarantee that a large body of staff could be made available and I do not intend to impose a new cost burden on business.

There are other issues which are raised in the Bill. Statutory control of restrictive practices in Ireland is committed to three authorities; the Director of Consumer Affairs and Fair Trade; the Fair Trade Commission and the Minister for Industry and Commerce. While the Bill currently before the House has addressed the future role of the Director of Consumer Affairs and Fair Trade it gives absolutely no indication of the future role it envisages for the Fair Trade Commission. As the legislation currently stands, the Fair Trade Commission is empowered to carry out a number of important functions. I would like to go through these now and ask Deputy Cullen which, if any, of these functions he intends the Fair Trade Commission to carry out in the future.

Under section 5 of the Restrictive Practices Act, 1972, as amended, the Fair Trade Commission can cause inquiries to be held into the conditions which obtain in regard to the supply and distribution of goods and the provision of services and into the operation of an order under section 8. Does Deputy Cullen envisage that the Fair Trade Commission will no longer have to carry out this function under his proposed prohibition system? If this is the case he should have provided for the repeal of this section in the Bill currently before the House.

If we look at section 7 of the 1972 Act, we find that reports of inquiries by the commission under section 5 of the 1972 Act shall, among other things, state whether the Commission are of the opinion that the Minister should make an order under section 8 of the Act. Section 9 (1) of Deputy Cullen's Bill provides for the repeal of section 8 of the 1972 Act thereby taking away from the Minister the power to make restrictive practice orders. It does not make any sense to have a section in the 1972 Act providing for the Commission to give an opinion on whether an order should be made when under one of the provisions of the draft Bill being discussed the Minister would no longer have the power to make orders.

Another example of poor drafting in the Bill is found if one looks at the provisions of section 8 of the Restrictive Practices (Amendment) Act, 1987. This section provides that notwithstanding anything in the 1972 Act the Minister for Industry and Commerce whenever he considers it expedient and after consultation with the Fair Trade Commission, the Director or any other Minister of the Government concerned may make restrictive practice orders. If it is the intention of Deputy Cullen's Bill to remove order-making powers from the Minister, then it would be necessary to provide for the repeal of section 8 of the 1987 Act in addition to section 8 of the 1972 Act.

Does Deputy Cullen intend that the Fair Trade Commission will continue to cause inquiries to be held into the refusal/alleged refusal by employers and/or employees to use particular materials or particular methods for manufacturing or construction purposes? Under existing legislation the Fair Trade Commission may hold special reviews of the operation of a section 8 order and submit reports to the Minister on their findings. If they are of the opinion that the Minister should amend the order they should recommend accordingly and indicate the form of amending order they recommend. If the Commission are of the opinion that the Minister should revoke the order they shall recommend accordingly in their report. As you will know by now, section 9 (1) of Deputy Cullen's Bill removes order amending and order revoking powers from the Minister so where does that leave the above provisions?

Section 12 of the 1972 Act provides for the commission to study and analyse the effect on the common good of methods of competition, types of restrictive practice, monopolies, the structure of any market, amalgamation of or acquisition of control of bodies corporate, the operation of multinational enterprises and relevant legislation. Will the Fair Trade Commission cease to have this function under Deputy Cullen's Bill and if this is the case why has no provision been made for the repeal of this section?

One of the self-professed highlights of the Bill currently being discussed is the provision relating to jurisdiction to award damages and other reliefs. Is this in addition to the provisions in sections 19 and 23 of the existing legislation or did Deputy Cullen intend that this provision should no longer be applicable? I could give you numerous further examples along the lines of the above but I do not wish to labour this point any further. I think I have said enough to highlight the very poor drafting of the Bill. The Bill fails to address the question of where the present legislation fits into the Deputy's proposed new scheme of things. A glaring failure is the omission of any reference to the role of the Fair Trade Commission in his proposed legislation. I would be very interested to know exactly what role the Deputy envisages for this statutory body. There are other deficiencies in the Bill.

Section 1, according to the explanatory memorandum, is the equivalent of Article 85 of the Treaty. However, it departs from it in respects that I find puzzling. First, in subsection 2 (d) it outlaws agreements that provide for equitable treatment among trading parties. This is quite contrary to the corresponding provision in the Treaty and I would appreciate an explanation for this. More puzzling still, when it comes to the question of exemptions, there is no guarantee in the section of any benefit to the consumer. The Treaty of Rome, in Article 85 (3), allows for exemption from the general prohibition on anti-competitive agreements but, it is essential to any such exemption that consumers are allowed a fair share of results of any improvement in production or distribution or promotion of technical and economic progress. No such guarantee exists in this Bill. Difficulties similar to the first I mentioned arise in section 2.

Sections 4 to 6 provide for the notification to the Director of Consumer Affairs and Fair Trade of agreements and his making decisions on them. Whether the director is the appropriate authority is open to question. This I say not to cast any reflection on any holder of the post but rather to raise the issue of whether such significant decisions should be taken by an individual. It is worth considering whether a collegiate authority would be more appropriate. The Fair Trade Commission is clearly one possibility. The commission have the experience of assessing the economic impact of arrangements. The director's office is more geared for investigation with a view to prosecution. There is a difference in the roles of the two bodies and they should not be blurred.

The deficiencies in the Bill that I have referred to arise from a rapid assessment of its contents. Further study may well lead to other points. This all underlines the need to deal with this issue thoroughly.

As Deputies will appreciate, therefore, there are many fundamental questions which need to be considered very closely in the context of adopting a possible prohibition system of the type envisaged in this Bill. Needless to say while these issues are still the subject of investigation I would consider it totally premature at this stage to indicate a positive reaction to this measure. I think the wisest course to follow is to await the outcome of the Fair Trade Commission's deliberations, to have serious debate and consideration of their proposals and then decide what should be done. This must include consideration of the constitutional issue to which I referred earlier.

I fully agree that the issues raised in the Bill are important. The question of choosing between a system of prohibition and the existing one remains open. It would be best to await the Fair Trade Commission's report. I would therefore ask Deputy Cullen and the sponsors of the Bill to await that and withdraw the Bill in the meantime.

I want to inform the House that, if the Bill is proceeded with, this party and the Government will oppose it.

Mr. J. Bruton

First, I should like to draw the attention of the House to the fact that this Bill is very similar to amendments I introduced on behalf of the Fine Gael Party to the Restrictive Practices Bill going through the Dáil in December 1987. At that time I made a case for a legal prohibition on anti-competitive practices. At that time, as a result of the amendment I put forward, I am glad to say the Minister agreed that the Restrictive Practices Commission would be asked, under the provisions of section 12, to conduct an inquiry into the practicality of adopting this approach. I am glad that that inquiry has got under way. I am glad also that the Progressive Democrats, in introducing this Bill, have chosen to endorse the Fine Gael proposal. In addition to making that proposal in the Dáil in December 1987, the Fine Gael Party also — in their document on 1992, published six months later in June 1988 — repeated their commitment to the proposal that Articles 85 and 86 of the Treaty of Rome, which ban anti-competitive practices should ab initio, be part of Irish anti-competition law. At the time I made those proposals in the Dáil they were supported not only by my party but by the Progressive Democrats spokesman in that debate.

I am glad that we are discussing the matter at this point. It is fair to say that the Minister's detailed response to the Bill proposed by Deputy Cullen and the acuity of some of his criticisms of the Bill are evidence of the work under way in his Department and in the Fair Trade Commission as a result of the inquiry initiated in this House in December 1987. It is clear from the Minister's reply that he has given quite an amount of thought to the practicalities of introducing a prohibition system and that we have made progress as a result of the initial raising of this subject in December 1987.

This discussion, resulting from the Bill brought forward by Deputy Cullen, takes that process a step further. I shall be coming to the points made by the Minister in a moment but it is fair to say that his contribution was one-sided in that although he gave a very thorough critique of Deputy Cullen's proposal, he did not criticise the general principle nor did he criticise the deficiencies of the existing law, which is probably more to the point. Some of the criticisms he made of Deputy Cullen's proposal, far from being inconsiderable or invalid were, generally speaking reasonable, criticisms one would expect to be made on any Bill produced by an Opposition party who do not have the resources available to them that a Government have. The purpose of Committee and Report Stages is to remove the cause of such criticisms. It would have been a more balanced presentation had the Minister also said something about the problems of existing law.

I believe that the existing law in regard to competition — in regard to dealing with anti-competitive practices, price fixing, market sharing, price cutting in order to eliminate competition, monopolies, rings and rigging of the market and so on — has four main defects which my proposal of December 1987 and the Fine Gael Party document of June 1988 were designed to eliminate. Indeed there would be a similar motivation in Deputy Cullen's Bill. They are, first, that no action can be taken on a particular practice unless there is a complaint lodged and that that complaint does not lead to action to eliminate the practice; rather that it would lead to an investigation, that investigation being conducted in a court-like fashion by the Restrictive Practices Commission or the Director of Fair Trade.

A very lengthy investigation procedure is conducted in respect of the complaint in regard to the relevant area of trade. A report is then prepared recommending action and is presented to the Minister. The Minister does not have the power to do anything about it at that stage. He must then go to the parliamentary draftsman to draft an order to give effect to the recommendation of the Restrictive Practices Commission. When that order is drafted it has to be presented to the Dáil and Seanad and time must be found to provide for passage of that order. The length of time between the initial complaint being made and the approval of an order by the Dáil and Seanad banning a particular practice can be two or three years. In the meantime the practice continues unabated. Therefore, my first criticism is that the present law is extremely slow in dealing with problems of this kind.

The second complaint is that even when the order is finally made it is extremely narrow in its focus. It only deals with the practice complained of in the particular trade in respect of which the complaint was made. Even if in the course of the investigation it becomes obvious that this practice exists in other trades, it is not unusual for a general order to be made prohibiting that type of practice across the entire community but only in respect of the particular area where the complaint is made. There is a lot of work preparing an order and it only deals with a very narrow area.

Another defect is that frequently it is discovered that the practice complained of does not come within the remit of the Minister for Industry and Commerce at all who is then powerless to do anything about it. There is a very glaring example which reflects no credit on the Governments involved — and certainly reflects no credit on me as Minister during some of the time involved — which I would like to produce to the House to illustrate the difficulty of the present law.

In April 1982 the Restrictive Practices Commission recommended the removal of the restriction on conveyancing and advertising by solicitors. The opinion of the Minister of the day was that the Minister should be able to act to remove the restrictions on conveyancing and advertising under the Restrictive Practices Act. However, the advice of the Attorney General was that this would be ultra vires the powers of the Minister for Industry and Commerce under the fair trade legislation and that the only way this recommendation could be acted upon would be by an amendment to the Solicitors Act which could only be promoted by the Minister for Justice. We are still waiting for this amendment to implement this relatively simple and minor recommendation made seven long years ago and we will probably be waiting for another two or three years before it becomes law. Therefore, we will have a gap of ten years because it was discovered that even the cumbersome procedures of the Restrictive Practices Act, which would take two or three years, could not be used but that there would have to be an amendment to principal legislation which was the responsibility of another Minister and as a result, it is taking ten or 15 years for anything to be done.

A code that is supposed to be a competitive code but allows delays of that kind for essential technical reasons plainly is not working. I only wish that the Minister for Industry and Commerce had applied some of his undoubted forensic skill — which he used to shaft Deputy Cullen's proposal in some respects which I will deal with later — to a similar acute examination of the defects of the existing law. If he had done that he might have taken the view that it would be better to take Deputy Cullen's Bill, warts and all, and amend it on Committee Stage with a view to dealing with the undoubted defects that are there.

There is another area of the present law that is unreasonable in my view, that is, in regard to the criterion which is used to determine what may be banned as unfair. The criterion is not one that is set out in detail giving specific examples as was the case in my amendment where we listed different categories of agreement to control production, shared markets, directly or indirectly fixed purchase prices etc: a whole guide is given in my original amendment and in Deputy Cullen's Bill to businessmen as to what practices are out so that they know if they carry out any of the practices that are listed they are breaking the law. This way people know where they stand now and in five years time.

I am afraid the situation under our existing law is quite different. All that our existing law says is that the Minister may use this cumbersome procedure to ban a practice that is "unfair". As we all know, unfair is essentially a political concept because what is unfair in the minds of Deputy McDowell or Deputy Cullen may be perfectly fair in the mind of Deputy Brennan. Because they are different people with different perspectives they may regard some things to be fair where others would regard them as unfair. The decision as to whether a particular practice should be banned will depend on who the Minister is, what his political outlook is, who happens to be the members of the Restrictive Practices Commission at a given time and their philosophical outlook. One does not know in advance whether a particular practice will be banned or not and there is no barrister, no lawyer, no expert to whom one can go for advice because there is no jurisprudence, no case law, determining what will be banned and what will not be banned. It will all be decided on the basis of individual examinations of individual sectors and no decision in regard to a particular sector need necessarily follow an earlier decision made in regard to another sector.

There is no basis in the present law upon which any businessman wanting to know whether to start doing a particular thing can discern whether he will at some time find himself in conflict with the law. It all depends on whether somebody complains, what the Director of Fair Trade thinks of the complaint when he gets it, what the Fair Trade Commission think is unfair when they get his report, what the Minister thinks is unfair when he gets their report, whether he agrees with it and, ultimately what the Dáil thinks is unfair. It is all entirely uncertain, entirely political and entirely subjective.

In my view one of the most important things that law makers in this House should try to do for business or for anyone trying to make a living is to create a situation that people know where they stand, where they know if they do one thing it is illegal but that if they do something else it is clear and they can go on with it, so that they can make their investment decisions on the basis of certainty. Yet, we have a code of law here which has institutionalised uncertainty and that is undesirable. It is fair to say that the proposals Fine Gael made in December 1987 for an amendment to the law incorporating the Treaty of Rome were designed, as is Deputy Cullen's Bill which we are considering here this evening, to remove that uncertainty.

There is a further advantage to proceeding along the lines suggested in this Bill which, as I have said, Fine Gael suggested long since, that is, that we will make the law that applies to trade practices within Ireland compatible with the law that applies to trade practices between Ireland and other countries. Trade practices between Ireland and other European countries are already subject to the provisions of Articles 85 and 86 of the Treaty of Rome. If an inter-State transaction occurs which is contrary to those articles it can be dealt with by the competition directorate of the European Commission under those criteria. If we introduce similar provisions into domestic law people will know that the same law will apply to them if they are selling something to County Monaghan as would apply if they were selling it further up the road to County Armagh. Both transactions, one a domestic and the other an export transaction, would be subject to the same basic legal provisions of Articles 85 and 86 of the Treaty of Rome. Again, we would be saving on legal costs because people would know that the same law applies to them in either case and they would be able to consult, as would lawyers, the jurisprudence that has been acquired in interpreting that law in other European jurisdictions to inform the likely decisions that will be made in this jurisdiction. That saves money and time, creates certainty in the law and means business people can easily make transactions across boundaries.

I would further say to the Minister if he were here that it would be desirable to take account of the fact that prohibitions of anti-competitive practices incorporating the rules contained in Articles 85 and 86 of the Treaty of Rome are also being introduced in other countries. The Secretary of State for Trade and Industry in Britain in the last year has published in Green Paper on competition law in that country which proposes in essence to do what the Fine Gael amendment and this Bill propose to do in domestic Irish law. The same has been done in Greece and similar proposals have been made in Portugal and France, with a view to incorporating in domestic law the provisions of Articles 85 and 86 of the Treaty of Rome, for the very sensible reason that those countries want the same rules to apply to their domestic trade as apply to their international trade within Europe.

If we persist in not pursuing that course we will put our people at a disadvantage. The longer we stay behind with our present law and do not follow the example of other European countries the greater will be our disadvantage. If we are first in the race in harmonising our law in that area with Community law we will be giving Irish traders a marginal advantage over traders from other countries where a dual system of law applies. In this House we should try, given the competition people will face in Europe, to assist business people as much as possible by making the law certain within our State and compatible across boundaries with the law in other States.

The Minister has raised a number of very worthwhile questions about some of the points made by Deputy Cullen. He was somewhat unfair in describing Deputy Cullen's Bill as poorly drafted. That comment had a slightly supercilious air to it and ought not to have been made, given that sometime in the future perhaps Deputy Burke will be on the Opposition benches, will be producing a Bill and might not feel that this type of patronising criticism is appropriate. That criticism was made but perhaps the Minister did not intend to say it. Maybe it was put into his speech and it was too late for him to take it out.

However, the Minister also made very valid criticisms of Deputy Cullen's Bill. It is fair to say there should be a clear role for the Fair Trade Commission in the implementation of Articles 85 and 86 if they are incorporated in domestic Irish law. The Fair Trade Commission should be the body to decide on issues like the granting of block exemptions to particular practices. On the other hand, the role of prosecution of individual breaches should be a matter for the Director of Fair Trade. It would be useful, in the initial period of application of Articles 85 and 86 to Irish law, to give the Director of Fair Trade a role in reviewing how the matter is working in practice. He should be charged, for the first two or three years, with presenting annual reports on how this new and radical change in Irish competition law is working, reviewing the court decisions that have been taken and drawing appropriate policy conclusions from those decisions so that the legislation could be refined in the light of his reports and any difficulties that have been identified in it eliminated.

The Minister also made the point — again this is something the House cannot ignore — that at a time of constrained resources he cannot guarantee that a large body of staff could be made available to deal with the issues of exempting particular sectors from the application of this very broad-ranging legislation. I would like to have that aspect teased out in greater detail. I know the answer will be that the Minister cannot grant block exemptions, that if that is done it gets rid of the need for the scrutiny of individual agreements. It is the scrutiny of individual agreements that is the most staff-intensive element but obviously the Minister is unconvinced that block exemptions would cover this issue. He still feels that a substantial number of staff would be involved. If this were a Committee Stage debate I would press the Minister to give reasons for that conclusion. I say that, not disputing his conclusion but simply looking for elucidation.

The Minister should retain his discretion to make orders under the legislation. The Fair Trade Commission should continue to have the power to direct that inquiries be held, as applies under existing law, certainly for a transitional period until we see how the new legislation is working out. Most of the existing law should remain for a period. Perhaps the position could be reviewed after five or six years to see if the new legislation is satisfactory. In that light I would be in favour of continuing to allow the Minister to have the order-making powers that he has under section 8 of the 1987 Act. I also think the Minister should continue to retain his powers under section 12 of the 1972 Act which allow him to ask the Commission to conduct general inquiries on methods of competition, types of restrictive practices, monopolies, structures, the market and so on. This is a very wide and broad-ranging subject matter which is not necessarily encompassed in Deputy Cullen's Bill.

Debate adjourned.