I thought we would have a decent speech when the Minister commenced with a Hemingway story which I heard 20 years ago. However, it went downhill from there on which was disappointing.
Despite the Minister's latter remarks that we need serious and reasonably comprehensive legislation in this area, I resent the fact that he does not seem to take this Bill seriously, despite its flaws and weaknesses. That is surprising given his comments in Opposition over the last five years. He portrayed himself as a person concerned about many weaknesses in our competition legislation.
His speech was disappointing to say the least. It verged on insulting to those who drew up the Bill. Deputies in Opposition do not have the back-up of civil servants or the parliamentary draftsmen when drafting legislation. Notwithstanding the difficulties the Minister has with the Bill, I hope tonight's debate will spur him into taking action in this area which, as he said on many occasions, is one which needs urgent attention. I am glad he recognised the fact that we need legislation in this area. Despite his reservations about the possibility of this Bill focusing on one sector of the food processing industry, I do not feel any inhibition because of these remarks. The reality is that this Bill might not be before the House were it not for difficulties being experienced in that area at present.
We support the Bill as far as the food processing sector is concerned. This is very timely in view of the anomalies and weaknesses which have been highlighted in this area. We would like to add to the Bill and improve it. I do not believe that any party can claim to have all the knowledge, wisdom or best ideas on how to deal with reforming legislation and the Bill could do with some improvement. However, the basic principles should be welcomed. If the Government saw fit, we could, on Committee Stage, strengthen the Bill as it deals with competition in the food processing industry.
Unfortunately I do not have any confidence in this Government. Up to the last ten or 15 minutes my lack of confidence was in the Fianna Fáil component of the Government but now I have no confidence in the Coalition accepting the Bill in its present form or even the principles of it. They will see it as a measure aimed at curtailing the monopolistic tendencies of a small number of entrepreneurs, particularly in the beef sector. The history of Fianna Fáil in Government, particularly since 1987, suggests that their primary interest has been to facilitate and encourage those monopolistic tendencies. In the course of the past six months we have seen the disastrous results of this policy.
As this Bill is aimed at removing the possibility of a monopoly in the beef processing sector in particular, I will confine my remarks to the fall-out from the Goodman affair which, after all, provided the principal impetus for this Bill.
In a previous debate I spoke about the necessity to clean up the beef industry in the interests of workers, farmers, consumers and the country generally. We are now facing a situation where a large number of foreign banks, with little or no interest in our economic development, are on the verge of becoming major players in the beef processing sector. For that we have to thank one Mr. Larry Goodman. It has become a trite and convenient argument advanced by most lobbies on behalf of the Goodman Group that the banks are entirely to blame for the debacle we witnessed last August. In this House the Taoiseach gave credence to that propaganda in his dismissive references to bankers and the attitude of bankers towards business. The truth is that Ireland as a small trading economy must be able to hold up its head and assert that in all its business dealings, including its dealings with banks, it has behaved honourably. We cannot make that assertion in respect of the Goodman fiasco. It bears repeating that that fiasco was caused by the decision of one man and his advisers to mislead banks quite deliberately about the purposes for which money was borrowed and spent. If most of the rest of us did that in our dealings with banks, we would have spent the last six months defending ourselves in court against civil actions, if we were lucky, and possibly against criminal charges or fraud.
Instead what do we find? The banks are forced into a rescue plan in which Mr. Goodman will retain 40 per cent of the new business, the banks will hold 10 per cent and the remaining 50 per cent will be placed in trust to revert to Mr. Goodman if a certain profit target is met. This is as close to getting away scot free as I have ever seen, especially when Mr. Goodman's personal wealth has not contributed in the slightest degree towards the cost of the restructuring. However there are, in my view, a number of serious obstacles still be to overcome before this agreement can be seen as fitting the letter or the spirit of Irish and European legislation in this area.
I have today written to the Minister for Industry and Commerce to outline my views on the agreement which will be before the High Court tomorrow. I would like to take this opportunity to read that letter into the record of the House because I believe what must be paramount in any consideration of the latest developments in this case is what our Constitution calls the exigencies of the common good, and what we often refer to in this House as the national interest. The letter states:
Dear Minister,
I understand that you will be considering the Goodman re-structuring under the Mergers, Takeovers and Monopolies legislation of 1978 and 1987. I am accordingly taking this opportunity to express to you a number of concerns that I have in relation to this whole matter. As I understand it, the relevant legislation gives you the power to refer this matter to the Examiner of Restrictive Practices for examination and report under a number of headings. These headings include inter alia:
—the extent to which the proposed merger or takeover would be likely to prevent or restrict competition or to restrain trade or the provision of any service;
—the extent to which the proposed merger or takeover would be likely to affect employment;
—the interests of shareholders and partners in the enterprises involved;
—the interests of employees in the enterprises involved; and
—the interests of the consumer.
In addition to the various matters which must be considered by the Examiner on your referral, the Act of 1978 also empowers the Minister, "if he thinks that the exigencies of the common good so warrant" to prohibit a proposed merger or takeover absolutely or to lay down conditions for such merger. Having regard to all of these provisions and, in particular, the responsibility vested in you to ensure "the exigencies of the common good" I would like to make the following points:
1. Serious question marks continue to surround aspects of the operations of this company prior to the re-structuring. In particular, it is my understanding that the security and intelligence authorities of several countries are investigating the provenance and purpose of a loan, the proceeds of which are lodged in a Cyprus bank and subject to a number of legal actions.
2. The principal suppliers to this company (i.e. beef producers) have a moral right to be satisfied that prices for their product will not be artificially controlled in order to facilitate the making of excess profits to finance the re-structuring.
3. The trade unions seeking to organise workers employed by the company have been continuously rebuffed (and in fact only succeeded in meeting the Examiner of the company following a threat of widespread industrial action). Conditions of employment in the company are very much inferior to standards commonly regarded as acceptable throughout industry.
4. It is understood that there is no intention of securing any contribution from the personal wealth of the former proprietor of the company towards the cost of the re-structuring.
A number of other issues also arise, and in my view they too are fundamentally important. The first of these arises in connection with recently enacted European Community merger and takeover legislation. Council Regulation No. 4064/89 (21st December 1989) on the Control of Concentrations between Undertakings entered into force in this country on 21st September 1990. On my reading of the regulation, its provisions appear to apply to this case.
Under Article 4 of that Regulation, concentrations with a Community dimension "shall be notified to the Commission not more than one week after the conclusion of the agreement, or the announcement of the public bid, or the acquisition of the controlling interest. That week shall begin when the first of these events occurs." In this case, it would appear that the first event to occur was the agreement between the banks, Goodman, and the Examiner, and that the one week deadline has therefore expired. Responsibility for notification rests on all parties to the transaction.
Third parties with a sufficient interest in the agreement (in this case both farmers and employees would surely feel that they qualify) are entitled to be heard before the Commission before it arrives at any conclusion. An important aspect of the notification procedure is that it enables a member state to complain to the Commission that a concentration threatens to create or to strengthen a dominant position as a result of which effective competition would be significantly impeded on a market within that member state. It is a matter for the Commission to decide whether to take action under the regulation. The point is that the agreement should be notified to the Commission in order for it to make up its own mind, and that once the concentration has a "Community dimension" the obligation to notify arises. Finally, in this connection, a copy of any notification sent to the Commission should be sent to the competent authority of the member state, (in this case, yourself) within three working days and the Commission is obliged to carry out the procedures under the regulation "in close and constant liaison" with the Minister.
Arising from this, it seems to me, there are certain questions:
—whether to your knowledge any notification of the agreement reached between the Goodman Group and its creditors was made to the European Commission pursuant to EC Regulation 4064/89 within the one week time limit provided by that regulation;
—whether a copy of any such notification has been received by you from the Commission;
—whether an opportunity will be given to interested parties to make representations to the Commission.
The third area in addition to "the exigencies of the common good" and the European dimension, which needs to be considered, is the City Code on Takeovers and Mergers.
As you are aware, this code is issued by the Panel on Takeovers and Mergers, a body consisting of representatives of the Bank of England and a series of British professional bodies. There is no representative of any Irish body on the Panel — however, because the London and Dublin Stock Exchanges are linked together, the Panel exercises jurisdiction in the Irish Republic as well as in the United Kingdom. The Code does not have the force of law, but all persons professionally concerned with the securities markets are obliged to comply with its provisions. The Code applies to all offers for companies listed on the Stock Exchange which are resident in either Britain or Ireland.
The purpose of the Code is to regulate "offers" whereby "control" of a company is to be obtained or consolidated ("control" in this case means a holding of shares carrying 30% or more of the voting rights of a company).
Following the vote in favour of the rescue plan by the banks, Mr. Larry Goodman will retain a 40 per cent shareholding in the new business, while the banks will hold 10 per cent. The remaining 50 per cent will be placed in trust and will either revert to Mr. Goodman (if certain profit targets are met), or to the banks. The banks therefore could potentially end up holding 60 per cent of the company.
The holding company in this case, Goodman International, is a private company to which the takeover Code does not apply. However, one of its subsidiary companies, Food International plc, is a public company. Depending on the precise details of the proposals accepted by the banks, it may well be that an offer is being made for control of at least 30 per cent of that company, within the meaning of the Code. If there is doubt on that question, it is one to be resolved by the Panel.
The major rule of the Code which would be relevant to this case is Rule 9. This provides that where a person, or a series of persons acting in concert (such as a group of banks), acquire shares which carry 30 per cent or more of the voting rights of a company, he or they must extend offers for all the remaining equity share capital, at a price which may require to be adjudicated upon by the Panel. The Panel is entitled to waive this obligation in circumstances which seem to it to be appropriate.
The question this must give rise to in your consideration of the Goodman case is whether or not your Department has considered the question of the applicability of the City Code on Take-overs and Mergers to the Goodman proposals. If so, you must be satisfied that the provisions of Rule 9 of the Code (already set out above) have been complied with.
I would appreciate if the Minister would take the opportunity of this debate to clarify the questions raised, which I believe are very important. It will be clear from the contents of that letter to the Minister for Industry and Commerce that it is not my view that the interests of the common good will be well served by allowing this take-over to go through. The Minister has, as I outlined, a number of options; he can refer the matter to the examiner of Restrictive Practices; he can reject the agreement or make it subject to conditions; he can ensure that it is referred to Europe or he can insist that it be made subject to the take-over panel rules. He must exercise these options in respect of this agreement. I would welcome the Minister's comments in relation to clarifying his attitude as he has not spoken in this regard since the announcement of the agreement by the banks.
The agreement is in the interests of only one person. It is not in the interests of people who depend for their livelihood on the production of beef; nor is it in the interest of those who are at present employed under, sometimes, very dubious circumstances in this industry. I do not even believe that it is in the long term interest of the banks involved and that there will be any protection in the agreement for them in the event of another debacle like the one we witnessed last August.
In the context of the Bill the Government have missed a very significant opportunity to bring about an improvement in this area. When we debated the Companies (Amendment) Bill last August in an emergency session, there was a very clear understanding in this House — and outside it — that we were buying time and facilitating the orderly dismantling of this business with a view to putting something better and more creditable in its place in the medium term. That opportunity only exists if the air of short term crisis in the beef industry can be dispelled. In particular, the opportunity is only there between killing seasons. The Government, instead of embarking on the restructuring of the industry to take account of new conditions in the market as well as in the manufacturing end, have given the time to restructuring Mr. Larry Goodman instead. It is regrettable that the Minister for Industry and Commerce, in particular, who made his strong views known to this House in the past two to three years, has missed the opportunity to restructure the beef industry.
The Bill before the House again affords an opportunity to the Government to restructure the beef processing industry because there was a debacle, despite promises, press conferences and a launching of a major private sector company by the Government and, indeed, in association with the Government, over the last couple of years. It has all come to nought. Not only that but the whole of the Irish beef processing sector has been brought to the brink of a major disaster and many people will regret the failure of the Government to grasp the opportunity which presented itself, albeit in very unfortunate circumstances, over the last couple of months. It appears that the Minister for Industry and Commerce has lost his nerve in relation to the statements made in this House over the last two or three years.
The Bill is worthy of debate within this House and of acceptance on Second Stage. As I said at the outset, there is room for improvement but I do not think anybody who has ever presented a Bill to this House would attempt to claim that this Bill has all the answers. It is regrettable that the Minister — and, indeed, the Department of Industry and Commerce — seem to consider this Bill unworthy of improvement or serious debate, from the comments the Minister made.