Deputy M. J. Nolan was in possession. He has 24 minutes left.
Private Members' Business. - Competition in Food Processing Bill, 1990: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time".
A Cheann Comhairle, I propose to share my time with Deputy Kenneally.
Is that agreed? Agreed.
As I stated on the last occasion we dealt with this Bill, the Bill as laid before the House is certainly not an answer in the retail area, and I am glad the Minister for Industry and Commerce has made it known that the parliamentary draftsmen are at an advanced stage in the preparation of a Government Bill to bring before the House.
One of the problems with the existing legislation dealing with competition is that it is very piecemeal. What is now needed is a new comprehensive Bill to deal with today's problems in the retail marketing area. The existing restrictive practices Acts and the orders relating to them are not the answer to the problem currently in the retail marketing area. Recent price wars, such as the "bread war" some months ago have done nothing to enhance the reputation of retail supermarkets in this country. Competition is very healthy and is the life blood of retail marketing in Ireland and we have a very healthy retail grocery trade. However, competition for the sake of competition must be guided and I think it is unfortunate that we must put in place comprehensive legislation to deal with the whole area of competition.
As I have said, we have some legislation on the Statute Book which covers various areas of the retail market but does not cover every aspect of the retail market, and some areas are outside the scope of the legislation. For example, the retailing of seasonal goods and fresh fruit and vegetables perhaps can be brought under this new Bill which the Minister hopes to introduce.
As I have said, the experience in the retail marketing sector has not been very good as far as competition is concerned. When the Minister brings forward his legislation, and I hope it will be sooner rather than later, I hope all aspects of retailing will be looked at. The Minister is to be commended on bringing forward this Bill with such haste. I hope it will not be interpreted as a reaction to the Bill before us in the House. I look forward to speaking on the new legislation when it is put in place.
As I have said, I want to share my time with Deputy Kenneally. The sooner the legislation which the Government are bringing forward is brought before the House the better it will be for all aspects of the retail sector.
I wish to take this opportunity to thank Deputy Nolan for sharing his time with me. One of my problems will be in trying to fill the time because there is so little substance in the Bill and it is difficult to know what to speak about.
The Bill is ill-conceived and is not well thought out. The only reason I can see for the Opposition bringing it forward at this time is political opportunism. The Bill is also contradictory. Section 25 of the Finance Act, 1987, is referred to in it. I do not intend to dwell at length on this point because the Minister did so when he spoke. It appears that the section does not refer to liquid milk processing, yet section 4 (d) of the Bill refers to that subject and that I think is an example of the way the Bill is contradictory. It is also misleading in relation to food processing because all that is referred to within the ambit of the Bill is milk and beef and it does not advert at all to the horticultural industry. That surprises me greatly because this is an area of huge growth and has huge potential not only for the processing industry but in other areas which can and will create many jobs.
I will quote some figures to support what I say; they refer to 1986 because in the short time I had to prepare for this debate this afternoon they were the figures that came to hand most readily. In 1986 we imported 224,028 tonnes of vegetables worth £54.8 million. We also imported 36,420 tonnes of potatoes which had been preserved by freezing, to the value of £17 million. In this country where we produce so many potatoes to such a high standard of quality and choice, why do we have to do that? We can produce them here and can process them here and can create many jobs by doing so. This is an important area that has not been adverted to at all. Some of the previous speakers on my side referred to the mushroom industry particularly in Wexford and Monaghan where it has been very successful. I know about this industry because I worked in this area before I entered this House. It is a shame to see the number of foreign products coming into this country which could quite easily be replaced by our own goods.
Another aspect of processing which has not been mentioned in the Bill is the whole area of packaging. Packaging plays an extremely important role in processing and to a large extent we are failing in this regard in the horticultural industry. If you walk into any retail outlet or supermarket you will notice that the quality of the presentation and packaging of foreign products, in particular Dutch products, is far superior to our own. I am surprised this has not been mentioned in this Bill. Just imagine what could be done if we got our act together in that area in marketing various co-operatives. This does not get a mention in the Bill, although supposedly it is a food processing Bill.
Deputy Barrett moved the Bill for Fine Gael and what struck me very forcibly about his contribution was that it was the contribution of an urban Deputy speaking largely on rural matters about which he knows nothing. The constituency which he represents is largely middle to upper class and he purports to speak about agriculture. His whole contribution was in relation to agriculture and he did not really mention processing, packaging etc. He attacked Larry Goodman and the Goodman organisation; this Bill could be called the "anti-Goodman Bill". I have no brief to carry for Larry Goodman, good, bad or indifferent. I am not for or against Mr. Goodman but I believe he did a tremendous job for agriculture in the past. Even my colleague from Waterford, Deputy Deasy, who was previously a Minister for Agriculture and is now a Fine Gael Front Bench spokesperson on Agriculture and Food never concealed his admiration in the past for Larry Goodman and for what he did and yet his colleague attacked him right throughout his speech and at one stage he spoke about, and I quote, "the misdeeds of one man". I think that is very unfair.
As I have said, I carry no brief for Mr. Goodman but I think this was a one-sided argument the whole way through. There is no doubt the Goodman organisation brought farming on to a new level; I believe it brought it into the 20th century and we would possibly be languishing behind if it were not for what Mr. Goodman and the Goodman organisation achieved in the past. That is not to say that they should have a monopoly, that they should control the beef or any other sectors of industry, but a reality, which has to be acknowledged, is the part he has played in the development of agriculture.
I think Deputy Barrett also referred in his contribution — which seems a bit strange for somebody moving a Bill — to the inadequacies of his own Bill when he said he hoped the Minister would bring in a competition Bill to cover areas which were not covered by this Bill. To cover the areas not covered by this Bill certainly gives the Minister tremendous scope because so little has been dealt with. I am glad the Minister mentioned it is his intention to bring in legislation in this area.
I am also amazed at the lack of awareness on the Opposition benches about the approach of 1993, because their provisions for restricting the share to 30 per cent of the market is, to say the least, ludicrous. I think it will retard the growth of Irish companies as we become part of the Single Market. There is no point in me referring to the example given by the Minister in his contribution when he referred to four companies who might have 25 per cent of the market in this country, yet if one goes out of business what is to happen? There is no point in my following through that analogy again.
Let us look at what we are in Europe. We are a small island nation of 3.5 million people. If we were to restrict any company to 30 per cent of a particular market here it would mean they would have access to only 1.05 million people. We are now entering the Single European Market in 1993 and there are 320 million people in the EC. That means that Irish industries have a capacity to cope with 0.3 of 1 per cent of that market. They cannot be expected to survive in that market. Recently I gave an interview to a student who was doing a thesis in a college in Dublin.
The Deputy would want to be careful.
He had no tape. We spoke about Ireland and the year 2000 and I told him what I expected would happen in that year in Ireland. One of the most important things that will happen will be our entry to the Single Market in 1993. I referred to my constituency because I am more familiar with industry in Waterford than in any other place. I am aware of industries that have gone by the board over the last number of years for various reasons, without wishing to put the blame on anybody in particular. I know there are many vibrant industries there giving gainful employment and I have no doubt they will survive in the future. They are well managed and there is tremendous co-operation and understanding between management and the workforce. The important thing is that they work together and that is the reason they are successful. I am aware that that is repeated throughout the country and because of that I am confident as we face 1993. If what is being proposed by Fine Gael in their Private Members' Bill comes into law that would put pressure on those companies. It would retard growth in those companies and make it more difficult for them to compete in the general European market.
The Bill does not take account of imports and exports and how they impact in Ireland and throughout the Community. They are a vital component of any area of market behaviour and this is something that must be recognised and understood by the Opposition. A term used extensively in another debate in this Chamber not so long ago was "level playing fields." An effort is being made to put a slope on it with the Irish companies at the bottom of the slope and all our competitors at the top. That is what this Bill would do.
The 30 per cent referred to, and which appears to be almost a cornerstone of this legislation, reminds me of Ryanair and Aer Lingus and the aviation business and shows up the lack of thought in the Bill. Why should controls be brought into play in one area of the economy but not in another? Perhaps that is something the Opposition intend would percolate through other areas. What is supposed to happen in the aviation industry? Ryanair and Aer Lingus operate on many routes from regional airports. If we break it down to the fact that they can have only 30 per cent of the market each what do the other 40 per cent do to get to their destinations? They cannot walk and perhaps the Opposition are suggesting they should swim. That shows how ludicrous the Bill is. It addresses one area but would percolate through the economy with disastrous consequences for many other industries.
I said at the outset it would be difficult to continue speaking about this legislation which deals almost exclusively with agriculture. The challenge facing our farmers and our agricultural industry at processing and marketing levels is the creation of a super efficient industry so that we meet consumer requirements better than any of our competitors. We have to look after the consumer and that should be the cornerstone of any legislation we introduce in the Chamber. With certain controls in place we can always allow the forces of supply and demand to operate. I do not think the Opposition parties are allowing that under the provisions of this Bill. Irish farmers have the potential to be Europe's premier producers of food. They could obtain premium prices on world markets but that requires the unwavering and combined commitment of Government, farmers and processors to reach that position. Because of the importance of agriculture to the Irish economy this can and must be achieved. The Programme for Government contains a commitment to introduce legislation that will apply the principles of Articles 85 and 86 of the Treaty of Rome to the domestic trade. This will be comprehensive legislation as distinct from the piecemeal approach that is available under current legislation. This Bill continues that piecemeal approach and it must be rejected.
As I said at the outset, there is very little substance in the Bill and it has not been well thought out. I cannot see it doing anything for the economy. I look forward to the legislation which the Minister will introduce. I do not think there will be any argument in this House about the need for more competition legislation but this Bill does not adhere to that and it has to be rejected.
This Private Members' Bill moved by the Fine Gael Party could scarcely have drawn a more scornful response from the Minister for Industry and Commerce on the last night we debated it. I hope the Minister's lofty disdain was aimed at the contents of the Bill rather than motivated by the customary Government response which is, apparently, that nobody, other than the Government have the right to move legislation, that the Government have a monopoly on good ideas and that, in any event, Private Members' Bills are usually imperfectly drafted.
The Bill is clearly motivated by the Goodman experience. It is ironic for the Minister for Industry and Commerce to chide Fine Gael for sponsoring legislation inspired by the Goodman affair when he last August was obliged to do precisely that with the Companies (Amendment) Bill, 1990. If I thought we could legislate to prevent the Goodman experience recurring I would be glad to do so. I doubt if we can so long as the same cocktail of ingredients are present and, in any event, I do not believe this Bill is capable of doing so.
It must surely be one of the extraordinary ironies of the entire Goodman affair that the legislation piloted through the House last August by the Minster for Industry and Commerce may yet facilitate the Goodman experience repeating itself. I will come back to this point.
It is true, and The Worker's Party accept this, that there are many legal anti-competition practices prevalent in our economy — unofficial cartels, collusion, price fixing and so forth. Only today the battle continues to rage between the supermarket moguls concerning the price of bread. Some people argue that the consumer will benefit from this price war but others argue, the trade unions among them, that ultimately this will end up costing us more jobs in our bakeries.
Nobody can claim that the existing legislation on restrictive practices is acceptable or effective. Certainly, the 1972 Act was convoluted, unwieldy, excessively bureaucratic and the procedures too slow to produce results. The 1987 Act tidied up some of these weaknesses but has been very little used, which must be the test. The Mergers, Take-Overs and Monopolies (Control) Act, 1978, is already out of date since it takes no account of the imminent Single Market and was drafted and presented to the House purely in the context of the domestic economy.
The then Minister for Industry and Commerce, Deputy Ray Burke, told the House on 7 February 1989 that his predecessor had asked the Restrictive Practices Commission to carry out an investigation of the case for and against the introduction of what he called the "prohibitive type legislation" similar to that in Articles 85 and 86 of the Treaty of Rome. The Minister was musing about the merits of changing from what he called a "control of abuse system" to a "prohibition type system" modelled on the provisions of Articles 85 and 86 of the Treaty of Rome.
On 7 February 1989 he told the House that he expected to have the report on the investigation "within the next few months". To the best of my knowledge that report is still unavailable. When I tried today to chase up this report, find out if it is publicly available, where it is and if it can be made available at least to Members of the House, I was told that the commission have finished their report and that it is with the Minister but it is still not available to Members of this House. In the context of the agreement on all sides of this House and in the light of changing market conditions and the need to confront free trade in the Single Market circumstances I find it difficult to understand why such an important report on our competition policy, promised to be completed within months of the statement on 7 February 1989, is still unavailable. If we are to go for a drastic change from the present system of anti-competitive legislation, such as it is, or the control of abuse system, as the Minister referred to it, towards a system which effectively imports the principles enshrined in Articles 85 and 86 of the Treaty of Rome into domestic law then this matter requires the most detailed debate in this House and indeed a public debate generally.
I ask the Minister to say in his reply when he is likely to make the findings of the commission available to the Members of this House. I sincerely hope that they will not be kept under wraps until such time as the Minister for Industry and Commerce decides to introduce his own Bill, which he has promised, to tackle the abuses we are talking about here. I can see no reason the rest of us should be asked to respond to a more comprehensive Bill by the Minister without the benefit of the expert views in that report. If an expert committee or commission comprising people with expertise in this area have been requested to research the entire merits of such a revolutionary change in this area then it should be made available to the Members of this House before we have to respond to that legislation. I say that because it is clear from the response in this House so far that there is no question of the Bill currently before us being enacted.
The Workers' Party believe that there is a need, in approaching the question of competition policy, to ensure a clear understanding among the public on competition policy because at present the details are incomprehensible in a great many respects. There must be a balance between competition policy and other policy objectives of the European Community. This will require democratic accountability to the European Parliament, for example. The annual European Commission report should play a vital role in this respect but it is regrettable that it is delayed year after year even despite strong protests and recommendations from the European Parliament itself. Sufficient staff and resources are needed to ensure that it is produced in time. In addition, the report has remained unchanged in structure for the past 15 years despite even more complexity in the competition area.
The new Merger Control Regulations of December 1989 are to be generally welcomed but again it is regrettable that too many exceptions are allowed to the basic rules, resulting in legal uncertainty. A major objective of competition policy must be to create and maintain workable and effective competition in all sectors, not unrealistic or theoretical models. Competition should be carried out linked to other vital policy objectives of the Community such as strengthening of economic and social cohesion and the achievement of sustainable development. In this regard there should be a systematic review of the impact of new competition rules such as an economic, social and environmental audit which would examine the impact on employment levels, social security and regional development, among other issues.
Competition policy rules are being introduced and implemented in the absence of a clear EC industrial policy which should include aid criteria in a far wider policy context. Aid for disadvantaged regions should be allowed and available to combat the effects of any such new competition policy. There is a need to open up competition between banks and the often closed liberal professions.
The focus of the Bill we are asked to consider is, as has been said by a number of speakers, extremely narrow. Even if the House was of the opinion that we can legislate for competition policy on a sectoral basis the scope envisaged by section 2 of the Fine Gael Bill is far too restrictive. It seems, for example, that the definitions used of a company in the food processing trade would entirely exclude co-ops which control such a significant share of the food processing sector. When the Minister for Industry and Commerce was replying he indicated that it excludes milk sold on the liquid milk market. Therefore, the focus of the Bill is very specific and betrays the fact that its paternity is solely due to the Goodman affair.
I am not arguing that the scale of the Goodman affair and the potential, if not actual, damage done to our trading reputation as a country do not warrant specific scrutiny. Goodman had such a dominant market share in the beef processing sector that the threat of a collapse for the livelihood of producers and factory workers seemed enormous. Above all, Goodman operated the kind of price fixing cartel that must be a central concern of any revision of competition policy. The complex and optimistic package put together by the examiner process originated by the Minister for Industry and Commerce in his legislation of August 1990 offers the very definite prospect of the Goodman organisation reverting to its old price fixing habits. Indeed, so enormous is the surplus which must be generated in order to bail out the international banks, that the entire package is predicated on a healthy margin being available to the company.
The group's examiner, Mr. Peter Fitzpatrick, is on record as saying — as reported on 29 January 1991 in The Irish Times— that the outlook for the Goodman group for the coming year is “less optimistic at this stage”. Any hiccup must inevitably mean that in order to preserve its margin the price to the producer must fall. The system will be operated as an inbuilt tax on the farmer or supplier, the extent of which can be varied depending on market conditions. The other factories will be only too delighted to be part of the cartel since the Goodman muscle guarantees these smaller players better margins, margins that they themselves could not win. In return this will have a negative effect on job security and the nature and extent of employment in the beef processing industry.
The imperative is a contribution of the order of £30 million whatever about the state of Irish agriculture. This is the only way the international banks, whose greed and imprudence got them into this hole, can get their pound of flesh. It is also the only way they can guarantee that Mr. Goodman will get back into the saddle. It is this scenario that the Minister for Industry and Commerce must now contemplate under the mergers and monopolies legislation. The Minister's legislation has succeeded in rescuing Mr. Goodman and in holding out the prospect of effective control of the dominant market share of one of our major industries being reasserted by Mr. Goodman. This can scarcely be what was contemplated by the Minister.
In many ways, having regard to the track record and to the manner in which Mr. Goodman abused his dominant position in recent years, this is a nightmare scenario. Why should the leopard change his spots now? Is the freewheeling use of political influence to shut out competitors from facilities to which they were equally entitled the kind of free enterprise supported by Deputy O'Malley and the Progressive Democrats? Mr. Goodman's organisation, in striving for a monopoly, broke the law. That is well established. I instanced, for example, on 28 August 1990 that the Goodman organisation had drawn down some of the £170 million package of section 84 loans for speculative purposes other than the purpose for which these loans were legally sanctioned. However, if some of the group's technically illegal decisions helped precipitate the crisis, many of its anti-competitive practices were perfectly legal and, one suspects, in many cases had the active support of the Government. I instanced on 25 October 1990 in this House how, for example, Mr. Goodman used his political contacts to intervene at Government level in 1987 to cause the newly secured credit export insurance to Halal to be cancelled.
The question being asked by farmers and meat factory workers is why should they be expected to work their butts off for private banks. Is there sufficient capacity in the industry to take up the slack? Is the Goodman Group essential any longer to suppliers who had cattle on the land last August? If not, why become imprisoned by this vicious circle of debt which totals, in all, almost £600 million? Does Irish agriculture not already confront enough obstacles without tying this millstone around its neck?
Whatever criticisms can be made of the narrow scope of the Fine Gael Bill, it raises this question. It is all very well for Government backbenchers to criticise the Bill as being produced out of the Goodman experience, but the Goodman experience is of such a scale and so critical to one of the major industries that it is quite proper for any party in the House to bring forward legislation that focuses on the errors that were made in the past. The question now is that having brought forward very special legislation last August it amounts to no less than penalising the farmer as producer and meat factory workers to enable Mr. Goodman to rise Phoenix-like from the ashes and, all going well, to reassert himself in control of this enormous company. That is the prospect that is held out to Irish farmers. The enormous contribution of £30 million that is expected to service the debt can only be achieved if the margin is maintained. If there are any difficulties in agriculture — we know there are a great many — that margin can only be sustained by imposing a further tax on the farmer or producer.
That is the kind of dilemma that now, ironically, faces, above all Ministers, Deputy O'Malley; the same Minister who was prominent in seeking to use parliamentary privilege, quite properly, when in Opposition to expose some of Mr. Goodman's more dubious practices must now decide whether to give Mr. Goodman a new lease to torment the industry again. Deputy O'Malley must lie awake at night at the realisation of how cleverly the two politicians most closely associated with Goodman's rise — the Taoiseach, Deputy Haughey, and the Minister for Finance, Deputy Reynolds — have passed the buck to him.
Fianna Fáil Cabinet Ministers found it easier to avoid dealing with some of the very serious charges raised by me and other Deputies in the House because the Minister, Deputy O'Malley, happened to be the Minister directly concerned with this portfolio. Now the Minister, Deputy O'Malley, finds himself having to give the seal of approval to a new Goodman monopoly. Where it may be claimed that effective control lies with the banks, he knows that, the banks have made it quite clear that they are dependent on Mr. Goodman and that if the project is successful Mr. Goodman will be restored in actual as well as in effective control. That is one of the central questions that must be addressed in any revision of competition policy.
I would like to refer to one of the criteria used by Fine Gael in bringing forward this Bill which seeks to arbitrarily fix a ceiling on the market share of any enterprise. I would like to quote a remark made by the Minister on this aspect when replying to the Fine Gael Bill. He said:
I do not believe that it is realistic to fix an arbitrary fixture as a ceiling on the market share of any enterprise in a particular sector. The extent to which competition exists, or can exist cannot be decided in the abstract by reference to some automatic formula. It is a matter that requires examination on a case by case basis. The market share held by one enterprise has to be judged in the light of other factors including the share, actual and potential, of others in the market.
I tend to agree with that summary. The first mistake in the Fine Gael Bill is that it is too restrictive and, secondly, it seeks to fix this arbitrary ceiling on market share. I fully appreciate that, in saying that, it must be juxtaposed with what I have just said about the experience of the Goodman affair where dominant market share was used to squeeze out competitors and ruthlessly used to fix prices and so forth. Nonetheless, in the international climate in which we are seeking to function. I do not think that the Fine Gael solution of breaking up the Goodman Corporation into tiny companies is the answer; I do not think that, in 1991, in an industry like agriculture, where we have so many advantages, it is desirable to have a proliferation of small companies attempting to compete internationally. Whereas people may say that the scale of this company is enormous by Irish standards — or the scale of half a dozen other companies is enormous by Irish standards — the facts of the matter are that, on the European canvas, they are minute by comparison. That does not apply to the Goodman group but, generally speaking, our largest companies are minute by comparison with the large-scale players in the European scene. If we are to secure — and win — new markets we must have large-scale companies if we are to be successful. For that reason, it is a mistake to seek to impose an arbitrary ceiling as suggested here. There are a great deal of technical objections that one could make to this proposal and, in his response on the last night, the Minister for Industry and Commerce dealt with some of them.
Of course it is an entirely different matter when some of these very large companies use various techniques in order to circumvent the law, weak and ineffective though it might be. For example, we would all have been a great deal wiser if the normal requirements with regard to disclosure of company information had been made to apply in the Goodman case and indeed in other cases. However, Mr. Goodman sought to circumvent that by the use of unlimited liability and we know how effective that was in terms of him ensuring that he could salt away his personal millions and leave us in this House tearing our hair out as to what would happen the farming community last autumn and where they would get markets for their cattle which would be ready at the back end of the year. Mr. Goodman did use the privilege of unlimited liability through the labyrinthine structure of his group of companies to evade his responsibilities under the disclosure of information legislation.
In abusing the Fine Gael effort and pouring scorn on it, the Minister promised us legislation of his own. I wonder to what extent this legislation will be informed by the traditional views of the Department of Industry and Commerce as we received them from the then Minister, Deputy Burke, during the debate on the Progressive Democrats' Bill in February 1989 or whether it will be informed by the Progressive Democrats' approach to this legislation. It will be very interesting to watch the shape and nature of the legislation when it emerges but it is clear, from what we know about the view of the Progressive Democrats on it, that if the Minister, Deputy O'Malley, holds firm to that view, the thrust of the legislation will be to attack what he calls "the monopolies of the State and semi-State companies in this economy".
We are now being asked to accept that the conventional wisdom is that various deregulations which have already taken place have been good for the consumer. It was regularly instanced — and it was this evening — that the intrusion of Ryanair was to the benefit of the consumer to a very measurable extent and that, therefore, air fares deregulation and competition in the air industry is a good thing.
There is now very considerable evidence available to challenge that conventional wisdom. If I may take two examples: the first deals with the question of air transport and I should like to quote — not from any Workers' Party policy document — but from the Financial Times of Monday, 18 June 1990 as follows:
Since the law deregulating the US airline industry came into force in 1978 more than 200 airlines have disappeared or been absorbed by a clutch of giants. Before that year the five biggest American airlines controlled 63 per cent of passenger business in the US. But, rather than reducing concentration in the American industry, deregulation has increased it. The five largest airlines now control more than 70 per cent of traffic and dominate key airport hubs.
You can apply that situation readily to the Irish experience. Already the Ryanair bubble is beginning to burst. There is an enormous accumulated deficit of almost £30 million and favourable measures by the Minister for Tourism and Transport to bail them out and give them free passage on choice routes, and the promise now, if Aer Lingus are permitted, to take over Ryanair. The withdrawal of British Airways leaves us in a less competitive situation, on the London-Dublin route in particular. For how long will this benefit to the consumer last and at what cost? In that respect I should like to quote very briefly, as I am running out of time, from a report prepared by the transport studies unit of the University of Oxford in respect of bus deregulation which the Minister for Transport cannot wait to bring before us. In that particular area the policy study group concluded as follows.
There can be no doubt that deregulation has been accompanied by a reduction in the costs of running bus services. This, being one of the main aims of the proponents of deregulation, could be interpreted as being one of the major successes. When these cost reductions are studied more closely it is apparent that most have resulted from the following sources: (a) relative wage reductions for staff; (b) transfer to minibus operations which have lower costs per mile and cheaper staff wages, and (c) lower investment in new vehicles. In simple terms the cost of tendered operations in terms of subsidy appear to be much cheaper than the previous system of blanket subsidy. However, when other costs are broken down it is apparent that the new system is costing nearly as much as the old system even though it is much cheaper in terms of providing vehicle miles.
I could go on in that vein and, no doubt, we will have an opportunity to do so when the Minister brings forward his own legislation.
Speaking in this House before Christmas, the Minister for Industry and Commerce identified the Competition in Food Processing Bill as being a cheap and cynical attempt to gain easy publicity. This is exactly what it is. The Minister took the time to go through the Bill and point out the serious shortcomings and misguided approach adopted in bringing forward such legislation.
Indeed in reading the contributions of Opposition Deputies to the opening debate before Christmas, it is quite obvious that the alleged objective to improve the competitive environment has not been seriously thought out or given the depth of consideration that it merits. Not only does the Bill barely scratch the surface of the problem of competition but, given the opportunity to expand on their thinking, the Deputies I have heard on the other side have not even begun to understand what is involved in this area.
I am glad to have the opportunity to speak on this subject. The importance of competition policy was recognised in the Programme for Government and endorsed in the Programme for Economic and Social Progress. The Government and the social partners agree that a comprehensive approach prohibiting anti-competitive behaviour is necessary to stimulate competition in the domestic economy “so that the traded sectors will not have to bear the costs imposed by anti-competitive practices in more sheltered local businesses”. This is the reason the Government will shortly be introducing a Competition Bill which will give effect in domestic law to provisions similar to Articles 85 and 86 of the EC Treaty. The provisions of the Treaty prohibit anti-competitive agreements and practices and the abuse of a dominant position in the market for trade between member states. Using this as a model, the Government will be introducing similar provisions applying to trade within the State.
With the signature of the new Programme for Economic and Social Progress we start into a new phase of economic and social planning and stability. We have created a framework within which we can plan ahead with confidence. In the programme we have also given certain undertakings, one of which is to see that legislation is introduced to improve the competitive environment for Irish business. The Government, through the programme, have created a positive economic framework. For our part, we will ensure Irish business operates in the most favourable economic and legislative framework. In creating these conditions we also expect Irish business to play their part. The drive for new markets and maintaining a competitive edge must be the responsibility of the firm.
I want to speak for a few moments about the content and objectives of the Bill. Deputy Spring said in his intervention in December that he did not believe any party can claim to have all the knowledge, wisdom or best ideas on how to deal with reforming legislation in this area and conceded that the Bill before us could do with some improvement. This must have been the most honest intervention of the debate. Regrettably, the Competition in Food Processing Bill reflects only the dimmest flicker of knowledge. There are several serious flaws in this Bill.
First, why draw up legislation which is clearly needed on a broad basis for one sector of the economy only? I can understand the concern for the food processing sector, but why single it out? Why would we want to apply separate rules for economic behaviour to one sector of the economy and not others? Indeed, not only does the Bill seek to apply to one sector only but it is now clear that it only seeks to apply to part of that sector. The Opposition seem to be obsessed with, and refer continuously to, a particular company in the context of this Bill. That would not be proper legislation and legislation that I would subscribe to. It would not apply to the preparation of milk for the liquid milk market, for example. The Director of Consumer Affairs and Fair Trade has on many occasions spoken out against the anti-competitive practices evident in this area. The rationale behind applying rules on such a piecemeal basis is mystifying to say the least.
There are many other sectors in the economy which could merit such attention. I am sure Deputies will be familiar with problems in their own areas and with problems at more general national level. We often hear talk that some group is operating a "ring" or collusively fixing the price or market. Is this right, and, if not, should we not attack the problem in a comprehensive manner?
A second major fault in the Bill is the fixing of a ceiling of 30 per cent on market share for companies involved in either beef or dairy processing. The most confusing thing of all is that this 30 per cent is not related in the text of the Bill to the concept of abuse of dominant position.
Are we to presume that just because a company is big it is bad? Conversely, could a company which has a dominant position in the market but which has less than 30 per cent of market share be free from the penalties suggested in the Bill? Are we to hatchet all companies who, by virtue of their enterprise, have expanded and grown? This is tantamount to punishing success. Would the sponsors of this Bill like to explain this to the Irish business community? Furthermore, as Irish business seeks to compete in the barrier-free market of the European Community it would not be appropriate to constrain their efforts because of populist opposition to company size.
As a third and general comment, it is a pity that the Bill does not pay more attention to the provisions of Articles 85 and 86 of the Treaty of Rome. The new sections 4A and 4B proposed in section 3 of the Bill bear some resemblance to the provisions of the Treaty. If care had been taken to look at the operation of these Articles and the legislation which has derived from these provisions, perhaps we might have been spared some of the more obvious failings of this proposed legislation.
Let us pause for a moment to look at existing legislation controlling competition in this country. The Restrictive Practices Acts and orders are the primary focus of our approach to competition. They are an extremely useful method of controlling anti-competitive behaviour. With the increasing complexity and growing internationalisation of economic activity, it has, however, become very evident that a new approach should be explored.
We now need a broad based approach that will bring us into line with mainstream thinking in this area in the European Community. It makes sense for us to have the same set of rules here as our partners in the Community. It also means that companies here will be well prepared for doing business with Europe.
It has also become clear that the approach under the Restrictive Practices Acts has become outdated and even clumsy. Making a restrictive practice order takes time. It requires a series of stages involving investigations and reports and ministerial orders with confirmation by an Act of the Oireachtas.
What the Government have in mind under their new Competition Bill is to replace this system with a simpler approach introducing a general prohibition on anti-competitive business behaviour. This will be far more simple and straightforward.
Although the Opposition speakers seem to have at least tacitly accepted that this new approach is warranted, they insist, with this Bill, in bringing us backwards instead of forward along the road I have just identified. Instead of building on the useful experience in EC and European legislation, the Opposition now want us to tack on a piece of ineffectual piecemeal legislation on the existing body of restrictive practice orders. I wonder why they did not try to call it a restrictive practices Bill.
We have not heard a word from the sponsors of this Bill about the rationale for a competition Bill. There are several questions we should ask before we start drawing up legislation for an area like this. Who benefits from competition and who loses from it? The most obvious beneficiary is the consumer. As competitive market forces come into play the consumer has a greater choice at keener prices than before. This can easily be seen in the local supermarket where price competition between branded goods gives the consumer a real choice. Indeed, increased competition is also good for business, at least those businesses who are not afraid of competition and of changing with the times.
Those businesses which look to the benches opposite for direction will be left behind on the scrap heap. They will be the losers from competition. They may have made huge profits in the past in false markets but they will no longer be able to do so. The consumer should no longer have to subsidise profit racketeers.
In controlling business behaviour in a manner similar to Articles 85 and 86 of the Treaty of Rome, the Government will be introducing in their Competition Bill a fair and equitable regime in which there will be benefits for all. The Government will be introducing a broad based Bill which will meet the needs of the Irish economy and set a new legislative framework in which all sectors of Irish business and, equally important, consumers will benefit.
At this stage we recommend that the sponsors of the Bill should withdraw this Bill because as I and my colleague, the Minister for Industry and Commerce, Deputy O'Malley, have explained, it will be totally ineffective and has been badly prepared. My Department are working on the legislation which the Minister will introduce in this House. The Bill before the House should be withdrawn as it is not suitable in the circumstances. The Bill the Government will be bringing forward will receive support on all sides of the House because it will be very comprehensive and will be ideally suited to the changing times ahead. As we proceed to 1992 it is vital that this legislation be brought forward. The Government are conscious of this and I assure the House that we are doing our utmost to bring it forward, as quickly as possible.
It is complex legislation and that is why I say, with respect to Opposition Deputies and parties, that they are not in a position to draw up such a Bill without the support and advice of a Government Department and the Attorney General's office. I understand and appreciate the constraints of being in Opposition. I recall some years ago when in Opposition bringing forward legislation.
It will not be too long before the Minister is in Opposition again.
It is difficult to prepare legislation, even with the assistance of the House, particularly on an issue as complex as competition and have it in line with European legislation. The Bill does not address the issues we will be dealing with in our legislation. A great deal of time has been spent in the House on this issue when in a sense it would have been better if the Opposition benches had the patience to allow our legislation to be brought forward. The Minister, Deputy O'Malley, is interested in this legislation and is anxious to bring it forward as quickly as possible.
I have outlined the shortfalls of this legislation and there seems to be an obsession on the Opposition benches about one company in the State who ran into difficulties which now it is hoped will be resolved. It is not appropriate that one issue or company should lead to a rush to bring in legislation for party political or publicity reasons which may be behind this decision. More detailed analysis is required than has been put into this Bill. It is a rushed, shabby affair and does little justice to the people who prepared it. We are quite clear on our stand. We will be voting against the Bill.
I am glad that some speakers, including Deputy Rabbitte, recognise that the 30 per cent rule in section 3 is unrealistic. That proposal takes no account of the Single Market. Judging matters exclusively by reference to the Irish market is outdated. We should not interfere with company size in such a context. We need to regulate behaviour. That is the essence of Articles 85 and 86 of the Treaty of Rome. It will be the centre-piece of the Government's Bill. This 30 per cent rule would be most damaging and restrictive on companies here who are competing in Europe and will, of course, face greater competition after 1992 against bigger companies.
It would not be appropriate or beneficial to the Irish economy to restrict the growth of companies. Small may be beautiful but size is necessary in the context of 1992 to ensure that Irish companies employing Irish people succeed, progress, build, expand and develop post 1992. We have great opportunities in the Europe of 1992 and I have no fears about the ability of Irish industry to face the challenge. We are constantly working with companies, aquainting them with the changes in legislation and the great progress that was made during the Government's Presidency of the EC in the first half of 1990.
I would like to take the opportunity to congratulate the Taoiseach, Deputy Charles J. Haughey, who spearheaded our Presidency of the EC. The planning that went into the preparation for the Presidency paid off. It is recognised in Europe that our Presidency of the EC was the most outstanding for a long time. Our Ministers and our excellent Civil Service contributed greatly to that success.
We are aware of the need for legislation in this field arising out of our attendance at meetings of Councils of Ministers and our success during our Presidency in bringing forward new rules under the Single Market. Those rules will allow for competition in fields heretofore closed off to competition in Europe, for instance in telecommunications, the provision of electricity and water systems. They were opened up during our Presidency, but to compete with European firms in telecommunications or the distribution of electricity we need very large firms. Fortunately, we have two major firms in Telecom Éireann in the telecommunications sector and the Electricity Supply Board, semi-State companies who are in a position, and will be in future, to compete in the Single European Market and obtain major contracts.
I am always impressed by the work of Irish companies, for example M. F. Kent from Clonmel, who succeed in getting contracts around the world against the biggest companies in the world. They employ Irish architects, engineers and technicians. Such companies are sourcing the majority of their products in Ireland. Why should we stand in the way of the progress of companies like those I mentioned? As Minister of State responsible for Trade and Marketing I have visited Irish companies when abroad and I have been on some of their sites in Spain. I was very impressed to see our highly skilled Irish men and women working and competing with the biggest and best in Europe and winning out. What is to be the largest hotel in Spain is being built by an Irish company. That is a great indication of the strength and success of Irish companies. But they must be large in order to allow for development and expansion and we should not stand in their way. It is my considered belief that the Bill before the House would constitute a retrograde step and would run counter to business development in that regard. We will bring forward properly prepared legislation, conscious of the needs of and opportunities for Irish companies abroad, so that we will not stand in their way, in creating much needed employment at home.
The question was posed here this evening as to what will be the philosophy that will underline the Government Bill, whether it will be that of the Department or of the Minister for Industry and Commerce. I should say that advisers merely advise but Governments decide and the philosophy underlying our proposed Bill will be that of the Government as outlined in the Programme for Government and agreed by the Government. The Minister himself is deeply involved in the preparation of this Bill whose heads have been approved collectively by Cabinet agreement. I want to make it quite clear that it is Government philosophy that is involved based on the advice of our excellent Civil Service. It has been the practice in this House not to criticise civil servants who cannot answer for themselves here, a practice I stand over. Having had the experience of working with various civil servants in various Departments I can say that perhaps they are sometimes better regarded in Europe than at home.
The Deputy should not be so harsh on Mr. McDowell.
In a European context I would contend that our Civil Service is the best. I have had much experience of working with them in the European context, within the context of the GATT discussions and of our Presidency of the EC during which time our civil servants chaired important meetings convened by their counterparts throughout Europe, whose appreciation and admiration of our civil servants was conveyed to me by other EC Ministers.
While there are excellent advisers available within the Department of Industry and Commerce, at the end of the day it is the Minister who must bring forward legislation encompassing the best advice available to him within his Department, and from the Attorney General. I must emphasise that the Minister is giving preparation of this Bill priority because he is conscious of the need for it. It is a very complex Bill——
The Chairman of his party was not impressed by the Civil Service.
——one which must be prepared very carefully. On Committee Stage we will be afforded an opportunity to tease out its every section. I hope we will have the full co-operation of Members of the Opposition in ensuring its speedy passage. I fully accept the need for its introduction and we will not be found wanting in bringing it forward. This Government have a record second to none in introducing complex legislation. My Department were responsible for bringing forward the Companies (No. 2) Bill, 1987, one of the most outstanding Bills to come before this House for some time and which necessitated enormous effort on the part of so many people over so many years. Many successive Governments failed to do so, including the Coalition Government of 1982-87, who were either unable or unwilling to introduce that legislation.
But they published it.
They may have published a Bill but it is more important to have such a Bill passed by the Houses of the Oireachtas. We have passed that legislation into law, it having passed through the hands of so many Ministers of that former Coalition Government. I was aware of the divisions within that Government in regard to that legislation when many Ministers of different persuasions came into the Department, all effecting their changes to it. Yet it took this Government and my Department to introduce it. We will do the same with regard to our proposed Bill in relation to competition in the food processing industry. We look forward to debating this Bill. In the circumstances it would be wise for the Opposition to withdraw their Bill and await the publication of ours.
The Minister of State who has just spoken described the Fine Gael proposal in regard to competition in the food processing industry as very dull. All I can say is that I hope the filibustering in which the Minister engaged in the course of his contribution — ranging from hotels in Spain to future prospects in terms of competition legislation — is not an indication of what will be enshrined in the Government Bill to be introduced in this House.
The Fine Gael Bill is motivated by a genuine concern at the lack of competition in many sectors of the food industry. It is essential that legislation be enacted to ensure that a dominant individual, or group of individuals, cannot suppress the price of a product to the producer or inflate its price to the consumer.
Recent events in the Irish food industry clearly indicate the importance of competitiveness in the Irish food sector. It creates a very poor impression — in fact that of a corrupt economy — when a private individual can gain access to huge amounts of unsecured finance to satisfy his personal greed, with the support of Government, while at the same time a less influential individual probably would require a deed of property, life assurance cover or even a personal guarantee from a member of his or her family in order to set up a small business here at present.
Is it not equally disturbing to realise that, since Fianna Fáil returned to Government in 1987 — when the Minister present became a Minister of State — personal patronage to friends of Fianna Fáil has made many people rich through various nods and winks, favourable tax legislation, while the less-privileged competitor must seek to sustain and expand a business development against those considerable influential odds? I would have to be honest and say that, when it comes to looking after one's own, the players in this Fianna Fáil/Progressive Democrats Coalition Government go back a long way together in terms of looking after people and their friends, sometimes at taxpayers' expense.
Since the return of Fianna Fáil to Government in 1987 the State has succeeded in bringing competition in food processing to a standstill. For political and financial reasons the Government decided to hinge the entire development of the beef processing sector onto one individual company under the control of Mr. Larry Goodman. The Minister of State present will recall the huge publicity given in 1987 to the launch of the food drive in the beef sector when the Minister of State at the Department of Agriculture and Food, Deputy Walsh, said that our food industry would henceforth be on the fast track with a huge investment of £250 million, with IDA support, to one meat company here. It was a Government decision to vest the overall development of the beef sector in one individual. That was not a Fine Gael but a Fianna Fáil decision and the Minister of State should remember that. By way of Government intervention, European assistance and exclusive IDA grants the Goodman Group built up a massive food processing empire which finally developed difficulties, not because of a threat of BSE, the withdrawal of export credit insurance or the Gulf war but by the greed of one individual and various policy decisions on the part of the Government of the day to the detriment of our economy and taxpayers.
In spite of the tremendous gusto and gung-ho statements on the part of the Minister for Industry and Commerce when he contributed to the debate on this Bill, and even when in Opposition, he has continued to support the Goodman Group through the enactment of favourable legislation in August 1990 and his failure to refer the latest High Court package for consideration under the provisions of the Mergers, Take-Overs and Monopolies (Control) Act, 1978.
I can assure the Minister for Industry and Commerce that if he does not refer this package under the above mentioned Act he will be seen as a Minister who has huffed and puffed over the years about the desirability of competition in all aspects of economic activity but who will have capitulated at the last moment and sanctioned a rescue package for a company that will allow a private individual 90 per cent control of his company again in seven years time at the expense of food producers in this country. So much for competition in the food industry when that same company and individual will continue to command over 40 per cent of the trade. This High Court rescue package clearly demonstrates the potential role of the new position of Examiner under the 1987 Companies Act. I warn the Minister for Industry and Commerce that the flexibility shown by the Examiner in the case of the reconstruction of the Goodman Group could have serious implications for lending policy by financial institutions in this country. There is no doubt in my mind that it will make it much more difficult to satisfy financial institutions about adequate security in respect of financial undertakings because of the experience of the court procedures and the role of the Examiner in this recent case.
I hope that the Minister for Industry and Commerce will be able to give assurances that other self-employed people whether in business or agriculture will not be victimised by financial institutions in respect of requests for lending facilities and thereby create unfair competition in the lending market.
There is an impression created here in Ireland that the Common Agricultural Policy indicates equality of treatment for all member states in the European Community. However, nothing could be further from the truth. There are major divergencies between member states in respect of geographical location, economies of scale, stage of economic development, financial position, interest rates, inflation rate and so on. Therefore, it is imperative that Ireland seeks to fight its case in Europe taking account of the condition of the various factors that I have mentioned and seek to win approval for our special position on the periphery of Europe and our generally under-develped economic and infrastructural needs and our distance from the centre of the European Market vis-à-vis other member states.
It is important in the development of the food industry that we are able to articulate the importance of the agricultural industry to our country and exploit our natural advantages over our European counterparts in the community.
I regret that this Government have not appeared to be succeeding in recent times when one considers the mess the Irish Commissioner for Agriculture is making with reforms under the CAP and indeed in the GATT negotiations. We have a Minister for Agriculture who was a former Commissioner and a Commissioner for Agriculture who was a former Minister for Agriculture and the two of them have put our agricultural economy into a tail spin and into utter confusion to the detriment of many people in the agricultural industry. In addition, the Government appear not to have an agricultural plan of their own as to how to reform the CAP or how to approach the GATT negotiations. We have a Minister for Agriculture who is seeking to pick his steps, as it were, over every minefield that his former colleague, Commissioner MacSharry, is putting in his way on the agenda for every meeting of the Council of Agricultural Ministers.
I call on the Government to assert their independence as a sovereign member state of the European Community and to show our people the unique contacts and new alliances that they made with their European partners during the much spoken about contribution of Deputy Leyden during our Presidency of the EC in 1990. That was when the trouble started in relation to the reform of the CAP and the GATT negotiations. Now we do not hear much about the contributions made by the Ministers during that time to the development of the agenda in these various reforms taking place at the moment.
I hope that at the end of the negotiations in relation to the Common Agricultural Policy and the GATT negotiations that I will not be in a position to conclude that the Irish Presidency of the European Community in 1990 was nothing more than a massive public relations exercise and an opportunity for more cheese and wine receptions in Dublin Castle.
The Taoiseach and the Minister for Agriculture should immediately tour European capitals to impress on other governments the unique importance of the agricultural and food industry to our economy similar to what Deputies Garret FitzGerald and Austin Deasy achieved during the milk super levy negotiations in the mid-1980s. On that occasion Ireland alone succeeded in getting a 4.64 per cent increase in our milk quota while every other country in Europe was taking a 6 per cent decrease. That is a measure of Fine Gael political clout in Europe and it was described at the time as the greatest sell out since the Treaty by the Fianna Fáil spokesperson for Agriculture.
I call on the Minister to indicate the Department of Agriculture plan on reform of the Common Agricultural Policy and the development of the food industry, if he has one, so that we can have a well informed debate in this House on this matter of crucial national importance to our economy.
Exports of food from Ireland in 1989 amounted to £3.3 billion and accounted for a staggering 21.3 per cent of total Irish exports. They have dramatically reduced in 1990 because the price of cattle to the farmer has gone down and this is reflected in the price of exports. It shows once again the clear importance of agricultural exports in our overall national returns on exports. It is clear also that the food sector is of critical importance to our economy because none of our raw materials has to be imported.
Fine Gael believe that a market-led strategy is the only way to develop an export-based internationally competitive food industry. It is an emphasis on the marketplace that will determine the price we receive for our food produce. The easy option of intervention is no longer available. To improve our marketing strategy in the food industry grant aid should be given to manufacturing and distribution companies that satisfy detailed marketing criteria.
All too often we see companies making market penetration at the expense of other Irish competitors manufacturing the same product. The best example of this relates to food diversification in the co-operative movement, particularly with dairy spreads. This has been developed in an ad hoc fashion and one co-op is competing with another for a small share of the market. Greater co-ordination of our export drive is essential and is desirable in the food industry. Improving food quality can be a cornerstone of this exporting drive.
We have failed as a nation to capitalise on the image of Ireland as a pollution-free island and as a nation that produces pollution-free food products. I condemn in the strongest possible language the rampant use of illegal hormones in the Irish beef industry today. The use of hormones, such as "angel dust" and other implants, are only a short term gain to the agricultural community and will only displace market opportunities in Europe if these illegal practices persist. It has been proved by consumer surveys over and over again that the consumer will pay additional price for food products that are pollution-, antibiotic- and hormone-free in the interests of food safety and consumer health.
A feature that has bedevilled the Irish food industry in recent times has been the lack of statutory co-ordination in respect of sampling of food for outbreaks of salmonella, listeria and so on. It is essential to designate the National Food Centre as an independent laboratory for the uniform sampling of food rather than the existing confused and disjointed system. It is also essential to extend this uniform sampling procedure to the European Community and establish an independent centralised agency, similar to the FDA in the United States of America, to convince European consumers on food safety.
These developments are essential if we are to make further market share gains in Irish food exports and thereby give the best possible price to the producer of our food products. The elimination of trade barriers by the end of 1992 will encourage Community food concerns to expand their geographical coverage and market leadership so that wide-scale restructuring and consolidation amongst the largest companies is likely.
I pay tribute to a co-operative which has made great strides and which has developed into one of the foremost national companies in the food area. I am referring to Avonmore, which is in my area. This company have devised a strategy that will bring them into the European and American marketplaces in terms of competing with similar companies in these countries. A sum of £200 million has been spent by various food companies in Ireland over the last two years in trying to develop internationally competitive industry. We have seen significant reductions in the number of co-operatives, with many more in the pipeline. I want to sound a note of warning. The objective of the ICOS and of the Government is to rationalise the food industry and the co-operative movement. The extension of the public limited company concept to the co-operative movement worries me slightly.
Debate adjourned.