Dáil Éireann debate -
Tuesday, 28 Jun 1994

Vol. 444 No. 5

Competition (Amendment) Bill, 1994: Second Stage.

Minister for Enterprise and Employment (Mr. Quinn)

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

The Competition (Amendment) Bill, 1994, is deliberately designed to be short. It is largely confined, at this stage, to making two major changes to the existing competition law. I would like to make it very clear that we are taking the opportunity to make these widely supported changes without changing the fundamental basis of the Competition Act, 1991. The two main amendments are improvements and will enhance the operation and applicability of the law within the State.

I fully accept there is a great need for debate in this House and in the public arena on the principles and priorities in the whole commercial law field. Deputies will be aware that I recently established a company law review group to look at a number of questions in this area. There is a clear need for critical analysis at this juncture.

The review group has broad based terms of reference. It can make recommendations in the area of our overall commercial law regime and I have asked it to report regularly to me with its recommendations and findings. I look forward to discussing these recommendations in the relevant Oireachtas committees. I assure Deputies that their views and contributions will be valued in our efforts to enhance the application of policy in this area. This Bill is a first step and should be seen as such. There will be continuing opportunities to input to the policy process in relation to company and business law.

First, the Bill provides for public independent enforcement of the competition rules. The existing system, whereby the principal means of enforcement was through private actions by individuals in the civil courts, has proved, in the period of operation, to be less than fully effective.

We have seen very few actions in the courts and there has, to date, been no award of damages to an aggrieved party. To strengthen the application of the law I propose to introduce public enforcement of the competition rules. The power to make investigations and to take actions will be given to the Competition Authority. To underpin this new function I propose to appoint a member of the Authority with specific responsibility for enforcement matters. The new member of the Authority will be known as the director of competition enforcement.

The second major change to the law proposes to remove all mergers from the scope of section 4 of the Competition Act which prohibits agreements between undertakings which prevent, restrict or distort competition. Merger or takeover agreements could, therefore, fall under section 4. It was not satisfactory that merger agreements were subject to two sets of regulatory instruments. Large mergers are already reviewable by me under the Mergers, Take-overs and Monopolies (Control) Acts. The dual jeopardy difficulty created by section 4 of the 1991 Act had to be removed. In this legislation I am also removing small mergers, or mergers which fall beneath the thresholds in the mergers legislation, from section 4 of the Competition Act. Section 4 is not an appropriate instrument to control structural changes in firms. Under section 4 of the Act a merger agreement could be licensed for a finite period of time. This clearly does not fit easily with the legal certainty required in mergers and acquisitions. While it is clearly desirable that mergers be removed from section 4 of the Competition Act it is also recognised that, in the interest of safeguarding competition, a system of checks and balances should be retained in this area. Our system has three components.

First, under the separate mergers legislation, I retain the power to approve large scale mergers, that is, mergers where, for each of the parties involved — the purchaser and the target firm or firms — turnover exceeds £20 million and assets exceed £10 million. Second, while merger agreements are to be excluded from section 4, ancillary ongoing agreements which are not indispensable to the merger or takeover will still be subject to section 4 of the Act. The Competition Authority has, in its recent decisions given indicators as to what is considered, on balance, to be acceptable or necessary for the transfer of goodwill to take place in terms of non-compete agreements. Third, mergers or takeovers will not be immune from section 5 of the Competition Act, 1991. Section 5 prohibits the abuse of a dominant position.

The removal of mergers from section 4 of the Act is also intended to facilitate co-operation between Irish firms and permit them to grow and take advantage of economies of scale. This should also enhance competition by creating new products and accessing new markets. This is in line with our overall industrial policy.

Before elaborating on the detail of the Bill it is important to explain the background and context in which the decision to amend the Competition Act in these respects was taken. The NESC, the Culliton-Moriarty Group, the OECD and others agree that for a small open economy like Ireland, growth and employment are dependent upon competitiveness and that sustainable employment growth can only be achieved by increasing the competitiveness of Irish firms. This view was further endorsed by the social partners in the Programme for Competitiveness and Work which said:

Sustainable employment expansion is dependent on increased competitiveness which:

— reflects the full range of operating costs for the whole economy, private and public.

— requires that inefficiency and rigidity should not be allowed to threaten the long-run viability of Irish employment,

— fundamentally depends on the capacity of Irish firms to innovate, to meet the needs of changing markets and to respond flexibly to the changing circumstances of customers at home and abroad.

Many factors influence the level of competitiveness in the economy and increasing competitiveness requires appropriate policy and action, on the part of Government and individual firms and industries.

Competition policy is a key area where Government can make a positive contribution to achieving the goal of increased competitiveness. The Government recognises that an effective competition policy is vital if we are to rid the economy of inefficiencies and anti-competitive practices, particularly in the non-traded sectors of the economy. I stress the word "effective" because that is the kernel of this Bill: its primary aim is the more effective enforcement of competition law in this country.

I am satisfied that the existing provisions for enforcement are inadequate and have not worked in practice. I am convinced that it is necessary now to strengthen the enforcement of competition policy in the manner proposed. This view is fully supported by the OECD and by the NESC in its report on a Strategy for Competitiveness, Growth and Employment, which concluded on the following point:

It is not clear that the Act provides sufficient powers to police effectively anti-competitive behaviour, with the reliance on private legal actions appearing to be a particular weakness. What is really required is that the present Competition Authority be given additional powers to initiate investigations and pursue actions through the courts if necessary.

It was against this background that the Government gave a commitment in the PCW to give urgent consideration to, and bring forward, such changes to the 1991 Act to address difficulties in the area of competition policy and to promote further the operation of competitive markets. The objective of the Bill is to deliver on that commitment. It will bring about the structural reform necessary to enhance competitiveness by protecting and promoting the effective functioning of the market system while at the same time affording help to the weak against those in more dominant positions.

Methods of enforcement vary but most countries have seen the value of strict and effective enforcement of competition rules which includes a public enforcement element. One of the principal beneficiaries of the Bill should be the consumer and small or medium sized enterprises, and it has to be remembered that the public sector is one of the biggest consumers of goods and services. We want to be sure that we too are getting good value for money.

This can be guaranteed only where there is open and free competition and where anti-competitive practices such as bid rigging, price fixing or market sharing are outlawed. Cosy anti-competitive arrangements in effect are a tax on the consumer, be it the State, firms or individuals and in aggregate constitute an unacceptable burden on the economy and a barrier to innovation and enterprise and future employment.

I turn now to the limited number of amendments proposed to existing legislation. I would like to stress again that the Government proposals are confined to two main points—public enforcement and mergers as they interact with the Competition Act, 1991.

Section 2 of the Bill has the effect of removing all mergers from the scope of section 4 of the Competition Act. The section does not preclude the application of section 4 to anti-competitive agreements or arrangements engaged in which are not part of the merger agreement per se.

Subsection 2 provides that mergers to which the Mergers, Takeovers and Monopolies (Control) Acts apply, that is, mergers above the £20 million turnover and £10 million assets threshold, are protected from section 4 actions retrospectively.

Section 3 provides that the competition Authority can now issue category certificates. Certificates are issued in cases where, in the opinion of the competition Authority, an agreement or arrangement does not offend against section 4 of the Competition Act. Up to now the Authority has had to issue individual decisions in each case. The new powers to issue a category or block certificate will assist in reducing the workload of the Authority and will cut down on the necessity for firms to make an individual notification if they are already covered by the terms of general category certificates.

Section 4 is a technical amendment. The effect of the section will mean that old agreements or agreements that were in existence before the 1991 Act came into force which have been notified to the Authority and which have been licensed or certified will be protected from third party actions for damages during the notification period. An anomaly which existed in the 1991 Act which protected new agreements from action during the notification period but not old agreements has come to light and therefore is being rectified.

Section 5 gives the competition Authority the right to take an action for breaches of sections 4 and 5 of the competition Act. In this section I am providing for public enforcement of competition by an independent body.

Section 6 permits the competition Authority to carry out studies and analyses on its own initiative. Under the 1991 Act the Authority had to wait for a matter to be referred to them by the Minister. This new power will give the Authority scope to target its investigation or studies as they see appropriate.

Section 7 permits the Minister to appoint a member of the Authority with specific responsibility for enforcement matters. The member will be known as the Director of Competition Enforcement and will have principal day-to-day responsibility for enforcement within the competition Authority.

Section 8 is a technical amendment. This section is intended to clarify in law an anomaly which, in practice, has been applied by my Department in relation to the mergers legislation. Section 8 specifies that the monetary thresholds set out in the Mergers, Takeovers and Monopolies (Control) Act, 1978—as amended—must be exceeded by each of the enterprises intended to come under common control.

Section 9 makes provision for the prescription of a fee to accompany merger notifications from large scale undertakings—over £20 million turnover or £10 million gross assets in each case. This is a measure which is in line with the general trend to make such services more self-financing. I would like to make it clear that the fee will not be onerous nor will it constitute a burden on business; it will not apply to small-scale businesses who are not in any event required to notify me under mergers legislation. On a technical point this section also provides penalties where false or misleading information is given in the context of a merger notification.

Section 10 is a standard section of the disapplication of the Public Offices Fees Act, 1879. Section 11 removes the definition of monopoly from the 1978 Act. This definition is no longer useful as it has been replaced by the concept of a dominant position. Section 12 is a standard section containing the short title of the Bill and the collective citation.

Competition policy is an instrument of economic policy and must be applied within an overall reference framework required to achieve our economic goals. Competition policy is a vital part of our industrial policy and therefore must be sentitive to the needs of our economy.

The approach taken in this short Bill reflects and underpins the twin objectives to support growth companies while at the same time protecting smaller firms and consumers from the damaging excess of cartels and abuses by dominant firms. Markets must remain open and competitive and must be seen to be so. Otherwise, the spirit of enterprise and innovation will be quashed and growth and employment which we require consequently will suffer.

I very much welcome the positive reception the Bill has received from various representative bodies and from those involved in the operation of the legislation. I consider we have achieved a well balanced approach and improved on the existing legislation both in terms of policy direction and in terms of the practical operation of the law. I commend this Bill to the House.

It is my understanding, subject to agreement between the Whips, that following completion of Second Stage today, the Bill will be referred to the Select Committee on Enterprise and Economic Strategy and will be dealt with in due course.

Mr. R. Bruton

Effective competition policy is an extraordinarily important instrument in the hands of any Government in ensuring the economic well-being of consumers and people at work here, its benefits being all too often ignored. For example, there was a recent study undertaken of the potential benefits of an effective competition policy here, the result of which was to place a figure of £265 million as the benefits that could be achieved therefrom. When one notes that this Government effectively is putting approximately £1 million into the existing competition Authority to secure that objective and has been working on the basis of a Bill that is seriously flawed, one readily appreciates that there has not been an effective commitment on the part of Government to achieve a proper competition policy.

I must also point out that the Minister gave a very firm commitment, when he responded to the Moriarty report, that there would be a programme of proposals to increase the efficiency and operation of market forces—as was said in the Moriarty report—through the relaxation of controls, restrictions, licences and other limitations whether official or private that operate to restrict entry to suitably qualified people or firms into trades, professions and services. Sadly, we have not seen any such programme published by the Government. No amount of jinking and weaving by the Minister will conceal that this area has not received the attention it deserves

The Bill shows some indication of commitment on the part of the Minister but sadly, at the end of the day, a very halfhearted one. Indeed at the end of these proceedings, we shall not have successfully put in place a competition policy with which we could be satisfied or of which we could be proud.

One of the major changes the Minister proposes today is to remove all mergers and take-overs from the law that protects against unfair competition. This is a sweeping change. The Minister passes it up by saying it was never intended but there is an onus on him to prove that the change he proposes is in the public interest. In his introductory remarks he failed singularly to prove any such item to be in the public interest. For example, he made no reference to the would be benefits that could accrue from the changes he is proposing. That is a serious flaw. I have serious misgivings about this. First, how can it be in the public interest to exempt an anti-competitive agreement if it is brought about by a merger or take-over but vigorously to prosecute that agreement if undertaken by a cartel? That is hard to understand and the Minister should explain why. Why should the fact that this agreement came about suddenly by way of a merger or take-over give it a charmed existence? Of course, the Minister will say that he vets these proposals. Again, that begs the question: how can it be in the public interest that decisions on mergers that contain anti-competitive elements be made by a Minister and not by an independent, arms-length authority such as the competition Authority which we have appointed? That question must be answered. The Minister did not advert to that. How can it be in the public interest that a takeover of a company with less than £10 million in assets or £20 million in turnover be exempt from scrutiny of its anti-competitive aspects, irrespective of how dominant the company making the acquisition may be? Many people saw the recent attempted takeover of Cooley by Irish Distillers as an anti-competitive move. If the company to be acquired had less than £10 million in assets or £20 million in turnover it would not come in for scrutiny under any code. The Minister did not indicate his view on this although he indicated some time ago that he took a contrary view.

In an article in The Irish Times the Minister originally announced that acquisitions below the threshold in the Act would still fall for review by the competition Authority but he changed his mind in recent weeks. The Minister did not advert to the arguments that persuaded him to change his mind. The House has a right to know what those arguments were, if they were cogent and coherent and if they justify the decision reached at the end of the day. How can it be in the public interest that applications to merge will now be kept secret, giving no opportunity for objectors to air their views? That is one of the hidden effects of this transfer of the remit to the Mergers, Takeovers and Monopolies (Control) Act which contains a provision for notification to the Minister but does not become public knowledge. His decision would only become public knowledge where he refused them. There is no opportunity for the voice of the public to be heard. If consumers or anyone else have a legitimate case to make they should have an opportunity to make those views known. It is strange that Iris Oifigiúil does not list proposed mergers due for scrutiny. The contrary is the case with the Competition Act where notifications become public knowledge. It is explicitly provided for in the Act that outside interests can make their views known. A significant change in policy is being introduced and the Minister's contribution was silent on what justifies it.

How can it be in the public interest that there will only be independent assessment of the merits of a merger where the Minister withholds his permission to the proposed merger but none where he gives the green light to a proposal? As I understand it, one of the major benefits of the activity of the competition Authority is that it has built up a pattern of information as to why it makes its decisions, the reasons it advanced in favour of certain decisions. If the Minister decides to give the green light there is no public assessment, no one knows the reason some were successful while others were not. This may be putting it strongly, the system proposed by the Minister lacks transparency as a result of the change introduced. It lacks consistency because he suggests that one activity would be treated differently if it is done as a result of a merger than as a result of a cartel. It lacks accountability in that the Minister does not give justification for approving certain mergers. Admittedly, if he blocks mergers it comes into the public arena and we can see the reasons for decisions taken. Nevertheless, people will worry if there is a suspicion of political patronage although I am not suggesting that the Minister would be involved in that. If we have a system whereby if Ministers give a green light they are not accountable to anyone—they do not offer any reasons —I could well see people arguing that this is a recipe for political patronage, for lobbyists trying to advance their case, that there would be a golden circle of people who would have preferential access to decisions under such a system. It is dangerous to move from a system, under the competition Authority, where we had clear transparency, public knowledge about decisions and accountability for reasons being given to one which does not have such merits. I am worried we are not establishing the due process we should have in the area of competition.

I recognise, and the case has been put by the Minister, that the present system for dealing with mergers has serious flaws. Mergers now have to run the gauntlet of scrutiny under two separate Acts—the Competition Act and the Mergers, Takeovers and Monopolies (Control) Act—which apply separate criteria. Business has rightly made the case that this exposes them to extra legal costs and to what they call "double jeopardy". There is clearly a case for a one-stop-shop but the Minister's approach is not securing the proper way to do that. The European Union operates such a system with two separate systems: one for controlling acquisitions and mergers and the other for controlling competitive behaviour of business. The Minister has arrived at an unsatisfactory compromise which will satisfy neither the consumer nor business. The consumer will, rightly, be offended by the lack of transparency and accountability in the new system for dealing with mergers. Businesses will discover that they still face the dangers of double jeopardy. A merger would be open to challenge years later that its creation constituted an abuse of dominant position under section 5.

The case has been advanced to me that there will still be uncertainty about mergers. A person seeking to merge or to acquire a company will still wonder whether the whole edifice could be brought down years later following a challenge from a third party on grounds that it was a dominant position. The aggrieved party challenging it could be a person who has been hurt because the merger was successful in bringing cometition to the industry and introducing lower costs or whatever. We have to examine that issue. I favour a one-stop-shop but competition law should be enforced evenly and fearlessly by an independent authority. In the case of mergers this means that their control should be exercised by an independent body, openly and fairly, and that the mergers should be exercised by the competition Authority, not by the Minister as envisaged.

It would be sensible to give the present ministerial powers under the Mergers, Takeovers and Monopolies (Control) Act to the competition Authority so that everyone can see what is going on; require that mergers be publicly notified and that other persons who wish to comment have an opportunity to do so. Decisions on proposed mergers should be made public so that a body of knowledge can be built up as to what constitutes an acceptable merger and not at the discretion of the Minister without clear criteria being known to the public at large. It should be a stand alone one-stop-shop so that mergers and takeovers are approved on the basis of one application and not open to subsequent challenge. The Minister did not indicate why he saw merit in removing the potential for challenge under section 4 but not under section 5.

It has been argued that section 5 deals with dominant position. The concern about a merger is that it will behave in a way that abuses its dominant position, not the fact that the whole merger should be unpicked years later. There should be one opportunity to vet the merger. If the merger is acceptable it is vetted and approved. If the merger then abuses its authority the full force of the law, undersection 5, should be used to deal with the abuse. I fail to see why one should say the merger could be challenged years later as an abuse; in other words, one would force the unravelling of the company which was formed many years before. I did not understand the Minister's argument about seeing a need to exempt in one case and not in the other. If one wants to adopt the one-stop-shop approach that the Minister sees as necessary one needs a vigorous mergers Act which I do not think we have and as soon as a decision is made it should be final and not open to challenge years later. I am happy with the Minister's explanation.

On the issue of a blanket exemption for takeovers of companies with a turnover exceeding £20 million and assets exceeding £10 million, this provision should be replaced by a more discerning provision. This is a "back of the envelope" way of deciding who would be vetted. The Minister suggested already that he had other thoughts about this matter but it is not beyond the capacity of this House to include a more discerning provision which would take into account the size of the merged group relative to its market. It is a surprising conclusion that a huge giant taking over a succession of small players to build itself up should not be subject to control. If a big player is successfully swallowing up the minnows this may be contrary to the public interest and should, in certain instances, be open to control.

We should have a discerning provision which would take into account the size of the group formed relative to its market and the degree to which the sector is sheltered from external competition. In the exposed sector of the economy we need to build up strong and large companies. It would be desirable in exposed sectors to see companies merge and to build up Irish giants but the same argument could not be made in the case of sheltered sectors where it is believed there is controlled and anti-competitive behaviour. If we provide exemptions we need to be more discerning rather than just say that there will be a threshold.

In dealing with mergers effectively the final ingredient is that any anti-competitive action by a company following its formation must be vigorously pursued. That leads me to the issue of enforcement. We all welcome the changes in the rules of enforcement because, to my knowledge, although the Minister had this power under the Act he took no action. Perhaps he will contradict me if I am wrong. It beggars belief to hear him say that his Department will have a great programme of proposals to deal with anti-competitive activities in the market-place when neither he nor his predecessors took any action. One wonders if this is rhetoric and if there is anything behind it.

The Minister also failed to take action under section 14 under which he has the right to investigate monopolistic behaviour. He is not now proposing to give this power to the Authority which strikes me as strange. If one had listened to what the Labour Party said in Opposition one would believe it was a party which was convinced that there is much anti-competitive behaviour in the economy, that people are colluding and not giving a fair deal and that this was the party which would take them on. However, it seems this is not the case.

The key weakness in the Bill is that there is no proposal to impose fines on companies which engage in anti-competitive behaviour. These fines have proven a real deterrent in other countries. In Europe a company can be fined up to 10 per cent of its turnover if found guilty and such penalties concentrate the mind. It was always unrealistic to expect aggrieved customers—or even aggrieved competitors—to go to court against market giants when there was an abuse of power. It is equally foolish to believe, as the Minister seems to believe, that without fines we can have proper enforcement.

When the Competition Act, 1991, was debated the Minister's colleague, Deputy Taylor, the Minister for Equality and Law Reform, said at column 1532 of the Official Report of 30 April 1991:

We must ask ourselves: is it adequate to, as the Minister is doing in this Bill, simply provide for damages and exemplary damages? Is that what is done in other countries in similar circumstances? Certainly it is not. In fact, it is far from it. What is done? How is the matter tackled? How do the EC laws cover penalties for a breach of anti-competition regulations? The procedure is quite different, more effective. The EC Commission, under regulation 17/62 may impose fines for a breach of up to 10 per cent of the turnover of the company in the country in which they have committed the violation. . . . That is a very different kind of picture to the one envisaged in this Bill. What is envisaged in this Bill, by way of sanction on a multinational, is small beer, would have very little meaning and, by no stretch of the imagination, would it operate as a sanction to make them think twice before breaching the competition regulations. . . . What is being done here is to deal with what, in effect, is a criminal matter, making it an offence but leaving it to a civil remedy to enforce: those two do not mix.

I am more impressed by the case made by Deputy Taylor than by the silence of the Minister today on the same issue. The only power the Minister is giving the courts is the power to wag its long finger at the offenders and tell them to stop. This is not satisfactory and there must be a change in that area if we are to have an effective competition Authority.

On the question of enforcement, one of the critical issues is resources. I am amazed that the Minister is silent on this issue. If we are to have effective enforcement by the Authority it will need resources. It will be expensive to take legal suits against companies which behave in an anti-competitive way; it would be taking on substantial interests who have much money to lose. We have to be willing to provide resources.

I draw the Minister's attention to the report of the competition Authority issued in 1992 in which it is stated in paragraph 1.8 that the staff consisted of one principal officer, one assistant principal officer, two higher executive officers, two executive officers, two clerical officers and two clerical assistants a total of ten. I have now been told that there are 11 staff. The reality was that there were three officers at assistant principal officer level or higher who were capable of carrying out the investigations envisaged under this legislation. By contrast the Ombudsman has 16 staff at that level and his investigations do not involve the detailed work the competition Authority will have to take on. The Minister must gear up the Authority if it is to do its job. The cellars of Dáil Éirann are knee deep in legislation passed but never properly enforced. The same could happen with this legislation.

Paragraph 1.9 of the report states:

The Authority feels that it is incumbent to point out that authorities dealing with competition matters in other countries, including countries of a size comparable to that of Ireland, have available a large number of staff, many of whom have professional qualifications in law or economics. The Authority is at a disadvantage, in dealing with its large volume of work, by virtue of having only a small staff and of not having available legal and economic advisers.

It was not suggested that the Authority should get involved in enforcement matters. Perhaps the Minister should wipe the dust off that report and reread it because of the cry from the Authority's heart ever before taking on these powers.

The Minister must also clarify the relationship between the Director of Competition Enforcement and the other members of the competition Authority. Questions have been raised as to whether it is correct to have a judge and policeman, as it were, on the one board. Should the Director of Competition Enforcement be acting as a policeman while making decisions on licences? There is an argument for giving the Director of Competition Enforcement a role similar to that of the DPP, whose sole role relates to enforcement. I would be interested in hearing the Minister's comments in this regard.

The Bill is vague on the procedure for a consumer or another third party to make complaints about anti-competitive behaviour. A strong case could be made for spelling out a procedure so that a consumer will know where his or her rights lie and how a complaint will be dealt with. At the very least there is a case for giving the competition Authority an explicit role in informing the public about duties and obligations under the competition Acts. It is interesting to note that the Director of Consumer Affairs has the power to inform the public about duties and obligations under consumer Acts. As this Bill involves similar powers of enforcement in regard to misleading information, that provision should be inserted in the Bill.

I referred earlier to the issue of studies. I welcome the fact that the Authority will have power to initiate studies on unfair competition. It is ridiculous that until now such a study could not be conducted without the Minister requesting it, and I am not sure if the Minister was particularly active in requesting such studies. He appears to want to retain the power of deciding whether there should be studies on the use of monopoly positions. There is no explanation for that. If we are giving the Authority power to carry out studies, it should be given power in that regard unless the Minister is content that there is no abuse of market power here, something about which I would not be very convinced.

The legislation fails to deal with the Groceries Order, defects in which recently prevented a supermarket chain from absorbing a price increase and passing it on to the consumer, even though the supermarket chain, Dunnes Stores, proposed to do so at its own expense and with no damage to the manufacturer. As a result of the Groceries Order it was alleged that such activity would involve below cost selling by Dunnes Stores, obviously a flaw in the definition of below cost selling. It is disappointing that the Minister did not introduce a proper provision for below cost selling in the grocery trade, one which would protect manufacturers from unfair treatment but at the same time not penalise the consumer.

The Bill does not refer to the qualifications, aptitudes or skills necessary for the appointment of a Director of Competition Enforcement. It is important that person appointed who will be involved in a very technical area, is the correct one for the job. I am not suggesting this would be a party hack chosen by the Minister, but the person chosen should have suitable skills and experience.

There is confusion about a provision in the Bill which deals with retrospective exemption and how that will operate in companies below a certain threshold. That and other matters can be deal with on Committee Stage. I outlined a number of concerns about the Minister's approach in this area and I hope when replying he will be more fulsome about the merits of the changes he proposes.

Mr. O'Malley

It is barely two weeks since this complicated Bill was published. It may be short, but its ramifications are considerable and its provisions require to be teased out line by line. I am glad, therefore, that there is no question of Committee Stage being taken today. I hope when it is taken in the Select Committee on Enterprise and Economic Strategy that ample time will be allowed to consider what is a difficult Bill. From my experience that committee is not necessarily the best place for examining matters, especially if time limits apply.

As the person who introduced the 1978 and the 1981 Bills and guided them through both Houses, I am more aware than most of the need for careful consideration of this legislation. Its concepts are new and different and are not fully understood here where, unlike the United States and continental Europe, we do not have a long tradition of dealing with anti-competitive practices and abuse of dominant positions and monopolies. Indeed, it could be said that restrictive practices are part and parcel of at least one aspect of our culture and many people would not see anything wrong with restrictive practices that are of benefit to them and their colleagues, but cost the economy and consumer dearly.

The first thing to be said about the Competition Act, 1991 is that, contrary to the popular perception that is occasionally cultivated by some commentators in journals, the Act has worked well and has already had quite an influence on commercial behaviour here. The fact that the number of cases taken civily and decided under the Act is relatively small so far should not be construed as meaning the Act is not having an influence. Many things would have happened but for the existence of the Act.

It should also be stated that the standard of the decisions of the competition Authority is very high. It is snowed under with many trivial cases but its decisions on important ones are excellent and well reasoned. I hope it will shortly be able to clear the once-off and non-recurring raft of notifications of pre-existing agreements it received in September 1992 and then concentrate on important cases of more general application and interest.

The great difficulty with the 1991 Act —as I saw at the time—was that for public expenditure reasons we had to confine its enforcement to private civil actions. The number of actions has been small and is likely to continue to be so because the marketplace here is small and often dominated by one or two very large suppliers or retailers, and rarely will a small retailer or a small supplier take on a major supplier or a major retailer. Accordingly, clear breaches of the 1991 Act are taking place without redress.

Notwithstanding the obvious and ongoing need control the cost and numbers of the public service there is no option at this juncture but to agree to the Minister's proposal that an additional member be appointed to the competition Authority for public enforcement purposes. If he and the Authority are to act effectively there will have to be adequate staff which will be costly, but I cannot see an alternative. It is a measure of my and my party's anxiety to keep down and reduce public expenditure that we tried in the 1991 Act to have private civil enforcement alone. I acknowledge that the 1991 Act is less than satisfactory without public enforcement and, therefore, I support the proposal in section 7 to amend the Schedule to that Act. The value of that Act will become rapidly more apparent when that appointment is made after this Bill is passed. However, nothing will be lost by a delay of a couple of months in the passage of this recently published Bill in order to ensure it is right. While there are unfortunate public expenditure implications in section 7, which I presume we will have to live with however reluctantly, serious difficulties of substance arise from some of the other proposed changes to the Bill.

The Explanatory Memorandum and the briefing material provided by the Minister give the impression that the other changes are relatively minor and technical and he said so in his contribution. That is far from being the case. Some substantial changes in the law are proposed in the Bill which will not do anything to help the Irish economy by advancing the concept of competition. The opposite will be the case and small firms especially are made particularly vulnerable to the acquisitive instincts of large companies, whether Irish or foreign, if the provisions in the Bill go through.

While section 8 is portrayed as a minor technical amendment by the Minister, its significance is considerable. The thresholds are too high at assets of £10 million or a turnover of £20 million for a target company. In many sectors of business here a large number of the companies involved would have assets or turnover below this figuure. The result is that one large and dominant firm can gobble up virtually all its competitors. This would be true, for example, in the beef sector, which is especially sensitive. The combined effects of sections 2 and 8 would have the undesirable result in practice of allowing one dominant firm to absorb most of its competitors, if not all of them. That runs counter to the theory and objective of competition policy and is foolish and dangerous.

The Culliton report, which is cited as gospel by all sorts of people to attain their objectives, makes no recommendation on the lines of what is contained in the Bill. Even though the Minister referred to Culliton and a long list of others as talking about the need to improve competitiveness, which they did, the only quotation is from a document that is at two removes from Culliton, namely, the Government's commentary on Moriarty's commentary on Culliton. Contrary to what the Minister suggests, Culliton says on page 28 of his report that, the active use of Community competition policy to limit the emergence of monopoly positions that could damage smaller Irish producers should be promoted. I thoroughly agree with what Culliton said on this point. The Bill proposes the direct opposite to what Culliton suggests. That was also the case under the industrial development Bill introduced last year. The provisions of this Bill will lead to less competition. Instead of protecting the position of smaller Irish producers or promoting their position as recommended by Culliton, they will disappear and there will be a more non-competitive or anti-competitive position than exists at present.

It seems that a few practical examples of how this Bill will work, based on specific cases that have arisen recently, would be useful in demonstrating the dangers in the Bill and why my party and I feel so unhappy about it. Towards the end of last year and the beginning of this year, a proposal by Irish Distillers, a wholly-owned subsidiary of Pernod Ricard of France, to acquire the share capital of the Cooley Distillery company was examined by the competition Authority. The transaction did not exceed the thresholds introduced in May 1993 and reproduced in section 8 of the Bill for the purposes of section 2 of the 1978 Act. Accordingly, ministerial approval for that takeover did not have to be obtained. However, happily under the 1991 Act the competition Authority was able to consider the transaction and quite properly it turned it down in a well reasoned decision.

If this Bill is passed, it will be possible for Irish Distillers to make an almost identical offer to Cooley for all its assets. Neither the 1978 Act nor the 1991 Act will then apply and neither the Minister nor the competition Authority could prohibit what is obviously a totally unacceptable scenario, namely the takeover of Cooley by Pernod Ricard, when Cooley is its only competitor or potential competitor, for the purpose of closing Cooley with a loss of 50 jobs and for the explicit purpose of preventing competition in the Irish whiskey market either here or worldwide.

It is totally unacceptable that such a thing could happen, but it will happen if this Bill is passed. Applying section 5 of the 1991 Act, the fallback position to which the Minister referred on the disappearance of section 4 for these purposes, could take years in an individual case. While the Continental Can doctrine which it represents is valuable and is retained under section 5 it seems foolish not to pre-empt something as obviously undnesirable as the Irish Distillers-Cooley scenario I painted, and which can now happen. It is inappropriate not to stop something undesirable happening if it can be stopped. It seems undesirable to let such a thing happen and spend years and much public and private money unravelling it. Such money would not have to be spent if such a thing had been stopped in the first instance.

I have given one specific example but there are plenty of other predators in other sectors of business who are just as greedy as Irish Distillers and Pernod Ricard and who will want to put small competitors or potential competitors out of the marketplace. This Bill is a charter for such anti-competitive, monopolistic forces to do as they wish. It is entirely wrong to bring such a Bill before the Dáil to allow such things to happen.

In the beef sector, which is especially sensitive here, there were a series of refusals of mergers or of agreements, subject to conditions which were never met, on proposals for takeovers by one large dominant company of smaller ones. If this Bill is passed it would no longer be possible to refuse or to impose conditions in cases such as those in the beef sector. Is it desirable that in the sensitive beef sector one company should be allowed to buy up almost all its competitors? Rather than facilitate such mergers in such a sensitive sector, it seems it would be appropriate in the beef processing industry that the Minister should make an order under section 2 (5) (a) of the Mergers, Take-overs and Monopolies (Control) Act, 1978 covering that sector so that all take-overs of beef processing companies, irrespective of amount, would have to be notified as is the case presently with newspapers and magazines in respect of which I made such an order in 1978 and which has worked satisfactorily since then in the common interest.

I already mentioned that I consider the threshold in section 8 too high. I mentioned a number of specific cases that should have been subject to ministerial control in the public interest but which would escape scrutiny and decision by virtue of being under the new restated thresholds which re-enact the May 1993 figures.

There is something of a dilemma here because if the thresholds are pitched too low it increases the bureaucratic requirements on businesses. If, on the other hand, they are pitched too high as proposed in section 8, it allows clearly undesirable transactions to escape scrutiny. It seems, therefore, that the better way to approach this problem is not by setting monetary limits for assets or turnover but by setting the limits at a percentage of the market in Ireland. This is the approach taken in countries like France, Italy and Spain and it is more satisfactory than having monetary limits. Even under the pre-1993 limits I can recall at least one transaction escaping scrutiny here about which I was doubtful but powerless. This was the proposal to acquire the Wilkinson Sword subsidiary of Stora by Gillette. Wilkinson Sword operated here through a further wholly owned subsidiary of theirs, Maguire and Paterson. When I found that I could not prohibit the transaction here, I drew the attention of authorities elsewhere to the undesirability of the proposal and I was glad that the European Commission and the authorities in a number of other countries all turned it down. It is curious that, although it was turned down in several other places, it was not possible to look at the proposal here, let alone to turn it down.

As a result of these experiences, the Minister and the Department should give some thought to substituting the concept of a percentage of the relevant market for monetary thresholds. An appropriate percentage might be 30 per cent of market share after the transaction.

A great many submissions in regard to the provisions of this Bill have come to hand in the last two days, many from lawyers who are seeking, naturally enough, in the interests of their clients, to further simplify the mergers and monopolies position here. They and the Minister portray merger and competition legislation as being in some way bureaucratic, unnecessary and damaging to business and to the economy and take the view that the more of it that can be swept away the better. That is, of course, a false way of looking at the situation. The reason for the 1978 and 1991 Acts was to improve the economy by making it more competitive and by reducing the chances of higher prices and other economic damage by monopolies and by the abuse of dominant positions.

Within reason, we must continue to maintain and indeed to strengthen our relatively weak law on these topics because our economy is suffering greatly as a result of anti-competitive and restrictive practices, particularly in the domestic or non-traded and non-export areas. This is especially true of State monopolies which are, perhaps, the greatest abusers of all. The objective of this or any other amending legislation should, therefore, not be solely to simplify the existing law but rather to make it more effective in the public interest. Sections 5, 6 and 7 do achieve that objective but I am very doubtful if any of the other sections achieve it and, in fact, they may bring about the contrary result.

Although it is proposed to give enforcement powers to the Authority, with which I agree, they will be confined to actions for a declaration, an injunction or damages. That action is of a civil nature. Ireland must be one of the few advanced countries that does not have a criminal jurisdiction for anti-competitive activities of a serious nature such as operating cartels against the public interest or price fixing. In the great majority of countries, there is such a criminal jurisdiction. In the United States, which is supposed to be the most free enterprise of all economies, that criminal jurisdiction has existed since the 19th century, over a hundred years.

The Minister should have taken the opportunity in this Bill to introduce a criminal jurisdiction. Anti-competitive activities go on all the time in this country, carried out with impunity and quite cheekily, which would put their perpetrators in jail if they were done in the United States or in some of the continental member states of the European Union. As part of that criminal jurisdiction which I suggest, there should be some provision analogous to that in the Consumer Information Act which would allow fines to be imposed on people guilty of certain anti-competitive practices, part or all of which could be paid over to those who gave evidence in the cases and who showed that they had suffered loss. This would obviate the necessity for them to start separate civil proceedings of their own.

The ideal would be if the competition Authority had power to impose fines as the Commission has in Brussels, but that, of course, could not happen under our Constitution. The kind of fines that could be imposed here by the courts if the necessary legislation was in place would be substantial because the profits won from concerted anti-competitive practices are themselves invariably substantial. It should be borne in mind that the Commission has fined some individual companies scores of millions of pounds.

My conviction of the need for a criminal jurisdiction here in anti-competitive matters is based on my experiences of the operation of the existing legislation. It is a matter of regret that in some cases of which I am aware, where a certain party became effectively the owner of certain companies without clearance under the 1978 Act, he took the view that, since no sanction could be imposed on him, he would continue as owner and operate, manufacture and trade as there was nothing the Minister or anyone else could do about it. This was a major weakness in the 1978 Act until it was at least partially cured in 1991.

The provisions of this Bill may, if anything, make the position of the 1991 Act worse, with the sole exception that the competition Authority, through its new member, may be able to initiate some form of investigation. However, even if it does in the absence of a criminal jurisdiction, it seems unlikely that it will be able to bring about any worthwhile remedy. I have noted with some concern newspaper reports over the past month or two which indicate that a large proportion of the beef processing sector may shortly be returned to the direct ownership and control of one individual who lost that control, nominally at least, in 1990 when all his companies went into examinership. The nominal legal ownership of some of those companies in the past may have been different from the effective exercise of control of the companies and that is a matter which the legislation should take account of. This is one of several important issues that would need to be fully considered on Committee Stage.

It is a matter of concern that the explanatory memorandum issued with this Bill should contain a misleading sentence. This is the last sentence of paragraph 3, on page 1, when, referring to the removal of all merger and take-over agreements from the scope of section 4 of the 1991 Act, if goes on to say "this amendment will furthermore facilitate growth and co-operation between smaller firms since merger or take-over agreements between the smaller firms will be excluded from Section 4 of the Competition Act". Merger or take-over agreements between small firms were always excluded from examination under the 1978 Act. What does require scrutiny and control in the interests of small firms is the take-over of such small firms by larger ones for the purpose of killing competition, and that is what is being excluded by this Bill.

What is stated in this regard in the Bill and in the explanatory memorandum is entirely at variance with what the Minister stated as recently as 19 April last in a speech at an IBI seminar when he said "under the new arrangement, small scale mergers may still be notified to the competition Authority". I reiterate that, because there are mergers below the very high thresholds mentioned in this Bill which will have a distorting or cartel— creating effect. There should be some way to look at them, although I agree there should not be a double procedure. My suggestion of a percentage of market share as opposed to monetary threshold would appear to be the most useful.

I wonder if the Minister can explain why subsection (2) of section 2 of this Bill makes the new section 19 (A) retrospective to October 1991. Why should it be retrospective at all? If it has to be retrospective, why is the retrospection confined to mergers or takeovers to which the 1978 Act applies by virtue of section 2 of that Act? Why is it not retrospective in respect of those to whom section 2 did not apply, but to whom section 4 applied following the Woodchester decision? Is there some sinister reason for subsection (2) to facilitate particular cases or people?

There are numerous other points of this kind that can be made about detailed aspects of this Bill. I do not propose to make them now but rather on Committee Stage when they can more usefully be made and hopefully responded to if the Minister is so minded and wishes to improve the legislation in a field which is tricky but enormously important.

The Bill is designed primarily to improve enforcement of the existing Acts By implication, this involves increasing the level of deterrence of breaches of the 1978 and 1991 Acts. Yet the Bill proposes a level of deterrence which falls well short of what it could be. Even the High Court will have no power to impose fines for violation of the law.

Take, for example, a cartel which has enriched its members by millions of pounds and seriously damaged its competitors and consumers for many years. The competition Authority exposes the cartel and obtains a High Court injunction to stop it. No fines can be imposed however. Other than ending the cartel, no penalties will be suffered by its members. The illegally obtained benefits may be retained. It is not sufficient answer to say that victims may then sue the cartel members for damages. This may not happen for many reasons. For one thing, the victims may have long since been put out of business. This issue needs to be looked at again if real deterrence is the aim. Serious breaches of competition law should not be cost free.

Mr. Rabbitte

First, I should say that whereas competition is on the minds of the majority of Irish people today, it is not necessarily focused on the detail of this legislation. For that reason alone I am glad the Minister has provided the opportunity for us to look at the Bill in considerably more detail on Committee Stage because notwithstanding my wish to facilitate the early implementation of section 7, there are aspects of the Bill which concern me and which cannot be dealt with in sufficient detail today.

In his speech and in other comments on this matter the Minister depicted the Bill as a reforming measure to facilitate and encourage growth and co-operation between firms. Business supporters of the Bill and some commentators in a series of media articles have welcomed the legislation, describing it as a measure to reduce red tape and to make the Competition Act, 1991, more user friendly. At the end of his contribution the Minister went out of his way to express similar sentiments and to welcome "the positive reception the Bill has received from various representative bodies". Having regard to the very brief time that has elapsed between publication of the Bill and today's debate, I would be very interested to hear who these representative bodies are who have expressed this welcome.

Mr. O'Malley

The Ardee Chamber of Commerce, perhaps.

Mr. Rabbitte

I would imagine the Ardee Chamber of Commerce is listening to the debate more closely than are other chambers of commerce throughout the country for reasons I will refer to later. Having regard to the fact that the only submission I have seen to date has come from the Incorporated Law Society——

Mr. Quinn

A disinterested body.

Mr. Rabbitte

I would think it is not a disinterested body but is probably part of the lobby behind some of the thinking in the Bill. Even that body regrets that it has been obliged to prepare a submission at such short notice. If memory serves me right—I do not have the document with me—it specifies that it dealt with the matter only the day before the submission was made.

Mr. Quinn

It may teach us a few tricks about restrictive practices.

Mr. Rabbitte

That is another argument and I may have no difference with the Minister on that point, but if the Incorporated Law Society has been caught on the wrong foot in making a considered response to the Bill, it is much more probable that bodies with an interest in the economic and public interest implications of the Bill have a great deal more to be concerned about. My initial response to the submission from the Incorporated Law Society was that it is not entirely the viewpoint of a body, as the Minister suggested, that does not have a vested interest in the matter. It is primarily preoccupied with the bureaucratic implications, cutting through the red tape and so on. I do not wish to cut across both Ministers as they discuss who is going to take the TEAM debate tonight. I suggest that the best way out of the impasse is to share it between them.

The Minister referred to comment in the media, but that has been inspired by him and his officials in briefing the media to take a particular view of the legislation. He in turn completed the circle by welcoming the media's comments which have been along prescribed lines. The Incorporated Law Society seems very little concerned with the public interest or economic implications of the Bill but is more preoccupied with bureaucracy and the ease with which it can do business for its clients without being subjected to double jeopardy, as has been suggested.

There are welcome reforms in the Bill, most notably the granting of additional powers to the competition Authority to prosecute breaches under the Competition Act. The core of the Bill is section 2, which seeks to remove all mergers from the scope of section 4 of the Competition Act, 1991. This is a regressive measure which will facilitate the gobbing up of small enterprises by large companies and which is not in the public interest.

The chairman of the Public Competition Authority, Mr. Paddy Lyons, has expressed concern about the removal of large mergers from the Authority's immediate jurisdiction. One prominent business journalist, Martin Fitzpatrick, in yesterday's Sunday Independent, warned that the result of the legislation would be that “any big Irish or European firm with predatory instincts will be able to swoop on a small company with no questions asked”. I will put on the record Paddy Lyons' quote in The Irish Times of 14 February last. Mr. Lyons is worried about the removal of large mergers from the Authority's immediate jurisdiction. He said:

It's a bit unfortunate that we will be doing one particular type of analysis on small mergers and publishing a report, whereas the vast majority of large mergers, which present more competition worries, might not get the same treatment.

Mr. R. Bruton

They will not get the small mergers now.

Mr. Rabbitte

Deputy Bruton has reminded me that they will not get the small mergers. It is clear that is about as frank a statement as one is likely to get from somebody in Mr. Lyons' position. The effect of this legislation will be to remove any public vetting, scrutiny or examination of the take-over of any company by another company, with the exception that a large company's take-over of another large company may be subject to review under the Mergers, Take-overs and Monopolies (Control) Act, 1978. If this Bill is passed in its present form such reviews will apply only where the two companies each have assets of over £10 million or where each has turnover of over £20 million.

The proposals seem to have been drafted without any regard to the need to protect small innovative companies from take-over by large competitors. Under this Bill home grown companies such as Cement Roadstone Limited and Smurfits, not to mention their foreign equivalents, will be able to gobble up as many of their competitors as they can buy, provided the smaller enterprises have assets of less than £10 million or turnover of less than £20 million. During his contribution Deputy O'Malley spent some time dealing with the implications of that for the beef sector. I think that events that have not yet come to finality are fresh enough in all our minds for us to appreciate the significance of that for the beef sector.

I agree that the thresholds are pitched too high, given the make-up of most companies in this economy. I do not have a view on Deputy O'Malley's suggestion that the yardstick might be set as a percentage of market share rather than the level of assets and turnover. I have no doubt, however, that the levels set by the Minister in this Bill are entirely too high, given that the requirement is on each company to have assets in excess of £10 million or turnover in excess of £20 million. That means that small innovative companies are entirely vulnerable to being gobbled up, with no questions asked. That is undesirable.

As I understand it, the terms of the 1978 Act applied to mergers and take-overs where each of the enterprises had gross assets of not less than £1.25 million or turnover of not less than £2.5 million and section 2 (2) states that the 1978 Act applies to a monopoly where in the most recent financial year the monopoly's sales or purchases of the goods or services concerned exceeds £1.5 million. I understand that was changed by the then Minister, Deputy John Bruton, on 8 July and assets were increased to £5 million and turnover to £10 million. The present Minister modified the asset and turnover requirement in May of last year and increased assets to £10 million and turnover to £20 million. The proposal in this Bill seems to be a recipe to concentrate power and control of substantial sectors of Irish business and industry into the hands of an even smaller elite than is now the case. It will certainly reduce the level of protection available to the public from mergers and take-overs and will lead to a monopoly or contribute to a level of concentration in an industry which could stifle innovation and competition.

If the Bill were passed in its present form the situation in regard to take-overs could be summarised as follows. Mergers or take-overs involving two firms, each with less than £10 million in assets, will not be subject to review under any legislation; mergers or take-overs involving two firms, one with assets of £150 million and the other with assets of less than £10 million, will not be subject to review under any legislation; mergers or take-overs involving two firms, each with assets of over £10 million will be subject to review only under the Mergers, Take-overs and Monopolies (Control) Act, 1978.

The only arguments I have seen put forward to justify such a fundamental change in the approach to mergers and take-overs have been that the present requirements are too bureaucratic, too expensive or that there is a need to reduce red tape. I believe, however, that the need to protect the public interest is of far greater importance than the need to reduce red tape. In addition, most of the arguments advocating this particular approach seem to be unconcerned about its wider economic implications. They are the views of commentators who are practitioners on the professional side of this business. Presumably for their own legitimate reasons they see it as being desirable but I do not think they are greatly concerned about its wider economic implications.

One of the most extraordinary aspects of this Bill is the provision in section 2 (2) which effectively backdates the operation of the Bill in so far as it applies to mergers and take-overs to October 1991, the date on which the 1991 Competition Act came into operation. My memory is that we enacted the legislation prior to that date but that it did not take effect until October 1991. It is extraordinary that under this provision it is proposed that effectively it will never have applied. It will be as if it never applied. In other words, what the Minister for Enterprise and Employment is asking is that the legislation passed by the Dáil in 1991 and brought into operation by Order of the then Minister on 1 October of that year has never had effect. We are being asked to rewrite legislative history.

The intention by the Minister, if not unprecedented, is certainly extraordinary. At the best of times I am wary of legislation which seeks to give backdated effect to changes in the law. It is a bad principle, one which I believe should be avoided. When we are asked to deal with this in the final week of a session with provision only for a very limited debate, the alarm bells should start ringing. In the context of mergers and take-overs, backdated legislation is quite simply unacceptable. What this means, of course, is that mergers or take-overs which have been blocked already by the competition Authority can now be reopened. I wonder about the motivation behind this Bill and the reason for the desire on the part of the Minister and the Government to have it pushed through before the Houses rise for the summer recess. I query the Minister on the purpose of this exercise and whether it is to allow the re-opening of any such take-over or attempted takeover.

Mr. Quinn

I can say "no" to the Deputy.

Mr. Rabbitte

I welcome that. I am very glad that is the case and I am also glad that we will have more opportunity to tease it out on Committee Stage.

As I understand it, the Competition Authority has refused sanction in only three cases. The most recent of these was the controversial case referred to by Deputy O'Malley, Irish Distillers Limited and Cooley Distillers. The Minister must deal with that particular question. Is it the case, as Deputy O'Malley has said, that Irish Distillers, or Pernod Ricard, may now re-open that particular case by changing the consideration in some nominal way and that it will sail through uninhibited? The Minister must answer if the primary purpose of this legislation is to allow Irish Distillers to make another attempt for the purchase or take-over of Cooley. I would be surprised if the Minister cannot reassure the House on that point because I understood the purpose of his party's participation in Government was to break the operation of the golden circle and that this kind of inside track access would be discontinued.

I cannot see how it would now be in the public interest to have a repeat of the Cooley type case. In the event of this Bill being enacted, the take-over would sail through without obstacle irrespective of the economic or other implications. If the Minister says that it is not intended to facilitate Irish Distillers Limited in re-opening its attempt to take over Cooley, will he answer two further questions? Notwithstanding the fact that he says that is not the intention, will it be feasible when the new legislation is enacted, if it is enacted as it is proposed in the Bill, for Irish Distillers Limited to do that irrespective of what the Minister intended? If my memory serves me correctly—and one cannot always rely on what one is told—the Minister was the subject of direct approach by the directors of Cooley prior to him raising the thresholds last April or May.

Mr. Quinn

That is correct.

Mr. Rabbitte

Subsequently they went ahead, obviously forgot about the 1991 Competition Act and came unstuck at that point. Whatever the Minister's intention in the matter, is it feasible for IDL to re-open its takeover bid and be successful on this occasion? I cannot recll anything as blatant as the Cooley case which involved the willingness to shut down a perfectly good plant and to make the workers redundant when there was a market for the product. The fact that that should be allowed to happen is unconscionable. If we had a similar case under the new legislation—if it were enacted as the Minister proposes—then as I understand it there is nothing that would prevent it on this occasion.

Mr. Quinn

That is not true. The enforcement officer would take action.

Mr. Rabbitte

I am glad to hear it if that is the case. That raises questions, however, that presumably we will have an opportunity to tease out on Committee Stage, including whether the enforcement officer will be resourced to deal with this kind of situation and so on, which is another day's work.

Deputy O'Malley raised an interesting question about the absence of criminal jurisdiction. I would like to hear the Minister's response to that issue because, without mentioning any names in the Chamber, I have been struck on occasion by the defence that is raised in respect of certain controversial matters that have happened in Irish industry in the recent past to the effect that nothing illegal was done. That is always the cry of the defenders—was there anything illegal involved or will the report when it is published show that there was anything illegal involved and so on.? The fact that it is unacceptable, that it is anti-competitive or that it is conducive to swallowing up smaller companies is all acceptable as long as it is not illegal. When there are no sanctions commensurate with what one would have in a criminal jurisdiction, it seems to me that certain people can say "To hell with the law, we will plough on as before". Having regard to the complete absence of a provision for the imposition of any fines to which a company of this magnitude would pay attention, the fees involved here are similar to a fine for not having a light on one's bicycle. That issue must be examined.

Deputy Bruton raised the question of companies having to comply with the demands of a parallel system. Having listened to him at some length on the subject, I feel he has made a good case that this matter should be examined. I would be extremely concerned that it would be examined in the manner proposed in the Bill where certain companies, as I outlined earlier, are entirely exempt from any review and, even where such power exists, it rests with the Minister. I would have thought that the present Minister would not want that power. In the reality of the marketplace, a Minister is vulnerable to all kinds of approaches being made to him once he has that power, which I believe should be exercised at arm's length. Deputy Bruton's proposal that the ministerial powers as they presently operate be transferred to the competition Authority is the obvious one. I do not see why a Minister of any party should be open to the kind of approaches and arm twisting that will take place, given the reality dictated by the marketplace.

For the first time in the history of the Dáil, I do not propose to avail of the full-time allocated to me and trust that the House will understand.

Mr. Quinn

I hope the Deputy intends to stay in the House.

Mr. D. Wallace

I am pleased to have an opportunity to make a contribution to the debate on this Bill. Competition is the life blood of true enterprise and it is important that a fair and balanced competitive atmosphere prevails at all times. In the Irish context this means a competition Authority with clout and effectiveness. I welcome the Bill as a strong contribution in this regard.

I welcome the various improvements to our laws dealing with competition which are proposed in the Bill. In line with a wide range of recent legislative changes, the Bill is part of a comprehensive and exciting programme of law reform undertaken by this Government. A number of the Bill's provisions are aimed at clarifying and, most importantly, strengthening current elements of competition law.

There are four elements of the Bill which I consider to be of particular interest. First, section 5 provides for an important addition to current legislation since it confers a right of action on the competition Authority in the case of breaches of sections 4 and 5 of the Competition Act. In addition to allowing the Authority respond to third party complaints, it also enables the Authority to initiate action at its own discretion. This should greatly increase the Authority's ability to react swiftly to worrying developments. In today's increasingly complex business world it is vital that the competition Authority can respond quickly and effectively to changing developments. A more pro-active competition Authority is in all our interests to ensure a proper system of checks and balances in our business and commercial life.

As a consequence of these new powers the Authority is certain to benefit both in terms of self-confidence and public esteem. I am equally in favour of section 6 which allows the Authority to carry out research on its own initiative. While contributing on a number of issues this session, I lost no opportunity to stress the vital importance of research in each sector of society. For too long we have been complacent in this area and we have seen research as largely the preserve of educational establishments. In contrast, the role of such activities in the industrial sector or the various institutions of the State has been grossly understated. As a result, many unnecessary mistakes have been made and the potential for improved performance has not been exploited to the fullest possible extent. Major decisions have often been made which have not been based on the availability of all the relevant information.

Research and development is the engine of innovation and enterprise growth. We cannot ignore it. It is only correct that the competition Authority be enabled to take every step to ensure that its information services are adequate.

It is also prudent that section 7 provides a facility which allows the Minister to appoint a director of enforcement to the Authority. This will give the Authority the ability to carry out investigations on its own initiative or at the Minister's request. As the role and scope of the Authority develops it is likely that such an appointment will be considered necessary. However, if this individual is to be truly effective he or she must be well resourced. I am glad to note the Minister has stated he will seek sufficient resources to underpin effective enforcement.

Section 9 is equally reasonable. It caters for the possible imposition of a fee in the case of notifications of merger. Similarly, guidelines are provided to facilitate the imposition of penalties where false or misleading information has been forwarded as part of the documentation of a proposed merger. This is important if the competition Authority is to have enhanced clout. It must be enabled to enforce penalties which will act as a real deterrent.

It is appropriate to stress the trading considerations which must be kept in mind as we draft legislation to ensure competitiveness in our economy. The rights of the consumer must be protected and the Minister of State, Deputy O'Rourke, had proved to be a reforming and pioneering Minister in this regard. Every effort must be made to ensure that cartel arrangements do not develop. They are anti-competition and anti-enterprise. Individual or group enterprises must be prevented from adopting a so-called dominant position in the marketplace. A second consideration which is equally valid is that we must allow our businesses to grow to a much larger scale than is the case. Without a substantial increase in the size of our native companies we are unlikely to penetrate foreign markets further. Competition laws must allow for a fine balance between these two conflicting objectives. The extra provisions introduced by the Bill are positive and I welcome them.

Another aspect of competition law which deserves attention relates to the level of awareness among both the public and companies regarding the implications of existing legislation. Much needs to be done in the area of education to ensure that important and positive laws are used to the greatest possible degree. While the increased scope offered by this Bill to the competition Authority will undoubtedly result in a significant improvement in the area of implementation, without parallel educational programmes it is unlikely the full benefits will accrue. Such programmes should be introduced as a matter of urgency. We must educate for enterprise if it is to become an inherent part of our national culture.

As well as assessing the various ways in which the consumer might be better educated about competition laws, it would be useful if comprehensive statistics were compiled on the level of abuse of these laws proven each year. Information on the extent and nature of such abuse would be an extremely valuable asset to us as legislators as we assess the potential for improvement of these laws and allow for the ongoing introduction of effective legislation.

While I agree with the broad thrust of the Bill I have one major reservation. The Government has made great efforts to promote small indegenous enterprise. It produced a task force report on small business and has started to act on its recommendations. It is cutting the red tape and bureaucracy which hinders enterprise and putting new measures in place to facilitate the granting of seed capital for enterprise. This is an enterprise-friendly Government. However, I do not believe that the legislation contains sufficient safeguards to protect small companies from the predatory behaviour of larger companies. If a large company chooses to gobble up small companies there is no need for such behaviour to be referred to the competition Authority. This is a flaw in the Bill which I hope the Minister will address. We have made great strides in promoting small businesses and we should ensure that nothing happens to hamper this.

I pay tribute to the Minister for his initiative in bringing forward legislation in many areas and for his foresight and thinking about what needs to be done. Bearing in mind my note of caution I am glad to commend the Bill to the House.

Minister for Enterprise and Employment (Mr. Quinn)

I appreciate that Deputies did not have much time to prepare for this debate. The Incorporated Law Society saw the text of the Bill in the last fortnight. It is appropriate that on Committee Stage in the Select Committee we will be able to tease out in considerable detail many points made. I will give a signal response to some of the points made.

One would get the impression from listening to the debate that people are obliged to sell to someone who makes an offer to purchase their firm and no one is free to refuse to sell. One would also get the impression that the spirit of enterprise, which we are all trying to foster, is motivated among other things by a desire to enhance one's own personal wealth and that such a spirit cannot reward itself by selling out at some stage in the future. We are frequently told there are impediments to enterprise in Irish culture, for example, the tax system. People cannot earn enough and, therefore, cannot take the risk of forming an enterprise. On top of that we are now told they are subject to predatory purchasing. This is mushy, confused thinking which should be clarified. It is contradictory. We will have an opportunity on Committee Stage to clarify it at some length.

Regarding Deputy Bruton's point, I have consistently set out five policy points which I have espoused as Minister for Enterprise and Employment in the area of economics and in an attempt to create a framework within which we can strengthen the economy in a manner which will result in employment. I have listed these points previously and I will do so again. At a macro-economic level we have to manage the finances of the economy in such a way that the external criteria, including interest rates, inflation, etc.— the Maastricht criteria—are brought to an optimum level. Nobody, least of all our detractors on the other side of the House, would have thought that a Coalition of Labour and Fianna Fáil would, within 18 months, have brought the Irish economy to the second position, after Luxembourg, in the league of best performing and best managed economies in the European Union in terms of those five criteria.

We have to maintain, because of our critical dependence on it, inward investment as promoted by IDA Ireland. We have to make this country an attractive place for such investment for a variety of reasons, not just for the capital it brings but also for the new markets which it opens up, the innovation it brings and the products, primarily electronics, health care and pharmaceutical, it produces. This year IDA Ireland will exceed its target of 6,000 new jobs by a factor of approximately 50 per cent. I am reliably informed that, six months into the year, it is confident of achieving approximately 9,000 new jobs, using the normal standard method and criteria of measurement which has been in place for some time. One can, therefore, reasonably say that we are continuing to enhance that policy area.

Deputy Bruton and others might say that there is nothing particularly new in all of this, previous Governments attempted to do the same. I would concur with those views. My Department is committed to a specific policy of strengthening Irish-owned indigenous companies so that they can become larger and aspire to becoming multinationals. It is a characteristic of our economy that, relative to other small European economies such as the Netherlands, Denmark, Finland and Austria, we do not have the same number of indigenous multinationals, if I can use that phrase. To put it in a more vernacular way, we do not have enough CRH's or Smurfits. If the competition Authority and Act had been in operation during the sixties and seventies it is possible that we would not have them today because of the way in which they operated.

This perhaps is where I genuinely diverge from the position held by Deputy O'Malley. We have to encourage indigenous Irish companies to become dominant players and, from that position in a domestic market, to move abroad and gain a substantial amount of international market share in the same way, to give one specific example, as Electrolux from Sweden has done. The characteristic of all indigenous multinationals is that they have a very dominant share of their national market. However, the term "national market" is now a misnomer following the completion of the Single European Act and the Internal Market. There is, therefore, a certain course which has to be very carefully steered in allowing companies, through acquisition and merger, to get a critical mass of scale and operation in place which will enable them to consolidate their domestic position and, hopefully, move on from that and be constructive in developing new markets, thereby enhancing employment at home and possibly generating employment and wealth abroad. This is the third component of a five leg strategy which I believe is absolutely essential and different from those pursued by previous Administrations.

For reference, one of the other two strategies is a specific focus on small business in a way no previous Administration has done. I referred to the Small Business Task Force and the recommendations it generated from practitioners, not lobbyists, and the substantial array of measures in this year's budget which reflected the concerns expressed to us.

If we were to do these four things the long term unemployed would not be affected in the short term or probably the long term, by which I mean five to six years, by an upturn in economic activity on the one hand and an improvement in the management of the economy by the Government on the other. It is for that reason — the ESRI concurred with this view — that it was deemed necessary to take additional measures to enable the long term unemployed to return to full employment. We have developed a series of measures from community employment, the local area development partnerships, etc., to address this problem.

In this context — I set it in this context because I was invited to do so — the measures in the Bill will go a long way towards addressing this problem. I would like to see an increasing number of Irish companies growing. If they do this through acquisition or merger in the Irish market, in a manner they consider to be in their best interest, then so be it. I do not want bureaucratic second-guessing or require them to declare their interests in public, which is now much wider than the national state of the Irish market: the market and the public who operate in it is now effectively the entire European market.

This is one of the difficulties any Minister would have in terms of managing competition policy at present. While the laws of this land will obviously extend to the territory over which we have jurisdiction, the reality of the market place is that anybody can come into our market. We have probably one of the most open markets of the 12 member states of the European Union. The thresholds to which reference was made in the first instance or, as Deputy O'Malley said, the percentage of market share, will in many cases include suppliers to companies outside the Irish national market, who become critical in terms of the effect on the development of mergers and monopolies here.

Deputy O'Malley was Minister for Industry and Commerce for approximately eight years and I do not think it was ever intended that there would be dual reference in the Competition Act in respect of companies contemplating mergers or acquisitions. Under the 1978 Act, there was always a threshold below which companies could, under market forces, decide either to acquire or merge, or in some other way get a bigger slice of the market action. When the competition Authority began to take on a life of its own it took upon itself the task of evaluating mergers independent and separate from the Department with responsibility in this area. It became a very bureaucratic and hazardous journey for people to travel and it was repeatedly reported to me by a number of companies that the exposure and demands associated with the compliance requirements — this matter can be dealt with in detail on Committee Stage — were a deterrent and because of the amount of documentation and information required some companies felt they were exposing themselves to a risk from competitors not necessarily resident in Ireland or producing or fabricating a product here.

Deputy Bruton referred to secrecy in relation to mergers. There is another side to the secrecy, that is, the need for confidentiality which the Authority has to ensure when it is looking at the way in which businesses are operating so that competitors are not given access to confidential commercially sensitive information.

Mr. R. Bruton

It does not stop them from publishing details and inviting——

Mr. Quinn

No, and the annual report at the end of each year——

Mr. R. Bruton

——or accepting observations or submissions from persons claiming to be interested as it may think proper.

Mr. Quinn

The Bill is very simple and straightforward and we can deal with certain aspects in considerable detail on Committee Stage. Properly speaking, the Bill will benefit more from a Committee Stage debate than a Second Stage debate. The immunity I proposed in this section is more than safeguarded by the countervailing power in section 5 where the pro-active enforcement role is given to the competition Authority. To take a specific example — Cooley — to which Deputy O'Malley referred, his interpretation is correct that, if this Bill was in force and Irish Distillers group applied to purchase Cooley, they would not have to apply in their documentation. However, if, as stated, its intention was to close Cooley, as I understand it — and this will be the subject of detailed discussion on Committee Stage — there would be nothing to prevent me as Minister exercising other powers under the provisions of the Competition Act to take the view that this was an abuse of a dominant position and contrary to the best interest of the Irish whiskey industry.

Alternatively, there would be nothing to prevent the workers of Cooley, or indeed the Ardee Chamber of Commerce — to which there was a reference — knocking on the door of a member of the enforcement Authority saying they consider this abuse of a dominant position, clearly signalling in advance abuse of a dominant position or, in this instance, a monopoly, not just a dominant one, when the member of the enforcement authority, in his or her wisdom, could decide to seek an injunction and prevent the take-over.

Mr. R. Bruton

What if they did not indicate they would close it down?

Mr. Quinn

I am referring to the specific case — I am speaking now from memory — when the indication was that it was doing it for competitive reasons, that it did not want to have another Irish whiskey competitor in the market. It went on to state — again this is subject to memory and I am conscious that I am speaking under privilege — that the Irish whiskey market was not a closed market in which they had a 100 per cent share, that there were other competitors in the whiskey market, albeit not Irish whiskey but a wider whiskey market.

If Members do not observe the balance in the Bill then they distort the potential effect of its provisions. I want to see as much freedom as possible for market forces to come into play. It is ironic that I make this case while Opposition Members are attempting to refute it. I want freedom for those market forces coming into play at local level among Irish firms accountable to our law for which I have responsibility to administer. I want those companies to consolidate, grow, merge and acquire without let or hindrance, without being second-quessed by well-intentioned civil servants or members of a competition Authority. I want to do it for the unashamed reason that I want to see more large, indigenous, multi-nationals but I do not want existing companies to exploit cartels or abuse a dominant position. First, the power to act in relation to the abuse of a dominant position is clear in law and has not been altered and second, the powers of the enforcement Authority will enable it to take a pro-active role, which was not previously the case.

Deputy O'Malley spoke about resources. I acknowledge that, within the context of the introduction of the Bill for which he was responsible there was a constraint on resources — I am glad he is now in Opposition and not objecting to increased expenditure in this area. I am not sure how much sanction will be entailed to enable us to obtain extra resources for the competition Authority. No doubt, when we come to the budget and Estimates, Deputy O'Malley will extend his sympathy to them. However, there will be extra resources and we have made some available. I hope that, by charging realistic but not onerous fees — nothing like accountants and lawyers charge for such mergers and acquisitions — we will be able to generate appropriation-in-aid that would persuade the Department of Finance to allocate extra resources. For example, we have been very successful in this regard in relation to the Companies Registration Office. I hope that, as with our success in the case of the Patents Office, where legislation is pending, we will be able to do something similar. That would comprise part of the route we would travel in relation to achieving a balance between obtaining the necessary extra resources and having due regard to the management of public funds in respect of which this Government has been particularly successful relative to our performance within the European Monetary Union criteria.

With regard to the overall question of criminal sanctions. I do not regard this Bill as endeavouring to do everything; it is not so intended. The experience of this House, at administrative level among civil servants and among former officeholders, attempting to load one Bill with the responsibility of curing all perceived ills at any given time has proved not the most effective route to travel. Nobody, not even somebody with eight years' experience as Minister for Industry and Commerce, sought to introduce criminal sanctions in respect of the operation of company law. It is a complex area. I am not sure criminal sanctions can be introduced within the context of the provisions of this Bill; indeed I am convinced that they cannot. Nonetheless it is an area which the company law review group will examine. A number of issues associated with it require a balanced and considered response by people who will have to make the law work. That is why the company law review group, under the chairmanship of Mr. Séamus Gallagher, a former practising chartered accountant and, if my memory serves me correctly, a former President of the Institute of Chartered Accountants of Ireland, will bring to bear on these issues the response of people practising in the field in the various professions who will have the responsibility of implementing this law. I was not aware that criminal sanctions existed for over 100 years in the United States of America but, if that group recommends criminal sanctions in a form yet to be decided, I will certainly look at such a recommendation. It is my intention to make reports of the company law review group available as they come to hand.

Mr. O'Malley

The review group the Minister mentions is to review company law; this is not company law, this is competition policy, economic policy.

Mr. Quinn

I know, but the whole question of criminal sanctions in respect of such matters, including competition policy, is part of its remit and I will examine its view within that context. We will be able to tease that matter out on Committee Stage if the Deputy wishes. However, in the absence of action to introduce criminal sanctions, I agree with Deputy O'Malley that a heavy sanction is not a deterrent to some people. If we introduced criminal sanctions in a manner that had not been thought out, or without having consulted a wide range of practitioners in commerce and business, I predict that the Deputy's colleague, Deputy Michael McDowell, would be in here screeching and roaring — in the manner to which we have now become accustomed — to the effect that the deputy leader of the Labour Party was about to penalise enterprise and criminalise business activity here. Therefore, I will not legislate for that type of circumstance until we have had a proper, considered and measured response from the people who will have a direct role to play in all this.

I want to use the legislation, including specifically competition legislation, to ensure that indigenous firms can grow speedily with the minimum red tape and provide a pro-active enforcement role for the new member of the Authority, who can ensure that there is not an abuse of a dominant position, which is what Members have not taken into account.

Deputy Richard Bruton referred to the groceries order, the subject of a major review within my Department which we hope to conclude very soon, which comes up for review towards the end of this year. Deputy Bruton also raised the question of skills and suitability of the new member of the Authority who would be responsible for enforcement. I share the Deputy's view that that person will have to be properly qualified, an independent-minded person with the necessary economic and business skills to ensure he is capable of doing the job. When we come to make that decision we will bear that in mind. I dealt with the Cooley situation to my own satisfaction.

Deputy Rabbitte raised some questions about the timetable in respect of the retrospection period. I repeat my interjection that there was nothing I was aware of what would give rise to concern. The matter can be teased out in detail on Committee Stage. I am aware of legislation being made retrospective in the past so as to ensure there was no possibility of a consequent action. It was not to interfere with actions initiated in the courts but to close a gap in the event of an action being initiated in the future claiming that for a period something which was illegal at the time, was no longer illegal and therefore could reach into the new changed legal structure. As I understand it, that is the reason for this legislation.

As Deputies will be aware, I inquired informally as to whether they would be agreeable to taking all Stages, largely because I was anxious to have the enforcement provisions put in place as soon as possible for reasons which are self-evident. Most people with whom I have spoken welcome the proactive enforcement provisions. However, I listend to and I heard from a number of responsible Deputies that they had concerns regarding the implications and the details of other sections. Therefore, I am happy to accept a reference to the relevant select committee for the taking of Committee Stage, when the Whips so decide. I have dealt with most of the points raised. It would be easier to take them seriatim on Committee Stage and to get clarification on the points raised by Deputies. I thank Deputies for their contributions.

Question put and agreed to.