Written Answers. - Ireland/UK Price Differentials.
Mary O'Rourke
Question:
10
Mrs. O'Rourke
asked the
Minister for Enterprise and Employment
the action, if any, he proposes to take in view of the report by the Director of Consumer Affairs on the pricing in the Republic of Ireland of UK magazines, compact discs and books; and the plans, if any, he has for competition guidelines in the magazine and book distribution market.
[7634/96]
Máirín Quill
Question:
15
Miss Quill
asked the
Minister for Enterprise and Employment
the results of the inquiry established to investigate the failure of news distributors to adjust the prices of British magazines in line with the punt's rise in value against sterling.
[7666/96]
I propose to take Questions Nos. 10 and 15 together.
The prices for magazines imported into Ireland from the United Kingdom have been a source of concern to consumers and indeed to Members of the House for some considerable time. In purchasing or contemplating the purchase of such magazines they can peel off the adhesive label showing the Irish price and in doing so have revealed to them a much lower UK price. Inevitably this gives rise to the impression that consumers are being grossly exploited and are being habitually "ripped off".
On 15 February last I announced in the House that the Director of Consumer Affairs had, at my request, commenced an investigation into magazine prices with the following terms of reference: to undertake a survey of the retail prices of UK magazines in Ireland; to ascertain the movement of these prices in the period since 1 January 1994 in the light of the appreciation of the punt vis-à-vis sterling; and to determine the components of these prices by reference to such elements as cost from the producer, applicable value added taxes, importers/distributors and retailers profit margins.
As recently as yesterday afternoon, I received the report of the director's investigation. It requires careful and detailed study by me and my officials. However, even at this stage there are a number of the director's findings which should immediately be brought into the public domain.
At the heart of the matter is the fact that, whether the Irish poundvis-à-vis the pound sterling is above or below parity, the prices of magazines imported into Ireland from the UK are always dearer here, largely due to value added tax.
Magazines are zero rated for value added tax in the UK, whereas magazines sold in Ireland are subject to VAT of, in most cases, 21 per cent and 12½ per cent in others. Thus the Irish price will, even discounting other factors, always be higher unless there is an extraordinary depreciation of sterlingvis-á-vis the Irish pound.
There are only two main importers of UK magazines into Ireland — Easons and Newspread. In addition to VAT, there are two other dimensions to their pricing system comprising sterling punt conversion and what is known as a margin for "uplift" which is designed to cover distribution and other costs associated with the sale of such magazines throughout the Irish market.
Both Easons and Newspread engage in what is prudent and well recognised business practice of the buying forward of the UK currency. In this regard the director has found that they buy forward four times a year, but what is significant is that they both complete their currency deals at or about the same time. This is a most unusual ocurrence. The importers contend that this locks them into a currency rate for a three-month period during which they leave mazagine prices unchanged. It is not clear what benefit consumers derive from these arrangements but it is safe to conclude that it is not to the disadvantage of importers.
Whereas there is evidence that some price reductions have occurred because of the appreciation of the Irish poundvis-á-vis sterling the Irish consumer is still greatly disadvantaged by the operation of what is known as the uplift.
A formula for the uplift was agreed with the now disbanded National Prices Commission back in 1983. It was fixed at 5 per cent at a time when the Irish pound was worth only 85 pence sterling. In the meantime the importers have, to their own benefit, operated the formula in such a manner as to increase the 5 per cent uplift to 10 per cent.
It will be recalled that the Irish cover price for magazines is calculated in the following manner: Sterling Cover Price at a rate of exchange of purchased currency plus an "uplift" for distribution costs etc., plus VAT. There appears to be no justifiable reason for this and it means that Irish prices are higher than they would be if the original National Prices Commission formula of 5 per cent was being adhered to strictly.
Another disturbing finding revealed by the Director's investigation is that the same pricing arrangements, which are complex, are operated by the only two importers and both of them provide ready reckoners or conversion tables which result in the same Irish retail price for the same UK cover price.
Thus we cannot conuntenance the continuation of these uplift and ready reckoner arrangements which clearly operate to the detriment of consumers and the development of free and fair competition. I shall therefore without delay decide on what course of action will best bring about an end to these arrangements either on a voluntary or statutory basis.
