Vol. 478 No. 1
5 Mrs. O'Rourke asked the Minister for Enterprise and Employment the discussions, if any, he has had with the EU in relation to the Tesco takeover of Quinnsworth and Crazy Prices; and the action, if any, he proposes to take on the matter. [10755/97]
This takeover falls to be dealt with under the EU Regulation on the Control of Concentrations. This takeover is not referable to myself due to the size of the enterprises involved. The transaction was notified to the European Commission on 1 April and under the terms of the regulation the Commission has until 5 May to decide whether to initiate proceedings or to declare the proposed acquisition compatible with the common market.
Officials from my Department met with Commission officials on Friday, 11 April to discuss this case. Among the issues discussed was the possibility of the Commission referring this transaction to the competent authority in Ireland for examination under the terms of Article 9 of the regulation.
Under the terms of Article 9 the Commission may, at its discretion, refer a case to the competent authorities in a member state where it considers that "a concentration threatens to create or strengthen a dominant position as a result of which effective competition would be significantly impeded on a market within that member state, which presents all the characteristics of a distinct market, be it a substantial part of the common market or not".
While it could be argued that the market in this State has "all the characteristics of a distinct market" the takeover would not be regarded by the Commission as a concentration which "threatens to create or strengthen a dominant position as a result of which competition would be significantly impeded". Having regard to the terms of the regulation and the meeting on 11 April with EU officials I have decided that there would be no benefit in seeking an Article 9 referral in this case.
On 26 March I met with the chief executive of Tesco plc and the managing director of Power Supermarkets, trading as Quinnsworth. At that meeting I received certain undertakings which were subsequently confirmed by letter on 4 April. These undertakings are as follows. Tesco has acquired the Power Supermarkets business with the intention of growing the business and enhancing its value to Tesco and to the Irish economy. These objectives will be achieved through continuing investment and by the addition of resources and expertise to the Irish business by Tesco.
Existing commitments to Power Supermarkets Ltd. employees in terms of pay and conditions will be fully honoured. Tesco conventionally adopts a partnership approach in its relations with its employees. Tesco intends to continue that policy in Ireland and to honour the spirit of partnership that is valued in Ireland between the social partners and between employers, employees and their trade union representatives.
The level of beneficial resources on purchasing and technology in Ireland available to Irish suppliers will be enhanced with a view to ensuring that the amount purchased will be maintained and increased. It is intended that a buying facility will remain in Ireland as a base for purchasing goods for the Irish and other European markets of Tesco. Tesco's experience in doing business with the Irish food industry over many years has been entirely positive and they look forward to enhancing that relationship over the coming years.
Tesco will adopt a developmental approach to foster new and emerging Irish suppliers in accessing the Irish and wider European market for own brand and branded products purchased by Tesco. Initiatives will include mentoring, quality enhancement and other support for SMEs. Tesco will, in consultation with Forbairt and Bord Bia, develop other initiatives including supplier assistance and supplier recruitment programmes, the details of which will be developed jointly with those agencies. Tesco would also propose to invite relevant business representative groups to participate in this process.
As business requirements in Ireland evolve, there will be ongoing consultation with distributors. Tesco is aware of the existing supportive approach of Quinnsworth/Crazy Prices to the Irish food supply chain and in the distribution sector. Tesco will remain cognisant of those relationships as its business in Ireland evolves.
Tesco will honour all legal obligations arising from its entry into the Irish market including those set out in the Restrictive Practices (Groceries) Order, 1987, and particularly those relating to credit terms and below cost selling. Arising from these undertakings, arrangements are being made involving officials from my Department, the relevant State agencies and Tesco, to set up the structures necessary to ensure that these commitments are implemented.
I am concerned to ensure that Tesco will play a full, responsible and positive role in adding business to Irish producers. As in life, change brings challenge and opportunities. Tesco is a merger opportunity for Irish suppliers but this change must be nurtured and maintained so that Ireland, Irish producers, the Irish consumer and Tesco all benefit.
In this regard. Forbairt is pursuing, on my behalf, a number of initiatives with Tesco including a supplier development programme, a management training initiative and a benchmarking initiative.
I and my Department will continue to monitor progress with a view to ensuring that the concerns of Irish suppliers are borne in mind by the Commission in their decision-making process.
That is a load of gobbledygook.If the Minister believes that he will believe anything. Like IBEC, RGDATA and other concerned groups. I believe that the Minister has sold the pass. No one is suggesting that Tesco cannot come to Ireland. That would be like King Canute trying to hold back the waves. However, if there is to be an agreement it is up to the Minister to ensure watertight conditions so that future inevitable incursions by other groups will meet similar conditions.
In the UK, Tesco uses 50 per cent own brand products, while Quinnsworth's share is 15 per cent. What assurances did the Minister receive that the 15 per cent would not increase to 50 per cent? I received the same letter as the Minister and I do not think he received any such assurance.I met the representatives of Tesco and Power Supermarkets on the same day as the Minister and I was not reassured by what I was told.
What written assurances did the Minister receive on the method of distribution and the Irish buying office? The Minister has given us vague assurances. They feel and sound good but they are not for real. In one of the Saturday newspapers the Minister stated that he was meeting Tesco representatives again. If the Minister was assured by what he had already heard, why is he seeking reassurance?
Ireland has been ill-served by the Minister's judgment on this matter. If he has not seen fit to ask his officials to lodge a complaint with the European Commission under the merger controls, it will feel that there are no grounds on which it can act. I support the views of IBEC, RGDATA and other groups who are voicing concerns in public.
The Deputy misunderstands the process under which these mergers are considered.Where a merger exceeds 5,000 million ECU in worldwide turnover, or more than 250 million ECU in two countries, such mergers must be examined by the European Commission, not the Irish Government.
I know that.
The Deputy appears to suggest that I sold the pass in some way, which is not the case.
The Minister lodged no complaint.
These mergers fall to be examined by the European Commission. My officials sat down with the Commission and teased out their concerns, examining the issue under Article 9. That clearly was not a feasible way to proceed. The Irish Government does not have power to bring this case back here for consideration for the very simple reason that it does not fall within the provisions of Article 9.
I know that but the Minister has another option.
If the Deputy cares to read the provisions of that article she will see that that is the case.
I know but the Minister has another option.
In respect of water-tight provisions, the Irish Government sat down with Tesco who have given firm, solid commitments which include some very important ones, such as to have a buying office in Ireland, to enhance the amount of resources the company puts into working with Irish suppliers to ensure that they, in turn, can increase the volume of sales in the Irish market. Tesco has agreed to bench-mark those commitments and agreed to their regular auditing, to ensure demonstrable progress in increasing sales of Irish suppliers. Tesco has that firm commitment, in addition to another related to elements of a development programme devised specifically for Irish suppliers which includes elements of management development, mentoring and so on. Furthermore, company representatives engaged in discussions with Forbairt and An Bord Bia on which very significant progress has been made. Representatives of Forbairt were in the United Kingdom last week developing those proposals. I am confident we shall obtain substantive proposals to the benefit of Irish suppliers.
It is only right that the concerns expressed by many, including Deputy O'Rourke, that Tesco honour the terms of the Groceries Order — in respect of which the company has given a voluntary commitment — be addressed to ensure there will be no-below cost selling or unfair competition in the processes undertaken by the company.These are solid commitments which will guarantee the development of Irish sub-supply in this area.
Whenever businesses are established here, in the nature of business, it is not possible to stipulate criteria the Deputy might like to see binding a party for all time. We are in a changing business world within which businesses change and will have to evolve and grow. However, in so far as we can obtain clear, firm commitments, they have been secured. I engaged in discussions with Tesco to ensure we obtained substantive proposals underpinning those commitments. I intend to ensure that we do. Substantial progress has been made already and I foresee us obtaining substantive proposals.
The day the Minister agreed to issue a joint press statement with Tesco was the day on which he undermined the public good in respect of this matter. It was a grave political mistake for him to engage with Tesco, in a joint press statement, welcoming this merger, in other words "selling the pass" on his very first meeting with the company. I do not know why the Minister did so, I was most surprised at this action. In so doing, he did not fulfil his ministerial remit and it was a grave political mistake against the public interest.
Does he agree the most important issue amidst all of the "feel good" factor or soft words being addressed to him by the company is that there is no ground for explaining the absence of any guarantee that Quinnsworth-Crazy Prices — which company had 15 per cent only of "own brand" on its shelves — will be taken over by a company carrying 50 per cent "own brand" products, thereby cutting margins substantially, picking and choosing among suppliers. I am well aware that, as times change, challenges come to the fore but the Minister failed to meet that challenge.It appears his officials were overwhelmed by Tesco representatives on the day they visited the Minister's Department. Why did the Minister issue a joint statement following that first meeting rather than hold his brief close to his chest, make a strong point and continue to emphasise what he wanted to see done?
The Deputy portrays a scant understanding of the type of restrictions one can impose on businesses that must trade in the open market.
I have plenty of understanding.Why did the Minister issue a joint statement with the company?
One cannot pin down the proportions of this or that product such companies carry; those are the types of restrictions that represent the type of silly material the Deputy is peddling.
I have asked the Minister several times: why did he issue a joint statement?
Please, Deputy, let us hear the Minister's reply.
If the Deputy wants to ask questions, I will sit down and allow her to pose four supplementaries. If the Deputy cares to read the statement she will see quite clearly that it is composed of a list of commitments given me by Tesco in the course of our meeting.
The Minister's name appears on it.
Yes, my name appears on it. These are commitments given me by the company subsequently confirmed in writing. The company subsequently sat down with the agencies of my Department and developed these proposals in substantial measure. I am quite confident those commitments, namely bench-marking the volumes of purchases of Irish goods by Tesco, its commitment to work with small and new emerging suppliers to encourage their further development are real, tangible ones from which we will reap benefits from this merger, which is our objective. As the Deputy indicated, it is not a question of informing Tesco that it cannot enter the Irish market.
I know that.
We are long past that stage. Rather it is a question of obtaining from the company a solemn commitment to the Irish Government that its approach in the conduct of its business here will be compatible with and helpful to the development of our economy. Those commitments have already been secured.
The Tesco delegation that came to me immediately following its meeting with the Minister informed me, with considerable triumph, that this was a joint statement with the Minister. The implied question was whether I would join them. I said emphatically "no".
I assure the Deputy that the commitments given and enunciated at the end of that meeting were real and have since been built on. We shall ensure this merger will be to the benefit of Irish suppliers, which is what we should be interested in instead of——
In other words, the Minister sold the pass.
We must proceed to question No. 6.
If the Deputy is so keen on shouting me down from a seated position, that is hardly dignified.
The Minister is whistling past the graveyard.
Nonsense.
Question No. 6, please.
