I move: "That the Bill be now read a Second Time."
The purpose of the Bill is to reform and modernise our current legislation relating to competition and mergers. The Bill retains what is best of the existing arrangements and introduces new features, in particular, a more focused approach towards the penalisation of anti-competitive activities, more sensible arrangements for how we handle mergers and acquisitions, and a strengthened Competition Authority capable of making a real impact in its core task of enforcing competition law.
The Bill is the culmination of a process of consideration extending over a five year period. That work commenced during the term of the previous Government with the establishment in 1996 of the competition and mergers review group. The final report of that group, published in May 2000, forms the main background to the Bill.
This is a time of modernisation also for the competition law of the European Union. Articles 81 and 82, formerly Articles 85 and 86, of the EU treaty set out the basic EU competition rules applying to undertakings. The practical appli cation and enforcement by the European Commission of these rules are mainly provided for in Regulation 17 of 1962. In September 2000 the Commission proposed a draft Council regulation to replace Regulation 17. This proposal, which is under consideration in a Council working group, involves the complete recasting of the existing arrangements for the implementation of Community competition law.
Two proposed EU changes are of specific relevance to the Bill. First, it is proposed to abolish the EU notification system and make the whole of Article 81 directly applicable. Second, the Commission proposes that the competent authorities in member states, in our case the courts and the Competition Authority, shall be empowered to apply Articles 81 and 82 using national procedures and remedies. While the draft regulation is still under discussion in Brussels, these two specific changes are likely to be included in the final version and appropriate account has been taken of them in the Bill.
I will outline the principal features of the Bill, drawing attention to the main policy innovations which it contains. The Bill will repeal and replace the three main statutes which deal with merger control and competition generally in the State. These are the Mergers, Takeovers and Monopolies (Control) Act, 1978, the Competition Act, 1991, and the Competition (Amendment) Act, 1996.
Part 2 makes provision for the rules and procedures which will govern the prohibition of activities which prevent, restrict or distort competition in trade in the State or which constitute an abuse of a dominant position in such trade. The 1991 Act, which first introduced these prohibitions and rules, relied for enforcement mainly on private civil actions and a system of voluntary notification of agreements to the Competition Authority. By 1996, it was considered that this approach was not achieving the desired results, and the Competition (Amendment) Act of that year introduced two important enforcement changes. First, infringements of the competition rules were made criminal offences in addition to being civil wrongs and, second, the Competition Authority was empowered to initiate or recommend civil or criminal proceedings in appropriate cases.
In general terms, it can be said the current system of competition rules and enforcement is working well. While the availability of private civil remedies for breaches of the competition rules may not have had the widespread impact envisaged in 1991, they have nevertheless produced a useful, if small, body of Irish jurisprudence in competition law. The notification system introduced in 1991 led to the establishment of a substantial body of Competition Authority decisions which has produced much certainty and given much guidance to business enterprises.
Regarding enforcement changes made in 1996, it may be too soon to reach a definitive verdict, but the initial results are reasonably encouraging. Certainly, the introduction of criminal sanctions for breaches of competition law has greatly increased the deterrent value of the competition regime and may have helped to change attitudes towards anti-competitive behaviour generally.
The most important policy change proposed in Part 2 is the rebalancing of the imprisonment penalties in section 8 to reflect the gravity of different types of anti-competitive behaviour. The current statutory provisions relating to penalties for offences under competition law are set out in section 3 of the 1996 Act. These provide for penalties or fines up to a maximum of £3 million or 10% of annual turnover and of imprisonment up to a maximum of two years. The new maximum fine provided for in section 8 will be €3.8 million, slightly less than the level of 1996. No change is proposed in the penalty relating to turnover.
Regarding the imprisonment penalty, the Bill introduces a new distinction in sections 6 and 8 between two categories of infringement, increasing the imprisonment penalty from two to five years in the case of the more serious category, such as price fixing, and abolishing it for the less serious category. The new five year maximum penalty, which also makes the offence an arrestable one, sends the clearest possible signal that blatantly anti-consumer activities such as price fixing will not be tolerated.
Part 2 also makes a number of important technical changes relating to criminal procedure for competition offences. These relate to presumptions, defences, fines, provision of information for juries and evidence. These changes, in conjunction with the new approach to penalties, are primarily designed to facilitate the prosecution of serious competition offences while taking due account of the rights of accused persons.
Part 2 also provides for the abolition of the notification system. The number of notifications has declined considerably in recent years suggesting that the level of understanding of the substantive rules regarding anti-competitive agreements, decisions and concerted practices among the business community and its advisers is now quite high. A second reason for abolishing the notification system is, as I indicated, that there is every likelihood that the comparable EU system of notification will be abolished when the EU draft Council regulation for the modernisation of EU competition law is adopted. The current system of notification will be replaced by the direct application of the relevant statutory provisions. The Bill retains in section 4(3) a power for the Competition Authority to issue category declarations which will be broadly similar to the category licences under the 1991 Act.
Two important and related changes are provided for in Part 3. First, it is proposed to transfer from the Minister to the Competition Authority responsibility for examining and deciding upon mergers generally based on competition criteria only. Second, it is proposed in the case of mergers in the newspaper and media sectors to retain a right to intervene where the protection of certain stated public interests requires such intervention.
Under existing legislation the Minister is responsible for merger control and, while he or she can refer a merger proposal to the Competition Authority for investigation and report, it is the Minister who makes the final decision on all mergers notified. The competition and mergers review group considered at length the question of who should control mergers. While the group was divided on the issue, a majority recommended that merger proposals should, in the first instance, be notified to the Competition Authority with the final decision resting with the Minister on stated public policy grounds. I was concerned that a two-tier approach would create a more cumbersome regulatory system than the existing one. At present more than 95% of merger notifications are cleared following an initial assessment and without referral to the authority.
In considering the CMRG's recommendation, I also questioned whether a reformed mergers regime should rely on non-competition criteria in the assessment procedure. Most competition experts maintain mergers should be assessed by reference to competition criteria only and while I believe there is a theoretical justification for the use of non-competition criteria, decisions have very rarely been influenced by such considerations. In light of that fact and to provide as simple and speedy a regulatory procedure as possible, I have formed the view that merger notifications should be determined by reference to competition criteria alone.
Furthermore, I believe the Competition Authority, as the specialist body, is the appropriate forum for undertaking the required competition examination and analysis. Its personnel are well placed to assess mergers expertly, impartially and free from party or lobby affiliations. In light of these facts, I propose to de-politicise the merger control system and transfer the function to the independent authority so that in future mergers will be examined and decided upon using competition criteria alone.
The second policy change, which arises out of the first, concerns the treatment of mergers and acquisitions in the newspapers-media sector. In September 1995, my immediate predecessor established the Commission on the Newspaper Industry. This was against the background of various difficulties in the newspaper industry, including the events which led to the cessation of the Irish Press titles. The commission, under the chairmanship of the former Chief Justice, Mr. Justice Thomas Finlay, reported in June 1996 making 16 recommendations, three of which were relevant to merger control over newspapers. The essence of these three recommendations of the Commission on the Newspaper Industry, as adapted by the CMRG, was, first, that certain public interest criteria, including the competitiveness of the indigenous newspaper industry, plurality of ownership and titles, maintenance of cultural diversity and cross-media interests should be taken into consideration in the case of newspaper-media mergers, and, second, that the scope of merger law should be extended to include the acquisition of control over newspapers-media by means other than the acquisition of shares or assets.
The basic issues we must address in deciding how to legislate for these difficult areas are as follows. First, should any special arrangements be made relating to the control of mergers and acquisitions in the media sector? If so, what form should those arrangements take? Specifically, what substantive tests or criteria should be applied in the examination of media mergers. Who should apply these criteria and how do we ensure appropriate accountability? To those questions I suggest the following answers. The products or services offered by the mass media of newspapers, radio and television are different from the generality of consumer products and services in at least one vital respect. We depend on them significantly for information and views about the world in which we live. The material they provide influences how we see the world, how we interpret events and, to a significant extent, our attitudes and even our behaviour. This has a particular relevance to the operation of our political system. The proper functioning of our democratic system depends ultimately on liberty of expression and all that entails. Excessive concentration of media ownership and control involves risks that go beyond those involved in the case of ordinary goods and services.
The test proposed in the Bill for the examination of ordinary mergers and acquisitions is whether the result of the merger or acquisition would be to substantially lessen competition in markets for goods or services in the State. Neither the Commission on the Newspaper Industry nor the Competition and Mergers Review Group found themselves able to recommend a purely economic criterion of this kind for the media sector. The approach they took was to seek to identify specific public interests that should be considered and taken into account in the case of media mergers and to have those interests enshrined in legislation. This is done in section 22(9) of the Bill in the definition of "relevant criteria". This sets out five considerations which address concerns that are specific to the media sector.
On the issue of who should regulate media mergers, that should follow from the nature of the tasks involved. The Bill, in effect, proposes a sharing of responsibilities between the Competition Authority, the courts, the Minister and, ultimately, the Houses of the Oireachtas. Media mergers which do not raise public interest concerns will, in practice, be controlled by the Competition Authority acting on the basis of the competition criterion and subject to the normal right of appeal to the court. I expect this will dispose of the great majority of cases. In those cases where there are reasons for concern on broader public interest grounds, the Minister will be able to require a full investigation by the authority and, no doubt exceptionally, to overturn a final determination of the authority. This power of the Minister will be subject to parliamentary scrutiny under section 24. This arrangement of responsibilities reflects the competences and responsibilities of the institutions concerned and provides for desirable checks and balances. It could work well and prove sufficient to safeguard the public interest in this difficult area. However, I am open to any new suggestions or proposals on the subject and will give careful consideration to any that come forward in the context of this debate. One possibility could be to confine the ministerial power to positive decisions of the authority, that is, that a decision of the authority prohibiting a media merger on competition grounds could not be overruled by the Minister on public interest grounds.
The Bill as drafted covers all existing technologies for the transmission and re-transmission of radio or television. However, it is possible that future technologies will enable radio and-or television to be transmitted or re-transmitted in ways which might not be covered by the current definitions in the Bill. In order that there should be no doubt as to what is covered by the Bill, I intend introducing on Committee Stage an amendment which will make it clear that all technologies for the transmission and re-transmission of radio or television will be covered by the Bill.
Part 3 also contains a considerable number of technical changes. In general terms, the effect of those changes is to bring our merger control regime closer to that of the EU merger regulation following the recommendations of the CMRG report.
Part 4 continues in being the Competition Authority and makes new provision about its functions. The authority is now just ten years old and it is possible to form a view of its performance. The authority has established itself as a competent professional executive agency carrying out its statutory functions to a high standard. It has gained widespread respect both in Ireland and internationally.
I have decided not only to retain the current collective nature of the authority, as a body comprising a number of persons, but to enhance the role of the chairperson broadly in line with the CMRG report. The collective nature of the authority is emphasised, in particular, by section 28(4) which requires the authority not to delegate certain key functions in the Act. These functions include the power to initiate proceedings for an offence under sections 6 and 7 or to make a determination in merger cases following a full investigation.
The Bill includes provision in section 28(1) for a new advocacy function for the authority. I place particular importance on this as an instrument for bringing about change in business culture. Some attitudes towards the notion of competing, or rather of not competing, are rooted deep in tradition and culture. Many of the problems have to do with the interface between business and Government itself. An example of this is the era of price control which may have contributed to a sense of "not rocking boats" within particular business or trade communities. The authority is already playing a very valuable advocacy and educational role and the Bill recognises and provides for this.
Part 4 also includes a number of changes which will strengthen the independence of the authority. Section 27(3) makes express provision for the first time for the independence of the authority. Increased autonomy in financial and staffing matters is provided for in sections 36, 37, 39 and 41.
Section 32, co-operation between the authority and certain statutory bodies, provides a statutory framework for practical co-operation between the authority and the sectoral regulators listed in schedule 1. This provision, which is wholly new, and is based on the advice of the CMRG, will underpin and enhance existing levels of co-operation between the relevant bodies. The inclusion of the Broadcasting Commission is particularly relevant to the media merger area and it should contribute to greater coherence in the overall monitoring of the media sector.
Part 5 provides for miscellaneous matters such as repeals, expenses and saving and transitional provisions. I should comment specifically on section 46 which empowers the Minister to amend or revoke the 1987 groceries order. The purpose of this provision is simply to allay any doubts as to whether the order could be amended or revoked subsequent to the repeal of the Competition Act, 1991. As I indicated in the Seanad, I have no proposals at present to amend or revoke the order.
The Bill is the result of a process of careful preparation, as befits a policy area of this complexity and importance. It takes account of the best independent advice available to Government, relevant EU developments and experience in implementing the current arrangements. If enacted, it will sharpen the focus on serious competition wrongdoing; take merger control out of the political arena; foster a new approach for handling competition problems in the media sector; and strengthen the Competition Authority.
The Bill will provide a sound modern framework for the promotion of competition throughout the economy over the coming years and I commend it to the House.