Joint Committee on Agriculture, Food and the Marine debate

Groceries Sector: Discussion with the Competition Authority and the National Consumer Agency

Chairman

I welcome the representatives from the Competition Authority, Ms Isolde Goggin, chairperson; Mr. Patrick Kenny, director of cartels division; and Mr. John Evans, manager. I welcome also the representatives from the National Consumer Agency, Ms Karen O'Leary, chief executive office and Mr. John Shine, director of commercial practices division. I thank them for attending today to brief the committee.

I remind the witnesses that they are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I invite Ms Goggin to make her opening statement and Ms O'Leary to follow.

Ms Isolde Goggin

I thank the Chairman and members for the invitation to attend today. I am accompanied by Mr. Patrick Kenny who is on my right. As the Chairman said, Mr. Kenny is a member of the authority and also the director of the cartels division, which looks after the criminal enforcement side of our activity. On my left hand side is Mr. John Evans, who is the manager of the monopolies division, which looks after the civil enforcement side.

We are very happy to have the opportunity to explain the mission and role of the Competition Authority and to explain to the committee our activities in the areas of grocery supply and retailing.

Our mission is to ensure that markets work well for Irish consumers, for business and for the economy as a whole. Our focus is on ensuring that the competitive process works to respond to the needs and tastes of Irish consumers. Increasingly in these tough times, as members have heard repeatedly in the sessions over the past few weeks, consumers are very focused on value for money.

Competition plays a key role in improving the competitiveness of the economy and when speaking about competition we are speaking about more than costs. Some people make their purchases based primarily on costs but competition is partly about that but is also about our ability to foster innovation, to improve quality and to achieve sustainable improvements in living standards and job opportunities for all. This leads to greater choice, increased innovation and quality, lower prices to both business and consumers and of course to increased employment.

Our role is to promote competition in the economy and for enforcing Irish and EU competition law. We do so by taking action to deter anti-competitive behaviour. A key role is the investigation of anti-competitive practices such as price fixing or other anti-competitive agreements or abusive conduct by firms that are dominant in the market. Let me mention, that in one area we are different from competition authorities in other member states. Our role is to investigate and either to make referrals to the Director of Public Prosecutions or to take a case before the courts. We do not take decisions ourselves on breaches of the law, which is not our role but the role of the courts. In some ways that is different from competition authorities in many other member states. We also have responsibility for merger control in the State and this has been a very active area in the food and grocery sector in the past few years, including Glanbia's acquisition of Dawn Dairies and Golden Vale in 2011 and at the retail level we also reviewed and approved the take over by the Musgrave Group of Superquinn in 2011.

We promote competition in many different ways. For example, we examine the competitiveness of market sectors, advise Departments and other State agencies on competition issues and we promote a culture of competition more generally through activities such as road shows, information booklets, guidelines, conferences, seminars and so on. In 2008, we published a detailed series of reports as part of our grocery monitoring project. A number of specific aspects of competition law are currently in place which apply specifically to the grocery sector, under the Competition (Amendment) Act 2006 and I will speak more about these later.

To return to the point of what competition comprises, it is about more than simply selling goods at the lowest possible price. The range of consumers benefit from variety in terms of price, quality, service and innovation. Given the pressure on household budgets in recent years, Irish consumers increasingly seek value in their weekly shop. They are becoming less brand-loyal and are migrating to own-brand offerings and discount retailers. The proportion of the household budget spent on groceries varies significantly, in accordance with income levels. In terms of income, the lowest 10% of households would spend up to one-fifth of their budget on food, much of it on essentials such as bread and milk. Therefore, the availability of a range of goods at low prices is very important for vulnerable consumers.

I mentioned our role in competition enforcement and how we prepare cases and bring them to court or to the attention of the Director of Public Prosecutions. Competition enforcement is complex. Good cases require not only credible evidence, but also witnesses who are willing to be put on the stand and cross-examined in court. This, as we have discovered over the years, is easier said than done. This applies to normal competition enforcement to which I have referred, such as anti-cartel activities, anti price fixing and the abuse of dominance. It also applies to the Competition (Amendment) Act 2006 which was passed to address the perceived imbalance in bargaining power between large retailers and producers. The Act makes certain practices illegal if they have an anti-competitive purpose or effect. These practices include compelling or coercing payment, or granting of allowance, for the advertising or display of grocery goods, or a retailer compelling or coercing payment for providing space for grocery goods within a new retail outlet, a newly expanded outlet, or an outlet under new ownership, within 60 days after the opening of the outlet.

This Act was passed in 2006. Our experience in the seven years since then has been that we have received few substantive complaints, basically for the reasons discussed substantially by the committee. Smaller producers may be unwilling to complain to the authority or to take court action, which they are entitled to do, for fear of retribution which could mean delisting. Larger producers suffer less of a power imbalance and they can negotiate on a more equal footing with retailers and are less likely to need the protection offered under the Act.

The most recent policy proposals in the grocery sector recommended implementing a statutory code of practice for grocery goods undertakings. A number of consultations were carried out on this in 2009 and 2011. On both occasions, the authority made submissions to the Department of Jobs, Enterprise and Innovation’s consultation pointing out the difficulties involved in enforcing codes of the kind proposed. I mentioned the evidential difficulties of getting somebody who is prepared to go on the witness stand and face cross examination. There is also a danger of significant compliance costs on small and large businesses alike, but more significantly for small businesses. Also, codes may not solve the problem they are intended to solve, in that the power imbalance may remain, even when manifested through codes of conduct or a terms of business agreement.

However, I am here today to inform the committee that if the Minister decides to introduce such a code and decides the authority - the amalgamated competition and consumer agency, the legislation for which is being worked on by our parent Department - is the agency which will have the task of policing it, we will fulfil that role diligently. Nobody has ever accused us of not doing the job we were given to do through legislation. Given there is open debate still happening in the EU and that an adjudicator has just been appointed in the UK to oversee the grocery supply code of conduct, one proposal we would make would that it would be a good idea to set a term for review of the operation of any such code after a certain period.

I will conclude by saying we will be very happy to take any questions from the committee when my colleague has spoken.

Ms Karen O'Leary

My colleague, John Shine, and I would like to thank the committee for the opportunity to contribute to it today and we hope to make a productive and positive contribution to its ongoing deliberations. I intend to outline the statutory remit and role of the National Consumer Agency and to provide some information on our previous work and activities relevant to the grocery sector.

The National Consumer Agency is the independent State body with responsibility for the enforcement of consumer law. As a statutory body, our remit and functions are established by law, principally the Consumer Protection Act, 2007. This Act, which transposed the EU unfair commercial practices directive is a maximum harmonisation directive, which means it limits our functions to the relationship between traders and consumers acting outside of their business trade or profession. We carry out our functions within this context - which is somewhat different to how the Competition Authority carries out its functions. Our mission is to protect consumers and to help bring about a situation where they are empowered to make well-informed decisions in fair and competitive markets. We have a clear statutory mandate to serve and represent the interests of consumers.

Since our establishment in 2007, the environment for consumers in Ireland has been transformed by the financial crisis and subsequent economic difficulties. The impact this has had on consumers and their spending patterns has been dramatic, across all sectors, including the grocery sector. I will expand on this point later.

In summary, the work of the National Consumer Agency can be described as promoting consumer welfare by enforcing consumer law and advocating on consumer issues. We provide a one-stop consumer information and education service via our websites, consumer helpline and public awareness activities. We also have specific responsibilities in regard to the safety of consumer products and personal finance information and education. As I mentioned, our statutory remit and focus is exclusively on the experiences of consumers in Ireland. Therefore, we have no role in the business to business or supply chain relationship.

The National Consumer Agency has a broad mandate and remit and an ever-increasing number of consumer issues compete for our resources. We must, therefore, make choices in regard to what we do and how we do it in order to be effective. Our decision-making is based on an assessment of consumer detriment and identifying where we can make the greatest impact. Given the option of two competing issues, we prioritise the issue where we will have the best opportunity to mitigate the most consumer detriment. We gather information through our direct contact with consumers. Our consumer helpline received over 58,000 contacts from consumers last year. We also acquire knowledge through our systematic market monitoring programme, direct market surveillance activity, media reports and information received from other agencies in Ireland and across the EU.

The frequency and speed at which new issues arise requires us to be flexible and to react quickly. Information is then evaluated and processed to identify the source and size of the problem, in particular the scale of consumer detriment, primarily financial, but not exclusively, and whether a potential breach of consumer law has occurred. Our subsequent interventions are evidence based and are focused on the areas where we can make the greatest impact. They often involve a number of complementary approaches across three pillars of activity, enforcement, advocacy and information-education for consumers.

In cases where there is a potential breach of consumer law, a more formal process is required and we take into account the likely detriment experienced by consumers, the nature of the evidence that is available, whether additional evidence needs to be gathered, previous trader behaviour and any past actions, possible motives and the level of knowledge of the trader. We may look for voluntary compliance where that is the most effective and efficient approach or use disruption to interrupt a practice where formal enforcement may take too long or cost too much. However, in situations where formal enforcement action is appropriate, we will not hesitate to act and we have a number of options available.

Our mandate is broad in that it crosses various sectors in which consumers operate, including the grocery sector. As with all sectors, one of our main objectives is to ensure price transparency. Consumers should know the price of a product or service before they buy it. This is important so that consumers can make informed decisions. It also helps to foster competition as consumers can use this information to choose where they take their business, which encourages businesses to compete with each other. We carry out compliance blitzes to ensure that traders are complying with pricing legislation. In 2012, we carried out visits to 349 traders nationwide, including a significant number in the grocery sector. We also investigate complaints from consumers to establish if there are breaches of the Consumer Protection Act and if enforcement action should be taken.

We carried out eight surveys on grocery prices between 2007 and 2011. In our last survey, we found high levels of price matching among the four major grocery retailers. In other words, the difference between the prices charged for branded products across the board was very low.

We also found that competition seemed to be focused on special offers and promotions as opposed to price. The National Consumer Agency has consistently called for a focus on everyday low pricing as a consumer-focused alternative to the "hi-lo" pricing associated with special offers and promotions.

Our most recent market research in the grocery sector, conducted in November 2012, found that almost half of all shoppers have made changes to their grocery shopping practices in order to reduce costs. The main change indicated, by over 62% of those who made changes, was that they now shop around for better value. Other changes include buying less, budgeting better, switching provider and changing brands. Over three quarters of those surveyed, 79%, indicated that these changes have reduced the amount they spend on groceries. Consumers have responded to changes in their own circumstances, as well as responding to the behaviour of retailers. Developments in the pricing behaviour of retailers have included an increase in price promotions, higher levels of price matching and development of own-brand ranges.

We focus our efforts where there is clear consumer detriment. We ensure that businesses adhere to pricing legislation and work to increase price transparency in sectors where such transparency is lacking. In the grocery sector, consumers have access to pricing information and can compare prices, should they wish to do so. In 2007, on average, consumers spread their shopping over two and a half stores. By 2013, on average, grocery shoppers are spreading their shopping over three stores. That is a 20% increase and clearly shows that consumers are less loyal and are more open and willing to change store should they believe that better value is available to them.

In its invitation, the committee mentioned two specific areas that I will now address. The first is the impact to the consumer on depleting produces, such as liquid milk. This is essentially a matter of supply and demand, where reduced supply will likely lead to less choice and increased prices to consumers if there is no reduction in the level of demand for the product. We would always advocate, where possible and relevant, for choice to be available to consumers to ensure that there is sufficient competition in the market in respect of price and quality of product. CSO consumer price index figures for May 2013 show that the cost of whole milk has decreased by 0.6% over the previous 12 months. However, it has been noticed that there has been an increase of between 5 cent and 10 cent per litre between May and June 2013. Increases had not been seen in the price of milk for a considerable period of time prior to this.

The second specific topic which the Committee asked us to address was the impact of further consolidation of the grocery sector. The National Consumer Agency has no direct remit in the matter of business consolidation, other than advocating for adequate competition in the marketplace to ensure that consumers are empowered and can make well-informed decisions in fair and competitive markets. However, we note that there have been some contrasting developments in this area in recent years. The acquisition of Superquinn by Musgrave and the decline in the numbers of small, independent retailers has occurred at the same time as the rapid expansion of two new entrants, Aldi and Lidl. Therefore, while there has been consolidation in some areas of the market, new entrants have brought a valuable alternative to consumers, to which they seem open.

New retail planning guidelines were introduced in 2012 and we made a submission to the Department of Environment, Community and Local Government when it was reviewing earlier RPGs in 2010. The recommendations we made at that time on facilitating competition stated that it is more desirable to have the emphasis focusing on promoting increased competition, rather than maintaining the status quo, which may play to the strengths of incumbents and deter new market entrants who could potentially be more efficient. The latest RPGs state that the preferred site for new developments is in the city or town centre. If this is not possible, then edge-of-centre locations may be considered. Only if this is not possible, out of town development may then be considered. We note that this sequential approach and its development limitations have had the effect of constraining the type of grocery retailer that can trade in an area. This limits the range of goods they can offer and influences the price point at which they can operate, all of which may undermine the competitive environment and deny consumers choice and value in the retail market.

How consumers behave in response to changes in the market should not be understated. Consumers are now increasingly open to new offerings. They are reacting to market changes in their best interests; they are in effect playing the system to their advantage. The National Consumer Agency’s view is that there is a place for all retailers to compete for the benefit of consumers.

In conclusion, I would like to reiterate our strategic priorities and their relevance in the grocery sector. We protect consumers by enforcing consumer law. This includes price display legislation and in 2012, we pursued 520 complaints in price display and misleading pricing. We empower consumers to make informed decisions. It includes improving price awareness and transparency in markets where consumers find it hard to make informed decisions. This does not appear to be the case in the grocery sector at this time, where consumers have access to pricing information and their behaviour indicates that they are increasingly aware of the alternatives available to them. We also represent consumer interests, advocating and intervening on significant issues of consumer detriment.

Finally, I thank you for the opportunity to address you today and my colleague and I are happy to take any questions you may have.

Chairman

Thank you. Before I invite committee members to speak, I would like to inform the committee that I have an apology from Deputy Ó Cuív. Today's meeting is clashing with a previous commitment. Senator Ó Domhnaill is also in the Seanad at the moment.

Deputy Thomas Pringle

I thank the witnesses for their presentations today. In her submission, Ms Goggins stated that there were two elements of the 2006 Act that deal with the retail sector. She stated that it only applied if there was an anti-competitive object as part of those. My view is that it would be quite limited in terms of the questions being asked of the retail multiples by committee members over the last few months. I presume somebody can ask for a supplier to contribute to the cost of a promotion that would not necessarily be anti-competitive. The supplier is supplying that person and is not excluding anybody else. While it may be illegal, it may not be illegal under the 2006 Act. I would like Ms Goggins to expand on that. When they were here, the representatives of the multiples were very strong in stating that the 2006 Act provides a mechanism for anybody who wants to make a complaint or raise an issue about any illegal practices that may be going on within their businesses. Lo and behold, nobody has made a complaint so everybody is very happy with what is happening. From looking at the presentation, it seems quite limited in what could be examined by the Competition Authority. Perhaps Ms Goggins could expand on that.

Ms Goggins also states that codes of practice are not always fit for purpose and do not solve the problems they were intended to solve. Are there examples of codes of practice that are fit for purpose and codes that have failed as well? That would be interesting for the committee's work. Ms Goggins also states that the code of practice would impose significant compliance costs. The representatives of the retail multiples in here over the last few months spoke very eloquently about how compliant they are and how much they spend on being compliant as things stand. It was very difficult to get an idea from them as to where this extra cost would come from. If they are already so compliant, it seems that there would not be significant extra costs in complying with a code of practice if it was brought in. They failed to my satisfaction to give concrete details of what these compliance costs would be and how they would impact on their business. Perhaps the Competition Authority might have some knowledge on that.

My next question is for the Competition Authority again. One of the issues that has come up in this committee is the price that primary suppliers are paid by creameries and the price paid in the supermarket for liquid milk. Would it be anti-competitive to set a minimum price for the primary producer of a commodity or a product? Would there be competition law problems with that if it was decided it was in the common good to have a level price for a product made by a producer?

My final question is for the National Consumer Agency.

Food costs in Ireland are 18% higher than the average across the European Union. The multiples said this is due to the increased cost of doing business in Ireland but did not really elaborate on that. Can the witnesses say, based on their own research whether that 18% differential is justified in the context of costs across Europe and other countries? Do they accept that the 18% difference is justified?

Deputy Pat Deering

I welcome our guests here today. Over the past few months we have had detailed discussion with many large multiples and all the shareholders involved in this issue. Like Deputy Pringle, I am not convinced by the arguments some of the multiples have made regarding the issues that seem to come up regularly. Three players in the grocery sector dominate 70% of the market, Tesco, Dunne’s and Super Valu. That seems very uncompetitive to me. Do the witnesses have a view on that or do they think it is healthy? If not, where do they think we should be going?

Groceries in Ireland seem to cost 17% or 18% more than the average price in 27 other countries. That is a substantial percentage above the average in other EU countries. If the Irish market is very competitive how come the prices are 17% higher than everywhere else?

The National Consumer Agency said it received very few complaints in 2006. Is there a reason for the absence of complaints? Suppliers in particular are very much afraid to complain. Last week I told the Northern Ireland Minister for Agriculture and Rural Development about a particular supplier which I had visited in my constituency in the past couple of weeks. It supplies 55% of a certain product in the country to a certain supermarket, a substantial amount of product to supply, and it would be afraid to make a complaint. It told me that it has to pay money up-front in order to get onto the shelves of that particular supermarket. It specified that there was one particular supermarket above the rest that would look for extra money. I understand that is a very delicate matter. Do we need to get to the bottom of some issues? Why should a supplier have to pay extra money? At the end of the day the consumer pays. That ties into my point about our grocery costs being 17% higher than those anywhere else in the EU. This is an issue that needs to be addressed. We have had a very worthwhile discussion over the past couple of months with almost all the people involved, with one exception, who did not grace us with her presence. We have to deal with what we did get.

Codes of practice are the kernel of the matter. There has been an independent adjudicator in place in England for a very short time. Does the National Consumer Agency have any indication how that is working out and would it be in regular contact with its counterparts on the other side of the pond about that system? There has been a great deal of talk about whether it should be a voluntary or a statutory code. Does the National Consumer Agency think we should go down the voluntary road? I think anything that is voluntary will not happen. It needs to be mandatory. What is the agency’s view on that matter?

Deputy Pringle mentioned the compliance cost and some of the multiples reminded us several times that they have a very good structure in place whereby they are able to assess everything. In view of the fact that it is in place there should not be an extra large cost involved. Where does the National Consumer Agency see the compliance costs?

The horsemeat issue earlier in the year could have been a disaster for the country. We discussed that at length at the time. There is a view that one reason for this problem is that it is a cheaper product that is similar to the main product which companies thought they were buying. Is that also a result of competition forcing down the price? Perhaps because of the times we are in when money is scarce the general consumer looks for value for money at the expense of quality. We did not know what we were getting in the horsemeat and we still do not know in some cases. Does the Competition Authority have a view on that issue? Are we losing out because times are difficult and costs are being forced down at the expense of quality? Likewise liquid milk, an area in which I have a personal interest: the price to the producer in recent years has been similar while the price to the consumer has risen gradually. There may have been a small rise in recent times but it would appear that milk is being used as a loss leader in most outlets. Does the Competition Authority agree or am I talking rubbish? To Joe Public who produces the milk that appears to be the case. It is left to one side and used as a special offer to draw the customer in to buy something else.

Deputy Michael McNamara

How many prosecutions were taken in 2010, 2011, and 2012 and of those prosecutions how many were successful? How many raids were carried out with regard to investigations of possible irregularities in the food and grocery sectors and who was raided in those years?

Deputy Tom Barry

I welcome the witnesses here today. This is an issue close to my heart. The multiples have the financial strength which protects them against the primary producer. I believe they need to display their profits here because when they deal with their suppliers in many cases they ask them to open up their books. There is a double standard. They dissect the books of their suppliers and decide if the supplier is entitled to any profit and if so how much. The State, however, does not know what is going on. This is double dealing and I do not like it. These are realities.

I hope everybody goes home today and remembers the word "potholing". I am not talking about Cork County Council sorting out a few holes in the road. This refers to a supplier selling a particular product and getting maybe €100,000 a month. Then its accounts show a dip for a particular month when it gets paid €50,000 and the buyer says it is filling a financial pothole and will get back to the supplier. The margins are tight enough in these contracts that this type of practice should not go on but it is going on. Market support is a kind phrase for hello money. There are many others. This is the elephant in the room. We are discussing these very serious issues which are crippling the primary producers in a country where agriculture is one of the main income streams. We have to deal with this. Obviously the multiples do not have the moral backbone to deal with it. Some are better than others and it is wrong to castigate everybody.

I do the shopping quite regularly and I agree with the witnesses that there are little or no price differences in branded products. I am one of those who go to several multiples for items which are better quality in some than in others.

They are using price promotions. One would need to work out the cost per millilitre or per gramme on an iPad. The consumer is not saving money; there is no transparency. As a person who grew up on a dairy farm the milk issue really annoys me. I saw how hard my father worked all his life and I appreciate how hard dairy farmers work. It is a 24-hour job, every day of the year. Their professionalism is outstanding and the quality of their product is amazing. However, they are being dealt with in an unfair manner. They came to this committee a short time ago and told us that they are slowly going out of business. This is shocking and wrong. They are going out of business because they are not getting a fair price for their product. These people are doing what we asked them to do but we need to protect them. The multiples are taking greedy profits on the back of these people's life's work and that is wrong. I hope that message is heard by the multiples.

When the price of milk paid to the farmers fell a few years ago to 26 cent a litre, the branded milk product was selling in the stores from €1.49. When the product price fell to 19 cent a litre we should have seen the €1.49 drop to around €1 a litre but this did not happen and the farmer continued to receive a price he could not sustain. There is a race to the bottom. The multiples are asking the primary producers to live on depreciation. People will have heard me make the argument before. Money is needed as profit but money is also needed to reinvest into the business, to put in the extra stainless steel and to abide by all the regulations. One of my colleagues spoke about the horsemeat situation. Can a consumer rightly expect to buy a burger that was sold for 8 cent when its actual cost should have been 80 cent? The consumer still pays out but is not getting the value or the truth. Our system of labelling needs to be examined. One would need to have a degree in food labelling to understand which was the country of origin. The primary producers have had a love-hate relationship with the Competition Authority over the years. I am a tillage farmer and I have seen shiploads of grain coming into the country. However, I appreciate that the authority has a job to do. The primary producers believe they are not being dealt with fairly. They believe that other parties on the opposite end of the equation are getting away with behaviour that is not being exposed whereas the primary producer is fully in the limelight.

The challenge for us all is to find a solution to the problem, perhaps by means of a mandatory code of practice because the voluntary codes have not worked. Our dairy farmers, cereal farmers and our small businesses build up business on the back of good behaviour only to find out that they are being put to the sword. This goes to the heart of the success of our food industry. We all have a role to play but we need solutions rather than talk.

Senator Mary Ann O'Brien

I welcome the witnesses and thank them for their contributions. Deputy Deering and Deputy Barry have raised most of my points so I will be brief. I have spoken confidentially to a few small suppliers. I am a supplier and I employ 110 people. I know how difficult it is for suppliers. I have a lot of friends in the food industry because I have been in business for 21 years. Some of the people I spoke to confidentially said that listing fees are still in operation but the language has changed. Humans are very creative and it is no longer called "hello money" or a listing fee. Deputy Barry referred to pot-holing but I have not come across that myself although I have been asked for it by English multiples as recently as last year. When their accounts do not meet their shareholders' requirements at the end of the year they ask their suppliers for contributions. However, I have never been asked for that by an Irish company. Who has the money to take a full page advertisement in the Sunday newspapers? I wonder who pays for those adverts. One of the suppliers to whom I spoke had been told that if their product was to be promoted it would be put on a lovely coloured page in the Sunday Independent and there would be a cost. This is the practice.

Has the Competition Authority considered having a focus group, an internal bunker focus group of 20 to 40 small suppliers? They could feed information to the authority in greater detail than the committee can provide. The issue of horsemeat has been well covered. No supplier wants to be driven down to that level. Another issue which must be faced is the advertisement of low-cost alcohol. I have a 19 year old son so I know all about it. I do not drink beer or cider as I prefer wine but I am surprised at the cheap prices of those drinks. The word, "footfall" is a favourite of the multiples. Cheap beer or a tin of sweets - Roses, I think - at Christmas are regarded as footfallers; they are designed to get the consumers to walk in the door of the supermarket and they are then captive. I had an audit last week which was carried out by an Australian retailer. It is easy for me because my business is 80% export. The practices are the same all over the world. They looked at my books and studied the percentage taken by each customer. I have an open book costing system so they can see my suppliers. As a Deputy said, the one-way street is unfair. I am a very small player with just a few random comments.

Ms Isolde Goggin

Quite a few topics for discussion and some very interesting points were raised. I will begin with the points raised by Deputy Pringle. The 2006 Act amended the 2002 Competition Act. He is correct that it has a limiting clause. That is a difference between competition law and unfair trading practices law. We will always start with the consumer and that is where the object or effect clause comes in. When examining practices that are forbidden by our legislation we always start with the question of what will be the effect on the consumer. Practices with the object or effect of preventing, restricting or distorting competition are those that harm consumers. Practices that affect relationships within the supply chain above that are not really the target of competition law. In a sense that is why the issue about codes of practice and other ways of treating it has arisen so widely in Europe. Competition authorities in general believe that their aim is to see what happens in markets and that markets operate to allow consumers to exercise choice but within the limits of regulation.

That is a crucial point. It is about exercising choice not on the basis of wrong or fraudulent information, mislabelling or anything like that, but making a decision based on accurate and comprehensive information. The Deputy is absolutely correct in pointing out that certain of the practices the committee is concerned about may not be illegal under the 2006 Act.

Deputy Pringle referred to my observation that the code of practice might not solve all the problems that exist and asked for examples of what has happened in other jurisdictions. Deputy Pat Deering raised the question of voluntary versus statutory codes. To give a few examples, codes of practice are in place in the United Kingdom, Lithuania, Spain, Romania, Portugal and Slovakia. In the case of the latter, the code is set down in legislation. In the example of our nearest neighbour a grocery code adjudicator was finally appointed in June. The experience in that jurisdiction was that a voluntary code did not work very well. It was reviewed several times and eventually made statutory. There was a long debate about whether a code of practice adjudicator should be able to impose fines; in the end the legislation was amended to allow for that. As I said, the adjudicator has just been appointed and is in the midst of consulting on practices, procedures and so on. It is difficult to comment at this stage on the effectiveness or otherwise of that office.

There are different models throughout Europe. In Lithuania, for instance, the Association of Lithuanian Trade Enterprises has voluntarily accepted a code of good business practices. In Hungary, companies with significant market powers are required to draft a code of ethics in the domain of fair commercial practices which must be submitted to the national consumer agency for vetting. The Spanish competition authority has issued a report on imbalances in the food supply chain and an initiative is ongoing, similar to ours, to establish a code of practice there.

It is very difficult to give a definitive judgment on the effectiveness of the various schemes. The European Commission is currently examining issues in the supply chain and issues of imbalance between suppliers and retailers. The Directorate General for the Internal Market and Services has been working for several years on the matter of business-to-business practices. In 2010 it set up a high-level forum to examine strategies for a better functioning food supply chain, with the aim of promoting the competitiveness of the European food industry. The business-to-business platform was part of that, with an expert group on the competitiveness of the agrifood industry and an expert group looking at food prices. The Commission is working on an impact assessment of the different options to assess what it calls unfair trading practices. One of the key issues in that regard is whether codes should be voluntary or statutory and whether penalties and so on should apply. The Commission published a Green Paper earlier in the year and issued a consultation to help gather information on the matter.

At the same time the Directorate General for Competition, the one with which we are most closely associated in Brussels, is of the view that unfair business-to-business practices and unfair trading practices are one issue and competition law is another. It would be aware of some of the investigations that have been done. For example, the competition commission in the UK did a major investigation into supermarkets and retailing. That commission made a general finding that most of the savings the supermarkets achieved were being passed on to consumers, but it also identified what it described as an adverse impact on competition in terms of the ability of suppliers to innovate. Suppliers, the commission found, would get to a certain stage before the pressure became such that they could no longer re-invest in their own products and so on.

DG Competition has commissioned a study on the retail sector which will consider such issues as the concentration of market share among a small number of players. That is the case in Ireland but even more so in many other European countries. In some of the Baltic states, for instance, two players have 80% of the market. The study will also examine the effect of own brand or private label products, entry barriers, whether the bargaining power of retailers could have a negative effect on the ability of suppliers, particularly SMEs, to invest and innovate, and whether unfair commercial practices might eventually lead to unviable businesses because of the pressure on investment and innovation. It will also consider, in cases where there are differences in the legal framework between member states - this being the Commission, there is always a concern about such differences and always a slight harmonisation agenda going on - whether that could lead to legal uncertainty for suppliers, particularly exporters. This is very relevant to Ireland. To sum up, there are various examples of codes of practice in jurisdictions across Europe. By the time the Commission has done its work we will be in a better position to say exactly what works and does not work.

The Deputy also asked about compliance costs and how they might impact on businesses. The larger retailers and larger suppliers, which include multinationals and major brand owners, have the large legal departments, back offices and resources necessary to invest in compliance, as I am sure they do. One of the standard aspects of codes of practice generally is that they provide for a written contract or terms of business agreement, as it is was referred to in the draft code devised by John Travers in 2011. The idea is that everything would be set down therein and variations would only be permitted where provision for such is included in the agreement. That is important in providing a degree of certainty to suppliers and retailers. One of the concerns about compliance is that we could have a situation where small suppliers would be summoned into the office of a retailer, given a 300-page agreement and shown where to sign. Most small suppliers will not have the legal capability and back-up to pore over a document of that complexity to identify potential issues. The same scenario could equally arise with smaller retailers and large multinational suppliers. It is a two-sided thing. The obligations might be on one party but where there is a written contract or terms of business agreement it must be scrutinised by both parties.

Deputy Pringle also asked whether it would be anti-competitive to set a price for a product. The quick answer is that it depends who is setting the price. For example, the whole idea of a co-operative is that it would set the price that is paid to the farmer for his or her product. In fact, historically, the co-operative movement evolved in order to solve this very problem of small dispersed producers and the lack of bargaining powers they had in the food supply chain. The revised EU regulation on the organisation of agricultural markets makes provision for producer organisations to get together, but I would not have thought there was scope, outside of that, to set the price of milk forever. Such decisions should be part of the normal bargaining chain and there should be fluctuations in terms of supply and demand.

Deputy Tom Barry asked whether milk is a loss leader for retailers. The figures would not indicate that to be the case. Specifically, the difference between the input price of 26 cent per litre and the sale price of €1.49 for 2 litres does not signify that milk is a loss leader. It is, however, most certainly a known value item. People know how much it costs before they go into the shop to purchase it.

Deputy Tom Barry

I apologise, I was not very clear. My point was that when farmers were getting 26 cent per litre the branded product was selling for €1.49 for 2 litres. However, when the price to farmers collapsed to 19 cent per litre, at a time when they were losing their shirts, the price to the consumer did not, as it should have, drop to approximately €1 per 2 litres. The multiples did not pass on that saving to consumers. They certainly did not pay it back to distressed suppliers in a spirit of sharing the burden. They were happy to pocket the difference, to the satisfaction of their shareholders.

Ms Isolde Goggin

Apologies, I misunderstood the issue the Deputy was raising. I take his point. We would always come back with the answer that there should be greater competition at the retail level. I noted a claim by a witness who appeared before a previous meeting of the committee that the Competition Authority had said that everything is hunky dory in the retail sector. That is not what we said. We observed that greater competition had caused prices to fall - this was in 2009 when there was a great deal of concern about people crossing the Border to shop and the price disparity between North and South - but we also identified many areas within the sector where there was scope for much stronger competition.

Deputy Deering asked whether we would describe the grocery sector as competitive.

One would not generally state that a sector which is so concentrated is particularly competitive. One would ask how easy it is for people to enter the sector and establish themselves and for suppliers to establish other channels to market. It seems to have become somewhat more competitive with the entry of Lidl and Aldi. I will ask Mr. John Evans, who is a specialist in the grocery market, to comment on this matter.

Mr. John Evans

If one is basing one's assessment on the competitiveness of a sector just on market share, Dunnes Stores, Tesco and SuperValu have approximately 70% of the market and that is a strong indicator. I suggest that the position is probably even worse than that as a result of the geographic profile of the different retailers. SuperValu is predominantly based in rural areas, although it does have stores in urban areas. As a result, there are between two and two and a half big players in the most urbanised areas and really only one big player covering the rural areas. The figure of 70% probably overstates the degree of competition.

Ms Isolde Goggin

I will move quickly on, particularly as Ms Karen O'Leary will want to address a number of the issues raised.

Deputy Pringle originally inquired about the price differential between Ireland and other countries. It has been well flagged that this is an issue about which people are becoming exercised. Ms Goggin outlined more recent statistics which show that the differential is narrowing. Forfás produced a report on this matter. The Deputy asked whether it is justified, which is a very fair question. There are two issues which arise. First, it has narrowed - which is good - and, second, the justification for it outlined by the industry relates to a higher cost of doing business here. The latter has been substantiated but not to the extent of the differential. It is narrowing and what we feel happens in markets of this nature is that there is supplier and retailer behaviour and then there is consumer behaviour. Where the two actually interact is where one gets the end price. Ms Goggin also referred to other matters such as resistance to the discount multiples - such as Lidl and Aldi - when they first entered the market. Something of a stigma attached to these retailers but that has now gone away completely and most of us understand that. Our research has shown a very big shift in consumer shopping behaviour.

People are much more conscious about where they spend their money and that is a positive development. It is one of the factors contributing to the price differential. Another factor is that we are talking a good deal about this and people are rightly exercised about it. Even if one accepts that the cost of doing business here is higher than in other countries, that does not explain a price differential that is above that.

Deputy Deering asked about the horsemeat scandal and food labelling. When we talk about consumer choice and value in a market, we are talking about products being what it is stated they are. In theory, if it was indicated on the label on a packet of burgers that they contain 15% horsemeat and one was willing to pay for that product, that is fine, but that is not what consumers were told. The inclusion of horsemeat in those products constituted fraud in terms of how this has worked out. Even in a market that is not competitive and where there is not a concern about a race to bottom and price pressures, fraud can still be practised because more money can be made from such practices. I would like to address the issue that it is perceived it is consumers who are driving this, but I do not believe it is. It is bad practice that is bred in the supply chain and operators may use that argument as an excuse to do things that they should not be doing. We would hope that it is concentrated in particular areas and is not a widespread practice. It has focused consumers' minds on that fact that there are consequences to the way they shop and where they buy their food.

Most consumers understand that even if they have to be careful in how they spend their money their shopping choices have consequences in the short and long term for the food sector and for the economic recovery of the country. Most people do not have the luxury of paying more for a product simply because it is Irish but, all things being equal, most people would opt for that product.

On the question of whether retailers should be forced to display their profits, we believe that, on balance, it would be better if they were forced to do so. That may require legislative change. Where retailers advance the argument that the cost of doing business here is higher and that is the reason they have higher prices, it is in that context that they should give that information, but if they are not making that argument, that is another ball game. It would be useful if retailers did this in terms of debate on this area, particularly given the power they exercise.

Labelling is a complex area and I will ask my colleague, Mr. Shine, to speak on it. The vast majority of food labelling is overseen by the Department's Food Safety Authority but from a consumer's perspective, people should know what they are buying. It comes down to a question of fairness.

On Deputy Barry's comment on the accuracy of price promotions in terms of the money savings for customers, of the 520 complaints related to pricing that we received last year, some of those related to price offers that did not quite stack up or that were potentially misleading. The cost per unit of a product must be displayed. There may be varying sizes of a product as in the case of nappies or washing-up liquid, but the price per unit must be displayed. Unfortunately, that information is not always clearly communicated. The writing on the label can be quite small. We tell people to make sure they check the cost per unit and that can involve a customer having to get down on their hands and knees in front of the shop shelve to check it. The price per unit should be displayed there but where it is not we can take action.

On the issue of alcohol products, our normal approach when we are asked for a view on grocery issues or policy decisions is that we would give a view in terms of the consumer's choice and value. When we were asked to comment on this issue, we very consciously said "No" because we felt this is not a consumer issue but a public health issue and, therefore, we would step back from that. In that context and speaking as a parent, I would support that approach. I will ask Mr. John Shine to speak about labelling.

Mr. John Shine

As was mentioned, food labelling is a hugely complex area. The Consumer Protection Act provides for protection again misleading activity in a range of contexts, including regarding the origin of the product. That Act is horizontal in its scope in that it is intended to cover all sorts of issues, products and services. Our agency is not active in the food labelling area as there is a plethora of specific legislation covering this area already in place, which is being enforced by the Depart of Agriculture, Food and the Marine, HSE inspectors and so on. I understand, further legislation will be introduced in this area as the European Commission is working on a regulatory impact assessment with a view to bringing forward further specific requirements before the end of this year.

In the context of food labelling, the agency's focus is on the business or consumer relationship. The problems in the horsemeat scandal existed further back in the supply chain. If the agency was to examine that issue, we would focus on the relationship between the retailer and the consumer rather than anywhere else in the supply chain. In the horsemeat scandal, it is clear that the problems existed significantly further back in the supply change rather than at the point of the consumer interaction.

Deputy Pat Deering

If a person has X amount of money to spend on X, Y and Z in a supermarket, that person will opt for the cheapest brand of the product at the expense of the quality, regardless of the standard. I take the witness's point that there are issues beyond that point, but there are also issues at that point. If a consumer has only a certain amount of money to spend, he or she will shop around for the best value, irrespective of the quality of the product.

Chairman

I will bring in Senator O'Keeffe next.

Senator Susan O'Keeffe

A vote is due to be called in ten minutes' time and that is why I want to contribute now; otherwise, I would be happy to wait. I thank the delegates from both organisations for coming in.

On the issue of "hello money" and all the various descriptions of that, the irony is that the large companies know they can get away with it. They realise the shortcomings and they know that it will take somebody to stand up to this. The knowledge of the situation is making this issue much worse in reality despite however much legislation we have on this area. As one of the witnesses said, unless somebody stands up in court, nothing will change. It seems that particularly affects many Irish food producers who would be small operators. Many large retailers would say that they are very pro-Irish and that they want lots of Irish products on their shelves but is that really the case? While we seek to support and encourage customers to buy Irish and encourage indigenous food production, the moment the producers' products arrive at the retailers, those producers are hugely disadvantaged because they will not be able to compete at a level because they are not operating on an equal footing, as the witness said, with the larger food producers and will not be able to get a fair whack, so to speak. While I appreciate the authority's dilemma regarding the legislation and the fact that people will not go to court, do the witnesses have any other offering of a solution given that this must frustrate them also? Clearly, it frustrates them all day, every day. Do they have a suggestion of their own or from another country that would help us to deal with what is a very clear issue?

On Ms Goggin's statement on the statutory code, I carefully read the language she used and it seems that while it is written in a fairly neutral fashion, namely, that such codes are not always fit for purpose and do not solve the problems they were intended to solve, it is quite a weighted comment, and from what I have read, I believe she is unhappy with the prospect of such a code. Perhaps I am wrong in reading that into the statement. She said the authority made a submission to the Department but she did not say what response it got from the Department in 2011. While clearly she is saying that the authority will be diligent in putting this into place if it is asked to do so, I feel her heart is not in it because she does not believe in it, which is fine. If that is the case, what would she say the authority ought to do? She said in one of the responses that the authority will wait and see what works and what does not work from what will emerge from the Commission's work. If she does not believe it will work, what does the authority believe will work? That is her area of expertise, it is not mine and I do not claim to be an expert on it.

I wish to ask about a consumer-related matter.

How would one describe the Competition Authority's response to the horsemeat scandal? Do the witnesses think that it was robust and strong? If not, why not, and what lessons have been learned given that it did come as a shock? What research has been carried out on loyalty cards, vouchers and points which seem to be a very attractive way of gathering people in? People feel they are getting value for money and something for free. Is it the case that it is a good thing or are we paying for that loyalty somewhere in the price? I am sure we are but I do not know what the evidence is.

I appreciate the point Mr. Shine made about labelling and that it is not his area. We know that all of the products under the Guaranteed Irish umbrella are not Irish. In a way one could argue that the Guaranteed Irish concept is misleading because not all of the products are 100% Irish-----

Senator Mary Ann O'Brien

Hear, hear.

Senator Susan O'Keeffe

-----yet the customer buying it thinks he or she is doing a good thing because the product is a Guaranteed Irish one. Is Mr. Shine saying that is effectively not the remit of the National Consumer Agency? If it is not, that is fine but please let me know. I am concerned about the Guaranteed Irish label and the Love Irish Food label.

Senator Mary Ann O'Brien

As far as I am aware, with Guaranteed Irish, 50% has to be manufactured or have value-added in Ireland where Love Irish Food is far more stringent. Mr. Shine can clarify the exact position. We do know of brands that are made in Poland and Portugal that have a Guaranteed Irish stamp.

Senator Susan O'Keeffe

That strikes me as being a consumer issue. If I go into a shop and spend €2.50 on something, thinking I am buying Irish and supporting Irish producers, I am only doing so to a small extent. I am concerned about that. I would welcome a response on the issue.

Chairman

Do Deputy McNamara and Deputy Barry wish to ask supplementary questions now? I will go back to the witnesses after their questions.

Deputy Michael McNamara

If you want, Chairman, you can go to the witnesses now and then I will ask my supplementary questions.

Chairman

Who wants to take Senator O’Keeffe’s questions?

Ms Isolde Goggin

My understanding is that the grocery code of practice is now Government policy. It was in the programme for Government. That decision is done and dusted and it is being provided for in legislation. If we are collectively given the job we will go for it. It is not practicable to delay until the European Commission has necessarily done and dusted everything. I say that because there will be more evidence at that stage about what does and does not work. That is why we suggested the possibility of building a review period into the legislation because a year or two down the road one might have more solid evidence as to how one would get over these kinds of problems.

At the time we made the submissions there was no response except that the policy subsequently comes out and is developed. There are no individual responses to submissions because it is a public consultation to which we were submitting. We were trying to look at ways of making it more effective and giving it teeth. Among the suggestions we had was that if we carry out an enforcement under the 2006 Act one could apply for a declaration that a certain practice is illegal and get an injunction to stop people doing it again. If a private company that is affected by an unfair trading practice takes a court action it can get damages. We suggested that it be considered that double damages would be given because it would give more of an incentive for people to get over their reluctance. No retaliatory delisting is likely to be an element of a code of practice. As Senator O’Keeffe said, people use language in different ways and people can describe things in different ways, so there is always a possibility that something might happen and not be identified.

We looked at the possibility of limiting exposure to costs for plaintiffs in private actions. One could imagine that for a smaller supplier going up against a much larger retailer or a small retailer taking on a large supplier the cost of a private court action could be substantial. Another issue that has since been solved under the Competition (Amendment) Act 2011 related to the notion that if the Competition Authority took a case then someone could go straight in to seek follow-on damages without having to prove the entire case all over again. As the lawyers say, it would be a res judicata. At that stage the suggestions we were making were aimed at strengthening the existing legislation rather than the code of practice. I am sorry to say I do not have a good solution to the question of confidentiality versus having teeth.

Ms Karen O'Leary

On Senator O'Keeffe’s comment about suggestions, in 2009 when there was a consultation on the code, the National Consumer Agency made a suggestion to use similar provisions to those in the current unfair commercial practices directive, which is only consumer to business or business to consumer. The suggestion we made was that it would be reformed in a business to business context because it gives a range of enforcement tools which are proportionate to the breaches. That depends very much on how it works in the supply chain because when we take enforcement action, as Ms Goggin mentioned, we have a range of tools that we can use which are very powerful. Going to court is costly and it takes time. Where it should be done, we do it, but we must be careful about how we assign resources. We do have some powers to enforce fines and also compliance notices. Such instruments lead to enforcement and are not costly. Again, we can do that on foot of complaints. Once the two organisations are merged and assuming the combined organisation gets a role in a grocery code it is about how to enforce what we need to enforce. I echo what Ms Goggin said, once we are merged and we have the job, it will be done to the best of our ability. Our only concern is that it can be done well and that the intention of it can lead to the right impact. That is what we want to see. We did suggest that at the time because we felt that it could provide a solution.

The other point that is interesting is that there is a statutory instrument relating to unfair terms in consumer contracts. It does what it says on the tin. It sets out that in pro forma contracts where a business gives a contract to a consumer on a take it or leave it basis there is a power imbalance. Increasingly, consumers are assigning contracts for stuff they did not have to provide contracts for previously, for energy, financial services and telecoms. We have the power to seek to have some of those terms overturned if, on balance, they are unfair to the consumer. Using that in a business to business context might also require legislative change. It would require the introduction of a new statutory instrument. I was reminded of that when Ms Goggin referred to slapping a 300 page contract in front of someone. I agree with her that if the code says everything must be in writing, that is fine but it does not address a big player and a small player and in fact it could make it worse for some. The instrument that is used in order to protect consumers in that context is unfair terms in consumer contracts regulations, which do not mean that every term must be pro-consumer but it means that the totality of the contract must be fair. It also makes provision for excessive transfer of risk or limitation of liability where the trader accepts no liability even when it should. Those are two things that might help when we are talking about application.

In response to the question on horsemeat, two things are important to understand. The legislation we apply is horizontal as Mr. Shine said. What that means is it applies to every sector and every practice where it is a business to consumer. It is quite broad and it is an instrument that can be very powerful in certain situations and in other situations it is not as suitable. In a lot of sectors there is sector-specific legislation. Financial services is a big one where the Central Bank has a sectoral role in consumer protection. Another area is telecoms where ComReg has a certain element of consumer protection within its overall mandate and also as an energy regulator. The consumer is at the top and one has sectoral regulators. There are some rules that are specific to food and they are better dealt with under the sectoral regulator.

What we do not want to do is bump into each other while trampling over the same problem. That is not a good use of State resources. I can tell the committee that the acting chief executive at the time - I had not been appointed - wrote to the chief executive of the Food Standards Authority of Ireland, FSAI, offering assistance and asking if there was anything it could do or if there were issues better dealt with under the Consumer Protection Act.

In terms of lessons learned, we genuinely asked what we can do but we came to the view that the FSAI was all over it, so to speak, that the Department of Agriculture, Food and the Marine and the FSAI had more power than we could apply, that the Consumer Protection Act, CPA, would not help, and that we would get in the way. We offered assistance and said that if breaches were found with regard to which the CPA would be a better instrument they should call us and we will come in.

On the overall issue, I agree it is a consumer issue but we believe that any agency or organisation, including Government policy, has to have consumers represented on it also. We do not have a monopoly on it, so to speak.

Regarding loyalty schemes and points, we have not done specific research on consumer attitudes to loyalty schemes. In terms of consumer behaviour - members should take surveys with a caveat - a friend of mine who has a set of keys has a loyalty card from almost everyone who offers them but it is a loyalty with no loyalty, so to speak. Consumers perceive they are getting something for it but the question is whether they are simply paying more and getting it back in another way. There is an element of that, but we have not done research into that specific issue.

Senator Susan O'Keeffe

Will the agency do that?

Ms Karen O'Leary

Absolutely, we will consider that. I will ask Mr. Shine to speak about the Guaranteed Irish labelling.

Mr. John Shine

I believe that, normally, sworn informations are held in the court where they are applied for. I do not believe they give them out as a matter of course, but I could check that with our legal adviser. They have been in the past but it is something that we have complained about because it can telegraph where an investigation may go, in the sense that one is not always finished on the first day.

Chairman

We have probably pursued this as far as we can. Going back to what was said here earlier, it does indicate that the Competition Authority itself is aware of people coming to it confidentially who are concerned about dominance. Yet the authority is afraid to proceed, even through the existing legislation. That issue must be examined.

Does Senator O'Keeffe wish to add something?

Senator Susan O'Keeffe

I have two supplementary questions but given that the Chairman has not spoken, I will hold off.

Chairman

No, I am happy enough to sum up at the end. The question I wanted to ask has already been asked.

Senator Susan O'Keeffe

The National Consumer Agency referred to a compliance blitz. Ms Goggin said that in 2012 the Competition Authority carried out visits to 349 traders. I wanted to clarify if this was done on the authority's own activation. Was the Competition Authority concentrating on one sort of trader as against another? Why were 349 traders visited? Is the authority being pushed to the pin of its collar with 349 such cases or would it like to do more?

Ms Goggin also talked about the grocery price surveys between 2007 and 2011 and the high level of price matching. I wonder what the situation is now. Is the Competition Authority not in a position to carry out that work and, if so, is it an issue of resources? Some of what we are hearing does not concern resources but, as Ms Goggin said, it rather concerns the legislation's limitations. Some of this might be to do with resources, although I am not sure. This is her chance to say if that is so.

Chairman

Does Deputy Pringle have a supplementary question?

Deputy Thomas Pringle

During this discussion there has been talk of the 2009 review on the retail grocery sector. That was in the context of price differentials with the North. I note Ms Goggin said the retailers have stated that everything in the garden is rosy. She pointed out that there were problems nonetheless. Does the Competition Authority monitor the retail sector on an ongoing basis, looking at developments and trends? Or does the authority operate on the basis of a major investigative report, as happened in 2009? If so, when can we expect the next report on the retail sector?

Deputy Pat Deering

In view of the fact that there is a realisation in the Competition Authority that all is not rosy in the garden - if I can put it that way - what kind of relationship does the authority have with the retail sector, especially with the grocery sector? Do the authority's officials meet with them monthly or annually? Does the authority ever discuss this big issue that everybody talks about? Is it ever discussed?

Ms Isolde Goggin

Can I come back to the point that Deputy Barry made earlier about reliance on imports and the need to protect native industries? To an extent, what I am going to say is related to the fact that some of these issues are being examined on a Europe-wide industry level. I appreciate what has been said but it is important to remember that the Germans, French, Danish and everybody else have the same instinct to protect their native industries. Given the reform of the Common Agricultural Policy, competition law has an important role to play in keeping markets open for our exports. At the end of the day, we are a small exporting nation and we need access to markets.

Some things could be of concern regarding one of our large export markets. If one has a capacity for a lot of co-ordination at producer level, which is provided for in the milk package, one can get a small number of very big groups of producers at that level. There are fairly rigid codes of practice tying those producers to retailers and one has a very concentrated retail sector. It is concentrated here but it tends to be concentrated elsewhere as well. In Germany, four retailers have 85% of the market. In Sweden, three retailers have 80% while in Denmark there are three retailers with 90%.

If there is a common European-wide system of regulation, it is important that we should be able to get in there as well. I am not saying that we should throw the Irish consumer off the sledge, but it is important that our producers can also get access to retailers in other countries. The system should not be tied up unnecessarily by long-term contracts.

A legal support agency for SMEs was mentioned, but I have never thought about it. It is an interesting idea and we would like to go away and think about it.

As regards monitoring sectors, we have interaction with sectors on an ongoing basis but we do not have a systematic way of sitting down and talking to people. I think the Deputy was talking about putting moral pressure on them, but it is difficult to do that when one has an enforcement side going on. We tend to do one big study every so often. In 2009, it was groceries, while at the moment we are looking at ports which is obviously an important input cost both for imports and exports. We are hoping to report on that by the end of the year.

We are happy about our resource situation at the moment. Between 2007 and 2011 we lost a lot of people when our staff numbers went down. Thankfully, however, we were given sanction to recruit ten extra people, which was great. They are all on board now.

We tend to examine one sector at a time. We can of course consider re-examining the grocery sector but at the moment our interaction with it would be in terms of advocacy. The kinds of things we are doing now include the code of practice and ongoing enforcement issues which we cannot discuss. Mergers also arise all the time and there has been quite a bit of activity on that over the last while.

Ms Karen O'Leary

As regards Senator O'Keeffe's question, I will give some history on the compliance blitz. The National Consumer Agency was established in 2007 and took over functions from the Office of the Director of Consumer Affairs, plus a host of other new functions given to it by the Consumer Protection Act. At the time, there was a constant on-the-road inspectorate, which was thought to be inefficient and had less managerial oversight than it could have had. I cannot take any credit for this because I was not there. It was pulled back and we thought we needed to ensure two main objectives. First, it is important for traders to know that we are out there so they are aware that they will get a visit at some stage. Second, consumers must have confidence in their spending. Obviously, consumer confidence in spending matters for recovery.

Compliance allows us to focus on price display legislation. If prices are not displayed, it is a breach of the legislation. Another provision is the misleading indication of a price where the price at the till is higher than the price on the shelf about which people, rightly, get annoyed.

We will get complaints about pricing. Last year, there were 520 complaints made. We will then send a follow-up letter or telephone call asking what has happened to the store. Depending on how they deal with us or if they have come up on our system before, we would list them for a visit. We marry the level of complaints with location and with various retail sectors. Most of our visits are to grocery retailers because they have more items on sale. It is a mixture of the large retailers and smaller ones.

As to how many we pick, it is a risk-based approach. There is also an element of geographical spread. Even if we have not had any calls from Donegal, we will visit there and make sure our presence is known.

The main constraint to our work is staffing. Ten years ago, consumer compliance would have been focused on pricing alone. Our job now is still that, plus product safety legislation. We have 21 people working in the division, of which 40% are focused on product safety because it is an important area. When the NCA, National Consumer Agency, was originally established it was supposed to have 80 staff as approved by the Department of Finance. However, that was in 2007 and now everything has changed. We got caught by the recruitment moratorium. When we opened our doors in 2007, we had 67 people. Now, we have 37.

We are not complaining. The world has changed. Businesses are operating with less and consumers are spending less. We fully appreciate that there were efficiencies and reforms we could implement to make the agency better. We try to be as clever as we can with the assignment of our resources. However, if we had more staff, we could be out there more. Increasingly, we have noted it is not about what has happened on the shop floor but the contract or online. The latter is becoming increasingly important as the agency is responsible for the e-commerce directive.

Chairman

I thank the delegations for their presentations. It is appropriate the two agencies were the ones that concluded our hearings on the code of conduct for the grocery sector. They are both involved in protecting the public interest. This has got a European dimension to it now as there has been a response by retailers for a voluntary code at European level.

There are still concerns that voluntary will not work. It seems odd that we accept Fair Trade products benefit the supplier from a less developed country, as well as the consumer. Why can we not adopt the same approach of fair trade for the domestic producer? Waters have been muddied by claims that a code will be expensive. Arrangements, however, can be put in place for dominant players and smaller suppliers. Retail Excellence Ireland stated smaller retailers are at the behest of the dominant large suppliers.

While the principle is simple, greed is getting in the way. Margins are being taken by some involved who pretend they have the best interests of the consumer at heart when it is at someone else’s expense. I know of cases of retailers telling processors what their product will cost. At all times the margin is kept by the retailer. This is not addressed by the legislation in place. It is not in the best interest of the consumer. Deputy Tom Barry highlighted the case that when milk prices for farmers fell through the floor, the same high prices were maintained in the shops. There is a milk price war going on. Another dimension to it is that much of the product is being sourced north of the Border. The concern is that Ireland may be left without a secure supply of fresh milk. Considering we export it, there is a certain irony in that.

On foot of these meetings, we will establish a small working group of committee members to prepare a report and, hopefully, publish it by the end of September. That is a tight deadline given the August break here. We hope the consumer and competition Bill, when it is published, will have the benefit of our findings and recommendations.

We cannot fight major multiple retailers in a publicity battle. However, we can lay bare the facts of pricing despite the gloss that is put on the issue at times. We are not trying to score points with these hearings, just to expose the facts. We are trying to protect the consumer, the processor and the primary producer at all stages. It is called fair trade and fair play.

The joint committee adjourned at 4.20 p.m. until 9.30 a.m. on Thursday, 18 July 2013.

Joint Committee on Agriculture, Food and the Marine debate - Tuesday, 16 Jul 2013

Groceries Sector: Discussion with the Competition Authority and the National Consumer Agency

Ms Isolde Goggin

Ms Karen O'Leary

Ms Isolde Goggin

Ms Isolde Goggin

Mr. John Evans

Ms Isolde Goggin

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Ms Isolde Goggin

Ms Isolde Goggin

Ms Karen O'Leary

Mr. John Shine

Ms Isolde Goggin

Ms Karen O'Leary

Ms Karen O'Leary

Mr. John Shine

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Ms Isolde Goggin

Ms Isolde Goggin

Ms Isolde Goggin

Ms Isolde Goggin

Mr. Patrick Kenny

Mr. Patrick Kenny

Mr. Patrick Kenny

Ms Isolde Goggin

Ms Karen O'Leary

Joint Committee on Agriculture, Food and the Marine debate -
Tuesday, 16 Jul 2013