On behalf of the Chairman, Deputy Penrose, who has been slightly delayed and sends his apologies, I welcome Mr. William Prasifka, chairperson; Mr. John Evans, policy division manager; and Mr. Ciaran Quigley, secretary, of the Competition Authority. I draw their attention to the fact that while members of the joint committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. 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 of the Houses or an official, either by name or in such a way as to make him or her identifiable. I invite Mr. Prasifka to make his presentation.
Grocery Industry: Discussion with Competition Authority.
Mr. William Prasifka
I thank the Chairman and members of the committee for inviting me to appear before them. They have received my opening statement, which I do not propose to read. Rather, I will focus on some of the highlights. I understand the joint committee wishes to discuss our work in the grocery industry and the reports we have prepared on it which were put together at the request of the Minister for Enterprise, Trade and Employment. We have written three, the first two of which were published in April, while the third was published in September. I will briefly describe them.
The first report dealt with the structure of the retail and wholesale markets, which we found were characterised by high levels of concentration, particularly the wholesale market. We found that Musgraves and BWG Foods were the largest wholesalers, which accounted for 80% of the wholesale market. On the retail side, we also saw a significant concentration but some interesting phenomena. For example, retailers which are truly independent, in terms of source, have been declining steadily in the State for the past 20 years. We found that simple retailers, namely, independent franchisees, were behaving more like multiples in that there seemed to be a closer relationship between the franchisees and wholesalers. This, in turn, meant that many of the traditional demarcation lines of competition had broken down. Multiples and franchisees were competing against each other and it was a growing phenomenon.
In the second report we looked at the price trends in the grocery sector before and after the removal of the groceries order. The story has been told many times but, perhaps, should be retold just one more time. In the nine months following the removal of the groceries order we saw a reduction in the price of items covered by the order, although that seems like a long time ago. From January 2007 onwards, we have seen inflation generally in food prices. This is something we see as an international phenomenon. We have noted food riots in 40 countries from Haiti to Egypt and Bangladesh. However, we must also note that in the most recent months we have seen an easing of world inflationary pressures and food prices have come down in the last three months in Ireland.
In the third report we focused on the retail planning system. We found a couple of things. First, in the most recent period, since 2001, there had been a significant amount of additional entries into the Irish retail market. On the other hand, we also found that the planning system did work as a barrier to competition in terms of entry. It does this in a number of ways. First, there are restrictions on the size of grocery retail outlets. These are well known. There are caps of 3,000 sq. m. to 3,500 sq. m. on the size of grocery stores and a sub-cap of 1,000 sq. m. to 1,500 sq. m. on so-called discount outlets — these being Lidl and Aldi. This is the part of the report which has received most attention but, in some respects, may be the least important.
The overall thrust of the report is that the planning system needs to be reoriented to have competition and consumer issues placed at the heart of the planning process. For example, we find in the planning guidelines that local planning authorities in making their planning decisions project floor space for six to ten years. These restrictions are then sometimes used to deny planning permission on the grounds that there is enough floor space. We see a problem in this regard. Clearly, one wants dynamic competition. It should not be restricted by an arbitrary limit on what someone believes is the amount of floor space needed and which could be used to protect existing competitors. Similarly, individual retailers in making an application must make the case that they will not take away business from existing outlets. Taking away business, or trade diversion, is at the heart of competition. This could be used to overly restrict competition.
Another one of our recommendations is that local authorities' health checks, an important part of the planning process, should include a competition element. The checks should include such questions as whether there are enough competitors and whether there is sufficient diversity. In the same vein, we recommend that planning authorities take consumer surveys in order that the consumer and consumer information can be at the heart of the planning process. In recent months we have seen significant numbers of shoppers driving very long distances, many to Northern Ireland, to shop. Their views have to be taken into account. If we are to look at the sustainability of the planning system, we must ensure we are doing enough to have competition in our own markets.
The last issue at which we looked was planning appeals. We note that third parties have the right to appeal planning decisions. The Competition Authority is not suggesting third parties should not be heard. We think their views should be heard. However, we also note in our report that sometimes third party appeals, at the very least, delay the planning process, create uncertainty and may be used to restrict competition. Here we are looking at studying the matter more carefully and seeking to find a way to integrate the views of third parties without unnecessarily delaying or complicating the planning process. I am here to answer questions and thank the Chairman.
I welcome the representatives of the Competition Authority, for whom I have a couple of questions. Therefore, I ask the Chairman for leeway.
On the proposal to merge the Competition Authority with the National Consumer Agency, is there a timescale for this? How will the competing interests in the organisations be maintained and protected? I am not referring to the delegates but those whom they serve.
The second report on price trends and variations states a uniform price across retail outlets cannot be legally enforced. It is pointed out that price variations are greater outside Dublin but Ms Ann Fitzgerald suggested the opposite when she appeared before the committee during the summer. Her survey found practically no difference between branded goods among the major multiples. It covered Spar, Centra, Superquinn, Super Valu, Tesco and Dunnes Stores. There seems to be a contradiction between experience on the ground, backed up by consumer surveys, and the findings of the Competition Authority.
It was suggested in the presentation that price enticements were limited by the groceries order, with a view to having the planning process expanded. Will the delegates comment on the use of specific products with regard to competition? I am referring to major multiples using alcohol as a price enticement product to attract customers, as was seen this weekend. They will not necessarily offer cheaper standard products but will use alcohol in conjunction with loyalty cards to attract customers. This undermines the independent retailers referred to in the presentation.
Cross-Border variations were referred to. With regard to the second report on pricing, has the Competition Authority done work on price differences on both sides of the Border? There appears to be a substantial difference and, as was said in the presentation, people would not travel if they would not save money.
I have a couple of points to raise on the report on planning. Part of the response to the report came from independent retailers which gave stark figures to show what was happening in the United Kingdom. Between 1997 and 2002, 50 specialist stores closed every week. Specialists include butchers, bakers and candlestick makers; the independent retailers which are the lifeblood of many rural villages. I do not want Ireland to end up like England, where one must travel many miles to reach any kind of store. There are many towns in England where a single multiple is the only grocery shop, although it may be in different guises in different sections.
There is a parliamentary body in the United Kingdom on small shops and it concluded that independent convenience stores were unlikely to survive until 2015. According to the figures supplied by the Competition Authority, there are 3,498 independent retailers in Ireland and 2,569 symbol brand shops. This comes to around 6,000 independent retailers which give a good service, although they may be slightly more expensive. Will we put them and the competition they bring at risk in the pursuit of a pure theory of competition, as opposed to practical competition? I would not like to think where price levels would be if those 6,000 retailers were removed from the system, as seems to be happening in the United Kigdom where there are very liberal planning laws on store sizes. The planning document recommends that restrictions on floor space be lifted. Has Mr. Prasifka given any thought to how much of the extra floor space will be given over to groceries and food products, as opposed to other products which multiples sell?
Mr. Prasifka talked about reorienting the planning system. Has the Competition Authority given any thought to reorienting its own remit? When it makes recommendations about planning, should it not give some loading to environmental factors? There have been calls to this effect in the United Kingdom because of the fact that larger stores are closing down smaller operators, forcing people to travel further because a store is no longer available locally.
What are Mr. Prasifka's thoughts about food safety issues? Is it not the case that in pursuing the larger model we are removing the local operator, which supports local growers?
In connection with the authority's report on the wholesale system, has Mr. Prasifkagiven any consideration to the treatment of suppliers by retail multiples and, in particular,the unfair practices in the form of the pressure which multiples apply to independentsuppliers? This pressure amounts to bullying in the way it forces suppliers to deliver products at uneconomical prices.
Mr. William Prasifka
Any hopes I had of going home by lunchtime have evaporated with the numerous questions asked but I thank members for their interest. I will deal with the questions in the order in which they were asked.
The timescale for the amalgamation with the National Consumer Agency is a matter for the Department of Enterprise, Trade and Employment. Since the announcement was made, the Competition Authority has worked very hard to understand how the two bodies can best be merged. The issue is not one of empire building or of one body taking over the other. However, to make it work we must come up with the best structures to make both the competition voice and the consumer voice more effective.
Properly understood, competition policy and consumer policy are complementary. For example, a variety of international agencies such as the Federal Trade Commission in the United States, the Office of Fair Trading in the United Kingdom, the Australian Consumer and Competition Commission and the Canadian bureau have both functions and are very successful. There are a few basic differences between the competition and consumer functions. The competition function concentrates on the supply side and the structure of the producer side of the equation. It looks at anti-competitive agreements which are upstream on the producer's side. The consumer function also looks at the supply side but from the point of view of the individual consumer. Is the individual consumer being treated fairly? Is he or she receiving sufficient information? Are products safe and what they claim to be?
The purpose of both functions is to make markets work better, more efficiently and in the interests of consumers. Either policy can come off the rails if they conflict with each other. There is, therefore, significant merit in merging the two agencies but they are different functions. The Competition Authority, for example, has a remit to prosecute hardcore cartels, which represent very serious criminal activity. We prepare files for the Director of Public Prosecutions and prosecute through the full procedures of the criminal law. That is a very different function from some of those of the National Consumer Agency, which can levy on-the-spot fines for failure to display prices. In the legal environment in which we operate we will have to come up with structures which safeguard both functions. We see the merger as an opportunity. The Competition Authority is researching international and domestic models as to how it can best work. However, it is a work in progress.
I will respond to the questions on our second report on prices and price trends. Deputy Calleary observed that our finding that there was greater similarity of prices in Dublin seemed to be at variance with some of the work done by the National Consumer Agency, NCA. We are extremely supportive of the work of the NCA. This is one area in which it is best placed to make information available to empower consumers. This is properly seen as its function rather than ours. I can only say our findings were based on data supplied to us at the time by the Central Statistics Office. The work of the NCA is in direct price surveys and at a different point in time. That may explain the differences.
Deputy Calleary then asked if we had views on major multiples using alcohol as an entitlement and whether this raised some competition issues. As he may be aware, we made an entire submission to the alcohol advisory group on the pricing of alcohol. The Competition Authority is supposed to be the expert in the field of competition. The control of alcohol is somewhat outside our area of expertise. If there is a concern that social problems are caused by alcohol being too cheap, the best policy instrument to deal with that problem is to tax alcohol. That is the way to raise its price. Restricting competition could also increase the price of alcohol, if that is one's goal.
The difference between the two policy instruments is that the money raised by tax goes to the Exchequer, while restricting competition gives increased profit to the retailer. If we are concerned about the availability of alcohol, it sends a wrong message to restrict competition and increase the profitability of alcohol sales. That, in effect, could simply encourage non-price competition if there are such high margins. Price competition takes many forms. There can be enticements and a variety of entitlements, most of which do not raise any competition issue. In areas in which they become misleading or are seen to be false, the National Consumer Agency should use its very different set of powers to address the issue.
Deputy Calleary asked if we had particular views on the cross-Border pricing issue and if we had looked at it. In our price surveys we looked only at prices within the Republic of Ireland. However, we are concerned about the differential in pricing between Northern Ireland and the Republic. Such a price differential in markets in such close proximity to each other raises concerns. Does it reflect a difference in the cost of doing business? Forfás is looking at this issue. It is a real concern. The Competition Authority has spoken strongly about the cost of basic public utilities such as waste management. Are these, perhaps, driving some of the price differentials? Other causes of concern are restrictive agreements between companies. Is a cartel operating here? I must stop myself because these agreements are a very serious matter involving criminal behaviour, upon which we could never speculate. If we had information that there was such activity, we would have to investigate it. If we found sufficient evidence, we would give a file to the Director of Public Prosecutions. Otherwise, we cannot comment on these matters, except to say they are of concern.
Are there other matters which are restricting competition unnecessarily here? One matter which concerns us is that of the planning laws. Could the difference in planning legislation explain the price differences? In Northern Ireland there is a different mix of shops. There are certain multiples which are not present here. There are shops of a larger size and a different retail landscape. To what extent is this a product of the planning system and to what extent is it driving an exodus to Northern Ireland? This is a matter which concerns us. A recent edition of Checkout magazine contained a survey conducted by TNS Worldpanel and released at an Irish Marketing Society event last month. It shows that in the quarter ending August 2008, more than 120,000 Irish households had shopped at either Asda or Sainsbury’s in Northern Ireland. This concerns us. If people are voting with their feet, we must reorient our attention to the way we do business here. Is there anything we can do better?
As Mr. Prasifka has mentioned Asda and Sainsbury's, does the Competition Authority have evidence that our planning laws are keeping these specific operators out of the Republic of Ireland? Is there evidence to show they were interested in coming but were precluded from doing do by our planning laws?
Mr. William Prasifka
That question would be best posed to the entities themselves. Given the economies of scale and scope generated in a retail company by having a chain of stores, the establishment of one or two shops in the Republic of Ireland would not make sense. Such a company would have to have the confidence to duplicate in Ireland the business model it uses elsewhere. To that extent, I can say with a high degree of confidence that our retail planning system creates a formidable obstacle to doing so.
It is not holding Tesco back.
Mr. William Prasifka
Tesco entered Ireland by buying an existing retailer. It has stuck at it for a long time. In our first grocery report we give chapter and verse on all the entries in the past seven years. Lidl, Aldi and Tesco have come. We indicate the amount of floor space added. It is not black and white. However, the way the planning system operates at local, regional and national level creates a significant obstacle for anyone who wants to come in on a large scale. However, it can and has been overcome. However, we must ask ourselves what the planning system is meant to achieve. What is it accomplishing? Is it proportionate to its goals? That is where the Competition Authority has very serious concerns.
In his third set of questions on the planning report Deputy Calleary raised some information given to him by the independent retailers which criticised the retail landscape in the United Kingdom. In the Competition Authority we have heard these charges and statements over many years. They are taken from a report called Ghost Town Britain which was based on data from 1999. The data indicate that a number of very small population centres in the UK, with an average population of just over 1,000, were self-selected. The report examined how these centres were being served by shops. Many of them did not have a shop and people had to drive great distances. The report concluded that this was because of the planning laws. We have looked at the data very carefully and we would be happy to give the Deputy and the committee chapter and verse on that. More than 90% of the parishes featured in the report did not have a bank, 75% had no bus service, 83% had no general practitioner and 80% had no pharmacist. To self-select groups of people in the middle of nowhere and use that data as a means of criticising the retail planning guidelines is an entirely suspect methodology.
May I interrupt, on behalf of the majority of Irish people who live in "the middle of nowhere"? Public representatives have a duty to sustain rural communities as well as building up big towns. There may be no bank or pharmacist but we cannot write off entire rural communities on the basis of competition policy.
Mr. William Prasifka
I did not suggest these places should be written off. I was trying to say that the reason they are not well served by shops has nothing to do with the retail planning systems. It has more to do with the underlying commercial demographic of these self-selected areas. The report of the UK Competition Commission, which was released in 2008, goes through many of these issues in great detail. Another accusation is that big hypermarkets will close down specialty shops. The 2008 UK Competition Commission report says:
The decline in the number of some types of specialist grocery stores is reducing over time. This indicates that many specialist grocery stores continue to survive ..... and because of the lack of barriers to entry there are many also that are opening.
The commission also found:
Entry by a new larger grocery store had no systematic identifiable effect on the number of butchers, convenience stores, delicatessens, fishmongers, health food stores or off-licences.
This is what the UK Competition Commission reported in 2008. They have been looking at these issues.
Deputy Calleary made the point that in some places in the UK there is only one big multiple store. At last month's meeting of director generals of competition of the European Union member states, I discussed this issue with Mr. Peter Freeman, head of the UK Competition Commission. He indicated that he does not want a situation where only one shop monopolises the entire landscape. He is trying to convince planners to keep a competition component in mind when making decisions about entry. In an area where it is not sustainable to have only one large retail shop because this would have an effect on competition, the retail planner should be in a position to see that this does not happen. We are not suggesting that the solution to the planning process is that every planning application should be approved. However, too often the bias is against facilitating entry and competition on the grounds that business might be diverted from an existing retailer. This is the wrong orientation.
We are not in favour of a small town only having one shop; planners must include a competition component when making planning decisions. We were asked whether we should re-orient our own remit to include environmental issues, food safety issues and other matters. It would be a mistake to give the Competition Authority a food safety or environmental remit because those matters are outside our area of expertise. However, these areas should be taken into account in the planning process. That is how these things can best be balanced but we find the planning process to be out of balance on the side of competition. These issues should be taken into account and there may be solid environmental reasons to stop certain developments from proceeding. However, we have difficulties when developments are not allowed to proceed because existing retailers can demonstrate that trade will be diverted from them. This could occur in an area where people drive hundreds of miles to get a bargain. We see a problem in this and feel the planning process should be re-oriented.
Questions were asked regarding unfair practices on the supply side. We have thought long and hard about this and, under the Competition (Amendment) Act 2006, we have specific enforcement powers to deal with this area. On the supply side we can deal with unfair terms. Problems in this area are probably best dealt with as enforcement matters. This can give actual redress to the parties involved. We can do a better job publicising the fact that we have these powers to encourage people to come forward. If these things are happening, the priority should be to redress grievances, rather than to write a lengthy report on the matter. I hope I have answered the questions.
Speaking as a keen environmentalist and a former retailer, I have a significant interest in this subject and I have a couple of observations for Mr. Prasifka. The practice of building huge shopping malls on the edges of large towns, at roundabouts and at the start of motorways sounds the death knell for small towns and villages in Ireland. Many of the people I represent do not want to shop in this way; they want a nice facility within the town or village with a choice of places to shop and a good pricing system. As Deputy Calleary said, they want the butcher, baker and candlestick maker. We must not replicate the parts of Britain referred to in the report by creating a ghost town Ireland. I have had much experience of parts of rural Warwickshire and Shropshire where one cannot buy a newspaper, let alone a Mars bar, because there is no village shop. I would hate to see this in Ireland.
I live in a lovely place in the middle of nowhere. I am surrounded by the Blackstairs Mountains with rivers all around. The people I represent, my friends and neighbours, like living in the middle of nowhere but we also like the option of shopping in our local towns and villages. As we face the challenges of global warming and the long-term viability of oil, we must ensure our consumers, shoppers and families do not need to drive to outer ring roads to shop in huge warehouses at discount prices. People want shops that are convenient and offer good choice, with quality assurance guaranteed. This is very important.
I have concerns about the statement on the retail planning system. It was also suggested that local authorities should carry out consumer surveys. My county conducted a very good survey called "Click for Carlow", which saw 6,000 people clicking on to say how they wanted to work, shop, live and have recreational time in Carlow. These people had to move out of the county because the jobs were not there. The 6,000 clickers for Carlow want to live in the town and have a shopping choice; they do not want the main street, Tullow Street or Dublin Road, to be like a ghost town because of shopping malls on the outskirts of town.
The debate we are having about the thrust of social engagement in society at the moment is very interesting, particularly given the downturn in the economy. Why should we force people into cars to drive to the edge of towns and cities seeking choice and variety? We should be able to provide choice and variety in towns.
The witnesses mentioned the planning appeals system and I would like elaboration on that point. The Competition Authority, along with the rest of us, recognises the democratic right of people to object and the Planning and Development Act 2001 has strong benefits and guidelines for people who object in a responsible, rather than knee-jerk, way to issues in towns and villages. I would get rid of the €20 charge for an appeal because I think it is bad for democracy; our system should allow people to object, if they so wish. People should be facilitated in making sensible objections regarding how they want their towns, villages and counties to develop. In his review of the retail planning guidelines in 2009, the Minister for the Environment, Heritage and Local Government will give us all a chance to make our views known to him. In this surge to protect retailers and ensure their economic security we must also protect the social dimension of our rural towns and villages; meeting the likes of Mrs. X, Mrs. Y and Mrs. Z and Uncle Tom Cobley when buying a paper or having a cup of coffee. One cannot buy this kind of experience in a big warehouse on the edge of town, where things might be cheaper without the frills but where there is no conversation and social interaction. As a former retailer, I feel we must not only give the consumer choice but the opportunity for social interaction; this is a very important part of Irish life that is disappearing.
Many people now shop on-line, which is fine for the people with busy lifestyles, but others will become unemployed and Ireland is an aging country. It is lovely to see a young mother going to the shop with her baby and an older, retired man tying his little terrier's lead outside before he goes in to get his paper. This is the kind of mix we should seek. The social value of shopping in towns and villages must not be lost in the wider concept of an economic drive towards adding value and consumerism.
The delegates may not wish to comment on these points as they represent my opinions.
We are having a very interesting debate today. I understand the delegates represent the Competition Authority, but there is a clear divide between competition and sustainable development with a social interest. Our duty in this House is to find a way to merge the two sides and find a balance. I accept that the delegates do not have this duty; they are concerned with one side of the equation. This is how I see things, though I could be wrong. I accept that the Competition Authority may have a broader view than has been outlined. There will always be differences of opinion when we cover these topics.
We have previously debated the alcohol issue in other committees and the delegates have strong, clear views on the matter. I am unhappy that the abolition of the groceries order has encouraged buying drink in bulk. I know the abolition alone did not cause this trend but it has contributed indirectly. People are encouraged to buy drink in bulk at large multiple stores and this is not good for society. However, I will not dwell on it as we have other things to discuss. It is not the problem of the Competition Authority but one that needs to be solved elsewhere.
We spent a great deal of time discussing the report on retail planning guidelines but we are missing the point because it is not just those guidelines that keep people out. If the planning laws were used properly anyone would be able to set up businesses in our towns and villages but the cost of land has also created restrictions in that regard. Mr. Prasifka will say the retail planning guidelines have led to the price of land increasing but I do not believe that to be the case as there is plenty of scope in the current planning laws to zone more land and create more competition. It is a pity the Competition Authority did not intervene in respect of the land market in recent years though I recognise that was not part of its remit. There would have been major gains for society if it had done so.
It was said that competition needed to be introduced into planning decisions. However, the lack of restrictions on the number of hotels that could be built in our towns means hotels will close in the years ahead and that is because of competition. There were huge tax incentives for hotels, as there were for other enterprises, and we took a willy-nilly approach to their construction. We did not question the displacement that resulted but hotels are now under pressure and will close. That is an example of bad planning but Mr. Prasifka is saying we should allow a system whereby planners do not concern themselves with displacement. There is conflict between competition and sustainability but it is not sustainable to allow unlimited retail units to be built in certain areas, because they will not all survive. I accept that competition means the survival of the fittest but that is not a solution.
My own town, Johnstown, has become part of the commuter belt and 2,000 houses have been built there. There used to be one shop in the old village and it was quite successful. Then the planners, in their wisdom and following competition rules, allowed a second shop at one end of the village. A year later, however, both shops closed. The situation was not sustainable and there was no gain to the community, who now have to travel long distances to find a shop. I refer to a small shop rather than a major retailer but I am making the point that the situation is not as simple as proposed. There are reasons for planning laws and they are quite successful so the solution is to improve the way we use them.
Mr. Prasifka mentioned delays in planning and referred to third party objections, whereby an existing retailer uses somebody else to object to an application. I acknowledge that takes place and it should not be allowed. The planning authorities know when it is happening, as does An Bord Pleanála. They should have the common sense to rule out those objections and the law needs to be amended to allow them to do so. It is ridiculous that it takes An Bord Pleanála between nine and 12 months to make a decision on a project. We do not need new planning laws to solve that problem, just as we did not need new planning laws to deal with incinerators. However, we need more planning staff. Mr. Prasifka's recommendations miss the point because we need to improve what exists at the moment rather than discuss the issues and write reports about what needs to be changed. If we fixed the present system and used existing laws in a better way we would have real competition.
There would be enough players in the retail market if the Competition Authority did a better job. I accept the point that, in some cases, laws prevent the authority from acting in certain areas. However, although there are many retailers, if one examines prices across the board, there is no real competition. The various multiples will point to competition affecting the prices across the range of their 5,000 or 6,000 products but there seems to be very little competition in the pricing of the top 100 products that people buy. Unfortunately, very little seems to be done about it. Is there any thing else the Competition Authority can do about that? Do we need to change the law or bring in new ones?
There appears to be price matching. I do not suggest there is a cartel but a situation whereby retailers watch each other's prices and match them. That is not real competition and does not produce the result we all need. What can the Competition Authority do in that area? I and many others believe not enough is being done and a discussion of rules and regulations is only a distraction.
The report stated that we were keeping people out. How big an issue is that? There are large retail parks on the edges of most new towns in the greater Dublin region. How did they arrive if the situation is so restrictive? They seem to work quite well and are not major eyesores. However, there is a danger they will pull customers away from the centre of towns and villages and we have a duty, as politicians and planners, to sustain town centre development and give small business a chance in a competitive environment. In the long term, and from a social and community perspective, that would be a better outcome but bad planning has meant we are denied it. We must try to rebuild town centres but we will not help the social side of the equation by changing planning guidelines.
Mr. Prasifka said the Competition Authority had to go through the full procedures of criminal law. I discussed that issue at a different committee because it is one that needs to be addressed. The authority, in its present form or when it merges with the National Consumer Association, must push legislators to make changes in that area because it should not take so long for the authority to get results through the legal system. If it takes up to eight years to pursue a case through the courts we will not gain the benefits of the work of the Competition Authority and there is no point in having a competition authority if justice takes so long.
Small independent retail association groups have come before various committees in recent times to make the point that they are not treated as consumers of the larger companies and the multiples. In the area of newspaper distribution, for example, they feel they are being totally disadvantaged and bullied by the bigger groups with monopolies on distribution but they receive no support from the Competition Authority. I recognise that the problem arises on account of their being businesses but they are also consumers. Perhaps Mr. Prasifka has a different point of view but it is a big issue and just one of many that are pertinent to small businesses. They have called for a separate ombudsman for their sector but I think that would be pointless. I would prefer the Competition Authority to be improved to enable it to help those businesses because they do a great deal for communities in providing jobs and other opportunities for young people. We should help them but without setting up more bodies. I wonder where we can change the laws or the powers of the Competition Authority in that regard.
There were a number of comments but I am sure Mr. Prasifka will be able to deal with them.
Mr. William Prasifka
I will make some overall comments on the concerns expressed by Deputies White and English on the social dimension of the issue. It is not fair to say the Competition Authority has no interest in the social dimension but we are trying to refocus the debate. There has been much talk about sustainability and preserving town centres but we must acknowledge the fact that many people in town centres drive long distances to shop elsewhere, such as Northern Ireland. The sustainability of our town centres is under threat and we must carefully consider whether one of the reasons they do not attract consumers is the fact that they are not sufficiently competitive. If planners decide that a town is adequately served and that no one else can come in and shoppers then decide to drive long distances, the sustainability issue confronts us similarly.
The Competition Authority believes that retail price caps, as a policy instrument, are completely disproportionate. There has been much talk about the social dimension and social needs but I fail to understand why Lidl and Aldi must have floor space equal to half that of Tesco or Dunnes Stores. What additional social demands do they put on an area in this regard? Does it make any sense to restrict them in that way?
The argument often made is that they have entered the market so there is no problem. We have to stop looking at the planning system from the point of view simply of the existing retailers. Existing retailers have a vested interest in the current system. They do not have a problem and can operate under it. However, if we are to have a serious debate on the social dimension of our planning laws we must ensure that the restrictions are proportionate to the goals we seek to achieve. If we seek to preserve the viability of our town centres let us take that as a given. What purpose is achieved by an arbitrary limit on the size of a Lidl and Aldi store to only half the size of a Tesco, Dunnes or SuperValu store? These are very serious questions that need to be debated. In terms of the retail landscape and, social policy, the members are absolutely right that at the end of the day this is the interface between economic, environmental and political concerns. The Competition Authority does not advocate that "entry trumps everything", but is trying to point out that in many regards it thinks the current system is simply out of balance, even from the point of view of sustainability. We must acknowledge that.
Deputy English raised a number of issues, including the impact of the planning restrictions. It is very difficult to get a precise handle on that. I cannot tell the members that because of restriction A or B that retailer X,Y or Z has not entered the arena. We live in very difficult economic times, people are now searching for better value. In these circumstance we need to take a fresh look at the planning laws to see if they simply are used to restrict competition or if they meet the test we have put on them of enhancing our social and environmental concerns. I take on board Deputy English's point that in markets where there is ease of entry, there will frequently be ease of exit as well. That can have a disallocating effect. It really comes down to a balancing point. Yes, one can have a market where nobody has gone out of business but that may be a market in which consumers were always being overcharged. That in itself is a problem. What happens in other countries, for example, is that local authorities run a test on competition in the area, testing whether there is a sufficient variety and diversity of stores. That goes into their planning system, so in areas where they see there may be a need because it is not keeping pace with other jurisdictions they can say perhaps we need a different kind of store and if one comes along it should be ruled upon favourably. These are the some of the issues that are considered. I think it is possible for the planning authorities, the planning decision makers, to integrate the competition elements into their environmental and social concerns.
On the question of civil administrative fines, we in the Competition Authority have been speaking on this issue for a long time. There was a view, which I think is rapidly becoming a minority view, that administrative bodies cannot impose substantial fines. That is no longer the case. We have seen that the financial regulator has been given those kinds of powers and has recently imposed large fines. As a lawyer, I note that has never been tested in the courts. We are anxiously awaiting the testing of that to ensure that it has the proper legal integrity. There is a view that significant fines can only be imposed by the courts because under the Constitution only the courts can administer justice. That is still an outstanding issue. It raises some very complicated points of concern in the Competition Authority. For example, if the Competition Authority was given the power to administer fines and, having carried out an investigation and come to a conclusion that company A, B or C were in breach of the competition rules, imposed a fine on them, that could be followed by a judicial process which was every bit as lengthy and as arduous as if we brought the court case in the first place. Our concerns are simply ones of workability and feasibility. I take the Deputy's point entirely.
We had another conviction for price fixing yesterday. These are the results of investigations that took place many years ago and we fully acknowledge the length of the investigation, the amount of resources and the delays. We have other cases where the investigations took place many years ago and are still before the courts. It is very frustrating. What we have done in the past two years is that using this rather cumbersome system we have achieved 22 criminal convictions. There were many people, including me, who some years ago thought it was not possible. I know that other enforcement agencies that have built up a credible record of enforcement had to start somewhere. One starts with the convictions, which may be small, but one builds on that. I am confident that we are in a building mode but I can tell the Deputy that I share many of his frustrations at the length of time and the amount of resources it takes to get what is, after all, a rather low level of convictions.
I welcome the delegation from the Competition Authority. This is a very interesting discussion. I suspect that we would be here until well after lunch if we did not have other commitments. Does the Competition Authority think it is swimming against the tide in light of recent events in the financial sector? Clearly regulations must be put in place in certain circumstances. We have come to a stage in society where we must ask ourselves if we want a society which has no competition or unrestricted competition where the fittest survive. In small rural villages and small villages around cities, for example in Dublin south east, competition is having an impact. Do we follow the Competition Authority's rigid adherence to competition at all costs? Are cheaper products the sole determinant of how we want to run our society or do we want to live in a society with a degree of regulation, where urban villages and bigger retail units can work to complement each other so that the baker and butcher can survive in small urban and rural villages? In our day-to-day rounds of meeting people, we see that shopping in these small villages is part of the social infrastructure for older people and families. I agree with Deputy English that we need to use the existing guidelines more efficiently. Clearly the planners have a wider remit and look at a broader set of issues than the narrow focus of the Competition Authority.
The Competition Authority's policy of deregulation seems to be leading to bigger shops. Smaller shops are being taken out as bigger ones grow. Does Mr. Prasifka consider he is swimming against the tide? If so, does he see a role for himself if regulation is introduced? He indicated during the pharmacists' dispute that there were circumstances in which the authority would not have a role. Must we have rigid adherence to competition rules? Does he see no role for the authority, unless we agree with everything in which he believes?
I welcome the representatives of the Competition Authority. It is important that they are here.
I was impressed by Mr. Prasifka's decision on the Dairygold-Kerry Foods issue. I understand he is under enormous pressure to change that decision. That is the area in which he should be involved, not the one on which he is concentrating. Kerry Foods and Dairygold each had 12 items. We wanted a shelf packed, with one company making one set of products. I understand the Competition Authority is under enormous pressure to reverse its decision. I hope Mr. Prasifka holds the line, even if the authority is taken to court. That is a real competition issue which he should pursue rather than going after corner shops.
In recent months we have seen several examples of what happens when there is competition. We are under enormous pressure to allow competition in the banking sector. We had an influx of foreign banks into the country. They were at every crossroads and corner. They are now leaving the country like wild march hares because of the difficulties in which they find themselves. They have upset our marketing system and left our banks and citizens in trouble. This is what competition brought in that sector. The foreign banks wanted bank switching and greater clearance because they did not have it.
I wish to defend local authorities and planning authorities. Our local authorities are well managed. They are run by elected councillors and managers. Each council has a right to take its own decisions. By and large, councillors have the final decision with regard to large developments, even though planning is a managerial function. We have out-of-town shopping centres. In Youghal there is a Tesco supermarket half a mile from the centre of the town and I will refer to other examples shortly.
Much nonsense is spoken about shop sizes. Shop size is related to population, nothing else. We cannot have large shops hoovering up business. We have a population of approximately 4 million. Our competition climate must be appropriate to a population of that size. There is no point in Ireland having planning regulations which are designed for other countries in Europe or for Britain, America and Australia. The Competition Authority must live in the real world.
I must disagree with what Mr. Prasifka said about drink. If a pint of Guinness cost €1 trillion, a person who wanted it would pay that amount for it. Tax is not a disincentive in that situation. Irish and British people have a habit of binge drinking which will continue until we control it by legislation and hours of closure. Binge drinking has been made worse by competition which allowed large supermarkets to bring foreign beer into Ireland. All the taxation measures in the world will not solve the problem. The same is true of drugs. It is simply an excuse to say drink should be taxed when we cannot afford to pay tax. Many enjoy a casual or leisure drink.
Mr. Prasifka referred to Lidl and Aldi which stock roughly 800 items. They cherry-pick. An item which is on the shelf in the morning will probably not be available in the evening. One cannot say their floor space has not been limited by local authority planning because they did not seek planning permission for outlets above the maximum size. SuperValu, independent retailers and some of our multiples stock as many as 4,000 items. Many items on the shelf in Marks & Spencer in the morning are not available at 4 p.m. In that supermarket the shelves are not restocked throughout the day, unlike native shops.
I foresee a crisis in shopping. I come from a rural area and employ 20 people five or six miles from the largest town. A small shop near to my farm closed a year ago. My employees were heartbroken. They could not buy a newspaper, a portion of cheese or anything else, unless they travelled five or six miles from their workplace. Do we want to get rid of all shops and have one shop for the entire country, as a hoover? That is what may happen. Mrs. Thatcher destroyed shopping in the United Kingdom by allowing out-of-town shopping. The same happened when shopping malls were built in America. We now read that shopping malls are closing down because out-of-town shopping is not as popular as it once was.
I do not wish to attack Mr. Prasifka, who is doing the job he is legally required to do. However, he has made reference to towns in Ireland where there is no bank. These towns had banks when there were fair days and cattle sales. Now we have ATM machines in the walls of shops. The world moves on. We once sold hundreds of thousands of store cattle to the United Kingdom and they were transported by rail. In Urlingford recently I remarked that the town must be prosperous because it had two banks. My acquaintance explained that the town used to have a big cattle fair but because it was no longer held, the banks were in danger. That is how things move on.
I know the town of Clonmel very well. The business of the town has shifted to a shopping centre. As a result, the town centre is derelict. We will see no development in Ireland for another ten or 15 years. We may see no development for 40 years as happened in America after the 1920s, although I am too young to remember it. I therefore ask Mr. Prasifka to relate to the Irish situation and not take us to Canada or Australia. I will go there for a holiday if I wish to. He referred to Northern Ireland which has a different currency and ferries to Great Britain on its doorstep. Supermarkets there do not need to have distribution centres, as their goods are trucked from Britain.
The US dollar is worth €1.26 and fuel prices are falling. There will be no rush of people to America this year to do Christmas shopping. Customs service spokespersons are talking in the dark. The pound sterling is worth €1.80. A person living in Drogheda or Dundalk will travel to Newry or Belfast to shop because that is where they will get value. If the currency moves in the other direction, Northern Ireland shoppers will come south. We have seen how the price of petrol has had that effect.
This matter is not being examined in a realistic, honest and fair way. If Mr. Prasifka wants to close down this island and its shops within the current law, I say to him, "Well done." It is for us to change the law and make it more friendly to the grocery and retail system.
I apologise for being late. It took me two and a half hours to drive here from Mullingar. The traffic was extremely heavy because a bus broke down in Nassau Street.
It is a pleasure to be here. I welcome the representatives of the Competition Authority and look forward to its playing an active role for the next four years. What can the authority do about the increases of 25% and 40% in gas and ESB prices in the last 12 months? That is unsustainable, given the low cost of oil. Can we not have a system of monthly reviews of gas and electricity prices?
I was involved in the recent grocery order controversy. This committee was unanimously in favour of retaining it, while Mr. Prasifka's predecessor was in favour of abolishing it and opening up the market. The last three months have seen a transformation in the retail trade. Since July the precedents have all gone out of the window. My family has a lot of experience in retail and everyone was doing quite well until then.
The authority's presence at the meeting is timely because there are two different issues. The first relates to town centres, which have been built to a very high standard and which it is an uplifting experience to visit with one's family. My question relates to town centres such as Mullingar and Mr. Prasifka can respond at a later date if he does not have the answer to hand. What percentage of retailers in town centres such as Dundrum and Liffey Valley own their shops? Is it 2% or 5%? Ownership is where the heart of sustainability lies and is the recipe for survival in the current economic downturn. In the past 30 years, 80% of businesses in the best known street in Ireland, O'Connell Street, have closed down. In Mullingar, families which have run businesses for up to four generations own their premises and, when they hit hard times, the family sticks together and keeps the doors open. I know of some businesses which must, at a level which has increased in just the past three months, renegotiate their leases with town centre landlords so that they can keep their door open for the next six months.
This meeting can adjourn for Mr. Prasifka to return with his comments, to enable us to decide what we, as a committee charged with responsibility in creating and keeping jobs, particularly in the retail trade, can do. As Deputy O'Keeffe said, the Northern Ireland example does not hold for the Republic because the former is part of a market of 60 million people. For the purposes of licensing and intellectual property, in which I have a lot of experience, the UK includes the Six Counties of the North of Ireland. We have all seen people going up to Jonesborough over the years. In the 1970s they would buy butter in Fintona and bring sugar back down. That is what happens when two different economies operate in one territory.
There is a serious challenge. The chairman of the Competition Authority said the Department should remove the cap on the size of retail outlets and allow local authorities to decide the size of retail developments in their areas. In the view of the Competition Authority, the cap on size is a disproportionate restriction and applications should be considered on a case by case basis. I have learned from my experience on this committee in the past six or seven years that we rely on family-run businesses and it is more sustainable if a family can own the property in which it conducts its business, rather than face increases in rents of 20% or 25% every five years so that, when it hits hard times, the business is unsustainable and is gone.
I come from the same area as the Chairman and neither of us was born with a silver spoon in his mouth. We both have experience of Mullingar and long may family businesses continue on the main street. A town centre should be located in the centre of a town so that family businesses can play their part. Out-of-town shopping is a form of decentralisation, where people come from outlying areas to the shopping centre and return home. If a husband has a birthday the family does not even come into the town centre to buy a tie or pocket handkerchief, but it is important it should do so. In rural Ireland family businesses survive on events that one would never imagine.
I am totally opposed to item 1. The problem was never brought home to me more than an experience I had on 23 December 2006. I saw a big security van driving into Mullingar at approximately 7.30 p.m. It reversed into the big shopping centre and brought away all the social welfare cheques, children's allowances and old age pensions from the town. They were probably in a bank in Switzerland before 12 midnight. They are the cold hard facts of the bigger shopping areas outside town centres which Mr. Prasifka proposes. I ask him to comment. As some of my colleagues with considerable experience have said, we will denude the centres of towns if we allow main shopping areas outside of them. It took a couple of hundred years to build up the towns we represent to the state they are in today. It is never the wrong time to do the right thing and the right time to do the right thing is now, when there is a downturn in the economy and we can see which people are committed to these areas.
During the week I read in the newspaper that small and medium enterprises were concerned about what large multiples were doing. On Saturday I picked up the Financial Times, which read: “Tesco in plea to suppliers over payments”. Tesco wants another month of credit in the UK and I suspect it will also apply to this country. This morning a large wholesale supplier told me that if he demanded a price increase, which suppliers have to at the moment, he would have to make a downpayment to the multiples to continue supplying them. That is not good enough. Wholesalers are small and are afraid to say anything. The situation arising in respect of large multiples will destroy the Irish food industry. I make that point because good decisions have been taken by the Competition Authority in other areas. It is a big issue in an Irish context.
As Mr. Prasifka will see, most people are deeply concerned. He has a remit under the Competition Act 2002 but that does not deter us from expressing views fundamental to how our society operates. There is an important difference between running an economy and sustaining a society and a balance needs to be achieved. I come from a village in a very small rural area and we own a convenience store. We are social entrepreneurs. We start at 7.30 a.m., we keep the door open, we pay three people and receive no return. Large multiples are fine but when people are stuck for a pint of milk at 9.30 p.m. they resort to the local convenience store. They can come to the house and somebody will go back into the store to help them get what they want. There is a huge social element to those convenience stores. Large multiples are in a position of huge strength, enabling them to negotiate significant credit terms.
As Deputy O'Keeffe said, they are now looking for additional credit facilities but a small rural shop pays for its cigarettes up front with a standing order which is paid before the items are received. There is a major difference between that type of a business and one that can negotiate three or four months' credit. It would be fine if Mr. Prasifka was comparing like with like but he is not, as a small shop does not have the economic muscle to negotiate terms. One is reminded of the ghost villages in a Clint Eastwood film in which the wind howls up the streets. That is what will materialise because there will be nothing left.
I know of some of these family businesses and many are holding on for dear life because the grandfather and grandmother ran the shop before the current operator. Some of the younger people are waiting for the parent who ran the business to pass on, at which point they will haul anchor. That is what we will have in the rush, which concerns me, as a social infrastructure in a rural area is very important.
I live in a rural area where, in reality, there is no public transport. As with the post office, if an elderly person telephones us, we will pop out to them with their bits or goods. Such people do not have e-mail and e-shopping may be the last thing on their mind. The postman or postwoman could bring us a message that Mary wants a loaf, a couple of pints of milk and a bit of butter when we can get out with it, for example.
I understand where the witness is coming from and the strict perspective he must take. I detest bottom-line accountancy methodology, which is what this amounts to. I have said before that it never factors in the social element, which is part of the problem. The price is bound to be 3 cent, 5 cent, 10 cent or 20 cent over other prices but if one comes from a village 15 or 18 km. away — we have to use such measurements now — one will have the cost of travelling and the carbon footprint, as Deputy White would indicate.
The Chairman is very good.
Along with such factors, what would be the bottom line if everything was taken into account? There would be the total time taken for shopping and the problem of getting and paying for parking. What would be the real benefit? Perhaps I am misreading the issue.
No, the Chairman is very good.
There are 6,000 shops of convenience. I do not expect any of my own children to take it on. I mentioned it to one in jest and the reply, although couched in diplomacy, indicated there was no nice way to tell me I was beginning to go off my head. What happens when the businesses are not taken on? That is our problem.
The witness has a view and has prepared three excellent and well-researched reports. When the delegation from the Consumers Association of Ireland came in, we asked difficult questions about the large currency differential which existed at the time, as it was surely a trigger for significant price differentials in shops. Some would absorb it, while others would put it in their pocket, pass it on or cut prices. There should have been significant differentials in price but there were not. As Deputy Calleary referred to, there was very little between the five or six multiples in question. What accounts for that and why did this happen?
Perhaps the witness does not cover the following issue, in which I have a great interest. When a person buys a gift certificate there is a time limit on when it can be used, such as three, five or six months. Somebody like myself, who is careless, might have it in the front of the car and not see it for 12 months. Surely if somebody pays €20, €40 or €50, the recipient should be entitled to use it whenever they wish. If a person is like me, it could be in a year and a half. There should be no time limit on recovery of the value.
I respect the position of the witness. The reports are useful in providing a good idea of how things stand. It is important we do not lose sight of the bigger picture because we ultimately have a social responsibility as well as an economic and accounting responsibility. The Darwinian theory is alive and well with regard to competition, as there is survival of the fittest. The strong always survive. I see the likes of smaller businesses being wiped out in the not too distant future. Whether the public wants this is a matter for it to decide and as the witness has said, people will gravitate to the cheapest source. One cannot blame them for doing this. We have a political responsibility to articulate the opposite viewpoint and let the people ultimately decide. That is the general thrust of the witness's argument.
Many of the comments, including my own, contained opinions and I do not expect Mr. Prasifka to mull over them. They are given in all honesty. As there were some questions, I thank the witness for his patience.
Mr. William Prasifka
I will make a few overall points before trying to address some of the questions. If people believe I have not responded to their specific questions they can remind me of them.
Much of the discussion here concerned the preservation of the integrity of the very valuable service which independent retailers provide and I understand those arguments very well. I will put a couple of facts before the committee. As we pointed out in our first report, there has been a very steady and long-term decline in the number of independent retailers. According to figures in our report, in 1977 there were just short of 12,000 independent retailers in the State and going forward to 2006, there were just over 4,000. The number has declined by approximately two thirds in a steady fashion throughout that period, during which policies were purportedly in place to preserve the independent retailer.
I took it there were independent retailers operating as groups. Will the witness clarify the number?
Mr. William Prasifka
Some of those, but by no means all, have shifted towards the symbol groups. There has been a steady and long-term decline in terms of the independent retail sector, which has been continuous and unrelenting. If we are looking at policy instruments to somehow support, promote, maintain or increase them, we must face the fact that such an objective has been a complete failure. Many policies have not supported the independent retailer in that sense.
Deputy Chris Andrews asked if I felt I was swimming against the tide in recent times. Recently we have been swimming against the tide and sometimes I feel that when I come before the committee I am also swimming against the tide. That is our job and what we do.
To make a serious point, we are in very difficult economic situation and we know there is a very significant international dimension affecting the performance of the Irish economy. In these difficult and unprecedented economic times, it is unsurprising that the Government must sometimes take exceptional measures, such as those to protect the integrity of the banking system. These measures run counter to basic principles of competition but we must take note of the times in which we live, although it should not necessarily unsettle us.
It is the role of the Competition Authority to point out that although extreme measures may be taken in exceptional circumstances, the long term health of the economy should be looked at. That will be served over time by a strong competition policy, and so we would continue to hold that view.
Deputy Andrews also asked whether there was greater need for regulation rather than for a view of competition at all costs. The Competition Authority is acutely aware of the need for regulation. One needs regulations in many circumstances. One is where competition is either weak or non-existent. However, there is a variety of other areas in which regulation is appropriate to ensure that consumers get the appropriate amount of information. There can be elements of market failure or information asymmetries, which ties in well to the challenge we will face when the Competition Authority is amalgamated with the National Consumer Agency. While the Competition Authority already perceives the need for regulation, we would like it to be complementary to competition and that works with markets rather than against them. It should empower consumers, give them more information and greater transparency and should end misleading unfair practices, all of which make consumers better shoppers. There is need for increased competition, as well as increased regulation in many areas. Properly understood, those two policies should be seen as complementary.
I will turn to some of Deputy Edward O'Keeffe's comments. I thank him for his compliments on our determination in respect of the Kerry-Breeo merger. It is not often that I come before this joint committee and am complimented regarding a decision on a merger. I will make one point to the Deputy. The Competition Authority is under no pressure on these mergers. The mergers come before us and we analyse them using what is now our well-established practice. The parties come before us and give very robust submissions. While they retain their expert advisers and economists, ultimately we make our decisions. In this particular instance, we concluded — as we rarely do, incidentally — that this merger would lead to a substantial lessening of competition in some important markets. Consequently, we blocked it on those grounds. The parties now are appealing this decision, as is their right, and the matter is before the courts. I will leave the matter at that.
Deputy O'Keeffe had other comments, particularly about Lidl and Aldi, on how they did not seek larger floor space and how that was not an issue. I understand this and that Lidl and Aldi are very good at what they do. They have a limited number of products. It is written into the planning guidelines that if one has a limited range and a self-service facility, one is subject to a lower floor space limit. From my perspective, the ability of existing retailers to operate under these more restrictive planning floor space requirements is not the issue. The real issue is what are the purposes of those guidelines. They should be there to facilitate entry. Clearly, Lidl and Aldi like the limits the way they are, because theoretically, they could prevent someone else with a different business model from coming in. Is this the reason we have such planning guidelines?
If I understood the Deputy's comments, he indicated that the town centre of Clonmel was dead. Again, this operates under the existing planning guidelines. Our suggestion to the planners in such a circumstance would be they need to be proactive from a competition point of view. Why is it dead and what can be done to bring it alive? How can entry be facilitated? I humbly suggest that a more competition-oriented perspective could enhance the vitality of our town centres and this is something to keep in mind. Again, we must face reality.
I wish to make a brief point in this regard. Mr. Prasifka refers to the introduction of competition to Clonmel. While I am unfamiliar with the circumstances in Clonmel, I am sure they are similar to those that obtain throughout the country. I imagine the only way in which one could introduce competition to Clonmel would be to allow a shop or superstore that is bigger than the one to which people are travelling at present. People are leaving Clonmel to travel to a major superstore further from the centre. The only way in which one could get competition back into Clonmel would be through the introduction of an enormous shop that is bigger than its rival. It appears that shops are getting bigger and big shops are feeding off bigger shops.
I will not allow anyone else to come in as Mr. Prasifka should be allowed to conclude.
Mr. William Prasifka
On that point, we have the retail price caps. In respect of groceries, while there cannot be a grocery store outside of Clonmel that is more than 3,000 sq. m, if the issue pertained to size, there could be a shop of exactly the same size in the town centre.
Turning to Deputy Cassidy's remarks about gas and ESB prices——
I have been promoted.
Senator Cassidy is telling Mr. Prasifka that he is a Senator rather than a Deputy.
Mr. William Prasifka
I apologise.
He is delighted with his promotion by Mr. Prasifka.
Does Mr. Prasifka know something about the future that I do not?
Mr. William Prasifka
I have been knocked off my stride.
Mr. Prasifka should continue with his crystal ball for the future. I am uplifted by his remarks.
We will not allow the Competition Authority to know about our competition. Members should allow Mr. Prasifka to reply, without interruption.
May I ask a question?
Mr. Prasifka has been very patient and should be allowed to continue.
Mr. William Prasifka
As for gas and ESB prices, this is a regulated market and as the Commission for Energy Regulation sets the prices, this matter properly should be addressed to it. The Competition Authority has commented for a long time on the structure of the electricity market and the lack of competition. We note the transmission grid is a natural and a national monopoly and consequently, there can be no competition in transmission. However, competition is possible in generation and were the market structured more appropriately, we could have more competition in this regard. Were one to have a more competitive market in power generation, this would lead to a more positive outcome.
Senator Cassidy made a number of comments on whether shopowners own their businesses and whether we had data in this regard. Having spoken to my colleague, we did not collect such data as part of our study. However, our understanding is that in the main, the franchisees of the symbol groups own their own shops. However, this is not an area we have tracked while performing our own analysis of the shops.
Perhaps the Chambers of Commerce could provide the data to the Competition Authority.
Mr. William Prasifka
Very good.
I believe I already have commented on the role of the caps in respect of building up the towns. As for the Chairman's comments, I understand the social dimension of the retail planning system. We also note that in areas in which there is easy entry, one element that can flourish is the convenience sector, which is one way to deal with that problem. However, everyone must face up to the reality that there has been a long-term decline in respect of the truly independent sector and this appears to be practically irreversible. If we really are talking about sustainability——
Are they being pushed?
Mr. William Prasifka
They have been pushed for a very long time and there has been a steady decline for the past 40 years. People can point to economies of scope and scale and there are savings to be made by becoming part of larger buying groups. Such groups exist to drive down prices and to provide more variety and quality to consumers. From the perspective of the Competition Authority, it is important to do everything we can to ensure the retail market is competitive because this will pass on such savings to consumers. However, the decline of the truly independent sector appears to be almost irreversible.
Finally, I refer to the Chair's comment regarding gift certificates. He may be aware that I sit on the board of the National Consumer Agency. This issue regularly arises at board meetings during the run-up to Christmas and I recall that the agency was investigating it. The agency would share the Chairman's concerns that if one buys something, an arbitrary short-term limit should not be imposed on its usefulness. I am not sure that we can expect shopkeepers to cater for everyone or extend the expiry date by 20 years but short-term limits raise questions of unfair or misleading practices. That is properly the remit of the National Consumer Agency.
In my earlier question I asked how the Competition Authority can help small newsagents in their dealings with distributors.
In the past 30 or 40 years, a decline would naturally have occurred in the number of shops where families no longer operated retail businesses or people moved but I would hazard a guess that the decline has halted over the past couple of years.
The Government's aim in merging agencies was to avoid the overlapping of roles. How many staff will be lost in the merger of the NCA and the Competition Authority? Will it be similar to the consumer shops?
I can buy 800 different items in Lidl and Aldi but I have to go to the corner shop for the remainder of my shopping. That is the joke. Reports are not kept of what is unavailable in Lidl and Aldi. I have been a member of a planning authority for many years and can attest that it did not restrict shop sizes in any way. We would have given permission for 100,000 sq. ft. if it was sought.
Mr. Prasifka did not answer my question on Tesco and its credit policies with small suppliers in the UK and Ireland. Saturday's Financial Times reported that the company is seeking one month’s additional credit from its suppliers. That newspaper makes for interesting reading in the current climate. Tesco is indulging in bully boy tactics.
I referred earlier to Clonmel because I received a letter from a constituent who worked in that town and who strongly supported me until he became annoyed at me on the loss of his job. He sent me a letter criticising the Government's failure to control the development of large retail centres outside our main towns over the past three years, which he claimed has killed trading in the centre of these towns. He pointed out that Clonmel was the most vibrant town in the south of Ireland only a few years ago but many of its long established businesses have since either shut up shop or have relocated to the major retail centre on the outskirts. He asked whether this represents progress. He feels that ghettoes are developing in the centres of our towns. We have a role to play in protecting our main streets.
Regardless of Mr. Prasifka's position in the Competition Authority, he is living in this country and is paid through the taxes earned by the sweat of people's brows. It is not socialism to argue against ghettoes. In this city, unfortunate people are forced to sleep at night in the doorways of shopping centres. In respect of a recently completed development, I could not believe that planning could be done so badly. I come from a side of society which could be described as right-wing and capitalist but I do not share that mantle. We have to consider all sides of society and, in an Irish context, we cannot ignore these matters.
Mr. William Prasifka
I apologise for not answering the question raised by Deputy English. The charge is frequently made by small businesses that, because of our consumer focus, we do not give them the service they desire. Sometimes this is a problem of miscommunication because, although we state that we have a consumer focus, we do not interpret that so narrowly that we only deal with complaints from consumers. To put on our economist hat, we are interested in consumer welfare, which includes businesses. Competition complaints are regularly made by businesses and we are as receptive to them as we are to anyone else.
I was briefed on the issue of small newsagents several months ago. I understand an issue arose in respect of new waste management rules for the disposal of excess newspapers and changes to the terms of trade. The Competition Authority was active in the matter and the file remains open. We have been making efforts to reduce the excess costs which were being put on small businesses. We do not compartmentalise complaints. When we say "consumer" we mean consumer welfare, including complaints made by businesses.
In regard to Deputy Edward O'Keeffe's comments on Tesco, issues pertaining to unfair trading terms or practices are best pursued as an enforcement matter and we will be actively encouraging those affected to come forward. We have a special remit under the Competition (Amendment) Act 2006 to deal with this sector.
The Competition Authority has a mandate to do that and I encourage it to pursue the matter.
How does the authority compare Northern Ireland and the South? Does it note the price of items on the shelves in Tesco stores in Derry and Cork? The only disadvantage in the North compared to the South is in the area of fuel. Wages are low and the exchange rate for sterling is 80p to the euro. These factors make the North very attractive. What formula does the authority apply and how often is it updated?
Mr. William Prasifka
I can answer that question very simply. Those price surveys are conducted by the National Consumer Agency, not ourselves.
Mr. Prasifka is on the board of the NCA.
I thank Mr. Prasifka, Mr. Quigley and Mr. Evans for assisting the committee in its deliberations. They always have many questions to answer and, in fairness to them, they are capable of expressing their views on their remit. We come from different shades of opinion but we respect the Competition Authority's willing engagement with us. This is the first step in a process of identifying why Irish shoppers pay higher prices than elsewhere in Europe and we are studying the entry barriers to outlets. We have gotten a comprehensive report from the Competition Authority in that regard. We may request another meeting with the representatives as we make progress on the matter.
The joint committee went into private session at 12.20 p.m. and adjourned at 12.30 p.m. until 10 a.m. on Wednesday, 12 November 2008.