The object of this Bill is to confirm an Order which I have made under the Restrictive Trade Practices Act, 1953, on the recommendation of the Fair Trade Commission, in regard to the supply and distribution of intoxicating liquor and non-alcoholic beverages.
Senators have already received copies of the Commission's report of their Inquiry into this matter, but I propose to give here a summary of its contents.
The Inquiry related to restrictive trade practices affecting supply and distribution and involving, inter alia, arrangements, agreements or understandings between retailers, made at the instance of retail trade associations, which affect or are capable of affecting the retail prices of intoxicating liquor and soft drinks. The Inquiry was undertaken by the Commission at my request, when, shortly after the introduction of the Budget on the 11th May, 1965, retail prices in the licensed trade throughout the country were increased by amounts equal to twice the amount of the increase in the duties on spirits and beer imposed by the Budget.
The Commission gave consideration to all the relevant factors, including the structure of the retail trade, the gross profit margins in the trade, the activities of trade associations and the preparation of price lists and circulars. They also examined a number of financial accounts furnished by publicans both in Dublin and in rural areas. They took into account the special importance of a fixed gross profit margin when it relates to a trade the value of the sales of which are enhanced by revenue duties of considerable magnitude.
The Commission found that there was only one type of restrictive practice in the trade which fell within the terms of reference of the Inquiry, i.e. the one relating to the preparation and issue of price lists and circulars by retail associations of licensed traders. A remarkable feature of the trade is the number of associations which represent retail interests. These have issued price lists or circulars in 17 counties. To the knowledge of the Commission, 27 associations issue price lists or circulars periodically. In their Report, the Commission describe the procedures employed by a number of associations in connection with the preparation of price lists and circulars. In Dublin, for example, it is the practice for the trade associations to have the question of revised prices considered by its Committee of Management which consists of some forty members of the Association. There is normally a discussion about conditions in the trade generally and an attempt is made to assess the magnitude of increased costs and the appropriateness of making an increase in prices.
It is not the practice to have financial accounts of a cross section of members available for discussion. The Association considers that the combined experience of the Committee of Management enables it to decide in an equitable and satisfactory manner what the new prices ought to be and in this connection, the Association has constantly in mind the desirability of achieving a fixed percentage gross profit margin on turnover. Usually, though not always, a general meeting of the members of the Association is subsequently convened, when the proposals of the Committee are placed before it and a vote is taken after the proposals have been discussed.
When new prices are decided upon by trade associations, they may be notified to members by means of a price list or by the issue of a circular letter or, on occasion, by the insertion of an advertisement in the daily press.
Two associations viz. the Dublin Licensed Grocers' and Vintners' Association and County Sligo Licensed Vintners' Association take measures designed to secure compliance with their recommended prices. These measures are described in Chapter 14 of the Report. The Fair Trade Commission are satisfied that serious and systematic attention to "price cutting" in the Dublin area has been given by the Committee of the Association. Both members of the Association and non-members have been visited by the Organiser and, on occasion, by some of the honorary officers of the Committee in an endeavour to secure their agreement to charge the Association's recommended prices. On one occasion the question of securing the co-operation of the trade union was considered. The Association also took specific measures in certain instances in which compliance with their recommended prices would have created a special problem for members. In regard to arrangements between the Association and Messrs Guinness concerning retail houses owned by Guinness, the Commission were not satisfied that there was not an element of moral pressure underlying the arrangements.
In the case of County Sligo officers of the Association may call on publicans with a view to explaining to them the economic reasons for the new prices proposed and, if a member remains unconvinced, he may voluntarily withdraw from the Association.
The Commission took evidence from brewers, distillers, and soft drink manufacturers, as well as from the licensed trade itself, in regard to the advantages or disadvantages of the issue of price lists by retail associations. Having considered the views of the different parties, most of which they reject, the Commission were of opinion that—
(a) the practice of issuing lists of recommended prices manifestly restricts price competition, since many licensed vintners unquestioningly charge the recommended prices, and do not determine their own selling prices in the light of their own costs and their experience of the trade;
(b) a further restrictive element arises in relation to the enforcement of recommended prices by a number of associations because its objective is to ensure that particular traders charge higher prices than may be warranted in their cases;
(c) such interference with competition is unfair and operates against the public interest, because (i) the public are denied the benefits which ordinarily result from the free play af competitive forces, and (ii) retail prices are recommended on the basis of fixed percentage gross profit margins which are capable of yielding excessive profits, since the profit margins are related to selling prices of which taxation forms an important constituent;
(d) it is not compatible with the public interest that retail prices in the licensed trade should be influenced by the collective action of members of associations whose primary interest is their own welfare rather than the promotion of the public good.
The Commission recommended—
(1) That the practice whereby associations representing the licensed trade issue lists of recommended prices should cease.
The Commission did not see any reason why matters affecting costs or prices should not be discussed at meetings of such associations, but they do think that no recommendations should be made, pressure exercised, or guidance in any form given by retail organisations in regard to the prices to be charged for intoxicating liquor or soft drinks.
(2) That an Order should be made under the Restrictive Trade Practices Acts making it unlawful for retail trade associations or groups of licensed traders (a) to make any collective decisions, recommendations or proposals in regard to the selling prices to be adopted for intoxicating liquor or soft drinks, and (b) to prepare, publish, issue or advertise retail price lists or circulars or other communications (whether oral or written) indicating or recommending alterations in retail prices by reference to existing lists or otherwise.
I accepted the Recommendations of the Commission and made the Restrictive Trade Practices (Intoxicating Liquor and Non-alcoholic Beverages) Order, 1965. The Restrictive Trade Practices Act, 1953, provides that an Order of this kind shall not have effect unless it is confirmed by an Act of the Oireachtas. The Bill now before the Seanad is the confirming Bill which is necessary to give force of law to the Order. With Bills of this kind, the arrangement is that the Order which it is proposed to confirm should not be subject to amendment by the Oireachtas but should be accepted or rejected as it stands. The matters with which the Order deals have been the subject of a detailed public inquiry by the Fair Trade Commission and their report sets out the arguments in favour of adopting the provisions embodied in the Order. I can, therefore, recommend the confirmation Bill to the Seanad without reservation. Its enactment should result in the development of competition which should tend to produce more diversified prices at a generally lower level than under the present system, with consequent benefits to the public.
