The purpose 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 relating to the supply and distribution of motor spirit.
The commission's recommendation is contained in their report of a public inquiry which my predecessor requested following representations made to him by the Irish Motor Traders' Association (now the Society of the Irish Motor Industry) who wished to have restrictions applied to growth in numbers of motor spirit retail outlets.
A previous inquiry relating to motor spirit was carried out by the commission in 1961. That inquiry was mainly concerned with the solus system—the system under which a retailer undertakes to handle one brand of motor spirit exclusively. It was found that the system had certain advantages but that it should be subject to regulation because it encouraged an excessive increase in the number of outlets. The then Minister for Industry and Commerce made an order in 1961 designed to regulate the system and the following year the commission agreed certain guiding principles with the petrol companies with the object of limiting the increase in number of retail outlets.
The report of the recent inquiry states that the pattern of supply and distribution of motor spirit has not changed significantly since 1961. There are at present six companies supplying the market; only one of these is wholly in Irish control. The three largest companies—Esso, Shell and Texaco—are subsidiaries of the companies which formed the consortium operating the Whitegate refinery; two others buy their requirements from these three and the sixth imports motor spirit.
One trade association—The Society of the Irish Motor Industry—caters inter alia for the retail motor trade, including petrol retailing. The society has two classes of members—wholesalers and retailers. Distribution of motor spirit has become more efficient since 1961 by reason of such developments as increased tanker sizes, reduction of number of depots, round-the-clock operation of road tanker fleets and assistance to dealers to enable them to increase storage capacity, with the result that prices, exclusive of duty, are virtually unchanged.
Altogether 25 witnesses were examined in the course of the inquiry. They included representatives of the Society of the Irish Motor Industry, the petrol companies, motor spirit retailers, the Private Motorists Protection Association, various public bodies and the Department of Local Government. Growing control by the petrol companies of the retail trade through ownership of outlets is the salient fact to emerge from the inquiry. While the total number of dealer outlets seemed to have stabilised itself between 1962 and the time of the inquiry in 1970, and to that extent the guiding principles which had been agreed with the petrol companies had been successful, the number of company-owned retail outlets had been increasing unduly and the proportion of total sales of motor spirit through these outlets had increased from 16 per cent to 31.1 per cent.
The commission felt that if this trend were to continue unchecked the petrol companies would be likely to secure substantial control over retail distribution in the foreseeable future. Such control would introduce a degree of rigidity into the market which would be likely progressively to reduce competitive pressures and which would lend itself more readily to restrictive practices such as market sharing and pricing arrangements. They considered, therefore, that the exigencies of the common good demanded that for a limited period these companies should neither purchase nor construct additional company-owned outlets. They recommended that all the petrol companies be invited to observer this pause on a voluntary basis on the understanding that it would apply to newcomers as well as to existing companies but if they were not prepared to do this the pause should be statutorily imposed. They also recommended that the maximum period of five years allowed for solus agreements under the 1961 Order should be increased to ten years because the five year limitation had proved self defeating in shifting the interest of the petrol companies away from dealers to the development of company-owned outlets.
Additional recommendations were that the 1961 Order should be amended to prohibit any differentiation in the terms and conditions of supply of motor spirit between company-owned outlets and independent retailers; to extend the present obligation on the petrol companies to furnish information in respect of their own outlets to include information on facilities afforded to independent retailers; and to modify the existing prohibition on price discrimination to allow a surcharge to be made by petrol companies to retailers in respect of deliveries below a specified minimum size.
I accepted the recommendations of the commission and invited the petrol companies to observe a voluntary pause in the construction and acquisition of company-owned stations. Some of the companies were not prepared to do this, however, as they felt that statutory control would be more effective and more equitable. I, therefore, decided to make an order to give effect to the commission's recommendations and I informed the petrol companies accordingly.
Subsequently these companies made representations to me about certain provisions of the proposed order. They asked for exemption from the prohibition on the construction or acquisition of new company-owned stations in certain cases where their arrangements had reached such an advanced stage that withdrawal would result in severe financial loss not only for them but also for independent dealers and other private interests who were involved. I felt that in cases involving the construction of new stations the companies should be given a reasonable opportunity of completing their arrangements and I decided, therefore, that in such cases the order should not come into operation for four weeks after it was made.
I was also asked to provide exemption where a company might dispose of a station and open up one in its place in another location, on the grounds that arrangements of this kind would not result in any increase in the overall number of company stations. I was not disposed to accede to this request but I decided that exemption would be justified in any case where a station was opened up in place of one which had been compulsorily acquired by a local authority or bypassed by a new road, provided the new station was in the same locality. Objections were also made to the proposal to allow petrol companies to levy a surcharge on deliveries below a specified minimum size on the grounds that such a surcharge would bear unfairly on remote areas of the country where the majority of dealers who take only small deliveries at a time are located. I mentioned earlier in my speech that distribution of motor spirit had become more efficient in the last ten years. One of the measures adopted by some of the companies in their efforts to achieve this efficiency was the withdrawal of supplies from retail outlets in certain cases where orders were so small as to make delivery uneconomic.
I felt that while the sale of motor spirit might not provide any substantial income to operators of small outlets, particularly in remote areas, nevertheless, an outlet attached to a shop, hotel or public house, was a convenience for customers and it would be a good thing if the petrol companies could be induced to continue or to recommence supplying such outlets. The surcharge recommended by the commission would, it seemed to me, provide such an inducement and I decided, therefore, that it would, on balance, be unjustifiable that distributors should be prohibited by law from applying it, and the order provides accordingly.
Representations were also made to me that newcomers to the petrol distributing trade would have no chance of getting a share of the market if they were precluded from constructing or otherwise acquiring company-owned outlets. While I was not too happy with the situation where the scope for newcomers to enter the market was restricted I felt, nevertheless, that to allow them to develop company-owned outlets while prohibiting existing companies from doing likewise might constitute discrimination. I also felt that newcomers could obtain a foothold in the market without necessarily constructing company stations or acquiring existing dealer stations. For instance, a new company could buy sites for sale to dealers and could finance the construction of stations on those sites by dealers in return for ten-year solus agreements, or dealers could be induced to sign solus agreements with a new company when their existing solus agreements with other companies came to an end. In any event, if it were found at a later stage that a new company could not enter the market because of the order the position could be reviewed.
In all the circumstances, I decided that the order should apply both to existing companies and any new companies that might enter the market. On 15th June, 1972. I made the Restrictive Trade Practices (Motor Spirit) Order, 1972, giving effect to the Fair Trade Commission's recommendations with the modifications I have already mentioned. The prohibition under the order of the opening of new company-owned stations will remain in force for a period of three years and it is my intention to ask the commission to review the position before the end of that period.
Orders of this kind do not have the force of law unless they are confirmed by Act of the Oireachtas. The Bill now before the Dáil is the confirming Bill which is necessary to give the force of law to the order concerned. With a Bill of this kind, the order which it is proposed to confirm may not be amended by the Oireachtas but must 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 which was presented to this House sets out the arguments in favour of adopting the provisions embodied in the order.
The Bill has already been welcomed in the Dáil and I can recommend it to the Seanad without reservation.
