Under the Restrictive Practices Act, 1972, the Minister for Industry, Commerce and Energy made an order last March amending the Restrictive Practices (Groceries) Order, 1973. I will explain briefly why the 1973 order was made and what its object was.
During the past ten to 12 years we have seen considerable changes in the methods of trading in grocery goods. We had the multiple supermarkets which heightened competition at the retail level. The traditional wholesaler and retailer formed voluntary buying groups in an effort to compete with the multiples. New ideas such as cash and carry outlets were introduced to make the distribution system more efficient. However, these traditional traders felt that certain unfair practices had arisen because of the importance of the buying power of the multiples. They alleged that suppliers, in order to ensure that multiples would continue to buy their grocery goods supplied them on terms which descriminated unfairly against the rest of the trade.
The Restrictive Practices Commission held a public inquiry into these complaints and reported to the Minister. The main conclusion of the Commission was that many suppliers discriminated unfairly against wholesalers and the smaller retailer. Suppliers also made small deliveries of goods at frequent intervals to individual branches of multiples, which did not encourage economies of distribution and did not take into account the real savings in making large deliveries. The commission recommended that these abuses should be corrected in the public interest. The Minister made an order under the Restrictive Practices Act, 1972 designed to rectify the position.
One of the functions of the Examiner of Restrictive Practices is to monitor the operation of these orders. In November 1974, he reported to the commission that the order was not succeeding in its aims. He gave the following reasons. The order placed the onus on suppliers of deciding what weight to give to delivery costs, and wholesalers did not agree with their assessment because they felt there were considerable economies in large deliveries. Furthermore the smaller wholesaler, who served sparsely populated areas, feared that he might not be able to handle large deliveries. Suppliers agreed, and for many, these wholesalers were the only way of getting their goods to the small country retailer. A number of supermarket chains and retailer buying groups reacted strongly to terms and conditions agreed to by suppliers and the Examiner. The suppliers were told that their goods would no longer be stocked and they were forced to revert to their old terms and conditions.
The Restrictive Practices Commission carried out a review into this part of the order. The commission recognised that buyers could resort to importing groceries and felt that Irish suppliers should be free to make the most of the advantage they had in being physically close to some of their important customers. They also felt that suppliers should have flexibility in determining their terms. Article 4 of the amending order gives suppliers increased freedom to take account of all the economies of supply and distribution to different buyers, having regard to their own interest, while still requiring them to operate equitable terms.
The commission also recognised that some large buyers were obtaining concessions, not by coercing suppliers in into giving larger discounts, but by not paying their bills on time. They felt that the taking of unfair or unreasonable excess credit should be prohibited.
I agree that this is a problem. It may be argued that suppliers have a remedy in the civil law to obtain payment of debts but I believe that many are reluctant to do so for fear of losing important outlets for their goods. I accept that their fear is real and that their rights need to be reinforced by making these abuses of economic power offences. The taking of excess credit must be seen for what it is—simply another way of getting goods on terms not available to the rest.
Failure to pay on time arises only where the purchaser has real economic power which the supplier is understandably reluctant to challenge by pressing for payment. This is reflected in the amending order.
Some people may feel that this provision will make it less attractive for purchasers to deal with Irish suppliers and may encourage them to obtain more goods from abroad. I do not believe, however, that the powerful Irish purchaser will be able to make some of the demands on foreign suppliers that are made of Irish suppliers. It may well be that it would not be a profitable proposition for some large purchasers to import a large volume of grocery goods. I do not believe, therefore, that there will be a change to foreign suppliers, and I hope that the new regime will not lead to this.
I would now like to turn briefly to some of the less important changes which the amending order brings about:
(1) Fresh and frozen meat: The commission felt that the arguments submitted to them by the trade justified excluding fresh and frozen meat from the scope of the order. Fresh and frozen meat—a commodity derived from animals of varying breeds and sold in a variety of forms—was a perishable commodity requiring special storage space and the seasonal supply and demand rendered difficult the control of quantity and price.
(2) Own-label goods: Suppliers of these goods did not want to publish their terms for the supply of these goods as this would encourage demand for them to the detriment of their own branded product which would not be in their interest. The commission accepted the validity of this argument, and Article 4 implements their recommendation. Article 6 implements the commission's other suggestion that the examiner should continue to have power to request details about these goods.
(3) Supplementary terms: In their report of the 1971 inquiry, the commission were not sympathetic to supplementary terms, that is to say terms additional to standard ones often negotiated confidentially with large suppliers. The 1973 order provided that these should not become so important as to substantially lessen the benefit of standard terms. There was difficulty about the interpretation of this provision, and article 4 of the amending order seeks to solve the problem.
(4) Registration of suppliers' terms and conditions: Suppliers, under the 1973 order, were obliged to lodge their terms and conditions with the Examiner of Restrictive Practices and to adhere to these. The examiner maintained that this provision did not work in practice. The commission accepted this, and Article 6 provides that suppliers need lodge their terms with the examiner only at his request.
The amending order also provides for some minor rearrangements of a number of provisions but I hardly think these need to be commented on.
The Restrictive Practices Commission recognised that their recommendations lacked precision and would allow a wide range of options for the supplier in determining terms and conditions of supply. However, they felt that the realities of the situation called for flexibility. The grocery sector of the distributive trade is very diverse. There are variations in the characteristics of different products, difference in the size and market position of individual suppliers, and exigencies of changing circumstances over time. These considerations require that the supplier should have flexibility in formulating terms of supply while at the same time the order seeks to ensure equity of treatment for all customers.
The Restrictive Practices Act, 1972 provides that orders of this kind shall not have effect unless they are confirmed by an Act of the Oireachtas. The Bill now before the Seanad is the confirming Bill which is necessary to give the force of law to the order.
The present position is unsatisfactory, and I believe this order will remove some of the difficulties which arose from the original order made in 1873.