Vol. 109 No. 12
I move:
That Seanad Éireann, pursuant to the provisions of section 2 (6) of the Mergers, Take-overs and Monopolies (Control) Act, 1978 (No. 17 of 1978), hereby confirms the Mergers, Take-overs and Monopolies (Control) Act, 1978 (Section 2) Order, 1985 (S. I. No. 230 of 1985), made under section 2 (4) of that Act.
The purpose of the resolution is to confirm an order which I have made under the Mergers, Take-overs and Monopolies (Control) Act, 1978 relating to the financial criteria which apply to mergers, take-overs and monopolies for the purposes of that Act.
Under the 1978 Act, any proposed merger or take-over which meets certain financial criteria must be notified to me. These criteria, which are specified in section 2 (1) (a) of the Act, are, where the value of the gross assets of each of the two or more enterprises to be involved in the proposal is not less than £1,250,000, or where the turnover of each of those two or more enterprises is not less than £2,500,000. In addition to requiring notification, a proposed merger or take-over must be the subject of a reference to the Examiner of Restrictive Practices and, ultimately, may become subject to an order prohibiting it absolutely or conditionally. Different provisions apply to monopolies under the Act. These do not require notification but may be the subject of an inquiry by the Restrictive Practices Commission and, subsequently, may be prohibited or broken up by order. The provisions of the Act relating to monopolies apply where a single criterion is met, that is, where the annual sales or purchases of the monopoly of the goods or services concerned exceed £1,500,000.
The 1978 Act made special provision, in section 2 (4) for increasing, by order, the amounts specified in the financial criteria relating to mergers, take-overs and monopolies. Any such orders also require confirmation by both Houses within 21 sitting days after presentation. The present order, which is the first order providing for any increase in these amounts, was made by me on 8 July 1985 and was laid before each House on 11 July 1985.
When the limits were fixed by statute in 1978, the intention was to exclude from the scope of mergers and monopolies control small to medium sized enterprises. These limits reflected that approach. With the passage of time, however, those limits were affecting a considerable number of enterprises in the small to medium sized sector by virtue of inflation. One indication of the position may be obtained from the number of firms to which, by virtue of the limits, the provisions of the Mergers Act applied. At the time of enactment, in 1978, it was estimated that the Act would have applied to about 200 firms. At present, it is certain that at least the 500 top firms in the country—and probably more— would, by virtue of these limits, be subject to the Act. Another effect of the lower limits was to cause an increase in the volume of administrative work involved in dealing with merger/take-over notifications. The number of formal proposals notified under the Act each year increased from 45 in 1978-79 to almost 80 in 1984.
In these circumstance,s it was, in my view, necessary and desirable that the limits fixed in the 1978 Act should be increased and I made the order accordingly. The new limits, as set out in the order, are £5 million and £10 million for gross assets and turnover, respectively in merger/take-over cases and £6 million in the case of the sales or purchases of a monopoly. It is estimated that the new merger/take-over limits would apply to about 300 enterprises at present. The figure of £6 million in relation to monopolies is also a reasonable one. In fact, no inquiry or order relating to any monopoly has taken place under the Act since it was enacted. The new limits proposed in the order generally should ensure that the provisions of the 1978 Act apply only to the types of enterprises for which it was intended and therefore I commend the motion to the House accordingly.
Really, what this is all about is taking account of inflation. Many companies that were not intended to be subject to the administrative costs of having to submit an application to me to merge with another enterprise are, as a result of inflation that occurred in the late seventies and in the early part of this decade, now in the net. Mercifully, inflation has come down to a very low level. It is unlikely that we will have to raise these limits again for quite some time.
We now have a situation where one of the big demands is for lifting the burdens imposed on business by administrative requirements of all kinds. Obviously, where two companies want to merge there is no real threat by their merger to competition, because once we are in the EC if any company is getting too dominant a position, a foreign company from another part of the EC can move into the market anyway and ensure that it does not overcharge except in certain services where the structure of the market is one that imposes a protection of its own. In such circumstances it is rather a waste of resources in the firms themselves and in my Department to have to go through the rigmarole of applying for approval. For me in 90 per cent of the cases, it would be granted without any great qualms at all. Nonetheless, to comply with the Act, a lot of paper work has to be gone through to reach a decision. The final analysis would probably to taken in about 60 seconds flat. That is not the best use of anyone's time. By raising these limits we are really lifting the burden not just off business but also off the people sitting behind me here, which is no bad thing either. I hope that it will command the support of the House.
I thank the Minister for his explanatory speech on this matter because I was not quite sure of what it was all about. It is a non-contentious issue and it deserves the support of the House. Anything any Minister can do to remove the red tape which, as all of us who are in public life knows, is tying the hands of the administrative process, would certainly be welcome. There is one question on which the Minister might comment before the motion is approved. No inquiry or order relating to any monopoly has taken place under the Act since it was enacted. Does that surprise the Minister, or was that just to be expected?
Very briefly, I welcome the motion and, indeed, support it. As Senator Lynch has said, it is a non-contentious issue. I welcome the decision of the Minister to take this very necessary and desirable step. He has, indeed, very clearly pointed out to us that inflation over the years took very many small companies into the net, which it was never intended, I would imagine, to include when this order came in 1978. The raising of the new limits to the figures that have been outlined by the Minister are, indeed, substantial enough and high enough to take it into some period that we cannot as yet identify in the future when a repeat of this exercise would be necessary. Indeed, I concur with what the Minister and Senator Lynch have said in welcoming anything that relieves the burden, whether it is an administrative burden within the Department, or the burden imposed by this order on small companies who found themselves in this situation. Much time and resources were involved in meeting the obligations that the original order had imposed on them. I welcome the motion and support it.
With the growth of mergers and the fact that so many commercial enterprises are dominated by major companies, and sometimes international companies, it is very important that the widest possible scope is given as quickly as possible to companies who want to merge for the purposes of being able to compete and stay in business. Obviously, it is possible to give, in a merger, the power and scope to small companies which they would not have in operation on their own. I agree with my colleagues and I welcome this measure.
I would like to ask the Minister, in relation to the statistics we have on mergers that have taken place up to now and the likely trend of events in the future, what percentage of those would be wholly Irish-owned?
We do not have the information which the Senator is looking for. I will send the Senator a note on that point. This legislation is about lifting the burden of administrative responsibility from business. A large part of the inspiration for mergers' control is to prevent the development of monopolies. Membership of the EC is the biggest single guarantee we have against monopolies. Monopolies only exist when firms are in a position, by virtue of dominance, to charge prices that otherwise the market would not bare. The EC gives freedom of establishment to business from outside Ireland from any one of the 11 member states. That, in itself, is the best guarantee of all that companies will not be in a position to take unfair advantage of the consumer.
Senator Smith made the interesting point that we should, in fact, be promoting mergers in Irish industry. It is a point I strongly agree with, and one that was made very forcibly in the Telesis report and subsequently endorsed by the National Economic and Social Council and in the White Paper on Industrial Policy. We need to build up strong Irish firms. One way of doing that is by mergers between existing firms. Rather than placing obstacles in the way of such firms, we should be encouraging restructuring of industry.
Provision already exists in section 2 of the Industrial Development Act, 1977, and in section 6 of the Industrial Development Act, 1981, for the IDA to guarantee loans and interest subsidy for the restructuring of industry. It is a power that is being continued in the Industrial Development Bill which is circulated to Members of the Dáil and Seanad today. I have asked the Industrial Development Authority for a report on the use of this power. The IDA should be making more active use of their powers in order to assist Irish firms in merging to become stronger and hence have the critical "mass" necessary to compete with foreign firms. I hope there will be active use of that power in the future because it is entirely consistent with the objectives of industrial policy which we have set for ourselves in the White Paper.
Senator Lynch asked a question as to my surprise or otherwise of the lack of any inquiry into monopoly under the Act. The situation is that any inquiry would normally be initiated by the Examiner of Restrictive Practices rather than by the Minister. He has not done so and, therefore, it has not occurred. The main reason is the one I have given at the outset of my speech. Monopolies do not exist in this country to any appreciable degree except in the public sector. Of course, the public sector is exempt from the restrictive practices and mergers control legislation. Some would argue that it should not be exempt and that its activities should also be subject to control of this kind. This matter was addressed in the Government's White Paper Building on Reality. Legislation to reform restrictive practices legislation generally is under consideration by the Government and we will be dealing with that matter.
I should like to thank the Seanad for the non-partisan welcome extended to this measure
