I have frequently argued in favour of increased competition in the grocery sector and in our economy in general. Developments relating to pricing in the grocery sector have attracted the most attention for the very simple reason that competition is directly related to the welfare of the consumer. Nowhere is this more evident than at the level of grocery retailing. It is an opportunity to exercise choice and where the basic economics of demand and supply come into play. There have been many welcome developments in the grocery sector, the growth in the number of smaller retail outlets and the expansion of the independent groups, for example. These groups now appear to be regaining part of the market share held previously by the multiples. This suggests that we have a basically sound competitive structure in the retail sector. Although there are large prominent multiples, there is still room for smaller units to enter the market and to compete.
Regrettably, however, there are a few persistent and worrying features which act to deprive consumers of real choice which quite simply defy justification. An example of this has been brought to the fore in recent days. I am speaking about what happened when a major retail multiple reduced the price of milk to the consumer. Since this may be the subject of legal proceedings I do not want to say too much here. I will confine myself to repeating a general comment that I have made before, namely, that if goods can be put in the hands of the consumer at a lower price than previously and the price is not below cost, then it should be welcomed.
There have been efforts to introduce price competition for other products in the grocery sector in the recent past; bread was one such product. At the time of the so called bread war, I suggested that this type of competitive pricing should be extended to other areas. I gave the example of milk as being one area where there appeared no reasonable explanation for the existence of a uniform price throughout the country. I can only welcome these recent developments which go some way towards reversing this tendency. There has been, I suggest, for too long a cynical disregard for the rights and interests of the consumer.
Business interests have taken advantage of their size, their position in the market and their relationship within the production and supply process to deprive the consumer of the welfare advantages which could be passed on. Equally, and perhaps something which is not always appreciated, business which behaves like this can itself suffer in so far as it will be deprived of the incentive to improve methods of production and to develop new products. Any awakening in recognition of these facts should be supported and encouraged.
On a more general level, it is my firm intention to eliminate the form of business activity that is based on these cynical assumptions. Not only does the consumer suffer, there is a real danger for business that this form of activity can contain the seeds of its own destruction. I will speak in a few minutes about the need for legislation in this area and the role of the Competition Bill in filling this gap. I feel there should be some explanagtion and clarification required about the regulations currently in force relating to the grocery sector.
The grocery trade is already subject to regulation by means of the Restrictive Practices (Groceries) Order, 1987. The Director of Consumer Affairs and Fair Trade is responsible for enforcing this order. This order is comprehensive legislation; many people will be aware that it prohibits below cost selling of most nonperishable groceries and bans the payment or receipt of what is called "hello money". But there is more to the groceries order than these two well publicised features. The order also deals with supply and credit terms. Under the order a supplier or wholesaler may not induce a retailer, directly or indirectly, by withholding supplies or otherwise discriminating against the retailer, to sell grocery goods at a fixed price specified by the supplier or by the wholesaler. The order does not stop the supplier from recommending a retail price but such a price is not binding on the retailer as a minimum retail price. The order prohibits collusion on the part of suppliers of grocery goods as to the prices at which they will supply goods or the terms on which goods may be supplied.
It also prohibits trade associations or other representative bodies from attempting to force suppliers to withhold goods from any wholesaler or retailer or discriminate against them as to the terms in which goods may be supplied to them. The order also deals with ensuring that entry to trade in any grocery goods is not restricted. Further, the order prohibits actions designed to secure a boycott against anyone involved in the grocery trade because of the prices charged by them or the terms and conditions on which goods are supplied by them. In other words, a retailer should not be discriminated against and denied a supply of goods because of the prices which he charges.
The House will agree that the order is quite wideranging in its regulation of the grocery trade and that it provides a framework within which competition in the grocery trade can take place. However, it does not and should not fix the price of goods. Any suggestion to control prices implies that one is seeking to avoid competition. It has always been my view that free competition in price is the best way to protect against the undesirable and damaging effects of monopoly power which can arise without it.
When the order was made a review of its operation was promised and this is being carried out at present by the Fair Trade Commission. One of the reasons for the promise of the review was the serious interference which the ban on below cost selling constitutes to market forces. Competition is best achieved by allowing free market forces to operate. The less interference in the marketplace, the greater the degree of competition. Therefore, I cannot agree with the call for the introduction of price control in supermarkets. Such action would not ensure price competition, on the contrary price control is by nature anti-competitive. Fixing a single price on a given product does not stimulate competition. Competition is stimulated most effectively by market forces.
The Groceries Order was made pursuant to the Restrictive Practices Acts, 1972 and 1987. Under those Acts a separate order must be made for every sector found to require regulation. This is a long drawn out process involving studies and investigation, formulation of the order and subsequent confirmation by an Act of the Oireachtas. The Restrictive Practices Orders currently in force do not cover every sector of the economy. Indeed they cover a surprisingly small percentage of total economic activity here. As I said, fair competitive business practices and behaviour are vitally important to the welfare of the consumer and, equally, to the life blood of business.
I have given long and serious thought to the entire problem of competition policy in Ireland. The Competition Bill which I hope to introduce in the Dáil during the next term will meet the requirements of our modernising and increasingly complex economy. It will set out clear rules governing business behaviour. It will explicitly prohibit anti-competitive business practices and the abuse of a dominant position in the market. The Bill will be closely based on Articles 85 and 86 of the Treaty of Rome. The provisions of these Articles will not be unfamiliar to firms already engaged in trade with our Community partners. The same rules apply to trade between member states. Our intention is to extend these rules to domestic business and trade. The Competition Bill is an important arm of the Government's policy to strengthen competition and the recently agreed Programme for Economic and Social Progress also gave its support to this objective.
The era of systematic price control which was based on artificial notions of how to protect the consumer has been passed over for an era of more soundly based policy. The idea is not to control business but to regulate the way in which business is done. It is a formula which will ensure the least interference by the State while affording the maximum protection to the consumer and the interests of fair competition.
The Seanad adjourned at 11.15 p.m. until 2.30 p.m. on Wednesday, 17 April 1991.