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Select Committee on Enterprise and Economic Strategy debate -
Thursday, 14 Jul 1994

SECTION 1.

Question proposed: "That section 1 stand part of the Bill."

How does the Minister respond to the point that this legislation will dramatically affect and sponsor the development of big business by permitting the establishment of new monopolies? The allegation has been made that the Bill will eliminate prior review for most mergers and take-overs and encourage big business to engage in predatory pricing and take-over activities against the small company sector. If this is factual, it would appear that the policies implicit in the Bill, and set out by the Minister on Second Stage on 28 June, run contrary to the direction of Government policies to date and the recommendations of the various advisory bodies such as the National Economic and Social Council. The changes to the Competition Act, 1991 and the Mergers, Take-overs and Monopolies (Control) Act, 1978 proposed in the Bill will have far reaching implications well beyond the scope of the Bill as indicated by the Minister when the Bill was published. Have discussions taken place with ISME, trade unions, consumer groups and the business community generally? Such discussions should take place.

Why do we not have a consolidated Act before us? It is extraordinarily difficult to examine the amendments being put forward by reference to an Act of 1978 which was subsequently amended by an Act of 1991. I imagine that somebody with a word processor could have produced a consolidated Bill which would be of long standing value to everybody interested in competition legislation.

The purpose of the Bill is essentially to clarify a situation which was presumed to be the case until such time as the Competition Authority started to offer a second opinion and, therefore, to introduce the concept of what is known legally as double jeopardy in that applications were considered by the Minister and the authority with the possibility that the former would decide in one direction and the latter in the opposite direction, leading to confusion. The purpose of the Bill is to clarify in law what was perceived to be the situation. This Bill is short and is not an attempt to rewrite competition policy. The 1991 Act is a substantial one based on changes in European law. At that time the enforcement proceedings were left to the market for reasons indicated by Deputy O'Malley on Second Stage. This was because of his inability to obtain provision for adequate resources.

The perception now is that the costs incurred are required for people who are at risk or felt they were subject to unfair competition. The legal costs of such aggrieved parties going to the courts were considered prohibitive and the enforcement functions of the 1991 Act have not worked as satisfactorily as people would have liked. Hence the desire to appoint a member of the authority to be a Director of Competition Enforcement who could, on foot of received complaints or representations from members of the public or companies in the public domain, take action, including legal action, in respect of such complaints. The function of the Bill is to clarify the situation in respect of mergers and monopolies and to provide for pro-active enforcement by the authority.

What the Minister said is broadly correct as far as it goes. It is remarkable that the provision in section 2, excluding section 4 of the 1991 Act, is totally at variance with what the Minister announced in a formal speech as recently as 19 April. I blame him for changing his mind. This shows the fundamental difficulties in dealing with a matter like this. If in the space of less than two months the Minister found it necessary to make a 180 degree turn on a central and fundamental point in this Bill, it behoves all of us to think carefully about it. Why did he make that change and what are its consequences? What are the consequences of the other proposals in the Bill? These proposals are not, as the Minister suggested on Second Stage and as the explanatory memorandum rather mischievously suggests, a technical sweeping up of minor problems which have arisen. These are fundamental matters.

Only some of the organisations which have commented have highlighted this. It is in the interests of some of the other organisations concerned to suit big business. This is why there is such a fundamental cleavage of opinion between ISME, which represents small and medium enterprises, and IBEC, which represents large ones. IBEC strongly supports this Bill and it cannot be passed quickly enough for them. The Law Society looks at the Bill only from the point of view of legal anomalies and minor technicalities. It is not about cleaning up legal anomalies which arise from time to time but fundamental economic policy. Its legal aspects are entirely secondary and should be seen to be so. Advice from the Attorney General on some amendments which might be added because of recent court cases are of little consequence. The fundamental policy is the economic one to be pursued by the State.

The Minister has made a huge change between April and today. This will have to be considered very carefully. It is difficult to get what Deputy Burke referred to as a global view of the overall effect of what is being proposed until we can look at it. We only received these amendments late last night and some of the submissions this morning. There are huge differences between the submissions of different organisations. These should be evaluated as all the organisations have a contribution to make. The truth may lie somewhere between them all. This is why I join with others in counselling that we do not rush consideration of this and commit ourselves to enacting legislation which will have huge consequences which may be deleterious for the economy as a whole.

I accept that the Minister's intention is to clarify the present situation. He stated that the Bill is short and not intended to rewrite the law in this area. However, it appears from the briefings which we have received that while the Minister's intention may not be to rewrite the law, the effect of the legislation will be exactly the opposite and will have a dramatic impact on the whole mergers, take-overs and monopolies situation here.

For example, in some of the documentation forwarded to us, reference was made to the explanatory memorandum accompanying the Bill which describes the changes in respect of the legislation covering mergers and take-overs. The explanatory amendment states that "the amendment will, furthermore, facilitate growth and co-operation between smaller firms". The contention is that the effects of the Bill on both the Mergers, Take-overs and Monopolies (Control) Act, 1978, and the Competition Act, 1991, are considerably greater than outlined in the explanatory memorandum. The submission is made that the proposals of the Bill will have the intended, or unintended, effect of permitting the take-over by any company of another company, with the sole exception that a large company's take-over of another large company may be the subject of review under the Mergers, Take-overs and Monopolies (Control) Act, 1978, as amended.

In reality, there are only 405 Irish groups of companies, as reported by Business and Finance magazine, with total group turnover of over £20 million per annum. It is likely that a review of any take-over or merger would be a relatively rare event if the Bill’s proposals are adopted. Such reviews will only apply where the acquiring company and at least one company out of a group of companies being acquired has assets of over £10 million or a turnover of £20 million. It would not be difficult to avoid such financial thresholds by so dividing the assets and turnover of any company or group being acquired between subsidiaries of any such company or group of companies, so that the assets or turnover of no one company exceeds the financial threshold set out in the Bill.

ISME has stated that the proposals set out in the Bill were drafted without any regard to the development of small, innovative companies. Great emphasis was placed on small, innovative companies by the Government, in the Culliton and Moriarty reports, their implementation, the employment through enterprise report, the NESC report, the national plan and the taskforce on small business' report.

While I in no way doubt the Minister's intention in relation to clarifying legislation, my fear in relation to section 1——

On a point of order, I honestly think that the Deputy is delivering a Second Stage speech. I would be quite happy to go down that route but the amendments are set out to try to deal consecutively with points made by ISME and others. What approach should we take to this?

Everybody requested that we not rush the Bill and I am not going to do so. Frankly, if Members want to keep going until Doomsday I am prepared to sit it out. There is a great deal of cynicism here this morning about the manner in which this Bill is being handled and some Members are going to get a taste of their own medicine. If that means for the lifetime of this Government, so be it. Nobody can accuse me of being partisan or trying to rush this legislation through. Members cannot have it both ways. I want to maintain some order.

I was concluding the point I wish to make in the spirit and generous nature of the Chairman's introduction. I accept fully that the Chairman has no intention of rushing this legislation. The Minister has made it clear that this legislation cannot be brought into force until the autumn, anyway, so that no matter what we discuss here or how long we take to discuss it, we are not going to delay the legislation.

The point I am trying to get across in discussing the interpretation section is that I am admittedly reluctant to get into the nitty gritty of the amendments without having had the time, and the Minister and his officials having the time, to consider in detail the points being raised by groups which have only now become aware of the implications of this legislation. At the time of its introduction in the Dáil, people were not really conscious of the impact which it was going to have on the economy. It is only now that it is dawning on various representative groups. We need time to discuss it.

I am quite blatantly, honestly and openly discussing the interpretation section in order to try to ensure that we do not get too deeply involved in amendments which we may have to change further on Report Stage, which I do not think is a good way of proceeding with legislation. The point is that it is not going to come into operation, one way or the other, until the autumn so I am suggesting that we move slowly.

I am sorry, Chairman, that you are not clarifying how we are going to conduct this meeting. I can see the point which Deputy Burke is making and, to be fair to him, he did raise with you the need to approach this Bill in a perhaps somewhat different manner than usual. However, you decided to go straight into section 1 before really responding to that. I was going to suggest at that stage that we should perhaps take up consideration at section 5 — where we are getting into the matters on which there is broad consensus — and deal with it and the following sections.

I would like you to give some indication of the approach which you are taking to this. We all can advance cogent arguments at this stage about misgivings which we have about the broad thrust of the Bill. I outlined many of those on Second Stage, as did Deputies Rabbitte and O'Malley. However, I do not want to be here on a fool's errand to spend our day rehashing principled positions which we might have about aspects of this Bill.

I would welcome a ruling from the Chair on whether you would like to see a principled discussion on section 1 — I am sure many Deputies would like to put their general feelings about this Bill on the table — or whether you are going to proceed by way of section by section analysis. Most of the amendments do try to tackle the issues which are of concern to ISME and others. I would prefer to have an early adjournment of this meeting rather than spending the day fooling ourselves that we are having a real Committee Stage debate.

I will concede, Deputy Bruton, that you are probably the most active Member of this committee and your attendance here is second to none. I take what you say very seriously because I know you are committed to the workings of this committee. It is my intention to go through this Bill seriatim,point by point. People have stressed the importance of this Bill. It is not my intention to deprive anybody of an opportunity to tease out any concern they may have.

Regarding tabling amendments at a late hour, I do not think that that is without precedent, with all due respect. We insist on waiting until the last moment ourselves — each of us has, from time to time, tabled amendments at the eleventh hour in the hope that they would be put on the agenda. I am not answerable for outside bodies when they come along with proposals or suggestions. We have the safety net, as it were, of the Report Stage to discuss provisions if we so desire. It is also not without precedent in the past for Deputies to use the interpretation section in this way. I have seen Deputies contributing to only section 1 of a Bill on Committee Stage and leaving it to the spokespersons to discuss the minutiae of the Bill. That is how it has worked since this committee was set up last year. As the Deputy knows, we will probably finish with six people left at the meeting.

The Chairman made the point that it has become practice for Members to attend committees and make Second Stage speeches if they did not get the chance to do so in the House. However, when it comes to processing the tedium of Bills, it is left to spokespersons. Will the Chairman reflect on whether this is a good precedent for committees?

It was argued that twelfth hour submissions were made in fundamental matters, that perhaps the Minister and his officials should be allowed time to consult and that we should take advice before proceeding further. The alternative to that is to proceed with the agenda before us. As Deputy Bruton said, the amendments before us encompass the issues being raised by way of general speech.

A sporting occasion was referred to and because of this important national occasion, when the Bill was going through Second Stage, Deputies Bruton, O'Malley and I, in the company of the Minister, were left with an unhindered playing field to say what we wanted. We can either rehash Second Stage or adjourn to allow the Minister to consult and allow us to take advice. Like Deputy Bruton, I am happy to do either.

I would prefer to proceed. Organisations which wanted to comment had ample opportunity to do so between Second Stage and Committee Stage and the Minister indicated that he had consultations with them. We cannot answer for outside bodies.

Some comments on section 1 might facilitate debate and provide clarification. My policy in this area underpins the thrust of the Bill. It is my policy that Irish business, large and small, should be facilitated by the regulatory regime of the Department of Enterprise and Employment and by the legal procedures which it must observe in the Republic and in the wider European Union.

I would like to see more large Irish companies emerge, like CRH and the Jefferson Smurfit Group Ltd. Numerous reports, which I will not cite, suggest that the characteristic weakness of the Irish economy relative to other small European countries like Finland, Austria, Sweden, etc., is that we have too few substantial multinational companies. I want to try in whatever way possible — mergers and monopolies legislation is one of the instruments open to me — to ensure that companies with the capacity to grow, either by acquisition or by organic growth, are facilitated. I make no apology for that and I can elaborate on that if any Member wishes. At the same time, I want to ensure that there is a level playing pitch, competition prevails, small companies are not oppressed by larger ones and that they have reasonable access at an efficient cost to legitimate protection if they are being economically bullied.

Nobody, not least ISME, could accuse this Administration or me, as Minister, of not being the most pro-small business of all time. The establishment of the task force on small businesses, the measures introduced in the last budget and the ongoing implementation of the recommendations of the task force are without precedent here. For ISME to suggest or indicate that this will set back policy considerably and endanger the interests of small Irish businesses does not concur with the facts.

I am travelling along two parallel and complementary tracks. I am helping large or potentially large companies to become larger, while at the same time protecting small businesses from being economically bullied by enabling them to go to the new enforcement member of the Competition Authority to obtain assistance to go to court at no expense as is the case now. That is a summary of my policy in respect of helping small Irish business. I can elaborate on it here or elsewhere.

On points raised by Deputy Burke, when the legislation was introduced in 1978, the number of companies affected, having regard to the thresholds which prevailed at the time, was approximately 200. Last year, on foot of the recommendations of the Moriarty report on the Culliton recommendations, I increased the thresholds to £20 million and £10 million respectively. As Deputy Burke said, approximately 405 companies, twice the number of companies now come under the scrutiny of the legislation than in 1978. Rather than favouring more monopolies, which would not come under the scrutiny of the Government of the day, the numbers have gone in the opposite direction. If these companies chose to come together they would be subject to legal scrutiny by the Minister of the day because of the increased thresholds, the general growth in the economy and in these companies.

Could I comment on that?

I have made a ruling.

This is ridiculous.

We had a lengthy discussion.

Some Members have a different point of view which they cannot express at this committee. The Chairman is guillotining the section.

I am not guillotining it.

A number of points have been raised by the Minister and I would like to comment on some of them. The Chairman said there would be no attempt to guillotine——

I am not going to play this game. Deputy Bruton rightly drew my attention to the fact that Members are going off course. I am trying to restore order. Members are trying to filibuster at this stage.

The conduct of this is regrettable.

Deputy O'Malley's conduct as a senior Member of Parliament leaves much to be desired.

Question put and agreed to.
NEW SECTION.

Amendment No. 1 is in the name Deputy Rabbitte. He submitted a substitute amendment based on an omission and has added the word "common" before "control" in line 5.

I move amendment No. 1:

In page 2 , before section 2, to insert the following new section:

"2.—Section 1 of the Act of 1978 is hereby amended, in the definition of ‘enterprise', by the deletion of ‘(ii) a holding company within the meaning of section 155 of the Companies Act, 1963' and the substitution of ‘(ii) all the assets and turnover of one or more companies which have been under common control prior to any proposed merger or take-over shall be considered as one enterprise for the purpose of this Act.'.".

It is important that this correction is made. The Bills Office was functioning under some pressure and I am sure the fault was mine in the first instance. The term "common control" is the one which is used and it was used in the 1991 Act. The phrase would not otherwise make sense. My amendment seeks to enshrine a new definition of enterprise by the insertion of a new section 2. It seeks to replace the definition of enterprise in the original 1978 Act with the following:

... all the assets and turnover of one or more companies which have been under control prior to any proposed merger or take-over shall be considered as one enterprise for the purposes of this Act.'.".

The purpose is to eliminate the possibility of transactions being financially or legally structured or engineered so as to avoid the financial thresholds which would trigger merger or take-over reviews under the provisions of the original Act or the competition legislation.

The amendment addresses one of the central concerns expressed by Deputy Burke, and others, that a review of any take-over or merger would be a relatively rare event if the Bill is enacted as currently drafted. The financial thresholds proposed in the Bill, and the fact that they are not subject to section 4, would mean that only a take-over by a very large company of a large company would be subject to review.

I am advised that the Bill facilitates the take-over of small and medium enterprises by large companies because it would not be difficult for those engaged in financial and legal structuring to devise a take-over where the £10 million or £20 million threshold is structured in such a way as to avoid or evade the provisions of the legislation. A company with assets of £190 million can structure itself so as to appear as many companies with assets of £9 million each.

Then one company will take-over.

Yes. One can have ten companies with assets of £9 million each which is effectively one company with £90 million worth of assets. This amendment provides that the enterprise would be one company for the purposes of this Act, a company with assets worth £90 million rather than ten companies, each with assets worth £9 million under common control. I am advised that there is currently no difficulty with structuring companies along these lines. I would be interested to hear the Minister's view on this.

Deputy Kemmy made an important point. This morning we were presented with a submission from ISME. I take its contents very seriously but, like Deputy Kemmy, I would like time to reflect on whether everything contained in the document is necessarily gospel. The Minister put forward a different view and I suspect this is what Deputy O'Malley wanted to comment on.

The Minister argued that the problem with this economy is that we do not have enough sufficiently strong indigenous companies. We need more strong indigenous companies, and competition and competition processes can be quite separate from that.

An alternative economic point of view is put forward in one of the submissions — possibly the submission on behalf of small and medium enterprises. It argues that a company in a dominant position or a very major company can have an adverse effect on pricing and if one facilitates the take-over of small companies by large companies, one is encouraging that trend. This amendment protects against that without undermining the Minister's economic objective. It merely updates the definition of enterprise in common with developments in business and company law.

The definition of a holding company in the 1963 Companies Act is now out of date. Defining a holding company as a company with a subsidiary is totally out of date when one considers the engineering of conglomerates in companies in 1994. We should address that. If it is possible for companies to be structured in a fashion that evades these thresholds because they can afford the best legal expertise, the Minister would surely have to agree that we are missing the point of the legislation.

Amendment No. 2 is related to amendment No. 1. Is it agreed that we take amendments Nos. 1 and 2 together? Agreed.

The effect of amendment No. 2 is much the same as the effect of amendment No. 1 in Deputy Rabbitte's name. My amendment possibly expresses the objective a little more succinctly than Deputy Rabbitte's amendment. However, on reflection, I am not 100 per cent satisfied with my amendment.

The phrase "common control" used in the 1978 and 1991 Acts is taken from the Companies Act 1963. It is not entirely appropriate to use that phrase because the 1963 definition is not suitable for the circumstances with which Deputy Rabbitte and I are trying to cope. It would be possible for somebody to circumvent what Deputy Rabbitte and I are trying to do.

It is difficult to deal with amendments at such short notice and without reference books and so on. The definition of "common control" in the 1963 Act is that companies are under common control if the same people have the right to appoint the directors of both or more of them. Some groups get around competition legislation by nominally having different shareholders.

If they have corporate shareholders, for example, one corporate shareholder is different to another corporate shareholder although the ultimate owner of both may be the same person. An example of this is the beef sector where there is a huge number of companies some of which have different corporate shareholders but where the ultimate control rests in one person.

My amendment sums up what should be the objective of this committee which is to prevent the "gobbling up" or the "hoovering up" syndrome whereby one large company gobbles up all its competitors in the Irish marketplace. There are important sectors where all the competitors of one dominant firm would be under the threshold of £20 million turnover or £10 million assets as referred to later in the Bill. Under this Bill it would be possible for a dominant firm to acquire virtually all its competitors in the country and not have to submit the proposed acquisition to the Minister or to the competition authority. That is wrong and if the committee reflects on that it will agree.

The Minister claims that if we can allow the development of a small number of large indigenous firms which, inevitably, because of the smallness of the Irish market, will be dominant in their own sector we are doing good for the Irish economy. I beg to differ. I was not allowed to express that earlier but I have the right to differ, and I think Members of the committee, on reflection, would also differ. The point is dealt with reasonably well in the ISME submission we received this morning which deals with the implications of the proposals on competition for the Irish economy. The domestically traded goods or services produced by dominant firms within the Irish economy are usually produced and sold at a much higher price than would be the case if there was competition.

I refer the Minister to the thinking in Mr. M. Porter's The Competitive Advantage of Nations which constitutes in part a basis for the thinking in the Culliton report. The thinking in the Culliton report should be adopted by the Minister and the Government. What the Minister is doing, as I pointed out on Second Stage, is the direct opposite. The Culliton report did not recommend the Minister to do what has been done in this Bill; somebody commenting on the Culliton report recommended it. The genesis for this policy lies in Mr. Porter’s work which states that the most successful economies are those where the degree of domestic competition is highest and strongest, and he produced a string of examples from countries as large as the US to those as relatively small as Singapore.

We suffer the inherent structural weakness in our economy of a lack of domestic competition, which is blatant in some cases, for example, telecommunications, and is less blatant in others. Everywhere there is a lack of competition there are higher prices and those higher prices run through the economy as a whole, and, in particular, they run into and severely penalise the internationally trading sectors which do not have the protection of operating only in a high priced domestic market.

As ISME makes clear, there is no great advantage to the Irish economy in developing companies such as CRH and Smurfit — the examples it gives — in so far as the domestic economy is concerned because prices tend to be higher as a result of their dominance, it is claimed. The comparison the Minister has made with Electrolux is wrong; a better comparison would be a company manufacturing throughout the EU. A good example is an Irish company in a similar line of business such as Glen Dimplex. It does not seek to dominate and does not dominate a domestic market in the same way as some other companies. The Minister will have to make the distinction between those categories of company.

These two amendments deserve the fullest consideration by the Minister and his Department. I am not asking him to accept them word for word; there is a fault with the legal concept of "common control" and it may have to be expressed differently. If the Minister would accept the point behind the amendments I am sure that between us all we could produce an amendment to achieve the desired result. Such a result is widely desired in the country.

The objective of the amendments is to prevent the "gobbling up" of all competitors. I have plenty of experience of that; I do not want to go into detail but I spent a number of years trying to resist this happening. It was difficult to do so because there were defects in the 1978 Act some of which were remedied in the 1991 Act. There are still lacunae of which people who want to get rid of all competition in the Irish market can avail. The purpose of this legislation should not be to help them do so but rather to hinder them. I urge that that principle be accepted now.

If certain people had got away with what they were trying to do in the late 1980s the consequences for the Irish economy would have been very serious. We should strengthen our hand with this legislation rather than weaken it. ISME and others — me included — have made the point that the weakness of this Bill is that it will do the opposite to what most people perceive is necessary. It will render the Irish economy less competitive and it will do the opposite to what the Culliton report wanted.

I am in broad sympathy with Deputies Rabbitte's and O'Malley's intentions. The central issue here is the control of a market. As phrased these amendments would mean that companies which were in entirely different markets would be caught in the same way. A person could have a small meat business and a large cement business but due to the size of the cement business, it would appear that the person was dominant in the market even though that person is a tiny player in the meat sector. In phrasing my amendments to later sections I tried to ensure that a definition of control of the market would be inserted. Perhaps this could be done by way of regulation as it might be difficult to do it quickly. From Opposition benches it is difficult to quickly draft ways in which it could be done.

The clear implication of both amendments is to prevent the large swallowing up the small. It underlines a fundamental flaw in the mergers Act as it stands. The mergers Act allows a business worth £1 billion to take up a business worth £5 million without any scrutiny. Once one of the parties is under the thresholds set out in section 2 of the original Act, the merger is exempt. The difficulty is that large companies can successively gobble up a number of small players but none of those actions will be under scrutiny.

The combined effect over time is that a massive dominance in the market is built up. This is at the centre of the problem. Deputy Rabbitte, and certainly Deputy O'Malley, probably have more experience of company structures. There may be a way in which the present wording could allow a business to appear to divest itself of companies that are essentially within its control and within the same market. This issue is fundamental and must be addressed.

It also underlines the flaws in the entire merger procedure. Applications to merge are not published. There is no opportunity for consultation with the consumer or other competitors before a decision is perhaps reached. There will only be an independent examination of the case if the Minister is considering turning it down. If the Minister decides that he will give the green light to the merger, there is no independent assessment of the case. It is a fundamental flaw to allow Ministers to essentially make political decisions on mergers that have potentially serious implications without any independent assessment. No Minister should be in a position to make decisions of that nature.

Other Deputies have adverted to what is a somewhat strange interpretation by the Minister of the so called Porter view. Porter clearly states that one builds strong companies on the basis of a competitive market and innovation. Strong companies are not built via dominant positions in non traded markets. The examples the Minister quoted are principally examples of dominant companies in non traded sectors.

I worked for Cement Roadstone, which is a great company, and I will not foul my own nest. However, it was an entirely monopoly operation in the cement business for decades. It had no concept of marketing and was not in the area of innovation. Ultimately, the business of building products was not a traded area but this does not ill reflect on Cement Roadstone. It was in a certain area and did very well. However, we do not need just the creation of giants which are dominant in non traded sectors. We need to create competition and innovation. Size comes from subsequent exporting. Both Smurfit and CRH have predominantly expanded abroad through acquisition rather than exporting. This underlines the difference in what we are trying to do.

The Minister is placing a great deal of faith in the ability of the competition authority to ensure that the smaller players are protected from potential swallowing up. However, the reality is that the Minister is not providing powers to the enforcement agency to impose fines. It will effectively be going in to wag its finger at the errand company. It will not have the power to fine which is the real deterrent for an effective enforcement agency in preventing large companies abusing a dominant position. The Minister's faith in the enforcement arm of this legislation is misplaced.

The amendments require some tidying up before they could be accepted because they may not have hit the nail directly on the head. However, they clearly hit at the fundamental flaws in the present merger procedure, if it is accompanied by the proposed dropping of the competition Act supervision under section 4. If we are to proceed to control mergers by way of a mergers Act without the competition Act, we must greatly reform the merger procedure. This is the approach I took in my amendments in seeking to greatly tighten up the merger procedure and to make it transparent, accountable. I also seek to make it independent and not so open to what appears to be the scope for political patronage.

Both amendments have much merit. Over the years, I have experienced situations, such as those to which Deputies Rabbitte and O'Malley referred, involving the take over of smaller companies and what happened within those companies after they were taken over. In recent years, separate entities within companies, such as finance, transport, sales, marketing and maintenance, have been split. This leaves it open to another company to then take it over because such a move would not be outside the guidelines as laid down in the Bill.

My concern is the myth that surrounds some of the bigger companies within the State which have grown or appeared to have grown over the years through the take over of smaller companies. This provided them with a vehicle to acquire companies outside the State. People would be amazed if they examined the number of people employed in Ireland in those companies. Annual reports tend to camouflage the real position. Companies have grown enormously but through the acquisition of companies outside the State and to the detriment of companies within Ireland. In many cases, their commitment to activities within the State has considerably diminished.

I am particularly concerned about this matter. If an increasing number of companies are taken over by bigger operations, it will have a detrimental effect on employment. As yet, there is nothing in the Bill to ensure that employees are protected. I worked in a company which had 3,500 employees a number of years ago. However, there are less than 1,000 employees now in what would be considered a top company in the State. Questions must be posed as to how and why this happened.

Major cartels are in operation in certain sectors. Nobody can deny that was due to the monopoly situation which has developed through those companies taking over smaller operations. There will be serious problems in the future if this continues without any protection for the consumer. It is not good and from personal experience, I have serious reservations about it. The amendments have much merit. It is a matter for the Minister as to how he deals with them in future debates.

I support the thrust of these amendments. The purpose is to eliminate transactions from being structured in such a way as to avoid merger and take-over reviews under the Mergers, Take-overs and Monopolies (Control) Act, 1978, or the Competition Act, 1991. It is right to take some action to tackle the problem highlighted by the previous speakers. The wording of the two amendments is not perfect and my two colleagues admitted this. I suggest that section 1 should be amended by inserting an amendment for the definition of "enterprise" in the 1978 Act. Section 1 (2) is amended by the substitution of a "holding company within the meaning of section 155 of the Companies Act, 1963". One form of wording could be that "all the activities of one or more companies, two or more of which have traded with each other during the previous year and which have been under common control prior to any proposed merger or take-over, shall be considered as one enterprise for the purposes of this Act". Such wording would tackle the problem which was highlighted.

We want to avoid take-overs being arranged so that the assets and turnover of each company being acquired are structured in such a way as to be lower than the £10 million or £20 million thresholds. The structure of a major group's companies could be arranged so that individual units are below the present thresholds. This anomaly must be tackled and we need to change the definition of "enterprise" in the 1978 Act. The parliamentary draftsman may decide the best form of wording, if the Minister accepts the principle we are promoting. I am willing to allow the Minister to consider the exact form of wording, if he agrees to the principle.

One cannot consider this issue only in the context of the home market, but in the wider context of the European Union and international trade. Has any attempt been made in the European Union to harmonise legislation on competition, take-overs and mergers and also common definitions mentioned by Deputies O'Malley and Rabbitte such as "enterprise" and "common control"? We need answers to these questions. Deputy Fitzgerald said that firms in member states, including Ireland, are acquiring companies in other member states. Other member states with a longer commercial and industrial history than us have more experience in this area and are able to find loopholes in legislation. It is important to learn from them in this regard. Has the Minister and officials in the Department of Enterprise and Employment considered other countries' legislation? We must remember that European trade is being freed up and is developing all the time and ensure that our legislation is not frozen in time.

I agree with Deputy O'Malley about the efficiency of Irish firms. It does not matter if a firm is big or small. The criteria one must consider when measuring the achievement of a company is if it is efficient, giving good value for money, helping the Irish economy and competitive in the sense of producing goods which will help the country in terms of exporting and selling on the home market.

Deputy Bruton mentioned the control of markets and that is why we are debating this Bill today. However, controlling the markets is easier said than done. Sinn Féin came to power to get control of the home market, but that did not last long. This is a fluid situation and legislation must reflect change. I agree with the attempt to produce balanced good legislation.

Regardless of the perfection of the amendments, the strength of view of the parties indicates concern about the phenomenon of larger companies gobbling up small companies and its impact on competition. Deputy O'Malley referred to the Porter report. Before the Minister replies, I will quote from a Government approved document, which I found while the debate was in progress.

The Porter report was approved by the Government. Some of its interpretations, no matter how erroneous they might have been, got the seal of approval.

It was a predominant influence on the Culliton review group, which the Minister proclaimed as important. The thrust of it, if not the detail, was supported. The quote from the NESC report, A Strategy for Competitiveness, Growth and Employment, states:

the presence or absence of vigorous domestic competition is an important determinant of the degree of innovation undertaken in an economy. A failure to innovate or, more precisely, to establish a ‘national system of innovation’ is, as noted above, a significant barrier to the long-run competitiveness of the Irish economy.

Deputy Bruton made an important distinction in an earlier argument when he made an exception of the case of dominant companies in the non-trading sector. The ISME submission refers to the existence of vigorous domestic competition for domestically traded goods and services and many economists believe this is an essential prerequisite to successful internationally traded goods and services sectors. Deputy Kemmy said that this competition in the domestic traded sector is a prerequisite to successful internationally traded goods and services sectors.

I am not arguing for precise words in this amendment, but its spirit is important and it should be taken on board. Some of the subsequent amendments are at the heart of this argument and it is only a toss of a coin as to whether one accepts them.

A number of points have been made, but I want to dispose of the philosophical and ideological ones first. I broadly accept the analysis of the Porter report. It did not deal with the phenomenon of the Single Market, where 12 member states with national governments were responsible for promoting the economic well being of those companies within the context of a Single Market. Whether one looks at something as large and regulated as the United States, with its regional economies, or something as dirigiste as Singapore or Korea, one cannot take that historical experience and apply it to what we have. It is the responsibility of the Oireachtas to promote the Irish economy as Deputy Kemmy said, within the Internal Market.

A balance must be struck because the companies to which I refer, dealing in bulk commodities such as cement and concrete, are subject to intense competition from producers in the European Union, and I am not including State monopolies such as telecommunications. My namesake across the Border in County Fermanagh provides strong competition in cement and blocks for anyone in the building industry. The slow and hesitant tendencies in Cement Roadstone Holdings come from the monopoly tradition of Cement Limited, rather than from the market driven expansion of Roadstone. That is by way of observation, but we will continue to differ in our interpretations.

I accept the principle of what Deputies Rabbitte and O'Malley are proposing. I thank them for the opportunity to indicate that I will correct the draft for Report Stage. I am informed in so saying that the Department in looking at applications will go behind the company and try to establish what the effective control is, but one would only have to read the interim report of Mr. Clarke in respect of Countyglen to realise the extraordinarily creative possibilities of financial engineering these days and just how complex that can be. Therefore, if it is the desire of this committee to make explicit in law what I am told is the practice of the present and previous administrations in the Department, I am prepared to accept that principle and we will table an amendment on Report Stage.

We have to be very careful how we draft such amendments. The thrust of the amendments, and what has received the support of all Members who have spoken, is that the nature of the ownership and control must be capable of being observed and examined so as to prevent somebody by subterfuge acquiring a company that appears to be in competition with another company when, in fact, it is not in competition. Control is tantamount to ownership because if you control a company you effectively have the benefits of ownership and that has to be made explicit.

If I understood the thrust of what Deputy O'Malley said based on his experience in one sector of trying to establish in the late 1980's who actually controlled what, deciding whether this was vibrant domestic competition or a very elaborately constructed existing or potential cartel, it proved to be extremely difficult. If that is what the proposers of the two amendments are suggesting I should address, if they are suggesting that the legislation should be amended in its definitions to clearly state what we mean by a holding company and what we mean by under common control, then I will certainly look at it between now and Report Stage.

I am conscious, however, of the point made by Deputy Bruton, that the activity in a particular market or activity of a conglomerate owned and controlled by a group of people may be relatively small. The total ownership and nature of that company may have no relevance or bearing on whether a potentially dominant position is being constructed which could lead to abuse in the production of some kind of widgets, for example. The Hansen conglomerate in the United Kingdom and the United States would be a very good example of a company that has a vast array of different interests and may very well have a relatively small share of a particular market. In looking at a company that is going to acquire a subsidiary of that large conglomerate does one therefore take into account — Deputy Bruton was trying to suggest this — its market presence as distinct from its asset value? They may not necessarily have the same implications from the point of view of competition policy and the avoidance through mergers or agglomerations of the potential abuse of a dominant position.

I offer that simply to say that, as Deputy O'Malley rightly said, there are complexities to all of this, but there is agreement to this amendment in principle. There is recognition by the proposers that the wording of this amendment will have to be carefully looked at. I will bring in an amendment on Report Stage. It may very well simply restate the present position. The Deputies say it is desirable to make explicit what is current practice as I understand it. If it is desirable, let us do it.

We agreed that we would have a sos from 12.45 p.m. until 2 p.m. On resumption I will call the two movers of the amendments first and then other Members who may wish to comment on the Minister's remarks before I put the question.

Sitting suspended at 12.45 p.m. and resumed at 2 p.m.

I welcome the Minister's indication that he intends to take on board the spirit and thrust of the amendments. Neither Deputy O'Malley nor I have claimed that either amendment, as framed, should be inserted into the legislation. However, their purpose is clear and if the Minister is committed to ruling out artificial constructs to evade the essence of the legislation it is to be welcomed. It is also to be welcomed that the pace and urgency of the enactment of the legislation appears to have been considerably wound down.

When the Minister and his officials consider the implications of borrowing from an amendment or framing a new amendment, it is important that such consideration does not skirt around the problem, graphically illustrated by the Minister regarding the recent experience with County Glen, of how easy it is to produce an artificial construct in this area. Will the Minister consider the feasibility of voting shares being held entirely outside of the group and the facility to park shares whereby ultimately when companies are traced back it is often found that control, if not ownership, is held by the same individual or the same number of individuals? Deputy Burke suggested that an enterprise be defined as comprising all the activities of one or more companies between which trading relationships exist or existed for a period of at least one year, and involving a supply/sales agreement between any two such companies. It might be useful to consider an addendum —"where there was at least one common director in the 12 months preceding the proposed merger or takeover of any one company". The term "common control" needs to be updated as does the term "holding company". While this is an important aspect of the Bill, it is not the most important one, and I do not wish to delay on it unduly if the Minister has undertaken in good faith, as I understand he has, to come back to us on Report Stage.

So you are not pressing the amendment, Deputy? Is the substitute amendment withdrawn?

I suppose that is the appropriate way forward now if the Minister is giving such an undertaking.

I will give the undertaking.

I am glad the Minister has given that undertaking. On that basis, I will not press my amendment either. I had the opportunity over lunchtime to look at the position on this matter. While I thought my amendment encapsulated what I hoped the Committee wished to do and what the Minister has now agreed should be done, I was somewhat nervous about the use of the phrase "common control". I was afraid the interpretation put on that would be the definition of it in the 1963 Companies Act. While it is defined in the 1963 Companies Act, in competition law I am advised that it will not necessarily, or perhaps at all, be defined by the courts in those terms because competition law is separate. I would remind the Minister of the long title to the 1991 Act which seeks to apply to Irish law, by analogy with Articles 85 and 86 of the Treaty of Rome, the principles of competition policy and law. That will take precedence over the definition in the 1963 Act so that the words "common control" can be used in their more popular sense rather than in the technical sense. When I say more popular sense I mean the ordinary meaning of words which is that a person or persons would exercise control over more than one entity.

I confined the amendment to companies because in practice it would only arise there. An enterprise is defined as including partnerships and sole traders, for example, but in practice so far as mergers are concerned it is companies. Therefore, the words "common control" will be used in their more popular sense and will be construed by the courts as being in the popular sense rather than in the specific sense of company law. The 1991 Act, which this Bill sets out to amend, is described in its long title as applying by analogy Articles 85 and 85 of the Treaty, therefore regulations made under the Treaty by the European Union are relevant. In that respect I would draw the Minister's attention to regulation 4064 of 1989, or the merger regulation as it is known, which deals with the control of concentration between undertakings. In that regulation, Article 3 defines concentration, and paragraph 3 of Article 3 states that:

For the purposes of this regulation, control shall be constituted by rights, contracts or any other means which either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking.

It goes on in paragraph 4 to say that, in particular:

Control is acquired by persons or undertakings which, (a) are holders of the rights or entitled to rights under the contracts concerned, or (b) while not being holders of such rights [I myself would insert "while not entitled to rights under such contracts"] have the power to exercise the rights deriving therefrom.

In essence, that means even if somebody can show he does not have legal control, but if the authority can show he has effective control, that is all that counts. As we are applying by analogy Community or Union law, the popular or ordinary meaning of "common control" should suffice. An example of where something that is not legal control amounts to control is given in one of the recent textbooks on the merger regulation which, while I do not have the title, was published last year. The author says that "you do not have to have legal control, in fact, to have control". He cites a case, on page 8, stating:

This was seen in the Arjomari v Wiggins Teape case. Arjomari ceded all of its assets to Wiggins Teape in exchange for a 39 per cent shareholding in Wiggins Teape. The Commission considers that this minority holding in fact constituted the acquisition of sole control by Arjomari over Wiggins Teape.

It went on to give the reasoning which was that while it had 39 per cent, there were 107,000 other shareholders, but nobody had more than 3 per cent so effectively it ran the company. In theory, all 107,000 shareholders could have ganged up against it but in practice that would never happen. I set out those matters in some detail to try to impress on the Minister that this should apply even if somebody does not have majority control or if he does not have, what would appear on the face of it to be, legal control under contracts or otherwise, if he has effective control.

Going back on my own experience, that was where the most serious problems arose. It was where people put nominee shareholders into companies in order to acquire others. On the face of it there was no obvious legal connection between the ultimate controller of the group and the nominee shareholders. In practice, however, there was because the nominee shareholders were usually the employees of the group and, therefore, the owner or controller of the group could exercise control over all its subsidiaries. When I left office, a number of those problems were unresolved. They had just been left there because the people concerned did not seem to mind. Whether they have been resolved since I cannot say. My guess it that they probably have not been and they have been left in abeyance. If possible, I would not like the situation that arose in 1989 and 1990 in respect of some of these matters to arise again. This amendment, or one close to it, which the Minister has been good enough to accept in principle, would cover this. I hope what I have said helps those who will draft any amendment introduced by the Minister on Report Stage to achieve the objective generally shared by the Committee.

The Minister said this is happening in his Department in practice already. If two companies proposing to merge establish that they are below the threshold, they do not have to notify the Department and it does not become aware of their interest in merging. I do not know how the Department could apply this concept in practice unless such companies are already notifying it. This would defeat the purpose of the Bill because if they are notifying the Department already, it can deal with them under the merger control procedure. It is important that these amendments be part of the law. The Minister is expecting his officials to know something in the minds of companies which do not notify the Department. This is virtually impossible. The Minister's suggestion that this is putting existing practice into a legal framework does not hold water. Existing practice does not cover what these amendments are seeking to do. It is important that the Minister puts down an amendment on Report Stage rather than referring to procedure and practice. If this is not in the legislation the Department will not hear about the proposed mergers in the first place.

I agree with the principle behind these amendments without necessarily agreeing with their wording. My objective is to facilitate mergers and take-overs between only small firms and provide that if a proposed merger is anticompetitive and does not come within the provisions of the Mergers, Take-overs and Monopolies (Control) Act, 1978, it will remain subject to prior review by the Competition Authority under the provisions of the Competition Act, 1991. Only mergers of very small companies should not be subject to prior review under the 1978 Act. If the Minister accepts the principle behind the amendments, I suggest a wording which might help. Section 2 amends Part IV of the Principal Act. The wording of section 19A (2) of the Principal Act should be deleted and the following inserted in its place:

Subject to subsection (3), section 4 shall not apply to any merger or take-over where (1) the proposed merger is subject to the Act of 1978 by virtue of section 2 of that Act or (2) when the most recent financial year of each of the enterprises intended to come under common control when the proposal is carried into effect is less than £2.5 million or the turnover of the said enterprises is less than £4 million.

The equivalent figures in Deputy Rabbitte's amendment are £1.5 million and £3 million. I do not want to get hung up on specific figures but to get at the broad principle. As with the amendments we discussed before lunch, the question of common control is important. The Minister accepted the principle earlier and I wonder how far he intends to go in this.

Both amendments have been withdrawn on the understanding that the Minister will take on board their spirit. No doubt he will also consider what Deputy Burke has said when we come to Report Stage.

Amendment, by leave, withdrawn.
Amendment No. 2 not moved.

Amendment Nos. 4 and 5 are alternatives to No. 3. Amendment Nos. 7 and 22 are related to No. 3. Therefore, amendment Nos. 3, 4, 5, 7 and 22 will be discussed together.

My amendment No. 15 proposes to amend section 2 of the 1978 Act. I do not mind if it is taken separately but it is similar to the other amendments.

Amendment Nos. 36 to 41 are related to No. 15. Amendment No. 42 is an alternative to No. 41. When we get to Amendment No. 15, I will propose that we discuss it with Nos. 36 to 42, inclusive.

I move amendment No. 3:

In page 2, subsection (1), to delete lines 21 to 25 and substitute the following:

"(2) Section 4 shall not apply to a merger or take-over except where the combined undertakings would, on completion of the merger or take-over, represent 25 per cent or more of the relevant market in the State for the products or services affected by the said merger or take-over.".

This amendment, as was correctly pointed out, is an alternative to some of the amendments following it. They are not all to be read together. There is not necessarily a sense of purpose between them. They are not necessarily consistent with one another. The consistency of purpose is to seek to change the limits and extend the controls more widely than would be the case under the Bill. There are a number of ways of doing this and this amendment is one of them. It introduces the concept of post acquisition market share. There are alternative ways of doing it, including financial thresholds in respect of assets or turnover or both. I have also tabled amendments in relation to this.

There should be one threshold, whether related to market share or financial, in respect of mergers examined by the Minister under the 1978 Act but there should be a lower threshold in respect of the very limited class of mergers examined by the Competition Authority under section 4, if the Committee or the House were to decide to retain that system. This will have to be debated. Within the past few months, as I pointed out this morning, the Minister expressed two quite different views on this. There are arguments in both directions. Amendment No. 3 states that section 4 would not apply, unless after the merger or take-over the combined undertaking, that is the acquiring and acquired companies between them, represented 25 per cent or more of the relevant market in the State for the products and services affected by the merger or take-over. This is an alternative way of approaching the difficult threshold question.

There can be anomalies in thresholds. it. A recent example is the one I referred to on Second Stage, the proposal by Pernod Ricard through its Irish Distillers subsidiary to acquire Cooley Distillers. This was under the post May 1993 thresholds but was clearly a case which should have been examined. Fortunately it came within section 4 of the 1991 Act, was examined by the Competition Authority and rejected by it in a well reasoned and logical decision with which nobody apart from the parties involved disagreed. The argument in that decision is very compelling. In that case although it was below the thresholds for the purpose of the 1978 Act it represented, between the two of them, 100 per cent of the production capacity in Irish whiskey. Clearly, it was undesirable if there was a competitor in the Irish whiskey market that he should be out of business. Indeed, there was the unusual circumstance in that case of the managing director of the acquiring company saying that their only purpose in acquiring the other company was to close it down. I cannot imagine anything more anti competitive or non-competitive than that.

Even if he had not said that, the proposal should obviously have not been allowed to go ahead. It called very strongly into question the wisdom of the order which the Minister made in May 1993 doubling the then threshold. My experience in the early 1990s was that the thresholds were arguably too high at that stage, and then they were doubled.

The number of cases to which this would apply is very low, which is borne out by a news item in the current issue of Competition magazine, volume 3, edition 6, page 160. This magazine is produced in Ireland, is edited by Andrew Whittaker and is the only journal of its kind. It is quite entertaining in parts and even makes competition law exciting. He states:

Please, Minister, may we continue to point out the obvious? There is no crisis of double jeopardy for mergers and acquisitions. The figures kept by accountants Stokes Kennedy Crowley for the first half of this year and published in The Irish Times on 30 June show 16 domestic acquisitions. Of these, only two judged it necessary to notify the competition authority. Since you do not publish what your Department does, we do not know how many of them were notified to you (eight, maybe?). You are persuaded that the present regime jeopardises the growth of Irish companies and you will reform it. Only one in eight firms believes you.

The fact of the matter is that the numbers are very small. For that reason, those of any significance which do take place should be subject to clearance by either the Minister or the authority.

There has to be some bottom limit and a later amendment of mine suggests that as far as section 4 clearances are concerned, the figures should be £4 million and £2 million. Obviously, very small ones do not need to be cleared. However, the point was made by successive speakers this morning — this is very much bound up with the two amendments we have just discussed — that it is totally undesirable that smaller companies here should be open to being gobbled up in these circumstances.

Therefore, even if the thresholds are very low, if the acquisition results in 25 per cent or more of the relevant market being vested in the combined undertaking, post acquisition, then that should be subject to being looked at either by the Minister or the authority. To have it otherwise will facilitate the gobbling up of all the smaller competitors, which most people would agree is undesirable.

I am not hung up on the form of this amendment. It would be acceptable if the Minister were prepared under one of the subsequent amendments which I and others have tabled to reduce the asset and turnover thresholds, or to introduce some form of lower threshold, if he wishes, for the application of section 4. However, mergers of significance in the Irish market, at least, should be subject to some form of control such as this.

I have suggested that a percentage of the market is, arguably, more appropriate than financial thresholds because that is what is used in a number of other countries, some of which I listed on Second Stage. That seems to work well in other countries. I do not mind whether we use the French, Spanish or Italian concept or the existing concept, as long as we control more rather than less of these. It is in the interests of smaller firms that this be done. Otherwise, they are appallingly vulnerable. As I said on Second Stage, this Bill, if it is not amended in this or some analogous way, is simply a charter for larger firms to go in and gobble up all of the competition. That is very undesirable from an economic and competitive point of view.

The Minister was correct when he said earlier that it was not envisaged under the 1991 Act that section 4 would apply in a merger context. I agree with him. However, that was in the context of much lower thresholds for the 1978 Act. If the thresholds for the 1978 Act are going to be as high as they were made in May 1993 and as high as is proposed in this Bill, then I am satisfied that we need the section 4 jurisdiction.

I would remind the Minister that the section 4 jurisdiction is not nearly as wide as people think. That is borne out by the fact that only two notifications were made in six months. It is also borne out by the fact that according to the decision in Woodchester v. UDT, which created this jurisdiction, the only cases to which it will apply are those to which paragraph 78 of the decision makes them apply. Paragraph 78 of the decision is very narrow. It only applies where the number of entities which would result from the merger reduces the overall number of entities in that sector to such an extent that there could not be genuine competition afterwards.

The number of cases where that will arise is very small, which is borne out by the fact that there were only two notifications in six months. Solicitors will not err on the side of taking a risk but on the side of caution. Perhaps, the two which were notified — I do not know what they were — did not really need to be notified but it was done purely as a matter of precaution. Therefore, the numbers which are likely to be covered by the merger jurisdiction of section 4 are quite small. It should not be removed. The classic case of where it was usefully used here was not in the case involving Woodchester but in that involving Cooley Distillers.

The case has been well made by Deputy O'Malley. I opt for a different approach although I said on Second Stage that I had an open mind on whether post acquisition market share ought to be the yardstick. I still have such an open mind. I would like to hear the Minister's response to the thrust of the argument which has just been made. It is very difficult to come down on one side or the other while we have this guillotine, as it were, hanging over us — I am not referring to the Chairman this time but to the thresholds being raised and the implications of that in the context of the configuration of Irish companies. An increase was made in 1985 by the then Minister, Deputy Bruton. The next increase, made in May 1993 by the present Minister, doubled the hefty increase made by Deputy Bruton at that time. Deputy O'Malley listed figures on the number of notifications.

Unfortunately, the magazine Competitionmakes for fairly arcane reading as far as the public is concerned. Although there are fundamental questions for the future of the economy, it is remarkable that since we kicked off this Bill, it has attracted little comment outside of specialist magazines. It is not a very sexy subject and kicking it off on the night Norway played Ireland was designed not to give it front page coverage. I hasten to add the Minister had nothing to do with that schedule, it was the decision of the Whips. This Bill warrants some comment. I find it difficult to decide whether we should retain this role for the competition authority.

Or for the Minister.

We should look at what could have happened in the Cooley Distillers case and the disgrace which could have been perpetrated there if we had not been able to fall back on the use of section 4. We cannot ignore that case. I do not know what subsection (2) is doing here. It seems that the purpose of it is to undo that decision in the case of Cooley Distillers.

I suggest different thresholds. I am not wedded to, as Deputy Burke said, assets of £1.5 million or a £3 million turnover or assets of £2 million or £4 million turnover. However, I suspect that there are many small companies which would not have assets of £1.5 million. I accept there must be a cut off point.

Although we are discussing amendments Nos. 3, 4 and 5 together, essentially, the amendment before the committee is amendment No. 3. I have an open mind on whether post acquisition market share should be the proper yard stick. It might, for example, take account of the point the Minister made concerning a large conglomerate which might only have a minor interest in this economy. I would like to hear the Minister's views on this.

Essentially, there are two ways this Bill may be amended to make it acceptable. One way is the approach outlined in these amendments, that is, to leave the Minister in control of large mergers and take-overs and to leave the Minister operate the Mergers, Take-overs and Monopolies (Control) Act, above certain thresholds, and to retain the vetting of smaller mergers under section 4 of the Competition Act, possibly subject to some new de minimis provisions exempting trivial mergers. I find that acceptable and I support the principle of what the Deputies put forward.

Another approach which I favoured was to give the Mergers, Take-overs and Monopolies (Control) Act to the competition authority thereby removing the double scrutiny. The difficulty is that these amendments need double scrutiny as a feature of our legislation. Deputy O'Malley put forward a cogent argument, which may be double jeopardy or which may not be as worrying a feature as we may believe. However, it is a persuasive argument that it is not fair if one is considering a merger that one should apply to two different bodies to scrutinise the operation. It does not seem to be a fair or efficient way of doing business. That is why I favour an alternative model, which we will come to later, where we replace the Minister with the competition authority in the legislation.

This would have several advantages because it makes what is going on more transparent. We could include provisions so the competition authority could continue its practice of publishing applications and giving reasons for the decisions it reaches so people know what is going on. It would remove the situation which now prevails that if the Minister decides to give the green light to a merger, he does not have to give any reason why he did so or even let us know it happened. It is unsatisfactory and that is why I am not happy to leave the Minister in control of the Merger, Take-overs and Monopolies (Control) Act, as is the presumption behind these amendments.

It may be easier to get the Minister to accept this provision — that is another day's work — but in an ideal world we would give control of mergers to the competition authority, make it more transparent and alter the exemption thresholds. If we decide to remove section 4 relating to supervision from the Mergers, Take-overs and Monopolies (Control) Act, it would not be satisfactory for a company with less than a £20 million turnover being taken over by a company, no matter how big, to be exempt from scrutiny. We would need to include in the 1978 Act provisions like those advanced in these amendments tabled by Deputies O'Malley and Rabbitte.

I hope the Minister will accept one of these models. If he is willing to accept Deputies O'Malley's and Rabbitte's model, I will support that. I hope he would be willing to support the alternative view giving regulation of mergers to the competition authority and to let it conduct its business in a transparent way, independent of any suggestion of political interference in the execution of competition law. We must accept one of these models because we cannot accept what is before us for all the reasons which have been articulated.

In my last contribution I covered the points on the difference in the figures. Deputy Rabbitte spoke about assets of £1.5 million and a turnover of less than £3 million, while I spoke about assets of £2.5 million and a turnover of £4 million. I am not hung up on either of the figures, but with the principle which should be to facilitate mergers and take-overs between small firms only. I would like to hear the Minister's comments on the alternative structure and mechanism suggested by Deputy O'Malley, that is, "25 per cent. or more of the relevant market in the State for the products or services affected by the said merger or take-over." I hope the Minister will accept one model. While I am not hung up on the specific figures, it is important to have a model and an amendment like that which has been argued by all parties this afternoon.

We should get back to basics. Members referred to companies being gobbled up as if they were unwilling victims of taking their profit and capital and walking away. I do not understand where certain parties or Deputies are coming from. Nobody is forced to sell assuming it is a free transaction and they have not been subject to the economic bullying which I referred to or the enforcement provisions of the competition authority been invoked. This would be a willing sale from company X to company Y. Unless I have misunderstood the Progressive Democrats and Fine Gael in the past, I would have thought that it was a fundamental right of people in the private sector to take the money and run. I would have thought that it was part and parcel of the enterprise culture that people would be entitled to cash in their chips if they thought it was in their best interests.

The representatives of small businesses whom I met said that their primary motivation for being in business is to make profit and not to provide the consumers with choice. During elections, when we are all entitled to a certain amount of political if not poetic licence, we have heard demands to get the State off the backs of small businesses and remove unnecessary red tape. Our democratic colleague across the water who likes to sign himself as the President of the Board of Trade had a bonfire of red tape in terms of regulations. I simply ask: why have all of this?

If people believe in market forces and in the priority of the principle of self motivation and the profit motive, why have any restrictions unless one is dealing with very large companies in which case there are thresholds? This is not necessary for small companies and the only people who gain are the lawyers. As Deputy O'Malley said, they are full of precaution. A significant number of the notifications made to the Department were unnecessary because they were below the threshold. I can make those figures available.

I am being very clear about this. It was never intended, as Deputy O'Malley said, that the 1991 Act would have a role in mergers. It has a role in other areas but it does not have a role where two companies willingly come together. I find it hard to fit that into the gobbling up or hoovering which some Members mentioned. Are there specific examples of this to which people want to refer?

Yes, there are.

I would be more than anxious to hear them. Are there examples of the owners of those companies being forced into selling? The consequences for employment, and other matters, is a different issue. Let us have some specific examples of the predatory acquisition of companies.

If there is an abuse of a dominant position in the market place where a company has been softened by predatory pricing over a period of time, it is clear that the enforcement provisions of the Competition Act have not worked. I do not think there is any dispute about the need to strengthen the enforcement procedures. On Second Stage, Deputy O'Malley, who introduced the 1991 Act, said that had more resources been available he would have liked a more proactive enforcement role but that financial constraints prevented this.

If a person becomes an unwilling seller because they have been softened by massive predatory pricing over a period then that is clearly an abuse of a dominant position. We should not allow that to happen to the point where companies are forced to sell.

Deputy Bruton suggested that we take this authority away from the Minister and give it to the competition authority because it is more transparent than Ministers. I have been a Member of the Oireachtas for about 17 years and I believe that the Oireachtas is our most transparent institution. Ministers are subject to far more scrutiny than people appointed to bodies. As a democrat and an elected politician who has gone for a renewal of my contract in the Oireachtas about eight or nine times I fail to understand how the authority could be more transparent. Members of the competition authority, the Judiciary and others do not have to go before the public in the same way as we do.

I can never understand why politicians want to give away accountable powers which we get from the electorate on a regular basis. I cannot think of a more accountable person than a Minister who is answerable to colleagues in the Cabinet, the back benchers in his or her own party and who is ultimately answerable in this kind of exchange on the floor of the House or in committee. I utterly resist the suggestion that we should give away powers in this area.

I have a second and separate reason for rejecting the suggestion. It is right and proper for a Government to have a direct hand on the levers of economic policy. I have never made any secret of my belief in intervention in the economy. An economy left to its own devices, without direct State intervention, will not thrive and prosper as required.

I dispute Deputy Bruton's concern about a lack of transparency in the behaviour of Ministers, including myself. I am certainly open to some of his other suggestions, for example, the use of Iris Oifigiúil, provided that the confidentiality and market sensitivity of the information is not endangered. I have no problem about making more information available.

The 1991 Act was never intended to concern itself with mergers as Deputy O'Malley has confirmed.

Yes, but that was in the context of much lower thresholds under the 1978 Act.

There are more companies affected by the higher thresholds than were affected under the original thresholds. The 1978 Act, with its enhanced thresholds, now applies to a larger number of companies than it did in 1978. In 1978 the thresholds applied to 200 enterprises and they now apply to 405 enterprises. It has a wider application even with higher thresholds. This is a policy issue as distinct from improving the drafting of the legislation.

I am totally at variance with the views put forward by ISME and the Opposition Deputies. I want the minimum amount of red tape for businesses and maximum enforcement of competition. I am giving powers of enforcement to the authority in this Bill and I am telling businesses that they do not have to apply in respect of mergers unless they are very large.

The question of market power share is very interesting. We have used the concept of cash volume, in assets and turnover, of £20 million and £10 million rather than the percentage of market share. One must ask what market we are talking about? For example, could I request the competition authority to take an action for predatory pricing or dumping against British newspapers operating in our market?

We are all aware of the current price war. If one buys a broadsheet newspaper on a Saturday, one gets a discount of 55p the following day. Is that predatory pricing? What is their market share? What is the market for British newspapers in terms of weekly sales or Sunday sales? What is the role of the competition authority in defining market share?

One of the great weaknesses in theorists of competition is that they have failed to take account of the dilemma I see myself having when trying to promote the Irish economy which, in population terms alone represents 1 per cent of the total Internal Market of over 350 million people. Where does the market begin and end? We are told that the completion of the Internal Market means that there are no barriers to the sale of certain goods. The newspaper is a good example of this.

If one is to use market share rather than turnover and assets as a criterion of measurement which market is one examining? I do not have a firm view either way and I would be interested in hearing expert advice and the views of colleagues in this committee. Are the proposers of these amendments suggesting that I want to have section 4 of the Act explicitly refer to mergers below the current thresholds? This is not about comparing one amendment to another. I heard clearly what Deputy O'Malley said and I do not think his suggestions are in the interests of either small or medium sized businesses or the Irish economy. The abuses that might occur can and will be adequately addressed by the proactive energising of the enforcement provisions of the Act. That is the core of this legislation.

The Minister is defending as a policy position something which is surprising for the Labour Party. It is not correct to say that nobody is forced to sell. If predatory pricing is taking place and a small company is coming under pressure from a large competitor it is difficult to take an enforcement action and prove that is going on.

Under the present situation or as it would be when the legislation is amended?

The burden of proof will be difficult. Perhaps the Minister will contest this but my understanding is that it would be difficult to establish that such predatory action was being taken against a small company which was the target of a hostile take-over. It would be equally difficult for the competition authority to go to court and do so. The tradition of Irish courts is to require a more significant burden of evidence than might be required in other countries, such as the US where there is a greater tradition of removing anti-competitive behaviour than here. It can happen that someone is forced to sell because their position becomes so difficult that they are presented with an offer they cannot refuse.

It was the Government through the task force which indicated that it would consult with small business when it proposed legislation that might significantly affect their position. The representatives of small business are to the forefront of feeling hard done by that the consultation they were promised did not take place. If they wanted to make their fast buck and cash it in they would welcome this legislation with open arms. It is clear that they have genuine concerns about it.

The original system envisaged for ministerial control of mergers was that even where the Minister was giving the go-ahead to a merger there would be at least some independent assessment by the competition authority so that we would know why the go-ahead was given. This will not be in the Minister's proposal once section 4 disappears.

The Minister also says that the Oireachtas is the most transparent body of all and, therefore, he should hold on to his role under this legislation. I question whether the Oireachtas is the most transparent body when it comes to extremely technical issues of company law and market conditions. This is illustrated by the fact that the Minister has never exercised his powers under section 4 to take enforcement action against an abuse of competition. Does that imply that the Dáil recognised that there were no problems with competition in the economy or that the Minister in his far seeing wisdom saw no problem with competition in Ireland and no need to take enforcement action? That is not the case.

If anything most independent observers would say that Ireland has a deep and entrenched problem with anti-competitive practices as a general rule. Particularly in the non-traded sectors there are many anti-competitive practices. The Minister has not come up with action under this programme. Although it was promised in the Moriarty report that there would be action on anti-competitive practices we have still seen nothing. I do not believe that the Oireachtas is an effective way of scrutinising a Minister on this matter.

The Minister has never exercised his power to investigate monopolies under section 14 of the Act. In my time in the Dáil I cannot recall any time when a merger approved by the Minister came under scrutiny in the Dáil. Not all mergers are necessarily good and politicians, by nature of their daily work, are not well aware of the intricacies of competition law and are not likely to be the most effective scrutineers. If the public wants an effective scrutineer it should be the competition authority.

In 1992 or 1993 when the Minister revised the thresholds from £5 million to £10 million and from £10 million to £20 million he had the defence that section 4 scrutiny was available and that this was not such a dramatic change in provisions. During the debate at that stage we were aware that there was the fall-back position. The Minister is removing the fall-back position and he does not see fit to do anything about the thresholds. If one believes in the effectiveness of the market and that the market should work then one has to prevent dominant market positions emerging and that means that one will have to have good scrutiny of mergers and take overs. ISME is verifying the suspicion and unease about this not only on the Opposition side. The Minister has to do more than appeal to free market principles and the scrutiny of the Oireachtas to defend what he is doing.

Before Deputy Burke speaks I ask the convenor, Deputy Flood to take the Chair. Is that agreed? Agreed.

In his contribution the Minister asked for examples. The best example I can give of the concern in the business sector is that given by ISME in its presentation to the Members of the committee. It refers to the increased risk of take-over with outside shareholders in the following terms:

When small companies expand they become more exposed to take-overs if they raise new equity from new shareholders, such as BES investors and the venture capital pension funds established in the 1994 budget. Shareholders will usually consider any take-over offer even if it is opposed by the management of a firm subject to a hostile take-over offer. The managers of venture capital pension funds have a duty to protect their investors' interests by taking the course of action which best protects their investors' interests and not the interests of any original investors, managers or firms in which they invest. The development of any small business usually requires the raising of equity from new shareholders and under the BES legislation proprietors cannot maintain a majority of equity if their firm is to qualify for BES funding. The use of BES finance and venture capital finance for small businesses arising from the provisions of the 1994 budget will expose small business to hostile take-overs from larger competitors. If the proposed legislation becomes law a large competitor, particularly a large competitor which is part of a large group, will be able to compete aggressively on price with the objective of weakening the financial stability of the smaller competitors and subsequently taking over such smaller competitors. In considering take-over offers during a period of intense price competition shareholders, particularly non owner/manager shareholders, such as BES and venture capital shareholders will be very tempted and probably accept take-over offers from larger competitors. Even a take-over offer at a price which reflects a small company's financial difficulties due to price competition may be acceptable to such investors. This objective is not currently available to such larger competitors because such take-overs are subject to review under the Competition Act, 1991.

An inevitable consequence of the current proposals is that small business owner managers will be reluctant to expand quickly by raising additional debt or equity finance. Small companies will also be reluctant to incur significant debts as their companies would become over exposed if they become subject to intense price competition for a protected period. They will be reluctant to involve new investors in their companies because they may lose the control of the business which they have developed.

This matter should be about innovation. If a small business with managers has good innovative proposals for the domestic trading or service aspects of the Irish marketplace, it should be encouraged to get involved in bringing in BES or venture capital investors. The Minister, given his approach in his last contribution, is anti competitive in that sense. He is going in the wrong direction in terms of encouraging innovation and small industry.

I wish to challenge the Minister's apparently absolute commitment to abolishing red tape and going down that road with all it entails. This is very much the essence of the submission from the Incorporated Law Society. I referred to this on Second Stage and Deputy O'Malley referred to it this morning.

It is not a body noted for its commitment to the forces mentioned by the Minister.

That is indisputably true. However, in this case, its argument is not concerned with the economic implications and the impact on the consumer or on employment. It is merely to do with bureaucracy and the costs borne by their clients in a merger or take over situation, etc. As far as it is concerned, it is a tidying up exercise.

I wish to add to the point made by Deputy Bruton that on occasions one is presented with an offer one cannot refuse. The Minister made the point regarding reluctance to take the money and run. However, small companies on occasions are squeezed and made an offer that they cannot refuse. It is correct that we should be able to intervene in such situations. The Minister asked for an example and the most dramatic is the Cooley distillers case. This company used taxpayers' money, at least in the sense of the amount of tax foregone by the State under the BES, etc. It created a marketable product which presumably had the prospect of such markets that the leading company in the country, Pernod Ricard/IDL, felt it was desirable to put it out of business.

The fact that it suited Cooley shareholders to collude in that does not mean that it was in our economic interests as a country to facilitate it. However, we would have facilitated it under the current law were it not for an unenvisaged use of section 4 of the competition Act. Otherwise, it would have gone through. The company would have been gobbled up by the giant company, shut down and 35 workers would have lost their jobs. A competitive product in the market would have been subsumed into the array of products of Pernod Ricard. This seems as tangible and practical an example as one could get.

The Minister chided the theorists and purists in competition policy, although he may have some entitlement in that respect. However, he went on to give a pure interpretation of democracy in terms of the argument of Minister versus the authority and asked why fellow politicians should not defend the position of an accountable Minister within the Oireachtas. It is an impeccably democratic argument. However, given all the wheels within wheels and the political culture that has dominated this part of the island, there is an impeccable argument against the Minister being in a position either to give the nod or withhold it in the type of circumstances envisaged here.

Without going into it in too much detail, I recall situations where Ministers facilitated the development of monopolies. They did not take action and took decisions which encouraged the dominant position of a certain company, if not more than one, in the not too recent past. Having regard to the position the Minister's colleagues and leader took on this, I thought he might have a view similar to mine.

His leader changed his mind after he took the shilling.

He never told anybody about it. He never spoke one way or the other, I recall. It was a very expensive silence.

After he took the shilling, he went silent.

Expensive silence. How many millions?

One of the great difficulties we are having with the ethics Bill is in defining "friend". I will work on it over the weekend and I intend to come up with a definition.

Tom Gill will give the Deputy an idea.

I recall that this was a major issue in politics recently in terms of who was a friend or a social friend or a personal friend or not a friend at all. It is the nature of culture in this society that everybody has somebody's ear. There may be an argument for a Minister not being open to influence in the manner mentioned by the Minister, notwithstanding accountability.

Other Deputies have covered much of what I wished to say. The Minister made a big play on the fact that nobody is forced to sell. He is innocent if he believes that. Many people are forced to sell for two particular sets of reasons in the current Irish context. One reason is where they have been softened up by predatory pricing by a large group of companies in opposition. This may have gone on over a year or two and the target company is so weakened that when any half reasonable offer is made, they have no option but to get out. They are under enormous pressure from their banks and creditors to accept it and get out of the business. They are forced to sell.

Another group of companies are also forced to sell in these circumstances. If the target company is not particularly profitable and has BES or venture capital investors—venture capital investors who were encouraged under recent budgets and finance Acts—it is very much in their interests as non owner non management investors to get out. They will put enormous pressure on the management to accept the offer. They may have voting control of the board which will make the ultimate decision. The management, which wants to fight on and try to expand the company and its employment, is forced to sell for the short term financial gain of the investors. Why did Cooley Distillery Plc want to sell out, if not for the short term financial gain of the investors? It was not in the employees' interest or in the interests of the economy, but in the interests of the principal investors in Cooley Distillers, who were going to make a killing, and Pernod Ricard, who were going to shut down the only opposition to them. The Minister is wrong to say that people are not forced to sell; they are regularly forced to do so. It is to the detriment of the economy and employment when this happens.

Competition is not a free for all and unless it is regulated, it will not be useful or profitable to the economy of this or any other country. If one has unbridled competition, as the Americans recognised 100 years ago, then the economy will be damaged. One must regulate it. The most competitive economies are those with a reasonable degree of regulation, not those where there is total freedom of action for big companies to put small companies out of business.

The Minister said there is a fundamental difference of policy between him and me, Deputy Rabbitte and other Deputies who asked if more, rather than fewer, take-overs or potential mergers in the economy should be subject to scrutiny. The Minister is entitled to his own opinion, but surely he cannot have such a deeply rooted opinion if, as recently as 19 April last, he was prepared to express publicly, as a matter of Government policy, the opposite view to that he is now expressing and the opposite view to that contained in the Bill, which he published approximately one month ago. I and some other members of this committee are taking the same view on this matter as the Minister took on 19 April. We are not too far apart in terms of time.

I strongly believe our views, rather than the Minister's views, are right. He takes a simplistic view of competition and he is inclined to look at these matters from the point of view of what would be legally neat and enforceable, rather than from the only point of view which counts — what would be economically most beneficial to the country. We should not make things neat from a lawyer's point of view, but things should be made effective, efficient and beneficial from a national economic point of view. We must have regulation of mergers and we must recognise that mergers in this country frequently take place between companies which are small by world or European standards. Small companies frequently have a significant say in the marketplace here.

The Minister quotes figures which suggest that after the major extension of the thresholds twice as many companies are now subject to it as was the case in the past. I do not know his source for that assertion, but I dispute it. When I was in the Department of Industry and Commerce, I recall getting approximately 200 notifications each year. Approximately half of those were not notifiable, half were considered and approximately half of that half came to me for decision. That came to approximately 50 a year, which was one a week. I was in that Department for a long period after the 1978 Act came in and while it would not be true of every year, it was true of many years. Many of these were foreign mergers, which were not of great interest, and I let them through when I saw what they were. One would need to spend hours reading the remainder and trying to balance the various arguments for and against. There were as many as 100 properly notifiable mergers in a number of individual years. If this Bill is passed in its present form, that will be reduced to a handful and that would be wrong.

The criterion by which one should judge this issue is the Cooley Distillers case. Surely no one disagrees with the fact that Cooley Distillers was referred to the Competition Authority for scrutiny. It would have been a tragedy if this had not happened. We should not change the law to allow future cases, such as Cooley Distillers, to be gobbled up without any scrutiny by a public authority, whether it is the Minister or the Competition Authority.

I will begin with Cooley Distillers because everyone has cited that example. It could be said — I am conscious that I am speaking under privilege and I do not want to abuse that position — that many people perceived that Cooley Distillers was set up to be taken out, that it was designed in such a way that it was under capitalised for such a product as a whiskey brand, and that it would have difficulties unless it got a strategic partner with whom it could do business. I will not comment about a number of other companies, with which I am familiar, which set themselves up in the hope that they would be such an irritant to a major player that they would be bought. That is not an unknown position for someone to adopt in the marketplace.

As regards Cooley Distillers' application and the reference to the Competition Authority, it is arguable, and I have heard it said by many people who are familiar with the details of the case, that had a different presentation been made by Pernod Ricard regarding the reasons they wanted to acquire Cooley Distillers, they might have got a positive decision from the Competition Authority. However, an explicit statement was made in the correspondence that the reason for the proposed acquisition was explicitly to take out competition. I am speaking from memory, but I believe I am fairly accurate in quoting that. That immediately warranted the red card which it subsequently got from the Competition Authority. If the Deputies are arguing that the Cooley Distillers case is the classic example of companies which are so vulnerable that they are subject to predatory purchasing, then they are wrong on two fronts. First, had a more adroit submission been made by Pernod Ricard to the Competition Authority, it would possibly have got a different result. More importantly, there is a strong suspicion in the marketplace, with which I have some familiarity, that from day one it was set up to be taken out.

Deputy Burke made some points which represented the concerns of ISME.

I reflect, rather than represent, the concerns of ISME.

I accept that point and, by doing so, the Deputy is doing his job correctly as a public representative. Those concerns are open to different interpretations. Deputy O'Malley challenged my comment that people are not forced to sell. I will clarify what I meant by that statement. A badly run company, which is mismanaged and is no longer able to maintain its position in the marketplace or to respond to legitimate competitive pressures, must succumb to market forces and be forced to sell or else go into liquidation.

The point at which they sell will depend on what they consider to be in their best interests, or their creditors or their banks may decide what would be in their best interests. A person can be forced to sell for different reasons. We all know family businesses in this country which sold out because the owner manager of that company had no successor within the family to take on the company and was forced to sell for personal, non-market reasons. They would have liked to hand on the business to somebody else within the family but there was nobody in the family who wanted to take it on. Is that enforcement to sell? In what sense is it enforcement to sell?

When I said nobody is being forced to sell I meant that they were willing sellers in every sense of the word unless they had been softened up by a campaign of predatory pricing where they were boxed into a corner, where their margins and their room for manoeuvre had clearly been clipped substantially over a period of time. Deputy Bruton referred to that point. I asked him whether he did not concede that by enhancing the enforcement procedures of this legislation in this Bill some of the concerns he was expressing would be countered.

I concede readily that there is a category of company that could be forced to sell against all the odds if it had been subject to a campaign of predatory pricing over a period of time, and which by virtue of its size could not go through the legal process of getting the courts to protect it. It is precisely for that reason that I am strengthening the enforcement provisions of the authority. I am not abolishing section 4 of the Principal Act. That provision will still exist and all the prohibitions that are explicit in section 4 of the main Act will still apply.

What might be even worse for an individual small company would be a collusion between two companies that they would jointly squeeze somebody, not necessarily merge, but enter into a non-competitive cartel arrangement to squeeze out company C or company D so as to enhance their own market position. All of those anti-competitive provisions which are made explicit in section 4 still prevail. There is nothing to stop somebody so aggrieved to invoke section 4 and to go under section 5 and complain that they are being subject to unfair competition.

I share Deputy O'Malley's view that competition is not a free for all. The greatest level of regulation in the US economy occurred probably in the 1930s under Roosevelt. Certainly with the establishment of the SEC, the state undertook a high level of intervention at a point when capitalism world wide was in critical crisis. The role of intervention by way of substantial regulation is less than 100 years old in the United States.

There is sufficient regulation in the Irish economy to do three things — I have not heard any Opposition Deputy refer to this point. It is not possible to treat the Irish economy as if it were a stand alone component outside the greater internal market of the European Union and outside what is now, following the ratification of GATT, an increasingly global market. I am trying to reconcile the improvement of the performance of the Irish economy, enabling Irish firms to grow so they can get to the level of taking on the kind of innovation to which Deputy Burke made reference, with the provision of a good competitive environment in which the Irish consumer and other Irish businesses who are takers of the services provided by individual companies can benefit both in cost to the consumer and in the cost to individual companies. This Bill has two components in essence and this is one of them.

Below the thresholds specified the question of mergers would not be referred to the Competition Authority. It was never intended that they would be referred to the Competition Authority although the thresholds were lower. Deputy O'Malley has made a fair point in relation to why I changed my mind. I decided on reflection that he was correct in what he put on the record of this House, that the belt and braces are not necessary. It is possible to remove the belt of the second reference. The protection of the enforcement provisions on the one hand and the flexibility within the marketplace of companies to make whatever economic arrangements they see as in their best interests would be preferable within the overall requirements of the Irish economy.

I conclude by making one last reference to some of the concerns expressed in the ISME documentation. If owner managers expand their company, get in venture capital equity participation, avail of BES expansion on the basis that investment in the company will help the company to grow, they have the choice of either putting in a restriction on the time within which the shares can be sold, which is a private arrangement which they can conclude for themselves or, if they grow the company to such a point that it is clearly a very strong economic success, it would be surely in the interests of the new owners who purchased 51 per cent of the shares to retain the existing management, if that management has clearly made such a success of the company in the first instance.

All the evidence we have from studies in the Department of Enterprise and Employment and independent studies shows that there seems to be a cycle of affinity to ownership and equity in the age profile of a company. Equity finance is the last thing the owners of a company want in the very early stages because they are so proud of this company. While they will take grants or interest free loans, equity is considered as blood, to quote a phrase from a very eminent person in this economy. Over the ageing process of the company there is a greater willingness to share equity more and to allow it out. That phenomenon is not unique to this country.

The concerns that have been conveyed by ISME are exaggerated, and their concerns, while they may be legitimate in other respects, are not threatened by the provisions of this Bill. It goes back to the central point about the hoovering up of companies, the predatory or hostile take-overs of those companies. I do not think that what I am proposing at this stage will make that probability any greater. On the contrary, the benefits of removing unnecessary red tape would be considerable.

The combination of that provision on the one hand and the safeguard in the provisions for the appointment of an enforcement member of the authority will be in the interests of the Irish economy in general, but in particular in the interests of small business.

I accept that the removal of red tape and bureaucratic strictures from business is a good idea per se, but you cannot in removing red tape also remove belt and braces. You can remove burdens and unnecessary bureaucratic irritants but you do not want to remove protections for small business. We want to encourage small business. The Minister has given me the example in relation to the BES investors and what could be written in regarding a time scale for sale of shares, but the venture capital pension funds also have a duty to protect the interests of their investors. They have to take the course of action which best protects the investors’ interests. They do not necessarily coincide in the short term or in the longer term with the interests of the original founders, investors, managers of the firms in which they invest. Rather than allow the situation arise where small companies have to go to the banks to raise money and incur unnecessary borrowings, use should be made of BES and venture capital funds, but they should not used as a stick to beat the original managers who own the businesses.

The Minister does not believe his proposal will have the effect about which ISME and others have expressed concern. It is our responsibility as legislators to ensure the greatest level of safety and protection for small businesses which we can provide. It should not be possible for an unintended development to arise from the legislation, and it should be copperfastened in this respect. The protections which small businesses should have, operating within the domestic market, including those in services and the supply of goods, must therefore be written into the legislation.

Suggestions were made in the amendments tabled by Deputy O'Malley and Deputy Rabbitte which should be considered. The principle behind these amendments should be accepted, whether it is in the form of the limits on turnover and assets, or in the form of the 25 per cent of the relevant market in the products or services affected by the proposed merger. It is only through this kind of guarantee that the small business sector can be helped, a sector which the Minister and Members contributing to this debate also wish to help.

The Minister has not convinced me, nor perhaps anybody else, that the course of action which he is set on in this respect is correct. Regarding the Cooley Distillers case, cited as an example of what should not be allowed to happen, the Minister suggests if Mr. Burrowes had not made the statement to the Competition Authority regarding a wish to close down the opposition, the authority would have decided otherwise. There is no evidence for this. A reading of the decision of the authority reveals that, apart from what Mr. Burrowes said, it would have come to the conclusion it did in any event. The statement by Mr. Burrowes perhaps made the decision more clear cut, but it would have had to conclude that the purpose of Irish Distillers Group Limited was anti-competitive, whether the company expressed it formally as such or not.

As the Cooley Distillers case was publicly decided and debated it tends to be the only example cited. However, there are many other examples in the past five to six years, such as the series of cases regarding the beef sector. While one is not expected to use the fateful words, it must be asserted that there is a very large beef processor who attempted to buy up most of his competitors. If he had been successful it could not have had any result other than a serious economic effect on the country, especially in respect of producers of cattle.

More than 80 per cent of the beef produced in this country must be sold abroad as only approximately 15 per cent goes to domestic consumption. If one person becomes totally dominant in the export of processed beef it has a huge effect on the price which cattle will make. There is almost nobody in the country who would not be affected by this, directly or indirectly.

It was clearly undesirable that a position would have arisen in which there was one totally dominant person on that side of the market who could have set prices. If there was no legislation in place that would have happened. Nobody seriously suggests that it should have been allowed to happen, yet even with the legislation in place it was difficult to prevent it as the person concerned was determined to make it happen if at all possible.

For that reason certain changes were made in the Competition Act, 1991 in order to make the Merger, Take-overs and Monopolies (Control) Act, 1978 more readily enforceable. It was never envisaged in 1978 that anybody would deliberately flout the law because it was then thought that the sanctions in the 1978 Act would have been sufficient to discourage them. As it turned out they were not sufficient and there was a deliberate flouting of the law. This situation was changed in 1991.

Under this Bill there is a danger of reverting to a situation similar to that which applied previously where the legislation would not apply to the vast majority of transactions. This would be wrong, because the legislation only applies to a small number of companies in any event. For example, the most I can recall was approximately 100 notified cases in a year, of which quite a high proportion were foreign and consequently of no great interest.

The Minister should therefore accept the principle of the amendments and I regret that he does not do so. Those of us who are urging this on him are doing so because of a conviction that some provisions along these lines are necessary and that the Bill as presently drafted is dangerous.

I am not persuaded by the arguments advanced by the Minister. He dismisses the Cooley Distillers case by suggesting that had Irish Distillers Group Limited been a bit smarter it could have persuaded the Competition Authority. However, that is not the point; the point is whether it was desirable that the take-over should take place. In this respect the issue is whether there should be scrutiny of such a proposal under the terms of the Mergers, Take-overs and Monopolies (Control) Act, 1978. The Minster is supporting the high thresholds which would exempt the issue from examination in either forum.

The Minister must therefore persuade the Committee that the take-over of Cooley Distillery plc was desirable and that if the take-over were to proceed under the legislation he now proposes it would do so without any question, and this would be a desirable outcome. Nobody, not even the Minister, is persuaded of this. I do not accept his argument that if Pernod Ricard had been a little smarter in the reasons they gave they would have saved the day and everybody would have been happy. Quite the contrary; everybody would have been unhappy. A broader perspective must be taken in the Mergers, Take-overs and Monopolies (Control) Act, 1978 if there is to be satisfaction that cases such as the Cooley Distillers case will not recur.

The Minster has not persuaded me that the enforcement option will be an effective vehicle for companies which come under it to avoid unfair pressure. It would be interesting to obtain expert opinion on this. Will the presence of enforcement powers in the hands of the Competition Authority mean that small companies under pressure will have fast and effective redress? I honestly do not think so. It will be difficult to prove predatory pricing to establish such a case convincingly. The Minister asked us to bear in mind the wider EU market of which we are a part, but we are also legislating for the non-trading sector. Interpreting that Mergers Act would allow the Competition Authority to recognise that some players in a wide market are clearly open to competitive pressures while others are not. These exemption thresholds do not make such refined distinctions.

The Minister agreed to take on board the spirit of the first amendments on the basis that the use of artificial constructs to evade the provisions of the legislation ought not be permitted. He asked for examples which we provided. In the case of Cooley, the Minister is saying that if the acquisition company had lied about or misrepresented its intentions, the Competition Authority would have made a different finding. Is it desirable that 35 people should be thrown out of work because it suits the corporatist requirements of a giant company acquiring a small company built on money secured through the BES scheme for which the State has foregone a great amount of tax? That is the issue. In recent years, we have seen a total swing around in industrial policy. Some people seem to believe that our whole future rests on the development of small enterprise, while 15 years ago we were pleading with the multinationals to rescue us from our industrial misery. I suspect that neither is the answer. Future unemployment is not going to be tackled by SMEs alone.

It seems to me to be an appalling suggestion that where you have a successful, indigenous, small enterprise using indigenous resources and creating jobs for 35 people, we should turn a blind eye to their being made unemployed and the product being absorbed into the product array of a giant like Pernod Ricard, and that we should let market forces have their say untrammelled.

Hear, hear.

It is essential that we have a mechanism to allow the Minister or an independent authority like the Competition Authority to intervene and deal with that situation. I do not know what the Minister's position is on the point raised by Deputy Bruton about whether merger responsibilities should be handed over to the Competition Authority or whether we should remove the Competition Authority entirely and leave it with the Minister's Department. That is a principal question which we should have some position on before we can deal with these amendments. One amendment before the Committee seeks to apply a yardstick of cumulative post-acquisition market share on the one hand, or an altering of turnover thresholds on the other. One or other of them is desirable and one could argue that a combination of both would be desirable because there are different situations. The question of market share would not necessarily be fair in every situation. To suggest that we pull back and say "let the devil take the hindmost and the big gobble up the small" is unacceptable. Were extra jobs created in Pernod Ricard as a result of the takeover of Irish Distillers? Like hell they were. Pernod Ricard had a clear distinctive corporative strategy.

By agreement, we said that we would conclude by 4 o'clock. At this stage I think we should adjourn until another day. I would like to thank everybody who contributed, including the Minister and his officials. Our next meeting on this legislation——

Are you putting amendment No. 3, Sir, if the debate on it has concluded?

I will have to allow the Minister some time to respond.

I have said everything that I have to say. I am not accepting the amendments. In the context of thresholds in the other area I am prepared to look at £10 million or £20 million and/or a market percentage share. I think there is an admissible principle there about a dominant position or a scale of that magnitude that either relates to the value of the turnover and assets and/or a percentage of the market share, whichever is the greater. There is validity in that criterion. However, I do not want to mislead Deputies. I am not proposing that I would reduce either the £10 million or £20 million thresholds. That is the only response I can give on the amendments. In relation to removing mergers from consideration under section 4, it is a key to the policy outlined in the Bill and I sorry that I have been unable to convince the Committee.

I do not understand the Minister.

In regard to the application of the thresholds elsewhere in other legislation, there is a general principle.

The Minister is talking about section 8.

Or elsewhere.

I think the Minister is referring to the one in section 8 and is saying that for the purposes of section 2 he would be prepared to make some alteration.

I think there is a validity — I will not go any further than this and I certainly do not want to mislead anybody — in saying that thresholds on their own are not the sole or exclusive measurement of the critical point at which reference should be made. Deputy O'Malley referred to the experience in others countries including Italy, France and Spain. I am certainly prepared to look at that without giving any undertaking or commitment. I can see the logic and desirability of it, but I would be misleading if I was in any way to indicate that I was accepting the thrust of the amendments, in so far as Deputies want to have lower thresholds included in section 4. I am not.

Before I put the amendment I want to make it perfectly clear that if a vote is called, it will be deferred until the next sitting day. We made a decision this morning that we would conclude at 4 o'clock. Is the amendment being pressed?

Rather than putting the question at 4 o'clock may I make a point to the Minister? We started off this morning with the Minister referring to a phone call he had had in relation to this question with the chairman of ISME, and that some meeting took place with some of his officials.

That is correct.

It was a fairly brief meeting and a phone call, I understand.

A phone call and a subsequent meeting on their submission.

They have now made a detailed submission. The Minister has listened very attentively to what has been said today by all members of the Committee. As we do not have to reach decisions this afternoon in relation to any aspect, and as his officials will undoubtedly be meeting ISME and others before our next deliberations on Committee Stage, I would ask him to consider carefully the points raised, without committing himself one way or the other at this stage. The points have been made and none of the amendments——

I have to interrupt you because we have exceeded our time. Is Deputy O'Malley pressing the amendment?.

Amendment put.

I think the question is lost.

I suggest that at our next meeting the vote on the amendment be taken.

Have you power under Standing Orders to postpone a division until our next meeting?

We decided today that we would conclude at 4 p.m. and I cannot change that.

It is 4.2 p.m. now.

Once it is past 4 p.m. I am within my rights to adjourn the meeting and if the Deputy wishes to contest that he should feel free to do so.

Is there a precedent for this, Chairman?

There are many precedents.

This is the most transparent piece of chicanery one could see.

I am glad the meeting is ending on a high note. It is a marked improvement on this morning.

When will we have the division? Will it be in October?

We are meeting at 2.30 p.m. next Tuesday to resume consideration of the Consumer Credit Bill. We can resume consideration of this Bill on Thursday if the committee so wishes.

I will be available at any time the committee decides to meet.

We have set aside next Tuesday and maybe Wednesday for the Consumer Credit Bill.

We will probably have the same problem then as we had today.

In addition to the Committee of Public Accounts, discussion on the Ethics in Public Office Bill is also scheduled for Thursday.

This committee must also consider the Casual Trading Bill.

This Bill must be brought back to the House in October. What is the reason for the mad dash? We should stand back from this legislation and seriously consider what is going on.

Chairman, you should follow your intended agenda rather than changing it.

My urgency arises from the concerns of Members about the processing of legislation which are expressed on a daily basis in the House. I took them seriously but I made a mistake and stand corrected. This concludes the business of the meeting.

The Select Committee adjourned at 4.5 p.m. until Tuesday, 19 July 1994.

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