Select Committee on Enterprise and Economic Strategy debate

Competition (Amendment) Bill, 1994: Committee Stage (Resumed).

Chairman

I welcome Members to the meeting of the select committee to consider the Competition (Amendment) Bill, 1994. In particular, I welcome the Minister and his officials. I suggest that we work until 1 p.m. at which stage we can decide whether to resume in the afternoon. With the co-operation of Members, perhaps we could complete the Bill by 1 p.m. and go our respective ways to prepare for the Presidential visit tomorrow.

At the last meeting at which this Bill was considered on 14 July 1994, the committee agreed section 1 and disposed of amendments Nos. 1 and 2 which proposed the insertion of two new sections before section 2. The committee had embarked on consideration of amendment No. 3 to section 2 in the name of Deputy O'Malley and had adjourned without making a decision on it. By reason of the reconstitution of the membership of the committee consequent on the change of Government last January, that amendment, along with all other amendments then outstanding, has lapsed. These amendments are deemed to have lapsed for practical reasons connected with the discharge of all former members of the committee. As a decision had been made on section 1 we will resume on section 2 to which Deputy O'Malley has retabled the amendment on which a decision was deferred. The Deputy may move his amendment again which is now No. 6 on the list; it was previously amendment No. 3.

In the interest of continuity and clarity in the reporting and recording of the proceedings of the committee the new amendments have been numbered so as to continue on a numerical sequence, that is starting with No. 3. From the last amendment previously disposed of by the committee, the amendments on the list dated 14 July 1994 should be disregarded.

Amendments Nos. 1 to 5, inclusive, to amendment No. 3 are related and amendments Nos. 4 and 1, 2 and 3 to No. 4 are also related. Therefore, amendments Nos. 3 and 1 to 5 thereto and amendments Nos. 4 and 1, 2 and 3 thereto may be taken together by agreement.

NEW SECTION.

Minister for Enterprise and Employment (Mr. R. Bruton)

I move amendment No. 3:

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

2.—(1) In this section—

‘agreement', ‘decision' and ‘concerted practice' mean, respectively, an agreement, decision and concerted practice of a kind described in section 4 (1) of the Principal Act;

‘certificate' means a certificate under section 4 (4) of the Principal Act;

‘licence' means a licence under section 4 (2) of the Principal Act.

(2) (a) An undertaking shall not—

(i) enter into, or implement, an agreement, or

(ii) make or implement a decision, or

(iii) engage in a concerted practice.

(b) An undertaking that contravenes this subsection shall be guilty of an offence.

(i) the defendant did not know, nor, in all the circumstances of the case, could the defendant be reasonably expected to have known, that the effect of the agreement, decision or concerted practice concerned would be the prevention, restriction or distortion of competition in trade alleged in the proceedings, or

(ii) at all material times a licence or certificate was in force in respect of the agreement, decision or concerted practice concerned and, in the case of a licence—

(I) the terms and conditions of the licence were at all material times being complied with by the defendant, or

(II) subject to subsection (3) of this section, in case any terms or conditions of the licence were not being so complied with—

(A) those terms or conditions are terms of conditions that had been amended, or inserted in the licence, under section 8 of the Principal Act,

(B) the defendant was complying with the terms and conditions of the licence immediately before the making of such amendments or insertions, and

(C) the defendant began to take, within 14 days after the date of publication, in accordance with the said section 8, of notice of the amendment or insertion of terms or conditions aforesaid, all reasonable steps for the purposes of complying with those terms or conditions and was proceeding with due expedition on the date on which the offence is alleged to have been committed with the completion of any step remaining for those purposes,

(iii) subject to subsections (3) and (4) of this section, in the case of an agreement, decision or concerted practice in respect of which a licence or certificate has been granted and such a licence has been revoked or suspended or, as the case may be, such a certificate has been revoked, the defendant began to take, within 14 days after—

(I) in the case of the revocation of a licence or certificate, the date of publication, in accordance with section 8 of the Principal Act, of notice of such revocation, or

(II) in the case of the suspension of a licence, the date of the order of the High Court or, as may be appropriate, the Supreme Court providing for such suspension,

all reasonable steps for the purposes of ensuring that any arrangements that had been made and which were necessary for the implementation of the agreement or decision or, as the case may be, which constituted the concerted practice were discontinued and was proceeding with due expedition on the date on which the offence is alleged to have been committed with the completion of any step remaining for those purposes.

(3) The defence provided for by subparagraph (ii) (II) or, as the case may be, subparagraph (iii) of subsection (2) (c) of this section shall not be available to a defendant if the date on which the offence concerned is alleged to have been committed is more than 2 months after the date of publication of the notice concerned referred to in subclause (C) of the said subparagraph (ii) (II) or, as the case may be, clause (I) of the said subparagraph (iii) or, where appropriate, the date of the order concerned referred to in clause (II) of the said subparagraph (iii).

(4) The defence provided for by subsection (2) (c) (iii) of this section shall not be available to a defendant the doing of any act or the making of any omission by whom constituted the grounds for the revocation of the licence or certificate concerned.

(5) (a) An undertaking that is a party to an agreement, decision or concerted practice in respect of which a licence is in force shall comply with the terms and conditions of the licence.

(b) An undertaking that contravenes this subsection shall be guilty of an offence.

(c) Subject to subsection (6) of this section, where, in proceedings for an offence under this subsection, the terms or conditions of the licence which it is alleged were not complied with are terms or conditions that had been amended, or inserted in the licence, under section 8 of the Principal Act, it shall be a good defence to prove that—

(i) the defendant was complying with the terms and conditions of the licence immediately before the making of such amendments or insertions, and

(ii) the defendant began to take within 14 days after the date of publication, in accordance with the said section 8, of notice of the amendment or insertion of terms or conditions aforesaid, all reasonable steps for the purposes of complying with those terms or conditions and was proceedings with due expedition on the date on which the offence is alleged to have been committed with the completion of any step remaining for those purposes.

(6) The defence provided for by subsection (5) of this section shall not be available to a defendant if the date on which the offence concerned is alleged to have been committed is more than 2 months after the date of publication of the notice concerned referred to in paragraph (c) (ii) of that subsection.

(7) (a) An undertaking that acts in a manner prohibited by section 5 (1) of the Principal Act or which contravenes an order under section 14 of that Act shall be guilty of an offence.

(b) In proceedings for an offence under this subsection (being an offence which consists of the doing of an act in a manner prohibited by section 5 (1) of the Principal Act), it shall be a good defence to prove that—

(i) the said act was done in compliance with the provisions of an order under section 14 of the said Act (‘the first-mentioned order'), or

(ii) subject to subsection (8) of this section, in case any of those provisions were not being complied with—

(I) those provisions are provisions that had been amended, or inserted in the first-mentioned order, by another order under the said section 14 (‘the second-mentioned order'),

(II) the defendant was complying with the provisions of the first-mentioned order immediately before the commencement of the second-mentioned order, and

(III) the defendant began to take, within 14 days after the commencement of the second-mentioned order, all reasonable steps for the purposes of complying with the provisions so amended or inserted and was proceeding with due expedition on the date on which the offence is alleged to have been committed with the completion of any step remaining for those purposes,

(iii) subject to subsection (8) of this section, in case an order under section 14 of the said Act prohibited the continuance of the act concerned except on conditions specified in that order and that order has been revoked by another order under the said section 14 (‘the second-mentioned order'), the defendant began to take, within 14 days after the commencement of the second-mentioned order, all reasonable steps for the purposes of discontinuing the act concerned and was proceeding with due expedition on the date on which the offence is alleged to have been committed with the completion of any step remaining for those purposes.

(c) Subject to subsection (8) of this section, where, in proceedings for an offence under this subsection (being an offence which consists of the contravention of an order under section 14 of the Principal Act (‘the first mentioned order')), the provisions of that order which it is alleged were not complied with are provisions that had been amended, or inserted in that order, by another order under the said section 14 (‘the second-mentioned order'), it shall be a good defence to prove that—

(i) the defendant was complying with the provisions of the first-mentioned order immediately before the commencement of the second-mentioned order, and

(ii) the defendant began to take, within 14 days after the commencement of the second-mentioned order, all reasonable steps for the purposes of complying with the provisions so amended or inserted and was proceeding with due expedition on the date on which the offence is alleged to have been committed with the completion of any step remaining for those purposes.

(8) The defence provided for by subparagraph (ii) or (iii) of paragraph (b), or, as the case may be, by paragraph (c), of subsection (7) of this section shall not be available to a defendant if the date on which the offence concerned is alleged to have been committed is more than 2 months after the commencement of the order concerned secondly referred to in the said subparagraph (ii) or (iii) or the said paragraph (c), as the case may be.

This amendment introduces a new element to the Bill relating to offences in respect of breaches of the rules of competition. It is in accord with the Programme for Government that fines should be imposed in this area. This measure moves beyond the provisions of existing legislation under which the Minister could only take action to have a declaration in respect of anti-competitive practices. This amendment provides for offences and penalties in respect of breaches of the rules of competition.

This section provides that an undertaking which contravenes sections 4 (1) or 5 (1) of the 1991 Act shall be guilty of an offence. Those sections deal with anti-competitive practices and abuses of dominant position, respectively. In addition, non-compliance with section 4 (2) of the Principal Act, the terms of a licence, or section 4 (4), the terms of a certificate, will constitute an offence. An undertaking means a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service. All agreements between undertakings which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, or in any part of the State, are prohibited and void. In particular, it shall be an offence for an undertaking to enter into or implement an agreement which has as its object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, or in any part of the State, contrary to section 4 (1) of the Competition Act, 1991; for an association of undertakings to make or implement a decision which has as its object or effect the prevention, restriction of distortion of competition in trade in any goods or services in the State, or in any part of the State, contrary to section 4 (1) of the Competition Act, 1991 or for undertakings to engage in concerted practice which has as its object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, or in any part of the State, contrary to section 4 (1) of the 1991 Act.

Prosecution for such an offence shall be initiated under one of two headings. Where, on summary conviction, an undertaking is found to be guilty it shall be liable to a fine not exceeding £1,500 or where the undertaking is an individual, a prison sentence not exceeding six months, plus the fine, or one or either of those punishments will be imposed. Such cases would be initiated in court by the Competition Authority. The second form of prosecution would constitute a conviction on indictment. On conviction on indictment a fine of £1 million or 10 per cent of the turnover of an undertaking, whichever is the greater, will be levied by the court. Where the undertaking is an individual provision is made for a fine, plus a prison term not exceeding two years, or either of those punishments. Such cases would be taken by the DPP on behalf of the State on foot of a file prepared by the Competition Authority. There is also provision for penalties for a continuing offence in regard to summary convictions where the undertaking shall be liable on conviction to a maximum fine of £1,500 per day for each day on which the offence is continued.

The 1991 Competition Act was a radical sea change from earlier legislation. It prohibits and voids anti-competitive action unless clearance is obtained by way of certificate or licence from the competition Authority. Actions in the civil courts provide for reliefs including damages or, for the abuse of a dominant position, exemplary damages.

This section now takes matters further by introducing the concept of criminal sanctions, stiff fines and imprisonment for such offences. The proposed fines are tough and are meant to be. The intention of this Bill is to introduce stiff fines and is in line with the Programme for Government. The proposed fines in other criminal sanctions, therefore, constitute a very strong deterrent in non-compliance with our competition legislation in addition to existing civil remedies. I recognise that a higher level of proof will be needed in criminal actions. Conviction on indictment must be obtained after a jury has been convinced beyond reasonable doubt that such an offence has taken place. It is acknowledged that proof beyond reasonable doubt will clearly be more onerous in comparison with establishing in a civil case on the balance of probability that an offence has taken place.

Mr. O'Malley

The amendments which the Minister put down, in particular the two major amendments — Nos. 3 and 4 — totally change the whole thrust of this Bill which is now completely different from that which was read a second time. It is totally different from the Bill considered by this committee last July. As well as two major amendments introducing an entirely new principle, the Minister proposes the deletion of three sections and the substantial deletion of almost all two others. The amendments are twice as long as the original Bill.

I agree with the principle of what the Minister is trying to do. I fought for it in committee the last day when we had awful difficulties. The then Chairman thought that this was just another Bill and he wanted it through by lunchtime. The Minister, in his different capacity, and I tried to explain to him that this was very important and difficult and could not be speedily legislated for. I am pleased that we did not get very far the last day. If we had the Minister would be heavily constrained in what he can do today. I say this to show I am in favour of what the Minister is doing and I will do all I can to help him to achieve that principle. However, I greatly fear that the way it is done will not achieve it. Unfortunately, it needs a lot of thought and consideration. In the last few days. I tried to get counsel to draft certain amendments to these amendments and they tell me that it would take a month as it entails a huge amount of study and comparison of what happens in other countries. It is not possible.

I got these amendments on Monday evening. I read and reread them and I see very considerable difficulties. I would have thought that the better course for the Minister, in view of the huge changes he made in the Bill, would be to withdraw the old Bill and introduce a new one.

You will be aware, Chairman, that Second Stage of the Courts and Court Officers Bill is before the House. It was originally introduced last year. The Government proposed certain changes in it, not anything remotely as radical as here, but they withdrew the old Bill and published a new one last week or the week before. I think they were right to do it that way. If they were right to do it in respect of the relatively few changes made in the Courts and Court Officers Bill it is necessary to do it here and to go back to a Second Reading with a new Bill.

I am not qualified to express a definitive view on this but one of the things that will arise, and which will have to be considered by the Clerk of the Dáil, is that you cannot go ahead in Committee with a Bill very different from the Bill as read for a second time. The commitee's remit is only to consider the Bill as read a second time. If the Minister proposes to take out more than half the Bill and to introduce new provisions on totally different topics that are twice as long as the original Bill, then you cannot argue in this committee that this is the Bill as read a second time. Perhaps the reason the problem was not adverted to up to now is that the matter is so complex it is very difficult to understand. The Clerk of the Dáil will have to give consideration to that point. It should be drawn to his attention. It is not very satisfactory that two and a half days after we got them we have to consider such huge, wide-ranging and fundamental amendments.

Amendments are normally moved because a Minister or Deputies think that what has been read a second time should be slightly fine tuned or honed in one direction or another, or that the wording might be improved. However, this is completely different. It is a totally new idea and concept. I agree with it but it will be awfully difficult to deal with. It is a pity that, unfortunately, the two main amendments come first. If the other, less fundamental, points could have been dealt with first it would have given us more time to prepare for it.

As it happens, Deputy Rabbitte was a Member of this committee and had very similar views on this Bill to myself. He wanted major changes in the Bill as it appeared the last time. He made a speech last June at a seminar in Trinity on competition policy and law where he indicated the general nature or thrust of the amendments that the Minister is now proposing. His speech at that time was considered by The Competition Journal which specialises in these matters. It does not have a large circulation but is avidly read by those concerned with these matters. A series of three articles were published by that journal last Friday, by a strange coincidence. At that time the authors of the articles did not have the amendments before them because they did not become publicly available until this week but they were working on the basis of what the Minister of State, Deputy Rabbitte, had said.

Because the amendments are in line with what Deputy Rabbitte said, I think the conclusions that the people concerned draw are valid. In particular I would like to draw the attention of the Committee and the Minister to an article by Deputy Michael McDowell written in his capacity as a senior counsel. The editor says in the journal that he asked him, a somebody who had been involved in a great many criminal cases, to consider it. It behoves all of us who are concerned about this matter to read this article and to take it on board because it shows very clearly what the pitfalls are. There is nothing in it which is invalidated by the publication of the amendments because they are on the lines which he had expected arising out of what Deputy Rabbitte said during the summer.

The difficulties are enormous and will have to be taken on board. There is no point in legislating on these lines if we never convict anybody and if the offences are too vague. The offences are enormously vague. What becomes an offence under this section is the civil prohibition in the 1991 Act.

Criminal law, under which one tries to convict someone before a jury, is different from civil law. One cannot say, for example — to take an analogy — that the tort of negligence shall become a criminal offence as the tort of negligence is too vague a concept and one cannot criminalise it. If one does and the Director of Public Prosecutions tries to prosecute someone before a jury, the people defending that person will ask how can a jury convict anyone of something that is as vague as that and they will not do so. It is well known that it is extremely difficult to secure convictions in this field. The United Kingdom authorities which have made every effort to get at corporate malpractices have a long list of failures. This is the subject of much comment in Britain, but the law there is far tighter than what is proposed here.

I wish to refer briefly to some of the matters involved. Deputy McDowell stated that one cannot criminalise all anti-competitive agreements or practices, but that is what is proposed here. He argues that it should be possible, if modern procedures, rules of evidence and evidential presumptions are introduced, to simplify serious offences of price fixing, bid rigging or market sharing into a form that can easily be prosecuted and understood by a jury and the public. He believes that unless this is done we are only wasting our time. I do not want to see that happen and I am sure the Minister does not either. We will have to think about the matter. The two and a half days that we have had are not adequate.

One of the difficulties is that criminal jurisdiction will be exercised here in the Circuit Criminal Court. It could take up to 12 months to process a case such as this. Is the entire administration of justice in a circuit — outside Dublin a Circuit comprises three or four counties — to be held up for 12 months and is nothing else to be done because a case such as this is being heard? Deputy McDowell points out that if a prosecution is taken against someone in Kilkenny the entire south eastern circuit closes down. Jurisdiction will have to be given to the High Court. That is one example which is easily rectified, but there are many others.

There has to be a specific criminal offence, one cannot have a vague offence, such as anti-competitive practices. Criminal offences were specified in the restrictive practices code and, in particular, the 1972 Act. Under that Act the offence was specific, declared as such by the Minister by order. These included, for example, under cost selling. One can produce evidence to show that a shopkeeper bought a particular item for X pence and sold it for X minus two pence, but a jury cannot understand something as vague as anti-competitive practices or bid rigging or price fixing. It has to be alleged that specific offences were committed and shown that the law was breached.

Another matter which arises is that in any country where this type of law is enforced there is a power of arrest and to interrogate suspects. Without this power it is almost impossible to secure a conviction. There will be no power of arrest under this Bill. It is not being assumed because the maximum penalty is two years. Under the Criminal Justice Act there has to be a penalty of five years before a general power of arrest can be granted. Without this power and the power to interrogate the possibility of a successful prosecution is negligible.

Another difficulty is that rules of evidence would have to be enacted to allow the contents of documents and computer records found in the possession of or under the control of a company or its advisers to be admissable in evidence against the defendant. It is not proposed to do this, however. One can produce all the documents one likes and the defendant or his counsel will state that it has nothing to do with him, that he did not know about it and the onus is on the State to prove that he did. It is impossible to do this. There should be a rebuttable presumption against those in control of a company that they authorised proven anti-competitive behaviour. This is provided for in the criminal law in other jurisdictions. It is unworkable without it.

There will have to be provision for the admissibility of expert evidence from accountants and analysts to assist the jury with interpreting records subject to the right of the defence to contradict them, but it is not propsoed to do this. While it is possible to call expert witnesses to give evidence in civil cases of this type there is no provision in Irish criminal law under which an economist or accountant can be called to give expert opinion in a matter such as this. There is no provision in Irish criminal law to call expert witnesses in a matter such as this.

There is no provision in the Bill for dawn raids. In other countries convictions only arise out of such raids. The dawn raids here were carried out under European Union law, not Irish law. Aer Lingus, much to its chagrin, and a number of other companies have been raided. Without the evidence gained in these raids it would be impossible to even contemplate mounting a prosecution.

Under sections 20 and 21 of the 1991 Act the Minister's authorised officer may, for the purposes of that Act, carry out a raid to search for documents, but this does not relate to criminal jurisdiction. What he may discover for the purposes of a civil case is not admissible in a criminal trial. Proper powers of entry and search have to be provided for. Furthermore, because this is not considered to be a felony third parties are under no obligation to report these matters. The system is unworkable as a consequence.

The reason I have spoken at some length is that the difficulties are huge, but the principle is correct. I suggest that the committee should have more time to consider the matter. The Bill has been fundamentally changed in the right direction, but it is hugely complex. I want to be supportive of the Minister but I want to see the Bill enacted in a way that will work. There is very deep concern by everybody involved in competition policy or competition law that the Bill as it stands will not work. We are all anxious that it be given the opportunity to work. I am not blaming people for this position. It is unfamiliar in Irish law. It is unusual and particularly difficult and that is why we need time to consider it.

Chairman

As Deputy O'Malley was a Minister in the Department concerned I must take careful consideration of the very important procedural points he raised. With the committee's agreement, rather than consult on this matter with the Clerk of the Dáil perhaps it would be more appropriate to consult with the Committee on Procedure and Privileges through the office of the Ceann Comhairle. The Deputy has raised a very fundamental issue which could have a bearing not alone on the work of this committee but of other select committees. I will proceed with the business until lunch time and, if we decide to adjourn for a further week or so, in the meantime I will ask that the matter be considered by the Committee on Procedure and Privileges. Have I the agreement of Members on that procedure?

Mrs. O'Rourke

Are we to take it that we will not address those amendments? If we take the Chairman's wise advice and refer the matter to the Committee on Procedure and Privileges, how will we deal with the amendments of the Minister and Deputy O'Malley?

Chairman

The Minister has been listening very patiently.

Mrs. O'Rourke

I wish to be helpful. As the author of the 1991 Bill, Deputy O'Malley's opinions have great validity. I was a member of the Cabinet at the time the Deputy put forward his proposals and I took particular interest in them. I was not the Minister in charge of the Bill; Deputy Quinn oversaw it through Second Stage and there was one day's truncated discussion of Committee Stage.

I and my party agree with the need for penalties but we do not agree the method as proposed will work. I read all the documentation to which Deputy O'Malley referred and it seems that under existing rules of evidence in the civil courts the procedures as outlined by the Minister will not work. While the thrust of the proposals in terms of heavy fines is admirable, there is no point passing legislation that will not be effective. Did extensive consultation take place on this matter — it appears not — between the Departments of Enterprise and Employment and Justice under whose remit is administration of the courts? If that was done this matter would surely have come to light.

The Minister properly proposes to establish, under the admirable chairmanship of John Cooke, senior counsel, an independent competition and mergers review group with broad terms of reference to allow the many complex issues involved to be considered more fully. While not wishing to be destructive or to score points, it would be putting the cart before the horse to discuss amendments to a Bill which will then be considered by an independent review group who may say we have done many wrong things in the passing of the Bill. One may say that is hypothetical, but it would be more appropriate to first set up the review group who would have, say, six months to consider the 1991 legislation and the proposed amendments to this legislation as well as previous mergers, monopolies and restrictive practices legislation relating to these matters. It could then make a detailed report which would lead to the introduction of a consolidation Bill, as requested by Deputy Bruton in Opposition.

Under the Programme for Government the Minister is committed to giving proper enforcement powers to the Competition Authority — there are various amendments to that. I would welcome such a measure. I suggest that the enforcement officer be separate and distinct from members of the board. The Minister should first set up the independent review group, give it all the data and request it to report to us with proper recommendations. The amendments we are considering will not achieve the desired result. I do not wish to be obstructionist or to delay the committee, but I ask the Minister to agree to my request.

Chairman

Important questions have been raised and I know that the Minister has taken careful note of them. Perhaps he will give us the benefit of his advice before we proceed further.

Mr. R. Bruton

It is wrong to suggest that this Bill is entirely different from the original Bill. That Bill dealt with the issue of enforcement and with mergers — considerable concern was expressed about the approach adopted to mergers. The central issue of concern in terms of enforcement was whether, in seeking to enforce competition law, we should go beyond the simple powers of enforcement by the Authority and introduce the possibility of criminal offences. That would be very much in line with the debate on Second Stage on enforceability of the competition Act.

On the suggestion that the amendments are long and that some provisions are being withdrawn, the length of amendments is immaterial. The withdrawal of amendments in respect of mergers reflects the considerable unease at the committee on the last occasion that the provisions relating to mergers were to be exempted from the competition Act and the only control would be under the mergers Act, which provides that only if the company being acquired is small would there be no control. People were concerned about that because they feared that large companies would be systematically in a position to absorb smaller companies without oversight. In accordance with the Programme for Government I consulted the social partners on that aspect but there is a lack of consensus on how to deal with that matter. I have decided that an independent review is required to get the best balance. That is the reason that element was withdrawn and it is very much in accord with the wishes of the committee at that time.

Deputy O'Malley raised the issue as to whether the criminal offences are too vague. They directly follow on from the offences set out as anti-competitive agreements in section 4 of the 1991 Bill. They refer specifically to directly or indirectly fixing purchase or selling prices or any other trading conditions, limiting or controlling production markets, technical development or investment, sharing markets or sources of supply, applying dissimilar conditions to equivalent transactions with other trading parties thereby placing them at a competitive disadvantage and making the conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. Specific types of offences are envisaged under that provision.

Presumably Deputy O'Malley is suggesting that what price fixing will amount to should be defined specifically. It is not practicable to define in legislation that level of detail at this point. A sensible way to proceed is to provide a deterrent. At the end of the day it will be up to the courts to decide on the severity of the offence. The Bill as it stands clearly sets out the nature of those offences and, as is normal in court hearings, the courts will have to assess the degree to which the law has been broken in relation to fixing prices. Deputy O'Malley's suggestions regarding concerted prices are not substantially different from those he mentioned of price fixing, bid rigging and market sharing. They are all envisaged. At the end of the day a court will have to decide whether the evidence indicates that a serious criminal offence has been committed.

The other issues raised by Deputy O'Malley concern the pursuit of criminal sanctions not only under competition law but across a range of legislation. There is a burden in providing proof in many cases. In the case of company law and criminal offences under it and under competition law and other offences, we need to examine and reform our court practices and study the rules of admissibility of evidence. I have no difficulty with that and would be keen to see it addressed. To suggest that it can be addressed solely in the context of competition legislation is expecting more than is reasonable. These are issues that must be dealt with because of the changing nature of crime in our society. That issue must be addressed by the Department of Justice and we would co-operate with it, but it should not hold back the inclusion of a provision of a serious deterrent in competition law that breaches of competition can be regarded as criminal and are so in certain circumstances. We should not hold back on that while the courts are undertaking reforms needed not solely for the Competition Act but many other types of legislation.

Mrs. O'Rourke

The Minister did not answer my two queries. I asked him why the Bill should be put before the independent competition and mergers review group and if it would not be better for it to make recommendations on what should be provided in the legislation. I also asked him if the Department of Enterprise and Employment had consulted widely with the Department of Justice on its proposed amendments as it appears it has not.

Mr. R. Bruton

We have consulted with all Departments including the Attorney General's office which helped us to draft the Bill. The reason this issue is not being brought before the mergers and competition review group is that we are trying to introduce enforcement provisions. There will be refinements to the legislation subsequently and consolidation work will be needed in respect of mergers legislation, but there is broad agreement that enforcement provisions are needed. No one doubts or questions that. At the outset the lack of such provisions represented a gap in the legislation and we should proceed to provide enforcement powers which would include the possibility that in serious cases enforcement provisions would enable cases to be passed to the DPP and the pursuit of a criminal course of action. First we need to deal with the enforcement issue on which there is considerable agreement and then proceed to deal with the wider review of competition law. Such a review would consider the precision of the existing law and might recommend refinements in the light of the experience of enforcement powers we have provided. As a result of the mergers review group, we may be in a position to further refine our approach in the area of enforcement.

It is important that we accept the principle of enforcement and give the Competition Authority powers in relation to enforcement. As thinking develops in the competition area, we will refine the competition law. To delete enforcement provisions from competition law pending later refinements would be a mistake. We have competition law. Unlike any other European country it does not include enforcement action on the part of the Authority nor does it provide for the investigation of third party complaints or the investigation of complaints at the Authority's initiative. Those are defects in the legislation with which no one argues. Therefore, we should include such provisions.

Mr. O'Malley

The Minister when replying to Deputy O'Rourke and I said he did not agree with what I said about the vagueness of the offences. He said the offences were set out in section 4 (1) of the 1991 Act. If he refers to subsection (1) he will see a list of practices declared prohibitive and void which are civil breaches of the law that would lead to an action for damages by an injured party. There is nothing in section 4 of the 1991 Act about offences. These are not offences, they are declared to be breaches of civil rights in the same way that if I were to drive a motor car negligently, knock down and injure a person, I would have breached that person's right and he or she would have a right to claim damages against me. That is what is provided in section 4 of the 1991 Act.

As in the example I gave earlier, the Oireachtas cannot claim it deplores civil negligence, but believes that civil remedies are not strong enough to deter negligence and, therefore, will criminalise the civil tort of negligence. Section 4 (1) is a civil tort giving rise to a civil action for damages. Without changing any of the definitions of the tort which are expressed in very general terms, the Minister now proposes to say that what was a tort in 1991 is now a criminal offence.

I was responsible for the 1991 Act to which I gave much thought. It was a very difficult Bill as we took out parts, inserted other parts, drafted and redrafted it. I knew it was not satisfactory and I was unhappy with it, but it was the best that could be done at the time. I know the thinking behind it and its meaning. It was never envisaged that section 4 could possibly be the foundation for criminal sanctions. It was purely a civil remedy section. Unfortunately, it has not been used as much as one would have wished and we all know the reasons.

If you want to change it you can do two distinct things. You can give the Competition Authority, or some other public body of that kind, but preferably the Authority, the right to bring an action for damages in the public interest without having to prove specific damage. The alternative way of public enforcement is through criminal proceedings but you cannot use the law or the legislation that was built up and passed for civil purposes to ground a criminal prosecution because all the rights in a criminal prosecution go to the defendant. Anyone defending a person charged with something as vague as entering into a concerted practice which had as its object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, would say that no jury could convict them because it is vague and subjective from the criminal point of view. There is no difficulty with that in the civil side but they are two totally different matters. No jury would ever be convinced that it should put somebody in jail for something so vague.

The Minister has the alternative of a public civil enforcement, but he does not seem to opt for that, or criminal proceedings. I think both forms should be used. In the event of a criminal form of enforcement you would have to draw up a criminal statute on which to base it. You cannot use a civil statute, as the 1991 Act was, to base a criminal prosecution. With respect to the Minister, he is incorrect when he says that the offences are set out in section 4(1) of the 1991 Act. They are not, they are a list of civil torts, not offences.

Mr. R. Bruton

This is an area where we have to agree to differ. I have taken advice from the Attorney General's office who have advised that these are specific criminal offences and that one can take criminal action on that basis. Of course, the burden of proof is a great deal more onerous where you have to prove beyond reasonable doubt, unlike the proof on the balance of probabilities that would apply in a civil case. The various items set out in section 4 (1) as being prohibited and void will become offences under this amendment so that we will have offences based on those same activities and the burden of proof will be more onerous. I suppose the Deputy is correct in saying it will be extremely difficult to take and win criminal cases. Its primary role will be as a deterrent. This is not the first time we have had criminal offences under this type of legislation. The Deputy was in the Department at times when there were criminal sanctions under various elements of restrictive practices legislation. I understand that criminal actions were not taken. Nonetheless a criminal offence is created under this legislation.

The review group in its work may define more precisely certain offences and elements of our competition law. As the Deputy said, certain activities are worthy of criminal sanctions in certain instances, where the case is sufficiently serious. The real difficulty will be in the burden of proof which has always been the deterrent in taking criminal action. The Deputy raised the wider issue of the burden of proof in a criminal case which will always be difficult. We are creating offences under this legislation. The nature of the offences are clear and it is up to the courts and the Director of Public Prosecutions to decide when they look at a particular file and what activity has taken place whether there is a basis for a criminal action. In the generality of cases I would not envisage criminal action being proceeded with. Essentially the enforcement powers of the Authority would be taken under the civil provisions and on the back of those civil provisions damaged or injured parties would be able to pursue their own damages and exemplary damages.

The main objective of the legislation we are seeking to enact will be to ensure enforcement cases are taken through the civil machinery. As in the restrictive practices legislation there is a category of activities which would be regarded as sufficiently serious and, if the evidence was satisfactory from the point of view of the Director of Public Prosecutions, a criminal action would be taken. It is not for us to seek to spell out in law every element of that. At the end of the day the Director of Public Prosecutions will, as the Attorney General has advised me, examine the offences created and assess whether he has the basis for a criminal case. That is the route it will take.

Mrs. O'Rourke

This debate is very helpful in setting the scene. By profession the Minister is an economist who likes ordered arrangements, bottom lines and so on. I put it to the Minister, not out of a sense of political opposition, that he mentioned the review group three times in his reply and said it could examine and change the legislation. The Minister has acknowledged openly that the review group will examine what we are doing and make changes to it. Why have it changed immediately? In pursuit of the Programme for Government, under which all Government Ministers have to put their house in order, the teeth i.e. the enforcement section of the Bill must be implemented ahead of the Minister's more rational suggestion from the independent competition and mergers review group. That is the ordered side of the Minister, deciding and examining the plethora of Bills and recommendations before him. The other side which is the political side asks where are the enforcement procedures. In that mix what has fared worse is proper policy making and proper legislation. That will only come about if we have the results of the review group. We can then look at the legislation and decide on a consolidated Bill with a proper enforcement regime and techniques which can be implemented.

The Deputy should permit the Minister conclude his remarks.

Mr. R. Bruton

There are two issues the merger review group must examine. It will examine mergers and the whole issue that was hotly debated here on the last occasion and how that will operate. That raises many thorny issues such as examining market share and relevant markets in which a merger is occurring and many difficult technical issues will be raised also. The other issue it will obviously examine is the experience in light of the competition Bill and the enforcement powers we are now giving it. The review group will report on an interim basis on the mergers issue and on the powers we are giving the Authority and it will indicate whether additional measures need to be taken.

I do not accept the suggestion that we should step back from enforcement, with which we all agree. We have perfectly robust legislation and the proposed criminal offence has been considered by the legal machinery of the State and approved as adequate. We should go ahead with the legislation and if the mergers review group comes up with proposals on how we can refine enforcement in the future I will be happy to come back to the House with those in the same way as I would with refinements in respect of merger control.

Mr. O'Malley

That is the same as admitting you are wrong but you will plough on regardless.

Chairman

We have had a very interesting discussion and I know Members are trying to be helpful and that the Minister appreciates that. Having regard to the motion before the House. I propose that we adjourn until 18 or 19 December, depending on the position in regard to accommodation and subject to the Minister being available. I thank the Members, the Minister and his officials for attending today's meeting.

The Select Committee adjourned at 12.10 p.m.

Select Committee on Enterprise and Economic Strategy debate - Thursday, 30 Nov 1995

Competition (Amendment) Bill, 1994: Committee Stage (Resumed).

Select Committee on Enterprise and Economic Strategy debate -
Thursday, 30 Nov 1995