No apologies have been received. We are taking Committee Stage of the Competition (Amendment) Bill 2011. I welcome the Minister and his officials. It is proposed to sit until 6 p.m, if the debate has not previously concluded. Is that agreed? Agreed. A grouping list has been circulated.
Competition (Amendment) Bill 2011: Committee Stage.
Section 1 agreed to.
SECTION 2
I move amendment No. 1:
In page 4, line 8, to delete "and" and substitute the following:
"(g) in subsection (10), by the substitution of “section 14 or section 14A” for “section 14”, and”.
The amendment inserts a reference to a new section 14A in section 8(10) of the 2002 Act. It has the effect of providing that civil proceedings may be brought by the Competition Authority under section 14A, irrespective of whether a criminal prosecution has been brought for an offence under sections 6 or 7.
My understanding of the reason behind the amendment is that, in the 2002 Act, public and private proceedings were all in the one section and the amendment is necessary because they have been divided out. That makes sense.
Amendment agreed to.
I move amendment No. 2:
In page 4, paragraph (g), line 9, to delete “the insertion” and substitute “by the insertion”.
This is a technical amendment to insert the word "by".
Amendment agreed to.
Question proposed: "That section 2, as amended, stand part of the Bill".
As I observed on Second Stage, the increase in maximum fines from €4 million to €5 million and the increase in maximum sentence from five to ten years will make no difference in practice, not least because there have only been 32 prosecutions for hardcore anti-competitive practices. Nobody has served a day in jail as a result. There have been a number of fines and all the sentences have been suspended. Are class A and class E fines defined in the legislation?
They derive from the Fines Act 2010 and they reflect a grading of seriousness.
What are the minimum and maximum-----
Class E is €500 and class A is €5,000.
My understanding is class A is not less than €3,000 and not more than €5,000, and class E is not less than €300 and not more than €500. Is that correct?
Class A is between €4,000 and €5,000.
Is class E between €400 and €500?
Between €300 and €500.
In the new section 11A the Minister is introducing a provision whereby the Probation of Offenders Act 1907 will not apply to a conviction under the Competition Acts. There are two types of offence. There are hardcore offences and offences that are not hardcore. I do not envisage the Probation of Offenders Act applying to hardcore offences. The non-application of the Probation of Offenders Act means that the offence will be listed and will be on a person's record.
To clarify, on what section is Deputy O'Dea speaking?
I am still on section 2, paragraph (g). I refer to the new section 11A which is being inserted. The Competition Authority indicated that there have not been any prosecutions for non-hardcore offences. It more or less says it does not intend to bring any prosecutions. Therefore, the provision would seem to be largely irrelevant. In the event of a conviction, hardcore offences will not incur the Probation of Offenders Act. If the Competition Authority is to be believed, it would appear that there would be no other types of conviction because it believes that a civil action for enforcement by itself is the appropriate remedy.
The Minister's colleague, the Minister for Justice and Equality, Deputy Shatter, is shortly to introduce legislation on excising the criminal record of a person with a certain type of conviction after a certain period. How will that fit in with this provision?
It is true that no custodial sentence has emerged from prosecution under the Acts but there has been a general consensus that we need to strengthen competition law. Part of that is to introduce new deterrents in the way of fines but there are also other measures such as requiring that the costs would be borne by a person convicted of an offence and changing the treatment in regard to the Probation of Offenders Act. They are deliberately introduced as deterrent measures. I accept it is difficult to secure convictions in competition cases. That situation is not altered, but the legislation will make it easier to secure a conviction and will create a greater deterrent.
We are separating out for clarity the private enforcement from the public enforcement. Where a conviction has been secured, we are allowing a civil action to be pursued on foot of it. They are a series of measures designed to reflect the need that has long been articulated by all sides of the House that competition law needs to be taken more seriously. It does not change the burden of proof obligation required to achieve a conviction. As Deputy O'Dea is aware, there was a debate on whether one could pursue civil actions in respect of what are criminal offences; the legal advice was categorical, that one could not do that. One is working within what is permissible under the Constitution.
My understanding is that the probation will stand. It will not be excised by subsequent legislation by the Minister for Justice and Equality. I will get a categorical answer to the question.
I would welcome detail on the point.
A number of new Deputies, including me, are not fully familiar with Committee Stage of a Bill and I ask other Members to bear with us. Will we get a chance later to deal with a number of issues that are not dealt with in the sections or should we raise them now?
We will deal with each amendment. When we have dealt with the amendments we can discuss the section in general and add in other points to the debate. Prior to the conclusion of debate on the Bill other matters can be raised, including a general comment. There is no problem in the Deputy raising issues on each section, should he wish.
From my perspective, this is a very important Bill, given that not providing the Competition Authority with the necessary tools makes a significant difference in terms of reducing the competitiveness of the State. It costs the consumer a significant amount and in many cases the State is a consumer and is therefore affected. It also puts competitors out of business unfairly.
On the amendment, we argued strongly for civil fines to be introduced. How would that work? Is there any way we could discuss how civil fines, as provided for in the amendment, would function?
Civil fines are not being introduced. The civil action would be by way of injunction that the Competition Authority could seek. I do not wish to paraphrase legal advice, but the difficulty with civil fines is that when something is created that has a criminal standard of proof and is deemed a serious criminal offence, if an attempt is made to get a person convicted on what is a criminal offence under a lesser burden of proof, namely, on the balance of probability, that person's constitutional rights are being undermined. It has been defined as a serious offence for which there are criminal implications for someone who breaches the law and because it is deemed a criminal offence, the test of proof being beyond reasonable doubt has to be applied because that is the test to which a citizen is entitled. When an offence of that nature has been created it is not then possible to attempt to prosecute a person by a back-door mechanism that requires a much lower burden of proof. That is my understanding of the reason why the Constitution does not allow us to apply civil fines.
Amendments on the matter were tabled by Deputy O'Dea.
On civil fines.
Yes.
There is a difference of opinion on civil fines. Some of the retail associations have a different opinion on how civil fines could be implemented under the Constitution.
There has been considerable discussion about this matter. It has been argued to and fro but ultimately, the Government must rely on the advice of the Attorney General. It is not just this Attorney General. Over the years Attorneys General have stoutly defended the principle. We do not have civil fines in any part of our Statute Book other than the revenue area where civil fines are permitted in legislation. The advice I have received from the Attorney General is that it is not possible to apply civil fines in cases of this nature where criminal offences have been created for the very action we are tackling.
I do not wish to labour the point but would it be possible for the advice of the Attorney General to be published so that we could consider it and gain a better understanding?
It is not my understanding that the advice of the Attorney General is ever published. I can describe it to the best of my ability, which I am doing, and I am sure my officials can provide me with more detailed advice but in a nutshell, that once an offence has been created that is criminal in nature and the State has said the gravity of this matter is such that it is a crime and the punishments include imprisonment and fines of such a level, the citizen then has a right under the Constitution to be tried according to the principles applying to a criminal case. It is covered by Article 38.1 of the Constitution. Given that, the State is not allowed to try to undermine the standard of proof that is required. That is regarded as being in breach of the rights of an individual under Article 38.1 of the Constitution.
Question put and agreed to.
SECTION 3
Amendments Nos. 3 and 5 will be taken together.
I move amendment No. 3:
In page 4, between lines 25 and 26, to insert the following:
"(a) the substitution, in subsection (1), of “prohibited under section 4 or 5, or by Article 101 or 102 of the Treaty on the Functioning of the European Union,” for “prohibited under section 4 or 5”,”.
The purpose of this amendment is to clarify that a private litigant has a right of action against anti-competitive behaviour prohibited by Article 101 or 102 of the Treaty on the Functioning of the European Union in addition to anti-competitive behaviour prohibited by section 4 and section 5 of the principal Act. While a private litigant has always had such a right on action, the inclusion of a specific reference to the treaty articles in section 14 provides additional certainty. Amendment No. 5 is consequential.
Is there anything that can be done in the case of a private litigant who takes a case against someone who the private litigant believes to be engaged in unfair competition and to allow for that to be heard within a reasonable timescale? A private litigant can bring a court case and may be involved in it for 20 years before a ruling is given in the High Court, never mind the continuation to the Supreme Court. That is an unreasonable length of time for an individual to pursue something. Is there a method we can include in this legislation to guarantee that it will happen within a reasonable period of time? This will bring satisfaction to the litigant and resolve the unfair competition practice.
I accept that this is a difficulty. In section 5, we introduced a provision whereby the Competition Authority or CER can establish a criminal case against an undertaking and the civil action for damages thereafter does not have to prove the case again for the criminal offence. Shortening the time it takes to take the case is a matter for the rules of the court rather than any legislative provision. Our legislative provisions are trying to make it easier for people to get damages awarded where the case has been established by the authority.
I take the Minister's point. Certain court cases take 15 or 20 years before they are resolved. Without naming names, court cases seem to have been elevated through the system to be taken in the same year. It seems to me that allowing private litigation and not allowing it to happen in a reasonable time are mutually exclusive and this neuters the private litigant opportunity.
I do not think this can be provided for in legislation. The courts attempt to proceed with cases with the best speed possible but if there is complicated documentation to be assembled, the courts will allow both sides time to put together the material. It is not something we can provide for in legislation because each case will be different and the complexity of the case will determine the length of time.
A period of 15 years is not required to determine complexity in any case.
I do not think we can provide time limits in legislation and the courts must decide what is fair to litigants in assembling a case and presenting it. We cannot pre-empt this through legislation.
Amendment agreed to.
Amendments Nos. 4 and 10 are related and will be discussed together.
I move amendment No. 4:
In page 4, between lines 33 and 34, to insert the following:
"(d) the substitution, in paragraph (a) of subsection (5), of "declaration (including a declaration in respect of a contravention of section 4 or 5 or Article 101 or 102 of the Treaty on the Functioning of the European Union that has ceased)" for "declaration",".
These amendments provide a declaration to the effect that practices prohibited by section 4 or 5 of the 2002 Act or Article 101 or 102 of the treaty may be made by the court in respect of a practice that has ceased. Thus, a private litigant aggrieved by a ceased practice will be able to rely on the doctrine of res judicata, as provided for by section 5.
Amendment agreed to.
I move amendment No. 5:
In page 4, line 39, to delete "section 5" and substitute the following:
"section 5, or Article 102 of the Treaty on the Functioning of the European Union".
Amendment agreed to.
Amendments Nos. 6 and 11 are related and may be discussed together.
I move amendment No. 6:
In page 4, lines 40 to 45, to delete all words from and including "may," in line 40, down to and including "purpose of—" in line 45 and in page 5, to delete lines 1 to 5 and substitute the following:
"may—
(a) order one or all of the following—
(i) that the undertaking shall discontinue the abuse, or
(ii) that the undertaking shall adopt such measures for the purpose of securing an adjustment of that dominant position, as may be specified in the order (including measures consisting of the sale of assets of the undertaking) within such period as may be so specified, or
(b) in civil proceedings, impose a liability on that undertaking for a fine not exceeding a class A fine.",".
This is an attempt to deal with civil fines. The difficulty is that there are two types of anti competitive activities, hardcore and non-hardcore. There are civil and criminal sanctions for each and prosecutions can take place for hardcore offences. There are also civil sanctions if the Competition Authority wants to go down that road. There is a particular difficulty with regard to less serious, non-hardcore, anti-competitive offences. By its own admission, the Competition Authority has never proceeded with a criminal prosecution for a non-hardcore offence, nor has it ever referred a non-hardcore offence to the DPP. The reason is set out in a report by the Competition Authority, where it says that these are complex matters and that in criminal cases an offence must be proved beyond reasonable doubt.
Non-hardcore offences are less serious, by definition, and the Competition Authority has taken the view that it is more sensible to go the civil route. That is what the Competition Authority has said it will continue to do. Unfortunately, if the case is won, the only remedies are an injunction to stop the activity in question or a declaration that the activity is unlawful. There is no provision for damages or for the person conducting the anti-competitive activity to be fined. The Competition Authority is not suggesting that it should have the authority, as a non-judicial body, to impose a fine but that it would have the right to recommend to the court that there should be a fine and that the court should, if appropriate, apply the fine. The Competition Authority is the expert in this area and produced a report published on 29 September which states:
But criminal prosecution is neither appropriate nor practical for non-hardcore infringements and the Authority does not, in practice, pursue criminal prosecutions in such cases. The only other remedies available to the Authority in such cases are to seek a declaration (i.e., a court ruling that a particular arrangement or behaviour is unlawful) or an injunction (i.e., a court ruling requiring a particular arrangement or behaviour to be terminated). Current legislation does not provide for any form of civil pecuniary penalty or sanction to be imposed on the undertaking(s) involved in such non-hardcore infringements. The Authority takes the view that the absence of such sanctions is a serious weakness in the Irish competition law enforcement regime. It believes that this weakness needs to be addressed by the enactment of appropriate amending legislation to provide for the type of civil fines for competition law infringements that exist in many other jurisdictions...
However, it is notable that since the enactment of the 2002 Act, the Authority has not instituted summary criminal prosecutions in cases involving non-hardcore infringements of the prohibitions in the Act, nor has it referred any such cases to the DPP for prosecution on indictment. (It has instead instituted civil proceedings seeking declarations or injunctions in respect of non-hardcore infringements and in some cases it has been successful in obtaining such remedies. But the absence of a provision for civil fines in the legislation means that, in such cases, the courts were (and remain) unable to impose any sanction on the parties for their involvement in the illegal activity concerned.)
In other words, the Competition Authority will take the case. If it wins it will get a declaration or an injunction to stop the behaviour that has been found to be infringing the law, but the person who was engaging in the behaviour may have profited considerably from it and there is no penalty or sanction for that.
Why would someone who has gained substantially from anti-competitive behaviour not proceed with it for as long as possible in order to make as much money as possible knowing that there would not be a sting in the tail at the end other than for an order requesting them to desist from doing it again?
It is interesting that the initial agreement with the troika in December 2010 contained a commitment to "introduce legislation to empower judges to impose fines and other sanctions in competition cases". In the revised memorandum dated 28 July 2011 the commitment changed. The new commitment is that the Government will introduce legislation to strengthen competition law enforcement in Ireland by ensuring the availability of effective sanctions for infringement of Irish competition law. In other words, it has gone from giving the courts power to impose civil fines to allowing the courts to impose effective sanctions. The problem is that the Competition Authority itself, which has all the legal and constitutional advice available to it, who are the experts in the area, tell us that the sanctions are not in place. Unfortunately, from what I can see, the legislation does not introduce them either. The Minister referred to legal advice, which we can discuss in a moment, but we are at a serious disadvantage vis-à-vis other countries. Most other jurisdictions have a system of civil fines for this type of breach but we do not. The experts are asking us to provide such a system and we are not providing it. I would like to know why.
I concur with Deputy O'Dea. Without sanction, the authority is toothless. A toothless authority will not change behaviour on a macro scale. It might change an individual's behaviour at a particular time but it will not change the culture.
It also strikes me that anti-competitive behaviour costs consumers money. For example, if one is to buy a car part and one pays €500 for it and that is replicated over thousands of individuals and if a case is taken and it is found that wrongdoing has occurred then surely the individuals who have paid over the odds for the car part over that period would be entitled to recompense for the loss they suffered? We should seek to achieve some level of proper sanction in the situation.
I have read the document referred to by Deputy O'Dea where a member of the Competition Authority set out the case for civil fines being possible under Irish law. That specific article was brought to the attention of the Government's legal adviser to see whether it was robust and, unfortunately, it was found not to be robust. The Competition Authority is composed of experts in competition law but they are not necessarily experts in constitutional law. The proposal was not accepted, ultimately, on constitutional grounds. The troika is in the same boat. It did advocate civil fines but it does not have the authority to override the Constitution either. Subsequent to the troika's original request, when the impossibility of introducing civil fines was clear, it sought alternatives. It is those alternatives that Members have before them.
There is a sting in the tail, in that where the Competition Authority successfully gets a declaration or an injunction, private individuals who have been damaged, without having to re-establish the proofs, can under section 5 take a civil action for the damages they suffered. This has advanced the case for exposing those people that were rightly described as profiting from some activity to damage cases. If the damages are not established by the authority they are established by the private litigant pursuing the case once the authority has established it. For those who wanted direct civil fines, it is not the perfect response but it is something that is within the Constitution and exposes those who are engaged in such practices far more greatly than they have been to these risks.
Other jurisdictions have the possibility of civil fines but they are debarred by our Constitution. The drafters of our Constitution felt that this was an important issue of principle in Article 38.1, that people should have that right of protection. In other cases civil fines are allowed but, interestingly, other authorities who feel that competition law is hobbled by a lack of criminal offences have been looking to this country as an exemplar of one of the few countries that has created serious criminal sanctions for people engaged in serious competition abuses. Given that we have opted for criminal offences and we have created the power to make people pay in a very serious way for serious breaches of competition law, one of the downsides of having created that is that we cannot then switch horses and say we will pursue competition law by way of civil fines, because we have committed to this route. Ironically, many other countries are looking to us as a country that is getting to grips with the issue. We believe that the changes we are making will give cause for reconsideration of activities that are in breach of competition law in the examples to which both Deputies referred.
First, there appears to be confusion in the Minister's argument. We are talking about non-hardcore offences for which the Competition Authority tells us - the record also tells us - that, in effect, there no criminal sanctions, there is only the possibility of a civil action where one either gets a declaration or an injunction. That is all that one has.
On section 5, the res judicata, it is not practicable and it will not be in many cases for litigants to bring a case despite the res judicata, because it is limited. The res judicata means that one does not have to prove that the activity breached competition law but one has to prove that one was affected by it and prove one’s measure of damages. That is the realm of the commercial court, which is a daunting prospect for many litigants.
To return to the Constitution, the advice as I understand it from the Attorney General is that the introduction of civil sanctions would breach Article 38.1, which provides that "No person should be tried on any criminal charge save in due course of law." Article 38.5 goes on to provide that "No person shall be tried on any criminal charge without a jury." The traditional interpretation of Article 38.1 is that it prohibits the imposition of substantial fines in civil cases. That is why, to test the legal advice, I have included in my amendment that the fine would not exceed a class A fine, which is a maximum of €5,000. That is very little when one considers the amounts involved in those cases. The constitutional argument is that a substantial fine is, in effect, a punishment, and any act that may expose a party to the risk of punishment should be categorised as a crime thereby conferring on that party the rights available to a person accused of a serious criminal offence. Those include the right to have the case against him or her tried by a jury and proved beyond any reasonable doubt. The question of what is a criminal offence or what brings a case into the category of criminal offence rather than a civil offence has been considered by the courts on a number of occasions. In the case of Melling v. Ó Mathghamhna, 1962, the Supreme Court looked at this question and set down the following guidelines. In three separate judgments handed down in that case, it set out the criteria that indicate and distinguish a criminal offence from a civil offence. For example, the possibility that a person will be detained; the bringing of the person to custody to a Garda station; the entry of a charge in all respects and the terms appropriate to a charge of a criminal offence; the searching of a person detained; the examination of papers and others things found on that person; the bringing of the person before the District Court judge in custody; the admission to bail, to stand trial and the detention in custody if the bail is not granted or if it is not forthcoming. None of those characteristics attaches to the idea of imposing a civil fine on an undertaking which has been in breach of competition law. In fact, in the case to which I refer, it was held that a civil sanction could apply in that case because it was not unconstitutional.
In the case of the Competition Authority bringing an action against an undertaking engaged in anti-competitive behaviour, it is not a case of bringing people in before the District Court judge to see if there is a case against them and the possibility of detention in custody or whatever. Even if the case is being brought against an individual the legislation can be fashioned in such a way that if the fine is not paid an order for attachment can be employed to get the money, a civil sanction rather than a criminal sanction.
It is interesting that this matter was again considered by the Supreme Court in the case of McLoughlin v. Tuite, 1982. This is a very interesting case because it is a Revenue case. A person who defaults on payment of tax in time, or who is found to have been involved in tax evasion, interest and penalties must be paid on top of the tax which is subsequently assessed. These interest and penalties can often be greater than the tax amount. For example, the previous list of tax defaulters published by the Revenue Commissioners show that a Mr. Thomas Byrne, from County Meath, a farmer, was liable for-----
Deputy O'Dea, you are not permitted to name an individual.
It is a published document.
That does not matter. You may not identify an individual.
OK, I will say a farmer from County Meath, a constituent of both the Chairman and of Deputy Tóibín. His tax came to €10,500 and the penalties and interest came to €32,519. Another gentleman from Blanchardstown had a tax liability of €81,000 and penalties and interest came to €185,000. A gentleman from Kildare had a tax liability of €61,000-----
The Deputy has made his point. This cannot go on all day.
-----and penalties of €114,000. The Supreme Court held that those type of penalties constituted a civil sanction and were not in the realm of criminal law. The courts of this country have held that if some person is caught evading or avoiding tax or not paying his tax or whatever, the Revenue Commissioners can impose interest and penalties three times the amount of the tax as well as the tax to be paid. However, if a person is found to have made millions of euro from breaching competition law, it is wrong that I should propose that he get a civil fine of up to €5,000 maximum. I have every respect for the Attorney General and for her staff, but in my view, this makes no sense. I do not wish to divide the committee but I respectfully ask the Minister to go back and to consider a very insubstantial fine for a start. I ask that he discuss with the Attorney General if a fine at least of that level can be imposed.
We looked at this every which way. We came with the same disposition as the Deputy, that it would be ideal to create a civil offence to prosecute. Other views and precedents were examined. It is not the case that the Department or me as Minister decided on a whim not to have civil fines. The Department was very interested in the possibility of criminal fines. The Competition Authority explored possibilities and assembled arguments for scrutiny. However, the legal advice from the Attorney General was clear that this could not be done, that even at fines of the level envisaged by the Deputy, this was a criminal sanction. It would contravene the rights of the individual by seeking to prevent the application of the criminal standard of proof and seeking to impose a criminal sanction without establishing the burden of proof as per a criminal case. I may not be doing justice to the legal and constitutional arguments which should be assembled. The article written by the Competition Authority referred to the precedent quoted by Deputy O'Dea. It sought to say if the person was not detained this could not be construed as a criminal crime and therefore a civil sanction could be applied for the offence. This argument did not stand up to scrutiny. I can only speculate as to why that would be and I am not a sufficiently constitutional lawyer to do so but I presume that the possibility of detention and arrest is available even if in the event this is deemed a petty version of a criminal offence, it is still a criminal offence and this cannot be shaken off.
As regards the powers of the Revenue Commissioners, they have always had this exception which is well established in law. The Revenue has the capacity to impose fines. We would have preferred to have been able to do this as it is regarded in other jurisdictions as an exemplary piece of legislation. This was pored over at great length before the decision was made.
I will not delay the proceedings unduly on this single amendment. Deputy Tóibín asked if we could see the advice from the Attorney General. It is a great pity that we cannot do so. I would dearly love to see how the Attorney General could justify her position. Could the committee be provided with a briefing note from the Attorney General between now and Report Stage to explain the basis for her decision?
We can circulate a note to the best of our ability.
To complete the point, the previous Attorney General obviously thought it was perfectly okay to provide for civil fines; otherwise he would not have signed off on that section in the deal with the troika.
Will the Minister circulate a note on the matter?
We will put a note together. It was just as much a source of disappointment for me as it was for the Deputy and others that it could not be done. If one has a dog, one does not do the barking. I must take the legal advice supplied to me and I have no reason to believe it is not robust.
I agree with Deputy Willie O'Dea that Teachtaí Dála find it very difficult to proceed with the Bill with that amendment because it does not give us the necessary teeth and means we are producing unsatisfactory legislation.
Amendment put.
The Committee divided: Tá, 2; Níl, 7.
Tá
- O’Dea, Willie.
- Tóibín, Peadar.
Níl
- Bruton, Richard.
- Conaghan, Michael.
- English, Damien.
- Griffin, Brendan.
- Kyne, Seán.
- Lawlor, Anthony.
- Ryan, Brendan.
Amendment declared lost.
Amendments Nos. 8, 13 and 14 will be taken with amendment No. 7.
I move amendment No. 7:
In page 5, lines 7 to 11, to delete paragraph (g).
The section regarding injunctions is inflexible. It does not allow the court to apply an injunction of finite duration. The courts are notoriously reluctant to apply permanent injunctions, which they must police in perpetuity. However, the Minister's amendment provides for an injunction of finite or indefinite duration. That will bring about the scenario I want to bring about and, therefore, I accept his.
Amendment, by leave, withdrawn.
I move amendment No. 8:
In page 5, line 11, to delete "an injunction of indefinite duration" and substitute "an injunction of definite or indefinite duration".
Amendment agreed to.
Section 3, as amended, agreed to.
SECTION 4
Amendment Nos. 9 and 12 will be discussed together.
I move amendment No. 9:
In page 5, line 24, after "director," to insert the following:
"shadow director (within the meaning of the Companies Act 1990),".
The proposed new section 14A to the Principal Act gives a right of action to a competent authority in the case of an infringement of the legislation. Section 14A(1)(a) states the application for relief can be “any undertaking which is or has at any material time been a party to such an agreement,...” and “(b) any director, manager or other officer of such an undertaking, or a person who purported to act in any such capacity, who authorised or consented to, as the case may be, the entry by the undertaking into, or the implementation by it,...”.
I propose the inclusion of an additional category in paragraph (b), namely, shadow directors. A shadow director is defined in the Companies Act 1990 as a person in accordance with whose wishes a director acts or under whose direction somebody acts as a director. Somebody can be outside the operation and can effectively control a director on the inside. The paragraph refers to somebody who purports to act as a director and this category is included. That does not quite cover shadow directors as defined by the 1990 Act. My intention is to strengthen the legislation and to make sure there are no loopholes whereby somebody in the background can agree to the stuff and walk away scot free.
We considered this and the definition of a director in the Competition Act 2002 includes a person in accordance with whose directions or instructions the directors of the undertaking concerned are accustomed to act. It does not include such a person if the directors are accustomed so to act by reason only that they do so on advice given by the person in a professional capacity. We are assured both by the company law and competition sections that this wording is the same as that used in the Companies Acts and includes within it shadow directors. The director for the purpose of the Competition Act includes a shadow director and there is no need to insert a specific reference as suggested by the Deputy. I, therefore, do not intend to accept the amendment.
I thank the Minister. I just wanted clarification on that. The proposed section 14A(1)(b) refers to a person against whom an action will lie and includes a person who authorised or consented to as the case may be. Is somebody who had knowledge, without actively consenting, covered?
Who is not a director?
If someone in one of the categories that action is brought against had knowledge and did not actively consent to the activity covered? Section 14A(1)(b) states, “any director, manager or other officer of such an undertaking ? who authorised or consented to...” the activity. Does “consented to” include someone who had knowledge but did not actively engage in the decision?
I will have to examine that and seek clarification for the Deputy.
Amendment, by leave, withdrawn.
I move amendment No. 10:
In page 5, line 34, to delete "declaration" and substitute the following:
"declaration (including a declaration in respect of a contravention of section 4 or 5 or Article 101 or 102 of the Treaty on the Functioning of the European Union that has ceased)".
Amendment agreed to.
Amendments Nos.11 to 13, inclusive, not moved.
I move amendment No. 14:
In page 6, line 17, to delete "an injunction of indefinite duration" and substitute "an injunction of definite or indefinite duration".
Amendment agreed to.
Question proposed: "That section 4, as amended, stand part of the Bill."
Section 14(A)(5) of the Principal Act states:
Where in an action under subsection (1) it is proved that the act complained of was done by an undertaking it shall be presumed, until the contrary is proved, that each (if any) director of the undertaking and person employed by it whose duties included making decisions that, to a significant extent, could have affected the management of the undertaking, and any other person who purported to act in any such capacity... .
I strongly recommend that officials examine how that subsection is drafted with a view to tightening it up. For example, it might to difficult to prove somebody who is a major shareholder in a company and has a great deal of influence was specifically involved in a decision. Will the Minister examine this with a view to drafting it more tightly?
I will do that. The text is from the 2002 Act.
I understand that.
I will check that before Report Stage.
Question put and agreed to.
NEW SECTIONS
I move amendment No. 15:
In page 6, before section 5, to insert the following new section:
"5.—Section 30 of the Principal Act is amended by inserting after subsection (1) the following:
"(1B) Where, following an investigation under this Act into an action, it appears to the Authority that the action adversely affected a person or contravenes section 4(1) or section 5(1) of this Act, the Authority may recommend to the Department of State concerned—
(a) that the matter in relation to which the action was taken be further considered,
(b) that measures or specified measures be taken to remedy, mitigate or alter the adverse affect of the action, or
(c) that the reasons for taking the action be given to the Authority, and, if the Authority thinks fit to do so, it may request the Department of State to notify the Authority within a specified time of the Department of State’s response to the recommendation.”.”.
Often the annual or special reports of statutory organisations that report to the Government and the Houses of the Oireachtas may not be properly considered or have action taken on their recommendations. This amendment seeks to ensure reports from the Competition Authority are formally responded to by the Government and by the necessary committee.
The Deputy's text provides for where an investigation under this Act occurs. However, an investigation by the Competition Authority would only be in respect of abuses of dominance or cartels. The Government may not be necessarily informed of it. There also may not be a recommendation to the Government on foot of it.
There is a separate category where the Competition Authority can present reports to the Government. It is the case that some have been but not acted upon. Since the EU-IMF programme, there is a new momentum to act on those reports and on foot of some of them some reforms are coming through. The Competition Authority is charged, however, with only one dimension of policy-making. For example, the authority may have a very particular view about planning guidelines. The Government, however, has to make a decision in the round, balancing not just competition but all policy issues.
The Ombudsman's type of report is very different to the Competition Authority's. The authority's remit is to investigate breaches by private sector bodies in delivering a service with a view to taking action, not Government bodies providing a public service.
I understand the Deputy's intention in this amendment. When in Opposition, I sat on committees which were frustrated by inaction on Ombudsman reports. It is not appropriate, however, that the Competition Authority's views be given a status ahead of Government's. The authority will provide advice reports to the Government which make up one dimension. Its investigations are into potential offences of which the Government would not be informed. Accordingly, it is not feasible to accept the amendment.
Anti-competitive behaviour is endemic in many different markets and sectors in the economy, costing hundreds of millions of euro through overpricing and so forth. When systemic problems are identified by particular investigations, in this case investigations by the Competition Authority, the Houses and the Government need to be aware of them and respond to them in some manner.
An investigation under the Act is very technical with the right to seize documents and pursue bodies in respect of a breach, abuse of cartel or dominant practice. An investigation will be undertaken with the possibility of ending with an action in court to prosecute the offending party. Under the Competition Authority's right as a statutory body to advise the Government, it has the right to produce reports and examine competition in, say, the medical profession or planning laws. If Government proposed legislation bears on the authority's remit, it is in the privileged position where its advice is sought which goes directly to the Government and is not mediated by my Department. The Government always has sight of the authority's views when making a decision on a matter that could bear on competition.
The Competition Authority has produced many reports on professions. When in opposition and in government, I have always been anxious to see them implemented. Many are now such as the legal profession, pharmacy and doctors reforms. In cases where the authority has provided advice which has not been acted on, the committee can call in the authority to discuss it. The present arrangement is that twice yearly I ask Cabinet colleagues to assess the implementation of any of the authority's reports that have not been acted upon and which come under their ministerial remit. There are relatively few of the authority's recommendations that remain to be implemented. Some have been passed by the sands of time making them no longer relevant.
Not all high-cost markets or sectors represent an abuse of market dominance or prove a cartel is at work. Accordingly, there is not always an action that can be directly taken to deal with the high costs.
I support the spirit of the amendment and the view that we should be rattling the cage of anti-competitive behaviour. By all means, the committee should draw to the authority's attention any examples of such behaviour and call it in to attend meetings. If there are such issues, we are anxious to pursue them, but I do not think this amendment can be accepted.
I hear what the Minister is saying, but the amendment goes further than that. What is says is that the authority may recommend or initiate some sort of action or report to the Government. It does not require the Competition Authority to send over copies of every investigation. It envisages that the report would contain recommendations, which would not compel the Government to do anything. I can envisage a situation in which there is an investigation by the Competition Authority into some form of activity that presents a clear, serious and imminent danger to the economy and on which the Government would have to move quickly. In such a situation, a report on an investigation by the Competition Authority would be valuable to the Department. From that point of view, there is a lot of merit in the amendment being proposed, and I urge the Minister and his people to consider it seriously.
To follow on from that, the Minister has mentioned the current practice of the Government, and it is commendable that the reports are being dealt with. However, this is an opportunity to put that voluntary discipline or best practice that the Minister discussed into legislation. Later Governments might not have the natural instincts of the current Minister on this issue. The danger here is that we could have a body that was toothless or was not listened to, depending on who is in the driving seat. A Minister, depending on his or her views or associations, may come to the view that he or she will just ignore this body. All we are trying to do is to make sure there is a response if the Competition Authority requests one on a particular issue.
To return to section 30 of the Competition Act 2002, the Competition Authority has a broad remit, including:
to advise the Government, Ministers of the Government and Ministers of State concerning the implications for competition in markets for goods and services of proposals for legislation ...; to advise public authorities generally on issues concerning competition which may arise in the performance of their functions; ... [and] to identify and comment on constraints imposed by any enactment or administrative practice on the operation of competition in the economy[.]
It has a wide range of powers which it exercises unilaterally; it does not have to come to the Government to advise public authorities of administrative practices and so on which may interfere with competition. However, it is still the case that the Competition Authority is not the Government. Ultimately, the Government must balance different considerations. In the case of planning issues, as members know, the interests of town centres, which could be damaged by removing all limits on planning permission - as has been recommended by the Competition Authority - must be balanced with the interests of competition. The Government considers not only competition and the price of goods but also broader issues such as protecting communities. We cannot measure things based on just one dimension, which is the price of goods in shops. There are broader interests that the Government must take into account. Rather than giving the authority powers, our system allows Deputies to pursue the Government. They can call in the Competition Authority to explain its view of things, weigh up that and apply pressure to the Government. The system we have is a democratic one. The Competition Authority does not have an authority that is superior to that of Parliament or the Government. It has particular insights which are worthy of attention, but we cannot get to a point at which it becomes, effectively, an arbiter in this area. There is a balance to be struck. The system is clear.
The Competition Authority is a statutorily independent adviser, so when it advises me on a Bill coming from the Department of Health, for example, I must deliver that advice to the Department. There is no way I can say "I do not like that piece of advice so I am going to sit on it." It goes to the Department because the authority is a statutory advisory body. It has a strong position in legislation as it stands.
In the case of the Joint Committee on Investigations, Oversight and Petitions, the Ombudsman is to report directly to that committee on an annual basis and the committee must discuss the reports that are initiated by the Ombudsman. This is because there have been situations in the past in which it was felt the Houses did not take into consideration major problems mentioned by the Ombudsman. This amendment does not state that the Government must enact the decision of the authority; it merely states that reasons must be given for the actions that the Government takes based on the submission of the authority. It does not determine Government policy in any way, but reasons must be given. That is my final word on it.
Is there an issue with wording that could be considered for Report Stage?
The Ombudsman and the Competition Authority are completely different animals. The Ombudsman investigates maladministration by the public service; he or she has no powers of enforcement of any sort. His or her only power is to report adversely to the Dáil on a failure of the Government to act on what he or she believes a Department ought to have done. This reporting by the Ombudsman to the Oireachtas is a constitutional provision, and it is absolutely right that the Oireachtas vigorously pursues these reports, because that is the Ombudsman's only power. By contrast, the Competition Authority has its own statutory investigation and prosecution powers which are given to it under sections 4 and 5 of the Act. It is an empowered body that can take direct action. When it strays outside existing law and seeks to advise Departments, its advice is in a privileged position, but it is not an absolute obligation of the Government to accept it. It is of a different status. While I understand the Deputy's view that the Ombudsman, who is the citizen's protection against the Administration, needs to be overseen and to have the Oireachtas riding shotgun with it, the role of the Competition Authority is different.
As framed, it is clear that investigations must be into breaches of the Act which have occurred or are occurring, so the amendment cannot be accepted. I honestly do not share the Deputy's view that there needs to be a statutory provision in this regard.
In terms of procedure, the Deputy could reconsider this and table an amendment with different wording on Report Stage.
We will reconsider the wording and resubmit on Report Stage.
Amendment, by leave, withdrawn.
Amendments Nos. 16 and 17 are related and may be discussed together.
I move amendment No. 16:
In page 6, before section 5, to insert the following new section:
5.---Section 30 of the Principal Act is amended, in paragraph (b) of subsection (4), by the substitution of “section 14A” for “section 14”.”.
These amendments amend the Competition Act 2002 by inserting a reference to the new section 14A in sections 30 and 45 of that Act. Amendment No. 16 replaces the reference to section 14 in section 30 with a reference to section 14A, with the effect that the Competition Authority will not be able to delegate the power to initiate proceedings under section 14A to any individual member of the authority or to a member of staff of the authority. Certain functions are reserved to the authority as a collective for reasons of good corporate governance.
Amendment No. 17 replaces a reference to section 14 with a reference to section 14A in section 45(13) of the 2002 Act. That subsection deals with the production of warrants of appointment for authorised officers during court proceedings. They reflect the fact that the public enforcement power is now under section 14A rather than section 14.
That collectivises the authority. Can an individual from the authority make a decision?
On a prosecution?
Must it be the authority as a whole?
That is already the law. We are only changing "section 14" to "section 14A" reflecting the separation, into two separate sections, of private enforcement from public enforcement. It is only a technical amendment.
Amendment agreed to.
I move amendment No. 17:
In page 6, before section 5, to insert the following new section:
6.—Section 45 of the Principal Act is amended, in paragraph (a) of subsection (13), by the substitution of “section 14A” for “section 14”.”.
Amendment agreed to.
SECTION 5
I move amendment No. 18:
In page 6, lines 18 and 19, to delete "a court finds" and substitute "it is determined".
I am concerned that it was envisaged that there would have to be a finding by a court after a trial that a guilty plea would not be covered. That was not a determination as such. I note the Minister has met that point in amendment No. 19. He anticipated me, or perhaps it was the other way around. In any case, I am prepared to withdraw my amendment.
Amendment, by leave, withdrawn.
I move amendment No. 19:
In page 6, between lines 26 and 27, to insert the following subsection:
"(2) In this section "finding" includes a conviction for an offence, whether or not that conviction is consequent upon a plea of guilty by an accused person.".
Amendment agreed to.
Question proposed: "That section 5, as amended, stand part of the Bill."
With regard to the reference to "res judicata”, are there circumstances in which the Minister envisages an individual taking a case after which the authority would decide to engage in proceedings? If so, is the authority covered to the same extent by the res judicata provisions?
Is the Deputy referring to circumstances in which an individual wins a civil case?
Yes.
The authority will only be able to come in for an injunction on the back of that, not for damages. I refer to criminal proceedings on the back of civil proceedings.
Proceedings under Part 2 are criminal proceedings.
An individual cannot take criminal proceedings in the first instance.
Are we talking about criminal proceedings only?
If a civil action were taken by an individual, the authority could only pursue an injunction.
It may be necessary.
I will seek confirmation.
Question put and agreed to.
Section 6 agreed to.
SECTION 7
I move amendment No. 20:
In page 6, lines 39 to 41 and in page 7, lines 1 and 2, to delete subsection (2) and substitute the following:
"(2) This Act shall come into operation no later than 12 months from the enactment of this Bill.".
This seeks to place a time limit on the bringing into force of the legislation. Obviously, the legislation is being criticised as not going far enough, and I acknowledge it is only a prelude to legislation coming down the line. On Second Stage, I praised certain aspects of the Bill. In certain respects, it involves a substantial improvement. It deals specifically with a number of factors. I am trying to ensure the legislation comes into effect. My amendment refers to 12 months but I am not hung up on that period if there is some compelling reason for choosing another. Everybody agrees the law needs to be updated urgently. It is part of our agreement with the troika.
I compliment the Minister on his decision last May to sign into law section 10 of the 2002 Act. One may recall it is to assist juries in criminal prosecutions related to anti-competitive practices. It provides that transcripts of the judge's charge and closing speeches by counsel, or other documents introduced into evidence, in whatever form, should be made available to juries to help them make a decision. When that legislation was passing through the House, the then Minister responsible for enterprise, Ms Harney, stated the change was designed primarily "to facilitate the prosecution of serious competition offences". The section that was supposed to facilitate the prosecution of serious criminal offences was not signed into law until May of this year. I compliment the Minister on signing it into law and condemn his negligent predecessors for not doing so. The aforementioned example shows what can happen. A provision that was supposed to be urgent was brought into effect ten years later. Could we try to ensure the Bill before us is brought into effect somewhat sooner?
It is my intention to bring it into effect very soon after its enactment. However, the way in which the Deputy has framed his amendment would prevent me from making orders. It would delete my power to do so.
I should always be accepting the praise offered.
Absolutely.
The truth is that the courts did not have the necessary infrastructure to implement the section to which the Deputy referred. My colleague the Minister for Justice and Equality put in place the infrastructure that allowed the order to be made. It is terrible to be rejecting praise; the Deputy will never offer it again.
I will not pursue the point on the infrastructure. I appreciate the Minister's bringing into effect of the provision. I may submit a doctored version of my amendment on Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 21:
In page 7, lines 3 and 4, to delete subsection (3) and substitute the following:
"(3) The Competition Acts 2002 to 2010 and this Act may be cited together as the Competition Acts 2002 to 2011 and shall be construed together as one Act.".
This is a technical amendment.
Amendment agreed to.
Section 7, as amended, agreed to.
Question proposed: "That the Title be the Title to the Bill."
I believe Deputy Tóibín wished to make some general comments.
Yes. Businesses or organisations that make profit from anti-competitive practices over a number of years may believe there is very small chance of getting caught and that, if they are caught, the fine will be so small as to be inconsequential. If the fine amounts only to a small amount of the profit made through anti-competitive actions, it is impossible to change the behaviour of a firm. Irrespective of how we proceed, there ought to be a strong likelihood of getting caught and an understanding that if one is caught, the fine will amount to more than one's profit derived from anti-competitive behaviour.
The Office of Fair Trading in Britain provides an incentive of up to £100,000 to whistleblowers who identify an unfair practice. This is only paid when the case is concluded and there is full proof. We could strengthen our legislation by giving some incentive to whistleblowers in this area.
I am not sure whether the question of resources is encompassed in this legislation. If the Competition Authority is not properly resourced, it will not be able to carry out investigations and, therefore, the culture will not change. Offenders will continue to believe there is no chance of getting caught if only one or two major investigations are carried out each year.
The ICTU document circulated to members expresses concern that agreements between unions and employers could be negatively affected by competition law and identified a couple of cases in which this issue arose. Unfortunately we were too late in receiving the document to have an opportunity to study the details of these cases. It is important that we discuss the issue on another occasion.
As I only received the ICTU report this morning, I did not have a chance to study it in depth. It appears to highlight a serious problem for a limited group. I do not know if the Minister received a copy of the correspondence but I ask him to study it in his own time so that we can expect him to introduce amendments in respect of it on Report Stage.
I am favourably disposed to the principle of offering monetary rewards in return for information. I understand a system was established several years ago whereby those who are first in, as it were, can get immunity from prosecution. Can the Minister indicate whether this system is working? More people could be brought out of the woodwork if rewards were offered.
I have received a number of inquiries on the regulation of these matters. Questions arise regarding certain regulators' previous involvement in the industries they are regulating, which clearly creates a potential conflict of interest. This issue was brought to my attention on several occasions. I can instance various examples where we would be in a better position as a country had we proper regulations. The issue should also be considered in the context of this Bill because there are justified suspicions that people are not as independent as they should be.
The ICTU document which has just been circulated deals with an issue involving SIPTU. It appears from the document that substantial work was undertaken to prepare an amendment on foot of commitments given in 2009 and ICTU understands the legislation has already been drafted. I ask the Minister to investigate the work that has already been done with a view to bringing an amendment either on Report Stage or in the Seanad.
I thank members for their amendments. We will continue to consider amendments on Report Stage with a view to strengthening enforcement and improving the legislation. Deputy Tóibín is correct that people make their decision based on the probability of being caught and the consequences of their actions. This Bill not only increases the deterrent but also finds other ways of increasing the likelihood that people will be brought to book. We are changing the balance.
As Deputy O'Dea pointed out, a leniency programme has been established in recognition of the role of the whistleblower. I will revert to the Deputy on Report Stage with further details on the programme's performance. On the wider question of whistleblower legislation, the Minister for Public Expenditure and Reform is exploring a range of measures.
My Department is reviewing the resources available to the Competition Authority to ensure it has the capacity to enforce competition law. Several Deputies referred to the ICTU document. A similar issue arose in the past in the negotiations between the IMO and the HSE, in respect of which the authority deemed an association of employers to be a cartel for the purposes of such negotiations. The negotiators had to work through an intermediary -----
Pharmacists
Sorry, it involved the pharmacists. It was suggested that exemptions from competition law could be provided to some of these groups but I understand such a dilution of the law will not be permitted under the EU-IMF agreement. This is a complex issue but I will respond to the members' concerns.
Deputy O'Dea raised the wider issue of regulators. As the Competition Authority recruits by means of public competition, I do not think the issue arises in respect of it.
Question put and agreed to.
Bill reported with amendments.