Tuesday, 15 October 2019

Questions (57)

Michael Harty


57. Deputy Michael Harty asked the Minister for Agriculture, Food and the Marine if a fully independent investigation will be commissioned into the beef processing industry to ensure companies are operating to the satisfaction of his Department in a transparent manner with regard to pricing, employment law, tax compliance, particularly VAT and to ensure meat plants are not abusing their near-dominant monopoly; and if he will make a statement on the matter. [41384/19]

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Oral answers (6 contributions) (Question to Agriculture)

Will the Minister commission a fully independent investigation into the beef processing industry to ensure companies operate to the satisfaction of the Department and in a transparent manner with respect to pricing, employment law, tax compliance and particularly value-added tax in order to guarantee meat plants are not abusing their dominant monopoly?

As an outcome of the recent beef talks, a number of initiatives aimed at increasing transparency along the beef supply chain were agreed in the Irish beef sector agreement of 15 September, which is published on my Department's website. These included the commissioning by my Department of reports, including an independent review of market and customer requirements, specifically on the four in-spec bonus criteria in operation in the Irish beef sector. Matters like the 30-month rule and four allowed movements were raised frequently in the dispute and there will be an independent study of those to see if they are used by the industry to suppress price and as a way to manage flow or if they are a legitimate demand of the consumer in respect of purchasing. There will also be an independent examination of the price composition of the total value of the animal, including the fifth quarter, along the supply chain and a summary of competition law issues as relevant to the Irish beef sector.

In addition, Bord Bia will develop a beef market price index model based on three components. These are live cattle prices, the beef market price index for retail and wholesale and an offal price indicator. Teagasc will also review the quality payment grid. Additional commitments in the agreement include detailed price reporting on the Beef PriceWatch app, examination of transparency models in other jurisdictions and a consultation process on the transposition of the unfair trading practices directive. Work on these commitments is under way and progress will be reported via the beef task force set up to oversee the implementation of the agreement.

The task force is comprised of key beef sector stakeholders, with Mr. Michael Dowling as independent chair. The beef task force scheduled for yesterday, 14 October, was adjourned, as members of the task force were prevented from attending the meeting. It is in the interests of everyone involved in the beef industry that the work of the task force should go ahead. The task force's remit is to monitor the implementation of the actions arising from the agreement reached on 15 September and it offers the most viable platform for strategic engagement with key stakeholders. It was a great pity that farm representatives were not in a position to air the legitimate concerns of farmers at the task force meeting.

The base price for a premium product is far below the cost of production and there should be a statutory investigation into what is going on in the beef industry. As it is currently structured, farming is not sustainable. Once the animal passes through the factory gate, the only person not making a profit is the farmer because the processor and the retailer make a profit. There is a lack of transparency in what happens in pricing and the Minister should be very curious as to why that happens beyond what has been agreed in meetings a number of weeks ago.

The Minister mentioned the "fifth quarter" and if that alone were paid, it would go a substantial way to meeting farmer demands. Many of the criteria used to decide price bear no relationship to the expectations of the retailer or the customer. The processor uses spurious criteria to drive down price so there should be a statutory independent investigation into the meat industry.

It is important that the task force considers all these matters. To inform that process, independent reports into these specific matters concerning transparency, residency and the four movement rules can be done. It will inform stakeholders' capacity to progress further such issues.

The Deputy raised issues around tax compliance etc. and any allegations of non-compliance with tax issues is a matter for the Revenue Commissioners. Any concerns should be reported to them. Concerns about the abuse of a dominant position are for the competition authority. One of the agreements is for a synopsis of competition law in the area. Some people would give the Minister the power to set price, for example, but we did not go near base price for good reasons. If I had the power to fix the price, who would I please? If the price is raised too high, demand would be killed. The market sets the price and we monitor the base price closely relative to what it is across Europe. It is a very depressed market because of flatlining consumption, changing dietary habits and new market opportunities etc. The Deputy raised concerns relating to employment law, which are a function of the Workplace Relations Commission. They are not issues that my Department would have direct competence or legal authority to inquire into.

I believe there are grounds for the Competition and Consumer Protection Commission to investigate the meat processing industry to ensure those involved are not engaging in price fixing or anti-competitive behaviour. Many issues relate to price. The Minister says the market sets the price. However, if the market has been distorted by anti-competitive behaviour or activities within the beef processing industry that change the market, there are grounds for investigation. If the farmer is the only person not making a profit in the meat industry, there must be something rotten there. It is incumbent on the Minister and his Government to ensure those involved are complying with all the various requirements. I fully understand that taxation and employment law are not within the Minister's remit but the Government as a whole should be investigating the meat industry to ensure compliance. I believe the activities of those involved are allowing them to maximise profit by paying a minimum price.

All these issues are areas of legitimate concern. Given the findings of all of the independent studies, the task force will be in a better position to make a judgment. Several developments are under way. One example is transposing the unfair trading practices directives into law. A public consultation process about a regulator for the sector is also an important development that could assist. There is no single silver bullet here.

The Competition and Consumer Protection Commission has been before the Joint Committee on Agriculture, Food and the Marine previously. This area requires constant vigilance. We monitor the price here and report in to an EU market reporting mechanism so that we can keep an eye on the price here relative to prices elsewhere in Europe. That is only one way of measuring whether we are out of kilter. It helps to have greater transparency around the value of the carcass and who is getting what. Retailers are getting so much and processers are getting so much. What is the consumer paying? What is the primary producer getting? We need greater transparency around those questions. All of those issues will be important in building a collaborative relationship between the players in the industry. The current level of engagement between the respective parties, especially processors and primary producers, is not conducive to an industry that, hopefully, has a long-term future here. We need to build those relationships.