I move: "That the Bill be now read a Second Time".
The Mergers, Take-overs and Monopolies (Control) Bill, 1974, which lapsed on the dissolution of the last Dáil, contained provisions for the control of mergers, take-overs and monopolies. The need for the introduction of controls of this nature was recognised some time before the emergence of the 1974 Bill but, unfortunately, it did not prove possible to bring our proposals for such control to fruition. I feel it is desirable to proceed with this legislation without further delay.
The reasons for the proposed controls have not altered much since their inception. Notwithstanding the depressed conditions through which industry has been, there have continued to be take-overs of industrial and commercial businesses and with the revival of the economy an increase in merger activity may be expected.
The arguments in favour of judicious merger activity are valid and indeed weighty. This has in fact been recognised by the Government in the Industrial Development Act, 1977, which provides a positive form of assistance to enable Irish firms to engage in planned and orderly restructuring. Such judicious mergers can achieve important economies of scale; underutilised resources can be switched to sectors where optimal use can be made to them; efficiency can be improved; sluggish management can be revitalised; rationalisation of production and marketing can be achieved.
One does not, therefore, require very much convincing that merger activity can be, and indeed has been, beneficial to our economy. I trust, therefore, that these proposals will not be viewed, as some commentators have suggested, as an inhibiting factor in the further strengthening of Irish industry, but rather will they be seen as a necessary check against the type of merger activity which is motivated by considerations other than those which achieve the effects I have referred to.
As the House is aware, the object of some mergers can merely be the elimination of competition with possible adverse effects on productive efficiency and allocation of resources and, ultimately, restrictions in consumer choice and higher prices to the consumer. Other undesirable objects could be the milking of profits from a business which has built up large reserves or even the run-down of a perfectly viable industry by assetstripping. Mergers so motivated can do great harm not only to persons immediately affected but to our economy as a whole and for this reason Government controls as proposed are essential.
Mergers, therefore, may be good or bad. I believe that in our circumstances the great majority are likely to be beneficial, but the need remains to distinguish these from the minority of cases which would be positively harmful. It is necessary to have some quick means of distinguishing the good from the bad, and I am convinced that the decision should rest with the Minister for Industry, Commerce and Energy. In view however, of the substantial powers which are thus vested in the hands of the Minister it is considered not only desirable but essential that there should be established a framework involving various checks within which the Minister must operate.
The first constraint on the Minister in the exercise of his powers will of course be the criteria set out in the Schedule of the Bill in respect of which a decision on a proposal must be considered. Additionally, the Minister may not decide against a proposal unless it has been examined by the Examiner of Restrictive Practices and has been the subject of an inquiry by the Restrictive Practices Commission. In this way the Minister will be considering the matter in the full knowledge of all the facts of the proposal.
Finally, and most importantly, the Minister's decision to prohibit a proposal will be by way of an order which must be laid before the Houses of the Oireachtas and must be annulled if a resolution to that effect is adopted by the Houses within 21 days of the order being laid before them. I am satisfied that this framework allows of the most expeditious control while containing at the same time sufficient checks against arbitrary use of ministerial power.
Another area of concern which arises from the proposed controls, and to which I have referred, is the possibility of delays resulting from the procedures laid down in the Bill and the possible consequential discouragement of even the most desirable merger. I am very conscious of this danger and I have tried to frame the Bill on lines which would minimise it. The procedures created by the Bill are to be brought into operation only where the Minister contemplates the possibility of prohibiting a proposed take-over. In other cases the machinery need not be activated at all, and it is the intention that in the majority of cases the go-ahead will in fact be given in a number of days. In cases where an immediate go-ahead cannot be given and where the procedures set out in the Bill have to be put in motion, it will be the intention to reach a conclusion as quickly as possible. Deputies will have noted that the maximum time available for this purpose has been cut from nine months in the 1974 Bill to six months in this Bill, but I want to stress that this is a maximum time and that normally a period of three months or less should suffice even in the minority of more difficult cases.
In connection with this maximum period within which the Minister may act, I should like to point out now that I will be introducing an amendment on Committee Stage to provide that where a person who is under investigation by the Examiner of Restrictive Practices seeks, by virtue of the application of section 8 (2) of the Bill, a declaration from the High Court that the investigation is not warranted, the relevant period may be extended by the period during which the request for a declaration lies before the court. While it is accepted that such an extension could be of a substantial duration, the proposal should not cause any concern for persons who are willing to comply with reasonable requests for information in relation to a proposed merger and I have no doubt but that in the majority of cases which will be referred to the examiner for investigation the persons concerned will come within this category.
The main provisions of the Bill are summarised in the explanatory memorandum which has been circulated and I do not therefore intend to go into any great detail at this stage except to say something about the criteria in the Schedule to which I have already referred. These criteria are of course of utmost importance as it is by these that proposed mergers and take-overs will be judged. The extent to which they would be likely to restrict competition and their possible effects on the continuity of supplies and services must be considered. As regards the latter criterion I should point out that the phrase "supplies and services" was originally qualified by the word "essential" but I have deleted this qualification as being too restrictive and possibly inducive of problems of definition. As regards employment, it will be noted that we will not be solely concerned with the effect of proposals on present employees of enterprises concerned in a proposed merger but also with the much broader aspect of the possible effect on national policy for employment. Accord with national policy for regional development is also a matter to be considered more especially when one envisages a merger which would involve the transfer of certain resources away from a depressed area to one which was already well provided for. Other criteria, which are for the greater part carried from the 1974 Bill, include plans for the rationalisation of the industry, improved efficiency in a number of respects and the interests of shareholders and partners in the enterprises.
Finally, I have added a new criterion to the Schedule—the interests of consumers, which, while these are perhaps already catered for to varying degrees in some of the other criteria, I feel are deserving of explicit reference.
In order to complete the picture in so far as mergers or take-overs are concerned, I should refer briefly to the EEC aspect. When my predecessor addressed the House at this Stage of the 1974 Bill he referred to the EEC Commission's vigorous line in defence of competition, the various methods already available to the Commission to facilitate effective implementation of this policy and the proposed regulation on the control of concentrations which will provide powers in relation to proposed mergers not unlike those which this Bill proposes. Discussion on this proposed regulation, which was submitted to the EEC Council in 1973, has proved to be very protracted and, in fact, decisions have not yet been reached on matters basic to the proposal, such as the principle of premerger control, the field of application and the decision-making procedure. However, in view of present trends in discussion relating to the scope, it appears that the regulation, when finally adopted, will affect only very large mergers, so large in fact that it is most unlikely that any proposed all-Irish merger will be affected. It is, therefore, essential that we should, on the domestic front, supplement the measures to which we shall be party on the international front.
My comments so far have been confined to the merger/take-over aspects of the Bill and, as Deputies are aware, the Bill applies also to monopolies. The Restrictive Practices Act, 1972 already provides for controls on undesirable practices of monopolistic concerns. Under this Act the Minister for Industry, Commerce and Energy is empowered to regulate and prohibit practices that may be engaged in but it is the general experience that statutory controls may be rendered at least partially ineffective where a particular market is dominated by one, unitary concern or undertaking. It is, therefore, as necessary to provide powers to restore competition by breaking up monopolies as it is to preserve competition by controlling mergers and take-overs.
I am not suggesting, however, that all monopolies are undesirable and should be broken up. On the contrary, in an economy the size of ours it is inevitable that there should be monopolies within the meaning of the Bill, that is to say which provide more than one-half of the goods or services of a particular kind in this country but it does not follow that these monopolies are abusing their dominant positions. The fact is, however, that given the existence of monopolies the possibility exists for certain undesirable market behaviour. It would be unwise not to recognise this and to provide for remedial action where necessary.
The proposal in this Bill in relation to monopolies is to amend the Restrictive Practices Act, 1972 to provide, by adding to the powers conferred by it, the power to break up a monopoly. As with the other decision-making powers in this Bill, this power is conferred on the Minister but it is subject to control by the Houses of the Oireachtas in that any order made by the Minister under this Bill relating to a monopoly will be subject to confirmation by Act of the Oireachtas before it has the force of law.
I mentioned earlier that this Bill contained much of the Bill introduced by my predecessor. I should now like, however, briefly to draw attention to a number of further changes contained in the present Bill and to which I have not already referred. First, the 1974 Bill was so worded that, apparently unintentionally, a take-over of a firm below the threshold sizes set by the Bill would have been caught by the Bill in certain cases. I have corrected this by providing that the Bill applies only where two firms—which would normally be the acquiring and the acquired firms—are above the statutory limits of size. The Bill also provides a protection for the seller of shares who, when disposing of his shares, may not be aware that an effect of the purchase of those shares would be such that notification of the proposed sale should have been made to the Minister. The purchaser of those shares will now be required to make good any loss incurred by the vendor by virtue of the invalidity of the sale.
Finally, I should like to refer to the inclusion of an appeals provision which I am confident will be welcomed by Deputies. For various reasons, however, I propose to include two qualifications to the use of this provision: the first that appeals should be on points of law and the second that there should not be an appeal to the Supreme Court.
The measures contained in this Bill can be seen as an effort to ensure that Irish business will operate in a healthy competitive environment to the betterment of the economy and not as measures designed to frustrate further business development. I accordingly recommend the Bill for the approval of the House.