: I move: "That the Bill be now read a Second Time."
The object of this Bill is to confirm an order made by the Minister for Industry, Commerce and Energy, under the Restrictive Practices Act, 1972, in March of this year amending the Restrictive Practices (Groceries) Order, 1973.
I will explain briefly why the 1973 order was made and what it set out to do. The order was made on the recommendation of the Restrictive Practices Commission following a public inquiry under the restrictive practices legislation to eliminate certain unfair practices in the supply and distribution of grocery goods.
The decade or so prior to this inquiry had been a period of great change in the grocery trade. The emergence of multiple supermarkets had brought about a quickening in competition at the retail level and had profoundly affected the traditional methods by which goods found their way from manufacturer to retailer and ultimately to the shopper. The traditional wholesaler and retailer had done their best to remain competitive by forming voluntary groups to match the multiples' buying power and by introducing such new ideas as cash and carry outlets to make their distribution system more efficient. They felt, however, that something more needed to be done to deal with certain unfair practices they claimed had arisen because of the multiples' importance in the market. They argued that it had become so important to suppliers to ensure that their products were carried by this expanding sector of the retail trade that they supplied them on terms which amounted to unfair discrimination against the rest of the trade. The inquiry was devoted chiefly to the examination of this question of unfair terms.
In their report, the commission concluded that many suppliers had terms which discriminated unfairly against wholesalers and the smaller retailer. The prevailing structure of terms and the concession often extended by suppliers of making small deliveries of goods at frequent intervals to individual branches of multiples did not encourage economies in distribution and did not reflect the true savings which occurred in making large deliveries. The commission considered that these abuses should be set right in the public interest by means of a ministerial order under the restrictive practices legislation.
There were a number of other recommendations generally designed to restore fairness in the trade. They dealt with such matters as the registration of terms, a ban on advertising allowances and a prohibition on below-cost advertising of grocery goods. An order, which had to be slightly amended some months afterwards, was made in 1973 to implement these recommendations.
A frank assessment by the Examiner of Restrictive Practices in a report to the commission in November 1974 was that the order had done little to change the structure of terms and conditions in favour of the wholesaler and smaller retailer. The examiner gave the following reasons in his report. In the first place suppliers complained that the order did not state clearly what changes they were required to make in their terms and conditions but placed the onus on them of deciding what weight to put on delivery costs. Their assessment of these costs did not in general coincide with that of the wholesalers who felt that there were major economies in large deliveries. Another difficulty was the fear of the smaller wholesaler who served sparsely populated regions that he might not be able to handle large deliveries—these fears were shared by manufacturers as for many, these wholesalers were their only link with the smaller country retailer. Much more significant was the reaction of a number of supermarket chains and retailer buying groups to the introduction by some suppliers of new terms agreed with the examiner. The suppliers were told that their products would no longer be stocked leaving them with little choice but to go back to their older terms. These were the reasons for which the examiner requested in November 1974 the Restrictive Practices Commission to review this part of the order. In their report of the review, the commission felt that their views following the 1971 inquiry on how fairness might be achieved in terms and conditions were still valid. They felt, however, that a mistaken emphasis had been placed by suppliers on delivery costs leaving them to concentrate on increasing delivery sizes. They agreed that economies could lie elsewhere in distribution and suppliers should be free to take these into account in their terms while still being required to ensure fairness towards all seeking supplies. They recognised that large buyers could prevent a move towards terms which might lessen an advantage that they had enjoyed but felt that this was something best dealt with in more general legislation.
The commission were aware that the increased freedom of buyers to import groceries made it necessary that suppliers should not be unduly restricted or prevented from making the most of the advantage they had in being physically close to some of their important buyers. Article 4 of the amending order, made on the lines recommended by the commission, gives suppliers this increased freedom to take account of all the economics of supply and distribution to different buyers, having regard to their own interests, while still requiring them to operate equitable terms.
In their report of the 1971 inquiry the commission had recognised that the purchasing power of certain buyers was used to extract very favourable terms from suppliers. As a remedy they felt that the responsibility for complying with published terms should be shared by purchasers. They should, they felt, be prohibited from inducing suppliers to grant them goods on terms other than their published terms and conditions. The order implemented the commission's recommendation but in practice it did not work well as important buyers obtained goods on more favourable terms and conditions, not by coercing suppliers, but by refusing to pay their bills on time. The commission felt that something needed to be done about this but they felt that the solution did not lie in imposing a general requirement on purchasers to comply with credit terms, rather the unfair or unreasonable taking of excess credit should be prohibited.
I agree fully with the commission that this is a problem that needs to be dealt with. People may argue that suppliers have a remedy in the civil law to obtain payment of debts but the reality is that many suppliers are afraid to make use of this so as not to lose an important outlet for their goods. I believe this fear is a real one and that the creditor's rights in law need to be reinforced by making these abuses of economic power offences. At first sight this practice may not seem unfair but the reality is that it is simply another way of getting goods on unjustifiably favourable terms.
The commission recognised, and there will be little argument about this, that the concern about failure to pay arises only where the purchaser has real economic power which the supplier is understandably reluctant to provoke by pressing for payment. This is reflected in the amending order.
It may be argued that this provision, effectively enforced, will make it less attractive for some purchasers to deal with Irish suppliers and as a result may encourage them to obtain more goods from abroad. I do not believe, however, that the powerful Irish purchaser will be able to make some of the demands on foreign suppliers that are made of Irish suppliers. It could also be argued that it would not be economic for some of the more powerful purchasers to go abroad for their grocery goods on the basis that they may be in a position where they could not handle a large volume of imports economically. I do not believe, therefore, that there will be a strong movement to foreign suppliers and it is to be hoped that the new regime will not lead to this.
I would now like to turn briefly to some of the less important changes which the amending order brings about. First, in regard to fresh and frozen meat the commission felt that the arguments submitted to them by the trade justified treating fresh and frozen meat in the same way as other perishable goods that had been excluded from the order. Article 3 makes this change. The commission were asked to exclude other products but they felt that the added flexibility which the amending order would allow to suppliers would enable them to overcome any problems.
Secondly, in regard to own-label goods, suppliers of these goods were critical of the requirement in Article 3 of the original order that they include their terms for the supply of these goods in their published statement. This might encourage demand for these goods to the detriment of their own branded product and this was hardly in their interest. The commission felt that the provisions in the order about fairness in terms and conditions should continue to apply to these goods but were willing to concede that suppliers' terms for their supply need not be included in their published statement of terms and conditions. Article 4 implements this recommendation and Article 6 implements the commission's other suggestion that the examiner should continue to have power to request details about these goods.
Thirdly, in regard to supplementary terms, the commission, in their report of the 1971 inquiry, were not sympathetic to supplementary terms, that is, terms additional to standard ones often negotiated confidentially with large suppliers. The 1973 order implemented their recommendation that these should not be allowed to become so important as to lessen substantially the benefit of standard terms. There was some difficulty about the interpretation of this provision and Article 4 of the amending order implements the commission's solution to the problem.
Fourthly, in regard to registration of suppliers' terms and conditions, the original order required suppliers to lodge their terms and conditions with the Examiner of Restrictive Practices and to adhere to these. The commission accepted the examiner's argument that this provision did not work well in practice and Article 6 will provide that suppliers need only lodge their terms with the examiner at his request. The amending order also carries out some minor rearrangements of a number of provisions but I do not think these need to be commented on by me.
The unique position of the grocery sector in distribution makes it rather difficult to apply stringent guidelines. This uniqueness, which derives principally from the sector's importance to each and every household and the immediate impact of changes in the sector on household management, will always provide an incentive to competition. It also explains the remarkable growth of the multiple chains and their powerful influence on suppliers' trading terms. The inroads of the multiples have produced a combination of powerful buyers from the traditional system that they threatened. In the middle we have the Irish supplier trying to sell profitably, faced with increased competition from foreign goods and hoping to run his business so as not to alienate any section of the trade. I am confident that the measures contained in the order which this Bill will confirm, together with other provisions of the original orders, will serve to remove some of the greater examples of unfairness in the trade by way of introducing a certain flexibility.
The Restrictive Practices Act, 1972, provides that orders of this kind shall not have effect unless they are confirmed by an Act of the Oireachtas. The Bill now before the Dáil is the confirming Bill which is necessary to give the force of law to the order. The order, however, may not be amended but must be accepted or rejected as it stands.
I think it will go some way to clarify and improve the present unsatisfactory situation resulting from the difficulties with the original order made in 1973. For this reason I have no hesitation in recommending the Bill to the Dáil.
