I am calling on the Minister for Industry and Commerce to reply to the Second Stage debate.
Restrictive Practices (Confirmation of Order) Bill, 1987: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
I am glad that this Bill has got a broad, even if at times guarded, welcome from the House. I thank Deputies for their substantial comments both on the general issues in relation to the grocery trade and on the details of the order. I outlined in my opening statement why I had made the order which is to be confirmed by this Bill. It would be useful to repeat some of those points now before dealing in detail with the comments of Deputies on the Bill.
On a point of order, the Minister is reading from a script and it is customary to circulate copies of ministerial scripts. May I have the guidance of the Chair on that matter?
I am reading from notes but I will get a copy of them for the Deputy if he wishes.
I would be very grateful to the Minister for a copy of them.
I believe that the new provisions in this groceries order will go a long way to redressing the balance of power in the grocery trade, particularly in the area of negotiations between manufacturers and multiples and in the area of competition between multiples and independent grocers. As I said in my opening statement, it has become apparent in recent years that the balance of power has swung too far in favour of the multiples. The over-concentration of buying power in few hands has obvious dangers for manufacturers, for the trade generally and at the end of the day for the ordinary consumer.
Deputy Bruton, in his contribution, went some way in questioning the basic principle of intervention in the market, the objective of the order and its likely effectiveness. I would find myself in agreement with a number of the points made by Deputy Bruton partly, perhaps, because I think he shares the strong view which I have that competition is the most effective way of ensuring economic efficiency and I believe he shares my dislike of regulatory interventions in the market.
Since opening the Second Stage debate on this Bill the House has had an opportunity to discuss the fundamental principles underlying competition legislation in the debate on the Restrictive Practices (Amendment) Bill, 1987, which took place last week. At this stage I would just like to deal briefly with what the Deputy referred to as the vagueness and subjectivity of the criteria in the Restrictive Practices Act, 1972, which are the bases on which the Commission make their recommendations. These criteria are necessarily general because they are intended for global application. In practice, in a review such as the Commission completed of the grocery sector, the general criteria are converted into specific recommendations on which the Minister of the day must make a judgement, based on, in the words of the Act, the exigencies of the common good. This system of examining trading practices, whatever its faults, has the clear advantage of allowing an objective body to obtain evidence and reach conclusions on which I, as Minister, and ultimately the Oireachtas can act.
In so far as the objective of the order is concerned, Deputy Bruton was critical, unfairly in my view, of the fact that the Commission could not state in their report the precise market shares of the multiple supermarkets and could not say exactly what the effect of the order they were proposing would be. It is not the fault of the Commission that reliable statistics are not available on the breakdown of the grocery trade; nor were the Commission seeking to establish any particular percentage as the maximum permissible share for any multiple or group of multiples. Any attempt to set such a maximum share would, in my view, be a very gross and blunt instrument for dealing with the problems which exist in the trade; it would represent the most drastic interference possible with the operation of the market and would give rise to far greater problems of enforceability than anything arising under the order I have made.
Nor did I suggest it.
The Deputy should read what he said. The Deputy referred to all the orders that had been made over a period and had not been effective and asked why we should come along with another one. That was the basis of his argument. The Deputy should have a look at the debate.
I did not suggest fixed market shares.
That was my interpretation of what the Deputy said. If he said differently he will have an opportunity to correct it.
The Minister was not listening to me.
It is precisely because the Commission want to see the market continuing to operate — although with the adjustments now incorporated in the Groceries Order — that they cannot foretell with certainty what the precise effects of the new provisions recommended by them will be. They provide in their report a balanced presentation of the advantages and disadvantages of the course which they recommend. It is as a result of that assessment that I made the order.
I cannot let pass Deputy Bruton's claim that my announcement of a ban on below cost selling and failure to follow up quickly with confirming legislation may have caused the recent price war. In the first place I would point out that it has been the custom of the major multiple groups to launch one of these so-called price wars every year at about this time. It is clearly a marketing ploy used in the lead up to the Christmas season. In the second place I would remind the Deputy that I introduced this Bill in this House on 4 June last. It was my hope, as I said at the time, that it would have been passed before the summer recess and, indeed, if the Whips had been able to agree arrangements at the time, that would have been possible. I regret that it was not.
I might also mention that the shenanigans of a new political grouping in the House wasted a considerable amount of Dáil time in voting on the Order of Business and so on. Indeed, they carry some of the responsibility for this Bill not being taken before now.
The same people do not appear to be in the Chamber for the debate.
It looks like that. Deputy Bruton — and other Deputies — raised the question of what constitutes "cost" for the purposes of the legislation. The order clearly spells out that cost is to be regarded as the net invoice price of the goods concerned, including value added tax.
"Net invoice price" is further defined as being the price at which grocery goods are supplied having regard to the invoice relating to the delivery which is the same date with the sale of goods or with the relevant advertisement or where no such invoice exists then such net invoice price shall be calculated having regard to the invoice which relates to such a delivery and which is that issued most recently prior to the sale of goods or the advertisement's publication. The order further specifies in article 11 that where charges in respect of carriage, insurance or other costs not included in the relevant invoice have to be paid by the retailer to the supplier to obtain delivery, then this can be added to the net invoice price and that where a sale takes place more than four weeks after a supplier's list price changes and no invoiced delivery has taken place in the meantime then the "best list price" will be substituted for "net invoice price".
Where goods are invoiced in a foreign currency, then the equivalent in Irish currency shall be calculated at the exchange rate quoted by the Central Bank as the official exchange rate for the Irish pound on the date of the relevant invoice or, if no official rates are declared on that date, at the latest previous mid-closing exchange rate.
I should point out that these definitions are exactly the same as those included in previous Restrictive Practices Grocery Orders which were the basis on which a number of successful prosecutions for below-cost advertising have been brought. In fact the definition was specifically put to the test in a High Court action in 1979 and that case established beyond doubt the meaning to be attached to net invoice price.
It has also been suggested that a ban on below-cost selling will lead to an increase in imports or to attempts to circumvent the legislation by importing grocery goods. I do not agree. I do not believe that the multiples, by and large, buy Irish manufactured products at a cost to themselves. Where it is cheaper to buy Irish they do so and this, I believe, will continue to be the case.
As regards the second assertion it will be the case that where products are offered at a price which might appear to be below cost, the Examiner of Restrictive Practices will investigate. If there then arose any suspicions that the invoices presented were not the true cost, then the transaction would have to be looked at in its totality and a check would have to be made to see whether supplementary invoices had been received or supplementary payments made. There would, therefore, be little to be gained by producing fraudulent or misleading invoices.
I might also mention here that I have introduced a new provision, which did not exist in previous grocery orders, that invoices or other documents produced by an officer authorised by the examiner should be accepted by the court without requiring that they be proved by the purchaser or, more particularly, the supplier. This is to get around some difficulties which had been experienced in getting suppliers, particularly those outside the jurisdiction of the courts, to attend cases in order to prove invoices. The change which I have made will make it much easier for the examiner to pursue cases where the supplier in question is based or trades outside the State. I should add that in the Restrictive Practices (Amendment) Bill which is also before this House at present I propose to transfer all powers of prosecution from the Minister for Industry and Commerce, where they reside at present, to the examinter. This should help to speed up the prosecution process and extend the examiner's power.
Deputy Bruton also raised the question of the exclusion which I have made in the order in respect of seasonal goods. On this I should point out that in making the exclusions I have gone beyond the recommendations of the Restrictive Practices Commission and, as someone who is opposed to the general principle of a ban on below-cost selling, I thought this might be welcome to the Deputy. However, there is a danger that if too many products are excluded from the ban the purpose of having such a prohibition will be defeated and, accordingly, I have included simply what I regard as the minimum of exclusions necessary. I trust the Deputy will see the logic of this even if he feels that the number of exclusions should be greater.
I do not see the logic.
The Deputy also wondered why articles 3 to 9 were in the order. The reason is quite simple. The order is intended to be a consolidation one and it is thus necessary that all existing provisions which it is not intended to repeal are incorporated in it. I am sure that the Deputy will agree that it is preferable to have all the provisions in relation to competition in the grocery trade contained in a single order rather than in a number of amended orders.
Deputy Keating and Deputy Spring spoke about the need for greater consumer information and awareness and I am fully in agreement with this. An informed and vigilant public is the best safeguard which we have against misleading and manipulative pricing practices, particularly in a situation where the public resources which may be devoted to monitoring or enforcing legislation are constrained. In relation to the order which I have made I am happy, that a ban on below-cost selling will bring about greater price stability and, in time, through a knowledge of prices, make the consumer more resistant to price changes and more conscious of the real value being offered by different retailers.
Deputy Keating also wondered about the exclusion of fresh meats and vegetables from the order. Basically these have been excluded, as indeed they have been from previous orders, because they are not, by and large, standard products and because their supply cannot be predetermined. Furthermore, in the case of vegetables particularly, they are highly perishable goods and it would be somewhat unfair to expect retailers to dispose of large stocks of deteriorating goods at full price. A time comes in the day when the shelves must be cleared and, if those exclusions were not made, they would not on the shelves causing a serious loss.
The same applies to seasonal goods.
It does not. However, we will agree to differ.
There is no point in selling Christmas crackers on New Year's day.
I thank Deputy Yates for his wholehearted support for the measure. I had hoped that Deputy Bruton would enlighten him on the two different attitudes taken by two members of the same party. I am amazed that Deputy Bruton is so out of date. Perhaps the two gentlemen are part of the problems that have arisen on the Fine Gael front Bench——
This is good stuff. I will set Deputy Doherty on the Minister.
I acknowledge that Deputy Yates has some knowledge of this area by virtue of his chairmanship of the Oireachtas Joint Committee on Small Businesses. I also note that he has withdrawn his Private Members' Bill in relation to below cost selling in deference to this Bill and I thank him for that. He was right to do so, particularly since the order I made contains a number of other provisions also designed to ensure fair competition in the trade.
Deputy Yates also expressed the view that consumers should be able to get the benefit of discounts negotiated by means of long term agreements. I agree that consumers should be enabled to get the benefit of such concessions and, indeed, any other discounts which might be agreed between retailers and suppliers and which may not, at present, be reflected in invoices relating to delivery of goods.
In this context the ban on below-cost selling which I have introduced may actually help to bring this about. In this I am assuming — and I think it is a reasonable assumption — that the multiples in particular will still wish to sell goods as cheaply as possible and that in order to maintain market share they will want to sell at least some goods at or as near as possible to cost price. Obviously this will produce lower and more attractive prices where more of the allowances, discounts or rebates relating to particular goods are transferred to the relevant invoices. It would be my hope, therefore, that we would see an increasing transparency in the trade in this respect.
Deputy Kitt, and a number of other Deputies, raised the question of credit terms. This issue was examined by the RPC in the course of their study and they concluded that in general the terms of credit available in the trade seemed to be unduly favourable to purchasers and that one of the factors which had led to the growth and development of the multiples has been the availability of credit from suppliers. Accordingly, they recommended that suppliers should review their terms of credit and should take into account the normal stock turn of their goods in a retailer's premises. They recognised, however, that given the change in power relationships between purchasers and suppliers it may not be possible for the suppliers in many cases to enforce credit terms and recommended that the examiner should undertake spot checks in the future to ensure compliance with the relevant credit terms. Of course it is a matter for the supplier and the buyer to arrange this but I am sure that all suppliers, and indeed Members of the House, are aware that the credit terms in this country are far more favourable than those in the UK or most other European countries.
Deputy De Rossa raised the question of possible evasion of the order and instanced requests for advertisements in supermarket newsletters as a possible means of circumventing the ban on "hellomoney". I know the case to which the Deputy refers and I would like to make it clear that I would regard any such advertisement as covered by the terms of article 18 (1) (a) of the order which prohibits any supplier from making any payment, allowance, price discount or any other benefit to a wholesaler or retailer in respect of the advertising of his goods.
The Deputy also asked whether there was anything in the order which would prevent supermarkets from refusing to handle South African goods. I can assure him that there is not. The boycotting which is prohibited in the order relates to boycotting in respect of prices or other terms and conditions on which grocery goods are supplied and contains no specifications in relation to the origin of particular goods.
Deputy Cullen spoke at some length drawing on this experience in the trade. I hope he will recognise that I also have a little expertise in this area myself. The Deputy seemed to feel that the present legislation was not the real answer to the problems which are seen to exist in the grocery trade. In this respect I am influenced first of all by the findings of the Restrictive Practices Commission who, as some Deputies have noted, have reversed their previous attitude in relation to the issue of below cost selling which they now see as undesirable in the face of the increasing concentration of buying power in the trade.
I am also swayed by the views of the organisations representing manufacturers and independent retailers in the trade, both of whom see below cost selling as the principal weapon used by the multiples in increasing their market share. Indeed, in a circular issued by RGDATA, the organisation representing small grocers, to Members of this House supporting this present Bill, that body are on record as stating that the legislation will solve 70 per cent of market problems.
Finally, a number of Deputies raised the question of staffing in the office of the Examiner of Restrictive Practices and expressed some doubts as to whether the Order which I have made would be properly enforced. At present the Examiner has a complement of six staff in his office, including one inspector. When, however, the Restrictive Practices (Amendment) Bill which I have already referred to is enacted, the two posts of Examiner and Director of Consumer Affairs will be formally amalgamated and an additional seven inspectors who are at present wholly engaged on consumer legislation, will also become available for deployment in relation to restrictive practice business.
The Director has gone on record and stated public that he expects 100 per cent successful enforcement of the Order. I am entirely satisfied, therefore, that the Order will be closely monitored and strictly enforced by the Director and his staff.
Accordingly, I now request the House to support this Bill confirming and giving effect to the Restrictive practices (Groceries) Order, 1987, in its entirety.
Question put and agreed to.
Could I have a date for Committee Stage?
Now.
Acting Chairman
I now propose that we proceed with Committee Stage.
The order of the House simply says Second Stage (resumed). I have no problem with taking this now but I want to be sure we are not infringing the rights of the other Members of the House who might simply read the Order of Business.
I do not think we would infringe their rights. The Bill is very simple. There are only two small sections in it. I understand that a number of amendments proposed have been ruled out of order because of the type of Bill this is and the order was already made on 27 May and signed.
The order of the House said Restrictive Practices (Confirmation) of Order Bill, Second Stage (Resumed). The order did not say all stages.
That does not stop us going ahead with it.
I submit to the Chair that there is a possibility that other Deputies might have taken it that the only business we were going to transact here was the Second Stage. I am not concerned as I am ready to take Committee Stage now but the rights of the other Members might be infringed.
I submit that Deputies who are interested in this Bill would be here. If we can get confirmation that all the amendments put in have been ruled out, that would explain why Deputies are not here.
I understand I am the only person who tabled amendments and I have been informed that they have been ruled out of order. The Committee Stage does not consist solely of amendments.
This is not a normal length Bill, as I am sure the Deputy will agree. There are only two sections in it. No amendments have been accepted and the order cannot be changed so I do not see that we have any problems in going ahead. The Deputy has agreed to go ahead anyway.
Acting Chairman
We will proceed with section 1.