I recognise that using rather homely descriptions makes this sound amusing but in practice considerable difficulties could arise. This will mean that people will understock seasonal goods that are not either Christmas cakes, Easter eggs or Hallowe'en bracks, because there is no point in being left with stock on hands for the whole of the Christmas holidays. If plum puddings are stocked in a supermarket and they find that they have plum puddings on their shelves on Christmas Eve, they have to get rid of them and the way they get rid of them at the moment is by marking them down substantially. There is no point in hanging onto them until the supermarket reopens in January because nobody will be interested in the goods that are specific to the Christmas season when the Christmas season is over.
Clearly this applies also to the general category of what might be called "festive goods" that are not related to a particular festival, for example, Christmas crackers. Obviously there will be a much bigger sale of those before Christmas than after Christmas. One might say that shopkeepers should be able to sell them after Christmas because there will be other parties going on. Even though that might be true, if people have ordered too many of them they will not be able to afford to keep them in stock for three or four months waiting for them to be disposed of. They do not stock crackers as part of their normal trade but for the Christmas season only and perhaps for a few weeks before Easter.
What are the shopkeepers to do? They will not be able to give the crackers back to the suppliers. They will have to sell them below cost to get rid of them. Because this Bill excludes all goods except Christmas cakes, Easter eggs and Hallowe'en bracks from the definition of seasonal goods shopkeepers will not be able to sell off goods such as Christmas crackers below cost. I do not see how that definition will be workable. It will lead to shortages of these goods. People will understock seasonal goods for fear of being left with excess stock on their hands. If they sell them off below cost during the last day or two before the feast in order to get rid of them they will break the law. This narrow definition of seasonal goods could lead to shortages of these goods.
I have trouble also with paragraph 11 (2) of the order which states:
Where a sale is effected to a purchaser of two or more items at a price which is less than the amount which he would have to pay to the retailer concerned if the items were bought from him singly, then, for the purposes of paragraph (1) of this Article, the price of each item shall be the amount obtained by dividing the amount paid by the number of items.
Paragraph (1) relates to the ban on below cost selling. I do not understand the meaning of paragraph 11 (2). Does it mean that no quantity discounts can be granted? If the price has to be the number divided by the denominator — which presumably is the price that would be charged for a single item — then that subparagraph, and I may have misunderstood it, seems to bar quantity discounts altogether. I do not think it would be the intention to bar quantity discounts because they are a normal part of trade. Could the Minister explain the meaning of paragraph 11 (2)? What is it about?
I have problems also with the definition of "net invoice price". I could not find a definition of this in my reading of the order and perhaps the Minister could guide me as to where I should look for the term "net invoice price". Apart from that, it may be that paragraph 2 (2) of the order is the definition and if that is so, I can be reassured.
During the debate I said I had a problem with this section but the Minister did not deal with it in the course of his reply. This order could lead to a diversion towards imports in the grocery trade in Ireland. Let me explain why. As I understand it, the net invoice price is the price written down by the supplier in a register as to what is the official price he is charging which he has to keep for inspection and of which he has to supply details to the examiner. The "net invoice price" is the official price and goods may not be advertised or sold below that price. From my reading of the Bill and from what the Minister said essentially that is what it means. However, I see a problem here.
If a person has a chain of supermarkets, and there are such, with branches on both the north side and south side of the Border, he is able to buy goods in the North for an outlet in Northern Ireland. After buying the goods he is then able to put them in an outlet in Ballymun. The goods can be sold off at a price which may appear to a competitor supplier in the South to be below his cost. He can complain to the Examiner of Restrictive Practices that imported goods being sold by this outlet in Ballymun are in his view being sold below cost. How can the Minister find out what the cost is? In this case, the net invoice price will be the price charged by the Supermarket Company, Northern Ireland Limited to the Supermarket Company, Republic of Ireland Limited. They can put down any price they like. How will the Minister be able to go behind that? He will not be able to inspect the books in Northern Ireland and he will not be able to inspect the books of the supply company in Northern Ireland because they are both outside his jurisdiction.
There is going to be problem in this regard. Many supermarkets may sell below cost and when it comes to choice customers might prefer to deal with a supermarket which competes on price rather than with a supermarket which competes by means of rip-offs in the form of competitions, draws, and trips where nobody knows what the chances are of success or how much extra they are paying on their groceries in order to qualify for these free draws, trips and so on. Consumers may prefer to buy from supermarkets which give them a lower price.
Many people may attempt to continue with below cost selling and it would appear, from reading the order, that in order to do that, all they will have to do is buy the goods from their company operating outside the jurisdiction. If they do that the invoice can say anything they like and the Examiner of Restrictive Practices will not be able to go behind it because the original transaction, buying from the supplier, will have taken place outside the jurisdiction where the examiner will have no investigative power. Therefore, this below cost selling ban could lead to a flood of imports and jobs will be lost and not saved in the food industry.
I am not, as the Minister said during his Second Stage speech, objecting on principle to below cost selling; principles do not come into it. What I am concerned about is the effect of this in practice. If the effect of it is to increase imports, I do not really mind about the principle as to whether there should or should not be below cost selling in some ideal world. This is the real world and it would have the effect of encouraging imports. Perhaps the Minister would address himself to this question.
Paragraph 12 of the order bans below cost advertising and it states:
... a retailer, wholesaler or other person acting on behalf of a retailer, shall not publish or display, or cause to be published or displayed, an advertisement for the sale of grocery goods—
which by the way are not defined,
—at a price that is less than whichever of the following is applicable...
which essentially is below cost. It goes on to say:
Paragraph (1) of this article shall apply in relation to an advertisement whether or not it contains an indication of the price of the goods to which it relates...
I do not know how you could advertise that something is being sold below cost without saying the price at which it is being sold. What is subparagraph (2) about? It is saying that it shall be illegal to advertise something below cost at a particular price and that will apply whether or not the price is indicated. It is confusing to say the least.
There is another curiosity here and I do not know if it is actually a loophole in the legislation which could lead to a flood of business into own brand goods and this is contained in paragraph 13 (1) (c) of the order. Paragraph 13 relates to the obligation on suppliers of goods or manufacturers to prepare and maintain a statement in writing prescribing the terms and conditions upon which the grocery goods are being sold. A key to the enforcement of this order is that without the list you are not going to be able to enforce it. Paragraph (c) states that the requirement:
Does not apply to the sale of goods that have been processed, blended, canned, packed or otherwise prepared in accordance with the specification and requirements of the purchaser, and, for the purposes of resale, are not given the name or a brand name of the purchaser.
I do not understand that. What is that all about? How would there be a situation in which a purchaser would give specifications for goods but not put his own brand on them? What type of situation is this concerned with? Is there any danger that this could be construed as not requiring a list to be kept in respect of own brand goods.
I have another problem with regard to paragraph 15 of the order. This is where we will have essentially subjective law making by the examiner without any recourse to this House or to objective standards. I do not believe it is appropriate that the subjective judgment on a commercial matter of a functionary should have the possible effect of making somebody guilty of a criminal offence. It is important for the rule of law, which is one of the essential underlying basics of civilisation which distinguishes countries of western Europe and North America from others, that people should be at risk to their freedom or to forfeit of goods or whatever only on the basis of commonly understood and well established rules that anyone can read and know before doing a particular thing.
Paragraph 15 — and I do not want to exaggerate it — flies in the face of the basic underlying principles that constitute the rule of law, prior objective and comprehensible rules. Paragraph 15 states:
If the Examiner is satisfied that the operation by a supplier of the terms and conditions contained in the statement... constitutes unfair discrimination in favour of any or against any wholesaler or retailer or any section of the grocery trade comprising the business carried on by wholesalers and retailers, the supplier shall, at the request of the Examiner, make such amendements to the terms and conditions aforesaid as may be specified by the Examiner being amendments calculated to eliminate the alleged unfair discrimination.
If the examiner thinks on his own authority that something is unfair he can say "stop" and if you do not stop he can prosecute. What criteria are there to guide him — that little word "unfair". What is unfair as far as I am concerned might be entirely fair as far as Deputy Yates is concerned. What is unfair as far as the Minister of State is concerned might be quite fair as far as Deputy Gibbons is concerned. Unfairness is the quintessential subjective matter. It means what you think it means. It means what you say it means and it could mean something entirely different to somebody else.
Here we have a situation in which the examiner will be able to say: "Stop, it is unfair", blow the whistle and put you in jail if you do not agree. I do not believe that is fair. It is our job to decide what is fair, not the examiner's. We the legislators make the rules, not some delegated person.
It is not unreasonable to advance the excuse which the Minister may do. If the examiner is going to take any sanction in this matter he will have to go before a court and take a prosecution against somebody for not abiding by his instructions about the terms in which they supplied certain goods. If we rely on the courts, the courts will be deciding what is fair and unfair in commerce. The courts can decide about facts; they can decide what the law means, but it is certainly not the function of the courts to decide what is fair business and what is unfair business.
That is the responsibility of this House and it seems we are failing to fulfill our responsibility in this matter. The House is being asked to give Carte blanche to the Examiner of Restrictive Practices, the worthy person that he may be, to blow the whistle on some transactions and let other through all on the basis of his interpretation, his own subjective interpretation of the little word “unfair” which can mean what anyone wants it to mean. That is not good law. This House and the Minister should say what constitutes unfair discrimination not in terms of unfair discrimination meaning unfair discrimination like our definition of “groceries” earlier where we said that groceries means groceries. This House must decide what is “unfair” and what is “fair” to give some guidance to the examiner so that we do not get a breach of the principle of the rule of law in this area.
My final point, and I have touched on it already but I wish to make it separately on Committee Stage, is that I am worried that once we have got into the area of regulation we will be swamped by it. I acknowledge that we are in it already as there is a ban on below-cost advertising and this is just a further development. It is like going into a swamp. The more you step into it the further you have to step into it. You keep getting deeper and deeper into the swamp of regulation and before too long you do not know where you are yourself. I think what will happen is that we will have a ban on below-cost selling and there will be no below-cost selling except below-cost selling of imports. In my view this will mean we will have more imports but we leave that aside for the moment. What will happen? The three or four supermarket groups who are competing for market share will not be able to sell below market cost and will ask what will they do. Perhaps they might offer a free holiday in Miami to customers who buy from their shops. The supermarkets will not say that you have one chance in 45,000 of qualifying for this free holiday in Miami or they will not tell you about the type of accommodation or anything like that. However, they will offer a free holiday in Miami. That sort of advertising by competitors is completely opaque. Nobody knows the value of the prizes in the competition they are participating in. Because we are banning below-cost selling, I think there will be a massive shift of marketing resources into all these other gimmicks rather than below-cost selling. I predict that the Minister for Industry and Commerce, whoever he or she may be in 12 months time, will be coming to the Dáil with an order on the lines of "the restrictive practices regulation of promotional activities order" which will state that nobody shall advertise free holidays unless the holiday is up to a certain standard and the proportional chances of winning the holiday are known. When that order is implemented a way will be found around it and a new quiz will be thought up by the supermarket retailers to win market share which will then have to be regulated. It will be like stepping into a swamp — the further you go in the harder it is to get out. I am worried as this is not necessarily the course on which we should be travelling.
