Vol. 404 No. 1
24 Mr. Barry asked the Minister for Industry and Commerce the action he proposes to take to prevent another price war in the bakery industry, in view of the fact that the last bread price war brought about the closure of 23 bakeries with the loss of nearly 1,400 jobs.
I take it that the Deputy is referring to the recent round of intensive price competition between the retail multiples in respect of bread and other grocery items. I welcome intensive price competition. Grocery retail outlets are free to compete with each other at whatever price levels they wish as long as they do not contravene the Restrictive Practices (Groceries) Order, 1987. This order prohibits below-cost selling of certain groceries including bread.
The Director of Consumer Affairs and Fair Trade, who has responsibility for enforcing the order, is currently investigating allegations of below-cost selling of bread arising from complaints he received during the so-called "price war" referred to by the Deputy. The director has informed me that following consideration of the results of this investigation and the issues raised he will include them in his report to the Fair Trade Commission who are to carry out a review of the 1987 Groceries Order next year.
It is not clear from the Minister's reply whether or not the director found there was a price war. He is just going to include the results of his investigation in his report to the Fair Trade Commission. Did he find there was a price war?
A price war is something one reads about in newspapers. It is not a legal concept. The newspapers tend to put it in banner headlines to suggest that there is something wrong with intensive competition.
It is very real to the people who lose their jobs.
There is no law in this country against price wars or intensive competition. In fact, I welcome competition which we have in most parts of the grocery trade. Unfortunately, we do not have it in many other areas where prices are maintained at particular levels. The only prohibition is on below-cost selling. The director intervened in a recent episode where multiple retailers were giving out vouchers. He advised them to cease that practice, and I understand they have ceased it.
I think the Minister understands the point I am making quite well, even though I am using the words "price war". I mean the selling of bread below the cost of production, which is against the regulations. Did the Director of Consumer Affairs find the supermarkets guilty of that and, if so, has he taken any action?
The findings of the director, were, so far as they were reported to me, that he did not find any below-cost selling of bread. He did not approve of this voucher system that some of them introduced but so far as bread was concerned, he did not find evidence of below-cost selling.
Would the Minister not agree that the figures in Question No. 23 speak for themselves and that many bakeries and retail outlets are engaged in a kind of commercial canabalism over the core product when they have the plant, the technology and capacity to corner what is a huge market, that is, the £139 million worth of confectionery imported to this country last year; that things would be exacerbated by the closure of Gateaux and that there is huge scope there, particularly in view of the "Strategy for the Food and Drink Industry, 1988 to 1992", published by the IDA? That is an area that could be looked upon usefully by the bakeries, given the proper stimuli.
I do not think there are any significant imports of bread into this country. Confectionery, in a broader sense, is important. The question, however, relates to bread and to the bakery industry. We are obviously subject to the possibility of imports. The difficulty with the bakery industry, which has been widely recognised here, is that because for many years there was a heavy State subsidy of bread, the industry never rationalised itself when other similar industries were doing so. Unfortunately, we are going through the situation at the moment where that rationalisation is catching up and there are a small number of highly efficient firms in the country who are able to produce bread at a much lower price than the average. The fact that it is much lower than the average does not mean that it is below cost.
Is the Minister aware that a number of very large modern bakeries are maintaining that the price being charged in some instances by some supermarkets is just not possible without below-cost selling? Is he aware of the figures that have been produced by some bakeries which clearly indicate that a way has been found of getting around the regulation prohibiting below-cost selling? I agree with the Minister that competition is very good and healthy and in the interests of the consumer. Would the Minister not agree, however, that whilst being keen on open competition, we could bring about a monopoly situation which would not eventually be in the interests of consumers, such as the price wars between two large supermarket chains which would ultimately bring about the demise of other supermarkets and particularly the small corner shop? Would the Minister not agree that we must find a balance between open competition and the efforts to create a monopoly which would ultimately destroy competition?
That is what I am always striving to do, but it is not always easy to achieve. The Deputy should look at that trade in the light of the Competition Bill which will be introduced shortly and where I think it will be possible to look at matters a bit differently and where, if there is any evidence of the abuse of a dominant position, it will be possible not just for the Minister but for individuals who might be damaged to take action in regard to such abuse.
That disposes of questions for today.
