I move: "That the Bill be now read a Second Time."
The Competition Bill, 1991, represents a central instrument in this Government's programme to revitalise the economy, to encourage growth and thereby address the most pressing problem facing us all — unemployment.
It will bring about a fundamental change in the basic structure of the market place by introducing into it a statutorily protected requirement for competition. Competition is fundamental to a growing economy. It is the life blood of an efficient market — a dynamic regulator without which everyone suffers. When competition is present, resources are allocated efficiently, innovation and enterprise prosper, and consumer welfare is safeguarded. Without competition firms may become dominant and bleed the economy. Without competition cosy cartels can emerge and share markets to the detriment of consumers and suppliers alike. Without competition a dominant market player can abuse his position to prevent new players entering the market place or to undermine successful companies. Without competition stagnation can infect a firm, an industry and the economy as a whole.
The objective of this Bill is to ensure that we have a properly competitive economy. I am convinced that this can be achieved by constantly exposing all Irish firms to the stimulus of competition. Without such a stimulus I believe that our economy will continue to under-perform, that we will be doomed to the economic periphery of Europe and that unemployment will remain endemic.
Competition is required throughout the economy in production and in distribution, in manufacturing and in services. All firms act as both suppliers and consumers in different market places. If a firm has to pay too high a price for its professional services or its raw materials due to some cosy arrangement up the line, then the goods and services that it produces will carry unnecessary costs. Such additional costs can and do cascade through an economy making domestic products uncompetitive.
The aim of this legislation is to address this problem at the core and prevent these additional costs infecting our economy and reducing our competitiveness. By addressing this fundamental weakness in our economy I am convinced that Irish firms will increase their international competitiveness and not only withstand the pressures of the Single Market but prosper within it.
Competition rules of the type provided for in this Bill are a characteristic of dynamic prosperous economies. It is by no accident that economies such as those of the USA and Germany are so successful. They recognise the importance of the market as the machine for economic growth and the need to protect it by ensuring it is well oiled by competition. The two key items of legislation in the United States to protect competition are the Sherman and the Clayton Acts which were enacted 101 and 77 years ago, respectively. This legislation and this policy have withstood the test of time and their impact is reflected today in the extraordinarily prolonged strength of the US economy.
The beneficial impact of competition has been recognised from the outset in the European Community also and market protection mechanisms are incorporated in the Treaty of Rome through Articles 85 and 86.
In contrast, the impact of failure to protect the market place can be seen throughout the world where it has led to stagnation and exploitation. The free market economies of certain South American countries have shown the long term damage of such failure where the basic fabric of their societies has been eroded and significant comparative advantages dissipated.
The Programme for Government includes a commitment to the introduction of legislation to give effect in domestic law to provisions similar to Articles 85 and 86 of the Treaty of Rome after the Fair Trade Commission presented a report to Government. This Bill delivers on that commitment.
The Bill is a significant part of the effort being made by the Government to prepare Irish companies for the increased competition which will follow on the completion of the Internal Market in 1992.
The rules contained in Articles 85 and 86 already apply to those sectors of the economy which are engaged in trade at Community level. There is no reason any sector should be sheltered from the discipline which these competition rules create. It is interesting to note that those sectors of the economy which have been exposed to competition are the most dynamic and have made a real contribution to economic growth.
The argument in favour of competition is not an academic one but rather is founded in the need to see the greatest possible degree of sustainable economic growth alongside consumer welfare. These twin aims are complementary. It is possible to artificially stimulate economic growth but this always imposes a cost either directly on the consumer through loss of welfare or indirectly through the tax system.
In its study of competition law, published at the same time as this Bill, the Fair Trade Commission in discussing the specific benefits which might be expected to flow to Ireland from introducing a more active competition policy stated, in Chapter 3:
Much of domestic activity may have been insulated from competition up to now. This is the case in particular with services. The development of full competition in most sectors within the EC is very likely. By acting quickly to bring about competition at domestic level, it is possible that Irish enterprises will improve their prospects of survival and development in the future;
Because so much of economic activity has not been subject to competition law, it might be expected that the benefits of changing the law will be very significant in the early years and will give a substantial boost to the economy;
The stimulus, and the experience of competition in the domestic market should better equip Irish enterprises and, particularly, Irish management to participate actively in world markets. One of the features of the successful exporting economies, Japan and Germany, is the intense competition in their home markets.
I agree with this assessment of the commission.
The only ones who should fear competition are the inefficient and those who conspire to deprive the consumer of the benefits to which he is entitled. I hold no brief for either of these groups and I trust that no one else in the House does.
It is of significance that the Programme for Economic and Social Progress recognises that “a modern efficient market economy requires a satisfactory legal framework in the area of... competition policy”. Specifically, the programme points out that the application of the same competition rules as already apply to those engaged in trade at Community level, will stimulate competition in the remaining sectors of the economy, so that the traded sectors will not have to bear the costs imposed by anti-competitive practices in more sheltered local businesses.
Existing legislation is based on the concept of what is called a control of abuse system. It does not ban any particular activity until it has been investigated. Such investigations have been undertaken on a sector by sector basis and have led to the making of restrictive practices orders for particular sectors. However, large areas of the economy have never been subject to investigation much less to action. This type of fragmented and piecemeal approach needs to be radically changed. Anti-competitive practices and agreements and abuse of dominant positions that operate in domestic business activity need to be outlawed as they are at community level under the Treaty of Rome. In order to provide a comprehensive, but not confusing, system the former Acts and orders are being replaced.
I will not detail here the numerous and time consuming steps that are usually involved in taking action against anti-competitive practices under existing legislation. I have done so in this House on a number of occasions in the past and Deputies, no doubt, will be familiar with them at this stage. It is clear that the difficulties and delays are considerable.
The Fair Trade Commission have made clear their support for the application of the principles of Articles 85 and 86 to domestic business. However, the commission's report took an approach to administration and implementation that was very closely based on the European Community model. While the philosophy behind Articles 85 and 86 is fully acceptable to me I consider that administration need not follow the Community model but should be adapted to our own circumstances. Indeed given the differences between the role assigned to the European Commission under the Treaties and to various organs by our Constitution, it would be impossible to replicate the Treaty system exactly.
Given that the central idea of the Bill is drawn from the Treaty of Rome, I cannot describe what is proposed as totally novel. Indeed, a number of proposals have been introduced in this House which had the same objective as this Bill. In the preparation of the Bill I have examined these earlier proposals. There is a necessity in legislating to ensure that any new system works and I have tried to take account of the comments made about earlier ideas. To the extent that there is novelty in the Bill it relates to its approach to administration and implementation. This can be seen as the detail of the Bill is examined.
Part II of the Bill, comprising sections 4 to 9, is the heart of the Bill. Section 4, in line with Article 85 of the Treaty of Rome, prohibits and makes void anti-competitive agreements, arrangements and practices. A list of examples is given that includes price fixing, sharing markets and price discrimination. This list is not exhaustive. The section allows exemptions from this prohibition to be given by the competition Authority. Exemptions can only be given if the benefits of the agreement outweigh the negative effects of the anti-competitive elements in it. An essential feature is that consumers must have a fair share of the resulting benefit. In no circumstances can an exemption be given if it would allow the possibility of the elimination of competition in respect of a substantial part of the products or services in question.
Section 5, which is based on Article 86 of the Treaty, prohibits the abuse of a dominant position in trade in the State or a substantial part of it. Unlike section 4, there is no possibility of an exemption being granted against this prohibition. The Bill will not allow, under any circumstances, the abuse of a dominant position. I think I need to say something in detail here about what is meant by a dominant position. I am prompted to do so by what I have seen, particularly in recent times, of over casual and careless use of the term. The term "dominant" has been used by people to describe the position of companies that are not dominant but at that moment are disliked by the speaker or writer.
"Dominant position" is not defined in the Treaty of Rome and no definition is offered in this Bill. It is not possible, in advance, to set precise criteria such as percentage market share that would allow dominant positions to be defined for all markets. Very few markets are so static as to allow that sort of analysis. Although not defined in the Treaty the concept is clear.
In a number of cases the European Court of Justice has addressed this issue and defined a dominant position as an economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained in the relevant market by giving it the power to behave, to an appreciable extent, independently of its competitors, customers and ultimately of its consumers. This description clearly brings out the point that it is the issue of relationships within a market that are central to determining whether there is dominance.
Finally, I want it to be clear that it is the abuse of a dominant position, and not the existence of such a position that is prohibited here. A dominant position can exist so long as it is not abused. Behaviour in the market is the issue being addressed. It is quite clear from this that there is no conflict between competition policy as expressed in the Bill and the industrial policy which the Government continue to promote.
The enforcement mechanisms proposed in the Bill are designed to ensure effective action without imposing undue burdens in compliance or enforcement. The system will be transparent and objective. Section 6 allows any person who suffers loss in consequence of a breach of sections 4 or 5 a right to damages or an injunction to restrain further damage. It offers an advantage over existing arrangements because it gives a direct remedy to those aggrieved and does not require action by any official authority.
The competition Authority, which is dealt with in Part III of, and in the Schedule to the Bill, will decide whether exemptions in respect of restrictive agreements should be granted. The procedures to be followed are set out in sections 7 and 8. In order to ensure transparency these sections provide that decisions on applications for exemptions made by the Authority will be published. Their decisions will be open to review by the High Court as provided in section 9.
Actions for enforcement, whether initiated by private individuals under section 6 or by the Minister for Industry and Commerce, will be decided on by the courts.
Section 10 establishes a new competition authority, whose principal functions I have already outlined. The Fair Trade Commission will be abolished. Section 11 allows the Authority to carry out studies at the Minister's request. Section 12 requires the Authority to report to the Minister for Industry and Commerce each year and that he publish these reports.
The concept of control of monopolies, with mechanical and artificial criteria for determining when they exist, as provided in the Mergers, Take-overs and Monopolies (Control) Act, 1978, will be replaced by a ban on the abuse of a dominant position. Section 14 sets out how this will be done if there is a fundamental structural problem arising. This provision is supplementary to Part II, which concentrates on behaviour, and I expect it to be used only in the gravest of cases, if at all. The corresponding provisions of the 1978 Act were never used.
The introduction of these clear concepts and simple mechanisms will make much of our previous restrictive practices legislation redundant. These Acts and Orders can be repealed. This is provided for in section 22.
The Bill will also amend some of the provisions of the Mergers, Take-overs and Monopolies (Control) Act, 1978. Experience with its operation, particularly in recent years, has demonstrated the need for certain changes. These changes are principally in the area of timing of notifications, the supply of information to the Minister for Industry and Commerce and enforceability. Sections 15 and 16 deal with these points.
The criteria against which a merger is to be assessed by the competition Authority are set out in a clearer fashion in section 17 than was the case in the Schedule to the 1978 Act. A change will also be made in respect of publication. Under the 1978 Act reports of the Fair Trade Commission on merger cases have not been published. Reports on such cases by the competition Authority will be published, but confidential business information will not be discolsed. This will ensure that assessment of significant merger proposals is carried out in a transparent way.
The 1978 Act will be amended, by section 19, to take account of the EC Regulation on the Control of Concentrations. This Regulation, No. 4064/89, which has been in force since 21 September 1990 gives the EC Commission exclusive jurisdiction, with some rare exceptions, over very large crossborder mergers in the Community.
Parts I and V of the Bill contain standard provisions in relation to citation, commencement, repeals, expenses and deal with authorised officers. The Schedule, as I mentioned earlier, sets out the detail of the competition Authority's composition, rules and powers.
To the extent that there has been public comment on the Bill since its publication, such comments have very largely been positive. I welcome this response and I have no doubt that it will be reflected in contributions to the debate here. I hope that a positive response will speed the passage of the legislation which I hope, with everyone's co-operation, to be completed by the summer.
The question may be posed whether this Bill will solve all competition problems. The temptation is to claim excessive credit and answer "yes", but that is unrealistic. The truth is that it will never be possible to deal with all competition problems to the satisfaction of everyone. However, this Bill so improves the present unsatisfactory system that I have no hesitation in promoting it. Its coverage should be universal as far as principles are concerned. The Bill is relatively short and sets out as clearly as possible how the essential objective of introducing a modern concept of competition rules is being proposed. I will consider any proposals for refinement of the system envisaged in the Bill but its thrust and the essential principles it contains should not be altered.
Accordingly, I commend the Bill to the House.