Vol. 470 No. 4
10 Mrs. O'Rourke asked the Minister for Enterprise and Employment the reason consumers continue to be overcharged in relation to the pricing of magazines, compact discs and books; and the action, if any, he proposes to take, two years on, to address the penal cost to consumers. [19154/96]
First, may I refer to my reply to a related question by the Deputy on 25 September 1996, as reported in volume 469(1) at columns 435-438 of the Official Report, when I reiterated that the only investigation initiated by me in the case of the products concerned relates to the retail prices of magazines imported from the United Kingdom.
As regards magazines, I informed the Deputy in reply to Question No. 151 on 10 October 1996 that I had asked the Director of Consumer Affairs some months ago to undertake an investigation into the prices of magazines imported from the United Kingdom because of the widespread perception that the benefit of the appreciation of the Irish pound vis-á-vis sterling was not being reflected in lower cover prices.
On that occasion I enumerated the principal findings in the Director's report to me, which were that the two main importers-distributors determined the retail prices for such magazines on the basis of a variation of a formula first agreed by the National Prices Commission in 1983; in contrast to the inclusion of an "uplift" of 5 per cent agreed by the National Prices Commission, to compensate for the additional costs associated with the distribution of these magazines here, the distributors had in the meantime increased the uplift to 10 per cent; it was no longer valid for the distributors to rely on a formula which is 13 years old, and which had not been reviewed, to justify current prices; the operation of the complex formula operated by the distributors resulted in the retailers charging the same price, and newsagents are given a guaranteed margin on each magazine and do not compete on price.
I also recalled the circumstances, arising from my consideration of the Director's findings and the outcome of consultations with the two main importers-distributors and retail newsagent interests, culminating in my decision to make a maximum prices order for imported magazines on 9 July 1996; the action by the principal distributor — which in an affidavit had claimed the order would result in an annual loss of profits of £1 million and the consequential loss of 200 jobs on the distribution side of their business — in conjunction with one of the retail newsagent interest, in applying to the High Court seeking an interlocutory injunction, before the order could take effect, and a judicial review; and that the legal advice available to me, was that I should revoke the order.
I revoked the order on 14 October 1996. I have also arranged that the consultancy unit in my Department would undertake an investigation of the cost structure, both wholesale and retail, and operating margins for Irish as well as imported magazines. This investigation is now in progress and comprehends the practice by the distributors of imposing delivery charges, the distribution arrangements for such magazines and the extent to which they are connected with those for newspapers.
May I draw the attention of the Deputy to the recommendation on page 10, paragraph 4.7 of the report by the Director of Consumer Affairs which states "The Directors view is that there is enough to be concerned about in this matter to justify an investigation by the Director of Competition Enforcement...".
The Director of Competition Enforcement is now seized of the matter.
I love the old fashioned term, "is now seized of the matter", it suits the Minister of State's new portly frame.
I could not make such remarks about the Deputy.
It would be sexist if he did, but I am allowed to do so. This matter has been dealt with in the House on a number of occasions and I acknowledge the manner in which the Minister of State was determined to take on the big players. He asked the Director of Consumer Affairs for a report, which he duly submitted. On foot of that report the Minister of State made a maximum prices order and, following legal advice, revoked it. That appears to be the position from his long reply. The Minister of State claimed credit on many occasions for his predatory raids on cartels and, to ensure that consumers, who are being massively overcharged, pay the proper price for magazines, he made a maximum prices order. Why did he revoke it? Does he still believe that consumers are being ripped off by a cartel? The retailers are not to blame, they merely get stick from the consumers. Are consumers being ripped off and, if so, what does the Minister of State intend to do about it?
The Deputy should not impute words to me that I did not use. The term "rip off" is peculiarly the Deputy's unique creation.
The Director of Consumer Affairs recommended that the matter be referred to the Director of Competition Enforcement as soon as such an appointment was made. The Deputy will be aware that legislation has since passed through the House and an announcement was made yesterday to appoint a Director of Competition Enforcement. I am now in the process of referring the matter to him. A formula was agreed between the National Prices Commission and the Department in 1983 which allowed an uplift of 5 per cent to compensate for what was seen to be peculiar about the distribution of magazines here. That 5 per cent became unilaterally 9.8 per cent and I made a maximum prices order to restore the 5 per cent formula agreed with the National Prices Commission. One of the distributors concerned, joined by one of the newsagent associations, challenged this by way of injunction of judicial review, if necessary. On the basis of legal advice available to me I revoked the order. The assertions in the affidavit of the distributor concerned claimed the order would result in an annual loss of £1 million in profits and 200 jobs and the report of the Director of Consumer Affairs did not contain economic data to challenge that. The economic consultancy unit of the Department is carrying out a scientific comparable economic assessment of the matter, which I hope will be available within two months.
Who advised the Minister of State to make the maximum prices order and who advised him to revoke it?
The maximum prices order was made arising from the findings of the Director of Consumer Affairs. It was, however, challenged in court, which the distributor concerned was entitled to do. Before the action came to hearing the legal advice available to me, based on the assertions in the affidavit which the report of the Director of Consumer Affairs did not rebut, was that it should be revoked. The purpose of the assessment being carried out by the economic consultancy unit is to establish the facts in terms of either the implications of that decision or the price of British magazines here compared to the United Kingdom. No such economic assessment has been done in recent years. The Director of Consumer Affairs carried out a survey of the facts of the matter, but the economic basis asserted for the change in Eason's affidavit was not dealt with in the report of the Director of Consumer Affairs.
In the uncomfortable radio interview between the Minister of State and Mr. Brian Farrell, which I was lucky enough to catch one Saturday morning, the point was made regarding costs that it is as far if not further from London to the Hebrides as it is from London to Dublin. There is no satisfactory explanation as to how or why the Minister or others, and I rather suspect others, bowed to pressure from outside influences in making this extraordinary change from introducing a maximum prices order and then revoking it when the big boys barked. Was the same legal advice not available to the Minister when he introduced the maximum prices order as when he revoked it? As the Minister of State in charge of consumer affairs, Deputy Rabbitte has faltered on the path of consumer rights in this matter. I will withhold judgment until the Minister of State receives the economic report.
I thought I would be safe on a Saturday morning and would get away without being heard by the indefatigable Deputy. Clearly, that did not happen but I can assure the Deputy that, whatever about Brian Farrell, I was quite comfortable.
The Minister of State was not.
It is not a case of the big boys barking but of the legal advice that was open to me. The Deputy is right. Let us see what an economic evaluation will throw up. Claims have been thrown around like confetti at a wedding about the extent to which, to use one of Deputy O'Rourke's terms, the consumer is being fleeced. If the consumer is being fleeced as alleged, and I have an open mind on it, then the economic evaluation will bear that out. I can assure the Deputy that I will deal with that when it comes in.
