Dáil Éireann díospóireacht -
Wednesday, 19 Nov 2003

Vol. 574 No. 5

Adjournment Debate. - Price Controls.

Mr. O'Shea

In response to a recent question I put to the Minister for Enterprise, Trade and Employment on proposals to control excessive prices for alcohol, soft drinks and food charged by some pubs, clubs and restaurants, she informed me that she has no plans to reintroduce price controls on any product. She stated that price control was a feature of policy in the 1980s when inflation rates reached over 20% and that it is a policy mechanism which failed, with maximum prices for products tending to become the minimum. The Minister went on to say that she believes that increased competition is the best way to reduce prices and ensure consumers get value for money.

On Monday, however, Ms Carmel Foley, the Director of Consumer Affairs, was quoted as saying that pub owners are reaping the benefits of an industry run like a monopoly and unthreatened by competition. Ms Foley said she believes that customers are continually exploited through high and indefensible prices. The Director of Consumer Affairs further stated that publicans are a privileged group of people who are not susceptible to the same level of competition due to current licensing laws which allow only a set number of pubs to operate. They are abusing their privilege by charging indefensible prices for alcohol and soft drinks in particular, given that there is no excise duty on such beverages. Ms Foley stated that anyone with eyes in their head can see the difference between what they pay for drinks in the supermarket and in the pub.

The State has granted these people an amazing privilege but there is no gratitude for it. I acknowledge the genuine concerns about alcohol abuse, but the regrettable side effect is the unjustifiable enrichment of a small group due to the small number of licences. The Minister for Enterprise, Trade and Employment puts her faith in increased competition while the Director of Consumer Affairs speaks of publicans, who are not susceptible to the same level of competition, abusing their privilege. The gap between them could not be wider. Indeed, the Director of Consumer Affairs went as far as to urge more shops to sell alcohol in a bid to rein in rip-off pricing by greedy publicans.

I raise this issue because a young woman from Waterford city, Maria O'Grady, made representations to me on the matter. The breaking point for her was when she was asked for €6 for a quarter bottle of wine in a city bar three weeks ago. As she pointed out to me, the wine cost €2.50 in the supermarkets, and supermarkets make their profit at that price. Ms O'Grady did not whinge and whine about the situation, which she found unacceptable. She went out, gathered up the evidence and, armed with that, she contacted the media, the Director of Consumer Affairs and politicians. In a structured way she sought a solution.

The prices she has quoted refer to Waterford city but there is no reason to believe that comparable prices are not being charged in other cities and large towns. Ms O'Grady instanced the fact that there is a difference of up to €1.40 in the price of a vodka in Waterford city, that night clubs with cover charges of up to €10 are charging up to €7 for a bottle of Budweiser and €4.50 for a vodka. These very high prices are not charged by average public houses but the fact that excessive profiteering is taking place at all is unacceptable.

The price of soft drinks is also an area which requires attention. Comparisons between supermarket prices and some public house, club and restaurant prices need investigation and action. Maria O'Grady draws attention to the fact that wines which can be purchased in supermarkets at prices ranging from €5.99 to €12.99 are on restaurant wine lists from €25 to €35. She instanced a case where a portion of carrots in a restaurant costs €5.95.

Publicans, like everyone else in business, are entitled to a reasonable level of profit but excessive profiteering is unacceptable. Ireland is no longer seen as a low cost country in terms of our tourism product. The Statistical Yearbook of Ireland 2003 indicates a 7.4% rise in prices in hotels, restaurants and licensed premises in 2002, while inflation was 4.6%.

With regard to the consumer price index, all items increased by 30.5% during the period 1993-2002. Alcoholic beverages and tobacco increased by 52.6% over the same period but the figure for alcoholic beverages alone is not supplied. Restaurants and hotels showed a price increase of 48.9% for the period.

The Minister's position on increased competition being the solution to excessive profiteering does not stand up to scrutiny. The drinks market is far from being a free market because of major restrictions on entry. I call on the Minister to enter into talks with the Director of Consumer Affairs with a view to effectively addressing the unacceptable practices exposed by Maria O'Grady.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. M. Ahern)

I am pleased to have this opportunity to reply to this debate on the prices for alcohol, soft drinks and food being charged by some pubs, clubs and restaurants. On the issue on prices generally, I am pleased to report that the latest figures produced by the Central Statistics Office show that annual inflation fell to 2.3% last month, down from 2.9% in September. While this decrease in inflation is welcome, I recognise that the products to which Deputy O'Shea refers – alcohol, soft drink and food in pubs – have always been stubborn exceptions to the general decrease in inflation. However, the index does show a short-term trend over the previous three months of a slight decrease in prices in this area. I am convinced, however, that with the Government's price strategy this trend will continue.

When visiting pubs and clubs people are entitled to know the prices they are expected to pay. The Retail Price (Beverages in Licensed Premises) Display Order 1999 obliges all premises where alcohol is sold to display the price of certain beers, spirits and soft drinks both outside and inside the premises. This provision gives the customer the information he or she needs to decide whether to enter the premises. The regulations are enforced by the Director of Consumer Affairs whose inspectors regularly visit licensed premises. Prosecutions have been and will continue to be made under these regulations to ensure they are complied with.

To reinforce the information which consumers are entitled to the Government, as part of the Sustaining Progress programme, has initiated a price awareness campaign. The principle behind this campaign is that markets work more efficiently with fuller information and that over recent years consumer price awareness may have lessened. The purpose of the campaign, which will run over the four weeks of November on television, radio, cinema advertisements and national press, is to stimulate greater price awareness among consumers, promote price comparison and encourage consumers to have a greater regard to price in choosing goods and in this way to promote a culture of the "active consumer" and "consumer empowerment". The campaign is being run by the Office of the Director of Consumer Affairs.

On 13 November the director published the results of a price comparison survey taken by the director's inspectors in Cavan and Dublin. The results highlight the sometimes dramatic differences in price for the same product or service in the same town. Although the survey does not cover soft drinks it does cover alcohol. In Cavan, the difference between the cheapest and the dearest pint of Guinness was 9.7%. In Dublin, the difference was more startling at 16.4%. I could also point out even more remarkable differences in food, although this is at retail level and not in a pub or restaurant. There is a difference of 465% in the price of own brand beans between two retail premises in Dublin. This campaign and the director's survey show the need for consumer awareness and the clear benefits for consumers being more active.

There is a link between the various strategies on prices described previously and the role of competition in these sectors. Competition between undertakings is a proven policy which ensures low prices. I have ensured that the Com petition Authority which enforces competition law has the tools to enable it to carry out its tasks. Last year, the Competition Act 2002 was passed which refined and strengthened provisions relating to the operation of cartels, the main focus of price collusion between undertakings. The Minister also ensured that the authority has the staff resources to carry out its functions. This strengthening of competition law and resources, together with consumer power, will provide the impetus for competition which in turn will help reduce prices. For this to work, however, consumers need to be active and price sensitive.

On behalf of the Tánaiste I would like to comment on the constant calls for the reintroduction of price controls. Some Deputies will recall the experience of price control in the 1970s and 1980s when inflation reached nearly 25%. In this period price control covered a wide range of products and services. What people forget is that this regime needed numerous officials to process the price rise applications and to enforce the subsequent prices orders. It needed a whole division of the old Department of Industry and Commerce to provide the administrative back-up to support this system. Even then there was no evidence that price control had any appreciable effect on price inflation. There is also the perception by many that price control contributed to price inflation. The Tánaiste regards this policy as a failed one and she does not intend to reintroduce it. Rather, she puts her trust in consumer power together with competition to reduce prices.