I thank the joint committee for giving me the opportunity to speak to it. I am accompanied by two members of the CCPC, Mr. Brian McHugh who has responsibility for our competition enforcement and mergers function and Mr. Fergal O’Leary who has responsibility for our consumer protection division and policy function.
From our engagement with the sector in recent years, the CCPC is acutely aware of the difficulties beef farmers are experiencing. We are also well aware that competition law and the CCPC have been variously identified both as an obstacle and as a potential solution in resolving the issues. We very much welcome the opportunity to appear before the committee and address some of this commentary as part of the wider discussion of competition law and trade associations. As the committee will be aware, the CCPC has an extensive and important remit across the economy to promote consumer welfare. This involves enforcing more than 40 competition and consumer protection legislative instruments. We are active in a number of markets, including motor insurance, ticketing and public transport procurement. We are also conducting inspections in the motor and retail sectors of pricing and product safety. We have recently published guidelines for the residential care sector and just commenced a major study of the public liability insurance market.
Before I speak about some of the obligations placed on businesses and trade associations by competition law, it is important to state the legality of any conduct or agreement can only be determined by the courts. The CCPC’s role is to investigate suspected breaches of Irish and European competition law and take appropriate enforcement action to deter such breaches and encourage compliance. This means that we cannot give legal advice. We can, however, provide general guidance on the parameters of competition law and hope it will be of use.
Competition is important for businesses, consumers and the economy as a whole. It ensures businesses maintain competitive prices and look for innovative ways to compete. As a result, customers benefit from the best prices and the most efficient and effective products and services. When businesses break the laws enacted to protect competition, the very same customers that can include businesses can lose out. That is where the CCPC steps in. Our role is to enforce competition law. We work to promote competition for the benefit of consumers and the economy as a whole. The objective of this work is to protect the process of competition in the interests of consumers. As the committee will know, the competitive process has delivered real benefits for the economy in growth and jobs. Both Irish and EU law forbid agreements, decisions and co-ordinated business practices which prevent, restrict or distort competition. Broadly, businesses are required to behave independently. This means that they should set their own prices and the conditions under which they are prepared to provide their products and/or services based on their own commercial strategy and circumstances.
One of the most obvious ways businesses compete is on price. Therefore, price-fixing, where competitors secretly agree to charge a certain price or fix a minimum price, is considered to be one of the worst offences under competition law as it leads to inflated prices and consumers paying more than they should. It has a detrimental effect in a market. For these reasons, price-fixing is illegal under both Irish and EU competition law. During the years the CCPC has been active in taking enforcement action against a number of businesses it has suspected of engaging in price-fixing.
While competition is based on businesses making their own commercial decisions, some activities and functions are better suited to collective efforts. Trade associations can provide pro-competitive benefits for their members and grouping by encouraging compliance, setting industry standards and advocating legislative reforms that enhance competition and protect consumers. However, from our experience of engaging with trade associations, we know that their work sometimes involves collective behaviour. This can create a risk of stepping outside the boundaries of competition law. Irish and EU competition law prohibits trade associations and their members from engaging in anti-competitive co-ordinated conduct. Among the activities of concern are co-ordination on pricing, market allocation, collective boycotts, collective negotiations and the sharing of commercially sensitive information such as future pricing intentions. If such co-ordinated practices are allowed, competition between these firms, or in the market as a whole, is lessened. The ability of individual businesses to decide their business strategies autonomously may also be lessened and, crucially, customers, both businesses and individuals, would most probably pay higher prices. Where the buyer is the State, the inflated price is passed on to consumers in the form of higher taxes or cuts in public spending.
Trade associations have the right to represent the interests of their members, but it is important that they take an active role in ensuring compliance with competition law. This means that they must not allow or facilitate commercially sensitive discussions between their members. During the years we have had reason to engage with many associations across all sectors of the economy. We monitor markets and, where we identify issues of concern, our approach is, first, to contact the associations and their members to make them aware or remind them of the boundaries of competition law. If we can bring about compliance quickly and efficiently without requiring enforcement action, we will. Where there is the potential for considerable detriment, we will work with the trade association to obtain commitments stating it understands the requirements of the law. We often assist associations in providing compliance training for their members. A recent example was our engagement with the Irish Property Owners Association.
Turning to the agriculture sector, during the years the CCPC and its predecessor organisations have been very active in the food sector, the enforcement of competition and consumer protection law, the publication of grocery surveys, product pricing inspections, assessing a number of mergers and the fulfilment of the grocery goods regulations. On enforcing competition law, we took a case all the way to the Supreme Court against the Beef Industry Development Society. It centred on an agreement between competitors to reduce capacity in the beef processing industry. The European Union provides a specific and unique status for the agriculture sector. The Treaty on the Functioning of the European Union allows for certain agreements, decisions and practices which in normal circumstances would be considered to be in breach of competition law. One such major exemption allows for the formation of producer organisations. They are agricultural associations that provide benefits for their members, including collective action and co-operation. Recognised producer organisations can benefit from exemptions from EU competition rules for certain activities such as collective negotiations on behalf of their members and planning of production or certain supply management measures. Producer organisations can take different legal forms, including agricultural co-operatives. In Ireland they must apply to the Department of Agriculture, Food and the Marine and undertake certain activities for their members. The CCPC has informed and reminded various trade associations in the agriculture sector about the availability of producer organisation status in competition law.
In the current situation legislation facilitating the establishment of beef producer organisations has been in place in Ireland since 2016. The first beef producer organisation, Glasson Beef Producers Limited, was established in September by the Beef Plan Movement. Producer organisations provide a legal means by which farmers can organise themselves when negotiating with processors on a collective basis. Although it does not allow the market-wide fixing of prices or quotas, an individual producer organisation can negotiate prices with individual processors. Any business acting outside a producer organisation, including meat processors and individual farmers who are not part of a producer organisation, is subject to competition law.
I would like to use the last few minutes in making my presentation to address some of the recent commentary on the issues in the beef sector. The CCPC had no role in the industry talks which took place and, as the enforcement body, we cannot provide legal advice for parties attending the talks. We did, however, engage with various representative bodies, as we have done in many other sectors, to remind them of their obligations and the producer organisation status available to them.
The Department of Agriculture, Food and the Marine also has extensive guidance available on its website to assist. Notwithstanding these exemptions, both Irish and EU law forbid the entirety of businesses involved in a sector from getting together and agreeing to set prices for products or services. Prices must be negotiated with individual processors.
The CCPC must be, is, and always will be, at heart, an enforcement agency. We exercise our enforcement powers independently, in the public interest, with integrity and professionalism. Competition law works for the benefit of businesses as well as consumers. It ensures businesses are free to negotiate and set their own prices, and as the body responsible for the enforcement of competition law, we are committed to ensuring that businesses and consumers in Ireland are protected from the effects of anti-competitive agreements. We are happy to take any questions and provide any further detail that is required.