I welcome the officials from the Department of Enterprise, Trade and Employment: Ms Breda Power, assistant secretary in the commerce, consumer and competition division; Mr. Kieran Grace, principal officer; Mr. Cathal O'Gorman, assistant principal officer; and Ms Julia O'Malley, assistant principal officer in the competition and consumer policy unit. I draw their attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. The Department has circulated an opening statement with a good summary. To get the maximum benefit, will Ms Power outline the main issues dealt with in the presentation?
Retail Sector: Discussion with the Department of Enterprise, Trade and Employment.
Ms Breda Power
I will summarise the presentation.
That will be useful, as it will enable members to spend more time on questions, from the replies to which we receive most information.
Ms Breda Power
The euro has appreciated in value by approximately 35% against sterling in the past 18 months but this has not translated fully into lower prices for consumers. Surveys carried out by the National Consumer Agency have shown considerable differentials in prices between this jurisdiction and Northern Ireland and elsewhere in the United Kingdom of up to 31% on certain grocery items and up to 51% on a selection of certain clothing, household and electrical goods.
The Tánaiste and Minister for Enterprise, Trade and Employment has engaged on a regular basis with the key elements of the retail chain on the reasons for the current North-South price differentials. Initial reasons proffered by retailers focused on the relative cost of doing business in this jurisdiction as compared with Northern Ireland and elsewhere in the United Kingdom. Forfás was commissioned to look at the relative cost of operating here and in the United Kingdom and found that while operating costs were somewhat higher in the South, they would account for a differential of only 5% to 6% in prices between the North and South. It is clear, therefore, that operating costs do not fully account for the current North-South price differentials as revealed by the various NCA surveys.
Following the Forfás report, the focus of the debate has turned to the relationships between suppliers and retailers and the impact of these relationships on retail prices. Retailers contend that sourcing goods is much more expensive in Ireland as against the cost of sourcing such goods in Northern Ireland or elsewhere in the UK, while suppliers contend that they are being continually squeezed by the increasingly difficult demands of retailers. The Competition Authority has been requested to examine how competition is working in the retail distribution sector and whether there are particular practices affecting the supply of goods.
The issue has also been considered at EU level. The European Commission is committed to examining the operation of the food supply and retail distribution sectors. The Department, in conjunction with others such as the Department of Agriculture, Fisheries and Food, intends to work closely with the Commission in its food supply and retail distribution studies, given the importance of both sectors to the economy.
I welcome the delegates and thank them for their work. In the final paragraph of the presentation it is stated the Department of Enterprise, Trade and Employment is working to bring greater transparency to issues preventing lower prices being passed on to consumers. A wing of the Department, the Competition Authority, is, I understand from a report in the Irish Independent , taking action against the Vintners Association and the Licensed Vintners Association because they want to keep prices down. I cannot understand this. We are banging our heads, as I am sure the officials are, to try to bring down prices. However, when organisations come together to bring prices down, the Competition Authority decides to take them to court. What message does that send to other sectors? I do not expect Ms Power to comment, but the view should be articulated that it is not good that a Government agency takes organisations to court for trying to bring prices down.
The detailed presentation refers to the powers provided in section 5 of the Competition Act, in particular, to deal with an abuse of a dominant position. Since Christmas we have spoken to retailers and suppliers and know the powers enshrined in legislation and that aggrieved persons have a right to take a private action, but they are all afraid. Suppliers were invited to appear before the joint committee but none accepted. We wrote offering each the chance to respond anonymously on the manner each of them is treated. We are receiving letters in response. In a reply this morning from one of the largest food companies in Ireland it is stated: "No, we will not respond to the questionnaire because our relationships with our suppliers are too valuable to us." We have absolutely no way of knowing the difficulties in the supply chain. The powers under the Competition Act will not help us because of the fear felt. This is understandable; if X is one's biggest customer, one will not challenge X at a Dáil committee or elsewhere. Retailers, particularly the big multiples, come here like church angels and claim they would never do this but obviously something is going on. Does the Department plan to address this issue which is causing difficulties? We have seen several examples of products made in Ireland which can be sourced more cheaply in England. They leave Dublin, are exported to Liverpool and brought back to the middle of the country at a cheaper rate than is possible in Ireland. This suggests there is a difficulty in the supply chain but we cannot get to the bottom of it because of the fear felt.
I have many concerns regarding the Forfás report. Forfás interviewed seven retailers, two of which are big operators — we did not get the names — and on this basis conclusions on operating costs were reached. These conclusions appear to be driving policy. When the big multiples came before the committee, we tried to find out their margins in the South but they would not give them to us or Forfás. They said it was private commercial information. Without knowing the margins of these companies, we cannot judge their profits in the South, nor will we be able to say whether discounts are being passed on to consumers. In terms of the work it does on the retail side and as the main company authority in the country, does the Department have the power to obtain this information?
I wonder how many government agencies in the world are funded by the government to encourage people to take revenue out of the state, thus lowering government revenue. The National Consumer Agency and the retailers who came before the committee dismissed the survey. It is noted in the presentation that the survey found customers in the Republic were being charged 31% more than customers in Northern Ireland; the Department seems proud of this. The National Consumer Agency survey was a big driver of cross-Border retail sales. I am sure the Minister for Finance, Deputy Lenihan, is cursing the agency as he tries to square many circles before next Tuesday. We have looked at the surveys and many of the retailers which have come before the committee have dismissed the comparisons made. It seems the only savings that can be made by crossing the Border are in alcohol-related products. I would like to hear the thoughts of the delegates on this.
There are many strands to the work being done. The Competition Authority has published three reports on planning in the grocery sector. A lifting of the cap was recommended but none of the stores interested in such a move was interviewed. No local authorities were consulted; nor was anyone in the Houses. However, the authority still made the sweeping assertion that the lifting of the cap would solve all our problems. I am wary of what the authority brings to the table. Where will all of this end up? Does the Department envisage making recommendations, in the late spring to early summer, that we in the Houses can follow up?
Ms Breda Power
The Deputy has mentioned suppliers' fears when it comes to naming certain retailers. This concern was expressed by suppliers at meetings with the Department. This is one reason the Tánaiste asked the Competition Authority to examine the supply and distribution chain. It was a recommendation made in the Forfás study.
When the Competition Authority met the various links in the retail chain, its objectives were to bring greater transparency to the reasons for the price differential on either side of the Border and to increase its understanding of the perspectives of retailers and suppliers. While the authority has certain powers under legislation, a complaint needs to be made before it can take action. I accept that some suppliers are afraid to make complaints in case they are de-listed. The Department hopes that the study being undertaken by the Competition Authority will bring greater clarity to the supply and distribution chain.
The Deputy concluded by asking where all of this is going. I reiterate that the Department is trying to bring greater clarity to all the links in the chain. In the initial stages, when the benefits of the appreciation of the euro against sterling were not being passed on to consumers, the main reason for the continued price differential was the hedging and advance purchasing of goods. In more recent times, we have heard about the costs of doing business in Ireland. That is why Forfás was asked to undertake its study and the Competition Authority was asked to examine the retail and distribution chain. It is expected that the Competition Authority's report will be submitted to the Tánaiste by the end of April. We hope we will have greater clarity on all of the issues when we have examined the report. The Tánaiste will have to decide what the Government will do, from a policy perspective, at that stage. We will have to await the outcome of that process.
Deputy Calleary was correct when he pointed out that Forfás interviewed seven retailers when it was preparing its report on operating costs. When representatives of Forfás appeared before the committee, they made it clear that the report was based on a case study, rather than on a survey. They explained to the committee how they went about trying to verify the claims the various retailers had made in respect of costs. The Forfás study revealed that the cost of doing business is between 5% and 6% higher in the Republic of Ireland than in Northern Ireland and the rest of the UK.
The Deputy also spoke about margins. All companies are obliged to comply with the provisions of the Companies Acts that relate to reporting. Different requirements apply to small, medium and large enterprises. Companies have to file accounts in the Companies Registration Office. The provisions vary on the basis of the size of a particular company. The requirements that apply to smaller companies are not the same as those that apply to larger companies.
I understand those requirements do not apply if a company's headquarters is outside this jurisdiction.
Ms Breda Power
If a company is part of a group that has its headquarters outside this jurisdiction, group returns can be filed. In such circumstances, the company's margins or profits are covered as part of the margins or profits of the group as a whole.
We have no way of knowing what margins are being made in this jurisdiction by such a company.
Ms Breda Power
That approach is in line with the requirements of the EU directive on the filing of accounts, which has been transposed into Irish company law. Such groups file their accounts in accordance with EU requirements.
What are the accounts-reporting requirements that apply to a fully private company that has its headquarters in this jurisdiction? Can we examine the accounts of such a company to see what margins it is working from?
Ms Breda Power
All returns that are filed in the Companies Registration Office can be examined. The extent of a company's requirement to file accounts, and the extent of the detail that must be filed, depends on whether it was established as a limited company or as a non-limited company. I understand that small companies have to file simple statements, such as balance sheets, whereas medium-sized companies have to file profit and loss accounts and balance sheets. I can give the joint committee more details on the legal requirements for the filing of accounts if it wishes.
In terms of margins, it would be difficult. I suppose it depends on what one means by margins. Are we talking about a mark-up on a particular product or a product range, or is it overall profits?
Overall figures are the least we can expect. We probably would not get internal information.
Ms Breda Power
I suppose there would be confidentiality issues for companies as well. Companies might feel that there would be certain confidentiality issues or price sensitive information, if they were to reveal their profit margins. The Deputy mentioned the NCA and the studies. The focus of the NCA and its surveys was to increase consumer awareness. Its surveys have shown that consumers are more price conscious and that they are splitting their shopping basket between the different retailers in the South. Some 37% have indicated a change in their habits. Previously, convenience was a critical factor for consumers when they were purchasing goods, whereas now people are more conscious of the price.
Is that due to the fact that we are all on tighter budgets rather than the work of the consumer agency? We have less money. It is not the consumer agency that is driving us to shop around.
Ms Breda Power
We are all very conscious, Deputy Calleary is correct. However, a follow-on study by the consumer agency revealed that, as a result of the consumer surveys and highlighting the differential in the different stores, people were becoming more conscious of prices.
Deputy Calleary mentioned the three studies that the Competition Authority undertook into the retail sector and, specifically, the planning study. Naturally, the Competition Authority acted independently when it carried out the study.
My understanding from the Competition Authority is that it did consult some of the local authorities and the Department of the Environment, Heritage and Local Government. The Deputy mentioned that the authority had not consulted this committee. I am not aware of the details of that.
The Minister for the Environment, Heritage and Local Government, Deputy Gormley, was with us and he stated his Department had not been consulted either.
The problem is the Competition Authority probably advertised for submissions but it did not request or go chasing them. Deputy Calleary and I both know what happens in local government. Local authorities are busy enough as it is and they will not respond to advertisements in newspapers. I do not think the Minister was asked either. It is a serious issue.
They recommended a very substantial change in planning law in Ireland without speaking to the people who do the planning.
Ms Breda Power
My understanding is that the Competition Authority consulted An Bord Pleanála and a number of local authorities and received assistance from them in conducting the study. That is the information available to me.
Does Ms Power know which local authorities were involved?
Ms Breda Power
I am sure I can get that information for the Deputy.
That is the first time we have heard that and we have had the Department here.
Ms Breda Power
I am sorry, we actually have the information.
Ms Julia O’Malley
This letter from the Competition Authority to the Minister for the Environment, Heritage and Local Government merely sets out that it has compiled a significant amount of information from the 88 local planning authorities.
That could not be the case because that is not the impression they gave us here. I accept that it is stated in the letter to which Ms O'Malley refers. I do not doubt that but I doubt that the Competition Authority consulted 88 local authorities.
The committee would like to know who the Competition Authority consulted.
Could we make an inquiry in that regard?
We certainly will.
Ms Breda Power
If it would assist the committee, we will ask the Competition Authority to let the committee know who it contacted.
That would be of help to us. I thank Ms Power. Deputy English will be followed by Deputy Chris Andrews and Deputy Ned O'Keeffe.
Our questions will probably overlap because they are along the same lines. They merely put a different twist on it. I might have to ask a few more later.
The Department now states the Forfás report was more of a case study than anything else but it has been spoken about as gospel. It has been used on Question Time. It has been used everywhere we have a debate on this matter as being well-researched fact. I have a major problem because it is not well researched. Most people who have appeared before the committee share the same concern that the report does not fully add up. I missed last week's debate but read the transcript and I am even more concerned than I was, yet this is being portrayed as gospel. The report is damning of the country and needs to be treated more carefully and discussed properly. Is it gospel in Ms Power's division? Is it correct? The notion that a 25% to 30% difference in the cost of doing business in certain countries can only contribute to a 5% to 6% increase in price does not add up because each business in an area faces such a cost difference and, therefore, each is 5% to 6% dearer which amounts to more than the initial 5% but that is not mentioned. Is the report fully accepted by the Department? Is that where we stand? We have established in our meetings that the difference in prices between the Republic and Northern Ireland and elsewhere is 30%. It is considered that a minimum of 10% of this can be put down to the difference in the cost of doing business. Therefore, 20% is not accounted for. One problem is the managers of a number of companies are achieving a greater profit margin than they are saying. This issue needs to be tackled. What plans are in place to address it? I accept the sterling exchange rate is a problem but that should iron itself out. We are beginning to see changes in this regard.
The final issue is economies of scale. Has anybody researched the price difference resulting from economies of scale? The committee has been informed this is a major issue because retailers in Northern Ireland can avail of economies of scale not available in the South. What difference does this make to pricing? We do not have an answer to this question.
I refer to hello money and so on. Everybody knows about it but nobody has proof or can do anything about it. I am not convinced a Competition Authority investigation will find the answers. Enterprise Ireland deploys mentors in many businesses and they know whether this practice is followed. The businesses cannot all make it up. We find evidence here and there and listen to insinuations, as well receiving telephone calls and letters. I agree with Ms Power that nobody will put his or her hand up and acknowledge it. I do not blame those involved because they would be out of business. Officials from the Department and Enterprise Ireland interact with these businesses and know whether this practice is being followed. Action should be taken by the Department without the need for Competition Authority reports. If I am wrong, that is fair enough but I do not think I am. I have come across departmental officials who agree with me. They visit businesses and someone must know. If it is not true, we need to stop talking about it but it must be true if we are discussing it so frequently. It does not make sense that we cannot do anything about it. Other countries have legislation that prevents this practice. Holland and France have working agreements where various sectors come together, prices are discussed and everyone doing business is protected. Ireland does not have such agreements but other countries have legislation to ensure every business has its fair share. Are there plans to move to a similar system in this jurisdiction? Have there been discussions to address the problem?
What is being done in the division to address the overall issue? The NCA and the Competition Authority are compiling reports but I question their usefulness. What policy changes have taken place in the Department in the past six months to deal with the issue? Has the division drawn up a list of potential actions or proposed new laws? Have its staff and resources been refocused to address the issue? Does the division examine the cost of doing business? I would like to gain an understanding of its workings to ascertain whether it has refocused to tackle the issue. It is a massive issue that is draining resources and will lead to job losses and a reduction in the tax take. I presume we will refocus to deal with the issue.
There is a lot of talk about potential job losses in the retail sector, with figures as high as 50,000 and 60,000 being mentioned. What are the Department's findings and how serious is the problem? What is being done to protect this important sector?
Ms Breda Power
The retail sector has told us that people are losing their jobs and are prepared to take a reduction in pay. We recognise that there are pay freezes across the private sector to try to protect jobs. It is difficult to put a figure on potential job losses. The Department is naturally very conscious of the importance of the retail sector and its contribution to the economy.
Is there an estimate that they will reach a certain level? Is there a plan of action to address the issue?
Ms Breda Power
For the retail sector?
Ms Breda Power
We have met several of the key players who have identified the difficulties they face. Nobody has put a figure on potential losses in the sector at our meetings with them but they recognise that there are and will be job losses. We have heard reports of stores that have closed some outlets.
The various groups which have addressed us and all the reports suggest the number of job losses could reach 60,000. Have they never discussed this in Ms Power's division of the Department?
Ms Breda Power
They have mentioned that they will face severe difficulties but I do not recollect their giving a figure for job losses. Some of my colleagues might recall if they gave a figure.
Is there no one in the Department with the skills to devise economic models based on the information the retail sector is providing and make projections?
I would have thought that Ms Power's division would be advising the Minister that there was serious trouble in the sector with a potential loss of up to 50,000 jobs and that the Department needed to X, Y and Z. That obviously does not happen.
Ms Breda Power
In the Department we are conscious of job losses in all sectors. The development agencies such as the IDA, Enterprise Ireland and the county enterprise boards are working to try to secure jobs. They are all being assisted to try to sustain existing jobs and attract new ones into the economy.
I accept all that but want to know about the Department's policies and whether there has been a refocus or new activity or action to protect this sector?
There is no Government agency that will help a retailer that is in business difficulty or wants to expand its business. Enterprise Ireland, the IDA and the county enterprise boards do not want to know them. If a retailer is in trouble and wants to save jobs, where does it go?
Ms Breda Power
The enterprise agencies support the manufacturing and internationally traded services sectors of the economy. That is Government policy. It would be inappropriate for me to go into the matter. Industrial policy is a matter for the Minister.
In other words, there has been no change and no refocusing. I thought Ms Power's division would deal with this. It is fine if we have to go to the Minister to secure changes but I had thought that in the light of possible job losses there might be some shift in policy.
Ms Breda Power
The current industrial policy supports the manufacturing and internationally traded services sector. Enterprise Ireland works with some manufacturers on the supply side.
I know that.
There are 750,000 jobs in the small and medium-sized enterprise sector which incorporates the retail sector. Are they below the radar? We have big job losses but retail units are scattered in every corner across Ireland, particularly in rural villages and towns. They may offer only three, four or five jobs but are the equivalent of a big factory in a large, urban populated area. The problem is that they are below the radar and although nobody passes many remarks about them, three or four jobs are being lost and counted among the thousands being lost every day. As a committee we are focused on this.
The witnesses told us we must lobby the Government to change its policy because these outlets will be standing when everybody else is gone. Many are family-owned and operated and that is an issue for this committee. The witnesses are not in a position to answer that but might take note that the matter is exercising the committee. That is the best way to put it.
We should probably invite the Minister to speak to the committee. I would like to see what the plan of action is for the retail sector. Today's debate concerns matters relating to the retail trade in Ireland. By this stage, a year after we found ourselves in serious trouble, I would have expected us to have a new plan of action for the sector. We might deal with this matter on Question Time today, and in other places, but we must have a plan as soon as possible. That is part of the work the committee has been doing for the past couple of months but obviously this has not got through to the Minister.
Deputy English is absolutely right. The plan of action, as best I can see, is to shuffle the business of the retail sector around between the Competition Authority, the National Consumer Agency and Forfás.
We invited some of the traders to talk to the committee but when we put them in a corner and squeezed an answer out of them, we found it does not stack up. There is an unaccountable 30% to 40% differential in prices here. Inevitably, at some stage we get the bland answer that the UK has a market of 65 million people while we have a market of 5 million. We asked the traders to quantify this, and Deputy English considered that issue again today. Nobody can quantify it, of course, but it is cited as one of the key elements behind the price differential.
I am of a mind to scrap the National Consumer Agency and the Competition Authority. If only there were a four or five person task force with some legislative back-up that would go in and, if necessary, kick chairs and waken people, demand to know what is going on and tell those concerned it will not leave until it finds the information. There is a lack of determination in pursuit of answers and this is felt by all members of this committee.
Perhaps the witnesses cannot answer this point. The new law protects this very sector, namely, the suppliers. I know they do a lot of work with the suppliers and I accept that good work is being done and that suppliers are trying to help their businesses grow. However, they are the ones being squeezed and under pressure from the retailers. In other countries there is protective legislation to prevent "hello money" or other malpractices occurring. I firmly believe these practices are happening even if people are not in a position to say so. Is there talk of such legislation? Do the witnesses believe it might work in Ireland?
I presume the answer is the 2002 Competition Act——
That is a waste of time. Years later that gets an answer. Other countries have legislation in place. I presume the way it works is that retailers sit down with suppliers and everybody gets their fair share, that this is done properly and is co-ordinated and organised. Perhaps I have a romantic view but the committee was told by retailers that this system operates in other countries. Does it fit the Irish model? Is it being considered?
Ms Breda Power
I am aware of the code of practice in the UK and am aware also that it is currently being revised. That was established to deal with the relationship between retailers and suppliers but we have been told the existing code has not worked. There are concerns about the new code and whether it will work because the British face the same difficulty. If suppliers claim they are being squeezed by retailers who demand "hello money", they have the same problems regarding how complaints stand up that people in Ireland face. Their competition law is the same as ours because it is mirrored by Articles 81 and 82 of the treaty. It is dependent on somebody coming forward and making a complaint.
Ms Power mentioned the United Kingdom but have we researched the position in other countries? It was mentioned that the system in Holland, I think, or France seemed to work well. I assume we have checked the position in these other countries
Ms Breda Power
As I mentioned, the European Commission is anxious to get to the bottom of this. It is aware there are issues around the supply and distribution chain and why costs have increased for consumers across Europe. That is why it has started the study. We will be engaged with it. My colleague Mr. O'Gorman may wish to add to what I have said.
Mr. Cathal O’Gorman
There are two diametrically opposed positions on this issue. Somebody has to be Solomon. The difficulty is that people have reported a fear of being delisted if they come forward. It is a problem here but has also been recognised as a problem at European level. The agricultural directors of the European Commission recently issued a communication on the food supply chain and identified this as an issue they wish to examine. Ms Power has talked about the issue in the United Kingdom where there are similar problems. Although the various parties have come together on a code of practice, they have the same allegations and it remains to be seen whether their new code of practice will be more successful than the existing one. We are aware of some other models, whereby one can entertain what might be termed an anonymous complaint. We do not know if they are appropriate to Ireland and would have to see if that would be possible here. Notwithstanding what we have said about the United Kingdom and elsewhere, there is a recognition at European level that this issue, on which the committee has been briefed and which we have heard about in our discussions, remains a problem. Can somebody be Solomon if one cannot get proof?
From the report I understand the Department is working with the Commission. My fear is that the Commission is a big organisation and can be a little slower; in the meantime people in Ireland suffer. I hope we might take more action because Enterprise Ireland staff are in the businesses which are being squeezed and know about it. It might not be on paper but if our people know about it, we know about it and should be able to do something. I will leave it at that for now but we hope to return with more ideas.
We may have to bring forward whistleblower legislation.
Is the Department examining a whistleblowers' charter? Clearly, somebody is lying somewhere along the line and perhaps it is time for this. Has the Department examined whistleblower legislation that would facilitate businesses to step forward and bring more clarity and transparency to the scheme? I agree with the comments made on the Competition Authority. As I have said before, it is like the old 1980s skinhead organisations. It intimidates people, oblivious to the consequences of its actions from a social and economic perspective. The point on whistleblower legislation should be examined. That is no reflection on the clerk.
I have also been a skinhead in the past.
I apologise to all skinheads for that analogy. I have done them an injustice.
Ms Power can now appreciate that we have strong views. The Deputy is asking if any legislation is lined up or contemplated. The existing legislation is not worth a curse. Does the Department have any legislation in mind? I will call Deputy O'Keeffe as I have no doubt he will refer to this matter.
We had a worthwhile and lively discussion with the delegates from Forfás when they appeared before the committee. There are many anomalies between the retail trade in the South and in the North in terms of warehousing costs. Those in the North can import products from Scotland by ferry. Different water rates and service charges apply. Their cost base is different and shops in the North operate on a cost basis spread over a larger population, which gives them an added advantage. Those are my points concerning the Forfás report.
The implementation of the groceries order has not been successful. It has done more damage than any other measure to consumers and suppliers. The committee vigorously fought its implementation during the past four or five years, but it was still put in place by the Department, which was insistent on doing that at the time. I fail to understand its message for doing that.
Does the Act dealing with competition that governs the Competition Authority also deal with competitiveness? If it does, there is a contradiction in its remit. It should have only one role, that of dealing with competition. Responsibility for competitiveness should be the role of the National Consumer Agency, which was mentioned by the Deputy from Dundalk.
I have no doubt that suppliers distributing to the major multiples and other shops are being intimidated. They are fearful of suffering losses, given the practice of "hello money" and other such transactions. I am aware they have also received extensive credit. This matter must be addressed and highlighted more publicly. We saw what happened when pork products were withdrawn at the time of the dioxin issue when one multiple sought funny moneys, so to speak, from suppliers as they claimed they were at a loss because of the incident. That should not happen. A newspaper article on that was published. That was outrageous.
I agree with Deputy Morgan that the Competition Authority and the National Consumer Agency should be rationalised into one productive agency because the agencies are not doing their respective jobs. Kerry Foods won a case in the High Court when the decision of the Competition Authority was overturned. This will result in the loss of 200 jobs and a monopoly will operate in that food sector. Some 200 jobs will be lost in Breeo Foods when it is merged with Kerry Foods. There will be only one main choice for such meat and dairy products. This development will further aggravate the position, given that they were the two major suppliers of those food products and now they will merged.
I cannot understand the reason for this. We toured such businesses with our Chairman. We visited Thurles where Campbell Soups were put out of business and a report was completed by the Competition Authority. Some 80 jobs were lost. I cannot understand why some 300 jobs will be lost in Breeo Foods and it will be merged with Kerry Foods following a High Court decision against the ruling of the Competition Authority. I would like someone to explain the difference between the closing of that business in Thurles, which was a smaller operation than Breeo Foods, and the closing of the latter on foot of a High Court decision. The effectiveness of the Competition Authority in carrying out its functions is nil. I agree with Deputy Morgan that we should abolish these agencies. That would be a policy decision for Government, but the Minister of State can convey to the Government the message of what is contained in this report. In that way greater transparency would be achieved and a better agency would be in place with four or five people who are prepared to police competition and ensure there is consumer protection. This area is a mess.
I very much share the view of the Chairman that the loss of five jobs in a rural village, whether it be in my village of Glanworth, County Cork, which has a population of 400 or elsewhere, has a bigger impact on a community than the loss of 500 jobs in Dublin city which has a population of 1.5 million. We need to be realistic and face up to the challenges presented. I feel very strongly on this issue because of the High Court decision allowing the merging of Breeo Foods and Kerry Foods. It will be disastrous for the country, for the two companies, the consumers and the producers.
I am sure the Minister of State, Deputy Power, will convey to his people that this committee has a strong view on this matter. Some decisions of the Competition Authority appear to be made in an ivory tower. The ultimate end of competition per se is to have the last man or woman standing in any particular area. If that it is be brought to its logical conclusion, competition is solely devoted to the Darwinian model, namely, that the strong will always survive and the weak will be weeded out. That is the strong view of this committee.
That is the attitude of the Competition Authority now.
When the social implications of a decision are not taken into account, it is absolutely useless. As Deputy Edward O'Keeffe said, we visited Thurles; we are not in an ivory tower. We may be criticised in the press and some of the media say we should be able to get the information by e-mail. However, we visited people on the ground. We were in Cappoquin and we sent out a warning from there, and we visited Thurles.
Some 80 jobs were lost as a result of the Competition Authority decision.
There is a strong view here that either the Competition Authority needs to be abolished, or some of the legislation on which it relies needs to be amended.
One of the issues in the Thurles case to which Deputy Edward O'Keeffe refers is as follows: we put it to the Competition Authority, when its representatives came before the committee, after we had been down there, and they really did not care. They were doing their job, and if 80 jobs were forfeit, so be it. That is just not good enough. As the Chairman said, they have an academic approach to what competition is and they do not give a damn what wreck or damnation that causes to real people. There are further signs of that this morning in the newspapers.
I totally support Deputy Calleary in what he says is in the newspapers this morning, in relation to the drinks industry and the High Court proceedings involving the Competition Authority. The drinks industry is trying to do a good job for the consumer and the industry and now it is being challenged by an august body set up by Government.
I know Ms Power cannot comment on some of this but the senior officials are taking notes. This committee represents every party in the Oireachtas——
The view is unanimous, by the way.
It is a unanimous view.
On occasion, agencies of the State refer to the brief and parameters under which they are obliged to operate. Perhaps the Department might comment in that regard and we can all pick subjects we have investigated. There are occasions where they point the finger at us, as the Chairman knows, saying, in effect: "You are the legislators who gave us this legislation. You designed it, now change it." Then, we go to change it and we are told all the reasons the legislation should not be altered. I tripped across something the other day that amused me. In Geneva, the EU addressed an issue on the defamation of religion in countries. If it adopts what is being proposed it will achieve the opposite of what is intended, because in Muslim countries it could be used in a totally different format.
However, with regard to the State agencies I dealt with, that is the position, as the Chairman knows, since they said it to us here in committee. Perhaps the Department is aware of the shortcomings in the legislation or in regulation as if affects certain bodies. This, then, is where the target is set to determine what goal is being achieved and the legislation that is in place.
I appreciate that Ms Power will not be able to comment on some aspects.
Ms Breda Power
I cannot comment on any cases the Competition Authority is pursuing. It is independent in the exercise of its statutory function.
That does not deter Ms Power, however, from bringing back a flavour of what the committee believes in this regard. The Ministers will be aware of our view, but it is very important that they——
It is very important that the Competition Authority gets the same message when its representatives come here.
I believe it has the same message.
If such organisations are not functioning effectively, and clearly they are not, then we need to find an alternative.
Ms Breda Power
As the committee is aware, the Government announced last October that it would merge the two agencies, the NCA and the Competition Authority. While we are working on bringing that about, a review of the Competition Act is under way. We sought submissions more than a year ago and are examining them in terms of the role and functions of the Competition Authority. The committee is probably well aware of that. It is Government policy to merge the National Consumer Agency and the Competition Authority. However, some of the functions of the Competition Authority stem from EU requirements because it enforces Articles 81 and 82 of the treaty.
How can the High Court overturn it then if it does not take EU legislation into account, which most judges do? I refer to the Breeo case in Kerry where the High Court ruled against the Competition Authority in favour of the Kerry bid. If there is an EU factor, how can the judge make a decision and turn the other decision upside down?
Ms Breda Power
That case was a merger and I will not go into the detail of it because it——
It was not a merger; it was a buy out. There was a bid on the table.
Ms Breda Power
Under the legislation, the appeal is to the courts. That was the route taken in that instance.
The European court should be the final arbiter in a decision taken here.
Ms Breda Power
Only when it is intertrade between states. I am sorry I do not have the finer details with me but it depends on the thresholds in the legislation as to whether the case should be considered at EU level by the Commission or by a national authority.
It was an outrageous decision from the consumer's and the producer's point of view. It created a huge monopoly on the shelves in this country. If that was the case, why was the case of Campbell's soups-Erin Foods in Thurles not taken to the court to be decided because it would definitely have turned that upside down? That was a small operation.
Ms Breda Power
It is a matter for the parties as to whether they want to appeal a particular case.
Could the Department of Enterprise, Trade and Employment not intervene and take a decision?
Ms Breda Power
Under the legislation, it is a matter for the parties in the transaction.
If Ms Power went to Thurles, she would hear the views we heard there.
Is that not my point and to what we always return on these issues? Is legislation or regulation normally derived from this committee or one of the Houses not the basis of everything? Is that not what we need to amend? That is to what Ms Power alluded in regard to the legislation. Is that correct?
Ms Breda Power
Whatever goes into the legislation is a policy decision for the Minister, the Government and, ultimately, for the Oireachtas. Apart from competition law, normally to take a case in the courts, one would need what is termed locus standi. One would need to have an interest in the case. Who takes the cases and the shape of the legislation are matters of policy.
What Deputy O'Keeffe and Senator Callely say is that the Department can be a legitimus contradictor; it can represent the public interest. Why not? The Department should have a role when something as important as that arises. Some 80 jobs in an area such as that is like 800 somewhere else.
An excellent product has been taken off the shelf.
What we listened to January 12 months ago would pierce one's heart. That was prior to the real downturn when it was beginning to rear its ugly head. These people's jobs were being lost. The legislation needs to be strengthened from the public interest perspective. The Department should be given the role as legitimus contradictor and that locus standi would derive from the public interest aspect. I appreciate it is dealing with Articles 81 and 82 — the abuse of a dominant position and so on. At the end of the day this is very important. I hope that prior to making any amendments to the Competition Acts we will have some input into it. The relevant personnel in the Department of Enterprise, Trade and Employment should appear before the committee to discuss the matter with us.
If the Chairman put that on the agenda the departmental officials might be able to indicate the progress made on any proposed legislation on merging the two authorities. We should speak to the people drafting the legislation and then call in the people the Chairman alluded to regarding the public interest to discuss the relevant section. That might be a way to make progress.
Ms Power referred to a European directive on competition. Obviously the decision by the Competition Authority on the Kerry Group to acquire Breeo Foods was taken in the light of that directive. How can the High Court overrule that? It should go back to the European court for a decision. The courts here should have referred it on. I am sure the Department of Enterprise, Trade and Employment was represented in that court. The Competition Authority is working under a European directive. It took a decision that went to the courts. I do not understand why the Kerry Group and Breeo Foods decision has not been referred to the European court.
Ms Breda Power
Sections 4 and 5 of the Competition Act mirror Articles 81 and 82 of the treaty. The Kerry Group and Breeo Foods case or any similar case involving a merger or a buy out is taken under the merger provisions of the legislation. Under that, certain types of mergers depending on the threshold involved and the turnover, are dealt with in member states by the relevant competition authority. It would not normally be an issue for the Commission to decide on those types of cases. The threshold and the turnover are deciding factors as to who will deal with the case and whether it is a local competition authority in a member state or whether it goes to the European Commission. In this case the matter was for decision at member state level. The test that would be applied by the Competition Authority would be whether it is a substantial lessening of competition. A similar test would be applied in all member states
I have no problem with the Competition Authority's decision. However, the court then ruled against its decision. That should have been referred back to the European court for a final decision. There is a contradiction there irrespective of the provisions of Articles 81 and 82. I am convinced this decision is not good for Irish consumers, producers or multiples. It is quite serious because full shelf space will be allocated to Kerry Group products. They will have Kerry, Golden Vale, Mitchelstown, Galtee and so on in a line and it will be the same in the meat products area. That will increase the imports that will be against Irish producers. It will be bad for the consumer as it will be a monopoly. It was a very bad decision by the court. It was very badly fought and thought out.
Ms Breda Power
We cannot comment on individual cases.
I appreciate that Ms Power cannot comment on individual cases. I am sure——
They can talk in the press about it.
I listened with interest to Deputy Edward O'Keeffe. We can all work together to address these issues, which I know is the intent. I alluded to the other matter I came across at the Oireachtas Joint Committee on Foreign Affairs. People had come together to address an issue and it turned out to do the opposite to the good intent of the group of people who had met to address the issue.
No matter what area one looks at, one could find similarities where a group of people, be they legislators, departmental officials or public or civil servants, come together to work. As with the old story of the horse and the camel, the message might get lost. Will the Department indicate the areas where there have been shortcomings in the legislation the legislators have given the Department to work on? Will it identify where the shortcomings are and what measures are necessary to address them? Is there another way we can address the issue? I understand Deputy O'Keeffe has an interest in the matter. We are finding it difficult to respond in particular cases and find it is not the best way forward. Can we look at this issue in a more holistic way in moving forward?
In fairness to the Department, that is to stray into policy areas, which is a matter for us. We certainly will do so but, no two roads about it, the Senator will appreciate there are strongly held views on this committee in regard to certain matters pertaining to competition policy.
While it cannot be answered today, and the Chairman's point is correct, it is not a policy issue. I would have thought that all other Departments would identify where problems are on an ongoing basis. The committees should be told this. The committees are cross-party committees and, while I understand the Chairman cannot go behind the Government's back and tell the Opposition, there should be a regular report to the committee on issues that should be examined with regard to change for the future and so on. We can then do the homework and pass the information on to Ministers.
This is what committees are supposed to do, namely, useful work. While it is not for today or even for next week, it should be an ongoing process that Departments should undertake. I hope they do this and let Ministers know, but as Ministers cannot remember everything, a committee could be useful.
To be fair, it is a new role.
I would have assumed it was an ongoing role but we never hear anything about it. If it is not happening, it should be happening.
We are the politicians, so, at the end of the day, we are the policy makers. Our role is to convey to the members of the Department at a very senior level that there is a level of disquiet in this committee in regard to the operation of the Competition Act. This is ongoing and virtually all the members of the committee have very strong views on competition issues.
While I appreciate the Department is bound by EU directives in regard to competition, including Articles 81 and 82, nevertheless, to put it another way, I do not believe the same view would be taken in France. We all know of the way the French promote their national interest irrespective of the pitch. It is about time we came out of the traps and articulated a similar view, particularly given the fact that, as an island nation, we have huge and diffuse population on the ground.
If we go to the ultimate, we will get rid of every corner shop, butcher's shop and candle maker — the whole lot — and we will have only a couple of businesses left. The theoretical view of competition is that one gets to a stage — what I would call the Darwinian model — where the strong survive and the weak disappear. Therefore, what does competition achieve? Price is not the sole determinant in the consumer's eyes. There is price, quality, how local the product is, identification and a myriad of reasons a consumer buys a product. Price just happens to be one parameter but it is the parameter on which the whole focus of competition centres.
When it turns, it will be the other way around.
That is true.
Another issue is the closure of Erin-Campbells group in Thurles with the loss of 80 jobs. That will definitely be included when the history of competition is written.
It certainly will. The Deputy has never let that issue drop although it was 18 months ago.
While I do not represent the constituency, I have strong views on the matter.
I understand the Deputy has strong views on it.
I thank Ms Power, Mr. Grace, Ms O'Malley and Mr. O'Gorman for attending and their assistance. We hope we have given them some food for thought. The delegation will be aware that we are nearing completion of our consideration of matters concerning the retail trade. It is important that the Department of Enterprise, Trade and Employment has shared its views and experience with us. It is hoped it will be cognisant of our views as it moves forward in terms of their role in the matter. The delegation's views will inform our report which will be made available to the Minister.
I remind members that the Select Committee on Enterprise, Trade and Employment will meet tomorrow at 1 p.m. in Committee Room 3 to consider Committee Stage of the Industrial Development Bill 2008 and that the Minister of State, Deputy McGuinness, will be taking the Bill. Also, at its next meeting on 8 April the joint committee will scrutinise COM (2005) 246 — 2004/02/09(COD) — which seeks to amend European Parliament and Council Directive 2003/88/EEC concerning certain aspects of the organisation of working time. Representatives of the employment rights section of the Department of Enterprise, Trade and Employment will attend that meeting.