I have been chairperson of the Competition Authority since last October. I am accompanied by Mr. Gerald FitzGerald, a member of the authority, Mr. Ciarán Quigley, secretary to the authority and who runs the corporate services division, and Dr. David McFadden, legal adviser to the authority. This is my first attendance before this committee since I assumed the position of chairperson and I thank the committee for its invitation. I hope this meeting will turn out to be a useful engagement.
The authority's mission is to ensure markets work well for consumers, business and the economy. Consumers are at the core of what we do. By consumers, I mean end-consumers and end-users, people who in their ordinary everyday lives buy groceries or petrol, for example. We also look at businesses as consumers, as well as the State which is an important consumer, particularly of professional services such as legal services. It is important for us that the State, as well as the individual, gets value for money.
Competition policy has come to the fore in recent years, partly because there is much more emphasis on competitiveness. As a small exporting nation, we need our country to be competitive as this translates directly into export jobs and higher living standards. Competitiveness is not just about costs but also relates to fostering innovation along with achieving sustainable improvements in living standards and job opportunities. Competition policy is particularly important in hard times when there may be a natural tendency towards protectionism. Given the strong evidence linking competition to productivity growth, however, it is important to ensure short-term solutions put in place today do not become tomorrow's problems. Competitiveness is important to all sectors of the economy. High prices in the non-tradable sectors such as professional services and many public services raise the cost of living and doing business.
The authority has undergone considerable change in the past two years. In the first half of 2010, the chairman resigned to become the Financial Services Ombudsman. Several members of the authority also resigned meaning the authority found itself without a quorum. Emergency legislation was, therefore, passed to permit the direct appointment of temporary members for terms of up to 12 months. Gerald FitzGerald and I came in for six months which was subsequently extended for another six months. Several senior staff, including Mr. Ciarán Quigley and Dr. David McFadden, were appointed as temporary members, pending the recruitment through open competition of new permanent members and a new chairperson in late 2011. They carried out that role in addition to their normal duties and deserve great recognition for that.
The authority consists of four members comprising myself, Mr. Patrick Kenny, Mr. Gerald FitzGerald and Mr. Stephen Calkins. We have a staff of 39 comprising members, economists, lawyers, specialist investigators and administrative staff. Like all parts of the public service, we have had to cope with cutbacks in staff and resources. We have been able to do more with less and we are looking to a slight increase in our staff in the future. Our strategy statement outlines our new approach to project selection, prioritisation and the timely completion of projects. We are also working closely with our colleagues in the National Consumer Agency to ensure our planned amalgamation is a success.
We have two roles, that of enforcement and advocacy. Advocacy is promoting competition in the economy. We promote competition in many different ways such as the publication of reports on the competitiveness of certain market sectors, such as lawyers, architects, engineers and so on, through advice to Departments and other State agencies on competition issues relevant to their work and the promotion of a competition culture to the wider community through the publication of guidelines and interaction with business organisations. This is all very well on its own but it needs enforcement. We need to protect competition by taking effective action to deter anti-competitive conduct. A large part of our role is the investigation of anti-competitive practices such as price-fixing or abusive conduct by firms dominant in a particular market. We also review mergers above certain financial thresholds to ensure they do not substantially reduce competition and harm consumers. If it is of a multinational nature and above a different threshold, it will be sent to the EU.
Anti-competitive practices can take many forms ranging from hard-core offences such as price-fixing and bid-rigging to other forms of behaviour that constitute abuse of market power. The Competition Act gives us the power to investigate breaches of competition law, following a complaint or on our own initiative. It also gives us specific powers of investigation which include the power to enter and search premises and homes with a search warrant issued by the District Court, the power to seize documents and records, the power to summon witnesses and to require information from third parties. We are a little different to our European counterparts which are administrative bodies and which allows them to decide if a firm has infringed the law and to impose fines. In Ireland, only a court can decide that competition law has been broken and impose penalties. Prosecutions are usually taken by the Director of Public Prosecutions following an investigation carried out by the authority and the courts decide whether a company is guilty or not. The authority can bring summary prosecutions in non-criminal cases to the District Court in our own right. Due to the higher criminal standard of proof beyond reasonable doubt and that these cases are prosecuted on indictment, it takes time to investigate and prosecute a hard-core cartel case.
The authority has established a serious track record of criminal enforcement for anti-competitive behaviour. Earlier this year, a conviction was secured in a jury trial where an individual was fined €30,000 and sentenced to two years in prison, suspended for two years, for his role in a cartel that sought to fix the price of heating oil in the west. In total, the home heating oil case has led to 18 convictions on indictment with fines totalling €149,500 and two individuals given custodial, but suspended, sentences of six months and two years, respectively. In another case involving the fixing of the price of cars, 15 convictions have been secured on indictment resulting in fines, various prison sentences and one individual sentenced to 28 days in prison for not paying his fine.
In other less serious cases, where we think competition law has been broken, we will bring a civil case before the courts. Sometimes, we are able to get businesses to change their behaviour without necessitating an expensive court case. For example, following an investigation of a scheme used by RTE to sell airtime to advertisers, the station agreed last year to change the scheme so as to address the authority's concerns that it may have involved the abuse of a dominant position by RTE by virtue of its effect on competing broadcasters. The broadcaster did this through legal commitments which took effect in July 2012. In January 2011, the authority reached a settlement in its long-running proceedings against Beef Industry Development Society Limited. Certain parties in the beef industry were paying their competitors to go away. This settlement was reached following a European Court of Justice judgment.
The Competition Act 2002 provides for a system whereby mergers above certain turnover thresholds must be reviewed by the authority. This is one of the few areas where the authority determines itself. This is done in a public and transparent way. We invite submissions from the public on a possible merger. All cases are published and are available to download from our website. With the financial difficulties of the banks in recent years, the Minister for Finance has a certain role in bank mergers. The Minister may request advice, information and assistance from the authority which happened in the case of the merger of AIB and EBS.
The benefits of competition for consumers can be seen in sectors such as telecoms, airlines and energy markets where monopolies existed previously. We have carried out formal study exercises with detailed market studies in the professions, banking, insurance, private health insurance and the grocery sector. As part of the action plan on jobs, on foot of direction from the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, we began a study into the ports sector in Ireland. It will be an interesting study because I mentioned the importance of exports and, by volume, much of our exports go through the ports. We must ensure they are working as well as they could be for the economy as a whole.
I referred to the banking sector. Given where we find ourselves since 2008, competition in the banking sector has had to take second place to financial stability. We have moved towards a two pillar banking system, but the Competition Authority has been involved in promoting the long-term benefits of a competitive and well-regulated banking sector. The EU-IMF programme has put a considerable amount of money into the banks to restructure them but, as part of the programme agreed between the troika and the Irish authorities, Ireland has committed to a number of measures to restore competition and improve consumer protection by making it easier for people to switch and by ensuring new entrants to the banking sector, if they come along, are able to gain access to the system and compete effectively.
We participate in a steering group, comprising representatives from the Department of Finance, the Central Bank and the National Consumer Agency, which reports annually on the progress in implementing these measures. When the memorandum of understanding was agreed with the troika, there were measures about structural reform as conditions of financial assistance. Some of them related to previous recommendations of the Competition Authority, particularly in respect of the legal profession and the medical profession. Amendments have been made to the Competition Act, which passed through the Houses of the Oireachtas recently, and these are welcome in terms of strengthening the enforcement power, increasing the penalties for competition offences, giving the Competition Authority the power to enforce more effectively undertakings given by companies, and also giving consideration to the resourcing of the Competition Authority. We are working closely with our parent Department on that point.
The strategy statement on our website covers the period 2012 to 2014. With a wide range of activities across the economy, like every other public sector organisation we are doing the best we can with the resources we have. There is always more we would like to do but we hope we now have the structures in place to meet our statutory role and to continue to deliver benefits for consumers and the economy. I thank the committee for inviting us and we are happy to try to answer members' questions.
