The object of this Bill, the third of its kind to come before the House, is to give the force of law to an Order made on the recommendation of the Fair Trade Commission, under Section 9 of the Restrictive Trade Practices Act, 1953, relating to trade practices affecting the supply and distribution of motor vehicles, tyres, spare parts and accessories.
The report of the public inquiry which was held in the matter by the Fair Trade Commission shows that there are two associations in the motor trade, namely, the Irish Motor Traders' Association, which I shall refer to as the association and the Society of Irish Motor Traders Limited, which I shall call the society. The commission found that, for a considerable number of years, a list of approved motor traders—known as the approved list—was maintained by the association. Entry to this list was subject to certain requirements which tended to become more comprehensive with the passage of time, and admission to the list was a prerequisite to the receipt of a large proportion of motor goods on trade terms. The supply and distribution of motor goods were largely influenced by the control arrangements of the association. Assemblers and wholesalers who were members of the association or of the society, as well as approved motor traders, undertook to confine supplies of new cars and other motor goods to persons on the approved list.
It was considered by the association to be an offence to supply goods on trade terms to unapproved traders. Two of the large assemblers were not members of either the association or the society, and did not adhere strictly to the approved list. Nevertheless, the majority of the main dealers appointed by both these assemblers were approved by the association and, consequently, had bound themselves to make supplies available only to approved traders.
The association also enforced the maintenance of resale prices fixed by assemblers for new passenger cars, and, by manufacturers, for tyres. A trader who was discovered by the association to have supplied goods on trade terms to an unapproved trader, or to have sold a new car or type for less than the manufacturers' list prices, might be subjected by the association to punitive action, such as a fine or removal from the approved list.
An important feature of the trade is the extent to which second-hand cars are taken in part exchange for new cars. It was estimated that 90 per cent. of sales of new cars involved transactions in second-hand cars. Despite frequent consideration, the association had not evolved a method of controlling the allowances made by dealers in respect of second-hand cars and this situation had rendered the maintenance of the retail prices of new cars difficult, if not anomalous.
The report indicates that an applicant for approval by the association as a motor retailer was required to meet certain onerous requirements. His garage had to have a ground floor space of at least 3,000 square feet under one roof. He was required to have specified tool and office equipment and to carry an adequate stock of accessories and parts. If not himself mechanically qualified, he was obliged to employ a motor mechanic who had completed a five year apprenticeship in an approved garage. Moreover, he had to give a written undertaking to adhere rigidly to the price maintenance regulations prescribed by the association. There were complementary conditions for entry into the motor repairers', wholesalers' and manufacturers' sections of the approved list.
The commission have concluded that the system described in the report whereby the association apply conditions for the approval of traders, and impose requirements with the object of confining supplies of motor goods to persons on the approved list, constitutes a restriction of competition and a restraint of trade. In the opinion of the commission this interference with competition and trade is unfair and operates against the public interest. The commission are satisfied that the tendency of the conditions as a whole is to preserve the status quo, and to retard the development of new methods in the wholesale distribution of motor goods. The commission consider that assemblers, manufacturers and other suppliers should not be governed in their distribution arrangements by adherence to the approved list. As requirements for admission to the approved list are deemed by the commission to be unreasonable and unfair, it would, in their view, be contrary to the public interest that suppliers should confine the supply of their goods on trade terms to persons on such a list.
Motor goods manufactured in this country are protected by tariff or by quota and, in consequence, the sources of supply of the goods are, in many cases, necessarily limited. It is the view of the commission that, in such circumstances, a responsibility rests on suppliers to ensure that persons actively engaged in the trade are not handicapped in earning their livelihood by reason of inability to obtain supplies of the goods on trade terms. It is always open to the individual assembler or to any other supplier, acting on his own initiative, to apply conditions relating to such matters as technical service and stocks which he considers to be necessary for the efficient distribution of his goods. Any conditions of supply which he imposes should, however, be fair and reasonable.
As regards resale price maintenance in the motor trade, the conclusion of the commission is that the practice operates against the public interest and should, subject to certain safeguards, be abolished. It is the view of the commission that the operation of resale price maintenance in respect of new vehicles tends to be anomalous and arbitrary in a situation where the part-exchange of second-hand vehicles plays so large a role in selling. If a trader is free to give a high trade-in allowance to one purchaser it is difficult to justify the imposition of a penalty on him if he reduces the price of a new car for another purchaser. The commission consider, however, that the individual assembler should be at liberty to withhold supplies of new vehicles from a trader who sells the vehicles at or below the prices at which he purchased them from the assembler, or, subject to notifying the commission and to the right of the commission to review the action taken, to withhold supplies from a trader who has advertised new vehicles for sale at less than the assembler's list prices. The effect of this would be to allow the individual purchaser to bargain freely with the dealer regarding the price of a new vehicle. It is the view of the commission, however, that the provision should be contingent on the continued absence of collective controls over the allowances given by traders for second-hand vehicles.
With regard to exclusive dealing in the trade, the commission refer to the advantages, as well as the risks, attaching to this system. They have not recommended any basic modification of the system as it now operates but have stated that, should the practice be extended or be made more restrictive, the commission might consider it desirable to review it in the light of the altered circumstances.
With the object of removing the abuses which exist and restoring conditions of free and fair competition in the trade in motor goods, the commission recommend in their report that an Order should be made prohibiting the particular practices which are considered to be harmful to the public interest. The commission recommend that resale price maintenance should be prohibited and that it should be made possible for traders to determine their own selling prices in the light of their own operating costs. As a corollary, there should be a prohibition on the collective fixing of trade-in allowances for second-hand cars or of minimum charges for technical services. To provide a safeguard against the possibility that price competition in the trade may occasionally become excessive, suppliers should be free to withhold goods from a person who resells at a price equal to or less than the purchase price and fails to give an acceptable undertaking to discontinue doing so. A supplier should also be entitled to withhold supplies of new motor vehicles from a person who advertises for sale a new car at a price less than the list price indicated by the supplier and fails to give an acceptable undertaking to discontinue this practice.
As regards the arrangements and practices adopted by the trade with the object of regulating the channels of distribution, the commission recommend that it should be made unlawful for a supplier to withhold supplies from a trader on the grounds that the trader is or is not a member of a particular organisation or association or because the trader's name does not appear on an approved list. It is also recommended by the commission that no trade association should be permitted to coerce a supplier to withhold supplies from any person, and that no association should be allowed to prepare or publish lists of approved or non-approved persons which are likely to restrict entry to the trade in motor goods or to be used as a basis for regulating or influencing the supply and distribution of such goods, or the terms and conditions on which such goods will be supplied. The commission recommend that it should be made unlawful for any person to secure a boycott of any supplier on the grounds that the supplier has refused to do any act which would be contrary to the terms of the Order.
There are, finally, two recommendations by the commission regarding the imposition by individual manufacturers or assemblers of terms and conditions for the acceptance of orders. Firstly it is recommended that a manufacturer or assembler should be permitted to impose conditions covering such matters as the size and frequency of orders, the functions of garages and the services to be rendered to the public. The only reservations are that these conditions should be reasonable, that they should be equitably applied to all persons seeking supplies and that they should be field with the commission, which may, if circumstances at any time so require, make fair trading rules in relation thereto. Secondly, it is recommended that there should be a prohibition against a manufacturer or assembler differentiating between purchasers for resale who should, in the normal way, be supplied on the same terms and conditions having regard to the size and frequency of their orders. The commission do not consider that a manufacturer or assembler should be prevented from advertising or specifying a maximum resale price or from withholding supplies from a trader who sells at a price in excess of the maximum price. Any such specified price should not, however, be binding on traders as a minimum price.
The Minister has given careful consideration to the recommendations of the Fair Trade Commission, and he is of opinion that the commission are fully justified in making the recommendations which are contained in their report and he agrees entirely with these recommendations. He has, therefore, made an Order to give effect to the recommendations contained in the report and a copy of the Order has been circulated to Senators. Section 9 (3) of the Restrictive Trade Practices Act, 1953, provides that an Order of this kind shall not have effect unless it is confirmed by an Act of the Oireachtas. The Bill now before the House is the Confirmation Bill which is necessary to give the force of law to the Order.
Since the Order was published it has been represented to the Minister that it will, when confirmed, have adverse effects on the level of employment and on wage rates in the motor trade. Employment is given in the assembly of motor vehicles, in the manufacture of motor goods and in garages on servicing and repair work. The Order can have no effect on the public demand for motor vehicles and other motor goods or on the public demand for essential servicing and repair work. It is, therefore, ridiculous for anyone to suggest that this Order can have any effect, however remote, on employment or wage rates in the industry. It has been suggested to the Minister also that the Order may result in a lowering of the standard of skilled service provided by garages. The Minister repudiates this suggestion also. The position is that, under Article 14 of the Order, an individual assembler will be free to impose reasonable conditions as to "after sales" service on motor traders. Since assemblers must protect the reputation of their brands, it may be taken as certain that, when the Order is law, assemblers will ensure that traders selling their particular brands will continue to give efficient "after sales" service. Of course, the "after sales" service is only a small part of the repair and maintenance work done by garages. Most of such work is undertaken subject to charges made to car owners. Any garage which, in the matter of repair and maintenance, does not give the motorist value for his money, will find that it is losing business. It has been said, also, that the abolition of the approved list system will mean that anyone who wishes to enter the motor trade will have to be given motor goods on trade terms and that the abolition of resale price maintenance will give rise to conditions of "cut throat" competition in the trade.
This Order will not involve any basic modification of the present system under which assemblers are free to arrange their own channels of distribution through the appointment of main dealers and sub-dealers of their own choice. Furthermore, as I have already explained, all car assemblers, as well as suppliers of other motor goods, will, under Article 14 of the Order, be free to apply to the acceptance of orders conditions covering such matters as the size and frequency of orders, the functions of garages, and the services to be rendered to the public. With regard to the abolition of resale price maintenance the position is that price competition in the trade in new cars exists at present and the only effect of the Order will be to allow that competition to come into the open. I have already drawn attention to the fact that, subject to certain safeguards, the individual assembler will be at liberty to withhold supplies from a trader who has advertised new vehicles for sale at less than the assembler's list prices.
In the case of confirmation Bills of this kind, the arrangement is that the Order, which it is proposed to confirm, would not be capable of being amended by the House, but must be accepted or rejected as it stands. The matters dealt with in the Order have been the subject of a detailed public inquiry by the Fair Trade Commission and the arguments in favour of adopting the provisions embodied in the Order are set out fully in the commission's report. I have no hesitation in commending to the House this Confirmation Bill which, on enactment, will, I hope, put and end to unfair restrictive practices in the trade in motor goods.
