A number of efforts have been made in the last decade to establish a system of controls of mergers and take-overs by legislation but for various reasons these did not come to fruition. The need for the introduction of such controls was first recognised at a time of very heavy merger activity and while this activity slackened off in the period of depression, there are indications that there will be a strengthening of this activity with the revival of the economy. I feel it is desirable therefore to proceed with this legislation without further delay.
The proposal to establish a scheme of control for mergers and take-overs should not be seen as an indication of an anti-merger bias by this Government. The contrary is, in fact, the case and this is evidenced by the enactment of the Industrial Development Act, 1977, which provides a positive form of assistance to enable Irish firms to engage in planned and orderly restructuring. It is recognised that the trend to date in merger activity has been on balance beneficial to the economy. Economies of scale needed to compete effectively both in the domestic and international markets have been and can be, achieved; under-utilised resources can be switched to sectors where optional use can be made of them; efficiency can be improved; sluggish management can be revitalised; rationalisation of production and marketing can be achieved.
It is clear therefore that merger activity can be, and indeed has been, beneficial to our economy. I trust, therefore, that these proposals will not be viewed, as some commentators have suggested, as an inhibiting factor in the further strengthening of Irish industry but rather will they be seen as a necessary check against the type of merger activity which is motivated by considerations other than those which achieve the effects I have referred to. As the House is aware the object of some mergers can merely be the elimination of competition with possible adverse effects on productive efficiency and allocation of resources and, ultimately, restrictions in consumer choice and higher prices to the consumer. Other undesirable objects could be the milking of profits from a business which has built up large reserves or even the run-down of a perfectly viable industry by asset-stripping. Mergers so motivated can do great harm not only to persons immediately affected but to our economy as a whole and for this reason Government controls as proposed are essential.
Mergers, therefore, may be good or bad. In our circumstances the great majority are likely to be beneficial, but the need remains to distinguish these from the minority of cases which would be positively harmful. Because of the strong probability that a proposed merger will be beneficial, the mechanism of control will be based on a presumption in favour of proposals. In recognition of this, the Minister has indicated his firm belief that only the very exceptional proposal will be referred by him for detailed investigations to the Examiner of Restrictive Practices. For the greater part, it is expected that proposals notified will be cleared at most within a two or three week period and, in the majority of cases, the Minister expects that the green light will be given within a matter of days. To facilitate early clearance, the Minister has stated that he would welcome informal consultation with promoters of mergers and takeovers before any announcements would be made and it would be his hope that informal reaction could be given to promoters at that stage. It had been suggested that the reaction given by the Minister at that stage should be binding upon him when the proposed merger is formally notified. While the Minister accepts that there is a certain merit attaching to this suggestion, he feels that the establishment of such a restriction would defeat the object of informal prior consultation for the reason that the Minister might not be willing to indicate his reaction to a proposal if he is to be bound by that reaction when a more developed proposal, which could differ in some important way from that which was the subject of the informal consultation, is notified to him.
Finally as regards the possibility of delays, I should like to draw the House's attention to an amendment effected to the Bill in the Dáil which provides for a maximum period of three months, with a possible extension of a small period when further information is sought, within which the Minister may consider a proposal and issue a decision thereon. This period compares very favourably with the period of nine months contained in the 1974 Bill and should go a long way towards easing concerns expressed about the possibility of delays. I wish to emphasise, however, that this period will be relevant only where the Minister contemplates the possibility of prohibiting a proposal and, as I have already said, it is expected that such cases will be very few and far between.
Another area of concern has been the level of the thresholds of application of the Bill. It has been suggested that the levels proposed are much too low and compare very unfavourably with levels in similar pieces of legislation in other countries. It has also been suggested that there should be a concept of market dominance associated with the thresholds. As regards the thresholds I should like to point out that those proposed represent a substantial increase over those contained in the 1974 Bill, an increase which outstrips the 1974 levels adjusted for inflation. Additionally, I wish to emphasise that the thresholds applies to both the companies involved, unlike the 1974 Bill where, in the case of a proposed merger, the Bill would have applied where only one of the companies involved had turnover or assets above the threshold. The thresholds themselves are, of course, arbitrary, as any such limits must be. They may also be considered low, but in a small market such as ours assets and turnover figures which might be regarded as modest in other countries might put the majority of mergers and takeovers here outside the scope of application of the Bill. It is vital to ensure that all significant arrangements are caught and the limits must, therefore, be low. The Bill, of course, does empower the Minister to raise these limits and it is the intention that this power will be exercised as frequently as necessary to ensure that the levels are not outstripped by inflation.
On the question of involving a concept of market share in the criteria for application of the Bill, I would like to point out that in a scheme of control concerned merely with the aspects of preserving competition such a concept would be desirable. However, while this Bill is concerned with this area, it is only one of the matters to which the Minister will have regard when considering a proposal. As will be noted in the schedule to the Bill, the Minister will also have regard to such questions as employment, regional matters, industrial reorganisation and the consumers' interest, each of which is equally important.
The main provisions of the Bill are summarised in the explanatory memorandum which has been circulated and I do not therefore intend to go into any great detail at this stage except to say something about the EEC aspects. Senators are no doubt aware of the EEC Commission's vigorous line in defence of competition, the various methods already available to the Commission to facilitate effective implementation of this policy and the proposed regulation on the control of concentrations which will provide powers in relation to proposed mergers not unlike those which this Bill proposes. Discussion on this proposed regulation, which was submitted to the EEC Council in 1973, has proved to be very protracted and, in fact, decisions have not yet been reached on matters basic to the proposal, such as the principle of pre-merger control, the field of application and the decision-making procedure. However, in view of present trends in discussion relating to the scope, it appears that the regulation, when finally adopted, will affect only very large mergers, so large in fact that it is most unlikely that any proposed all-Irish merger will be affected. It is, therefore, essential that we should, on the domestic front, supplement the measures to which we shall be party on the international front.
My comments so far have been confined to the merger/take-over aspects of the Bill and, as Senators are aware, the Bill applies also to monopolies. The Restrictive Practices Act, 1972 already provides for controls on undesirable practices of monopolistic concerns. Under that Act the Minister for Industry, Commerce and Energy is empowered to regulate and prohibit practices that may be engaged in, but it is the general experience that statutory controls may be rendered at least partially ineffective where a particular market is dominated by one unitary concern or undertaking. It is, therefore, as necessary to provide powers to restore competition by breaking up monopolies as it is to preserve competition by controlling mergers and take-overs. I am not suggesting, however, that all monopolies are undesirable and should be broken up. On the contrary, in an economy the size of ours it is inevitable that there should be monopolies within the meaning of the Bill, that is to say which provide more than one-half of the goods or services of a particular kind in this country, but it does not follow that these monopolies are abusing their dominant positions. The fact is, however, that given the existence of monopolies the possibility exists for certain undesirable market behaviour. It would be unwise not to recognise this and to provide for remedial action where necessary.
The proposal in this Bill in relation to monopolies is to amend the Restrictive Practices Act, 1972, to provide, by adding to the powers conferred by it, the power to break up a monopoly. As with the other decision-making powers in this Bill, this power is conferred on the Minister but it is subject to control by the Houses of the Oireachtas in that any Order made by the Minister under this Bill relating to a monopoly will be subject to confirmation by Act of the Oireachtas before it has the force of law.
I should like to draw the attention of the House to the definition of a monopoly which was amended by way of official amendment. It had been suggested that the original definition would have applied to a large percentage of the types of industries which the IDA are actively encouraging to establish in this country and the realisation of this by potential investors might have caused them to hesitate. The Minister accepted that there could be a certain validity in the argument that industrial promotion efforts could be adversely affected accordingly, and he also acknowledged that any adverse effects of export-oriented monopolies would hardly be felt here. In these circumstances, the Bill now provides for the exclusion from the definition of a monopoly of enterprise at least 90 per cent of whose output is exported or at least 90 per cent of whose output is supplied for incorporation in products which are exported.
Finally, I should like to emphasise that the fact that an enterprise comes within the definition of a monopoly does not mean that its operations will be automatically investigated. Investigations will only arise where there is good cause for believing that the monopoly enterprise in engaged in practices which are unfair or operate against the common good.
The measures contained in this Bill can be seen as an effort to ensure that Irish business will operate in a healthy competitive environment to the betterment of the economy and not as measures designed to frustrate further business development. I accordingly recommend the Bill for the approval of the House.
