Léim ar aghaidh chuig an bpríomhábhar

Seanad Éireann díospóireacht -
Thursday, 22 Jun 1978

Vol. 89 No. 11

Mergers, Take-Overs and Monopolies (Control) Bill, 1978: Committee and Final Stages.

Question proposed: "That section 1 stand part of the Bill."

There is only one question I want to ask. I am concerned that subsection (3) has the effect of treating the person with 30 per cent of the shares in a private company as having control of that company. It is certain that this is not true. In the vast majority of cases the control of the private company is only exercised by the holder of the majority of shares in the company. A minority may stipulate on taking shares particular rights which would attach to the shares he had which, if they are in excess of 25 per cent, will be protected by provisions of the articles. I am concerned that legislation might suggest that the Houses of the Oireachtas mistakenly thought that in the normal case within a private company majority control can be exercised by the holder of 30 per cent. The 30 per cent figure comes from what is known as the take-over panel positions where persons getting 30 per cent of the shares of a quoted company are then, by virtue of the provisions of the take-over panel, under obligation to bid for the rest of the shares of the company. It is not a control position; it is an obligation which arises from their taking 30 per cent though, it arises because in a public company if they have 30 per cent factually, in most cases we give control and that is the reason for the provision. Would the Minister assist the House and the people who have to study this legislation afterwards by giving the reason for it.

I accept what Senator FitzGerald has said that in the case of private companies the 30 per cent shareholding would not normally give control because normally it requires a 51 per cent shareholding. One reason for the retention of the 30 per cent in the case of private companies is to prevent the possibility of circumventing the Bill. It should be remembered that in the 1974 Bill it was 20 per cent and it was then raised to 25 per cent and as a result of a Government amendment in the Dáil it now stands at 30 per cent.

It is not desirable to have different standards for different classes of enterprises and I am sure Senator FitzGerald would agree with that. Furthermore, I believe that the vast majority of private companies would have assets and turnovers below the threshold and would, therefore, be outside the scope of the Bill.

Question put and agreed to.
Question proposed: "That section 2 stand part of the Bill."

I would like to make one point on this section, having spoken at length in objection to the gross assets figure and the turnover figure. I do not want to dwell on this aspect, however inadequately we may have dealt with it on Second Reading. I have already made my point there.

I want to direct the Minister's attention, through the Chair, to subsection (4) and to ask if the Minister is able to give us an understanding that this is not going to be understood as a policy decision that, for the future, we are only going to adjust the gross asset figures of £1¼ million or the turnover figure of £2½ million by the cost of living increase or if the cost of property increases; that if in the operation of this Bill, it is found, as I and everybody who has spoken on this Bill have said, that these figures are inadequately low, and they will create a great burden of administrative work which will do nobody any good, this subsection will be availed of to get us out of these limitations. In 1978 terms that £1¼ million may be made £5 million or, as they are proposing to make it in the United Kingdom, £8 million. In other words the Minister will at least allow the policy option that the figures could be very greatly increased and that this will not be another Parkinson giving rise to an extension of staff to cope forever with figures that are, in administration, found to be wrong. If the critics of these figures are right, adjustments will be made and the full power contained in this subsection will be used and it will not merely be a question of adjusting annually or biannually for cost of living increases and for property value increases. The subsection seems to be a way of getting out of this trap.

The Senator agrees that it is a very necessary and essential element that the Minister should have this power and that these figures should not be regarded as figures for all time?

Senator FitzGerald is right in assuming that these would not just be adjusted because, as he said, of increases in the cost of living and so on. It is important, however, that the provision, as Senator Conroy said, must be there. These figures may be reviewed from time to time and, in practice, it might be found that the figures are too low. The Senator would agree though that in the 1974 Bill the Minister had the power to decrease or increase. It is most desirable now to remember that the powers now are to increase these limits.

I would not like it to be thought that Senator Alexis FitzGerald is the only one who thinks the specified limits are too low. I do not go along with the rather extreme position he took up last week when he said that the Bill is unnecessary. Even though we have joined the EEC and there is EEC legislation on the way, we still need some residual, national provision or precaution against abuse. I recall vividly going into a lion's den some years ago of take-over gentlemen where the notorious Jim slater enjoyed the company of some prominent Irish financial enterpreneurs. I pointed out to rather reluctant listeners that there could well be, at least in relation to the kind of operations they were engaged in, shell companies and conglomerate building, a conflict between the objective of private gain and social good. I made the point there that, unless there was a commitment to much improved management in relation to the take-over, there was a presumption that private gain was the predominant consideration. Indeed, some of the events that have taken place since in relation to shell companies and conglomerates have proved that point.

There was another point that I made on that occasion which is still valid, namely, that a great deal of damage could be caused to Irish output and employment if foreign enterprises were able to achieve a completely dominant position in the distributive trades. I have in mind in particular the importance of the orders placed by the major supermarkets with Irish industry.

This is something which we will not be able to influence very much longer. The retention, in so far as we can, of control over distribution outlets in Irish hands is a way of ensuring greater loyalty towards Irish suppliers than if we had to allow the control of distribution outlets to pass entirely into foreign hands. When I consider that aspect I find the figure for turnover mentioned in this Bill absolutely absurd. Two-and-a-half million pounds is very small fry indeed in this business, because most of the major supermarkets and chainstores and so on are now enjoying turnovers which are a multiple of 20 to 40 times this £2½ million. If I take that as a measure it seems to me that these levels from which we are starting are much too low. This carries with it the real risk that a considerable amount of Ministerial and departmental time and effort will be engaged in dealing with small cases out of proportion to the national interest. It also carries the risk that local and secondary considerations may be brought to bear in trying to influence decisions.

There is, in subsection (5), an over-riding power to the Minister to intervene irrespective of any specified limits in relation to any proposed class of merger or take-over. Although the word "classes" is used there, my experience is that a class can always be defined so as to include the particular case or cases one has in mind. I would like the Minister to reconsider the specified thresholds with a view to raising them substantially, bearing in mind the over-riding power, in subsection (5), to ignore the limits where a particular case warrants it in the national interest.

Question put and agreed to.
Government amendment No. 1:
In page 6, to delete lines 8 to 17 and substitute the following:
"3. — (1) In relation to a proposed merger or take-over, title to any shares or assets concerned shall not pass until —
(a) the Minister, in pursuance of section 7 (a), has stated in writing that he has decided not to make an order under section 9 in relation to the proposed merger or take-over, or
(b) the Minister has stated in writing that he has made a conditional order in relation to the proposed merger or take-over, or
(c) the relevant period within the meaning of section 6 has elapsed without the Minister's having made an order under section 9 in relation to the proposed merger or take-over, whichever first occurs."

I would like to draw the attention of the House to a slight amendment to the amendment itself. Section 3, subsection (1) (c) states:

In relation to a proposed merger or take-over, title to any shares or assets concerned shall not pass until...

(a), (b) or (c). At the end of paragraph (c) the words "whichever first occurs" should be placed slightly out to the left because they follow up on "shall not pass until" whichever first occurs. Is that clear? It refers to (a), (b) and (c), not to (c) alone as it says in the amendment.

It is fair to say that this amendment is a response to a point I made on Second Reading.

Before we talk on the amendment, is the amendment to the amendment agreed?

Amendment to amendment agreed to.

This was a very fair ministerial response to the point I made on Second Reading with regard to the language that existed in what this is being substituted for because "shall not with effect", in common law countries, is a very serious leap in the dark legally and this amendment, by specifying the effect which will result, by narrowing the effect down to something quite definable as the vesting of title, makes the position very much less dangerous.

In this context also, another amendment which the Minister is proposing, in section 9, makes it very much easier to operate the control proposed by the Bill. I thank the Minister for the response.

Amendment agreed to.
Section 3, as amended, agreed to.
Sections 4 to 7, inclusive, agreed to.
Government amendment No. 2:
In subsection (2), page 7, line 31, to delete "of any".

Section 7 (b) provides for a referral by the Minister of a proposed merger to the Examiner of Restrictive Practices for investigation in relation to all the scheduled criteria.

Section 8 (2), however, provides that the examiner's report of his investigation shall contain his opinion as to whether or not the proposed merger concerned would operate against the common good in respect of any of the scheduled criterion. It has been suggested that the examiner would be in a position to isolate one criteria and confine his report to a statement that the proposed would operate against the common good in relation to that particular criterion. I agree that this would be undesirable and the amendment now proposed will remedy this situation by providing that the examiner in his report will deal with the operation of the proposal in relation to all of the criteria.

I support this amendment which has got rid of a considerable worry and a possible danger to the operation of the Bill. I am grateful to the Minister for proposing it.

Amendment agreed to.
Section 8, as amended, agreed to.
Government amendment No. 3:
In subsection (2), page 7, line 49, after "order" to insert "and, in the case of a conditional order, may have retrospective effect".

Under the proposed amendment to section 9 the Minister will have power to make a conditional order which could validate a purported merger with retrospective effect. A condition would probably be, however, that the enterprise concerned should divest itself of any shares above the 30 per cent limit it had acquired. If an enterprise acquired 35 per cent of the shares of another enterprise it would be required to divest itself of 5 per cent in order to bring it down to the 30 per cent limit in the Bill.

I welcome the amendment not merely for the reasons given by the Minister but because it enables the Minister to come in and clear up a situation where someone has inadvertently got himself into a merger or take-over position which the Act affected without his knowing it. This can put it right and it is a very welcome amendment.

Amendment agreed to.
Section 9, as amended, agreed to.
Question proposed: "That section 10 stand part of the Bill."

This is a section on which I will only say a few words. It is unfortunate, and I would like to be on record as saying so, that there is no provision for what, in EEC language, is called a negative clearance. This is where somebody about to make a substantial investment is in an apparent monopoly position and is afraid of incurring substantial investment — I am talking about at least one particular case — because by doing so he may be creating a potential competitor for himself where he extends his monopoly and, because he has done so, that monopoly can be divided up and that plant can go into competition with him. This induces a degree of uncertainty for him in that operation. It could also affect more modest investments where there are monopolies in smaller situations which could be backed up by big investments. The Minister should have taken the power to give an undertaking that during the normal investment life of a particular investment that, provided the recipient of the undertaking behaved himself and complied with the conditions which were laid down before he got his clearance, that his monopoly could not be broken up. It cannot be broken up at the moment but it can be broken up from the time this Bill is enacted. It is recognised already in the definition section that not all monopolies are necessarily bad because it has exempted particular institutions. There may be, in the developing economy that we have, and hopefully much greater growth and progress will take place, many more such situations where people will hesitate. It is no good saying that the Minister of the day says it is OK because the Minister of the day has only such power as the Oireachtas gives him, unless it derives from his position as Minister for Industry, Commerce and Energy, whatever that may infer. In the normal way he will only have such powers as the Statute gives him and it is unfortunate that the Statute does not empower him, in effect, to extend the exemption in particular cases under control, subject to the condition, the extension of the exclusion which is already in the Bill in relation to export-oriented industries. I want to place my views on that matter on record.

I do not think it would be wise to accept Senator FitzGerald's point that negative gains should be given because I can envisage a situation where many monopolies would make a protest to the Minister to get negative clearance and these would probably have to be investigated by the examiner and in turn by the Restrictive Practices Commission. It is not the intention of the Minister — and I think we made this clear on the Second Stage — to investigate all monopolies, only such monopolies as he may be worried about.

As well, during the period of clearance the monopolies would have the way cleared for them or would be free to indulge in mischief without the threat of being broken up. Therefore it is wise to keep the threat of being broken up, not that I would hope that any monopolies would be broken up — the Minister would hope that in fact none would be, that the situation would not arise where that became necessary. But if conditions were attached to such clearances, and obviously there would have to be, these could be onerous and lengthy and I feel the provision should stand.

Question put and agreed to.
Sections 11 to 16, inclusive, agreed to.
Question proposed: "That section 17 stand part of the Bill."

I want to make a point on this section which I should have made earlier — it still remains orderly for me to make it on section 17. I believe I am right in thinking that this is casting some shadow or creating some uncertainty in business from the point of view of how it will be operated, how people will be affected by it. It would be very useful, to eliminate uncertainty, if the Minister would say now what the policy will be in the great majority of cases and how she will so organise her Department that the what I will call the very-quickly-indeed people in planning mergers and take-overs will get notification in writing from the Minister that it is all right, and that we will be talking about, not months or weeks, but days, in the communication of that. If we made a statement to this effect I think confidence would be increased, which would be a desirable thing to have.

Because of possible lack of confidence in certain business, it is important that the Minister would make a decision as soon as possible, as Senator FitzGerald said, not in a matter of months or weeks but days.

Question put and agreed to.
Section 18 agreed to.
Schedule agreed to.
Title agreed to.
Bill reported with amendments, received for final consideration and passed.