Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I thank the representatives of Tesco for coming before the joint committee and providing a very interesting exposition of the company's policy. It is very difficult in unequal relationships for everybody to get an equal result. One of the issues of concern is that we have powerful and dominant players in the market relative to the suppliers. The failure to secure a contract would spell disaster for some suppliers, including some significant companies. What checks and balances are in the system to ensure there is a fair relationship between the supplier and purchaser under current rules?

Consumer law is all about consumers, which is fine because we all want consumers to get good prices. However, we do not wish to do so at the risk of putting suppliers, including farmers who are the original supplier, out of business. Will Mr. Keohane outline how Tesco approaches purchasing? Does it decide what price it will pay for a product and then ask suppliers to provide the product at this price or is an open tendering system used? If the latter is the case and the tenders do not offer the product at the price Tesco wants, does it refuse the tenders and seek a lower price? These mechanics determine how the relationship between purchasers and suppliers operate.

I ask the representatives to give us an outline of the mechanics of purchasing and how that relationship works. I have met primary suppliers who produce food and who told me that they would be afraid to appear before this committee. They were not saying this in the context of any retailer in particular, but rather that, in general, they would be afraid to appear before this committee in case they would suffer retribution. Perhaps that fear has no grounds but it is there, nonetheless. It is a real fear that was expressed to me by people who would not be given to hyperbole but who are very serious, good producers of high-quality products. We cannot gloss over the reality of life that very rarely are commercial relationships based on equality and very rarely is it the case that there is not a dominant player. It would be fair to say that the view of many in the farming community is that the current situation is equivalent to the tied-supplier situation of the past and that they do not have choices. Admittedly, some of the difficulties for farmers lie with the processors, whom we will also be meeting.

I know the argument that will be put to this committee is that the current set up yields cheaper prices for consumers. That reminds me of the constant pleas from the media that everything they do is aimed at informing the public but they never admit that they are also motivated by the need to make a profit. The whole name of the game in the media and in retail is to make money. Certainly it is important that consumers get value for money or they will not shop with certain retailers. However, it is not the ultimate objective, which is to run a profitable business and to make as much profit as possible. Unfortunately, in the case of Tesco, we do not have any knowledge of what the company makes in Ireland because there are no separate accounts. There have been consistent allegations that we pay higher prices here than consumers pay in other Tesco stores in another part of this island and on the island of Britain. Perhaps that is an issue upon which the representatives could throw a little light.

One thing that has been made clear by the various groups that have appeared before this committee is that they are against a code. On the one hand, I can understand that it will create an enormous amount of red tape for suppliers, particularly the smaller ones. On the other hand, I remember dealing with voluntary codes in the past and as long as they were voluntary, those involved promised the sun, moon and stars, knowing that they would never be answerable for upholding those codes. However, when we introduced statutory codes which were a lot less comprehensive than the voluntary codes, the people who were bound by the new codes would then declare that the new, statutory codes were way over the top. They would argue that the new codes had way too many provisions, even though they promised a lot more under the voluntary codes. This is an issue which we, as committee members, will have to tease out among ourselves. We must determine why everyone is so keen on a voluntary code. Is it because of the potential for less red tape or is it because it is unenforceable? It would be important to get the advice of the witnesses on this question.

The representatives mentioned average farm-gate prices and I ask them to outline how much those prices are affected by the movement in world prices. In other words, if world prices went up by 15%, did farm-gate prices in Ireland go up by 15%? It seems to me that it is a statistic with an obvious logic underlining it. Food would not be the dominant cost in general consumer prices across the board. However, if world prices for one particular product increase, that would have an impact here. I would be very interested to know how much of the price change here reflects changing world prices as opposed to any better deal for the farmers here, on a stand alone basis.

A number of years ago when I was at Cabinet, the then Government made a decision about which I have always had mixed feelings. I do not know whether we were right or wrong to get rid of the groceries order which prevented below-cost selling. The argument was made at the time that it would lead to lower prices for consumers. I am now wondering if it also helped to depress the prices paid to primary producers. I understand that when a company like Tesco gets involved in below-cost selling, it squares it out. Again, our lack of knowledge about Tesco's profits puts us at a disadvantage but my understanding is that Tesco's profits do not drop but rather, it sells a staple product, such as milk, at a very low price and then claws the money back on the less price-sensitive, luxury items. In that way, when the computers in Tesco make their calculations, the company is making the same amount of profit and the consumers have spent as much money as they would have spent anyway. In other words, lots of people operate on the basis that they have X amount of money to spend and they spend it. People can be very price-sensitive in certain ways about basic products but they can also be very price-insensitive when they get to the checkout and are buying chocolates and other luxury goods. I would be interested in the representative's views on below-cost selling and whether the decision to get rid of the groceries order was the right one. Would it have been better to leave the groceries order alone and maintain the ban on below-cost selling?

I am very reassured by what the witnesses said about their meat products and the fact that such products will continue to be sourced in Ireland. In that context, I am interested in what they have to say about fruit and vegetables. Is everything sold in Tesco supermarkets purchased centrally or, as with the previous group before us, is there any discretion for stores to source produce locally? Is it possible for a store in east Galway or north Dublin to buy potatoes from local suppliers? Is it possible for products produced in a region to be put on the market in that region? It is significant that we were told earlier that it is not so much for Irish products as local products that people are willing to pay a little extra. That is particularly the case where the farmer who produced the product is identified. I did not get an answer earlier but I ask the witnesses to express their opinion on ugly fruit and vegetables and whether stores are allowed to sell such produce to those who want to buy it.