Mr. Dermot Breen:

I will address the issue of the code of practice, which was raised by a number of the members. We believe that the code of practice as proposed has its limitations. It has more disadvantages than advantages. Nothing is perfect in this world but we believe it has limitations. Not everybody has agreed to it and not everybody believes it is necessary, including the Competition Authority. It will involve an enormous amount of red tape and additional cost. The main cost will be in legal fees. The legal profession will do very well out of it, if it goes on a statutory basis. That is an issue of concern.

The Competition Authority has carried out a detailed analysis of the sector and a review of the proposed code. It has concluded it is not necessary as there is plenty of scope within existing legislation to deal with any of the issues, that setting up an apparatus that will be very costly and involve a new quango is perhaps unnecessary and unwarranted and that it is adding cost which will inevitably ultimately affect the pocket of the consumer. We also believe it will put Irish suppliers at a competitive disadvantage versus their competitors in Europe. Ours is the most open economy in Europe.

Our food industry competes right across Europe. Both the Irish supply base and the food industry here must be competitive. This means minimising their costs and their level of exposure. A code will add to costs for them but it will also restrict their flexibility in the context of negotiating. They would then be at a competitive disadvantage vis-à-vistheir counterparts in Europe.

On the other hand, the European code, as proposed, is actually supported by all the supplier and retail representative groups at European level. I include in that many of the parent groups of the local representative groups who oppose the code in this country. Those parent organisations support the European code. It is a very robust code and it has been in development for approximately two to three years. It is based on principles rather than on anecdote, which certainly makes it more sustainable and justifiable. If, however, the Government wants to take the more costly statutory route, that is a matter for it. The European code will, it seems, become a reality within the next six months. I understand the target in this regard is the autumn. Matters are moving steadily forward and the code has been accepted by all the groups which represent retailers and suppliers. The Belgian Government has adopted it even before it is available for adoption. We are of the view that there is a great deal of merit in the code and it is a matter for the Government to decide whether it wishes to take this route.

A question was posed as to whether the code could be adopted on a statutory basis here. The point about statutory adoption is that this is the point at which legal costs kick in. The European code does not seem to require the red tape, record keeping and legal detail which would be required under the proposed Irish code. We will be obliged to wait and see how it might roll out on a statutory basis. If the statutory route is taken, that is when legal costs will kick in. That is the point when it will become very expensive and when consumers will end up paying for it. There is no certainty that the proposed Irish code will achieve anything more than the proposed European model. That is our view on this matter.

A number of other issues were raised. Deputy Ó Cuív referred to the groceries order. The latter was in place until 2006. It was investigated and reviewed in detail by the Competition Authority and the then Department of Enterprise, Trade and Employment. The reports produced by both entities concluded that it was anti-competitive, did not serve the consumer interest and did not support a competitive market and, therefore, had to go. It effectively amounted to what is referred to in legal terms as resale price maintenance and was fundamentally anti-competitive in nature. Has its abolition led to lower prices for consumers? I am of the view that it has done so. If one considers food prices during the past five years, one will discover that there has been a significant amount of food price deflation in Ireland. During a period of two to three years, there was actually a negative growth in prices. It is unlikely that this would have been sustained under the groceries order. In such circumstances, it has had a very positive impact on the rate of inflation here in the context of keeping it under control.

Has the removal of the groceries order depressed primary producer prices? There is no evidence to suggest that this is the case. On the basis of the CSO data for the past three years, it is obvious that its abolition has not depressed those prices. I accept that the prices to which I refer are impacted upon by commodity prices. Ireland has the most open economy in Europe and, more than any other state, it is exposed to world and European prices. Inevitably, commodity prices will flow in through the market here. However, the domestic factor which impacts on prices is that relating to costs. I refer to costs in our domestic economy. Deputy Deering stated that food prices here are 18% above the European average. That is a fact. Approximately two years ago they were in the region of 34% above that average, so they have decreased substantially. The key reason for this relates to the cost base in our economy. Wage levels in Ireland are running approximately 15% to 17% above those in the UK and Northern Ireland. This has a direct impact because these are our most immediate competitive markets. In addition, wage levels are well above the European average. Energy and other input costs are inevitably higher in Ireland. This fully explains the 18% gap between prices here and those elsewhere in Europe.

It was stated that the Competition Authority does not have the resources required to enable it to investigate. It has already carried out an investigation in respect of the groceries sector. In that context, four different reports were produced between 2006 and 2009. In terms of its scope, this was probably one of the most comprehensive investigations ever undertaken by the Competition Authority. All of the conclusions reached would still be entirely valid because not a lot has changed in the market. The market does not change that radically and we are talking here about a fairly recent review of the sector. The Competition Authority has clearly concluded that the entire grocery sector is very competitive. It is a market that is working well. Much of the noise and many of the anecdotes one hears are actually a reflection of what are called normal healthy tensions between suppliers and retailers in negotiating prices. We are satisfied that the Competition Authority has reached a fair conclusion to the effect that the market is working well and that it is competitive.