Andrew Doyle (Wicklow, Fine Gael)
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Apologies have been received from Deputy Martin Heydon who will be here a little later. He is on his way from County Donegal.

I welcome the representatives of RGDATA, Ms Tara Buckley, director general; Mr. John Foy, president; and Mr. Joe Doyle and Mr. Richard Nolan, members of the association. I thank them for coming. Witnesses are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person, persons or an entity, either by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. I invite Ms Buckley to make her opening statement.

Ms Tara Buckley:

I thank the Chairman and members for giving RGDATA the opportunity to make a presentation to the committee on a number of areas that are of critical importance to the retail, grocery and food industry. The Chairman has introduced my colleagues who are representative of the 4,000 owners of local shops, convenience stores and supermarkets throughout the country. I will ask them to briefly outline their own position, the people they employ in their stores and some of the issues facing them.

RGDATA is the representative body for the independent retail grocery sector. Collectively, our members own and operate more than 4,000 shops. They are present in every community and, collectively, hold more than one third of the retail grocery market. It is an extremely competitive and highly dynamic sector. What sets Ireland apart from many of our European neighbours is that, despite high levels of market concentration and the arrival of large international multiples, it continues to have a strong, vibrant and dynamic indigenous retail grocery sector. In most towns, villages and suburban communities one will find a locally owned and operated store offering great quality and standards not seen in other European countries. The continued resilience of the independent retail grocery sector is extremely important for the national economy.

Our members play a significant role in their local communities. They provide 90,000 jobs and, collectively, contribute an estimated €3.6 billion to the economy, according to the economist Mr. Jim Power who conducted a study for RGDATA in 2011 entitled, Local Heroes - A study of the economic, financial and social significance of the independent retail grocery sector".

The independent retail grocery sector is also a key supporter of Irish suppliers and producers. Without a vibrant independent sector and local family owned shops, many Irish suppliers would not have been able to bring their goods to the market as we are the ones who give them their first break, which will come as no surprise to members of the committee. We believe it makes sense for local retailers operating within the community to show support for suppliers in their locality. This is extremely important.

My colleagues will briefly outline some details of their operations, the extent to which they support local suppliers and some of the key challenges they face in the sourcing and supply of local food and in operating in what is a competitive marketplace.

Mr. John Foy:

I have been involved in the retail sector from the age of 15 years. I am the store owner of a SuperValu supermarket in a small rural town, Cootehill, County Cavan, which has a population of 1,500. I employ 55 people and we aim to provide 100% support, where possible, for local suppliers and producers. The SuperValu chain is part of the Musgrave Group and 100% of our beef, chicken and pork is sourced in Ireland. From being involved on the ground and dealing with local suppliers, I am aware that some of the difficulties they encounter in running small businesses relate to the cost and bureaucracy involved in being listed in some of the larger chains. On a local basis, because I adopt a hands-on approach as a retailer, I can make that decision.

I will mention what I would want to see happen in the future. Because of what has happened in recent weeks on the issue of the traceability of meat products, I have lost confidence. We trace the beef used in our products from the backdoor to the consumer, but I lack confidence because of what has been happening in the case of other products. I suggest there is a need for greater transparency for consumers in order that they will have confidence about from where products are coming. Some of our chicken products are deemed to be Irish, but once products are imported and processed here, they can be called Irish. For example, a large percentage of some key Irish branded cheeses with good Irish names are produced outside the country. As a retailer, what I need is confidence that the Department of Agriculture, Food and the Marine will be held accountable and that it will ensure the reputation of Irish produce is protected across the world.

Mr. Richard Nolan:

Nolan's Supermarket has been trading successfully in Clontarf since 1955. It is a family run business and an independent operator, with no affiliation to any of the major symbol groups. It is one of a very small group of retailers of this type left in the country. The neighbourhood shopping centre in Clontarf includes a supermarket, an off-licence, a newsagent, a coffee shop, a hardware and garden centre all run by the Nolan family. It also includes a hairdressing salon and a dry cleaners which are operated on a lease basis. It provides some 30,000 sq. ft. of retail and storage space. We currently employ 125 full-time and part-time staff. Because of the type of business and the service Nolan's hopes to provide per square foot and per euro of turnover, we employ more people than any Tesco, Dunnes, Aldi or Lidl store of similar size.

I have been directing the company for the past 30 years, during which time there has been considerable expansion of the neighbourhood shopping complex. I have always valued the independence of the family business and strongly believe a hands-on approach and flexibility are the key to our ongoing business success. We are very proud of our superb staff and the level of service we provide for our customers. In this regard we are not just about providing a retail experience; it is not unusual for people visiting Dublin from overseas to comment and say to me they have no access to a similar local facility and that they have to travel miles to do their shopping.

We are very much part of the fabric of the local community in Clontarf. We place considerable emphasis on the quality of our fresh food offering and the range of products stocked. We are ardent and active supporters of all things Irish. We provide exceptional support, with a no strings attached attitude towards Irish artisan producers. This is the simple ethos of the company to excel in customer service and quality.

Mr. Joe Doyle:

I operate the family run business Donnybrook Fair. Our business is based mainly on fresh food retailing. We produce fresh food on a daily basis. We also support small Irish companies and start-up companies in working actively with Bord Bia and the many small producers which supply to our stores. Between the retail and manufacturing parts of our business, we employ 240 people, 65 of whom are employed directly on the fresh food manufacturing side.

Because of the business we run, we are not eligible for support in the form of grants because we are a producer for the home market. One of the challenges we face relates to the volume of prepared meals and foods brought into the Irish marketplace in trucks.

Every day of the week, they are supplying to the retail business and can avail of grants and everything else. One often wonders if there is a better way of managing the playing field. Our direct contribution to the Exchequer, including through our staff, is approximately €1 million per year. That is a sizeable contribution for a small company. I cannot get into aspects of legislation and licensing law managed by the Department of Agriculture, Food and the Marine. There seems to be one target for everyone and if members want me to explain it later, I will do so.

Ms Tara Buckley:

I will briefly talk through the four issues we were asked to address. The first concerns the proposed code of conduct for the grocery goods sector. RGDATA is supportive of a statutory code of conduct for the grocery goods sector and rejects the contention by some of the larger retailers operating in Ireland that no code can be introduced to the retail grocery sector in Ireland before any EU wide initiatives. This is an open market that has seen significant penetration from international retailers in recent years and we believe there is no legal or practical reason a code should not be introduced to specifically govern relations between international retailers and Irish-based suppliers with regard to the supply of grocery goods for sale in the Irish market. We note the United Kingdom has appointed an adjudicator of its grocery code. We could examine that model here.

The relationship between suppliers and the large multiples in Ireland is unbalanced and there is a need for some independent, enforceable code around which sustainable, respectful and commercial relations can be built. In a sector where the largest players impose unreasonable and unfair terms on suppliers, all too often the suppliers seek to recoup the losses or the cost of promotions by changing the terms of those least able to resist change. This is one of our issues of contention. Many of our smaller members are paying the cost for some of the ways the larger players in the market operate. This has perverse consequences, with the independent sector effectively subsidising or indirectly funding unreasonable terms of supply extracted by the largest multiples. This is not sustainable. We would like to clarify that independent, family-owned shops do not engage in practices such as demanding hello money, shelf space payments, promotional budgets or other ad hoc payments from suppliers. However, the large players in the market do engage in these practices.

We are also aware that larger suppliers have behaved unreasonably towards independent retailers and smaller players. This includes larger suppliers that have delisted independent retailers or issued legal threats to shopkeepers who have sought to source identical products from other markets in circumstances where they can be secured on more favourable terms. In a number of instances, retailers have been delisted by suppliers as a mechanism to ensure they purchase the entire stock of a branded product from a supplier or distributor, rather than sourcing the product on more advantageous terms from third parties. This has a knock-on impact on the price offering that independent retailers can provide to customers for certain branded products.

Five objectives should be adhered to regarding any regulatory or legislative measure that touches on the relationships between suppliers, distributors and retailers in the retail grocery trade. The regulatory system should be effective, responsive and respected. The regulatory structure should attack practices that should be illegal and that distort the competitive landscape for retailing food in Ireland. It should ensure an indigenous Irish supply base is maintained and encouraged and not subject to the ad hoc vagaries of large retail concerns. Any code of practice should facilitate retailers that are independent of the multiple chains to compete on a fair and equal basis with larger retail competitors. The independent sector should not have to carry the can for excesses practised by large multiples in their trading relationships with suppliers or wholesalers. A code of practice should prevent discriminatory practices by brand holders that are large monopoly or duopoly suppliers and that prevent independent retailers from getting goods on competitive terms for their customers.

The committee asked us to address the impact of pricing on primary and secondary suppliers. Members of the committee are aware that significant price pressure is put on primary and secondary suppliers by the large multiples which try to justify this by claiming they are doing it in the interests of consumers. They fly themselves as the consumer champion to excuse what could be unacceptable behaviour. The problem with all the major retail multiples operating in Ireland is caused by the veil of secrecy under which they operate. We strongly advocate the committee pursues the issue as a matter of importance. The large multiple retailers go to inordinate lengths to conceal details of turnover and profits generated by their activities in Ireland. They have a complex web of unlimited companies, subsidiaries of foreign-based companies and other structures designed to conceal financial information about their activities. This should be addressed and we should seek to lift the veil and make them reveal their profits and turnover in Ireland. Successive Governments have failed to tackle the issue and, in the public interest, learning about the profitability of these companies should outweigh the desire to keep these operations secret. Until we have visibility on the level of profits generated by major retailers operating in the Irish market, the committee, producers, retailers and ultimately consumers will be in the dark about whether the efforts of retailers to squeeze suppliers is genuinely in consumers' interests or more concerned with squeezing higher profits.

The committee also asked about support for local producers. The independent retail grocery sector in Ireland is the biggest supporter of local Irish producers. Significant efforts are made by the independent retail sector to source goods from new and emerging producers to give them a foothold in the market. It makes sense, as a local retailer based within the community will always try to source locally made products from the community if the price and quality are at least comparable with imported products. They will also support local producers where the quality is clearly higher than imported products even if the price is higher. International retailers operating in Ireland go to great lengths to highlight their commitment to Irish producers and suppliers. Independent retailers are the biggest supporters of local Irish suppliers but we do not have the resources of the global giants to make the same song and dance about it.

We want to highlight one key difference. When consumers purchase Irish goods in an Irish-owned shop, they are making a far more significant contribution to their local economy. The key difference is that they are supporting the independent retail grocery sector and local suppliers. When they spend the money in our members' shops it is worth four times more to the local community than when they spend that money on Irish goods in a global retailer. A study done by Jim Power shows that €100 spent in the locally-owned shop is worth €250 to the local economy. This is significant for local economies when we need to be investing in our local communities. Supporting local shops that support local suppliers provides the optimum benefit for Irish consumers and society in general.

Food labelling is a significant issue and an area of contention for RGDATA members and their customers. Irish people like to buy Irish sourced and supplied foodstuffs. Sadly, the labelling regulations have facilitated the creation of confusion for consumers as to whether the food they are buying is actually sourced from Irish ingredients and produced in Ireland. We are constantly informed the Government has limited options to change the way food is labelled given EU regulations but we believe that, with a bit of imagination, the Department of Agriculture, Food and the Marine could support the creation of some mark that helps to provide consumers with clear information about the source of genuinely Irish produced foodstuffs. We acknowledge the good work done by Bord Bia, Guaranteed Irish, Love Irish Food and Think Irish but it must be a priority that any Irish consumer genuinely seeking to buy Irish produced food should not be misled by clever labelling tactics on the part of some producers. It is also critical that existing penalties for mislabelling of foodstuffs are reviewed to ensure the deterrents that exist for negligently or wrongfully describing food are sufficiently severe to act as a deterrent. However, we also appeal to the committee to ensure the responsibility for mislabelling should be directed at the source of the problem and not visited on the independent retailer.

The independent retail grocery sector is a strong supporter of the Irish food industry. We may not be able to afford the big advertising fanfare or the glossy newspaper inserts but RGDATA, the Retail Grocery Dairy and Allied Trades Association, members are dedicated to Irish food and demonstrate this daily in their shops. We support a regulatory environment for the supply and sale of food to consumers that will assist independent retailers to be competitive and sustainable. Lifting the veil on the profits made by the largest players in the market will provide much-needed transparency and will allow suppliers, the Government and consumers to test claims by large retailers that their actions in squeezing suppliers and producers are always driven by a constant focus on the well-being and betterment of consumers.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I welcome RGDATA to today's meeting. I read and listened with interest to what the delegation had to say. There are two issues here, namely, the local supplier providing locally to a retailer and winter liquid milk producers supplying the multiples and the small shops who claim they are doing so at an ever decreasing margin. The latter claim that it will come to a point where there will not be enough winter milk and people will have to buy UHT, ultra-heat treatment, milk. Most Irish consumers would be stunned to think that they would ever have to buy UHT milk to put on their Cornflakes rather than fresh milk.

We are also talking about major sectors of the economy that supply retailers of all types. We want to ensure that it continues to be profitable for Irish farmers to produce high-quality food for sale. As RGDATA pointed out in its submission, there are many challenges on the way. Is it correct that the wholesaler for SuperValu is Musgraves?

Mr. John Foy:

That is correct.

Éamon Ó Cuív (Galway West, Fianna Fail)
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How much of what a RGDATA retailer stocks is determined by the wholesaler and how much is supplied by a food processor? Can an independent retailer make a deal with the wholesaler? We are concerned not just with price of foodstuffs but the conditions for sourcing products. My understanding with liquid milk is that if there is a surplus in the North, it comes to the South and southern farmers get displaced and vice versa.

I am told food prices in Ireland are higher compared with most other EU member states. I am also told the multiples will charge more in the South rather than in Northern Ireland and that there is quite a considerable price differential. I would be interested in any light that RGDATA could throw on this issue and how it comes about. We are all on the one island and one would imagine there are the same transport costs to bring in food products to the island.

We need a code of practice with teeth. The points made by RGDATA are very salient to the way this plays out, particularly if the multiples are imposing huge conditions which the supplier has to claw back. When we refer to the supplier, are we referring to the farmer, the processor or the wholesaler? The committee is trying to gather information to get an understanding of the dynamics at play here.

We all agree that there needs to be much greater emphasis on labelling, making it easy to read and understand. If a product is declared to be Irish, it should be Irish. I understand there are many challenges in this area because of country of origin rules. There are more problems with processed foods because inevitably they are imported products. This is an area that needs to be examined and RGDATA's views on this are important.

There is an effort in America to establish who is getting what out of food products. Is it the primary producer, the transporter, the processor or the retailer? I know this process has been flawed but a flawed system is better than no system. As RGDATA rightly pointed out, we simply do not know who is getting what out of the final consumer price for the food. Without that information, we are at a loss. We need to gather a whole lot of information on what is going on with this sector. We need to get an understanding of the dynamics of the trade and see its various parts. We then need to propose actions which would come under four headings. First, the public should know the truth of what actually happens in this sector. Second, we should create public awareness about the importance of quality products and labelling. Third, we should take legal action in Ireland, rather than wait for the EU train, to bring in a statutory code of practice. I understand the Minister for Jobs, Enterprise and Innovation is proposing a Bill in this regard.

We should also consider whether there are other legal issues that would result in a change here. The figures for some of the multiples are bigger than those for countries and states. At an EU level there is considerable interest, but the problem is getting the juggernaut to actually do something. This issue should be tackled and if various states do not tackle it at state level, it will not be put on the EU agenda. Ultimately, we are interested in two aspects. Clearly, the committee is interested in primary food producers. However, it is fair to say we are interested in the consumer also and the consumer needs to be given a guarantee. If there is not a decent margin, the consumer cannot be guaranteed high quality safe food that we can and will continue to produce on this island into the distant future. We should take a long-term perspective and recognise that the processes of the wholesalers and retailers are important and legitimate links in the chain. We have to strike the optimum balance between the various sectors; it is not a case of one against the other, rather we need a balance to get everyone to take a long-term view, which suggests that if we could achieve such a balance, it would be best for Irish society.

I referred to the milk issue. Life, politics and the media are funny. I issued a press release on the matter and someone raised the issue with me of ugly fruit and vegetables; in other words, the question of supermarkets being unwilling to sell irregular sized vegetables and so on. I remember giving prominence in the press release to the challenges being faced by liquid milk producers. However, in the public mind and most of the media the ugly fruit story is far easier to sell than the idea of liquid milk producers being under significant pressure. That will only become a story when there is no liquid milk in the shop one day in January.

There is a subset. We are dealing with the issue of major commodities being placed on the shelves by the various suppliers. We are also interested in micro artisan food producers, with whom I was involved in a previous life as a Minister. I am aware of the important part they can play in selling to high quality food shops such as those the delegation represents. It is a matter of getting a toe-hold in the market and setting up a small niche artisan food business offering high quality produce. We used to work with such businesses in terms of the HACCP and so on. The delegation represents those involved in a particular niche market which has a reputation and in which I am interested.

There is an issue with fruit and vegetables and so on because there is a need to be able to say where they have been grown. Certain issues arise for the delegation in terms of seasonality, standards and so on. Is there something we could do to make it easier for local shops such as those the delegation represents to buy local produce? What challenges do RGDATA members face, especially those tied to large wholesalers? What is the extent of the challenges they face in terms of their discretion to buy local produce such as fruit and vegetables?

Thomas Pringle (Donegal South West, Independent)
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I thank the RGDATA delegation for its presentation. There is no doubt that Irish people appear to be wedded to local shops. There was a meeting last night in Donegal to address the issue of the threatened closure of a local shop in Creeslough. The meeting was attended by over 500 people to express their concerns about the issue and the 40 or 50 jobs at risk. It is important that we maintain, as much as possible, a vital independent sector.

In its presentation RGDATA refers to the code of practice and outlines five points that it is keen to see included. As always, running through this issue is the theme of the competitive landscape and competition. Does RGDATA have any view on the Competition Authority and its role in ensuring there are competitive practices within the retail sector? Does it have any view on how effective or otherwise it may be in policing competition in the sector?

The delegation has outlined the impact of the veil of secrecy on pricing. This is something that should be included in any code of practice. Legislation should be introduced by the Government to ensure all multiples operating in Ireland will be obliged to reveal their turnover and profit levels in order that we can make a fair and equal comparison.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I welcome the delegates and thank them for their informative presentation.

Deputy Thomas Pringle referred to the local shop. In Ireland we all like to support our own industries and shops, but we are our own worst enemies in this regard. How many of the 500 people referred to go down the road to one of the large multiples under discussion? We need to be able to turn our speeches into actions, rather than remain negative all the time. We need to support the local shop at the same time.

A topical issue in recent times is that of beef product. It is a significant issue in terms of transparency in labelling. What effect will the developments have in the rest of the year? Unfortunately, day by day we learn of new parts to the story of beef and horsemeat. The issue must come to a conclusion reasonably soon. Where does RGDATA see this issue going with regard to the industry and sector it represents? From where does its affiliates source their beef products? Are they sure they know exactly what they are getting?

The cost of groceries in Ireland is 18% higher than in any other country in Europe. I am open to contradiction, but I am reasonably certain that this is the figure for 2011. It represents a substantial price difference between the cost here and in our nearest neighbour. Why does the delegation believe that is the case? Does it believe it is possible to bring the figures closer together? Is it possible to close the gap, or is it the case that RGDATA affiliates are under pressure from the large multiples to try to keep in line with them all the time?

I welcome the comments of the delegation, hard-hitting and all as they are, on the large multiples and the need to display the facts and figures on a yearly basis. It is important that there be transparency in that regard. It would be welcome if that occurred in the near future.

I welcome RGDATA's code of conduct which is something that should be put in place. How effective will it be? How can it be implemented in an efficient manner such that everyone will be on the same wavelength in a given period?

Michael Healy-Rae (Kerry South, Independent)
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I apologise for not being present at the beginning of the meeting and I am sorry that I will have to leave again soon. However, I am rather keen to make a contribution.

I have read RGDATA's submission quickly and declare a vested interest. I am one of the small shopkeepers RGDATA represents. On a day-to-day basis for many years I have dealt with the issues on which the RGDATA delegation adequately represents its members. I applaud the work RGDATA has done during the years.

We are at a crossroads. I realise that we cannot stand up and be openly critical of the multinationals. At the same time, however, when they come here, they are like large banks which come in and take over. They refer to the jobs they create when they open in a town or city. They claim that they create 100 jobs, but there is nothing about the 150 jobs knocked out as a consequence.

Let us consider what has taken place in England, Scotland and elsewhere throughout Europe where certain large shops have entered the petrol trade, for example. I will cite one example. When a large retailer opened in Killarney town, a total of 12 petrol stations closed.

When they had them closed, this retailer continued to bring down the price of petrol to rock bottom. These were family businesses that had been run by highly respectable people and their fathers before them, who reared their families by selling petrol and doing repairs prior to the advent of convenience shops. When those 12 petrol stations and forecourts were closed, the retailer realised it would not be able to knock out the few that remained, and Killarney is now one of the most expensive places in Ireland to buy petrol because the price is artificially inflated. Now that such retailers know they are at rock bottom and that nobody else can be knocked out, they are keeping the price of petrol and diesel up. This is what big companies do. The ordinary respectable small shopkeepers and supermarket or convenience store owners are put to the pin of their collars to keep their businesses going. It is difficult. Those people are coming into this country and sucking their profits out to Europe. They do not give a damn about Ireland, the fabric of our society or the small shops that have been the backbone of our villages and small towns. I agree this will have the perverse consequence of leading to the independent sector effectively subsidising the unreasonable terms of supply extracted by the largest multiples. This is not sustainable for the grocery sector.

The witnesses spoke about glossy advertisements in our newspapers. How many of us are sick when we open our newspapers on Sundays? Of course, they do not give a damn as long as they sell their newspapers and make money. Last Sunday one national newspaper contained 12 pages telling us about how cheap bacon, beef, turnips and cabbages were in certain large shops. This is not good for the consumer because when all the small shops are gone the big players will be able to control the market in the same way they do with petrol. They did it in England and Scotland. When small shops and service stations are gone they will not be able to pull themselves up and open again in several years' time. It simply will not happen.

I am glad we have an excellent committee, with an excellent Chairman and members who will listen to what the witnesses have to say. They are speaking for the people who provide employment and who are not fly-by-nights who come in here like multinational mobile banks to take whatever chunk of the market they can find and zap their profits out of this country. The latter companies do not care about reinvesting here or what they are doing to the small shopkeepers. If I was here until tomorrow morning I could not compliment the witnesses and the people they represent enough. I appreciate the work they do in representing the backbone of Ireland. These are the people who create genuine employment and I hope they can survive. It will be extremely difficult given the number of shops and service stations that are closing, but I am sure this committee will do what it can to help. I thank the witnesses for coming before the committee today and I hope they will return to represent the smaller business people of Ireland.

Andrew Doyle (Wicklow, Fine Gael)
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Reference was made to the attitude of the Competition Authority. As the witnesses will be aware, a new Bill proposes to merge the Competition Authority and the National Consumer Agency. Down the years there have been differences of opinion between these two bodies. Ironically, the Competition Authority seems to believe that unimpeded pricing or marketing is in the best interests of the consumer, whereas the Consumer Agency takes the view that if the sector becomes too consolidated, the absence of diversity will not be in the long-term interest of consumers. I ask the witnesses to comment on that issue.

Ms Tara Buckley:

I thank members for their comments and questions. The uniqueness in the independent retail grocery sector is worth fighting for because, regardless of what happens in the market, we bring an element of competition that will not be present if a few global multiple retailers are allowed to take over. What we bring to the market is valuable to Irish consumers in the long term. If the small Irish businesses that produce high-quality products do not have a route to the market through the likes of Donnybrook Fair, Nolan's or SuperValu they will not be able to get a foothold. That is why it is worth fighting for independent shops. When RGDATA was established more than 70 years ago, there were approximately 13,000 small groceries in Ireland. That market has changed significantly since then, but one of the changes that allows our 4,000 to survive is the way in which independent wholesalers have joined together in groups and symbols to form part of a bigger purchasing group. The independent trade still has a market share of approximately one third, which is much more significant than the market share enjoyed by the independent sector in our nearest neighbours, Northern Ireland and the UK. The quality and standard of shops run by independent retailers is testament to the hard work and investment these local entrepreneurs carry out in their communities. Through our market share of one third we create two thirds of the jobs provided in retail grocery. This is why we should be allowed to compete. We ask the committee to ensure that what whatever codes and regulations are introduced allow smaller independent players to compete. When others are rolling down the shutters and giving up, the independent grocers are rolling up their sleeves and getting on with it. They are also reinvesting in their businesses. In the next week or so we will be publishing research conducted by Amárach Consulting which shows that even though our members' turnover was lower in 2012 than in 2011 and they are struggling in some of the most difficult of circumstances, more than half of them are thinking about investing in their businesses. They want to invest in their staff and training. These are optimistic and hard-working people who need a break to make sure they can continue through very tough times.

I will ask Mr. Foy to address the specific questions from Deputy Ó Cuív and others regarding sourcing products, supporting Irish goods and relationships with wholesalers.

Mr. John Foy:

Going back to the coalface, my aim is to look after the consumer, but we have to make sure consumers are looked after in terms of what they are looking for. Value has become a big word in the marketplace. I am part of the Musgrave wholesale group and approximately 90% of our goods are purchased from within the group. We have an allowance which permits us to purchase from local suppliers but if we were not part of the group I do not believe, as an operator in the retail industry for the last 19 years, that we would be able to compete against the global multiples such as Tesco, Lidl and Aldi, which are among the top eight retailers worldwide. Tesco will turn over more than €40 billion this year and Lidl and Aldi will turn over more than €45 billion each. That is what I am competing against as an independent retailer in Cootehill in County Cavan.

In regard to the supply chain, I am happy to be transparent about the margin I make in milk. It is not particularly significant. Sometimes I scratch my head and ask myself where the rest has gone. That question is sometimes unanswerable in the retail sector, but the group I am with is very supportive of Irish producers and has done a lot of work between the Centra, Daybreak and SuperValu brands.

There are more than 700 shopkeepers within those three groups and they are also the largest wholesale provider to other independent shopkeepers.

On the beef issue, it saddens me that I do not have confidence any more in regard to what happens to produce before it comes into my store. I believed, with all of the bureaucratic checks I do in the context of the HACCP system and traceability in my store, that I was giving my customers the best product. To be fair to Musgraves, it has not got caught up in the horsemeat issue. However, it concerns me, as president of RGDATA, that somewhere along the way there has been a failure in the system and the consumer could suffer in the longer term.

On the issue of costs, I will give an example from my store. I use more than 1,100 hours per week in my store. About four years ago I did a survey on the costs for that and found that in comparison to an identical store in the UK, it costs me €1,400 a week extra in labour costs. My son works in a UK chain at the moment and at 22 years of age he is on £6.10 per hour. If a person of 22 years was working in John Foy's shop in Cootehill, the minimum he would receive would be €9.75. If I had that €1,400 extra per week to return more value to my consumers, I would be delighted to do that. These extra labour costs are added on to the other costs involved in the day-to-day running of our businesses, such as rates. Last week I raised the issue of rates at a meeting. If, for example, businesses were thriving, rates might increase because the retailer had the ability to pay. However, the opposite should occur if a retailer is struggling and there should be some mechanism in place to help that retailer compete in the market place.

As independent retailers, we want the ability to compete so as to ensure we give the consumers what they want. I would like to see more transparency between me and my competition. The competition does not have to put its results in the marketplace, but as an independent retailer I do. More transparency in this regard would go a long way towards achieving an awareness of the difference in prices in regard to the products we sell.

Mr. Richard Nolan:

As a Dublin man, I never thought I would get the opportunity to praise and compliment Deputy Healy-Rae. However, he hit the nail on the head in his contribution. Deputy Ó Cuív raised some interesting observations, to which I would like to reply. Mr. Foy and I are at the opposite ends of the spectrum and, as I explained in my presentation, I am not affiliated to a group in any way. Mine is a family business that has been trading now for 55 years. Today, it would not be possible for my business to open as an independent retailer without being part of a symbol group here.

I extend to the Chairman the same invitation I extended in this room a number of years ago. My independent business is unique and I would be more than happy for the committee to come out and see what we do and how we do it. Although I come from farming stock in Sligo and Wexford, as a Dublin retailer I have no sympathy for the farming community whatsoever. Meat and dairy issues have been a legacy issue between farmers and retailers for a long time. We sell our potatoes either too cheaply or too expensively and in the meantime, most IFA housewives shop in the local Aldi or Lidl and complain about bacon, vegetable and cabbage prices in the Sunday papers. There is a huge moral debate on the issues in this regard.

With regard to making decisions, I do not have to make decisions with any wholesaler and our decisions are instant and final. The issue of pricing in the Republic compared to that in the UK was raised. If one compares prices on the Tesco UK website with prices on the Tesco Ireland website, one will sometimes find a price difference of up to 50% for the exact same product. I cannot say why that is the case. However, in 2009, as an independent operator we changed our source of supply. We had been dealing with indigenous Irish wholesalers, which in most cases were simply agency people bringing products in from the UK and elsewhere and redistributing them here. In 2009, we began to deal directly with a co-op in the UK called Nisa. That decision is the reason I am still in business today.

The difference in pricing between the UK and the Republic in some cases is criminal. I put this down to a number of factors. The question was asked as to why a product was a certain price in Northern Ireland. Historically, in the UK there has been a certain attitude towards the Republic of Ireland. It is seen as a different domain and on that basis it is of secondary importance to whatever is happening in the UK market. I could go into great detail on that, but I do not think we have the time.

Labelling is an issue with which I have a major problem. I know for a fact that I can bring in Thai chicken and simply dust it in breadcrumbs, put it on a tray, wrap it in cellophane and stick a Bord Bia label on it. That is wrong, but it is something that would be very simple to resolve. I am not sure what efforts are being made in America to establish transparency, but I do not understand the fixation here on how much money retailers are making. I am not a charity. I am in the business to make money. Walmart is the largest retailer in the world and it makes billions. Tesco publishes its figures every year. Ms Buckley made some important comments with regard to this in her submission. The ethos of those companies is to make money.

Reference was made to the liquid milk business, but I do not know much about it. I put it to the committee that there is a close affinity between the cost of milk and share prices. If one was a shareholder in Glanbia, one would have been very pleased with the performance of its shares over the past 18 months. I am sure many farmers are shareholders in Glanbia. However, if one wants to know why farmers are not getting paid enough for liquid milk, one should look at how much Glanbia pays them and how much money that company makes.

A comment was made with regard to the irregular size of fruit and how difficult it was to make a comparison between that issue and that of liquid milk producers. The situation is not funny. In London's famous fruit and vegetable market, for example, a recent exercise found that some 500 tonnes of perfectly good food is thrown out every week because somebody in a multiple somewhere decides, for example, that a lemon must be a certain shape, size and colour before it is suitable for sale. The amount of waste involved in this is scandalous in this day and age.

The issue of artisan producers is important. We were one of the first retailers to involve ourselves with artisan food producers, and west Cork farmers were one of the first artisan groups we dealt with. It was quite a funny situation, because we had to move from a beards and sandals, Dinny and Miley from Glenroe, type of arrangement, where they bought half a dozen eggs in the local supermarket, brought them back to the farm, covered them in dung and feathers and sold them as free-range eggs. At the other extreme, we had people who were totally passionate about their food product to the extent that they became transfixed by the importance of the beauty of the piece of cheese they were making and as a result were unable to get it to the store on time. I am happy to say that since then, 99.99% of Irish artisan producers have become über-efficient and über-professional in the manner in which they do business. We are delighted to be able to support them.

To answer Deputy Pringle's question, as far as I am concerned Ms Buckley can give him all of the information he likes on the Competition Authority. An enormous amount of research has been done in the UK, France, Sweden and other European countries. The big four in the UK have been investigated more than once by the Office of Fair Trading. I do not think there are any issues and as far as I am concerned it is quite clear and one can read between the lines.

With regard to the effect of the beef issue, we are a traditional supermarket and butcher and we do not sell pre-packed products as such. The recent meat debacle has had a wonderful and excellent impact on me personally. The overriding issue is still the same and it has been mentioned by a number of people, namely, that cheap food means cheap quality. It is very simple. With regard to the 18% price difference between the UK and the Republic of Ireland, I am available for a week if committee members wish to speak about this and they are welcome to come to my store.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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To return to the beef issue, Mr. Foy mentioned consumers would fall down in the long term with regard to the quality of beef. Are consumers looking for cheap food or quality? Mr. Nolan stated he is a beneficiary of what has happened and I suppose many local butchers are. Does Mr. Nolan sell prepacked products?

Mr. Richard Nolan:

Yes. In the current environment customers are looking for top quality at the cheapest price.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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There is a constituency who will look for cheaper products-----

Mr. Richard Nolan:

Yes.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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-----without knowing what may be in it.

Mr. Richard Nolan:

Absolutely.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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This is the big issue. Consumers must be made aware of what exactly is in a product.

Mr. John Foy:

I agree with this to a point, but consumers are looking for quality at a cheap price so "value" is the word. As Deputy Deering stated, consumers should be made aware. What amazes me is that the bigger companies outside of Ireland involved in this chain of events do not have inspectors to ensure a system is in place to protect consumers' interests. This is what I am concerned about and, touch wood, Musgrave Group has not been affected so I am a bit more confident. I question that these big multinational companies do not have chemists or others in place to ensure the problem has not occurred. Do committee members honestly believe this has just happened in the past six to eight weeks? It could have been happening for years but this is not the debate today. If consumers are looking for value we must try to get the best quality product to deliver this value. There is a limit and if pressure is put on suppliers somewhere along the way they might cut corners in this regard.

Andrew Doyle (Wicklow, Fine Gael)
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There is general interest in this subject and the national broadcaster has complained about mobile phone feedback and has stated the footage will be unusable if it is not cleaned up. I again ask members to ensure their phones are off. To get this subject on the agenda we need to use every available opportunity we have.

Éamon Ó Cuív (Galway West, Fianna Fail)
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As a matter of information, how many of the 4,000 local shops which were mentioned are garage forecourt shops? This information would give us a sense of where the sector is surviving. I mentioned ugly fruit, and food wastage is a serious issue. The point I was trying to make is that certain stories are more media friendly than others and not that one issue is more important than another. Where two stories are of equal importance sometimes one is picked up because it contains a word which captures the public mind.

I accept that because the sector represented by the witnesses is independent its cost base is higher which means higher prices. Perhaps the witnesses do not have the answer, but we are puzzled because a big multinational trading on both islands can charge one price on one part of this island and a significantly different price in another. They do not have huge cost differences.

We want to make it clear that anybody who is in business is doing so to make money and this is fair and we have no argument with it. We are concerned that if there is a perpetual squeeze, and we know producer margins have decreased, then for a producer to get a fair price the consumer will have to pay. This is not so much the case in the witnesses' sector because I accept none of them is making huge profits. We are considering the entire sector and the witnesses are the first to come before us. A total of 70% of the sector is not represented by the witnesses and it is fair to ask if a supplier is being squeezed to make products cheaper for consumers how much is the retail sector making and to what extent is the consumer the ultimate beneficiary of the squeeze. As the witnesses articulately put it, how much of this is caused by quality. We will not know until the entire beefburger fiasco is fully and independently investigated how much was ultimately caused by the price squeeze on processors. I cannot prove it, but there seems to be much talk that the big multiples and wholesalers are putting a huge price squeeze on processors, who are always looking for cheaper inputs to try to meet the demands of the wholesalers and the big multiples. It is fine if the witnesses do not have views on these issues, but we are trying to delve into these matters to find out about these relationships and their end results. The witnesses represent 30% of the sector, which is more fragmented, and we fully accept they are not the big force in the market.

I was very interested to hear what the witnesses said about small food producers and the lack of quality and consistency. In a previous life through the Leader programme we paid a full-time small food co-ordinator to help small food producers reach the standards mentioned by the witnesses such as delivering on time and quality standards. Has there been an improvement in the ten years for which it has existed? West Cork was mentioned. The Fuchsia brand was a Leader brand, and the Department I used to head had a big role in encouraging it. We saw it as a blue ribbon approach, with a Leader company creating standards and a brand one could stand over and guaranteeing to retailers they would have consistent quality. What are the views of the witnesses on how producers can increase penetration of these high-quality niche brands being produced throughout the country?

We have moved some of the way in the past ten years, but, while that is certainly what I am hearing from the sector, there is still a long way to go. I can remember huge arguments taking place with the producers in regard to the HACCP and we worked with them by pointing out that the HACCP was their protection and that, if they did it right, they would be covered in terms of food scares and so on. We all know of the dangers associated with a food scare. I would be interested to know that they have got their act together as a sector in which there is a disproportionate level of employment for the amount produced because it is a niche product.

Andrew Doyle (Wicklow, Fine Gael)
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Does Deputy Pat Deering have an additional comment to make?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes, briefly-----

Éamon Ó Cuív (Galway West, Fianna Fail)
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Excuse me, please. With regard to the big multiples, it is my understanding that if a supplier is producing milk, that supplier provides the fridge, stacks the milk in it and all the retailer has to do is to check it out and so on. Is there a difference between the sector and the big multiples in getting the supplier or processor to do all of the hard work? Do RGDATA members have to stack their own shelves and is there a qualitative difference in that work?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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On the milk issue, I am one of those soldiers. I also declare an interest in that I am a Glanbia shareholder. Therefore, I could spend a week discussing the matter with the delegates. It never ceases to amaze me that, no matter what supermarket one goes into, whether it is supplied by Musgrave or otherwise, one will never see the same price displayed for a carton of milk. I will get the same price per litre day in, day out from the Glanbias of this world, yet I can go into my local Supervalu store in Tullow, County Carlow or else in Carlow town and there will be a difference of perhaps 10 cent a litre.

Mr. John Foy:

Should I respond now?

Andrew Doyle (Wicklow, Fine Gael)
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Yes. The first question concerned garage forecourts, while the final one was Deputy Pat Deering's question on the price of milk.

Ms Tara Buckley:

I am not sure how many garage forecourts there are, but there are certainly several hundred. Mr. Frank Gleeson is coming to the meeting later and may have more specific numbers. The vast majority of our members operate convenience stores or small supermarkets in town centres. We have many members with larger supermarkets, as well as having members who are newsagents-tobacconists, but the largest sector of our membership encompasses the small convenience supermarket in town centres.

Mr. Foy may wish to respond to some of the questions about the price of milk.

Mr. John Foy:

With regard to truly local produce, we were asked what more could be done for artisan producers. I suggest we continue the Leader programme, thereby enabling companies to gain more grants. For example, given the unemployment figures, there are people in, say, the Cavan region who are trying to do other things and, as a supermarket, we are trying to support and help. Naturally, as not everyone has the same skills, we can help in providing some of the skills they lack. There should be a continuation of some programme for local artisan producers.

Mr. Richard Nolan:

While I am not here to farmer-bash, farmers have an incredible lobby group and I have often wondered why they cannot apply the same determination in looking after, growing and marketing Irish fruit and vegetables. Let me give an example. An old codger in Rush used to bring two lorry loads of vegetables to Limerick city because there was nobody between Rush and Limerick growing vegetables. It is a fundamental problem in the agriculture sector, although we do not have time to discuss it today.

I am not lost on the question of ugly fruit, but I will not go back over it. Deputy Éamon Ó Cuív mentioned the perpetual squeeze, which is all the more reason this protocol should be put in place. I do not have anything else to say in that regard.

I merchandise my own milk. I do everything and receive no assistance from our milk suppliers in that regard. We receive a financial contribution, but, while I am not into liquid milk company bashing, I have to say Glanbia, because of the manner in which it is set up, is not one of our favourite suppliers. For my sins, we use milk from Northern Ireland, County Donegal and several suppliers; therefore, our friends in Glanbia do not enjoy exclusivity in our store. There is a variety of reasons this is the case.

On Deputy Pat Deering's comments on the price of milk, as I am not affiliated to Supervalu, I cannot explain its marketing techniques-----

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I was just using it as an example.

Mr. John Foy:

Within the wholesale sector Musgrave supplies us, but we still have the choice to sell at any price within our store. It depends on the competitive environment in which one is operating, although there have been recommended selling prices for certain lines. The Deputy referred to the price of milk. I could be selling it at €1.49 for 2 litres, while in another SuperValu store ten miles down the road, it could be selling at €1.59. That brings us back to the independent nature of the retailers within the SuperValu group. We can still make the majority of decisions as to the price at which we sell products and where we will buy some of our produce.

Mr. Richard Nolan:

There is one final point I want to emphasise. While the committee will want to focus on the bigger picture, there are many smaller pictures also. Members have no idea how fantastical and farcical is the environment in which retailers operate at times, given all of the legislation in place, the inspections that take place and the other regulations Ms Buckley can eloquently discuss. I will give a very recent example. Although the horsemeat issue is foremost at present, a Department of Agriculture, Food and the Marine inspector came to my premises a number of weeks ago to check the residual toxins in fruit and vegetables and one of the items he wanted to check was a bottle of wine. I have no idea why somebody from the Department of Agriculture, Food and the Marine should have been checking the level of residual toxins on the grapes used in wine when somebody was mislabelling beef in a boning hall somewhere in the country. It is both fantastical and farcical in some cases.

Thomas Pringle (Donegal South West, Independent)
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I had a question concerning the Competition Authority and the National Consumer Agency.

Éamon Ó Cuív (Galway West, Fianna Fail)
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In hindsight, was the abolition of the groceries order and the change in regard to below-cost selling good or bad ideas?

Mr. Joe Doyle:

When one sees the truckloads of produce crossing the water every Monday and Tuesday morning and the displacement of Irish jobs in manufacturing, it is easy to see where things have gone. We have all talked about the price of wine and the below-cost selling of alcohol generally, as well as the amount of revenue lost to the Exchequer, although I do not agree with the solution proposed at the start of the year. I am involved in food manufacturing, although I am also an independent retailer, like Mr. Nolan, and we provide a lot of employment within our business. When one considers the volume of goods produced in this country versus the truckloads coming into the country every Monday morning, it is hard to understand from where it is all coming.

Ms Tara Buckley:

On the point concerning the Competition Authority and the National Consumer Agency, RGDATA has probably not had a very smooth relationship with both of these agencies, mainly because of our frustration. We raised many issues with them during the years in regard to the frustration of independent retailers who considered they were being bullied by large and monopoly suppliers, some of which were semi-State companies. We found that we were not listened to very much and that we were being led down long, dark paths by the Competition Authority which took a long time to assess our complaints and which would eventually come back to us to state it was not really an issue for it. We are talking about issues such as newspaper distribution and the availability of stamps to retailers.

These are simple things which is why we are supportive of a grocery code of practice because we would like it to apply equally to the large suppliers who are supplying small independent retailers and those relationships in so far as they can be managed and be competitive and sustainable. The National Consumer Agency consistently tells us that it does not deal with the business-to-business relationship and that it only deals with the relationship with the consumer. We are often the small guy with a frustrating relationship with a very large supplier or monopoly provider and we need somebody to intervene in those situations.

Andrew Doyle (Wicklow, Fine Gael)
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The Senators are not participating today and I know Senator Mary Ann O'Brien who is in the Gallery would have much to say if she was allowed to do so. I would like to acknowledge that because she is in the business of producing a particular product and avails of retailers large and small to market and sell it. This is very important. We went through part of this process during the last Dáil, decided to produce a report on conclusion of our hearings and present it to the Government to lay before the Houses. In the event that the consumer and competition Bill goes through the Houses and we have not finished, we aim to adequately contribute to the debate on Second Stage on the basis of the hearings we are having here. Hopefully, due regard will be given to them by all sectors.

The delegation has given us a very frank, robust and provocative contribution. It is quite obvious that the three gentlemen with Ms Buckley are survivors, have competed in a very competitive environment and are successful in that regard. Due to the fact that we received notice that there was concern about interference from mobile phones, this debate will be on the public record and to that end, it is important. I also thank the members for putting the questions and drawing out the debate.

As a delegation from Retail Ireland will come before us, I must suspend the meeting for five minutes to allow the previous delegation to withdraw. However, just as members from the delegation from Retail Ireland were welcome to attend this hearing so members of this delegation are welcome to attend the forthcoming session if they have time. I thank Mr. Foy, Ms Buckley, Mr. Doyle and Mr. Nolan. The sitting will be suspended for five minutes while the new witnesses take their places.

Andrew Doyle (Wicklow, Fine Gael)
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I welcome Mr. Stephen Lynam, director of Retail Ireland, and Mr. Frank Gleeson, chairman of Retail Ireland, for coming before us today. I know both witnesses were in the public Gallery but I must go through the procedure regarding privilege again. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members have already been reminded of their responsibilities regarding privilege. I now call on Mr. Lynam to make his opening statement.

Mr. Stephen Lynam:

On behalf of Retail Ireland members, we thank the members of the committee for the invitation to address it today. I am the director of Retail Ireland and am joined by Mr. Frank Gleeson, who is our chairman and retail director of Topaz Energy. For the information of the members, Retail Ireland is the representative body for the entire retail sector in Ireland and is affiliated to IBEC. Our members have 3,000 shops, including department stores, DIY stores, electrical retailers, fashion and footwear retailers, major supermarket groups, symbol groups and specialist and independent retailers. As a representative organisation for the retail sector, rather than a retailer itself, Retail Ireland would like to take this opportunity to contextualise the debate on the sector that the committee will have in the coming weeks.

This debate takes place against the background of depressed consumer demand and job losses in our sector. Since 2008, over 50,000 people have lost their jobs in the Irish retail sector. There has been a large fall in consumer demand and spending. Retail sales generally are down by the order of 25% and many retail businesses around Ireland have closed. Consumers, of course, are the lifeblood of the retail sector. Members will no doubt be aware that consumer sentiment is very volatile but the KBC Ireland/ESRI Consumer Sentiment Index, which is the latest measure, is down 35 points on where it stood a few years' ago. That said, retail is still the largest employer in the State, with over 250,000 people working in Irish retail. We represent 14% of the total number of people employed in the economy and account for about 10% of GDP. We are the most geographically diverse industry in the country, helping balanced regional development with about 44,000 active wholesale and retail enterprises located in every town, village and city in the country. It may surprise members to learn that 86% of Irish retail businesses have fewer than ten employees and 86% are Irish-owned.

I will hand over to Mr. Gleeson who will speak on a number of the issues pertinent to the discussion today and, hopefully, we can have an exchange.

Mr. Frank Gleeson:

Despite the huge difficulties in our economy and the huge difficulties facing our customers, retailers remain committed to sourcing as many products as possible from Ireland. I will let the supermarket groups themselves tell members about their own programmes and level of commitment to Irish suppliers but in the round, Irish retailers purchase around €5 billion worth of Irish food and drink every year.

This compares to total exports of Irish food and drink of €9 billion. This commitment is not altruistic. Retailers exist only because they sell things that consumers actually want to buy. Irish retailers are very aware that consumers wish to purchase Irish products, without sacrificing the quality or value mentioned. Retailers respond to that desire whenever they can.

As a trade association, Retail Ireland is not allowed to discuss prices or facilitate discussions among its members on the issue. However, it is worth noting a number of facts already in the public domain. The first relates to the trends in grocery prices in recent years. Grocery prices paid by consumers have fallen significantly in recent years. This is supported by official data from the Central Statistics Office. Every month the CSO compiles the consumer price index which collects nearly 20,000 prices of 170 food and non-alcoholic drink products. These figures provide a robust sample size that can be relied upon to give an accurate picture of price trends. They show that food and non-alcoholic drink prices have fallen by 6.3% since 2008. The reason for these price falls is quite simple - consumers have less money. Tens of thousands of us have lost our jobs and those of us lucky enough to have a job have seen cuts in wages. Retailers have had to provide even greater value for money as a result. If they do not, they will not survive and go bust. Prices did increase last year but only by a very modest 0.6%, primarily on foot of higher commodity prices worldwide. Even given this small rise, Irish grocery price inflation was the lowest in the European Union, where prices rose by an average of 3%, and much lower than in the United Kingdom, where prices rose by an average of 3.2%. The rise was also significantly lower than the general Irish rate of inflation which stood at 2% last year.

I refer to supplier relations. I am aware that the committee has in its mind the forthcoming consumer and competition Bill and the enabling provisions that may be contained within it on the issue of retailer-supplier relations. In its submission to the Department of Jobs, Enterprise and Innovation on this subject in 2009 Retail Ireland stated it opposed the type of code of practice published by Mr. John Travers in his consultation document at the time. We did so for several reasons. The rationale for the code has not been demonstrated and the code is not justified by any identifiable consumer benefit. More important, the Competition Authority has already stated that the retail sector is competitive. The code, as presented, would have inhibited legitimate commercial behaviour that benefited the consumer. In addition, the code would add an unnecessary regulatory and cost burden that would ultimately be borne by consumers and retailers.

To provide extra detail, I make the following points. The retail sector is intensely competitive. This is the view of the Competition Authority which in 2009 published its report on the retail related import and distribution sector. On its publication, the chairperson, Mr. Bill Prasifka, stated falling retail prices were proof that competition worked. That report is the most authoritative examination of the Irish grocery market by an impartial body that had full and confidential access to all the facts and all the market participants. It is of note that the Competition Authority did not call in this report or at any other time for a code to govern the retailer-supplier relationship. The then Tánaiste noted at the time of publication that "no major systematic problems in the overall market were identified." The relationship between retailers and suppliers is, without question, a robust, often tense, commercial relationship. Retailers drive hard bargains - they do so because they have to. Value for money for the consumer is vital. However, there is a difference between legitimate commercial behaviour and sharp practice. Retailers do not engage in unfair or illegal practices and if such practices take place, there is already in place a legislative framework to deal with them. As the Competition Authority stated in its submission to the Department in 2009, the Competition Act 2002 already prohibits or prevents the compelling or coercing of payment or allowances for the advertising or display of goods and "hello money" in regard to new or extended retail outlets under new ownership. Its submission goes on to state the provisions of the Act may be enforced by either private plaintiff or the authority. To date, no cases have been brought before the courts under the Act.

I take the opportunity to refer to the ESRI's publication in 2009, "How To Do A Lot of Harm by Trying To Do A Little Good". In the document Mr. Paul Gorecki rightly pointed to the harm that would be caused by the draft code of practice for the grocery sector then being proposed and stated, "The Code is likely to lead to a rise in prices for suppliers with no mechanisms or tests for considerations of consumer harm to be taken into account".

Members of the committee may be aware of developments at EU level in the area of retailer-supplier relations within the multi-stakeholder dialogue which reports to the high level forum on a better functioning food supply chain. That process has seen retailers and suppliers sign up to a set of principles, good practice exemplars and a framework for implementation and enforcement agreed to by manufacturers, wholesalers and the retail trade. The principles of the European code, in summary, are: all agreements should be in writing; unilateral change to contract terms shall not take place unless such a possibility has been agreed to in advance; all agreements should be complied with; information should be exchanged in strict compliance with competition law; all contracting parties in the supply chain should bear their own appropriate entrepreneurial risk; and that there shall be no application of threats in order to obtain an unjustified advantage or transfer an unjustified cost.

Retail Ireland and its members support these principles which provide a framework for doing business that respects contractual freedom and ensures competitiveness, trust and continuity. These characteristics are essential for business development, innovation and economic, social and environmental sustainability and these principles will benefit consumers and wider society. The framework aims to ensure signatories respect the principles and process commitments to integrate the principles with daily business practice. It includes a disputes procedure with a choice of options and offers reassurance to the complainant that he or she will not be subject to commercial retaliation. What is more, the principles are being applied this year. The first tranche of signatories will come on stream in the coming weeks, with more coming on stream throughout the year. At very least, the process should be given the time it deserves to bed down and succeed. We believe the EU voluntary agreement, with the full support of suppliers and retailers, offers the best model for progress. Crucially, it provides an even playing pitch for all retailers and suppliers across Europe. No Irish retailer or supplier is placed at a competitive disadvantage vis-à-visits counterparts or competitors elsewhere in the European Union.

The committee is obviously interested in the well-being of farmers. A national code would benefit neither consumers - as costs would rise - nor farmers, as retailers generally have no direct relationship with farmers. That is a key point for us. Retailers never purchase product directly from farmers; rather, they source product from suppliers and processors. It is these groups with which retailers have direct commercial relationships. The only organisations that would benefit from a national code would be those suppliers and processors in the middle of the supply chain, not the consumers at one end or the farmers at the other. It is vital that this fact is recognised; otherwise the unintended consequences of a code of practice would see large suppliers and processors benefit to the disadvantage of small independent retailers, with no advantage to farmers or consumers. These disadvantages would be coupled with very high compliance costs which would include legal advice on compliance with the code; the appointment of a compliance officer, as well as training and operational costs; buyer training; the maintaining and supply of records as required under the code; and costs arising from responding to queries from any enforcement body. These cost increases would not be sustainable, particularly in the current environment described by Mr. Lynam.

I will now hand over to Mr. Lynam to conclude.

Mr. Stephen Lynam:

The retail sector is committed to fair practice. We are committed to having a supply chain because our businesses depend on it. We are committed to offering good value for money to the consumer. These aims are not mutually exclusive. They can be achieved only through adopting a balanced and rational approach. How to achieve this approach poses the challenge, but it is one that can be overcome.

I thank members for listening. We are happy to discuss all issues.

Andrew Doyle (Wicklow, Fine Gael)
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I thank Mr. Lynam and Mr. Gleeson.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I was very interested in what Mr. Lynam and Mr. Gleeson had to say. However, I talk to various people involved in the supply chain, particularly those in its weakest link, small processors or producers who, by their very nature, are small and diverse. What they report is very far from the rosy picture painted today. We are often told there are a few dominant players in the market, an issue I was trying to explore during the previous session. Of course, there are many small independent grocers, but most of them deal with big wholesalers.

It is fair to say that between prices and the actual terms and conditions which apply, there is a huge squeeze on suppliers, producers and processors to continually provide more for less. I have been informed about specific examples of behaviour which show an abuse of dominant position by the biggest players in the market here. One of the reasons I referred at our earlier session to the need for transparency with regard to where the money was being made was that we were constantly informed that all of this squeezing was being done by the biggest and most powerful players on an altruistic basis and in the interests of the consumer. As the delegates from the retail trade who were present earlier pointed out, these players are not altruistic. It is clear that they are particularly hard-nosed and out to make as much money as possible for their shareholders.

Are our guests stating the elements of the retail sector in Ireland which work with both primary and secondary producers operate on the basis that the relationships involved are equal? Are they saying none of those in a fairly dominant position has succumbed to the temptation to refuse to buy goods from certain producers, thereby leaving the latter with nowhere to go? Are they stating there has been no abuse of their very dominant position by some of the big processors, in particular? Are they informing the committee that the position is good and that the Minister, Deputy Richard Bruton, does not need to introduce legislation to try to restore a balance among primary producers, small food producers, processors and retailers?

Thomas Pringle (Donegal South West, Independent)
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I thank our guests for their presentation. I have a couple of questions regarding the Competition Authority and the report it published in 2009. Given that four years have passed, perhaps it is time to publish a new report on competition in the retail sector. It is interesting to note the authority's statement to the effect that it cannot carry out investigations because of a lack of staff and resources. This begs the question as to whether there is any point in the authority remaining in existence. Our guests have indicated that because the authority stated this, there is no problem in the retail sector. As Deputy Éamon Ó Cuív indicated, however, we have all been informed of instances where difficulties or problems have arisen, particularly in the context of the abuse of their dominant position by certain retailers. The fact that prices have fallen does not necessarily mean anti-competitive practices are not being used, neither does the fact that there have not been convictions. All this indicates is that these matters have probably not been investigated.

Our guests have also referred to the EU voluntary agreement which is due to come into place later in the year and highlighted the disadvantages of a code of practice, namely, that issues relating to legal advice, training compliance officers, etc. would act as barriers to the introduction of such a code. Surely these would also be required under the voluntary code. If retailers are going to comply with such a code, they will be obliged to put in place systems to ensure compliance. That which our guests have made is, therefore, not really not an argument against the putting in place of a code of practice. If a voluntary code is such a good thing and it is going to work, a statutory code should not prove to be too great a burden for the retail sector to bear.

I am suspicious of voluntary codes, particularly as such codes applied in the banking sector and elsewhere in the past. Those codes did not work well. A code of practice is necessary. The cost of complying with such a code would also apply in respect of a voluntary code. What are Retail Ireland's members doing to ensure they will be in a position to comply with such a code? Which of those members would be expected to sign up to and implement the voluntary code in the coming months?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I am somewhat amazed that a code of practice is not in place. As previous speakers pointed out, there are numerous examples of instances which highlight the need for such a code. Like Deputy Thomas Pringle, I am of the view that a statutory code would be better than a voluntary one. A statutory code would have more teeth. In the case of a voluntary code, opt-in and opt-out clauses might be included in respect of particular organisations. This would mean certain entities would not be as forthcoming with information as would be the case if a statutory code applied. The only way forward is to introduce a code of practice on a statutory rather than a voluntary basis because this will ensure it will have teeth.

Andrew Doyle (Wicklow, Fine Gael)
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Our guests have made the point that, to date, no complaints have been made under the provisions of the Competition Act 2002. We are informed that this is the case because the system involved is adversarial in nature and the complaint must come from the individual. Our guests have also made the point that the Competition Authority can initiate proceedings. However, the authority would have to become aware of a difficulty in the first instance. Will our guests explain the position on implementation of the European code and the high compliance costs they have identified in the context of the draft code presented by Mr. Travers?

Mr. Frank Gleeson:

Part of my role in Retail Ireland is to represent both independent and large retailers. We have a real mixed bag in our group. My company runs 120 stores and also supplies 220 independent retailers, with which I would have a very close working relationship on a day-to-day basis. Broadly speaking, I am not hearing many complaints. This is because the market operates in a free environment. Multiples and independents can enter the market. It is very easy to do so, but there is fierce competition. The Irish retail market is considered to be one of the most competitive in the world. At supermarket and convenience store level, one can certainly see this in terms of the quality of our retailers. The prices charged reflect the cost of doing business. The costs of doing business in this country are a great deal higher than those which obtain in other EU countries, particularly in the context of wages, utilities, etc. It is difficult for us because we do not control any of these costs and they are costs which we must bear. There are supply chain costs which are an issue for suppliers.

I will work backwards through the points made by the Deputies. In reply to Deputy Pat Deering and the Chairman, complaints can be made. I do not understand why people do not make complaints if issues arise, but I have not heard of anything in the recent past. It is an open door from that perspective. The Competition Authority compiled a report in 2009 and if it needs to be updated, that is fine. However, it contains the most recent data available to us which is factual and not anecdotal in nature. I have heard anecdotal complaints, but I would like some facts to be presented that we could investigate and deal with in a proper fashion.

I will ask Mr. Lynam to outline why we think the European code is a good idea, particularly from the perspective of our membership of the European Union. Given that we hold the Presidency, this is a good initiative which we should, perhaps, embrace and bring forward. We have encouraged retailers and suppliers to participate and are of the view that this is the right thing to do in terms of the market.

Mr. Stephen Lynam:

On the question of why a European code is better than a national one, there is one simple answer, namely, that it would put no Irish supplier or retailer at a disadvantage against their European counterparts. That is a simple premise and it is one we fully support.

Frank Gleeson outlined many of the principles which are regarded as beneficial to a sustainable supply chain. The difference is that retailers and suppliers have worked together to develop an implementation framework for those principles which will be significantly less costly than the proposals made at national level some years ago. An independent adjudication group would be set up with options for dispute resolution, a procedure to deal with aggravated and anonymous complaints, a governance group to monitor the new system and also sanctions for breaches of the principles.

I refer to a question about actions being taken by Irish retailers to ensure they are ready. This is being facilitated by EuroCommerce, our European trade association. A series of meetings will take place in March at which retailers will be briefed on the nitty-gritty of how the new voluntary approach will work. Early adopters and signatories will come on stream in March and April. This system is currently being introduced across the European Union by major retailers and suppliers. It would be premature to introduce a national code that would supersede the system and put an unnecessary administrative and cost burden on the retail sector at a time when costs are being cut back to the bone and consumer spending is falling. The retail sector across the European Union has said that if stakeholders at any level are of the view after a year or six months that this system is not working, it will be reconsidered. The European Commission is involved in that process too. We think we have developed a good system with suppliers that will protect consumers and also suppliers and retailers throughout the Union.

Éamon Ó Cuív (Galway West, Fianna Fail)
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One perpetually hears from small operators and the more vulnerable sectors that they are fearful of making complaints. I remember an example of a service that was contracted to a Department of which I was a Minister at one stage. It was a very poor service and I was anxious to bring the service provider to court. The problem was that the people who used the service depended on it and had no other service. The result was that nobody would give me, as Minister, the complaint so that I could bring the operator in question to court. The people were afraid of retribution. Anecdote would have it - I think it is more than anecdote, as we have all heard the same - that there are plenty of food suppliers of various types who believe impossible burdens are being put on them. They have great difficulties with contracts and conditions, for example. They are bearing all the risk but they cannot put their heads over the parapet because they will be the losers if they do so. I have even heard people say they would not testify in front of this committee because they are afraid that the people who buy their produce might blackball them if they did so. If all these people are wrong, there is a significant public relations job to be done. They sincerely and honestly believe this to be the case. In the normal course of events, anybody who is invited to appear before this committee is really eager to attend. People like to attend this committee for all sorts of reasons, including the schoolchildren who are next door at the Irish language committee. They like to be in the Houses of the Oireachtas and to have their points heard. It would be fair to say that people on the supply side of the industry are afraid to come in here. If Mr. Lynam is correct that there is nothing to fear and that it is all fair competition and no dominant position is being abused, then these people are labouring under a significant misapprehension. It is very important for the retail industry to reassure them that this is not the situation. However, if they are correct, then it is not working, and the Oireachtas will have to deal with the issue.

On the issue of voluntary codes, in a previous life, I had plenty of examples of how a new body will sign up to anything in a voluntary code because there is no sanction in a voluntary code. Give them half as many conditions in a statutory code - an enforceable code - or a statutory regulation or law and they will squeal because they know sanctions are attached. Given the choice between fewer provisions with legal sanction or a voluntary code with more provisions, I would choose the fewer provisions with the legal back-up. I do not believe a voluntary code is worth much, because it is only a voluntary code and there are no sanctions if it is breached.

Thomas Pringle (Donegal South West, Independent)
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Will the voluntary code ban such things as listing and slotting fees? Will it provide that payments to suppliers are made on time? As Deputy Ó Cuív said, if the voluntary code is so acceptable, would Retail Ireland be satisfied if it were put on a statutory footing in this country?

Mr. Stephen Lynam:

On that final point, if the European code was incorporated into Irish law I think that would be a very good outcome. However, I see no need for that if major Irish retailers sign up, not least because should Irish suppliers or retailers decide that the code needs tweaking this would then involve a legislative process at national level. On the issue of listing, hello money is against the law. It is covered by any code and by legislation.

Mr. Frank Gleeson:

From the perspective of a retailer, I am not in favour of more regulation because it is anti-business and anti-small-business in particular. However, I would favour the introduction of the EU voluntary code as a first measure. It it does not work then it could be put on a statutory footing. It is a European code of practice which has been debated at length. It certainly looks like a modern piece of code writing that would be beneficial to European suppliers and businesses and to Irish businesses and suppliers.

Perhaps a better public relations job is needed. Some of the suppliers are very powerful in the market and as a representative of independent retailers we have little choice in some of the products carried by our members. Some big retailers have a lot of power too.

The consumer makes the decision on where to shop. If consumers do not get the right products and the right prices, or if they believe they are not getting the Irish products they want, they will vote with their feet. The consumer makes the decision, ultimately, as to whether a retailer stocks a product. The consumer is the person who decides where the business goes. This has been demonstrated many times. Many of the independent retailers who spoke earlier have a point of difference from a big multiple because they carry local produce. In my view that is a good policy. They are able to do something different. If Irish consumers want to shop there, they will do so. Big multiples do their business their way. As a practising retailer and a supplier into the retail trade, in my view, it is not a case of one shoe fits all.

Mr. Stephen Lynam:

I wish to reply to Deputy Ó Cuív's question about fear. The Competition Authority can itself act on any reports it receives of unfair or illegal practices. It has also raised the point by stating "It is not clear why it is thought that the attitude of suppliers towards making complaints would change if a code of practice was introduced." I have yet to hear how any code of practice would deal with that problem. What would deal with that problem is the provision within our EU voluntary code on anonymous complaints. I am happy to provide that information to the committee. The introduction of a code of practice would not solve that problem. Small suppliers or small retailers could still believe that the dominant supplier or retailer is abusing its position and a code of practice would not address that issue. I think our voluntary approach at EU level would do so.

Éamon Ó Cuív (Galway West, Fianna Fail)
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There is much talk about the Competition Authority. From my knowledge of that body, its concern is to stop businesses from forming cartels and overcharging the consumer. It is not concerned about what the supplier gets, good, bad or indifferent. In fact, the less money the supplier gets, the cheaper the product for the consumer. It does not deal with the issue we are discussing, which is ensuring that we keep the suppliers of Ireland in business.

Andrew Doyle (Wicklow, Fine Gael)
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I thank the gentlemen for an interesting discussion.

One of the points made by the previous contributor was that if a code was to be applied, it should apply to suppliers and retailers because dominance worked in two ways. Large suppliers can hold a dominant position over small retailers, as can large retailers. It is not true to say there is no dealing with and no direct purchasing from the primary producer. In the one area in which there has been a significant decline - fruit and vegetables - there are and have been direct purchasing arrangements between the suppliers of potatoes and vegetables and the multiple retail outlets and purchasing groups.

The forthcoming consumer and competition Bill will have to include an enabling provision to allow the Minister, no matter what else happens, to move to a statutory position very quickly. That has to be the basic minimum in the Bill. Otherwise we would be simply closing the door and saying we had done our business. We would then have to introduce new legislation to do it. The legislation has to provide for the enactment of statutory codes under a statutory instrument, a regulation from a Minister, if the evidence is available. I do not think anyone else should be afforded protection or allowed to take comfort from the idea that new legislation would not allow for this. It would be a huge mistake. That is a personal opinion and I will make that point on Second Stage of the Bill.

I thank the delegates and committee members for attending. This is an ongoing issue. The multiples will be meeting the committee and we have received requests from other representative organisations to come before us too. All of the meetings will be held in public. People are welcome to attend and be present in the Visitors' Gallery or read the Official Report afterwards.