Mr. Paul Kelly:

I will respond initially to Deputy Éamon Ó Cuív's questions on the concerns about undue bureaucracy. Obviously, any additional legislation will bring with it a degree of additional bureaucracy. However, this should be set against bringing a greater degree of balance to the trading relationships within the sector. We believe the benefits will far outweigh any increased bureaucracy. As for bureaucracy, there is much to be learned from the voluntary process. I will come back to Deputy Thomas Pringle's particular question on that issue shortly. We spent a significant amount of time on the issue, as did the officials in the Department of Jobs, Enterprise and Innovation who worked with Mr. John Travers. They explored the issue in great detail at national level in terms of how the market worked and what was taking place in other member states. This brings them to a position where they have a more informed view of the code that will finally be put in place.

We have learned significantly from what has happened across the water in Britain, where a voluntary code was brought in in 2000. In 2010 what is known as the grocery sector code of practice, or GSCOP, was placed on a statutory basis. In recent months an ombudsman was finally introduced. We can learn from the mistakes made in Britain and also identify the good parts of what was done there. Obviously, there will be an additional bureaucratic burden associated with this, but we believe the benefits will far outweigh that burden.

The issue of price and pressure and so on was raised. It is worth bearing in mind that initially the objective behind this approach was to deal with unfair trading practices. It is not appropriate to address price setting in this context. It is subject to normal commercial negotiations which are generally tough. A problem arises with retrospective changes to contracts. For example, demands can arise where there are changes to the conditions or where there is an excessive transfer of risk, whereby the cost of promotions must be largely borne by suppliers, whereas the benefits will largely accrue to the retailers. This indirectly places a significant cost burden on suppliers. However, just as important, this can have a remarkably negative impact on the business planning process and can result in rather bumpy cashflow and also minimise one's ability to forecast how cash movements will unfold. This has a negative impact on companies and a downward impact on pricing.

It is worth examining how each category is structured with regard to cheaper ingredients and so on. Most categories will have the full spectrum, from premium to budget products. There is a variety of other factors feeding into this issue alaso, including consumer sentiment, the money a consumer has in his or her pocket which is causing him or her to trade down and commodity prices which are having a notable impact on the cost of ingredients. The overriding factor is whether a product is safe. A number of lessons have been learned in recent months in this regard, but many of these cases have to do with deliberate fraud in various parts of the food chain. It should not take away, however, from the fact that the downward pressure on pricing has an impact on the sustainable margins of companies and their ability to reinvest in the business, manufacturing operations and innovation, which is the lifeblood of the industry because if we are not innovating or bringing new products to the market, consumers will go elsewhere.

I will outline some points specifically on labelling. European legislation, specifically a regulation on the provision of food information for consumers, is being implemented and large aspects of the regulations will take effect from December 2014. The Commission is considering extending the country of origin labelling regulations which currently apply to beef to other meat products such as poultry, lamb and so on. Broadly, our colleagues in Meat Industry Ireland and most major export companies support the extension of country of origin labelling regulations to these products.

The Commission's assessment is coming to an end and the results are expected soon. The use of meat as an ingredient is undergoing assessment at European level. There is a difference that is worth bearing in mind. The extension to other primary meat products will take effect in December 2014 as part of the regulation. The Commission is required to undertake an assessment to determine the feasibility of using meat as an ingredient and this assessment is under way. Processed products such as pizzas, for example, are made up of a large number of varied ingredients which may come from different countries. There are practical issues which need to be addressed and any solution will not necessarily be as straightforward as extending country of origin information to other primary meat products.

Deputy Éamon Ó Cuív asked about the European Union's approach. We are very close to the line for the introduction of a statutory national code; we need to implement such a code. Unfortunately, however, we have probably been very close to the line for too long at this stage, which is a matter that needs to dealt with urgently.

I spoke about the details of the voluntary initiative. This will be one of three factors which will feed into the Commission's decision about whether to go down the legislative route. Legislating at European level will be somewhat complex because of the different legal systems in place, particularly with regard to contract law on which it will impinge, across the 27 member states. The approach is likely to be accepted at this stage and it is probable the Commission will propose legislation in the not too distant future. As with any legislation, it is very important that it be properly drafted in order to avoid legislation that is not fit for purpose. The somewhat laborious process we have endured here in the past few years should mean the national code is fit for purpose. The exercises being progressed at European level probably amount to the right approach at this stage. As I said, our priority is to get the national level codes over the line and have them implemented.

As a major exporting nation, what happens across the rest of Europe is very important. Our major export market which takes over 40% of our food exports has had a statutory code in place since 2010. We simply ask that the domestic market have the same legal framework as is applied in our major export market.

In answer to Deputy Ferris's questions I will elaborate on the enforcement element. A number of options were considered. With regard to the implementation and effective enforcement of the voluntary initiative, the strength of that enforcement varied, depending on which part of the food chain needed the strongest enforcement. Certain parties were looking for more of a third party approach such as independent assessment and enforcement to be overseen by the Commission. However, this was not acceptable to some of the other players involved in the initiative. The eventual compromise was that there would be an internal assessment and enforcement. A series of KPIs have been put in place, including the number of companies and member states which will sign up in different parts of the food chain and the number of complaints coming through at national and European level. It is all meant to be done in a transparent fashion and the results will, in turn, be fed back to the Commission. This was not deemed to be an acceptable level by some parties to the original agreement on the principles.

The Deputy also asked if the process had begun. It is envisaged that it should be up and running by the end of the year. The initial communication has started to be issued to companies across Europe asking them to sign a letter of intent on signing up to the voluntary agreement. We estimate that these letters will be returned to Brussels in the next month to three months. A public launch of the voluntary initiative is being considered for the early summer. In practical terms, it will probably be up and running in some form by the end of the year. We strongly hope the national statutory code will be up and running in advance of this. This relates to the Deputy's question about the urgent need for a code. As I said in my statement, we have been talking about this in one form or another since 2006 when the groceries order was revoked. The voluntary process was in place for a few years, but it did not work. The statutory code was issued for public consultation in mid-2011 and we are now close to mid-2013. It is a question of getting it over the line and having it implemented. I emphasise to the committee that my members regard this matter as urgent.

Deputy Thomas Pringle asked about unfair practices. I will give some examples. Generally, they are defined in such terms as retrospective price adjustments and retrospective financing of promotions. These are particular terms taken from the recent Green Paper produced by the EU Director General for the Internal Market. The excessive transfer of risk or the general concern about retrospective changes to contracts are phrases the UK Competition Commission used as the centrepiece for the groceries supply code of practice, GSCOP. I refer to practices such as suppliers being required to pay listing fees to ensure their product receives a prominent position. Major issues include delays as a result of minor invoice queries. This comes back to my point about the bumpiness of cashflow which can have a significant impact on companies, their business plans and medium to long-term viability in the current credit environment, in particular.

The Deputy also asked about the imbalance in the trading relationship. For the majority of companies in the domestic market, an individual customer may often account for 20% to 25% of their business. As in most other European markets, there has been consolidation in the retail grocery sector. Ireland is one of the more consolidated markets, with a very high level of concentration among a small number of retailers. That is the reality for suppliers. This imparts very significant buying power to retailers. The countervailing market power of suppliers does not apply to any great extent. It does not really matter whether a supplier is an SME or a large business. If more than one of a supplier's customers have such a significant chunk of its business, this certainly concentrates the mind and may hinder companies in making complaints.

The Deputy made the point that existing competition legislation might not have been utilised to the extent it should have. I refer to the point I made in my presentation. I referred specifically to the European competition network which is made up of the competition authorities across Europe. This is not about competition rules but rather has to do with unfair trading practices and there is a significant difference. The legislative remedies appropriate to competition rules - competition legislation or the implementation and utilisation of existing competition legislation - are quite different from the legislative response required to deal with unfair trading practices.

Our view is that the statutory code being introduced is the appropriate legislative response necessary to deal with unfair trading practices. That has been seen in a number of member states across Europe. The approach being taken at European level involves literally teasing out what form this will take. It is worth bearing in mind that when legislation is considered at European level, it is not simply a case of either legislating or not doing so. What is really the case is that they will either legislate at European level or indicate that they are happy with the legal remedies which are in place at national level. That is what is going to be the outcome.

The final question related to the Travers process, as it was known. That process went on for a significant period and we engaged very substantially and constructively with it. The report relating to it is extremely detailed and contains both the submissions made and details relating to all of the meetings which took place. All I can say in respect of the process - this is highlighted on numerous occasions in the report Mr. Travers produced - is that our preference was for a statutory code. However, we entered into the voluntary process without prejudice to that view. We were of the opinion that if it worked, that would be fine. As already stated, we engaged constructively during the entire process. When the process was complete, however, the facilitator ultimately adjudged it not to have been successful.