Andrew Doyle (Wicklow, Fine Gael)
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I welcome Mr. Paul Kelly, director of Food and Drink Industry Ireland, FDII. I thank Mr. Kelly for coming before the committee to discuss the proposed code of practice for the grocery sector.

I bring to the witnesses’ attention that they are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity 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 members should not comment on, criticise or make charges against a person or persons outside the House or an official by name or in such a way as to make him or her identifiable.

I invite Mr. Kelly to make his opening statement.

Mr. Paul Kelly:

I thank the Chairman and members of the committee for this opportunity to address them on the proposed statutory code of practice for the grocery sector. FDII represents 150 companies across meat, dairy, consumer foods and beverages and has consistently called for the introduction of a statutory code to address the unfair trading practices that flow from the imbalance of power between retailers and suppliers. The supply sector, food companies and producers, which employs approximately one in eight people across the economy, is seeing increasing pressure on margins and escalating costs in retailer supports. This is leading to reduced product choices, reduced quality, lack of competition and diversity and, ultimately, poorer value for the consumer.

Examples of unfair trading practices are many and varied but can include retrospective price adjustments, retrospective financing of promotions and other practices that effectively lead to retrospective payments or excessive transfer of risk. This reality has been acknowledged by the European Commission and the UK Competition Commission. Other EU member states, including our nearest neighbour, have introduced measures up to and including legislation to combat these negative effects. We must do so for the sake of the Irish agrifood sector and we must do this by way of a statutory code. The European Commission continues to look closely at this issue and previous speakers before this committee have cited the European voluntary initiative on business-to-business relations in the food chain as an alternative to the Irish statutory code.

I will provide some background on this initiative and the broader context at European level before making some general comments as to why it should not be considered as a valid alternative. In November 2011, 11 representative bodies from the entire food chain - the European associations representing farmers, food processors, retailers, etc. - adopted a set of principles and examples of fair and unfair commercial practices. They were subsequently asked by the European Commission to deliver an agreed framework for effective implementation of the principles, in other words, a form of voluntary code of practice for business-to-business relations at European Union level. Securing agreement on such a framework proved much more difficult. Farmers and secondary meat processors, for example, considered the implementation and enforcement element to be too weak and did not sign up, while others who signed up to the agreement had reservations. This initiative took place in recent months and the process of getting companies operating in the food chain to sign up has begun.

Before the end of the year, the European Commission will decide on whether to propose EU legislation to tackle unfair trading practices. It will base its decision on three factors: the take-up of the voluntary initiative I described; the results of an impact assessment of various possible actions that is being undertaken by the Commission's directorate general on competition; and the results of a consultation the Internal Market directorate general is undertaking based a Green Paper on unfair trading practices in the food and non-food supply chain.

It is worth noting the following points at this stage. The European process is very much in its early days. As I will detail shortly, we in Ireland have gone through an unsuccessful process, facilitated by Mr. John Travers, to determine whether a voluntary code could be introduced. While the European voluntary initiative is principle based, it is also the case that the draft Irish statutory code circulated for consultation by the Minister for Jobs, Enterprise and Innovation in 2011 also has four governing principles, namely, consumer interest, fair dealing, strong supplier base and a competitive retailer sector. The opposition of the Competition Authority to the statutory code has also been cited in earlier hearings of the joint committee. While the authority is opposed to a code, this misses the point in that the issue here is unfair trading practices as opposed to competition rules.

To illustrate the point, I will cite the Report on Competition Law Enforcement and Market Monitoring Activities by European Competition Authorities in the Food Sector, which was published in May 2012 by the European Competition Network, a body comprising of national competition authorities, NCAs, from across Europe. The report states:

In their monitoring investigations a large number of NCAs have also identified as an issue the existence of certain practices linked to imbalances of bargaining power between market players that are deemed unfair by many stakeholders. Although this is an issue which has been identified regardless of the level of the chain, particular focus has been devoted to this type of practice in the context of the commercial relations between suppliers and retailers. However, the NCAs have found that most of these practices do not fall within the scope of competition rules at the EU level or in most of the Member States. Consequently, a few NCAs have proposed alternative solutions to tackle them, such as the application of national laws against unfair trading practices or the adoption of codes of conduct or good practices with effective enforcement mechanisms. A few NCAs have also expressed concerns about the potential anti-competitive effects that certain of these practices may have in the long term, should they ultimately negatively affect the competitive process in the supply chain or consumer welfare by reducing investment and innovation or limiting consumer choice.

A major concern for Food and Drink Industry Ireland is the length of time it is taking to draw up and implement the code. The groceries order which banned below cost selling was revoked in 2006. In the absence of any legislative framework, the food industry began to highlight the buying power of retailers, incidents of unfair practices and the need for a grocery code. In 2008-09, political commitment to introduce a code was achieved. The proposal by Government was to try and introduce a voluntary code by agreement and if this was not possible, to introduce a statutory code.

Between 2009 and 2011, an unsuccessful attempt was made to reach agreement on a voluntary code of practice for the grocery sector. Consequently, the Minister for Jobs, Enterprise and Innovation gave a commitment to introduce an enabling provision in primary legislation before the end of 2012 which would allow him to introduce a statutory code soon afterwards. He issued a draft code for consultation in mid-2011. Food and Drink Industry Ireland fully supports this course of action, which we would like implemented as a matter of urgency, with a view to introducing a fair trading framework, restoring a degree of balance to trading relationships and underpinning the continued growth of Ireland's agrifood sector.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I thank Mr. Kelly for coming before the joint committee. It is interesting to hear the other side of the story, having listened to the case presented by a number of other groups. Mr. Kelly will have followed our deliberations and will no doubt have noted that one could have concluded from most of the previous presentations that there were no problems in the sector, the current system is fair, everybody loved everybody else and every supplier was perfectly happy with the prices being paid for their products. Mr. Kelly painted a different picture.

Many of the other groups that appeared before us indicated they would not have a problem with a voluntary code but would have a difficulty with a statutory code. They appeared to indicate that their principal objection was not to the power provided by a statutory code but the bureaucracy it would create. Would it be possible to introduce a national statutory code that would have teeth but would not create unnecessary bureaucracy? In designing any scheme, it is necessary to consider the benefits of the scheme in the context of the work required to achieve the desired outcome. I am interested in Mr. Kelly's response to this because the creation of bureaucracy was the main argument presented against a statutory code. I assume from Mr. Kelly's contribution that Food and Drink Industry Ireland favours a strong statutory code.

Food and Drink Industry Ireland represents the industry. We also have primary producers, processors and retailers. How do the processors believe they measure up in terms of demand from retailers? In other words, one suspects that the primary producer is the weakest link in the power chain. How much pressure is being applied to processors to drive down prices? Is the financial pressure on processors forcing them to put pressure on suppliers and primary producers? Some of us suspect that this pressure is forcing processors to switch to cheaper ingredients, including imports. Does Mr. Kelly believe the recent horsemeat scandal was an indirect, if unjustifiable, action caused by ever increasing demand for cheaper ingredients?

Will Mr. Kelly outline the position in terms of quality versus price as pressure is applied by large multiple retailers? Is quality being diminished to secure more competitive prices? We heard some figures on the prices at which beefburgers are retailing. I am interested in industry's experience of price pressure. Is this pressure forcing the industry to use lower quality ingredients? Has price pressure on Irish food and drink manufacturers forced them to source lower quality products or materials outside the State?

We heard very little about product labelling. What challenges does the industry face to ensure products that Irish labelled products come from Ireland?

There seems to be so much packaged in Ireland with all sorts of flags and so on put on produce. Is there an industry approach to labelling to ensure it is absolutely transparent that a product is Irish? I agree that in the case of manufactured products this causes a difficulty. I am interested in hearing the view of the delegation on how this labelling issue should be dealt with in order that we know the provenance of products, especially where there is a mixture of raw materials. If a product is labelled as pure beef, one hopes there is nothing else in it except beef.

At EU level does the delegation see the European Union taking action on this issue in the short term in a mandatory way? I am not referring to voluntary guidelines. Will it deal with the international element that many multiples exhibit? Does the delegation believe we can do things at a national level ahead of the European Union? How effective can we be at a national level? How important is it to have legal intervention in Europe if we want to deal with this issue, given the sheer size of the multiples?

That is my first round of questions and I thank the delegation for listening.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I thank Mr. Kelly for his presentation. As Deputy Éamon Ó Cuív noted, we have been given a different perspective in the presentation. The lack of commitment to the voluntary aspect is an issue. If it could be agreed to on a voluntary basis across the board, it would be beneficial at this point, but, obviously, that is not the case.

The delegation remarked that the voluntary code of practice was proving difficult in reaching agreement with farmers and secondary meat processors because of the belief the implementation and enforcement were too weak. Will the delegation elaborate a little on the implementation and enforcement aspect? Will it enlighten us on why it believe they were too weak? It also stated the process of getting companies operating in the food chain to sign up to the initiative had begun. How successful has this been? How widespread has it been? Reference was made to primary legislation before the end of 2012 that would allow the Minister to introduce a statutory code. Where does that commitment now lie?

Thomas Pringle (Donegal South West, Independent)
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I thank Mr. Kelly for his presentation. In the final paragraph of his statement he noted that he would like to see implemented as a matter of urgency a fairer trading framework. Will he expand on this and give some examples of where it is unfair and indicate what is happening in practice? All of the multiples from which we have heard here have said everything is perfect, that they operate a totally fair and transparent process in dealing with suppliers and that there are no unfair practices. Will the delegation tell us something of the imbalance in the trading relationship and offer some examples? Another point made by everyone was that the legal provisions were already in place for individuals to make complaints and that since no one made any complaint there must be no problems. I am keen to hear more detail from Mr. Kelly in that regard.

Reference was made to the process of Mr. John Travers to introduce a voluntary code. Where did it fall down or fall apart? Will the delegation expand on why the process did not work?

Andrew Doyle (Wicklow, Fine Gael)
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Perhaps we will take those three sets of questions first.

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.

Thomas Pringle (Donegal South West, Independent)
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On listing fees, issues relating to invoices, etc., does Food and Drink Industry Ireland have evidence of specific incidents involving the multiples? When they came before the committee, all of the multiples categorically stated that listing fees are not requested. As a result of the fact that individuals cannot come forward or are afraid to do so, we have not been able to establish the position. Is Mr. Kelly's organisation aware of the type of practices to which I refer?

Mr. Paul Kelly:

Yes. Our members would have informed us about such practices on a regular basis. There have been certain reports in some of the newspapers in recent weeks in respect of some of these practices. When the then Joint Committee on Enterprise, Trade and Employment held hearings on this matter in 2009, suppliers were extremely reticent to come before it and discuss these matters in public. In Britain, the ombudsman has been brought in to deal with this issue and has been tasked with rooting out these practices in a very proactive fashion and without placing individual suppliers in a very invidious position.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I accept what Mr. Kelly said in respect of what is happening in Britain, where the ombudsman was brought in only recently. Would a system similar to that in Britain work in Ireland? There has been a great deal of discussion regarding the cost involved in putting in place a statutory - or even a voluntary - structure. Would putting an ombudsman, or an independent adjudicator, as the relevant official is known in the UK, provide a practical solution? Would it represent a step forward? As Deputy Pringle indicated, suppliers are afraid to come forward. The multiples continue to state that there is no issue, that everyone gets along and that they cannot wait to do business with each other. There is no hard evidence to suggest that there is an issue here. Would the appointment of an independent adjudicator or an ombudsman represent the way forward?

Michael McNamara (Clare, Labour)
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I welcome the emphasis on labelling and on the need to differentiate in respect of what is made and produced here. Mr. Kelly referred to the importance of innovation. One of the innovations I have witnessed in the area in which I live - I believe this to be the case in all rural areas - is the emergence of farmers markets. Approximately 18 months ago there was a major brouhaha with regard to whether raw milk could be sold. This was symptomatic of something greater. I grew up on a farm and when the hens laid too many eggs, the excess were sold to a local shop. That shop is no longer there but if it were and if we sold our excess eggs to it, I am of the view that both parties would be fined.

There are extensive health and safety regulations in place and anyone who makes pork pies, apple pies or whatever and sells them at a farmers market must, in theory, comply with those regulations. The great majority of the regulations are not adhered to by most people. How could one possibly comply with them if one is baking or whatever in one's own kitchen? Surely there ought to be a voluntary assumption of risk whereby it must be stated that pies sold at, for example, farmers markets are not produced by a commercial enterprise or that one's eggs were not produced by hens kept in a battery. I accept that I am being slightly facetious in saying so but some such batteries resemble factories. If one accepts that certain foods or whatever are not produced by a commercial enterprise and that the relevant hygiene standards do not apply, then one is accepting the risk involved. Said risk is the same as that which obtains in respect of raw milk. Should a differentiation be made and should consumers be able to choose? It is clear that foodstuffs, etc., presented at farmers markets elsewhere throughout Europe have been produced. The states involved do not, on the face of it, appear to be as preoccupied - as is increasingly the case in this country - with closing down small businesses which demonstrate a modicum of innovation. Perhaps as larger businesses go bust they concentrate their efforts on smaller ones.

Mary Ann O'Brien (Independent)
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I welcome Mr. Kelly. I will make a quick statement rather than pose a question. I am a supplier to all of the retailers to which Mr. Kelly refers. I cannot really speak openly about my relationship with them. We do very good business and have extremely strong relationships with them. As is the case with all forms of business, times are tough. Most of the practices which obtain in Ireland, England and throughout Europe emanated, possibly, from Walmart in the United States, which bought Asda in the UK. Business is business. If I have a product listed with a supermarket chain in the USA, the UK or Ireland, I do not enter into the arrangement with my hands hanging. It is necessary for me to organise a spending budget in order that I can put in place a promotional calendar with the chain in question for the year. This is something we have come to accept and it is extremely tough to deal with. However, that is the way of life. I suppose that in order to educate the other members of the committee we might other suppliers to come before the committee. All suppliers have been obliged to come to terms with dealing with those in the retail trade. Buyers are under huge pressure and must meet their targets. We, in turn, must meet our targets. Consumers are also very demanding because economies are in shreds and they want value. It is a vicious circle.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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That is the other side of the coin.

Andrew Doyle (Wicklow, Fine Gael)
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The important word used by Mr. Kelly was "retrospective". We are not really concerned with people hammering out tough deals but rather with suppliers not having control over or input in respect of retrospective changes to such deals.

Mr. Paul Kelly:

Deputy Deering referred to bureaucracy and costs. When the debate on GSCOP and the ombudsman was taking place in Britain, studies were carried out by the relevant authorities. That was a few years ago and the position may have changed - either upwards or downwards - in the interim. However, the authorities in Britain calculated the cost of running the office of the ombudsman at £5 million. At that stage, this equated to 1p on people's weekly shop. That is for a market of 60 million people as opposed to one of 4.5 million. The draft statutory code for this jurisdiction refers to the appointment of an officer who would have a series of powers that would be quite similar in a number of respects to those of an ombudsman. It is difficult to comment further until the Minister for Jobs, Enterprise and Innovation publishes the legislation and the associated statutory code. In the context of what was available in draft form, it was envisaged that an officer would be appointed. It is not clear whether said officer would operate within the Department or within the combined entity that will be created when the Competition Authority and the National Consumer Agency are merged.

On Deputy Michael McNamara's question regarding farmers' markets and so on, that issue arises from time to time. The question in this context is whether it is possible to put in place a lower threshold. That issue arises from time to time and has been successfully addressed in other legislation applying to SMEs, but it is one to be considered. The only proviso is that we are potentially talking about food safety. The voluntary aspect having regard to some of the risks which can be associated with food not produced or stored properly is significant from a health perspective. These concerns would need to be taken into account in considering whether a lower threshold would be appropriate.

On Senator Darragh O'Brien's statement, I agree with what the Chairman said. I would differentiate between costs, including the cost of promotional plans for the year and so on. Even within the food supply chain we see differences in categories. One of the concerns of some companies is related to a promotion being cancelled at short notice. The costs associated with this will differ greatly if one is producing ambient packaged products which can be kept in the warehouse and diverted somewhere else or if one is providing perishable fresh produce. The implications in terms of different practices can vary, but it is our view that the draft code, in the way in which it has been phrased, has the capability to deal with these and bring a degree of fair trade back into the relationships between suppliers and retailers. I acknowledge and agree with the Senator's point that ultimately there must be a good working relationship between suppliers and retailers which provide the outlets for the produce of the vast majority of companies. When they retail, they can do it very well and it can be a very beneficial relationship both for suppliers and retailers and, ultimately, the consumer. Our point is that there is an aspect of that relationship that is problematic. The statutory code, if it can be introduced as a matter of urgency, is a way to address this aspect.

Andrew Doyle (Wicklow, Fine Gael)
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It is obvious that the FDII's priority is to have the code introduced on a statutory basis, regardless of what happens in Europe. While Mr. Kelly welcomes the progress being made in Europe and the possibility that the code will be introduced on a statutory basis in time, we are much further ahead with the Irish process and have been for some time. That is the important message to be noted.

We will hear next from the delegates from the IFA. We will also hear from the representatives of another willing multiple. The representatives of one multiple have so far decided that they do not want to meet us and on foot of this, we will write a report which we will feed to the Department of Agriculture, Food and the Marine and also, I envisage, into the passage through the Houses of the consumer and competition Bill. I do not want to pre-empt what the committee will do, but if we believe we should do so, we may decide to recommend the tabling of amendments on Committee Stage. I thank Mr. Kelly.

Andrew Doyle (Wicklow, Fine Gael)
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I welcome from the IFA Mr. John Bryan, president, Mr. Pat Smith, general secretary, and Ms Elaine Farrell, Oireachtas retail executive. I thank them for coming before the committee to discuss the proposed code of practice for the grocery sector. I draw their attention to the fact that they 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 any person or an entity by name or in such a way as to make him, her or it identifiable. Committee members have already been reminded of their responsibilities in regard to privilege.

I invite Mr. Bryan to make his opening statement.

Mr. John Bryan:

I thank the Chairman and members of the committee for giving the IFA the opportunity to make this presentation. As the Chairman is well aware, it is a presentation I have made on several previous occasions. When he was Fine Gael spokesperson on agriculture, we meet him on several occasions. Deputy Martin Ferris is probably tired of looking at me in coming here to make presentations on this matter. This legislation has dragged on for so long that I am concerned about the commitment made on the part of all those concerned to progress it.

Farming and the food industry make a hugely important contribution to the economy and rural society, something that has become more apparent during the economic downturn. It is an export-driven industry, with the volume of exports growing to a record €9 billion last year. Farming, the food sector and related service industries maintain an estimated 300,000 jobs in the economy and contribute to economic activity in every parish and town in Ireland.

The report recently commissioned by the IFA and undertaken by the UCD professor of agriculture and food economics, Mr. Alan Renwick, on the cattle and sheep sectors shows how embedded primary agriculture is in the local economy. Farming and the agrifood sector have the potential to capitalise on growing global demand for sustainably produced food products and further increase employment and exports.

The Government's Food Harvest 2020 food targets are ambitious. Farmers are willing and able to increase production but only on the basis that they will be fairly rewarded for their work and investment. A major threat to realising this objective is posed by the reality that primary producers are not getting fair play in the food supply chain and that their viability is being seriously challenged, both in domestic and European markets. The dominant position of the large retail groups in Ireland and across the European Union is widely recognised and forcing down the prices paid to food suppliers to below cost of production levels, in some cases. For example, liquid milk producers are receiving 33 cent a litre, on average, with production costs near 40 cent a litre. The food supply chain in Ireland, in our main export market, the United Kingdom, and most of Europe is characterised by the concentration of buying power in the hands of a small number of very large and powerful retail groups with significant market share. In Ireland almost 80% of the retail grocery trade is controlled by three players - Tesco, Musgraves and Dunnes.

Farmers are very disappointed at the delay on the part of the Government in the publication of the consumer and competition Bill which is to include a statutory code of practice for the grocery goods sector. The two Government parties made a big play of this issue in the run-up to the general election over two years ago. The programme for Government committed to "enact the Fair Trade Act, which will ban a number of unfair trading practices in the retail sector such as "hello money" which suppliers have to pay to secure a place for their goods on supermarket shelves". The Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, gave the IFA a personal commitment and made repeated promises that the legislation would be prioritised for publication, first, before the end 2011, then in 2012, followed by before the end of 2012. I understand the legislation has been "A listed" for Government approval since last autumn and the Government's inaction in the matter is unacceptable.

The inability of the Government to address the serious inequities in the food supply chain is putting primary producers under severe income pressure and some processors are in danger of being forced out of business.

Demands by retailers for large sums of money for promotions, shelf space and discounts from suppliers are adding to this pressure, and are totally unacceptable.

The IFA supports statutory legislation to address the imbalance of power in the supermarket-supplier-producer relationship and to deliver more equity in the food supply chain for the primary producer. The IFA believes that all stakeholders in the food supply chain should be covered by the code, but it must specifically focus on targeting retailers to secure equity in the chain, right back to the primary producer.

The code must ensure that retailers have responsibility for ensuring their pricing and purchasing decisions do not impact unfairly on primary producers; prevent below cost selling and predatory pricing practices; ensure a fair system of procurement for Irish products; guarantee that contracts between retailers and suppliers do not include provisions to support retailer promotions or discounting; set a limit on the use of own brands by retailers; address the credit terms between suppliers and retailers and provide for no more than 21 days credit; include a provision for "retention of title", which should be automatic until goods delivered are paid for in full by retailers; oblige retailers to report details of their profitability and turnover in this country; put substantial penalties in place to guarantee that retailers comply with the code; and insist on proper labelling of produce, avoiding any confusion or misleading of consumers.

Along with a statutory code of practice, the Government must legislate for an independent ombudsman's office which would have legal powers to investigate and adjudicate on the relationship between producers, suppliers and retailers; act in the public interest and in pursuance of the code of practice, ensuring farmers are not forced to produce below the cost of production; demand information from retailers as part of their investigations; provide anonymity and confidentiality to suppliers who make complaints, initiate investigations; and enforce penalties for non-compliance and abuse by retailers.

The Chairman has already had an in-depth discussion on EU legislation. I attended a meeting in Brussels last week at which Commissioner Barnier spoke. He was clear in his intention to introduce a statutory code in the long run that will introduce transparency and ethics - two things about which I have serious concerns. I indicated that retailers do not publish their profits or margins which means transparency is lacking. We will have a job to get ethics included in a code. The UK would regard itself as the major free-trader in the world. I am surprised that its retail legislation is way ahead of this country. It is time we made a serious effort to catch up.

Farmers are highly regulated and the relentless downward pressure on their margins from the retailers is not sustainable if they are to continue to produce high-quality, safe food for consumers. Product price and input cost volatility remains a constant challenge for farmers today, with product prices varying across the commodities in 2012, while input costs rose across the board, on top of a major cost increase experienced in 2011. The horrendous weather conditions of the past 12 months led to an increase in the volume of inputs consumed, particularly feed and energy, which further added to the cost of production.

While product prices have been largely positive over the past two years, it is not sufficient to provide farmers with a viable income as input costs have increased at a greater rate. Since 2005, the major input costs for feed, fertiliser and energy have increased by between 40% and 65%. The price being returned to producers does not cover the increased costs and the retail multiples must reflect the reality by returning higher prices back down the chain.

Irish consumers want to buy Irish produced products. The Bord Bia quality mark provides consumers with independent assurances of identification and traceability. Research carried out by Bord Bia clearly shows that is the case. The IFA continually monitors Irish retailers’ shelves on the basis of their self-acclaimed commitment to locally-sourced product. The Government must close the loopholes in the labelling legislation, which are misleading consumers and short-changing producers. Irish farmers are proud to produce food in an environmentally sustainable way, to the highest standards of traceability, quality, safety and animal welfare in the world. Lessons must be learnt from the horsemeat DNA episode and it is clear that there must be stricter controls on secondary processors, particularly in relation to imports.

The IFA’s position is as follows: any serious breach in regulations or lapse in standards that results in damage to the reputation of the Irish food sector should lead to proportionate penalties where one is guilty of an offence, including the possible loss of a licence for the processor involved; the Department of Agriculture, Food and the Marine must introduce real transparency in the supply chain and should publish the names of companies importing meat and the volumes involved on a monthly basis; only Irish raw materials should be used in meat products that are labelled and sold as Irish; and clear and accurate labelling must be implemented right across the food chain to include the retail sector, butchers, food service and restaurants. Proper compliance with the regulation would guarantee full traceability on all meat.

Irish farmers are extremely disappointed that the Food Safety Authority, FSA, has not implemented the legislation on beef origin and labelling across all food outlets in Ireland. I call on the committee to pursue this issue. The over-riding principle is that food labelling must, first, serve consumers by upholding their right to clear and straightforward information on the origin of product, and, second, it must safeguard producers by ensuring transparency and fair competition from imported product. To give the consumer an informed choice on all meats, similar to that currently available for beef, the Government must legislate so that there is an obligation on all food business operators, retailers and the entire food catering and service sector to state where their product is produced. The legislation must then be backed up with proper enforcement across the entire sector.

I call on the committee to support the IFA’s position on the urgent need to regulate the retail sector on grocery goods. The current imbalance of power in the food supply chain is unsustainable for the family farm structure in Ireland and across Europe. Vulnerable sectors, such as liquid milk, horticulture, pigs and poultry, are under particular pressure from retailers and will not survive the price war if the Government does not take action. Retailers must review their race-to-the-bottom, lowest price policy, in order to ensure acceptable standards and quality are always maintained for consumers, and producers are paid a fair price which reflects production costs plus an acceptable margin.

The Government and the EU Commission must accelerate their plans to regulate the sector, as farm families are not recognised or fairly rewarded for their role in the food supply chain. The legislation is required urgently. People are being pushed out of the sector due to pressure from major retailers. We would like to see legislation introduced and treated in the manner it deserves. In the past we failed to regulate the banks and the entire economy is paying for it. The second most powerful sector in the economy comprises the major retailers. Our failure to regulate them is evident at this stage. It is time that we stopped talking about the issue and took strong action. I urge the committee to put pressure on both the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, and the Minister for Agriculture, Food and the Marine, Deputy Coveney, to address the legislation as a matter of urgency.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I welcome the IFA back before the committee. It is not the first time it has been before us. I have been asking about the consumer and competition Bill for some time. Mr. Bryan will be delighted to hear that there is no need to apply any more pressure. The Taoiseach gave a categoric assurance to me on the floor of the Dáil last week that the Bill would be published in this session. I take him at his word. He was very clear. Normally, on the Order of Business one could get a variety of answers. The Bill is a little bit behind time but I welcome that it will come forward in this session. I understand from having been involved for many years in drafting legislation that there can be delays. One can get legislation to 90% completion very quickly but it is the final 10% that can cause difficulties for the parliamentary counsel. Bills can take time.

I hope when we get the Bill that it is a good one. That is more important. I would rather get a proper Bill following a three-month delay than to get a weak Bill because we rushed matters. I look forward to the publication of the Bill. I have no doubt on foot of what the Chairman said that the committee will have a considered and significant input into the Bill. I agree with the constructive proposal that the committee would table amendments that we had all discussed and agreed. It would lead to that particular pillar in the process being put in place. Significant progress is being made.

I do not think it will make any difference in three or four years' time whether the Bill was three months late if it is the right Bill and is enacted correctly.

Many issues were raised by Mr. Bryan. We would all like to see something happen at European level because of the sheer size of the multiples. It is fair to say that I am not alone on the committee in hoping that not only can we take action at a national level but that we could take action at a European level as well because we sell our products into other countries so we want to get our price there.

An issue which I would like to ask Mr. Bryan to address is one that was raised by liquid milk suppliers. They are very straightforward. One is not adding or subtracting anything in that regard. One is basically providing liquid milk. One goes through a process and the milk is passed on to the retailer on a daily basis. Producers raised with me the power and dominance of the multiples in terms of the unbalanced share of profit of the gross price which the consumer pays. The continued downward pressure of price by the multiples on manufacturers and, in turn, the price they pay for a litre of milk threatens the viability of the production of milk in the winter months. They believe that if the current situation continues, that it is unsustainable and will leave producers with no other option but to cease or reduce winter production.

It is not easy to replace a product such as winter milk. In other words, one cannot bring it in from too far away or it will not be fresh milk. How are the retailers so dominant in this situation? One would think that the processors would have significant control because the liquid milk suppliers are feeding the processors and the processors are feeding the multiples. In recent weeks it has been said that processors in Britain will take the milk out of the south east of this country and bring it over to Britain. Could Mr. Bryan outline from his experience how the multiples are so dominant? Is it because farmers in Northern Ireland have a low cost base for production and that they have a choice of market in this country or in Britain for anything they want to move out of the Six Counties?

Could Mr. Bryan give us an idea of the structure of liquid milk? If we got our dream of a united Ireland and we had one jurisdiction in the State I would imagine that there would not be much profitability in importing liquid milk every day. In such circumstances one would think the supplier and the processor would be in a dominant position. When it comes to liquid milk is the “Northern” factor the reason for giving the multiples the dominance? I heard one processor say that they are asked to tender every year. Obviously, they are not allowed to form a cartel as it would contravene competition law for the processors to get together. I am sure they are not blind to their costs and if all costs were the same one would think that the processor would have to demand a price that would entail a profit. Whether they talk to each other, one would think they would come out with give or take the same price. One would think they would factor into that something that would guarantee profit to the winter milk producers who consistently complain that there is no profit in the business. From his vast knowledge of the industry it is important for Mr. Bryan to explain where the lúb ar lár is or how the retailers have got so much power.

Mr. Bryan covered the retail issue quite well in his submission. A second issue which he might explain, because it affects primary producers hugely, concerns meat factories. My understanding is that if I go to England that I would get a much better quote from factories that operate in this jurisdiction and in England for similar animals. Does Mr. Bryan have an explanation for that? How is it the case that in the United Kingdom factory prices for animals seem to be much higher? Did Mr. Bryan ever take up the issue of the fact that one can drive a lorry with cattle onto a boat in Larne to the United Kingdom without difficulty but if one goes with the same lorry to cross from Dublin or Dún Laoghaire to Britain that it is not possible to do so. However, one can travel back to those ports from Britain with an empty cattle lorry. Has Mr. Bryan ever raised the issue with the people who operate the boats and the Department of Agriculture, Food and the Marine? What is the explanation for the difficulty in getting a lorry on the boat in Dublin or Dún Laoghaire? Even if there is a significant difference in the factory price that would justify the extra transport cost, one cannot avail of it. That is a significant factor.

I understand that the IFA gets a levy that is collected by meat factories and processors. It is a significant source of revenue to the IFA. Could Mr. Bryan outline how much money is involved? Is it an inhibiting factor for the IFA in dealing with meat factories and processors given that they are a source of a considerable amount of funding? Did any factory or processor ever threaten the IFA to refuse to collect the levy if too much pressure was applied or if pickets were put in place to highlight their power in the market? Could Mr. Bryan clarify the issue?

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I wonder would the Government clarify a matter. I remember a Government party getting a levy from a trade union.

Andrew Doyle (Wicklow, Fine Gael)
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It was not for this Chairman anyway.

Michael McNamara (Clare, Labour)
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There are sources of funding for political movements.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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Perhaps Deputy McNamara could clarify the matter.

Andrew Doyle (Wicklow, Fine Gael)
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We will stick to the issue.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I thank Mr. Bryan for his presentation. As he said, we have heard it all before. There is no point in saying otherwise. It is an indictment of the political system that has failed to deal with the issue. I concur with Deputy Ó Cuív’s point that legislation will be forthcoming. I hope it will satisfy the necessary requirements. The big issue for everyone now is the state of the farming sector, in particular in the past 18 months. Each and every electoral representative has been trying to highlight the situation on fodder and how it has made matters much worse than was the case. The producer on the ground is the one who is suffering most. He or she is also the victim of increased costs in oil, diesel and feedstuffs.

The loopholes in labelling were raised by Mr. Bryan. If ever the issue was brought home to retailers, consumers and producers it was in the recent debacle with horsemeat and the lack of traceability. A lack of a proper labelling system was evident. Various ingredients from different jurisdictions have done enormous damage to the industry. In fairness, the Government dealt with the matter swiftly. Does Mr. Bryan concur with the view that all ingredients used as fillers should be clearly labelled, including country of origin?

I raise the cartels within that sector. The people who are at a loss because of those are the producers and the people on the ground, so to speak.

Mr. Bryan raised the issue of an independent supermarket ombudsman. Will he elaborate on that? It is a very good idea. People are crying out for such an office, and it can only benefit the sector as well as the consumer.

Mr. Bryan stated also that the United Kingdom legislation is far more advanced than ours and he called on our Government to follow the UK lead and regulate retailers by introducing similar strong legislation and enforcement powers. Will he outline the enforcement powers he envisages? Enforcement powers will be needed if this is to work properly.

We have done all of this previously. The welcome aspect is that the Taoiseach promised on the floor of the House that the legislation is forthcoming. It is up to us, as elected representatives, to keep up the pressure to ensure that happens, and my party will not be found wanting in that regard.

Thomas Pringle (Donegal South West, Independent)
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I thank the IFA representatives for their presentation. My first question is on the code of practice. Mr. Bryan said it should set a limit on the use of own brands by retailers. Why does he hold that view and will he expand on it?

Some of the retailers who came before the committee cited that they only sell Irish beef in their stores but given that 90% or 95% of Irish beef is exported, that would be a very small portion of the amount of beef being produced and therefore the prices they pay would not have a huge impact on the price the producer would pay when so much of it goes to the export market. What are the witnesses' views on that?

An issue that arose from the evidence given by the retailers is that they negotiate a price and the contract price is there but the code of practice will cover issues that arise outside of the contracted price. Does Mr. Bryan have any figures on those additional costs? If these practices were stopped and the processor was benefiting from it, how does he see the code of practice leading to the producer achieving some of that benefit also? Would that be provided for in the code as proposed or would it have to be examined?

Michael McNamara (Clare, Labour)
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The witnesses list horticulture, pigs, poultry and milk among vulnerable sectors. With regard to pigs, it has been a very difficult few years, particularly with accumulated debts, food prices and so on coming at the same time as the implementation of legislation requiring changes in housing. I know there was a consideration, and the late Minister of State, Shane McEntee, was in Clare discussing this issue, that the Department of Finance or the Department of Agriculture, Food and the Marine would talk to banks about parking debt or portions of debt to ensure that the entire pig sector is not wiped out. Does the IFA have any proposals for the Government with regard to ensuring the ongoing sustainability of the pig sector? I know labelling is an issue but beyond that is there any proposal?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I welcome the IFA delegation. Many issues were dealt with by the previous speakers. We have had discussions with the different supermarket groups in recent weeks and many allegations were made prior to those meetings about hello money, listed money and so on but the representatives who came before this committee said there was no issue in that regard. They were very strong on that on some occasions. Have the witnesses hard evidence of suppliers coming to them directly, be it a beef producer, a horticulture producer or whomever, indicating they are under serious pressure from X, Y or Z, showing the evidence of that and asking what they can do for them? If that is the case it should be incorporated into any report this committee produces to feed into legislation. We all know of different cases but it is important that this is up front.

Deputy Ferris mentioned the UK independent adjudicator. I understand the person is in that office only four or five months but have the witnesses any feedback from their equivalent in the UK on the way that process is working? Is it possible to have a similar process here?

As a liquid milk producer I know only too well the difficulties involved. It is a constant source of irritation that when one goes into different supermarkets one will never find the same price for the same litre of milk, even though I might get 33 cent per litre. Many litres come from the one tank I produce every day of the week. That is a constant source of irritation but I welcome the witnesses observations in that regard.

Brian Ó Domhnaill (Fianna Fail)
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I welcome the delegation to discuss this important topic which affects the food industry. We all saw what happened with the horsemeat scandal, which was the tip of the iceberg and not the first time issues were raised about the ingredients going into final food products be they agriculture-based or any other food products on supermarket shelves.

What has come to the fore is that the legislation in Europe, and the State, are not strong enough to protect the consumer as well as the farming interest. The primary producer, the farmer, and the consumer must be protected because everyone would agree from what happened in the horsemeat scandal that the people in the middle, the major processors, the importers and the supermarkets, cannot be trusted. There was a breakdown in the process. They were given latitude but they were labelling product that clearly was not what it said on the tin. The consumer deserves to be protected and the only way that can be done is through a code of conduct, which must be backed up by regulations, to ensure the courts can adjudicate in instances where anomalies occur.

The UK legislation appears to be stringent, for example, an ingredient that is more than 2% of the product must be indicated on the label. We all know that is not the case here. We have products in all the multiples, even after the horsemeat scandal, that are labelled as Irish product yet there is a high percentage of non-Irish ingredients in them. It is a major issue, and it is affecting Irish agriculture. There is only one way to deal with it and that is through primary legislation here. I would be fully supportive of that because it will protect the primary producer but also the consumer. The farmers want to make sure the consumer is protected because ultimately they will gain from it also.

The independent supermarket ombudsman is a very good proposal. I would go further, and Mr. Bryan might have included this in his proposal, and allow the consumer make submissions to the ombudsman as can be done with the Ombudsman, Emily O'Reilly, to whom consumers who have a gripe with a supermarket can make a complaint directly. A period of time should be given for an adjudication to be heard, and statutory powers should be given to the ombudsman also.

This is a matter that should be considered by the relevant Minister, be it under the remit of the Department of Jobs, Enterprise and Innovation or the Department of Agriculture, Food and the Marine. It probably is a mixture of both. As for what is happening in the United Kingdom, while I have examined the legislation in place there, does Mr. Bryan believe it is working on the ground? On the face of it, having read the legislation, it appears to at least be protecting the interests of consumers and farmers. While I could touch on many other issues today, I note the fodder shortage has been mentioned, I will keep to the agenda.

Pat O'Neill (Fine Gael)
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I thank Mr. Bryan for his presentation and will raise a couple of matters. While others have dealt with the issue, I refer to hello money. It is very interesting because many of the large multiples have appeared before the joint committee and they all deny it exists. Can the Irish Farmers Association, IFA, bring evidence before the joint committee to prove it still is being sought? One reason for abolishing the groceries order in 2006 was to cut out the fact that hello money was being sought. What was the IFA position in 2006 on the abolition of the groceries order? My second question relates to proposed European Union legislation and as Mr. Bryan noted, such legislation may take a lot longer to pass than Irish legislation. Were Ireland to introduce legislation, does Mr. Bryan think it might have a disadvantageous effect on our producers? One of the large multiples that appeared before the joint committee last week operates in nine countries, while Tesco operates worldwide. Were Ireland to introduce a legislative Bill, might that affect our producers were the multiples to source the products from areas which did not have such legislation? Does Mr. Bryan believe it would affect our primary producers in that way? Unless such legislation was passed on a worldwide or European Union basis, could putting in place legislation in Ireland have a detrimental effect on our producers? The multiples could then begin to source the products in other countries.

Mr. John Bryan:

As they were shorter, I will start with the last questions. On Senator O'Neill's question regarding hello money, I have had discussions with the Chairman on this issue over the past three or four years, when vegetable growers approached the Chairman and told him they were asked for hello money. Several representatives from the horticultural sector have approached us but they will not make a complaint. Just as Senator Mary Ann O'Brien has stated she must do it, I have met people, both at that level and at a much higher level, who have told me they were asked to make a substantial contribution at Christmas. However, were one to ask them to make a complaint, they would not do it because they know they would get delisted regardless of whether they were a small horticultural grower in north Dublin, a chocolate manufacturer like Lily O'Brien's or perhaps a dairy or beef supplier. They are intimidated by the sheer power of the retailers because to get delisted from organisations like Dunnes Stores, Tesco or the Musgrave Group, which purchase so much of one's product, is a considerable knock to one's business. This reverts to the IFA's point, which is that retail regulation is required, as is an ombudsman who can investigate. I would not be concerned that this might affect Ireland because different levels of legislation exist in different jurisdictions and it actually is the legislation which applies in the individual jurisdictions with which one would be obliged to deal. My only concern would be that some country like France, which is considering a retail code, might go a bit over the top in nationalistic terms, given that we export 90% of our beef and will be exporting more than 90% of our dairy products. Consequently, at European level, we must watch that to make sure no trade-distorting legislation is brought into any of this.

As for the Senator's question on the abolition of the groceries order, the IFA actually had made submissions to the then Department of Agriculture and Food seeking to strengthen it. At the time when the groceries order was abolished, we were seeking to have more products included in it. Several of the products the Senator and I both produce were not covered by the groceries order and we were seeking for them to be included.

In response to Senator Ó Domhnaill, the lessons from the horsemeat scandal certainly must be learned. Representatives of the IFA were in Leinster House on the day the Minister appeared before the joint committee and I thought that was a good discussion. However, we must all learn lessons from that. Moreover, there must be improved legislation. We cannot simply state that it was a mess and then put it behind us, as much stronger legislation is required. We need much greater inspection at secondary processor level. We need much clearer labelling and it is extremely important that labelling is what it says. It is unacceptable that one could buy something, be it water, alcohol or anything else, in which there could be product from six different countries. Clear and transparent labelling is required and this is the time for the Government to act. There is a view, which was expressed by both Ilse Aigner, the German Minister for Agriculture and Stéphane LE Foll, the French Minister for Agriculture, seeking stronger legislation in this regard. Consequently, Ireland also should be pushing for a much stricter legislation. Moreover, to take up a point made by the Senator, if the label says something is Irish, the ingredients should be Irish. Part of what emerged from this scandal was there was a mix and matching process going on and people were using labelling that clearly was designed to mislead the consumer. This was in addition to all the other things that went on involving unacceptable practices. Consequently, a tighter level of regulation is required in this regard. We must learn from this issue and a level of proper legislation must be brought in.

As for the Senator's question on a supermarket ombudsman, the IFA believes precisely what the Senator stated, which is that such an ombudsman should be there to represent the consumer, the primary producer and any other third party. This is because the person who makes a complaint often will be another shop or retailer. The idea is to put in place an ombudsman that can take complaints independently. The Senator inquired about the ombudsman in England and the IFA has met its British equivalent, the National Farmers Union, NFU, on this subject. While it has not been running for long but the NFU is reasonably happy with it. Its members believe the opportunity to make an anonymous complaint, without being rung by the retailer in question to tell one it is dumping one's vegetables the next day, is extremely important. Again, in a response that also answers some of the other questions, there must be proper, substantial penalties. There is no point in having penalties of €100 or €1,000 for an entity with a turnover of €2 billion. One must have real and meaningful penalties and we also refer to ethics in this regard. When a product manager's total salary is based on who he or she does along the line, whether he or she does the primary producer or the consumer, his or her salary is based on a bonus based on how much her or she can screw everyone in between. How can there be ethics when this is the way? This issue must be dealt with in retail legislation, in that one cannot be paid more for buying from the Senator for nothing and then selling for three times that to the Chairman. This entire area must be regulated and the payment system in place for individual product managers at present certainly is encouraging them to do everyone along the line. Moreover, if the penalties are small, they will continue to do this because their salaries are based on bonuses.

Deputy Deering noted that representatives of the supermarket groups appeared before the joint committee and asked the reason they are so opposed to a code of practice. As my predecessor from IBEC stated, they spent a few years stating they were against the voluntary code but now that they think there is a chance of a compulsory code, they are against that but seek a voluntary code, because they know they have a lot to hide. I have never met a retailer anywhere in the world that did not claim no regulation was needed or sought. The attitude is there is no need whatsoever for it, that it should be got rid of and is an unnecessary cost on the consumer. However, food still sells at a higher price in Ireland even as the retailers source much of it more cheaply here in Ireland. It is similar to the point Deputy Deering made in respect of milk. He gets his price, which, relative to different markets in Europe is lower than some and slightly higher than others, but yet the retailers here sell at a price that enables them to take a hell of a good margin on it. Deputy Ó Cuív asked some highly in-depth questions to which I will turn in a minute but milk is a sector in which the capacity of retailers to take a huge margin at a time like this shows no respect whatsoever for primary producers. I refer to the weather and the pressure under which primary producers are operating on foot of the winter that has just passed with the higher costs of meal but yet the retailers pay as little as they can get away with.

Deputy Pringle queried the limit on own-brand products. Probably the main reason the IFA gets concerned about own brands is the retailers use it all the time as a way to push down the price. I do not wish to name brands - and it does not matter whether the milk is from Connacht Gold, Glanbia or whoever - but the retailers stock it and the consumer gets used to buying it. However, if it is Tesco's own brand or Dunnes Stores' own brand, they can substitute the morning after and one does not know from where they sourced it. Essentially, own-brand products give the retailers greater power. Senator Mary Ann O'Brien has left the room but earlier she referred to how the practices come from the United States from entities such as Walmart and so on. These are the practices they employ to push down prices.

Those practices are evident here but we must resist them as best we can and encourage people to do so. They make it way too easy for the retailer to substitute.

We export 90% of our beef and 85% of our dairy produce. As dairy production increases, that percentage will rise substantially. That is why other markets across Europe are vital to us. It is vital that there be free trade within Europe and that we have equal access to France and the United Kingdom, for example. At different times, little barriers can be put in place. However, the Irish market, particularly the fresh beef market and also the liquid milk, pork and chicken markets, is important. Members will see our poultry men protesting when they see too many imported products. They can get a greater margin in their own market.

Everyone selling into an import market sells at a discount. If I sell Irish beef in the United States, I do not sell it at the US price. The same applies to sales in England or France. There is a little discount. If English beef comes to Ireland – there is some – or English chicken or Northern Ireland milk, it all tends to be sold at a discount. The domestic market is vital, especially for fresh meat, such as pork, chicken and beef. Some 10% of the market is at stake but it is a very high-value sector. It is helpful that the major Irish retailers source only Irish produce.

I was asked what we expect the code of practice to achieve. We expect there to be a level playing pitch. Senator Mary Ann O'Brien could not have been clearer. A business person is expected to bring in a big wad of money. However, if there were a code of practice banning this, in addition to transparency, it would be useful. I agree with the Chairman that retrospective action is far worse. The practice to which I am alluding does take place, as we all know. If it were banned and if there were a sufficiently large fine for companies, it would be stopped. It exerts considerable downward pressure. Horticulturalists have told us a major retailer met them at Christmas and sought 10% or 15% of the turnover. They will not stand up in front of this committee unless there is anonymity and proper legislation providing for a massive penalty. Anonymity is very important.

On Deputy McNamara's point, we have met the banks. We have told them about the huge pressure on the pig and poultry sectors and others. There is probably no sector in farming that is not under pressure after the winter we have had. Huge feed costs have been incurred. In a normal year, most stock would be out a little after St. Patrick's Day, even in the Deputy's part of the country. This year we are heading for 1 May. Every sector has considerable debt built up. We have asked the banks to be more lenient and to give people more years in which to pay and to spread loans. We have asked the banks to consider restructuring for some of the pig farmers in serious trouble. Many of the pig farmers have large loans from merchants, as the members will be aware. It is not easy to deal with that. We want to sustain the pig sector in Ireland and address the high cost of feed.

The retail margin plays a huge role. The retail margin taken on liquid milk, beef or lamb is much lower than that taken on pork. A huge margin is taken on pork. Tightening up in this regard would be of considerable help.

I agree with Deputy Ferris. Since 2005 and 2006, I have been coming here talking about labelling. I met former Tánaiste Mary Coughlan and former Minister Batt O'Keeffe and I have worn a trail on retail legislation. I spoke to Deputy Michael Creed, present members and the Minister of State, Deputy Sean Sherlock. There are very few spokesmen on agriculture with whom I have not sat down with over the past five or six years. We are not talking about three months but about six or seven years. We need legislation. I welcome the fact that there is a commitment from the Taoiseach but what I propose needs to happen. People have been made promises for so long. Operators in the pig and poultry sectors are so disappointed that the matter has dragged on for so long.

I agree with Deputy Ferris on proper labelling of all ingredients and the country of origin. It is totally unacceptable that a pie could have unlabelled ingredients from six countries. It is not fair to the consumer or primary producer.

The Deputy mentioned cartels. Retailers have power over major food companies but the power they have when dealing with small and medium-sized producers is unbelievable. The latter are sucked into an arrangement on which they become totally dependent. On supermarket dominance, it would be very helpful to enshrine in legislation the right of people to make complaints anonymously and the right of an ombudsman to impose substantial fines. Retailers will resist the legislation. They will resist voluntary and mandatory codes of practice. However, when the legislation is introduced, most will obey. When there is no legislation, there is an à la cartearrangement, but proper legislation will be a big help.

Deputy Ferris asked about the UK legislation. We met the NFU several times about it. It is relatively confident that legislation can force the retailers to be bit more responsible. I do not like setting my bar too high; I am just saying what I have said already, that is, that there should be substantial penalties. How product salesmen are treated by product managers and retailers is downright scandalous at times. They are treated as if they were a lower form of life. If there were proper legislation in place to find law-breakers, it would be desirable.

Deputy Ó Cuív asked me about eight questions. I welcome his strong support for the Taoiseach's commitment to a timeframe of three or four months. I will have to keep the pressure on until the measure is introduced but it is important that it be introduced. We want action at national and EU levels. I am a little sceptical of action at EU level based on remarks of Commissioner Barnier the other evening. It will probably take him two or three more years talking about voluntary codes of practice and then the Commission will proceed to talking about mandatory codes. This represents a long time. Some countries, such as Denmark and Holland, will be dragged screaming. The amazing point is that the United Kingdom has moved ahead. As Mr. Paul Kelly said, there will be contract legislation, etc., brought into play. The Danes and the Dutch will put up resistance and that is why it is important that there be a national element.

I was asked about liquid milk but he answered the question himself. The reality is that the major processors are spoken to. The Deputy is in touch with the Clóna representatives and a few of the others. The individuals submit a contract. They shop around and if they do not, they talk to people in Northern Ireland. In recent years, the Northern Ireland trade has taken over 25% of the Irish liquid milk market. That is a substantial proportion. The market extends all the way to the area about which the Deputy is talking. It is very hard to regulate the practice. We work very closely with the National Dairy Council, which brands Irish milk as Irish when it is produced and manufactured in the Republic. Some of the people in the North came up with a solution to this. It involved buying a few gallons from someone in the South, bringing it across the Border and then bringing it back down again.

Winter production is very expensive. The dairy sector is vulnerable in this regard. Deputy Deering outlined clearly the costs. Retailers will do anything to keep the price down. We have met all the retailers. The answer to the Deputy's question is self-evident. Why do the retailers not agree? All we do is negotiate on behalf of perhaps 2,000 liquid milk farmers and 17,000 dairy farmers. We had the Competition Authority rampaging up our stairs. Fifteen of its officials were with us for two days just because one or two of our members said the price may not be realistic. It is very clear why companies such as Glanbia, Clóna and Connacht Gold cannot agree on a price. If they even thought about it, the Competition Authority would issue a fine of a few million euro. Retailers, however, will never be fined for manipulating the price downwards. Competition law, as it exists in the State, is very flawed, to the point where it discriminates against primary producers. We have no rights at all but if we just say we want a fair price and cover the cost of production, we are deemed to be conspiring to shove up the price. The competition legislation is wrong.

Reference was made to the one tender every year. Some must tender every three months. With regard to the own brand milk in particular, there is a tendering process, the price is set and one is up and down. Some processors put in a plant with the intention of supplying a retailer. If they lose that business, their viability is called into question.

The Deputy asked me about meat factories. There are 30 to 33 export plants in Ireland and there are three major operations.

The question was asked about supply and demand at different times of the year, and our price in different categories. I do not have a figure off the top of my head for an R3 steer, but one is probably talking about somewhere in the region of €100 between here and the UK. One would get €150 more here than in England for a P-minus cow. Therefore, the price varies on different grades of animal and at different times of the year. Ireland is currently at 107% of the EU average for our beef prices. Last October we were at 92% or 93%.

A question was also asked about the IFA and the levy. The IFA gets a levy on marts, milk, horticulture, pigs and several other areas. How does the committee think we run the IFA? We ran campaigns, the same as Fianna Fáil collects outside the church.

Éamon Ó Cuív (Galway West, Fianna Fail)
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So the focus is on the collection.

Mr. John Bryan:

I will finish. I did not interrupt the Deputy. We ran a campaign for three years to ban Brazilian beef from Europe. Several of the factories the Deputy is talking about were involved in importing it. Therefore, to say that there is a conflict of interest, just means that he has no in-depth understanding of the beef industry. We have put a huge effort in over the last couple of years to get ships going. A couple of months ago, I was at the launch of the first boat to Libya in 15 years. We do not collect any levy off boats but we work daily at international markets. We work for farmers and run a full-time office in Brussels. The lobbying we did on the MFF and to get a proper budget on the single farm payment involved working with the French, the Germans and others. That is what the IFA does. We are a lobbying organisation, not a political one. We are not involved in anything else, but we put a huge effort into working to represent 124,000 farmers.

At times, one would be concerned that there is an understanding - and that is a very weak word - between factories. Someone else mentioned cartels. Of course, one would be concerned when they all pay the same price. A moment ago, the Deputy asked for all the dairy co-ops to quote the one price.

Éamon Ó Cuív (Galway West, Fianna Fail)
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No, I did not. I want to correct that.

Mr. John Bryan:

At different times, I would be concerned that factories work in cohesion to maintain the price. It is our job, however, to do everything we can to raise the price. That is why we work hard on live exports and to encourage the maximum amount of cattle to go through the marts. That is why we are trying to work with the NFU to get cattle into the UK. Cattle do go from Larne easily but there is EU legislation on transfers between countries. When one crosses the Border it is, unfortunately, deemed as a different country. When one crosses from Larne in Northern Ireland to the UK, it is not regarded as a different country. The legislation that applies to international exports does not apply from Larne to Scotland or England. However, we have worked hard to reduce the cost of transferring livestock between countries. A substantial amount of cattle go North but it is deemed as moving to another jurisdiction, so we have to get the regulations reduced to a minimum when that happens. Over the last two years, an average of 70,000 cattle per annum have gone north of the Border, varying from weanlings, to store cattle and finished cattle.

As regards shipping policy, a boat must be certified by the Department of Agriculture, Food and the Marine to carry livestock. It is an expensive process. I explained how we worked to get boats certified for north Africa, including Libya and other areas. If one wants to haul cattle from Holyhead to Dublin or vice versa, one must be certified by the Department of Agriculture, Food and the Marine, which has very high standards. I am not giving out about that. Irish standards for animal transportation are the highest in the world. That is good because it secures our live export trade and means that cattle will travel in comfort and safety, which is important.

The Deputy asked a frivolous question about whether anyone had threatened us. If he knows anything about the IFA, he would know that threatening us is a waste of time.

Andrew Doyle (Wicklow, Fine Gael)
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Before calling Mr. Smith, Deputy Ó Cuív wanted to clarify one point.

Éamon Ó Cuív (Galway West, Fianna Fail)
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No. Let Mr. Smith finish and then we will go back to that.

Mr. Pat Smith:

In recent weeks, I have had quite a number of discussions on liquid milk, poultry and eggs with retailers with whom we interact. We are pushing hard to get a price increase which is way overdue in the liquid milk sector. In the context of trying to move the matter on, one of the retailers said he was looking for money off somebody before he could do that. For anyone to say that type of skullduggery does not go on, is incorrect. There are only two things that motivate people in life - fear and pleasure. Retailers work on the basis of fear through delisting. Some element of retailer regulation is absolutely critical to balance the show in the context of processors and primary producers.

Deputy Ó Cuív asked about liquid milk. Own-brand milk has basically decimated the branded products. The situation is being abused. One can spend ten years developing a product - including research, development and innovation - but overnight a retailer can decide to get a replica product to undermine that investment. It is a drive to the bottom because they will get their margin in whatever way they can. One of the reasons that liquid milk is under so much pressure is that retailers have allowed so much of a differentiation between the own-brand and branded products. That is a strategic move by retailers, so effectively the percentage of own-brand is increasing all the time. The margin left for a processor to pay the farmer back is being diminished. Own-brand is a significant issue in the context of liquid milk, but also concerning other products. It was scandalous for the Competition Authority to put an organisation like ours to that cost because a couple of people tried to say they were going out of business producing liquid milk.

I want to answer Deputy Ó Cuív's point about meat factories. I have been in the IFA for over 20 years and was responsible for its organisational perspective for many years. Not once did the IFA ever blink, nor will we. Other than the IFA, I do not see anyone else who has challenged the meat factories. They blockaded the meat factories day after day. We are challenging them on price, as one can read in any newspaper, whether it is Henry Burns or James Murphy. We are fearlessly on the farmers' side and nobody has put more effort into getting live exports to ensure that there is price competition.

In the last week, both the president and myself had meetings with the NFU to see how we can get live exports into the UK. In the financial context, it is about 5% to 6% of the IFA's total income. The money comes from farmers and not a red cent comes from the meat factories. We pay them a commission to collect it, but it is paid by farmers. To even suggest that we would be bought, is very disrespectful to this association.

I wish to make a point about the weather conditions which are very difficult. It is an unprecedented situation so I ask this committee to use its good offices to get the Government to do a bit more now and appreciate what is going on in the farming community.

Andrew Doyle (Wicklow, Fine Gael)
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To be fair to Deputy Ó Cuív, he asked if this inhibited dealings. I think Mr. Smith has explained it quite clearly.

For the record, Senator Mary Ann O'Brien did not say that she paid hello money.

Mr. John Bryan:

She mentioned a portion.

Andrew Doyle (Wicklow, Fine Gael)
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She said that part and parcel of an arrangement is coming to a deal that includes support, financing or promotions. She did not say that she paid hello money. I would like that to be put on the record, just for her own sake because she is not here. It is only in fairness to her as a committee member.

Éamon Ó Cuív (Galway West, Fianna Fail)
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Can I come back in again?

Andrew Doyle (Wicklow, Fine Gael)
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Go ahead.

Éamon Ó Cuív (Galway West, Fianna Fail)
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The IFA representative said he would like to see competition law changed here. As he quite rightly pointed out, he has a lot more resources than I do as an Opposition politician. Is it possible for us to do so within European law? I am against it and I will be absolutely blunt about this. One of the worst decisions that was ever made in Europe was the Sutherland competition law. It has proven to be a disaster and I blame that law for the collapse of the banks. They made a god out of competition. Anybody or anything that stood in the way of competition, as they defined it, was to be steamrolled over. I have, therefore, never been a great proponent of competition at all costs. At the end of the day, as we saw in the horsemeat situation, the consumer pays one way or the other.

I would be interested in finding out the technical information, if the witnesses have it. Would the changes they want to see in competition law in Ireland be legal under European law?

It is a farce that the vulnerable sector, which in this case is suppliers, cannot muscle up to something so powerful that there can be no competition with it. They are in the weakest position by far. It is totally unfair competition. It is a bit like Wicklow playing Kerry in a football match. We need to get to the technical realities. We can all be for and against all sorts of nice things, but the question is whether it is an EU law problem or a domestic law problem. If it is a problem of domestic law, we can recommend in our report that the law be changed. If it is an EU law problem, we face a great deal more complexity.

I want what I said about milk processors to be absolutely clear. I said they could not get involved in a cartel because the Competition Authority would be down on top of them like a tonne of bricks. What I said was that even if they never spoke to each other, they all have the same cost base. If they were to make a profit for their suppliers and themselves, they should end up with the same profitable margin. It has been confirmed by the delegation that what is happening is that winter liquid milk suppliers are finding that it is becoming uneconomical to supply here. That leaves us with the issue of the North of Ireland. How can they produce milk so much more cheaply there and export it down here? I use the term "export" in a technical sense, which reflects the legal position even if some of us would not like to recognise the Border. How can they flood the market with cheap milk? Without forming another illegal international cartel, it would be in the interests of farmers North and South - and no doubt the IFA has talks with the Ulster Farmers Union, as it indicated it has with the National Farmers Union in Britain - to ensure that we do not end up without milk. If the day were to come that the island of Britain was short of winter liquid milk, to which I am referring specifically, the Northern Ireland farmer could start shoving product handily into the UK market. We could end up drinking Dutch UHT in the middle of winter if that happened as we would not have enough liquid supply. If people pull out of the industry, they will not easily return. Where are we in this triangle? Apparently that is the explanation of the low price to the winter milk producers. It is ironic that while we are being flooded with milk from the North, some of the largest suppliers in the south east of Ireland are being lobbied by companies from the island of Britain to put the milk on a boat and bring it there. We must deal with that issue.

Perhaps I am a simpleton, but I take it that Northern Ireland cannot supply the whole of the island of Ireland with milk in the winter. If suppliers refused to allow retailers to put their labels on the product, what could the retailer do? He would have no milk. I recognise that would involve a bit of eye-balling, but from what we have been told, the retail multiples are not slow to eye-ball themselves. Serious issues have been raised with us. They were raised with me last summer when I become the spokesman for agriculture. To be fair to the joint committee and the Chairman, in particular, it took the issue on board and widened it to a discussion on the power of the multiples. We must get to the bottom of it. In the meat and liquid milk sectors there is a clear connection between the supplier and the supermarket. It is not a long chain whereas in a very highly processed food, it is difficult to establish the prices of the various ingredients. The price of 33 cent per litre was quoted. I understand 2 litres of milk costs approximately €1.49 in a supermarket in the middle of winter. It can vary from €1.99 to €1.46. I understand there is no loss of milk during processing. One wonders where the rest of the money goes, who gets it and whether the distribution is fair.

I understand that boats will not transport animals even where all the certifications and approvals are in place. We are talking about a three-hour journey. It is no longer about bringing the poor animal from Galway to Dublin on a lorry. It would be nice for us to be able to play the market so that when the British price is up, we go there and when the Irish price is up, we keep them. They have a little bit of a hermetically sealed container here, which is very handy from them.

On the levy, there is a story going around, which I am glad the delegation has put to bed once and for all. In politics, all sorts of stories grow legs and become the truth after a while. The story is that the IFA put a picket on a well-known factory operator, who invited its representatives in for very useful negotiations. The story also goes that the parting shot as they went out the door was "Do not do that again, lads, because there will be no levy collected". I take it that story has been denied and there is no truth to it. Politics and lobbying is about perception. If the amount of money collected is only 5% or 6% and the people one is negotiating with on behalf of farmers collect the money, the system should be changed as we had to change our money collecting systems to make them more transparent and referrable to the person actually levied. It sends all the wrong signals to have the people with whom one is meant to be negotiating prices being the agents for collecting the money. I know they do not contribute, but they do the mechanical collecting of the money. As Fianna Fáil does, I suggest the IFA collects the money from the membership directly.

Mr. John Bryan:

There is no legislation issue with boats if they are certified. We have often put cattle on boats in Dublin and gone to Holyhead and then through England on the way to France and Italy. They do not like animals to be transported through the tunnel, however. There is no legislation stopping animals going over and back. I cannot tell the Deputy if the boat to which he refers is certified. In the past we worked with P&O and used to have four containers a week going out.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I am not talking about containers.

Mr. John Bryan:

I am talking about livestock trucks. We had four livestock trucks travelling on each sailing to Holyhead. That is not a problem at all. The question is only whether it is viable. If the boat is to take livestock, the rules are very different with approximately six times as much space having to be allocated for a livestock truck compared to a container. There is legislation on airflow, etc. I presume that is the reason for the issue. Unless the demand is for a substantial amount of trade, the boats will not do it. They will have to be certified by the Department of Agriculture, Food and the Marine to the effect that each sailing meets the space allocation and the trucks are chained down. There is a significant raft of legislation. I was involved in it. I was on a ferry when the animals were being transported and I could not believe the distances that were being demanded. It was for airflow to ensure that there is no pneumonia among the animals. There is no legislation preventing it, however.

There are several reasons for the Northern Ireland issue. As England and Northern Ireland are in one legislative jurisdiction, a great deal of quota flowed to Northern Ireland. There was a massive increase in production. However, they do not have drying plants as we have for powder which means that at certain times they have surplus milk. They would not have the capacity to dry it all, which means it suits them to put a certain amount in here. I do not know how they can have done it at the price we have seen on some occasions. I imagine what they were doing was unloading a surplus. To do it for the whole year suits them, but they could not supply 100% of it.

The Deputy's other suggestion would require some level of collusion by many people, which is definitely illegal under competition law, on which the Deputy and I disagree.

There are completely different interpretations of competition law in Ireland and France. As Ireland takes a purist view of competition, it is deemed illegal for six or seven people to sit down and decide that the price of beef or milk is wrong and that they will lean heavily in one direction. I am informed that it is illegal under Irish competition law for us to discuss the issue of price with retailers or processors. I am not saying whether I do or do not do this. In France the right of the FSNA and other bodies to negotiate is accepted. In the high level milk discussions that take took place in Europe recently the rights of inter-branch organisations and the right to negotiate prices and margins were debated. There is a grey area between European and Irish law. No more than in the case of much Irish law, we err on the extremities. We meet the Ulster Farmers' Union on an ongoing basis and have a very close working relationship with it. The types of farm and agreements in Europe are similar. Again, when we talk to it, all it wants to do is send more milk, beef and chickens down here. It puts the tricolour on them if they are being sent to the Republic of Ireland and the Union Jack if they are being sent to England. That is its philosophy and it works for it.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I do not think Senator Pat O'Neill would be too keen on that one.

Mr. John Bryan:

In respect of the levy, ours is the only democratic farming organisation. Some of the groups associating themselves with Deputy Éamon Ó Cuív were self-appointed. We hold a secret ballot in which our 90,0000 members vote. We elect our county chairmen at public meetings. Our Kerry chairman was elected the other night in an election in which 200 people voted. Therefore, ours is a very democratic association. Our membership is quite happy to contribute through a levy to support our operations both in Brussels and here, be they retailers, meat factories or dairy processors. That is what we do as a lobbying organisation. At times we must mount massive campaigns.

Again, I cannot underestimate the effort we have put in in the past three and a half years in Europe. At conferences I have spoken with Angela Merkel and Stéphane Le Foll. We have a huge operation, but it runs on goodwill which does not come free. One must work at it and with other farming organisations to secure delivery for Irish farmers. I presume members are well aware that the situation in Brussels is much more delicate. There has been a substantial increase in the number of countries that want to see the budget cut. In the past one always knew that Great Britain would want to see it cut, but now Sweden, Finland, Denmark, the Netherlands and even Germany want to see a cut. Many of them are putting downward pressure on the MFF and the CAP; therefore, it was essential that we carried out a level of work to maintain funding. I am sure Ms Farrell has sent the committee a copy of our report on the livestock and sheep sector in which the importance of premiums is very clear. A substantial cut in premiums would result in a huge drop in production and the number of jobs. From the farmers' perspective, a small levy paid on animals slaughtered, milk processed or cattle going through marts would represent good value for money.

Andrew Doyle (Wicklow, Fine Gael)
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I thank Mr. Bryan, Mr. Smith and Ms Farrell for coming before the committee. Competition and the Competition Authority have been mentioned several times. Mr. Kelly made a very relevant point when he said the opposition of the Competition Authority to a statutory code had also been cited in earlier meetings of the committee. That is the case, but it misses the point that at issue is unfair trading practices, not competition rules. That sums up what we are about.

As part of the proposed new legislation which we all welcome and for which I have been pushing for a long time, it is proposed to merge the Competition Authority and the National Consumer Agency. Reference was made to this issue at another hearing. The National Consumer Agency will tell us that the consolidation or cannibalisation of the groceries sector is not in the consumer's best interests because it leads to dominance and too few entities having too much control. Sometimes people cherry-pick which side they want to talk to. There may be an issue when these two bodies are merged to try to merge their ethics, but we will see how that goes.

We thank the delegation for coming and outlining its position. At this stage, most of us are well aware of the issues involved, with no disrespect to anyone who has fed material to us. It is important that we try to pick out the points that will give us a productive role in putting a new enforceable code in place that will work in harmony with EU law. The major danger is that if we do too much, without working in harmony with the European Union, we will lose our competitive advantage.