Oireachtas Joint and Select Committees
Tuesday, 1 October 2019
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Competition Law and Trade Associations: Discussion
I welcome from the Competition and Consumer Protection Commission, CCPC, Ms Isolde Goggin, chairperson, Mr. Fergal O'Leary and Mr. Brian McHugh.
I remind members, visitors and those in the Visitors Gallery to ensure their mobile phones are turned off or switched to flight mode for the duration of the meeting as they interfere with the broadcasting and recording equipment, even when left in silent mode.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, 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 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 they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.
Members have been provided with a copy of the presentation submitted by the attendees. I ask Ms Goggin to make her presentation to the committee.
Ms Isolde Goggin:
I thank the joint committee for giving me the opportunity to speak to it. I am accompanied by two members of the CCPC, Mr. Brian McHugh who has responsibility for our competition enforcement and mergers function and Mr. Fergal O’Leary who has responsibility for our consumer protection division and policy function.
From our engagement with the sector in recent years, the CCPC is acutely aware of the difficulties beef farmers are experiencing. We are also well aware that competition law and the CCPC have been variously identified both as an obstacle and as a potential solution in resolving the issues. We very much welcome the opportunity to appear before the committee and address some of this commentary as part of the wider discussion of competition law and trade associations. As the committee will be aware, the CCPC has an extensive and important remit across the economy to promote consumer welfare. This involves enforcing more than 40 competition and consumer protection legislative instruments. We are active in a number of markets, including motor insurance, ticketing and public transport procurement. We are also conducting inspections in the motor and retail sectors of pricing and product safety. We have recently published guidelines for the residential care sector and just commenced a major study of the public liability insurance market.
Before I speak about some of the obligations placed on businesses and trade associations by competition law, it is important to state the legality of any conduct or agreement can only be determined by the courts. The CCPC’s role is to investigate suspected breaches of Irish and European competition law and take appropriate enforcement action to deter such breaches and encourage compliance. This means that we cannot give legal advice. We can, however, provide general guidance on the parameters of competition law and hope it will be of use.
Competition is important for businesses, consumers and the economy as a whole. It ensures businesses maintain competitive prices and look for innovative ways to compete. As a result, customers benefit from the best prices and the most efficient and effective products and services. When businesses break the laws enacted to protect competition, the very same customers that can include businesses can lose out. That is where the CCPC steps in. Our role is to enforce competition law. We work to promote competition for the benefit of consumers and the economy as a whole. The objective of this work is to protect the process of competition in the interests of consumers. As the committee will know, the competitive process has delivered real benefits for the economy in growth and jobs. Both Irish and EU law forbid agreements, decisions and co-ordinated business practices which prevent, restrict or distort competition. Broadly, businesses are required to behave independently. This means that they should set their own prices and the conditions under which they are prepared to provide their products and/or services based on their own commercial strategy and circumstances.
One of the most obvious ways businesses compete is on price. Therefore, price-fixing, where competitors secretly agree to charge a certain price or fix a minimum price, is considered to be one of the worst offences under competition law as it leads to inflated prices and consumers paying more than they should. It has a detrimental effect in a market. For these reasons, price-fixing is illegal under both Irish and EU competition law. During the years the CCPC has been active in taking enforcement action against a number of businesses it has suspected of engaging in price-fixing.
While competition is based on businesses making their own commercial decisions, some activities and functions are better suited to collective efforts. Trade associations can provide pro-competitive benefits for their members and grouping by encouraging compliance, setting industry standards and advocating legislative reforms that enhance competition and protect consumers. However, from our experience of engaging with trade associations, we know that their work sometimes involves collective behaviour. This can create a risk of stepping outside the boundaries of competition law. Irish and EU competition law prohibits trade associations and their members from engaging in anti-competitive co-ordinated conduct. Among the activities of concern are co-ordination on pricing, market allocation, collective boycotts, collective negotiations and the sharing of commercially sensitive information such as future pricing intentions. If such co-ordinated practices are allowed, competition between these firms, or in the market as a whole, is lessened. The ability of individual businesses to decide their business strategies autonomously may also be lessened and, crucially, customers, both businesses and individuals, would most probably pay higher prices. Where the buyer is the State, the inflated price is passed on to consumers in the form of higher taxes or cuts in public spending.
Trade associations have the right to represent the interests of their members, but it is important that they take an active role in ensuring compliance with competition law. This means that they must not allow or facilitate commercially sensitive discussions between their members. During the years we have had reason to engage with many associations across all sectors of the economy. We monitor markets and, where we identify issues of concern, our approach is, first, to contact the associations and their members to make them aware or remind them of the boundaries of competition law. If we can bring about compliance quickly and efficiently without requiring enforcement action, we will. Where there is the potential for considerable detriment, we will work with the trade association to obtain commitments stating it understands the requirements of the law. We often assist associations in providing compliance training for their members. A recent example was our engagement with the Irish Property Owners Association.
Turning to the agriculture sector, during the years the CCPC and its predecessor organisations have been very active in the food sector, the enforcement of competition and consumer protection law, the publication of grocery surveys, product pricing inspections, assessing a number of mergers and the fulfilment of the grocery goods regulations. On enforcing competition law, we took a case all the way to the Supreme Court against the Beef Industry Development Society. It centred on an agreement between competitors to reduce capacity in the beef processing industry. The European Union provides a specific and unique status for the agriculture sector. The Treaty on the Functioning of the European Union allows for certain agreements, decisions and practices which in normal circumstances would be considered to be in breach of competition law. One such major exemption allows for the formation of producer organisations. They are agricultural associations that provide benefits for their members, including collective action and co-operation. Recognised producer organisations can benefit from exemptions from EU competition rules for certain activities such as collective negotiations on behalf of their members and planning of production or certain supply management measures. Producer organisations can take different legal forms, including agricultural co-operatives. In Ireland they must apply to the Department of Agriculture, Food and the Marine and undertake certain activities for their members. The CCPC has informed and reminded various trade associations in the agriculture sector about the availability of producer organisation status in competition law.
In the current situation legislation facilitating the establishment of beef producer organisations has been in place in Ireland since 2016. The first beef producer organisation, Glasson Beef Producers Limited, was established in September by the Beef Plan Movement. Producer organisations provide a legal means by which farmers can organise themselves when negotiating with processors on a collective basis. Although it does not allow the market-wide fixing of prices or quotas, an individual producer organisation can negotiate prices with individual processors. Any business acting outside a producer organisation, including meat processors and individual farmers who are not part of a producer organisation, is subject to competition law.
I would like to use the last few minutes in making my presentation to address some of the recent commentary on the issues in the beef sector. The CCPC had no role in the industry talks which took place and, as the enforcement body, we cannot provide legal advice for parties attending the talks. We did, however, engage with various representative bodies, as we have done in many other sectors, to remind them of their obligations and the producer organisation status available to them.
The Department of Agriculture, Food and the Marine also has extensive guidance available on its website to assist. Notwithstanding these exemptions, both Irish and EU law forbid the entirety of businesses involved in a sector from getting together and agreeing to set prices for products or services. Prices must be negotiated with individual processors.
The CCPC must be, is, and always will be, at heart, an enforcement agency. We exercise our enforcement powers independently, in the public interest, with integrity and professionalism. Competition law works for the benefit of businesses as well as consumers. It ensures businesses are free to negotiate and set their own prices, and as the body responsible for the enforcement of competition law, we are committed to ensuring that businesses and consumers in Ireland are protected from the effects of anti-competitive agreements. We are happy to take any questions and provide any further detail that is required.
Before we begin, I would like to remind attendees, particularly non-committee members, that this engagement concerns the legal framework governing discussions involving trade associations. While these matters have come to the committee's attention in the context of the ongoing issues in the beef sector, the wider issues in the sector fall within the remit of the Joint Committee on Agriculture, Food and the Marine, and are outside the remit of today's engagement.
I thank the CCPC for such a comprehensive briefing document. Following our previous meeting on 17 September, we decided to invite the commission to our meeting because it had been thrown into sharp focus over the summer months with the beef crisis. While we have issued this invitation in the context of the ongoing issues in the beef sector - and, thankfully, there has been a resolution of sorts in the past two weeks and workers are back working and farmers are back farming - we wish to understand the general legal framework and what negotiations are permitted in these types of discussions between trade associations. During the summer months, I felt I did not understand the role of the CCPC and why it could not get involved in trying to secure a fair price at the time. I know the commission said it had no role in the industry talks which took place and that, as the enforcement body, it cannot provide legal advice to parties attending those talks, but I would like to tease that out. I would like us to examine exactly why the commission feels it has no role. Would it like to have a role and what would have to change if it were to have a role?
I call Senator Reilly first to put questions because he has to leave early.
I welcome the witnesses. I have experience of the former Competition Authority prior to my time in politics. The Competition Authority was the predecessor to the CCPC. The answer to my first question should be "Yes". Does the CCPC monitor the activity of producer organisations to ensure competition law is being adhered to? If so, how? What criteria does it use? On the beef and agriculture sectors generally, does the commission believe they should make greater use of producer organisation models as it has described?
Is the commission happy it has sufficient powers to deal with cartels that might operate in various sectors? Clearly there is often a sense among producers that they are at the mercy of a small number of businesses that can dictate price and the market.
I want to move completely away from that area to a matter that has always been of concern to me. Has the commission ever investigated the true cost of hearing aids and the hearing aid market and the cost of producing a hearing aid versus the price that is charged to the consumer? That price is often subsidised by the State. Does the CCPC have a view on the fact that the audiologist who carries out the hearing assessment is also the person selling the product? I know there are similarities between opticians and the sale of visual aids such as glasses, but the costs are considerably at variance.
I do not expect them to have comprehensive answers to these questions to hand and, therefore, I would like to get them in writing later if the witnesses do not mind. I apologise that I have to leave to go to the Seanad.
Ms Isolde Goggin:
I thank the Senator. We will likely have to come back to him on the issue of hearing aids.
On the Chairman's question, we have some guidance out there for trade associations on what to do and what not to do. It is something we should probably update because it has been out there for a while and it needs to be focused on more but we are able to be clear on what to do and what not to do. We say the prices of goods and services supplied should be independently set, invitations or requirements to discuss prices or costs with competitors should be reported to the CCPC and staff should be trained not to discuss or share commercially sensitive information with competitors or bodies that act on their behalf. We say they should not discuss their benchmark prices and costs together with competitors, such as sales or purchase prices, including related cost elements, minimum prices, standard prices or list prices. They should not discuss price increases or decreases, they should not discuss price-related factors such as discounts and so on and they should not attend meetings that involve these matters.
As for monitoring the activity of the producer organisations, these operations are quite new in most areas. There have been a couple in the area of mushroom production for quite some time. The producer organisations have never come across our radar and it is unlikely they would because they have such a broad exemption from competition law. Within the producer organisation is the Department-----
Ms Isolde Goggin:
Mushrooms are dear to the Minister's heart in the area of Monaghan. The Department of Agriculture, Food and the Marine monitors the compliance with the terms and conditions of the producer organisations, which it has set down on its website. The monitoring of the beef sector is very new. It was just set up last month so we would not have had any scrutiny of what it has done yet or how involved it has been in the area of pricing but it has a broad exemption. I might ask Mr. O'Leary to come in on some of those points.
Mr. Fergal O'Leary:
To go back to the Chairman's original remarks, from my reading of the commentary on the beef crisis over recent months, specifically the commentary on the CCPC, I would be confused myself on what the commission's role of the was. We are working through approximately 180 complaints in this sector and, therefore ,we are a little restricted in what we can say. However, this is a useful opportunity for us to talk about the issues in the sector. It is also important for us to give broad guidelines, as Ms Goggin has just done, about what is acceptable and what is not acceptable. We want to do that and we want to be helpful with that. As Ms Goggin also said, we are updating the information on our website, we are making videos and we are trying to make this is as easy as possible for every business to understand. We go to events. Tomorrow we will be at an event in Athlone called Taking Care of Business. We are there to try to help people to help themselves to be compliant.
Regarding Senator Reilly's question on monitoring, we conduct extensive market surveillance across every sector in the economy. We have social media set up to look at and we monitor press articles. One of the most important parts of our market surveillance is probably the complaints we get. We have 180 complaints in at the moment relating to the agriculture sector, which we are working our way through. When we see an issue we believe is falling into the area where the parties are in danger of breaching consumer law, our approach is to contact them and tell them they are in danger. Then we advise them generally on what they can and cannot do and we give them an opportunity to come into compliance. It is only after that, and after giving people a chance, that we move into the enforcement space. It is generally moved onto different people in the organisation at that point who are trained investigators and specialists.
The Senator asked two other questions that I will cover briefly. We would like more powers. We were in front of this committee several months ago regarding a new European competition network, ECN, plus directive that is coming in over the next 18 months. It will allow us to be much more efficient because we have two broad tracks at the moment. One track is civil enforcement, which takes a long time.
The sanctions in Ireland are not strong, particularly in comparison to other EU jurisdictions.
The other track we have is criminal. I have been through a number of these investigations, as we all have. The burden of proof is set so high in terms of the volume of evidence we must get and the number of investigative steps we must take that we are looking at a number of years before we can get an outcome. We then send the file to the DPP. That is the way it works. We have very good relations with the office but it may or may not take the case. The ECN+ will be a completely different model that will give us more control to do things more quickly, which is why we welcome it. If that could be introduced in Ireland over the next 18 months, we would be looking at a very different competition enforcement regime.
Regarding hearing aids, I have worked in the area of consumer protection for many years and am well aware of some complaints about how these devices are sometimes sold. I am not aware of the number of complaints we have received but we will check that and come back to the Senator Reilly - possibly through the committee. We will tell him the number of complaints we have received and the actions we have taken as a result.
I thank the witnesses for their presentation. I will leave most of the questions relating to agriculture to my colleague, Deputy Cahill, who is our spokesperson.
My question relates to insurance. I am concerned about the insurance industry and its cartel-like actions. The CCPC has carried out a lot of good work on the industry and there have been a number of high-profile "stings", for want of a better word, on the back of it. Do the witnesses feel that price fixing in the insurance sector has been rampant? There have been investigations on the back of the CCPC report so there is no smoke without fire but will some serious sanctions come down the road for insurance companies? The commission is dealing with big businesses in places like London and countries like Germany. If they are doing it in Ireland, I am sure they are doing it in lots of other countries. Will there be some traction to squeeze these guys into some pain so that at the end of it, the customer might access cheaper insurance prices?
Mr. Brian McHugh:
As many members will be aware, we are conducting an ongoing investigation into the insurance sector. That relates to price signalling by insurance companies. It is a large investigation. I will not say much about it for obvious reasons but we have collected approximately 1.4 million documents and held about 55 summons hearings so it is very large and many insurance companies are involved. We will see what the evidence is to bring that case to a conclusion but, as Mr. O'Leary has said, sanctions are not within our control. Finding that something is anti-competitive is a matter for the courts subject to where we go with the ECN+ and we are hopeful that this will change.
Regarding Europe and the wider market, the European Commission is also carrying out an investigation into the insurance market in Ireland in respect of access to information and whether there are any anti-competition issues. We work closely with it. Obviously, it is the Commission's investigation.
Mr. Fergal O'Leary:
We hope to complete that aspect of our study within 12 months. We do not need to tell the committee the issues that are at play in terms of businesses being able to get public liability insurance in the first instance. The second issue is the volatility in prices people face. How can a business or individual make an investment decision if they do not know what their cost base will be next year or the year after? This is something we have been told. The third issue is whether there is a market for this service in Ireland at the moment. We want to produce a report as quickly as possible because the cost of insurance working group has done fine work along with the Personal Injuries Commission, of which we have been a part. We want to build on the work of those two bodies and see whether anything else can be done quickly. This relates to Senator Davitt's question about whether there is confidence in the market, including the motor or public liability insurance markets. We want to promote the message that there is a market here and a number of things could make it better so that there will be more competition in future. That is our focus in terms of the investigation and the study, which are two separate things running parallel.
Ms Isolde Goggin:
The Chairman asked earlier whether we might like to have more of a role in the agriculture sector. An interesting aspect that comes out of the discussion is the breadth of our role and the way we must be nimble and intervene when we see something that comes up as a result of our market monitoring. It could be beef, public liability insurance or hearing aids. Those are the three issues that have come up so far in a relatively short discussion. Our role cuts across the economy where we can intervene when we see problems in particular areas as long as they are within our remit. We do not see ourselves as having a specific, almost regulatory, role in any particular industry. We try to remind people that competition law is in place so they must respect that in the same way they must respect taxation, company and consumer law. It is a general floor across the economy rather than the way a sectoral regulator in something like telecommunications or energy might focus on a particular company or set of companies.
There was a report recently on some of the larger insurance companies, which are loss making. Public liability insurance was mentioned. Insurance companies do not want to touch it and will get rid of at least 20% performing policies, particularly with regard to public liability insurance. Two or three companies seemed to be quoting for it over the past while but now nobody is quoting. Companies drift out of some markets at certain times and drift back into doing cheaper offerings. They all seem to move at the same time. I have a general understanding of the insurance industry but there seem to be concerted moves by the heavy insurance guys from time to time.
Mr. Fergal O'Leary:
I must be clear that this is not an investigation. It is an analysis of the market so I can speak more openly in that regard. Like other markets, confidence ebbs and flows in this market so it is about whether it is a good or bad market to be in. There was a view in the public liability market over the past few years that possibly because injury awards were very high and there was a feeling they might get worse, it was a part of the insurance market that companies did not want to be in.
I am speculating here that the study will continue over the next six to nine months. I hope it will not continue for another 12 months but it will certainly continue for the next while to try to figure this out on an evidence base. There is definitely a feeling that there is a movement in and out of the insurance market. We want to figure out how to bring confidence back to the market and bring players back in. I know this is something the Department of Finance and the Minister of State, Deputy D'Arcy, are working on. They have met companies and told them what Ireland is doing to make it an attractive place for business. Ultimately, the more players that are in the market, the better that will be for businesses and consumers in terms of access to the facilities that we have seen close in the past couple of months.
Some of these guys are not fit to operate in the insurance sector and the CCPC has identified some complications with some of them. Would the CCPC suggest to the Central Bank that these guys are not fit to have a licence in the Irish insurance industry?
Mr. Fergal O'Leary:
At a high level, if we come across any information that we believe is pertinent to the regulatory function of the Central Bank, we will not hesitate to give that information to the Central Bank. That is a general point. We speak to the Central Bank about any specific information we come across.
The CCPC has done great work in the area in the past while. Ireland is a small country with an open economy. The State should warn these insurance companies that if they mess around, the problems they cause will be documented. We must tell them the Central Bank will strongly consider refusing them a licence.
It is timely to have the insurance issue raised today. Last year, the joint committee did a substantial body of work on the costs of doing business. The common denominator among the witnesses and in the submissions was insurance. Rates also arose but insurance was raised by everyone. I thank the witnesses for answering our questions.
Ms Goggin indicated that her organisation monitors markets across the whole economy. Can a small or medium-sized enterprise seek advice, help and support from the CCPC if it encounters a problem?
Ms Isolde Goggin:
Absolutely. We very much encourage that. We would absolutely encourage any company that believes it has been the victim of anti-competitiveness practices or has a general question to contact us. When we say we cannot give legal advice I mean we cannot answer hypothetical questions, for example, if somebody asks us whether it would be okay to do this or that, have a certain kind of contract or sit down with competitors. At that stage, the person would have to get legal advice. However, if people feel they are having a difficulty because of the anti-competitive practices of either a large dominant organisation or a grouping of organisations, we would be very interested in hearing from them.
Ms Isolde Goggin:
No, absolutely. We have talked a lot about cartel-type offences, which are horizontal agreements that are between parties at the same stage in the value chain. One of the major provisions of competition law is the one on abuse of dominance. Dominance is a high threshold. Just because a company is big, it does not automatically mean it is dominant. Dominance has a very specific meaning and normally involves companies with a market share of more than 50%. That could be in the form of the company either abusing consumers by charging excessive prices or it could be something that we have investigated quite a lot in terms of larger companies, whereby discounts are given to consumers which are so large that no smaller company can come in. They are what we would call exclusionary discounts. We have certainly investigated that in relation to An Post and RTÉ where, for example, smaller competitors found it almost impossible to attract consumers because they were tied in by very strong rebates and discounts. That is one example. We do our best to provide guidance by providing guidelines and information on our website about compliance with competition law, how to make a complaint and compliance with consumer law.
To be clear, the CCPC can offer guidance. The issue was raised with me. There is a perception that someone could contact the CCPC which could advocate on that person's behalf in a legal capacity. I want to make clear that the CCPC can only offer guidance. Is that correct?
Mr. Fergal O'Leary:
Yes, and this is an important point. It is not that we do not want to do as the Chairman described. Most State agencies have a similar role to us, certainly the economic regulators, in that we do not advocate on behalf of individual consumers and we are not in a position to give specific legal advice to businesses. As Ms Goggin said, it is in our interests for businesses to be compliant so we certainly give guidance. The issues over the last couple of months have shown to us that we probably need to do a bit more to make that guidance more accessible to people across the economy. We are working on that and accept the point that has been made. It is not a case that we do not want to be helpful. If we take a scenario where we gave specific legal advice to an individual company and somebody subsequently makes a complaint about our advice, we could end up in court. In that scenario, we will have given our position on the matter. As a State agency, one which is an enforcement body at heart, that is not something that we can do.
We heard earlier that the CCPC would like more powers. The CCPC is restricted from what I can see. Would the CCPC like more powers in that respect, especially with regard to small and medium-sized enterprises? A small company with between two and five employees would not have the same financial backing as a bigger entity.
Mr. Fergal O'Leary:
The rules are fairly straightforward and should be understood by any business of any size. We give guidance and we continually try to improve that guidance. We will try to make it more clear over the next while. In terms of a small business versus some of the multinational companies, the rules are the same and apply to everybody. It is just that the bigger a company becomes, the more complicated it might seem and that is where a company should get legal advice.
Ms Isolde Goggin:
In that specific instance, it is more a question of resources than powers. That is not a complaint about resources. We are not an ombudsman for every single transaction or event that takes place in business in the country. We could not perform that role because we would need a staff of thousands. We cannot intervene in everything so we try to focus our enforcement interventions on the most egregious types of offences. We also try to empower smaller businesses to take their own actions or point out to the person they disagree with what their rights are under the law. That sometimes results in us writing to firms on behalf of a smaller complainant but we cannot do that in every case. We must prioritise and assess whether a case is suitable for us to deal with or if perhaps a sectoral regulator would be better placed to do so. We ask how much effect a case would have and to what extent we could use it as an example or case study for compliance. Acting as an economy-wide ombudsman would not be within the scope of any agency.
Mr. Fergal O'Leary:
We also play a consumer role. Every year, we get well over 40,000 calls and emails from consumers. This is a great source of market intelligence and information. We also get close to 2 million visits to our website.
We could not possibly intervene in each and every one of those cases. For us, it is about making the rules as clear as possible for businesses and consumers. When it comes to systemic or large issues, the teams based in our office examine them.
Ms Isolde Goggin:
We have just over 100 people currently and recruitment is under way, which we expect will bring us up to approximately 120 people. The number is always contingent on what is going on at the time. What is going on for us now is the same as what is going on for everyone else in the country, namely, Brexit. We managed to reach this point without mentioning it, which was good. Brexit will have a large impact on our work. It has an impact on consumer rights when buying online, for example, and we will be doing a great deal of work to try to inform consumers about that. If they buy stuff from a UK website, they will not necessarily have the same rights that they would have had previously. We have a consumer product safety remit, which involves ensuring that products entering the country destined for general consumer use are fit and proper and meet the relevant standards. If everything coming in from the UK becomes a third country import overnight, our product safety remit will ramp up significantly. We have been given additional resources by the Department to do that.
There is always more that one can do, but the resources that we have are contingent on the jobs we are given to do. If we are given more to do, we will need more resources to do it.
In preparation for this meeting, I reflected on the anger at the CCPC following its intervention during the beef protest. I read the comments of the various spokespersons and leaders of the farming organisations. The common thread was how ABP's takeover of Slaney Foods and the merger between Dawn Meats and Dunbia would impact on prices. In July 2017, a senior Irish Farmers Association, IFA, delegation met the CCPC. This was in advance of the merger of Dawn Meats and Dunbia, which took place in September of that year. The delegation conveyed the IFA's serious concerns to the CCPC. It referred to how studies conducted by independent competition consultants pointed to a strong body of evidence that competition in the primary procurement markets for cattle was weak and additional mergers were likely to weaken competition even further. What is the CCPC's response to these independent studies and why did that not lead to more action? I am not asking the witnesses to rehearse their decisions around the merger and takeover, but they will acknowledge that those events had an impact on beef prices.
Regardless of whether the witnesses agree, the wider point has to do with the anger of the farming community stemming from its perception that, although the CCPC failed to address what the community viewed as cartels in the beef industry, the community was threatened with legal action by the CCPC when it stood up to that injustice. One quote stood out in my mind: "The CCPC was like a lamb in dealing with processors but is acting like a wolf with a group of farmers who are on their knees." These are strong words and I would like the witnesses' response to them.
The CCPC has heard some of the calls for an ombudsman in this sector and has seen some of the reports at European level. The core issue is one of transparency in market returns, wholesale prices and profits across the meat chain from processing to retail. People do not believe that there is transparency. Various Oireachtas Members have produced Bills on transparency in recent weeks. As long as I have been a public representative, which is almost 18 years, the feedback I have always got from people involved in various parts of the agriculture sector is that they are like David against Goliath. They are the primary producers, yet they cannot get a price that keeps them on the land.
Do the witnesses believe the CCPC is fit for purpose where transparency around market returns, wholesale prices and profits is concerned? If it is not fit for purpose, what further powers does it need? Is a separate ombudsman for food necessary? I would genuinely like the witnesses' feedback about whether they feel that the CCPC has done its best with the powers it has. They made the point that the CCPC had a large area of responsibility and between 100 and 120 staff. Maybe a separate regulator for the sector is required. If the witnesses believe that the sector is not something that it can focus on solely, it would be helpful to point to a plan B.
I was interested in something referred to in the presentation, namely, the advice that producer organisations may be the way to go. I am sure that the witnesses understand that there are incredible anger and frustration in not only the beef sector, but various sectors. Has the CCPC met the farming organisations? There is a range of them. The IFA is the major one, but there is also the Irish Cattle and Sheep Farmers Association, ICSA, the Irish Creamery Milk Suppliers Association, ICMSA, the Irish Natura and Hill Farmers Association, INHFA, Macra na Feirme and so on. Has the CCPC met them to tell them that it has read their comments and acknowledges their concerns and that they should be facilitating a solution by encouraging the establishment of producer organisations? The witnesses mentioned that one producer organisation had been established recently. How many such organisations exist in the category in question?
Those were my three questions. I would appreciate the witnesses' responses.
Ms Isolde Goggin:
I will ask Mr. McHugh to deal with the questions about the mergers and Mr. O'Leary to deal with the questions about the ombudsman, transparency and producer organisations, but I will make a quick response to one point. I always feel hard done by when farmers say that we do not go after the meat industry. We chased the beef processors for five years as far as the High Court, the Supreme Court and the European Court of Justice in Luxembourg and back down again to stop the processors from implementing an anti-competitive agreement, that being, the Beef Industry Development Society, the idea of which would have seen them getting together and paying their competitors to go away. We viewed that as artificially reducing the number of outlets that would be available for beef processing. As such, we have taken extensive, prolonged and eventually successful action in the sector.
I will now ask Mr. McHugh to discuss the mergers.
Mr. Brian McHugh:
I will also discuss the other side of the question, namely, that we were a wolf with the farmers. In the case of the Beef Plan Movement, we identified a potential for anti-competitive behaviour to be carried out. We wrote to the movement for the purpose of expressing those concerns and setting out some of the issues that might arise for them in terms of anti-competitive behaviour. In particular, the movement faced the potential risk of private action. To some extent, the movement needed to be aware of the risk it was taking and get legal advice, given that parties could have taken private action against it. It was of benefit to the movement to understand that, as private action could have been a serious matter for it. It is important to emphasise that, in the letter we wrote to the movement, we highlighted the benefit of producer organisations and the option to form one.
This is a question of how we engage with bodies. We did not take enforcement action in this case.
We continue to monitor developments. We are aware there has been some de-escalation but we did not take action. We wrote, in what we regard as a constructive manner, to try to identify a potential issue, resolve it and achieve compliance. That is a constructive approach we always take in these matters. Regarding the producer organisations, we welcome the fact that the Beef Plan Movement has, since our letter, got approval to be a producer organisation. That is a positive development.
With regard to meeting the various parties, I met representatives of the IFA recently. I have gone through all these issues. We are always available to meet various parties to discuss the issues we face, to explain where we are coming from, and to try to understand where they are coming from. It will not always be the same. We understand they have their interests and goals and we explain our position.
With regard to the merger, the IFA will have its view. It is quite constructive in providing its view on the evidence and the expert report mentioned. We go through a very large process in respect of a merger like that whereby we examine all the evidence. We work through the technical issues to determine whether there is evidence of a substantial lessening of competition. We publish our analysis and our rationale for our decision in that case. In the case in question, we considered all the evidence and the report provided and arrived at our conclusion that there was not any evidence of a substantial lessening of competition in the market. There are quite a number of players still in the market. We did not feel the evidence would point to the merger damaging the interests of consumers.
I have listened intently to what has been said. The difficulty is that most objective observers would agree the environment that led to the protests in recent times is such that it has been felt by producers across the board that the meat factories have been setting prices universally at a level that is absolutely unsustainable for farmers. The commission has been given reports before and has decided, on the basis of evidence, that the independent consultant reports received were to be disregarded and that it was going to agree to a merger and takeover. Would the commission acknowledge at this point in 2019, a number of years later, that it was wrong and the objective evidence suggests that its decision in 2016 and 2017 must have been wrong because the market prices are absolutely unsustainable for the primary producer at every single meat factory?
Mr. Brian McHugh:
It is important to clarify our position. We do not analyse what is the right price. There are significant issues with beef prices in Ireland and at European level. We do not go about trying to estimate the right price and the right profit level from wholesale to retail. What we consider are the issues in the market and whether the merger would lessen competition. We did not see evidence at the time and have not seen evidence since that the merger would lessen competition. That does not take away from the very real issues that arise regarding the current price of beef and its impact on farmers. I do not believe, however, that the cause of the problem was a particular merger, nor do I believe the solution would have been to prevent mergers.
Regarding some of the discussions on the regulatory sphere and what other solutions might exist, I will ask Mr. O'Leary to comment.
Mr. Fergal O'Leary:
We are very well aware of the issues in the sector. The Beef Plan Movement felt it necessary to come to our offices and it gave us information directly. It was not done by way of a protest but very politely and respectfully. We noted at close quarters the strength of feeling that exists. We acknowledge and accept that. As we said, we have in the region of 180 complaints, many of which are from the Beef Plan Movement and from individuals and other stakeholders. We are working our way through them as quickly as possible.
Our fundamental issue, which relates to the Senator's second question, on the role of an ombudsman, is that we are talking about market design. That is one of the reasons we were in front of Deputy Deering's committee in May and last year. We do not really see that there are the tools available to solve the problems of sustainability and viability purely through competition law, nor do we believe the current grocery regulations, for which we are responsible, will radically change the fact that buyer power is a significant issue in this sector. We absolutely accept that, and we accept the sustainability arguments. If, however, one is trying to work towards a solution, one realises that the unfair trading practices directive is coming down the track from the European Union. It was the subject of our appearance before the agriculture committee. It is our view that if buyer power is to be addressed and the State feels this needs to be done, it is a matter of a sectoral regulator with powers to be an ombudsman, to intervene in the market and, ultimately, to provide the support and information to those on the ground who need it. It is also a question of having the tools, on a regulatory level, to create a market. There may be an opportunity to do that as the unfair trading practices directive comes in over the next couple of years but competition policy, competition law and the grocery regulations for which we are responsible are not the right tools to address the issues that are currently arising in the market. We are professional regulators. It is our job to figure this out. We do not expect that a small business should be able to do that. That is where we see many of the differences of opinion - I will not call them misunderstandings. "Differences of opinion" may be a polite and rather feeble way of saying the problem we see in the market is different from what small farmers are seeing and experiencing. We are acutely aware, however, of the difficulties people face.
Moving on to solutions, a sectoral regulator presents an opportunity to address some of the issues.
Towards the end of Mr. O'Leary's presentation, he focused on the producer organisations. If I am missing something, I ask him to correct me. What I am taking from the presentation and the responses today is that the commission obviously operates under European and Irish law and implements it as an authority. The terms of reference - the framework the commission has been given as an authority - are not fit for the purpose of addressing the range of issues that have led to the crisis, which has been long coming. Am I correct that Mr. O'Leary would acknowledge that his authority, with its current legal framework, is not appropriate for addressing the range of issues we face and that there is, therefore, a need to consider a new dedicated regulator for the sector? Is that a fair assessment?
Mr. Fergal O'Leary:
Let me add one point. The fact that the producer organisation exemption is in place recognises the special status of the agri-sector. Without it, there would be a very different conversation regarding competition law.
The importance of this sector in Ireland and across Europe is accepted. This facility, which allows producers to come together, is helping to solve the problems that exist. The Beef Plan Movement has taken the time and the effort to make an application and to be approved. That helps their members to work within the system that exists at present.
I thank the representatives of the CCPC for attending the committee. I have a couple of questions. Have there been any prosecutions in the agriculture sector in the past two or three years? Have there been any prosecutions in the insurance sector in the past five years? The witnesses might not have these details to hand. I was going to ask a question about fitness for purpose, but I think it has been already answered. In light of what we have heard about the CCPC receiving 40,000 emails a year, are sufficient resources available to it to enable it to carry out its duties?
Okay. I ask the witnesses to educate me on where they are coming from on the use of data mining by businesses as they are trading. Have they any comments to make on the collection of consumer behaviour analysis, particularly in the case of the insurance industry? Smart technology has become extremely sophisticated over the past three or four years. The algorithms that are used are extremely sophisticated. The mapping of a market can now be quite sophisticated. Algorithms can be used to put prediction models in place. I do not know what types of algorithms are being used. I do not know whether virtual learning algorithms are being used. I would like the witnesses to comment on this matter. Obviously, these types of algorithms are getting more and more sophisticated. I will mention as an example a case in which a person telephones an insurance company to say he or she was quoted €200 more with another company. I do not know whether the companies are logging that information. If they are using these very sophisticated algorithms, it will not be long before they have the market completely mapped. That will enable them to do some sophisticated forecasting. I ask the witnesses to comment on this. Have they had any engagement in this regard? Where does this fall under fair trading?
Ms Isolde Goggin:
There have been no prosecutions in the agriculture sector. The kind of behaviour about which we are talking does not involve secret cartels. It involves people going on the radio and to the press. As my colleague has said, when we note such behaviour we write to people to tell them they might be in danger of falling foul of the law. As Mr. McHugh has rightly said, this is not just a question of public enforcement; it is also a question of people leaving themselves open to actions for damages by injured parties. The purpose of writing to people in this way is not to stir up things, but to say "look, this is where you are, this is the danger, but this is where you could be". That is why the producer organisations are mentioned. We are trying to say "lads, it is bucketing rain and there is an umbrella in the cupboard, but you need to do the thing that opens the cupboard to get the umbrella out for yourself". The producer organisation thing is a shield against all of this kind of trouble. We took-----
Ms Isolde Goggin:
Data mining is a significant issue that concerns us on the competition and consumer protection sides. We are in contact with our fellow competition and consumer protection organisations across Europe. We are working with the telecoms regulator, ComReg, and with the Broadcasting Authority of Ireland. We are all concerned with what is going on under the bonnet. We are all concerned about understanding how companies are using these things. We are certainly aware of at least two ways in which it can be detrimental to consumers, the first of which is the area of personalised pricing, which arises when people use the same website and the same IP address to look for goods and services online. The website operators keep the data. They know perfectly well what it is like. I always mention as an analogy that when I come back to work every January, I google sun holidays in Lanzarote in February. They know perfectly well how much I am willing to pay because they know how much I have paid in the past. The pricing can be tailored to the individual person in a way that extracts as much value as possible. That is the first area. The second area involves algorithmic collusion. There are only so many software companies that develop the algorithms used in online bookings. We are concerned because they check what the other websites are doing all the time. They continually check what is happening on the other websites. Is it possible for the algorithms to achieve a kind of collusive outcome by reaching an equilibrium whereby the websites will not reduce their prices further because they think they do not need to do so? If they charge a higher price, nobody will go to them. They end up at a price that may not be the competitive price. It is question of trying to get under the bonnet to understand what is going on.
Ms Isolde Goggin:
I do not think anybody is really. We are very much in touch with what is going on in Europe. It is at the stage of people doing academic papers and trying to figure out what is going on. I do not think we are at the stage of really understanding. We took action about online bookings in relation to the most favoured nations clauses. That was going on across a lot of competition authorities in Europe at the same time. I do not think we are behind the ball, but I would not say we are ahead of it either. We are keeping in touch with what is going on. I expect that much of the enforcement which might come out of this might take place at European Commission level because these markets are intrinsically transnational. When we deal with online markets, we are not really looking at national markets any more.
I am grateful to the Chair for allowing me to ask some questions even though I am not a member of the committee. I welcome the representatives of the CCPC. I will focus on beef in my questions. There has been a great deal of discussion. There is substantial dissatisfaction with the CCPC among primary producers. I suppose beef is the issue at the moment. In the past, people were not satisfied with the way the liquid milk market was operating. It is felt that the CCPC is there to look after everyone's interests except those of the primary producer. I do not think the CCPC's role involves setting prices. I have no qualms in that respect. The CCPC definitely has a role to play if there is a monopoly with regard to the setting of prices, for example if everyone is on the one word on a Friday evening with regard to price. Farmers feel that in the milk market, there are significant variations in the prices paid for litres of milk, whereas in the beef market, they could make six or seven phone calls to processors to ascertain this week's beef price, but all they would be doing is wasting the price of the phone calls because they would get the same answer in every case. Farmers on the ground cannot understand how there can be such uniformity of price. According to Bord Bia, all of the factories are sending their beef into different markets and there should be different returns from those markets. Nevertheless, there is complete uniformity of price. We cannot understand how that can happen.
I want to ask a few specific questions. I did not hear all of Senator Mac Lochlainn's questions, but I heard the answers. I think he focused on the same subject. When a major processing plant was sold a couple of years ago, it was purchased by the main player in the industry. If I understood it correctly, the CCPC felt that this did not lessen competition in the trade. I cannot comprehend that answer. A major player was taken out of the industry and its processing capacity was given to a major player in the industry. I would like to see the criteria that were used by the CCPC when it was coming to that conclusion. I cannot understand how taking one player out of the industry and giving its business to the major player in the industry would not lessen competition. It just baffles me. I would like to see the criteria that were used by the CCPC in coming to that answer.
My understanding is that there are four plants operating in this country's rendering business, which deals with the offal in the beef industry.
Three of them are being operated by the same company. Has there been any investigation into that situation and whether price-fixing is happening? Even more so than price-fixing, has there been any examination of whether the kill is being controlled in plants by the rendering business? The company concerned is telling processing plants how many tonnes of offal it will take from them and, in so doing, it is controlling the kill and other processors in the business. It is causing huge disquiet among primary producers that rendering is being used as a weapon to control the business. Has the Competition and Consumer Protection Commission undertaken any investigation into the competitiveness of the rendering business in the Irish beef processing sector?
When the delegates appeared before the Joint Committee on Agriculture, Food and the Marine some months ago, I asked them about the proposed Kepak-Glanbia scheme. The answer I got on that occasion was that the CCPC had looked into the proposal and found it to be anti-competitive but, because it is a small segment of the marketplace, it did not warrant any further investigation. I do not understand that. If we let a scheme like this get a foothold in the industry, the conditions attached to the scheme will become the norm. We saw that happen in the past with bonus schemes that were introduced. If a scheme is anti-competitive, it should not be allowed. I made that point strongly at the meeting of the agriculture committee and I ask today for further clarification. Even though it is a small segment of the marketplace, anti-competitive practices should not be allowed. If farmers were engaging in anti-competitive practice, they would surely be subject to the full rigours of the law. However, two major companies have introduced a scheme under the cloak of offering bonuses for primary producers in the future, but the restrictions attached to the scheme represent a slippery slope. I am not confident that primary producers will benefit from it.
Mr. Brian McHugh:
On mergers, I am not sure whether the Deputy was referring to the Slaney Foods merger, which was adjudicated by the European Commission, or the Dawn Meats-Dunbia merger, which we examined. In both cases, there was a full analysis and consideration of all the evidence provided by multiple parties. We produce detailed guidelines on how we approach mergers, and the European Commission does the same in respect of its procedures. We also produce a detailed decision in such cases setting out how we arrived at our conclusion. Any merger where two parties in a market come together could arguably be seen as causing a reduction in competition. The test we use is whether there has been a substantial lessening of competition in the market. We go through a lengthy process of considering all the evidence before arriving at a conclusion on that question.
As I said on the previous occasion, the conclusion in the case in question was that there was no evidence of a substantial lessening of competition as a result of the merger, as there was a sufficient number of players to provide competitive pressure within the market. We set out our position in great detail and discussed the matter at length with the Irish Farmers Association and others. We are open to having those discussions, taking viewpoints into consideration and examining any evidence with which we are presented. We are always keen to speak to anyone who can bring additional evidence to us and provide new insights. We follow a similar process where a claim is made that a cartel is in operation. We want and need to see evidence of any such claim. We do have certain powers - in some circumstances, very strong powers - but we do not use them without serious consideration and without seeing the evidence that will make it worthwhile to use those powers. That is a key point of discussion we have with lots of players in lots of markets. We are keen to understand their concerns but we really do need to see the evidence. Without going into great detail on a specific merger decision, the process by which we arrive at a finding is comprehensively set out and we are open to discussing that process with anyone.
Mr. Brian McHugh:
Yes. All our merger decisions, some of which are very detailed, are published. The third-party process is a key part of the whole thing and a useful one from our point of view. When third parties can provide evidence, it is very helpful to us. Another thing we like to do is undertake an ex postanalysis. We are trying to do more of that and have had discussions with other competition bodies on how we can best look back and see what actually happened in a market following a decision we made. It is something we are keen to progress.
Regarding Deputy Cahill's specific question about the rendering sector, I am not aware of an investigation into that sector. We have received a number of complaints in that regard recently but I am not in a position to comment on the parties involved and whether there may be potential for practices that are happening to be used as a weapon by one business, as the Deputy describes, to influence prices elsewhere.
Mr. Fergal O'Leary:
I remember the discussion at the agriculture committee of concerns raised by Deputy Cahill regarding the Twenty20 Beef Club. To reiterate what we said last May, we do not see an issue with that scheme at this time. There is what we call a vertical block exemption in place which allows those types of schemes to be implemented. We did not say that it was anti-competitive. We did say that there may be a certain, high threshold above which it all becomes a little too inclusive. However, from our analysis of the scheme so far, we are not near that threshold. The scheme is permissible under the law. However, we never give something a clean bill of health into the future and, as such, we will keep the matter continually under review.
Ms Isolde Goggin:
Thank you, Chairman. A transparent market is one where prices are public, as they are in this particular market. The prices are published on the RTÉ website and the IFA website and are broadcast on the radio. Where there is that type of transparency, prices tend not to diverge too much among suppliers. I used the analogy the last day of a person looking to buy apples on Moore Street. There will not be a lot of price difference between the trader at the top of the street and the trader at the bottom, for the simple reason that everybody knows what everybody else is charging. If one tries to charge more for apples, customers will choose the next seller. If one starts charging less, one will soon be looking around and wondering why one is making less money than one could be. Where everybody knows what everybody else is charging, prices tend to converge. I am not 100% convinced, therefore, that more competition in everything will be a solution to the issues that undoubtedly exist in the industry. Moreover, given that it is an industry where 90% of output is exported, would it even be possible to have transparency criteria or rules in operation? It comes back to our concerns regarding the impact for Irish consumers if the rules apply differently to the beef market in Ireland from how they apply to beef markets elsewhere. Will the Irish consumer end up paying the penalty in the end?
I thank the Chairman for giving me the opportunity to put some questions to the delegates from the Competition and Consumer Protection Commission today. Like Deputy Cahill, I will concentrate on the issues that have arisen recently in the beef sector. Following our discussions on the future of the beef sector, which included a meeting with the delegates last May, the number one recommendation from the agriculture committee was the need for a sectoral regulator. There was a view that the CCPC does not have enough power to deal with the specific matters that are emerging.
The unfair trading practices directives which are being transposed into Irish law are seen as a first step. What is the timescale for that? The process began in April or May of this year at European level. How long will it be before what has been passed into European law will come into being in Irish law?
We have had a lot of conversations in recent months about retailers, particularly the large multiples. At Christmas time in the past, large multiples used to use certain items as loss leaders, in particular agricultural or horticultural products. In the most recent case, carrots were basically being given away in order to attract customers in. What power does the commission have to deal with that sector, if any? It is a very unfair trading practice but we see it on a regular basis in the milk industry, where the same carton of milk will have ten different prices in ten different supermarkets while the primary producers are getting the same price at the farm gate. Did the commission carry out an investigation into the carrot issue? How did it turn out? Across the water, a regulator has been appointed and she is coming to Ireland in the not-too-distant future. One of her first roles was to take on one of the large multiples, which she did successfully, after they were found to be engaging in similar practices. Is a regulator required in that space here?
The demerger issue was raised by Deputy Cahill and Senator Mac Lochlainn. If another processing facility came up for sale and one of the main players decided to purchase it, what is the process the commission would have to go through to ensure the sale went through without competitive advantage for somebody in the marketplace as a result? Does it have to go to Europe? Would the commission have to recommend it go to Europe? A processing facility is, indeed, for sale at the moment and there is speculation about who may or may not buy it. It will not be an ordinary businessperson because no businessperson has got into the sector in recent years to make money out of it. It will most likely be one of the main players in the sector.
At a previous committee, we carried out an investigation into unfair trading practices. We looked for primary producers to provide evidence but they were reluctant to come forward for one obvious reason, that is, that if they put their head up they would be shot down very quickly and their chances of a contract would disappear overnight. There are many allegations about "hello" money and upfront payments in the retail sector so no primary producer will say they had to pay an amount of money to get onto the shelf of a particular retailer. There needs to be protection in these cases, whether it is by the commission or somebody else.
Mr. Fergal O'Leary:
The unfair trading practices directive needs to be transposed by April 2021. The CCPC is an agency and we are not responsible for policy formulation. We have views on how best to transpose the directive and we have made them clear at the agriculture committee. We have also written to our parent Department and to the Department of Agriculture, Food and the Marine. A working group of the Departments of Business, Enterprise and Innovation and Agriculture, Food and the Marine is working on the transposition at the moment. I understand there will be a public consultation in the next couple of weeks and we will give our view to that. The decisions are, ultimately, matters for the Departments and the Government but we will give our views, as we have done all along.
A comparison was made between what we do and what the grocery code adjudicator does in the UK, which is like night and day. It is completely different. The 2016 grocery regulations cover 27 entities and the basic rule is fairly straightforward. If there is a contract, pretty much everything is allowed. The regulations are about transparency and certainty for the players. The unfair trading practices, UTP, directive which is coming down the tracks is completely different and will be slightly more analogous to what is done in the UK. It will take a more holistic view of the market. The grocery code adjudicator has a mediation role and she has more powers that what is currently being envisaged in the UTP directive. It is about market design and economic regulation. It deals with how a market is set up to balance the needs of primary producers, aggregators, wholesalers and retailers. In the long term, a sectoral regulator would allow for more intervention in the market but, as an agency, we are not responsible for deciding what the answers are for this issue.
The sale of vegetables at very low cost is not something in which we have any role or function at the moment. The topic came up when we were in front of the agriculture committee 18 months ago. It can be good for some consumers if they can buy groceries cheaply. An issue arises, however, if it is not sustainable. If it can only happen by putting a producer out of business, we could not sit here and say it was a good idea. However, we see loss leaders all the time, on alcohol and other things that are less good for society. There is a need to ask where the harm is done and whether there is a benefit to these practices. We do not have the powers to police goods being sold below cost. The groceries order was abolished, though I do not believe it applied to perishable goods in any event.
Mr. Brian McHugh:
I will try to keep my answer on the merger process at a high level.
Effectively, if the merger or acquisition is relatively large, it will be notifiable. If it is very large and it crosses multiple member states, it will go to the European Commission, so there is effectively a formula which will bring it to the European Commission or it will come to us. We will then publish that on our website and look for third-party views in regard to the merger. We will then go through a process of analysing the merger and looking at a variety of issues.
This is where I do not want to go into a huge amount of detail but I will mention a few things. We will look at what the market is and the market definition, for example, the market might be the processing of beef. We will look at the geographical market and whether it is within the State or international. For beef, whether the market is international or within the State could be a key question that would have to be answered. We then look at the market generally, for example, we look at barriers to entry and how difficult it is for someone new to come into the market and, therefore, that might be a measure of how hard it is for the larger player to drive prices up, or down, from the point of view of farmers. We would look at the evidence on all of those things. Then, on the other side, we look at what we call buyer power. Effectively, we are trying to get to the point of understanding whether this new bigger player has the power, as a result of the merger, in normal circumstances, to drive up the price and impose a sustainable price increase that consumers have to pay. From the point of view of farmers, we can turn that around and talk about the power to reduce prices paid to farmers.
Those are the types of things we will look at. We will go through evidence from third parties and look at precedents. We look at a lot of mergers and, in fact, we looked at nearly 100 last year. Where the evidence says that a merger should not be approved or the company needs to make divestments, we are not afraid to say this. We have had two such cases this year where we have demanded divestments from the companies and, effectively, if they wanted the merger to go ahead, they needed to sell a chunk of the business because, otherwise, there would be a significant risk to competition in that market. When we follow our analysis and follow the evidence, we will make a decision. We have no fear whatsoever about taking a decision to prevent mergers or to demand divestments.
I do not agree with Mr. O'Leary, for example, with regard to carrots being sold as a loss leader for 9 cent a bag. I was on Facebook during the week and I saw a video of a company that is located just five miles from my own home. It showed how a field of carrots was being harvested. Obviously, the carrots had to be sold by the primary producer but the video showed how the carrots were harvested, graded and washed, and how they went from the field to the shop within 24 hours. This gives the wrong perception. If a person goes into a shop coming up to Christmas, they might buy six, seven or eight bags of carrots only to dump them afterwards. While this may not be under the remit of the CCPC, it certainly needs to be under somebody's remit. It must be soul destroying for a farmer, given all the work that goes into making sure the crop is successful, is harvested and is top quality, to see it being sold at 9 cent a bag, with a lot of it being wasted afterwards. I would agree with Deputy Pat Deering on that. Everybody wants value for money and we all love a bargain. However, the CCPC should certainly look at this issue of products being given away.
Mr. Fergal O'Leary:
There are two viewpoints. First, there is the personal view. I have two very small children and trying to demonstrate to them the importance of food, the value of food and the fact it does not just appear on the shelves is a very important thing for me personally. However, when it comes to my job, my profession, we currently do not have the powers to get into below-cost selling. From a professional point of view, it is quite a difficult line to put in the sand as to what is good and what is not good in that space. We saw before with the groceries order that it was used in certain cases as a prop to keep a floor on prices right across the economy. It is a difficult issue and I am certainly not saying that it is not. However, my point is there are a couple of different ways of looking at it.
Mr. Fergal O'Leary:
Absolutely. There are a couple of different ways this can be done. As we would have said before, we will meet anybody, in any circumstance, in any place, and take information. It does not have to be an official record and people do not have to say, right at the start, that they want it to be formally on the record. We meet people all the time and they do not give us official information but they give us tip-offs. We will investigate those and we are happy to do that. We are absolutely cognisant of the fact that a supplier who does not want to be in business anymore is going to be the one who gives us an official complaint, and we accept that. There is a barrier below that, where we will accept market information and we will then go off and try to do the best we can with that, and that happens all the time. However, there comes a point, particularly in a criminal investigation, where we need a witness to go into the box. As I said earlier, we refer cases to the DPP and it normally prefers to have a witness - somebody who is describing the evidence and saying what happened. However, that is a long way down the road. If people have evidence, it does not matter what type it is, we will hear it, and we will not put them in harm's way if they do not want us to.
I have listened to Mr. O'Leary. I worry about the family farm in Ireland, given some of the comments he has made, for the simple reason it seems to be a race to the bottom and no one minds what happens. A group of farming organisations may decide to come together with the members they represent. It was pointed out earlier by Ms Goggin that things are generally roughly the same price and, for example, if apples are 2 cent more, someone will not buy them. If the meat is the same price that the factory is quoting and the representatives people have signed up to go in to negotiate cannot do it. This is what has come out. I cannot fathom it. The organisations have an authority from the members of the association to represent them, in the same way we have, as public representatives.
At the same time, Mr. O'Leary talks about competition and we know the name of his organisation is the Competition and Consumer Protection Commission. We now have a situation in this country where there are three or four large operators in the meat industry because they have been allowed to merge. I am a contractor for my living. I will put it simply. When I go baling, I cannot charge the price I want because if there are ten balers around my area, I have to make sure that I am competitive. However, if there are two or three and we are all very busy, who is to stop me from charging more?
The CCPC has, over a number of years, let the number of operators in the meat industry come down through mergers without keeping control of it. Over the last ten to 15 years, has the CCPC ever looked at this, because I can tell Mr. O'Leary that the dog in the street knows this? There is a big fear among communities and it is on everyone's lips what is going on in the meat industry in Ireland. As a competition authority, did the CCPC ever bother to seize computers and take all that type of gear? Mr. O'Leary can correct me if I am wrong, but my understanding is that it was a European outfit that came into Ireland to check the insurance. Is that correct?
It was reported as European.
Why are we not doing that when there is suspicion? I accept it may be unfounded.
Ms Goggin spoke about the large operator and the smaller operator. Does the commission ever look at procurement? The National Parks and Wildlife Service, NPWS, has a procurement process for re-wetting peatlands. A guy with one digger, a laptop and bad broadband coverage is at a distinct disadvantage to a civil engineering company. The guy with the one digger is not let into the game. This is the way the procurement process has gone but nothing has been examined.
The commission has looked at POs, producer organisations. It can talk about bonuses and so forth. However, it was unusual to see how exercised the commission got when a farmer was trying to get a fair price. Before that, not a word was said.
I note the commission met different organisations. Did it meet Meat Industry Ireland? I am a farmer in the west. I cannot be sure of getting €4 from Glanbia and I am not sure about buying a calf. Why is the competition loaded against me because of where I live? Why will the commission not examine that? This was highlighted by Deputy Cahill, although he was of the understanding that what was going on was not fully legitimate.
Many people in the agricultural community have lost faith in the Competition and Consumer Protection Commission. They do not want to hear about it because they have been absolutely disgusted over the past six weeks of what has gone on. The commission spoke about more powers. Where does it see more powers working?
Taking the point about mushrooms raised earlier, one would have to look at it if it was driven out of business. If a product’s price goes below the price of production, what will happen? The conglomerate will go the distance. Has the commission looked at the VAT rate for feedlots, for example? There is legislation in place for it. It is alleged in the chicken industry that feedlot prices are inflated. Has the commission examined these issues? Agriculture is at a crossroads. In fairness, the farming organisations were trying to deal with the issue. Five people getting €10 with a €2 profit and are going to give €8, I cannot understand how I can discuss that with them in the line of a base price. It is not price fixing but price reality. It is price necessity and price survival.
It was the greatest farce ever. One can give a bonus to a great worker at Christmas. It is like the employer not being able to talk to the employee or the employee asking for more money. There is a disgust out there. What more powers will give the commission the teeth required to dig into some of these large conglomerates? Now 80,000 to 100,000 family farms are at risk over the mess that is going on. To be quite blunt, the commission is no addition to it.
Ms Isolde Goggin:
The criminal enforcement powers we have are extremely strong and require absolute justification to be used. We cannot go and use those powers to do a fishing expedition in any company. Those are the rights guaranteed to individuals and companies by the rule of law and by the Constitution. If we are to get a search warrant to search a company and seize evidence, we need to go before a judge to swear that we have reasonable grounds to believe there is evidence located in the company. We will not do it without that. I am happy to say none of the staff would do it. The judge would not give us a warrant if we did not have reasonable grounds.
Where does one get reasonable grounds? In a criminal prosecution. As Mr. Fergal O'Leary said earlier, one gets them from witness evidence. We have had several people come to us and we have done much work trying to encourage them to come forward. We are talking about experienced investigators on our staff. We have deliberately recruited several ex gardaí. A detective sergeant from the Garda fraud bureau is seconded to us. These people know how to work with witnesses and how to question them.
Regarding the industry in question, nobody has ever brought us to the point where we could validly seek a warrant. None of these matters are closed. As my colleague said, our doors are always open. People can come in and talk to us. We are willing to listen to anybody at any time. However, we need somebody to bring this up to the point if any further action is to be taken.
Ms Isolde Goggin:
I do not believe that we would have not taken steps if substantial evidence had been brought forward. What we mean by substantial evidence might be different to different people. We have had people claim they have given us substantial evidence when what they gave us was a newspaper report of a press release that they had issued. That is not evidence. What we need is actual witness evidence of people on the ground having seen something untoward which could constitute a crime and be willing to speak about it.
I have to say that in defence of due process and the way that we operate. We cannot go on fishing expeditions carrying out raids and abusing our powers in a way that would be completely unlawful, unconstitutional and detrimental to our mission.
We certainly look at public procurement. Was it procurement in general that the Deputy was asking about?
I have many examples of the mouse against the elephant. I am not blaming the NPWS as it is using the system in place. However, take the example of re-wetting a peatland and a small operator with one machine who lives in the back of beyond and does not have broadband. He has to go through all this procurement process and tick all these boxes. He is at a huge disadvantage compared with the big company which might not have a bull’s clue but has somebody in an office with good broadband to do all the fancy stuff. The latter will win the contract.
What is going on in the procurement process is costing more money to the State, even though people thought it was the greatest idea ever.
Ms Isolde Goggin:
There would be cases where we would have encouraged procuring authorities to see if they could break up the lots. Rather than doing one large lot, it could involve a small number of people. This would be in the interests of promoting competition. It would be about ensuring it is in place the next time around and one does not get one single operator hoovering up all the business.
Mr. Fergal O'Leary:
It is absolutely an issue in terms of the disadvantage to the small player versus the large player in the tendering process. We are on the Office of Government Procurement SME advisory group. We want to ensure everybody has a chance. We want to ensure it is a little bit more rebalanced in favour of small and medium-sized enterprises to allow them an opportunity to tender for public procurement contracts. That is something we are working on with this part of the group.
Mr. Brian McHugh:
We have received over 170 complaints recently. If the matter the Deputy mentioned on chicken feedlots is part of that, we will be working through it.
On the letter from the Beef Plan Movement and the work that we do, we wrote a letter to highlight potential concerns about anti-competitive behaviour.
It also highlighted the risks it was taking. It is the type of letter we send as standard to try to get compliance. It was not an enforcement letter. It also highlighted the options it would have to become a producer organisation.
Returning to the Deputy's point that farmers cannot get their representative and go on and negotiate. If they are in a producer organisation, they can negotiate with that processor. That is what it allows them to do. Our letter pointed out that this exemption existed and groups such as the Beef Plan Movement could look at that option.
I am not talking about the Beef Plan Movement. What I am saying is that, for example, if several of us were to join Fianna Fáil, which is highly unlikely for me, or others join Fine Gael and they represent the people that wanted them to represent them, can they not go in because of who they represent and talk about the price because they are representing people?
Forget about the producer. I am talking about a farming body. Going down to a producer thing is no different. If I join a farming organisation, I do so because I believe it will do something for me. If it has 20,000 members or 50,000 members can it not collectively, because it has all the farmers in the country bar a few because not everyone will join a producer organisation either, go in and talk? Earlier we talked about the apples being the same price on Moore Street. If the beef is the same price roughly, why can we not go in and talk about base price?
What is the difference for a member of a producer organisation? If Deputy Rabbitte set up a producer organisation she would have membership of our club without being in the thing. What is the difference with a farming organisation such that when it goes into talks with factories or whatever it cannot talk about base price, but if it forms a producer organisation, it can go into the same place, meet the same people and talk about the same thing?
Mr. Brian McHugh:
Certain criteria are set out in order to qualify as a producer organisation. They are detailed on the Department of Agriculture, Food and the Marine website. It is not just any group that can become a producer organisation. They must meet certain criteria. The argument was that agriculture was special and needed an exemption from competition law. That argument was accepted and the exemption was set out. Certain organisations trying to achieve certain things, such as an increase in efficiency which is one of the goals of the producer organisation, could therefore get an exemption from competition law. Importantly, they can then go in and negotiate with that process. That option is available. I do not know why others have not taken it up, but one has. They can go in and-----
Is there an obligation on the processors to engage with them because at the moment they are stonewalling. A farm organisation - a group of them together - might be boxed into a corner given what they are dealing with. They had to discuss price because there was a group of them together that represented most people in the country. At the moment if there is a producer organisation because cattle are plentiful, they will not engage with anyone because they are afraid to give them any power. What is going on is a contradiction.
Does Mr. McHugh not regard it as unusual that everywhere in the country €3.45 per kg is the price for a steer and €3.55 per kg is the price for a heifer? There is not even a difference of one cent or two cent between processors. Does Mr. McHugh worry about it?
Mr. Brian McHugh:
Going back to Ms Goggin's point, in a number of markets the prices come together, where the prices are transparent. If they see a better price, people can transport not just within the State, but internationally. There are markets where the prices all come in line and are transparent. This is not evidence that there is a cartel. We are happy to discuss with anyone the things they see in the market. We are always open to that. It is not right to suggest that this is evidence of a cartel and therefore an investigation must be opened and the very strong powers we have must be used. That is not how we see the market.
Mr. Fergal O'Leary:
We should not lose sight of the Deputy's original point, which is about the sustainability and viability of those 80,000 households. The Central Bank report published just before the ploughing championship highlighted the difficulties in the sector. In our engagement with this sector, we constantly see people trying to solve problems with competition law which is not the right tool to do that. In looking at buyer power, and issues of sustainability and viability, in the context of the unfair trading practices directive that is coming in, that is where we need something more. It needs something that gets involved and has proper powers, ranging from information and advice to the ability to be able to request information from individual suppliers. These are the types of powers economic regulators, such as ComReg and the Commission for Energy Regulation, have in other markets. That is not in place in the agriculture sector at the moment. To address the problems the Deputy mentions would require a very different set of powers from the ones for which we have responsibility today.
Mr. Fergal O'Leary:
That is what we have been suggesting for the past few years. People almost unanimously agree that the upcoming unfair trading practices directive will not address the problems in the sector at present. Therefore it will be necessary to go further, possibly with an ombudsman role or a mediation role - that kind of intervention. When the problems lie with buyer power, viability and sustainability, the answers for us in terms of the unfair trading practices directive lie in having a sector regulator.
I am grateful for the opportunity to speak at this committee, as I am not a member. As I know it has been a long evening, I will not delay the witnesses. I thank them for their presentations. I was taken aback by what Mr. O'Leary said earlier about a difference of opinion. What we see in the market is very different from what the farmers see. We talk about the 80,000 farm families. Throughout today's meeting, I felt the commentary from the Competition and Consumer Protection Commission was more corporate based than family farm based. Based on the witnesses' presentation, they seem to be more on the side of corporate governance than on the side of the small family farm.
Given its role, I would have thought the CCPC would be far more balanced and fair in its presentation but this is not what I have picked up. I picked up that it was there for the corporate side.
I am very confused by the fact there has been no prosecution whatsoever in the sector. Why has the CCPC permitted producer groups operating outside the producer organisation legislation to go unchecked? Why is a blind eye turned and what else is being ignored by the CCPC? Perhaps Mr. McHugh will answer this.
Why are factory owned and controlled feedlots at arm's length permitted when international opinion is that the nature of such feedlots is considered to be market influencing? Is price signalling acceptable to the CCPC? Has it analysed Meat Industry Ireland as a facilitator for price arranging? These are the questions that predominantly drove farmers to the point of frustration that led to the pickets last August and continued the frustration that almost brought the industry to a complete halt because it was felt there was a lack of intervention by the CCPC.
One of the witnesses said the CCPC could do with regulatory powers regarding sectoral regulation and mediation. The CCPC had an opportunity to mediate in the first and second rounds of talks. Deputy Fitzmaurice spoke about the base price. The CCPC had every opportunity to meet the various farming organisations in a mediation role to discuss base price but it chose not to do so. To think the CCPC has never once had a prosecution while it has facilitated a beast to grow out of control that is choking the rural Irish small farmer. It is unbelievable. It is absolutely shocking that people think farmers can work at 50 cent below the cost of production and survive and live. That is not right. That is not industry. What the CCPC is doing is pushing them out. Perhaps the witnesses will answer some of these questions.
I have another question on Europe, if the Chairman does not mind allowing me back in afterwards.
Ms Isolde Goggin:
I would be very disappointed indeed if the reputation or image was out there that we are on the side of the corporates rather than that of the family farm. We are on the side of consumers. That is our job. That is the job the Oireachtas gave us. We are not on one particular side or another in an industrial sector. Our mission, and the job we have been given, is to promote competition and protect consumers. Our approach to every single issue that comes before us is to ask what is the best outcome for consumers. It is no part of our job to mediate between competing industry structures. It is no part of our job to get into the beef process talks and state people should have this money or that money, as my colleagues have said. We are not a price regulator. I am not at all disputing that may be what is needed but it is no part of a competition authority's role or a consumer protection organisation's role. It is getting squarely into the area of sectoral regulation. There is no competition authority in the world that will get involved in talks and deciding what price should be as between two sets of businesses. Our role is to promote competition and protect consumers, and it is the welfare of consumers that will be at the forefront of our minds throughout this. We are not pro one side or the other on any of these issues. The side we are on is that of consumers. I will ask my colleagues to speak about the producer organisations.
Ms Goggin has been very clear that it is not part of her job to mediate. Unfortunately, there was a perception during the summer that it was part of her job. This is the main reason I wanted the CCPC before the committee today, to spell out exactly its role and what powers it needs so it can be more involved. What has come out of our talk today is that the sector regulator seems to be the way forward. The CCPC is an independent statutory body under the remit of the Department of Business, Enterprise and Innovation. There is a perception that its remit goes further than it does.
Ms Isolde Goggin:
That is very much the case. We have been speaking a lot about beef but we have discussed other areas where our role extends, such as insurance. Imagine us getting into the middle of the insurance industry and having to mediate between people as to who should get more money out of a particular transaction. It is just not where we are. Competition law and consumer protection law are a baseline for the way in which industry operates, in the same way people must comply with revenue law and environmental legislation. It is not a means of solving these problems. It is a pity this perception has arisen that the CCPC is more of a problem and more of a solution than it is in this sector.
Mr. Brian McHugh:
No, we do not turn blind eyes for anyone. We have written to Bank of Ireland highlighting concerns and we will write to the Beef Plan Movement. We have written letters to others to work towards achieving compliance in the first instance.
A huge amount of our resources are involved in the ticketing investigation and the insurance investigation. These are big corporate players. This is a huge element of what we do. We are not scared of anyone no matter what size they are. Where there is evidence we will go there. The insurance issue is about price signalling. If there is price signalling it is a concern. When we engage with parties we have these discussions. It can be quite technical, in terms of competition law and the issues surrounding it, but the more we have these discussions the more we learn and the more we can highlight what would and would not fall within competition law.
Mr. Brian McHugh:
I will speak generically. A market will have a player that operates vertically, which is upstream and downstream, in terms of input and production. This is not unusual in itself in a market generically. Whether there are specific issues in this complaint we will have to look into it and get to the bottom of it.
I am interested to hear the opinions of the witnesses on European pricing and the market pressures that are possibly influencing dominant players throughout Europe with regard to beef. Has the CCPC come across this?
Mr. Brian McHugh:
The market certainly has a European dimension and we do engage at European level. There is a lot of interest in the unfair trading practices directive, which is obviously European legislation, and issues within the industry. We have not particularly come across cross-border cartels or investigations of this nature. We continue to discuss with Europe all of the issues in the market. We attend European meetings quite regularly and they are very useful sources of information for us. If there were to be concerns at European level we would engage with the Commission.
Mr. Fergal O'Leary:
I accept there is disappointment about the role of the Competition and Consumer Protection Commission and I understand the strength of feeling. As somebody who holds a senior role in this organisation, I would be disappointed if anybody saw us as not being constructive. Over the past several years, with the incoming transposition of the unfair trading practices directive, we have gone a little beyond our role in suggesting measures which could address issues in this sector. We will continue to do that because we see the difficulties in this area. Our frustration is that the measures being proposed to solve the issues will not, in our professional opinion, do so. That is why we are coming back to this idea that if one wants to address buyer power and sustainability, then a much broader perspective needs to be taken than our current groceries regulations or competition policy. That is where it comes back to the idea of the sectoral regulator which could be a way forward, along with the existing supports from the Department of Agriculture, Food and the Marine, Teagasc, Bord Bia and the Food Safety Authority of Ireland. There are many mechanisms in place but there are market intervention mechanisms and instruments not in place which we believe should be.
I thank Mr. McHugh, Ms Goggin and Mr. O’Leary for engaging with us today. It was a constructive engagement and I now know much more about the commission’s role. The witnesses answered a wide range of questions from small and medium-sized enterprises to insurance to hearing aids to beef.