Micheál Martin (Cork South Central, Fianna Fail)

The promotion of competition in the economy requires an effective legal framework. Strong competition legislation contributes to our competitiveness by penalising anti-competitive and anti-consumer behaviour, and by protecting the competitive process in all sectors of the economy.

The positive effect competition has on consumers takes two forms. The most visible one is that companies that compete to win our business will reduce prices, provide enhanced service and variety, and generally become more responsive to our needs. The other benefit, the one that is less visible, is that competition drives companies to cut their costs and find more efficient and productive ways of doing business.

If competition were just about cutting prices it would bring important benefits but when we take account of the effects of competition on cutting costs, they are much more substantial. Lower costs and greater efficiency bring further price cuts for consumers but, more importantly, they mean higher productivity growth for the economy as a whole. When those companies trade their goods and services internationally, the higher productivity they enjoy from competition at home makes them more competitive abroad.

The 2002 Competition Act consolidated, reformed and modernised previous legislation relating to competition policy and merger control. In essence, the 2002 Act increased the penalties for serious cartel activities such as price fixing, enhanced the independence of the Competition Authority and transferred responsibility for controlling mergers and acquisitions from the Minister to the Competition Authority but the 2002 Act did much more than that. The Act was the culmination of a root and branch review of all aspects of competition law in the State, which was undertaken by the competition and mergers review group. The review group comprised eminent lawyers, economists and representatives from across the economic spectrum, including the social partners. It reported in 2000.

The 2002 Act implemented the recommendations of the review group and anticipated developments at EU level. In particular it provided a framework for the application of Regulation I of 2003 in the State whereby the authority was enabled to fully apply European Community competition rules.

The 2002 Act became fully operational on I January 2003. Therefore, it is a recent statute and its provisions have not yet impacted fully across the economy. Nonetheless, it forms the basis for one of the most modern competition regimes in the world. I would appreciate it if the Opposition acknowledged that.

Section 4(1) of the Act sets out the general prohibitions on anti-competitive agreements, decisions and concerted practices, and reflects Article 81 of the European Union treaty. Section 5 prohibits the abuse of a dominant position and reflects Article 82 of the EU treaty.

In this respect, I wish to comment on predatory pricing, about which some comments were made this evening, which is an abusive and anti-competitive practice that acts against the interests of consumers. It is a tactic employed by a firm that is dominant in its market and involves the sale of product below cost for a prolonged period of time to damage or eliminate a competitor. It is an expensive practice and the predator must be confident that he will be in a position to raise prices after the event to recoup any losses incurred. A predator could find, for example, that after one competitor has gone out of business, another even bigger competitor enters the market making it impossible to raise prices. Because it is expensive and not guaranteed to succeed, predatory pricing is quite rare. This is the experience internationally.

Predatory pricing must not be confused with other forms of low cost selling, such as for promotional reasons, to dispose of old stock or to match a competitor's prices.

The groceries order was not a suitable vehicle to prevent predatory pricing because it was unable to make the distinction between legitimate low prices and genuine acts of predation. On the other hand, predatory pricing is prohibited by section 5 of the Competition Act which outlaws abuse of a dominant position in a market. Dominance does not have to be measured on a national scale and the Act allows for measurement "in any part of the State". The Act is, therefore, sufficiently flexible to allow the authority to tackle predatory pricing in all circumstances. If dominance were more tightly defined, it would make the prohibition of predatory pricing more difficult, not less so as some have claimed.

The provisions of the Competition Act that outlaw predatory pricing are based on the provisions of EU treaty law. There is case law in Europe to support the use of these provisions to prohibit predatory pricing. It is important to bear in mind such case law when interpreting the provisions of the Competition Act. If any individual business or group of businesses believe they are being harmed by predatory pricing, they may make a complaint to the Competition Authority, which has the powers to investigate and take legal action, including by means of bringing an injunction; seek a private injunction in the High Court to stop the illegal activity; and seek compensation in the courts for any damage done, either following a successful authority court case or as a private right of action.

The Competition Authority has extensive powers and a dedicated division of expert staff which investigates allegations of companies abusing a dominant position. The circumstances of each allegation are unique and each complaint is assessed case by case. Under the 2002 Act, moreover, the authority can block anti-competitive mergers and acquisitions. This means large retailers cannot build a dominate position by buying their competitors where this significantly lessens competition. The penalties for any undertaking found to have engaged in predatory pricing are up to €4 million or 10% of the company's turnover.

These are very substantial penalties and are much greater than those that applied under the groceries order. They are likely to act as a real deterrent to any business contemplating predatory action. In this context, it is important to note that there are constitutional issues in regard to the possibility of the authority being in a position to impose fines, as suggested in the Fine Gael motion. These genuine constitutional difficulties undermine the case made in the motion.

The Competition Act 1996, which created criminal offences for breaches of competition law, provided for an "ignorance defence". In other words, defendants could escape punishment if they could claim they did not know, nor could be reasonably expected to have known, that the activity engaged in was likely to be regarded as anti-competitive. Under the 2002 Act, this defence was abolished, making for much more effective enforcement of the law.

The 2002 Act also created new offences for breaches of the provisions of EU competition law. This greatly facilitates the enforcement of EU competition law in line with recommendations of the competition and mergers review group. An important provision in the Competition Act is that a distinction exists between lesser and more serious offences. The most serious offences, often referred to as hard-core offences, are defined as agreements, decisions or concerted practices involving competing undertakings, the purpose of which is to directly or indirectly fix prices, limit output or sales or share markets or customers. This reflects a more economic approach to competition law enforcement whereby certain offences are regarded as being unequivocally harmful to consumers and to the economy as a whole. Certain other offences, particularly those relating to vertical agreements, are less seriously restrictive of competition.

Section 6(2) introduced a presumption that applies in the prosecution of the more serious offences. This obliges the court to presume, unless the defendant can prove otherwise, that the object of the agreement is to prevent, restrict or distort competition. The Act also provides greater penalties for hard-core offences. Agreements, decisions and concerted practices between competing undertakings attract a penalty on summary conviction of a fine of up to €3,000 for an undertaking. An individual will be liable to a fine of up to €3,000 or six months' imprisonment, or both. On conviction on indictment, however, the penalty for these offences is a fine of up to €4 million while the penalty for an individual is a similar fine or five years' imprisonment or both. This five-year penalty of imprisonment also makes this offence arrestable under criminal law.

The authority's power to investigate breaches of the law can be delegated to any member of the authority or member of staff of the authority. Its search powers were also strengthened with powers to enter premises, by force if necessary, and to search private dwellings. The authority can take away original documents rather than copies. Search warrants obtained under the 2002 Act, unless they state otherwise, operate to authorise members of the Garda Síochána to accompany and assist authorised officers. Furthermore, whistle-blowers are given statutory protection under the 2002 Act and any statements they provide may be admitted into evidence.

The Competition Authority is, therefore, one of the most empowered, proactive and successful enforcement agencies of competition law in Europe. It was also the first enforcement agency in Europe to secure a criminal conviction for a competition offence and, to date, has obtained five such convictions. These facts, combined with the authority's cartel immunity programme and the recruitment to the ranks of the authority of gardaí with powers of arrest and detention forcompetition offences should send shivers down the spine of anyone considering cartel membership or participation in the most serious anti-competitive practices.

Section 34 of the Act facilitates co-operation agreements between the authority and other regulatory bodies. The authority has concluded such agreements with the Office of the Director of Consumer Affairs, the Health Insurance Authority, the Broadcasting Commission of Ireland and the energy, aviation and communications regulators. These agreements enable the authority to exchange confidential information with those regulators as well as to consult them and, where appropriate, to act instead of them in a competition matter in which they are both engaged. In addition to the formal co-operation agreements, the financial regulator has a statutory mandate to monitor competition in the financial sector and to pass on to the Competition Authority any information it has about possible breaches of the Competition Act. The Consumer Strategy Group has recommended that the new national consumer agency should be able to liaise formally with the Competition Authority. It is likely that a co-operation agreement will be the most appropriate basis for such liaison.

On the question of a statutory provision that the authority advise the Director of Corporate Enforcement of the conviction for competition offences of company directors, any finding by a court that a company director has infringed competition law will be a matter of public record and the authority is entitled, without the need for amending legislation, to bring this to the attention of the Director of Corporate Enforcement.

I will comment briefly on the nature of investigations by the Competition Authority. Its experience of investigating hard-core cartel activity, such as price fixing, bid rigging and market sharing, is that it is a difficult and painstaking process. Cartels are by their nature conspiratorial. Participants are secretive and hard-core cartels are difficult to detect and prosecute successfully. The evidential standard for indictable offences is high with a beyond reasonable doubt burden of proof on the prosecutor. Following investigation, the authority is required to prepare a file for the Director of Public Prosecutions after which a book of evidence must be prepared. Following a decision by the DPP to proceed with a prosecution, the authority assists and works with the DPP, the chief prosecution solicitor, legal counsel and the Garda Síochána in getting a case ready for trial.

Yesterday, Ireland was expected to be the first country in Europe to hold a criminal trial in front of a jury for a breach of competition law involving an alleged cartel of oil retailers in the west. Even though the trial has had to be deferred until next year because of a lack of court time, one of the defendants has pleaded guilty and will be sentenced next March. This case has been complex and has taken some time to bring to court. The authority has informed me that it does not view the number of defendants in this case or the length of time it has taken to get to court as unusual or atypical of cartel investigations.

Another Competition Authority investigation of which I am aware relates to alleged business cartels covering a span of ten years. The estimated financial damage caused by the activities in question is between €75 million and €105 million. The investigations are extensive and have involved the authority in 35 searches and 46 cautioned interviews. Files have been referred to the DPP. International experience of cartel investigations is no different to our own. Cartels, wherever in the world they operate, are secretive and their detection and successful prosecution is slow. Even jurisdictions with a much longer history of competition law enforcement, such as the United States of America, recognise that cartel detection, like most other white collar crime, is time consuming to prosecute successfully.

I stress the importance of complaints in the Competition Authority's campaign to stamp out anti-competitive behaviour. It has substantial powers to investigate complaints if it has reasonable grounds for suspecting that a breach of competition law has taken place. When the information provided through complaints is sufficient to give the authority reasonable grounds for suspicion, a formal investigation may be launched. It is vital that organisations and individuals provide the necessary information where they suspect anti-competitive activities on the part of any business or sector of the economy.

Last week, the Leader of the Opposition asked the Taoiseach to instruct the Competition Authority in a particular matter. This is not the correct way to proceed. If the Leader of the Opposition or anybody else has information about anti-competitive behaviour, it should be sent to the authority. I am not sure whether the Leader of the Opposition has communicated the issue in question to the authority. We must protect the independence of the authority. It is important that we do not embroil it in partisan politics.

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