Ned O'Keeffe (Cork East, Fianna Fail)

The Competition Act 2002 is relatively recent legislation on the Statute Book and is substantially based on equivalent EU competition provisions in the Treaty of Rome. Essentially, it involves overlaying the economy with the competition regime which applies across all European states. While this approach is fine in principle, it raises concerns on some issues of important detail.

If one seeks to apply complex rules developed primarily for external trade across 15 EU member states to a relatively small economy, one must ensure they have equal validity when applied to smaller economies and bind large and smaller players. In some areas the Competition Authority and Competition Acts need refinement to ensure they secure fair play for all businesses, not only larger enterprises.

Under the Competition Act, as drafted, there is no doubt smaller companies suffer legal discrimination in competitive markets dominated by larger, frequently global companies. Given the extremely positive role small and medium sized enterprises play in the economy, it is important this impact is recognised and addressed. For example, under the Act independent owner run companies are treated differently from branches of a larger company. If two independently owned companies combine to deliver a price response to a larger competitor, they are liable to be prosecuted for price fixing. On the other hand, if the large competitor instructs two branches of the company to co-ordinate prices in an area, the branches are not liable to be prosecuted for price fixing unless the company is deemed to be dominant. This means it is acceptable for a large company to fix prices while fear of prosecution should deter two smaller operators from considering co-operation to meet a competitive threat.

Under competition law, a finding of dominance can be elusive. For example, in one case the Competition Authority found that a market share of 65% was not dominant in a local market. This places smaller operators at a distinct disadvantage and tilts the balance in favour of larger businesses. The reliance on establishing a finding of dominance to assess any abusive activity by a large player is also misguided and needs to be reviewed. It is farcical that the only factors determined to assess dominance are the activities of particular companies in the State. Examining market share in the State alone as the arbiter of dominance gives a skewed result and ignores the significant muscle many companies bring to the Irish market as a result of their operations overseas. For example, a retailer with a 5% market share here could have a significant international business which dwarfs an entire sector in Ireland. It is nonsense that the overseas activities of a player operating in this market are not taken into account in determining dominance. We need enlightened thinking to overcome this imbalance.

In his recent announcement on the revocation of the groceries order the Minister stated he would strengthen the Competition Act to make certain activities illegal if carried out by a firm which is not dominant. He specifically mentioned the demand for 'hello' money, the imposition of unfair contract terms and fixing of minimum resale prices. While this announcement is welcome, particularly given the skewed manner in which the Competition Authority assesses dominance, the Minister should go one step further and outlaw predatory pricing by a company which is not dominant. This could be achieved without impacting on genuine competition in the market.

Predatory pricing is the main problem. The Competition Act only outlaws predatory pricing when carried out by a dominant firm. It occurs when a major player with deep pockets targets a small competitor by selectively dropping prices to unsustainable levels for a period and squeezes the competitor out of business. Ben Dunne said on NewsTalk that the small players try to take on the bigger ones but that it is like an elephant dancing with a flea, and I agree with him.

Some 50% of the Irish retail market is controlled by two groups. Tesco holds approximately 27% and Dunnes 23%. That is not a healthy situation. Since no player in the Irish retail grocery market has reached the market share required for dominance, it is unlikely that the authority will take action on predatory pricing.

That is a ridiculous situation, given that one of the main players in our retail sector is a major international giant with a turnover eight times that of the entire Irish grocery market. That player would be able to engage in predatory pricing without sanction under the Competition Act 2002 as currently structured. That is unfair, unreasonable and unjust as it confers enormous power on the biggest player in the market over smaller players without independent external review.

To ensure competition in the retail grocery trade, we need the retention of the Restrictive Practices (Groceries) Order 1987, with predatory pricing expressly outlawed for those who are dominant. That would make predatory pricing and the charging of unsustainable prices an uncompetitive activity and therefore legal under the Competition Act 2002. It would ensure fair play and competition in the grocery trade.

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