Michael Ahern (Cork East, Fianna Fail)

I welcome the opportunity to speak on this Private Member's Bill which seeks to establish the rights of self-employed individuals to be represented by a trade union for the purposes of collective bargaining. It also proposes to allow the representative body of any profession to enter into collective negotiations with a public body in respect of services provided to the public by members of the profession where those services are publicly funded.

While these provisions are well-meaning, I am concerned that they have far-reaching consequences which may go further than intended. While I accept elements of the Bill have merit, as a Minister of State at the Department of Enterprise, Trade and Employment, which has responsibility for competition and consumer policy, I cannot ignore the anti-competition and anti-consumer consequences.

Prior to addressing the specific provisions of the Bill, I want to emphasise that the effective promotion of competition in the economy is not possible without an effective legal framework. Sound competition legislation contributes to our competitiveness by penalising anti-competitive and anti-consumer behaviour and protecting the competitive process in all sectors of the economy.

The Government continues to consider competition as the life blood of a vibrant economy and we are committed to removing unwarranted constraints on competition in all sectors of the economy and placing the consumer at the top of the policy agenda. Increased competition in the economy has a critical role to play in helping to keep prices under control. An example of this is the aviation industry in which competition from low cost airlines has substantially reduced the cost of air travel. While much needs to be done to encourage competition in some sectors of the economy, the Government is working hard to bring about these changes.

The Government also recognises that restrictions on competition arising from regulations can impose substantial costs on the economy and have adverse effects on the international competitiveness of Irish business. In this regard, the Government is committed to addressing sectors where barriers to entry or restrictive practices exist. Our commitment to better regulation stems from the recognition that if State regulation is excessive in quantity or is of poor quality, it will be an unnecessary burden on economic and social activity. By minimising regulatory barriers, we can make it easier for entrepreneurs to avail of business opportunities and enter markets and we can achieve greater efficiency and choice for consumers.

A practical example of the Government's commitment to foster competition can be seen in the revocation of the groceries order by way of the Competition (Amendment) Act introduced by my colleague, the Minister for Enterprise, Trade and Employment, Deputy Micheál Martin, last year. The groceries order was abolished primarily because it allowed wholesalers and suppliers to determine minimum retail prices charged to consumers, thereby seriously constraining price competition in the grocery trade. The purpose of its removal was to introduce greater competition into the grocery trade by allowing retailers freedom to determine the prices they charge their customers.

The 2006 Competition (Amendment) Act also strengthens the existing provisions of the 2002 Act by continuing to prohibit certain practices previously prohibited by the groceries order. These include the imposition of resale price maintenance in regard to the supply of grocery goods; unfair discrimination in regard to the supply of grocery goods; retailers or wholesalers of grocery goods compelling or coercing suppliers into payment of advertising allowances; and retailers compelling or coercing suppliers into payment of "hello" money.

Following the removal of the order, the selling of grocery products below cost is not an offence, nor is there any reason to believe below cost selling of itself acts against the interests of consumers or is in any sense anti-competitive. The use of aggressive pricing strategies is a perfectly legitimate marketing tool and the normal outcome of the competitive process.

It is important that we remind ourselves that competition law is designed to promote consumer welfare and protect competition. Anti-competitive practices such as price fixing are essentially theft with the consumer being the innocent victim. The development of a strong competition culture is therefore essential from both a consumer and business perspective. The economy, too, will benefit from open competitive markets. The positive effect that competition has on consumers has two sides. Not alone do companies who compete with each other to win our business reduce prices, provide enhanced service and variety and generally become more responsive to our needs, competition drives companies to cut their costs and find more innovative, efficient and productive ways of doing business. This less visible effect of competition is no less valid.

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

In recent months, concerns have been raised regarding difficulties around negotiations between public sector bodies and service providers. The Competition Act 2002 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, with the Minister for Enterprise, Trade and Employment retaining a residual function in media mergers.

The 2002 Act was the culmination of a root and branch review of all aspects of competition law in the State undertaken by the competition and mergers review group. The review group, which reported in 2000, comprised eminent lawyers, economists and representatives from across the economic spectrum, including the social partners. The 2002 Act implemented many of the recommendations of the review group and anticipated developments at EU level. In particular, it provided a framework for the application of Regulation 1 of 2003 in the State, whereby the authority was enabled to fully apply the European Community competition rules.

Section 4(1) of the 2002 Act sets out the general prohibitions on anti-competitive agreements, decisions and concerted practices and reflects Article 81 of the EC treaty. Section 5 prohibits the abuse of a dominant position and reflects Article 82 of the EC treaty. Predatory pricing is a practice that is considered, both in national and international competition law, to constitute the abuse of a dominant position and is prohibited by both section 5 of the Competition Act and Article 82 of the EC treaty.

The previous 1996 Competition Act, which created criminal offences for breaches of competition law, provided for an "ignorance defence" if the defendant did not know, nor could be reasonably expected to have known, that the effect of the agreement, decision or concerted practice concerned would be the prevention, restriction or distortion of competition. Under the 2002 Act, this ignorance defence was abolished. The 2002 Act also created new offences for breaches of Articles 81(1) or 82 of the EC treaty to facilitate the enforcement of EU competition law in Ireland in line with recommendations of the competition and mergers review group.

An important provision in the Competition Act is that there are different categories of offences. "Hard-core cartel" offences are regarded as extremely serious and could result in a custodial sentence. These offences are defined as agreements, decisions or concerted practices involving competing undertakings, the purpose of which is to directly or indirectly fix prices with respect to the provision of goods or services to persons not party to the agreement, decision or concerted practice; 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. Other offences, particularly those relating to vertical agreements, are less seriously restrictive of competition.

Section 6(2) introduced a presumption which 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. All other section 4 and Article 81(1) offences and all breaches of section 5 and Article 82 are treated as less serious. The penalties are lower and this presumption does not apply.

The 2002 Act also established the Competition Authority on an independent statutory basis. The Irish Competition Authority is one of the most proactive and successful enforcement agencies of competition law in Europe. It was also the first enforcement agency in Europe to secure a criminal conviction before a jury for a competition offence.

I will comment briefly on the nature of investigations by the Competition Authority. The authority's experience of investigating "hard-core cartel" activity, such as price fixing, bid rigging and market sharing, is that it is a slow and time consuming process. Cartels are by their nature conspiratorial. Participants are secretive and "hard-core cartels" are notoriously difficult to detect and prosecute successfully. The evidential standard for indictable offences is onerously high with a "beyond reasonable doubt" burden of proof on the prosecutor. Following investigation, the authority is then required to prepare a file for the Director of Public Prosecutions, after which the preparation of a book of evidence can take several months. 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 preparing a case for trial.

As the enforcer of competition law, the Competition Authority has been successful in tackling hard-core anti-competitive practices. Last year alone, 15 criminal convictions were secured in a home heating oil case in the west, while a further two convictions were secured this year in connection with this cartel. Proceedings in respect of two more defendants in this case are ongoing.

Following a detailed examination into alleged price fixing in the car market, a businessman pleaded guilty earlier this year to charges of aiding and abetting the Irish Ford Dealers Association and its members in implementing an agreement which had the object of preventing, restricting or distorting competition in the motor trade so as to directly or indirectly fix the selling price of cars.

These cases constitute major successes for the authority——

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