Willie O'Dea (Limerick City, Fianna Fail)

I thank the Minister for his presentation. Fair competition in trade and commerce is essential to a healthy Irish economy. Ireland is a small economy that depends to a large extent for its prosperity on its trade. We can dispute the influence of the extension of competition law since the 1970s to our general competitiveness, but there is no doubt that it has been important and has become even more so.

We all subscribe to the notion that Ireland should be one of the best places in the world in which to carry on business, trade and commerce. Essential to this is the strength of our competition law. Vigorous competition between firms drives productivity and helps consumers. Cartels are inimical to the interests of the economy and to consumers in particular, as the Minister recognised. The case in question is evidence of the fact that a minority of judges are slowly beginning to grasp the full reality of what we are dealing with in this situation. In the Duffy case, to which I presume the Minister referred, Mr. Justice McKechnie describe cartels as:

... offensive and abhorrent, not simply because they are malum prohibitum, but also because they are malum in se. They are in every sense anti-social. Cartels are conspiracies and carteliers are conspirators.

In his sentencing judgment, he went out of his way to make the connection between price fixing and theft.

Competition protects consumers and forces firms to work hard to win and keep their clients. It tends to reduce prices and improve choice and quality. However, there was a time when we did not take the concept of fair competition seriously. For many years, some of the largest companies in Ireland behaved in a notoriously anti-competitive way. Among the worst offenders were semi-State companies. It was a macho thing with them. Their attitude was to brutalise, bludgeon, hammer and crush any competition that dared to raise its head. For decades, some companies, in particular semi-State companies, behaved in such a way that, had they been operating in any other jurisdiction, their principals would have been subjected to long terms of imprisonment. Happily, most of them have been dragged kicking and screaming into the modern world of competition. Some of the activities engaged in by firms, including semi-State bodies, would have landed the perpetrators in prison in other countries. The commonly held view was that the fortunes of a particular semi-State company were more important than those of the economy as a whole.

The first relevant legislation in this field was the Take-Overs and Monopolies (Control) Act 1978, which was followed by the Competition Act 1991. Interestingly, the same Minister, my former constituency colleague Mr. Des O'Malley, piloted both Acts through the House. When the time came to debate the 2002 Act, even he recognised that the 1991 Act contained a number of significant deficiencies. The Competition Act 2002 consolidated and updated competition law and attempted to provide a more focused approach to the penalisation of anti-competitive activities. A central part of the 2002 legislation was Part 2, which significantly increased and streamlined the penalties to be applied to anti-competitive behaviour.

However, the law needs to be updated again. The Government has adopted a two-tier approach. As the Minister mentioned, under the programme for Government and his party's election manifesto, the Government is committed to introducing the larger competition legislation whereby the Government will merge the Competition Authority and the other agency and deal with matters like media mergers, and so on. Increases in penalties could have been included in that Bill's measures. I am unsure why they are being singled out to be addressed separately. Perhaps it has to do with a commitment to the troika.

I understand what the new legislation will contain. However, the programme for Government was firm in its commitment to the introduction of fair trade legislation and the establishment of a business inspection and licensing authority incorporating the NCA's existing business and inspection activities. Has the Government completed its study of the economic impact of eliminating the cap on the size of retail premises? From the Minister's statement, I understand that the proposed code of practice will form part of the forthcoming legislation and will not be voluntary. Is my understanding correct? How effective has the 2002 Act been in practice? To what extent has it curbed anti-competitive activities? To what extent has it been enforced? How many successful prosecutions have been conducted during the lifetime of the legislation and how many are pending? Have the resources allocated to the Competition Authority by the various Governments since 2002 been sufficient? I was the recipient of an e-mail in the past 24 hours - I am sure my colleagues received the same e-mail - from someone complaining bitterly that the resources available to the authority were woefully inadequate. Have the legal difficulties, namely, the difficulties of proof that preceded the 2002 Act, been resolved or does some work remain to be done on the new Bill?

I welcome some elements of this proposal in so far as they are minor improvements. For example, I welcome section 5 on res judicata. It provides that, if the facts of acting contrary to competition law have already been established, they will not need to be proved again. This will save time, expense and effort. I have a question for the Minister which perhaps is more appropriate to Committee Stage. Would it be possible for the Competition Authority itself to bring a case after a private case has already been brought? If so, will this rule apply?

I welcome the provision whereby if somebody is prosecuted and convicted that person may be asked to pay for the costs of the investigation and the case. However, I do not understand why this provision is confined to criminal offences. I will speak later about non-hardcore offences where in practice a prosecution does not occur but sometimes the authority is forced to bring somebody to court for a declaration or injunction, which can be a very expensive procedure. I know in such a case the judge has discretion to grant costs against the party found to be liable but this should be strengthened and made more specific in the legislation.

I also welcome the provision whereby the court has discretion to disqualify a company director convicted of a summary offence. Disqualification already applies to somebody convicted of an indictable offence. I have issues with how the Bill is drafted but I will return to these on Committee Stage as it would be more appropriate to raise them then.

Will the change to the Probation of Offenders Act mean any offence for which a conviction has been secured under competition law, no matter how minor, will now appear on the record? I suggest - helpfully I hope - to the Minister that he consult his colleague the Minister for Justice and Equality who will shortly bring legislation, with which I largely agree, before the House to provide for certain types of offences to be expunged from the record after a certain period of time. How will this apply to this type of offence which, for the first time, must go on the record?

I also welcome the fact that on 3 October the Minister signed section 10 of the 2002 Act into operation and brought it to life. Recently, at a committee meeting I had exchanges with the Minister of State, Deputy Sherlock, on the patents legislation as I was trying to get information on the timeline in which it will be introduced. The Minister will be happy to hear that the Minister of State did not give an inch. Section 10 is one of the most important provisions of the 2002 legislation and I am sure that at the time assurances were given that it would be signed into operation at the earliest possible moment but it was not done until a decade later. However, I compliment the Minister on eventually signing it into operation and I am critical of the Ministers who preceded him who did not manage to do so.

With regard to the provisions in the Bill, I note a matter which caused some controversy when the 2002 Act was being debated was section 6(2) which reversed the ordinary situation in criminal law whereby the burden of proof is entirely on the State. Section 6(2) placed the burden of proof in an anti-monopoly or anti-competitive prosecution to some extent on the defence. This was heavily criticised in 2002 as it was argued to have gone against one of the most fundamental principles of criminal law, which is that the State must prove its case all the way beyond any reasonable doubt.

Section 6(2) introduced the presumption that anti-competitive behaviour had taken place unless the defendant could prove otherwise. This shift in the burden of proof is not unique in criminal law, but it has been sparingly used, mainly in the area of taxation law. I would like to know how this was worked out in practice. It must be stated and admitted that the presumption in section 6(2) relates to only one part of the proofs necessary to secure a conviction. It will still be necessary for the prosecution to prove that an agreement was in place and that the person accused was party to that agreement. It is only when these elements of the offence have been discharged that the presumption then kicks in and the agreement is presumed to be anti-competitive unless the defence can prove the contrary.

With regard to the legislation before the House, the material amendments to section 8(1) of the principal Act are with regard to an increase in the penalties following a criminal conviction under section 6 of the Act. Section 6 deals with what are generally referred to as hardcore offences which relate to cartels and, more specifically, activities such as price-fixing, market sharing and bid-rigging. Section 8(1)(a) of the 2002 Act deals with summary convictions for a hardcore anti-competition offence and the amendment to this section provides for an increase in the fine from a maximum of €3,000 to what is called a "class A fine". I do not see any definition of a "class A fine" in the legislation itself nor could I find it in my cursory glance at the 2002 legislation; it may very well be there or it may be defined elsewhere. On page 2 of the explanatory memorandum it seems to be implied that a class A fine is a fine not exceeding €5,000 but not less than €4,000. If this is what it means I want to know what the authority for it is. If this is the case, it is a significant change and one to be welcomed.

The amendment to section 8(1)(b) of the 2002 Act increases the penalties for conviction on indictment from €4 million to €5 million and from a maximum five-year custodial sentence to a maximum ten-year sentence. I do not think the imposition of a penalty of €5 million rather than €4 million will make any material difference, particularly when the alternative penalty exists of 10% of the previous year's turnover. I have no objection to it but I do not think it is what the troika had in mind when it asked the Government to introduce legislation to stamp out anti-competitive practices.

The possibility of imposing a ten-year custodial sentence rather than a five-year sentence for what is after all white-collar crime will not make any difference in practice and will not have any deterrent effect. This is particularly in view of the fact that since 2002 it has been possible to send a person convicted of a hardcore anti-competitive offence to prison for five years yet not one person so convicted on indictment has ever seen the inside of a prison cell. I understand one man went to prison but it was for refusing to pay a fine he had been ordered to pay by the court. I also note from a study of these cases that when a prison sentence is imposed it is always a suspended sentence and to my knowledge, and the Minister may wish to contradict me, has never been for more than 12 months. Despite the fact that during the past ten years a five-year custodial sentence could have been imposed not one person has served one day in prison. Therefore, giving the judges power to increase the possible maximum custodial sentence to ten years appears to be mere window dressing.

The material amendments to section 8(2) of the 2002 Act increase the penalties following a criminal conviction under section 7 of the Act. Section 7 deals with what are generally referred to as non-hardcore criminal offences such as abuse of a dominant position. The amendment to section 8(2)(a) introduces class A fines and the amendment to section 8(2)(b) deals with increasing the penalties on conviction on indictment from €4 million to €5 million. Whatever about the change to section 8(2)(a), the amendment to section 8(2)(b) is guaranteed to have no impact for the simple reason that the Competition Authority has stated on more than one occasion that it has no notion of pursuing a criminal conviction for a non-hardcore offence. It has not pursued any cases or referred any for consideration to the Director of Public Prosecutions either. The point was set out as recently as 9 June in a paper published by the Competition Authority, Filling a gap in Irish competition law enforcement: the need for a civil fines sanction:

While criminal prosecution is appropriate for hardcore cartel activity, it is rarely, if ever, appropriate or practical to seek criminal convictions in cases involving non-hardcore infringements. Such cases usually involve complex economic analysis and argument and a criminal trial, in which a jury must be convinced, beyond reasonable doubt, of the guilt of the accused, is an unsuitable forum in which to try such matters.

[...]

However, it is notable that since the enactment of the 2002 Act, the Authority has not instituted summary criminal prosecutions in cases involving non-hardcore infringements of the prohibitions in the Act, nor has it referred any such cases to the DPP for prosecution on indictment.

The suggested amendments of the section are perhaps the greatest examples of where the proposed Bill falls short of what it should be or could have been. This is particularly the case in respect of non-hardcore offences and it ties in with, and underscores, how ineffective are the proposed amendments of section 8(2) in respect of the notional criminal prosecution of non-hardcore offences. Currently, section 14(2) of the principal Act gives the Competition Authority, where it forms the view that there is an infringement of the Act, the right to bring a civil action to obtain the remedies of declaratory relief or injunctive relief, which are available under the Act. These remedies, according to the Competition Authority paper published on 9 July "obviously involve no sanction for the past anti-competitive behaviour of the undertakings involved and are therefore devoid of any general deterrent effect".

As matters stand, the Competition Authority has no remedy available to it other than the declaratory relief and injunctive relief and there is no provision in the 2002 Act for civil fines and penalties for breaches of competition law. The advantage of the civil route is that the burden of proof is lower than that required in criminal cases and the problem of having juries in criminal trials getting their heads around the complexity and nuances of competition law is removed. One would have thought this Bill provided the perfect opportunity, seeing as the penalty section is being dealt with separately, to amend the 2002 Act to provide for such pecuniary sanctions. This is particularly the case where the Department of Jobs, Enterprise and Innovation has specifically stated that the purpose of the Bill is "to introduce legislation to strengthen competition law enforcement in Ireland". The Competition Authority paper expresses serious concern at the current lack of proper civil remedy contained in the 2002 Act:

The only other remedies available to the Authority in such cases are to seek a declaration (i.e., a court ruling that a particular arrangement or behaviour is unlawful) or an injunction (i.e., a court ruling requiring a particular arrangement or behaviour to be terminated). Current legislation does not provide for any form of civil pecuniary penalty or sanction to be imposed on the undertaking(s) involved in such non-hardcore infringements. The Authority takes the view that the absence of such sanctions is a serious weakness in the Irish competition law enforcement regime. It believes that this weakness needs to be addressed by the enactment of appropriate amending legislation to provide for the type of civil fines for competition law infringements that exist in many other jurisdictions.

[...]

For the reasons explained in this paper, the Authority's view is that there are no "effective sanctions" for non-hardcore infringements of competition law in Ireland. Such infringements, which include abuses of a dominant market position and various forms of restrictive agreements, can seriously distort and impede competition by excluding competitors from markets and, in some cases, even putting them out of business. As Irish competition law stands, criminal prosecution is the only means by which any sanction can be imposed on infringing undertakings.

[...]

Non-hardcore infringements can, however, have serious economic effects and, in such cases, sanctions in the form of civil fines/pecuniary penalties should be available, at the Court's discretion, to offset at least some of the gains the infringing undertakings have earned from their unlawful activities and, equally importantly, to deter them and others from engaging in further infringements.

The proposed amendments to this Bill, namely the removal of subsection 2 and the insertion of the new section 14a in its place, does nothing more than tidy up the language. It also expands the definition of injunctions, which is minor but welcome. It does not do what the troika, the Competition Authority and the Director of Public Prosecutions want done, along with everyone with knowledge in the area, namely, give the courts the discretion to apply some pecuniary penalties for non-hardcore offences. It is not practical to prosecute them and the only sanction is civil. When the Competition Authority takes a civil action, the only remedy involves stopping the activity. There is no punishment for the profits and the gains realised by the activity for the period in which it continued. There is effectively no deterrent because people can operate until the Competition Authority manages to get an injunction or declaration but they can retain the profits gained through illegal activity.

This is an obvious case where the legislation needs to be amended. There are constitutional issues in respect of Article 38 of the Constitution, which, some will argue, does not allow the Minister or the Government to do that. I reject that view. We are not talking about the Competition Authority imposing fines but about the courts having the discretion to impose fines where the Competition Authority succeeds in establishing a case. Article 38 of the Constitution provides that "No person shall be tried on any criminal charge save in due course of law." Article 38.5 states that "No person shall be tried on any criminal charge without a jury." Therefore, the traditional interpretation of Article 38.1 is that it can effectively prohibit the imposition of substantial fines in civil cases. The argument is that a substantial fine is, in effect, a punishment and that acts that expose a party to the risk of punishment should, by definition, be categorised as crimes, thereby confirming the party concerned with the rights available to an accused person in a criminal case. These include the right to have the case proved beyond any reasonable doubt, the right to a trial by jury, and so on. The Competition Authority refers to a number of very persuasive authorities from the superior courts of this country, one of which refers to a taxation case, that demonstrate that one can have the possibility of punishment without the civil wrong being categorised as a crime. The case is persuasive and I would love to know the response of the Government to it.

There was a specific agreement on this precise matter between the previous Government and the troika. The first agreement, dated 27 December 2010, included the Government's commitment "to empower judges to impose fines and other sanctions in competition cases". Miraculously, in the revised memoranda of understanding, dated 28 of July 2011, the measure changed somewhat to state that the Government will introduce legislation to strengthen competition law enforcement in Ireland by ensuring the availability of effective sanctions for infringement of Irish competition law. As I have demonstrated, these are not effective sanctions. Anyone who knows anything about this area has agreed that there is a gaping hole in the law, which this legislation provided an opportunity to fill and the Government has backed away from it.

I suspect the Attorney General examined the provisions of the December agreement and said it cannot be done because of Article 38 of the Constitution. I disagree, however. Some compelling authorities were cited by the Competition Authority in its report, which certainly questioned that. I want to see the Government's response to this. The Government is committed to strengthening competition law. According to the revised agreement with the troika, dated 28 July 2011, the Government is committed to introducing effective sanctions. The sanctions are not effective, however. It is not effective to say one will fine a maximum of €5 million rather than €4 million, or that prison sentences will be increased from five to ten years, when nobody goes to prison. In the case of non-hardcore offences, nobody faces criminal prosecution.

I am not opposed to the legislation, as such. If nothing else, it will enable us to focus more time on the more substantial legislation on mergers because we will have dealt with the penalty side of it. I am, however, disappointed because I do not think it does what it specifically sets out to do. It certainly does not do what all the learned commentators in the area want. I will not oppose it but there are a number of minor changes with which I agree. I outlined them at the start of my contribution.

I accept the Bill in principle but, apart from the question of civil fines, there are a number of other drafting items which we will deal with on Committee Stage. We will be pressing hard on Committee Stage for the Minister to accept an amendment along the lines I have suggested, that is, although it need not be applied in all cases, giving courts the discretion to apply civil fines where they are deemed appropriate.

See this speech in context