Wednesday, 12 October 2005
I apologise. I offered to do this on behalf of the Minister of State at the Department of Finance, Deputy Parlon. I see my colleague, the Minister of State at the Department of Agriculture and Food, Deputy Browne, coming into the House to take this matter.
The Ceann Comhairle must share my frustration. I thank the Minister for coming in a little sooner than he expected to do. He deals regularly with the groceries order and I want to bring to his attention the situation as it applies to constituents of mine who feel particularly vulnerable at the prospect of the groceries order being abolished, or changed in a way that will not take account of their situation.
I refer particularly to the dairy farmers in my constituency. They have suffered for many years and their numbers have dwindled from 200 in the 1960s to 22 in the north of the county. Their cost base has been growing throughout that time. Quota prices have been cut from €2.50 to €2. Since enactment of the legislation on veterinary prescriptions the cost of veterinary care is growing, particularly for mastitis.
I ask the Minister to examine the practice in the retail sector whereby essential items such as milk or bread become the focus of low-cost selling. These items are used as quite ruthless retail methods to bring people into a shop and so increase competition. The producer is the victim of this practice. The portion of income spent here on food continues to fall, a trend that is bad for both the economic and physical health of the country. As the Minister is a former Minister for Health and Children he no doubt has an interest in that matter too.
I ask him to take into account when considering the groceries order that the Irish Farmers Association and many others have argued strongly that the trend making it difficult for liquid milk producers to stay in business will push many over the edge. Already there is the case of imported milk being brought to Virginia to make a so-called Irish cream liqueur. The basis of our economic success is to include traceability and provide an authentic product. The Minister should note that this will be difficult to maintain, as will the livelihoods depending on it, if we do away with the groceries order.
The number of registered milk producers has dropped in the past ten years by more than 22% from 3,500 to 2,700. Due to increased productivity the volumes of milk produced remain relatively stable and that hides the reality that fewer people are able to earn their livelihood from primary food production, particularly in the liquid milk sector.
If I had more time I would discuss the other sectors such as fresh produce. The vegetable sector is suffering considerably. The number of potato growers in my constituency and around the country declined by more than 50% in the past eight years. Vegetable growers declined by 40% in the past five years. As a former Minister for Health and Children, the Minister will appreciate that we must prioritise food in the retail sector, and the livelihood of the producers. If we abolish the groceries order without taking account of the primary producers, particularly the liquid milk producers, we will become more dependent on imports that will have neither the traceability nor quality of food produced here. Neither will they have the same quality since food miles are not simply a matter of the energy consumed. The closer the food is produced to the consumer, the better its quality and dependability. I ask the Minister to take account of the salient facts that have been strongly brought to my attention by liquid milk producers in my constituency, reflecting a nationwide concern that the groceries order stands between livelihood and oblivion for many. I ask the Minister to ensure that it is maintained on that basis.
I thank Deputy Sargent for raising this matter on the Adjournment.
At the outset, I should state that I have no role regarding quota prices received by dairy farmers. Most of that area has normally been dealt with at European level regarding the various reforms to the Common Agricultural Policy. My colleagues, the former and present Ministers for Agriculture and Food, Deputies Walsh and Coughlan, have performed in an exemplary fashion in negotiations on behalf of Irish farmers.
That is the reality throughout Europe. It is equally important to point out that the Restrictive Practices (Groceries) Order 1987 does not cover vegetables, and when people talk about such matters, how can we blame it? If it were removed next week, it would be convenient for people to blame it for everything that has happened in recent years, which Deputy Sargent has articulated. I am aware of the importance of competition in all sections of the economy and at all levels of markets for goods and services in the State, including the supply, wholesale and retail levels of the Irish grocery market.
The Restrictive Practices (Groceries) Order 1987 contains several provisions aimed at curbing anti-competitive practices such as below-cost selling, so-called hello money and boycotting. The order covers all grocery goods, as well as intoxicating liquor and other household goods ordinarily sold in grocery shops. However, it does not cover fresh fruit, vegetables, fresh or frozen meat or fish. Enforcement of the order is the responsibility of the Director of Consumer Affairs.
Since its introduction, the Restrictive Practices (Groceries) Order 1987 has continued to be contentious and provoke much debate. The most controversial provision in the order is the ban on below-cost selling or, more correctly, the prohibition on selling at below net invoice price, which is really what the Restrictive Practices (Groceries) Order 1987 is. Those who oppose the order argue that this provision prevents retailers from passing on to consumers any discounts or rebates that they receive from suppliers not shown on the invoice. In many respects, the order does not protect suppliers from the demands of retailers, since the latter can demand higher discounts from suppliers, and very often do. There is a lack of transparency in that regard. It is a myth that the order protects suppliers against the big multiples. It does not.
Members will be aware that in March 2005 the Government-appointed consumer strategy group recommended that the order be revoked in its entirety. However, the report acknowledged that there are strong arguments to be made on either side of the debate. For example, listing the arguments that it received for retaining the order, the consumer strategy group noted that suppliers considered that a fair trading environment helped them to increase production and employment in the sector. On the other hand, the group noted the report of the competition and mergers review group which in 2000 stated that "the main case against the groceries order is a simple one: it restricts price competition".
Accordingly, the Government, at its meeting on 3 May 2005, agreed with my proposal to undertake a public consultation process on the future of the order. Advertisements were placed in the national press on 18 May and interested parties were invited to submit their views on the future of the order by the end of July. There was a great response to the consultation process, with 561 submissions received from a wide range of parties, including trade groups, producers, retailers and a significant number from the public. Submissions were also received from producer interests, including the Irish Farmers Association and the ICMSA.
Those submissions have all been considered, and a comprehensive report on the consultation process is being finalised in the Department. I expect that the report will include recommendations regarding what action is appropriate on the order, and I will carefully consider its findings before making recommendations to the Government.
I appreciate that many producers and retailers have strong views on the order and many do not agree with the consumer strategy group's call for its repeal. However, I am also aware that suppliers are already under pressure to reduce costs as a consequence of competitive market forces. That is a fact of commercial life and has little or nothing to do with the operation of the groceries order. The Irish retail groceries sector has changed immensely since the order was introduced 18 years ago, with small, independent operators facing increased competition from the expanding multiples. One significant development in that regard has been the entry of the German discounters, Aldi and Lidl, which have acquired a significant foothold in the Irish market and plan to expand further.
That continued expansion by the multiples has increased competition in the sector, giving consumers more choice than ever before, and I welcome any positive measures that provide additional competition and benefits for consumers. However, I also recognise the continuing important role played by the smaller operators in the sector. I am pleased to see the way that many of the independents and non-multiple groups have responded to that increasing competition by developing their operations.
I am already on record as saying that the retention of the order in its current form is not a tenable proposition as the structure and trading practices of the groceries market have changed very considerably since the order was produced in 1987. However, I assure the House that I will obviously carefully consider my Department's report on the outcome of the public consultation process in detail before I bring any proposals to the Government on the future of the order.