Dáil debates
Tuesday, 15 November 2005
Private Members' Business.
Reform of the Competition Act 2002: Motion.
7:00 pm
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I move:
That Dáil Éireann:
notes,
—the continued presence of excessive charging resulting in higher prices and reduced spending power for consumers;
—that since 1996 the Competition Authority has not secured one significant or meaningful criminal conviction for breach of the Competition Acts; and
—the insufficient resources allocated to the Competition Authority to do its work;
calls for reform of the Competition Act 2002 to allow for:
—the creation of a category of super complaints that can be made by bodies including the Director of Consumer Affairs, the Consumer Association of Ireland, IFSRA, the Financial Services Ombudsman and the Insurance Ombudsman;
—the publication by the Competition Authority of an annual report on the implications of State action for competition in the provision of goods and services which identifies areas where the State, either through direct involvement in the economy, or through regulatory systems, has restricted, inhibited or prevented competition;
—the referral of directors of companies found to be in breach of competition law to the ODCE for possible disqualification;
—the setting of a 30 day deadline by which time the Competition Authority should have responded to a complaint of anti-competitive practices;
—the outlawing of predatory pricing;
and calls on the Minister for Enterprise, Trade and Employment to significantly increase the resources of the Competition Authority.
Fine Gael regrets the need to move a motion like this in Private Members' time, particularly regarding competition law. However, the need to do so is quite clear. It is based on the failure of this Government to control prices, adding substantially to the ever increasing cost of living. We move this motion because of the complete refusal of the Government to deal with rip-off Ireland, its complete inability to tackle the vested interests, its complete antipathy to consumers and small businesses as a result of the flourishing anti-competitive practices it is happy to ignore and its complete ignorance of what life is actually like for those who every day find their hard earned cash not going as far as it should.
It is not merely a case of the Government standing idly by. This Administration has actively and deliberately worked against the consumer. It voted down Fine Gael's consumer rights enforcer. It allowed its national consumer agency legislation, the announcement of which came only after Fine Gael pressure, to become bogged down in the same bureaucratic nonsense that holds back everything else it does. It dithered on the groceries order and did not spell out the detail of what it would do on predatory pricing. It still has not done that and the Minister changed his mind substantially from what he said publicly in June, that he was going to completely abolish the groceries order. Instead, he decided in mid-October to change the Competition Act. Why did he do this? It seems the groceries order is not gone, even though the Minister has spun the story that it is gone. He did nothing to change long-term agreements between suppliers and retailers, so the discounts and rebates that are being swallowed up by retailers are not being passed on to consumers. The Minister is already in retreat on that issue, so we will have to wait and see the detail of the Competition Act.
The Government has allowed the introduction of 36 separate and distinct stealth taxes on everything from accident and emergency visits to college fees. We have not been shy about highlighting this rip-off mentality, but the Government has not been shy in criticising us for doing so. In a speech in his constituency on 4 November 2004, the Minister for Arts, Sport and Tourism, Deputy O'Donoghue, stated "One of the great myths is that there is in existence a rip-off Ireland mentality. That myth must be laid to rest for the sake of Irish tourism and the Irish economy". At one point last year it seemed that a Fianna Fáil spin doctor had instructed his minions in the Oireachtas to paint Fine Gael as unpatriotic for bringing up the issue. That strategy failed and I note the silence from the former cheerleaders for such a strategy in the Dáil and Seanad, since it became painfully obvious that such a strategy had fallen flat on its face. A recent television series may have contributed to that.
Fine Gael has a positive agenda in all this. Every time we highlighted excessive charging, we proposed a policy that would help alleviate that problem. Tonight is no different. We were delighted to make a submission on the establishment of a consumer rights enforcer to the consumer strategy group. We were gratified that the same proposal was implemented in principle, but under a different name, the National Consumer Agency. We would prefer to see it implemented sooner rather than later. The facts of the matter are exactly as our motion states: since 1996 the Competition Authority has not secured one significant or meaningful criminal conviction for breach of the Competition Acts. It is central to the achievement of effective levels of competition in the economy that there is an effective competition enforcement regime that operates in the interests of all consumers of goods and services in the State. Unfortunately, the performance of the Competition Authority and the operation of the Competition Act have not been as effective as consumers are entitled to expect.
While effective competition policy requires a political willingness to pursue a pro-competition agenda, it also requires the competition enforcement authority to be pro-active, vigorous, resourced and focused in its pursuit of competition policy objectives. That is why we made the call for reform of the Competition Act at our national conference on Saturday and we repeat that call tonight. We need a Competition Authority that is properly funded, with the powers it needs and the legislative mandate that help and compel it to revolutionise the competition agenda. That is why Fine Gael is calling for a substantial increase in the funding available to the Competition Authority. This will be required if the objectives set out by the Minister for the National Consumer Agency are to be implemented. Together with reform of the Competition Act, we can transform the treatment of consumers.
To address concerns about the length of time that some investigations take the authority to conclude, it should be obliged to complete different stages of investigations within defined time limits, rather than the current open ended and non-specific provisions. In the UK, the Office of Fair Trading promises to give a response to a complaint as soon as possible and in any event within 30 working days. Similar measures should be enacted here as a matter of urgency and complainants regularly kept informed on the progress of the investigation. It is not fair to have people in limbo for a two to three year period while at the same time leaving them unable to plan ahead. In addition, Fine Gael proposes that specified bodies be given the right to make so-called super complaints to the authority on any market practice that is contrary to the best interest of consumers. Upon receipt of such a super complaint, the Competition Authority would be legally obliged to issue a report within 120 days assessing the nature of the problem and possible responses including action by itself or proposals for legislative intervention. Such reports would also be transmitted to the Houses of the Oireachtas. We propose that on an initial basis, the Director of Consumer Affairs, IFSRA, the Insurance Ombudsman, the Financial Services Ombudsman and the Consumer Association of Ireland should be designated as eligible to make super-complaints.
The Competition Authority should issue an annual report on the implications of State action for competition in the provision of goods and services in the State. This report should identify areas where the State, either through direct involvement in the economy, or through regulatory systems, has restricted, inhibited or prevented competition in goods or markets in the State. There should be a statutory obligation on Departments and on State agencies to respond to any comments or criticisms raised by the Competition Authority regarding State actions on competition within 30 days from the date on which the comments or criticisms are made.
For example, why is no one calling the Government to account for the licensing regimes on everything from pharmacies to buses? Anti-competitive practices that make life a misery for tens of thousands of people are perpetuated by the State, the very institution which is meant to be the consumer's guardian. The Competition Authority should be empowered to blow the whistle on this kind of action and, under the full glare of publicity, perhaps before an Oireachtas committee, tell the Government what it must do and when it must do it.
The Competition Authority should be conferred with the power to impose fines on individuals and businesses in breach of the Competition Act without the necessity for a court hearing. While I understand that there are constitutional issues in this respect at present, they can be overcome. Currently, the Competition Authority may only apply to the High Court for the imposition of fines it cannot impose. This should be reviewed to speed up the process whereby decisions may be made. Otherwise, it deprives the Competition Authority of an essential tool in competition enforcement, one which is available to the European Commission and in competition agencies in other European jurisdictions. If we are serious about competition and about taking on those in breach of competition legislation, where a company is found to have breached competition legislation, the company directors should be referred to the Director of Corporate Enforcement for possible disqualification or restriction under the Companies Act.
Much of the more cutting edge legislation in this area comes not from Ireland but from Europe. Under the new EU framework for implementing competition law, the European Commission has power to adopt commitment decisions. In effect, this would allow the enforcement body to make a binding decision which is accepted by the infringer, but without the need to go to court. In addition to that cost saving, it would establish a useful precedent in that commitment decisions would be legally binding. Therefore, Fine Gael proposes that the Competition Act be amended to allow the Competition Authority to issue commitment decisions of this nature.
Much of the time and financial resources of the Competition Authority is tied up with notification of mergers and takeovers. While this is an obligation in the Act, little happens to change the nature of mergers or takeovers when the Competition Authority is notified. Nevertheless, it takes a considerable amount of time and resources to deal with them. As far as this Competition Act is concerned, since 2002, out of the hundreds of cases which have been referred to the Competition Authority, only one change has been made by it in respect of mergers and takeovers.
There is a widespread problem with competition in this economy. However, there are some examples where there is a particular problem, for example, in banking, cement, insurance, home heating and gas. In the case of Cement Roadstone Holdings, profits have been extracted from the economy by means of a complex industry structure that is both anti-competitive and anti-consumer. The European Commission, European Court of First Instance and European Court of Justice have upheld findings of serious anti-competitive behaviour against CRH and others. While this has been the subject of many complaints to the Minister's Department as well as to the Competition Authority, no action has been taken and no investigation has been held.
While Sweden, Finland, the United Kingdom, France and Germany have since levied huge fines against the cement industry, Ireland's answer has been a stony silence, despite a more recent public statement from Dr. John Fingleton, former chairman of the Competition Authority, that CRH was using small concrete manufacturers as "proxies for the consumer". Last year alone, the German competition authority levied fines of €660 million on the German cement industry and the crackdown resulted in a dramatic drop in cement prices. Cement prices in Germany are running at half the price pertaining in Ireland.
In the home heating oil market, small oil distributors continually complain of the practice of differential pricing on the part of the major oil importers where discounts are applied to certain larger distributors who in turn discount the distribution charge from, for example, 5 cent to perhaps 3 cent or 2 cent per litre. This practice is unfair and anti-competitive given the limited access to market or choice available to the smaller distributor. Consequently, smaller distributors are being driven out of business or hoovered up by large distributors.
In Galway and Mayo alone, recent casualties have included Fuel Services of Loughrea, Muldoon Oil, Flanagan Oils, Gort Oil, All Star Motor Oil, Connell Oil, Cloonan Oil, Matt Geraghty Oil, Ruby Oil, Hughes and O'Boyle of Ballina, Gaughan Oil, Swinford Oil, Holmes Oil, Campbell Oil, Castlebar Oil, Heston Oil, Major Fuels and O'Gara Oil. This does not make me confident that business is being conducted properly. While the Minister may be trying to consolidate the market in the hands of the few, this leads to casualties rather than to lower prices. The end result will be higher distribution prices for the consumer, as consolidation occurs on foot of this differential pricing structure operated by the oil majors.
Moreover, attention should be paid to recent comments by a company called Vayu which pointed out that the criteria on which the Commission for Energy Regulation grants Bord Gáis increases in price is fundamentally flawed as it is based on both the cost of the gas and the cost of its transmission. The price increase includes charges for the pipes which are already in place and for which the capital cost has been deployed. A depreciation charge has already built into the prices. Why should the recent 25% increase in the price of gas also include an increase for the transmission network? Eircom are probably trying to adopt a similar course. Vayu contends that this cost is overstated so that the value of Bord Gáis will be increased in preparation for the potential privatisation of the company. All these areas remain untackled and ignored.
In the foreword of the 2004 report of the Competition Authority, the outgoing chairman outlined the scale of concentration resulting from a legacy of anti-competitive and anti-consumer policy and culture. In particular, he highlighted core areas of the economy where there are high levels of concentration in which consumers do not have adequate competition and choice.
While Members have heard many points being outlined and many lectures in respect of what must be done, they have seen little action from the Competition Authority or any other body. The then chairman, Dr. Fingleton, also outlined other sectors of the economy in which leading private sector firms have a market share of 50% as well as markets that are highly concentrated where, for example, four firms control more than 80% of the market.
As we recently discovered, in other key sectors of the economy such as the provision of legal services, the regulatory structure for the provision of those services is not adequately focused towards the needs and welfare of the users of those services. Poor competition in the provision of goods and services adds to the daily living cost for consumers. It also contributes towards inflationary pressures which affect the country's national competitiveness in an increasingly global trading environment. It is critically important to inject a new competitive dynamic into the economy for the benefit of all consumers of goods and services. It is not acceptable that according to the World Economic Forum's global competitiveness report, Ireland has fallen from fourth place in 2000 to 26th place this year.
The National Competitiveness Council has stated that Irish prices rose 22% more than those in other EU countries in the years from 1999 to 2003. The reason for that was the failure to provide for a competitive economy where anti-competitive practices were rooted out. Fine Gael has unveiled an agenda to deal with these matters and has brought it to the House in the desperate hope that the Minister may agree with it. I am disappointed that he has felt obliged to table an innocuous amendment which contains much on which all sides of the House agree as to what must be done.
Brendan Howlin (Wexford, Labour)
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It is a restatement of the law.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister is playing politics and is not serious about doing anything in respect of this issue if he cannot agree with the Opposition parties on this fundamental issue. Undoubtedly, however, despite not supporting this motion, the Government will be obliged to do something in respect of competitive pressures because it knows — the focus groups have told it — that the cost of living is an extremely important issue.
Opposition Members have been left with no option but to represent the widespread view of the people, namely, that the Government has no consumer policy, that it contributes to higher costs of living through stealth taxes and charges and erodes the power of the consumer and diminishes workers' living standards. While such workers may have had their personal tax burdens cut, they have found that the money was taken back from their pockets and household income by the imposition of stealth taxes and indirect taxes. That is not the route to take. We must tackle the root causes of our competitive deficiencies. I ask the Minister to reconsider his amendment. Perhaps by tomorrow he may be able to indicate that agreement can be reached as to what is necessary to proceed with a pro-competition agenda in the interests of the consumers.
Paul Connaughton Snr (Galway East, Fine Gael)
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The Competition Authority must be revamped. In fairness to the authority it has had a long, difficult road to travel since its inception. Ireland has a culture of cosiness which is conducive to the emergence of cartel arrangements and that has resulted in a wide range of impediments being placed in the way of real competition. This manifests itself daily in 1,000 different ways.
The Competition Authority has set out to gain the confidence of ordinary consumers and small, downtrodden companies which are no more than fodder for the sharks of industry in manufacturing and services. More people than ever before are aware of the authority's role but while it has had some success in the area of mergers, it is foundering in the area of enforcement.
Now that the principles, role and purpose of the Competition Authority are known, the question arises as to whether it has been effective. The authority is somewhat similar to the Garda Síochána in that it has no shortage of laws with which to work but it does not have sufficient personnel to enforce them.
The public and big business learn quickly. For instance, although the penalty points system had a major impact when introduced, it is ineffective because members of the public are aware that the chances of being caught are minimal. The same applies to big business. It is faced by a paper tiger in the form of a Competition Authority with no real teeth. As the Minister knows better than anyone, some cases brought by the authority have been pending for more than nine years. How could this be good for our competitive edge? Justice delayed is justice denied. If the Competition Authority is to achieve the results which are vital to the promotion of real competition, much faster, crisper procedures need to be established to put manners on the greedy manipulators involved in the business world.
The rip-off culture is sparkling and can be found in every aspect of business life. It is evident in equal measure in private business and public utilities and is so widespread that consumers are as likely to pay higher interest rates if a bank believes it can get away with it as they are to pay an exorbitant charge for a simple cup of coffee in a small restaurant.
My colleague, Deputy Hogan, referred to Cement Roadstone Holdings. In representations made to me it has been alleged that this company has enjoyed a monopoly for years. It has taken the Competition Authority too long to decide whether CRH is a monopoly or a cartel, and such uncertainty creates significant problems. I understand another long-standing case brought by the Competition Authority against a company involved in the oil business was this week put back for a hearing until next October. Clearly, there is something wrong with a system in which such delays arise.
The Competition Authority requires a much greater financial allocation. To achieve what the Fine Gael Party is proposing, for example, the Government would need to double its funding. In parallel, the staff of the authority will have to include the best and brightest investigators. There is an old saying in my part of the world that one does not send a boy on a man's errand. Those involved in carrying out investigations and doing the detective work necessary in the big, bad world of business must understand what type of activity is taking place. The Competition Authority has a massive job ahead and will need much greater resources to carry it out.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Deputy's time has concluded.
Paul Connaughton Snr (Galway East, Fine Gael)
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Although I have much more to add, I will leave it at that.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I welcome the opportunity to speak to this important motion. Excessive prices and reduced spending power for consumers are major problems which no one has highlighted more clearly than my colleague, Deputy Hogan. While Mr. Eddie Hobbs received some of the credit for his recent television programmes, it was Deputy Hogan who launched the ripoff.ie website two years ago.
The Minister for Enterprise, Trade and Employment, Deputy Martin, who recently decided to scrap the groceries order — we are still not sure what precisely he proposes to do — will no doubt be given credit for some changes in the pricing structure in the months and years ahead. If, however, the Minister fails to introduce proper structures and funding for the Competition Authority, the removal of the groceries order could have serious long-term implications for industry and primary producers, with only a few multinational companies enjoying its benefits.
Micheál Martin (Cork South Central, Fianna Fail)
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Here we go again, the interests of the consumer go out the door.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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It will also mean the end of small grocery shops and will provide little or no long-term benefit to consumers. We will wait to see what transpires as the people of County Monaghan know the Minister
Micheál Martin (Cork South Central, Fianna Fail)
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I merely want to know where the Fine Gael Party stands on the issue.
Paul Connaughton Snr (Galway East, Fine Gael)
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The Minister does not know where he stands.
Micheál Martin (Cork South Central, Fianna Fail)
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I am getting conflicting messages all the time.
Paul Connaughton Snr (Galway East, Fine Gael)
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As the Minister, he should know where he stands.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Will the Minister indicate whether he proposes to outlaw predatory pricing? I recall the year when an American lady hosted all sorts of dinners and meetings to encourage farmers to buy soya bean meal at knock-down prices because it was surplus. However, when storms in the United States caused a collapse of the soya bean crop the following year there was no sign of the lady in question or the product.
It is vital that the groceries order is removed in tandem with the introduction of realistic legislation which guarantees the rights of consumers and ordinary people in the trade. I have no doubt the objective of the multiples in seeking to force the Minister to abandon the groceries order was to give them greater freedom to take control of the market and, in turn, eliminate their competitors.
If retail groups use products to undercut the market at throwaway prices, the prices paid to producers will be depressed further. No area will experience greater difficulty than the meat and dairy sector. Only a few weeks ago, an international magazine published the views of an organisation representing the interests of 4,500 Austrian dairy farmers, which accused one of the country's major retail groups of selling yoghurt at throwaway prices and, to use its words, further depressing milk producers' prices with its unacceptable behaviour. Yoghurt was being sold at 9 cent for a 150 g carton during the week of 18 August. This price would cover the costs of the product's plastic packaging and transportation and would leave nothing for manufacturing or the producer. A similar yoghurt here retails for approximately 40 cent.
I have no doubt Mr. Eddie Hobbs played a major role in influencing the Minister's decision on the groceries order. I hope the Government takes the other issues raised by Mr. Hobbs with the same degree of seriousness. If the Government does as he suggests, there is no doubt the costs of manufacturing will decrease and the economy will become much more competitive. In addition, the Competition Authority must secure proper staffing and funding and must be given sufficient powers to act on behalf of consumers.
A few weeks ago, the Minister for Agriculture and Food, Deputy Coughlan, insisted in the House that a requirement to have veterinary prescriptions for animals would not add to costs. At the same time, the Minister for Health and Children, Deputy Harney, speaking at a nurses function, claimed she would have to allow certain nurses to provide prescriptions for humans so as to reduce prices. The House is being given different messages from different Ministers.
Thousands of manufacturing jobs have been lost. An examination of the list of stealth taxes demonstrates what is happening. It is sad that most of the increase in costs is Government led. In 2002, VAT increased by 8%. Motor tax increased by 12% and hospital charges by 26%. Drug refund costs rose by 31%, and later that year VHI fees rose by 8.5%. They have risen further since. In the December budget, the cost of the drug refund scheme rose by another €8, and accident and emergency charges to €45. We could go on. Many of manufacturing industry's problems and the costs to consumers are Government-led through all those stealth taxes, which must end.
Olwyn Enright (Laois-Offaly, Fine Gael)
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I welcome the opportunity to speak on this motion and congratulate my Fine Gael colleague, Deputy Hogan, on his work in the area.
Reading the Government amendment did not instill confidence in me that it had learnt anything over the summer. I wish to deal with the issue primarily from the perspective of students and young adults. The Minister's predecessor, the Tánaiste, long advocated the "shop around" philosophy as the best way to achieve value for money. It is a lovely notion, and young people may be more likely to do that, but it is not always possible or practical, particularly in more rural areas.
There is no doubt that we live in a high-cost economy, and that is largely because of Government's failure to deal with this issue. The amendment seems to suggest the Minister believes the Competition Authority has the power and resources it needs. If so, he must think again. Some of Ireland's weakest areas in the IMD World Competitiveness Yearbook in 2005 included Internet costs, in which we were ranked 54th, and mobile telephony, in which we were 53rd. We have one of the highest mobile telephone-to-person ratios in the world and very high computer use. However, we remain extremely uncompetitive in the area, something that has not been adequately addressed.
I welcome last week's establishment, which did not involve the Minister, of a website that will compare mobile telephone charges from different operators in a user-friendly way. For the first time, it provides a real way of comparing tariffs, which are never described in the same way by the different mobile telephone operators. However, that will not deal with the 12-month contract that ties one to a single operator. One is penalised if one does not fulfil the contract, so even if one knows one is being ripped off through comparing the charges and that there is a better offer from another company, one cannot do anything about it, since one is still tied to the original operator for the 12-month lifetime of the contract. If one tries to leave, one is penalised. Whichever way one turns, one will be ripped off. Having the information is not always enough.
Another fee hike for which the Minister can blame no one else is the continuous rise in third level registration fees, which Deputy Hogan also mentioned. It has been extremely dramatic over the last few years, having risen substantially every year since 2002. The only way to avoid that charge is not to go to college, so there is no room for shopping around on that one. The Minister might also tell us how junior or leaving certificate students, who are supposed to receive free education, should shop around to avoid the budget increases in their examination fees over recent years. That unavoidable tax hits many hard-pressed families.
Car insurance is still prohibitive for many young people, and there has been a lack of action in that area too. If a student is sick, he or she is forced to pay more, whether at the GP or the accident and emergency department, and the same is true of medication. If one wishes to go abroad in the summer to earn a few euro to pay for all the other charges, one must pay significantly more for transport than a few years ago.
Student rents are affected by rising ESB and gas prices, and the TV licence fee is also increasing. When they enter the real world and try to get a home, they face development levies starting at around €6,000 when building their first home. If they decide it is prohibitive and try instead to buy a new house, instead of the Government-created development levies affecting them, in some areas they face substantial State payments that add significantly to the cost of their home, always assuming they can afford one in the first place in the context of such dramatically increased costs.
Socialising is becoming ever more expensive, depending on where one lives and likes to meet friends, with high charges for everything from parking one's car to hanging one's coat to buying a drink, whether alcoholic or otherwise. The Government voted down the Fine Gael Consumer Rights Enforcer Bill 2004 in this House and later told us it would set up a national consumer agency, a watered-down version of Deputy Hogan's original proposals. Consumers are no nearer to having their voice heard, and the Minister's rejection of our motion and amendment clearly shows he has not got to grips with this issue.
John Perry (Sligo-Leitrim, Fine Gael)
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I compliment Deputy Hogan on raising the very important Competition Act 2002. It is a shocking indictment of the Government that young and old people across the country are becoming increasingly appalled at the high cost of living. This is bad management of taxpayers' money and rip-off government in every sense. In 1997, €27 billion was taken out of the economy, and up to €48 billion is now coming out indirectly. We are now literally paying tax on our tax; that is how bad it is.
It is the fault of this Government and no one else that we are in this position. We have heard nothing about the appointment of regulators, and since the last election the Government has hit taxpayers 36 times with new taxes and charges. This year alone, we saw accident and emergency charges rise by €10, while the drugs refund scheme threshold rose again to €85. ComReg has approved increases in the cost of sending packages and parcels. The management of services by the State would lead in a private company to the board of directors being sacked instantly, since there is no accountability or value for money. Competition is the lifeblood of trade in the business world, but there is certainly no competition in Government-provided services. Is there no end to the financial burdens the Government will impose on people?
The Minister has suggested the abolition of the Restrictive Practices (Groceries) Order 1987, but that is only a smoke-screen. I totally agree with its abolition, operating in the supermarket business myself, since it is completely outdated. The Minister has said there will be a €1,000 saving to every householder.
Micheál Martin (Cork South Central, Fianna Fail)
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I never said that.
John Perry (Sligo-Leitrim, Fine Gael)
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He was certainly reported as saying that, or something very close to it.
Micheál Martin (Cork South Central, Fianna Fail)
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No, I never said it.
Brendan Howlin (Wexford, Labour)
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Which of his spin doctors said it?
John Perry (Sligo-Leitrim, Fine Gael)
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That would be very effectively benchmarked, since——
Micheál Martin (Cork South Central, Fianna Fail)
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On a point of order, I have never said that and I challenge the Deputy to find any statement that I have made on this issue where I mentioned any figure.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Minister need not respond.
Micheál Martin (Cork South Central, Fianna Fail)
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Others may have said that, but I have not.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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It was only his spin doctors.
John Perry (Sligo-Leitrim, Fine Gael)
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If the Minister did not say that, it is certainly in the public media, in every newspaper, that each householder will be better off by €1,000.
Micheál Martin (Cork South Central, Fianna Fail)
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I do not write the newspapers.
John Perry (Sligo-Leitrim, Fine Gael)
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I am not saying that, but it is very much influenced by him.
Correctly benchmarked, it would mean that every multiple would be losing millions, something I very much doubt. However, regarding competition in the trade, several years ago there was complete deception and the Minister was totally negligent in his dealings with the Competition Authority, which had no staff, back-up or support to deal with real competition, which the Government has let run absolutely riot. There is no competition in any sector of the economy. The Government believes the masses are influenced by the spin put on the Restrictive Practices (Groceries) Order 1987, but time will tell.
The Government has totally mismanaged such matters as registration fees for students, which have multiplied in recent years. They have risen by over 19% since the Government was elected in 2002. We can only imagine the injustice the Government has imposed on Irish students on a very tight budget. One must remember that the euro is now a valueless currency, buying considerably less than it did a few years ago. In the year the Government was elected, we saw a massive number of stealth taxes. Every week, the Comptroller and Auditor General uncovers a scandal regarding the mismanagement of taxpayers' money. It is very hard to reject that, since it comes from Mr. John Purcell, the Comptroller and Auditor General. It is taxpayers' money.
Micheál Martin (Cork South Central, Fianna Fail)
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Did the Deputy not open the premises himself?
John Perry (Sligo-Leitrim, Fine Gael)
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The sum of €156 million is small money.
Micheál Martin (Cork South Central, Fianna Fail)
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I refer to that excellent facility in Manorhamilton.
John Perry (Sligo-Leitrim, Fine Gael)
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It is regrettable that the €156 million has given Sligo a very bad name.
Micheál Martin (Cork South Central, Fianna Fail)
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I was not allowed to open it, so the Deputy did it.
John Perry (Sligo-Leitrim, Fine Gael)
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It is no credit at all that PPARS was based in Sligo, since the mismanagement——
Micheál Martin (Cork South Central, Fianna Fail)
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I am not talking about that but about the one the Deputy opened. Did he open it?
Micheál Martin (Cork South Central, Fianna Fail)
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It was the Manorhamilton one.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Allow Deputy Perry without interruption. Deputy Perry should not allow himself to be deflected by the Minister's interruptions.
Micheál Martin (Cork South Central, Fianna Fail)
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He opened one on his own.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Deputy Perry should express his remarks through the Chair.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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It was the Minister's predecessor who went by helicopter to open an off-licence.
John Perry (Sligo-Leitrim, Fine Gael)
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Yes, the Tánaiste opened the off-licence in Manorhamilton.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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We have run out of time.
John Perry (Sligo-Leitrim, Fine Gael)
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The Ceann Comhairle must give me extra time to compensate for all the interruptions.
In 2002, VAT rose by 8%, TV licence fees by 40% and bank and card charges by 100%. The Government seems intent on using indirect stealth taxes. We hear CIE has proposed another price hike. It must be noted that the cost of living——
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Has the Deputy rewritten his speech?
John Perry (Sligo-Leitrim, Fine Gael)
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I will have to do so.
Irish people are being ripped off left, right and centre. One in seven children in Ireland lives in poverty. That is a dramatic statistic, and the Government continues to impose higher charges on people. It is further widening the divide between those with and those without, and while many people are financially stable, that number will decrease if the Government continues its current practice of raising taxes.
The level of competitiveness in the economy is being diminished in terms of the spending value of a weekly wage by indirect VAT, PRSI charges and the stacked-up charges on people operating businesses. Small companies who employ people get little support from the State. The economy has been built by small companies.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Deputy must conclude.
John Perry (Sligo-Leitrim, Fine Gael)
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In the development of an economy it is vitally important that small companies are given encouragement to grow. The Government has done nothing but impose a further stealth tax on them every day of the week, which will have a dramatic impact on the services sector in the coming months.
Micheál Martin (Cork South Central, Fianna Fail)
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I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
"notes:
—the importance to a successful fast growing economy of the effective and independent enforcement of competition law so as to prevent the emergence of anti-competitive practices, restrictions on the freedom to trade and barriers to entry in all sectors of the economy;
—that the enactment of the Competition Act 2002 substantially increased the powers and independence of the Competition Authority and provided Ireland with one of the most modern bodies of competition law in the world;
—that the Competition Act 2002 provides the Garda Síochána with powers of arrest and detention in respect of competition offences, as well as making provision for financial penalties of up to €4 million, or 10% of turnover, for breaches of competition law;
—the doubling of the resources available to the Competition Authority in the past five years and the continuing ongoing review in conjunction with the authority of the resource demands arising out of the increased level of activity in the economy;
—the highly complex and resource intensive nature of criminal proceedings for breaches of competition law;
—the determination of the authority to seek criminal convictions for competition offences where it believes such is justified but also its track record in securing voluntary compliance with the provisions of competition law;
—the existence, as a result of powers available to the authority under the Competition Act 2002, of co-operation agreements with other statutory sectoral regulators with a view to guaranteeing effective competition in those sectors of the economy;
—the entitlement of any individual or organisation who becomes aware of anti-competitive practices in the economy to bring complaints in regard to such activities to the attention of the authority;
—the restrictions that would be imposed on the authority as a result of the creation of statutory deadlines for the investigation of such complaints;
—the powers and functions of the authority under the Competition Act 2002 to study and analyse competitive practices, to investigate any breaches of the Act and any complaints in regard to such breaches, to advise the Government of the implications of any new legislation for competition in goods and services, to publish guidance on compliance with the Act, to carry on such activities as it considers appropriate to inform the public of issues concerning competition and to disclose to the Garda Síochána any information relating to the commission of an offence whether under the Act or otherwise; and
—that the practice of predatory pricing is prohibited under section 5 of the Competition Act 2002 and that the substantial penalties provided for under the Act operate as a very convincing deterrent against engaging in such activity;
calls for:
—the reaffirmation of confidence in the independence, determination and resources of the authority to rigorously enforce competition law;
—the rejection of proposals to introduce any measures which might inhibit the powers and functions of the authority in that regard; and
urges all individuals and organisations to report instances of suspected anti-competitive practices and breaches of the Competition Act 2002 to the authority with a view to ensuring their speedy investigation."
I wish to share time with Deputies Curran and McGuinness.
The bulk of my speech is concerned with the Competition Authority, the subject matter of the motion. Had I known there would be a broad economic debate, a debate on the economic performance of the Government——
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister worked a lot of things into his own——
Micheál Martin (Cork South Central, Fianna Fail)
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——I might have switched the emphasis somewhat.
Brendan Howlin (Wexford, Labour)
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The Minister can work off-script.
Micheál Martin (Cork South Central, Fianna Fail)
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I will do that too but I have to be conscious of the time constraints.
I welcome the tabling of the motion by Deputy Hogan as it presents an opportunity to discuss issues pertaining to competition policy and the Competition Authority. I found the Deputy's remarks on the lack of consensus on an agreed motion somewhat rich given that prior to the tabling of his motion he never sought such agreement with me, nor was any attempt made to reach consensus on an agreed motion.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I am aware of the Minister's views. He said over the weekend that he was happy with the Competition Authority.
Micheál Martin (Cork South Central, Fianna Fail)
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On a broader level, people commented in a partisan manner, through the Chair, on certain aspects of what it is like to be a young person living in Ireland today. I suggest this is the first generation since 1845 that can look forward to genuine employment opportunities, with almost full employment in the country. The reality is that young people have much better access to jobs than any previous generation in the history of the State. There is no question about that. Opportunities today for this generation of young people are far greater——
Brendan Howlin (Wexford, Labour)
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Are they not shown in any focus group results?
Micheál Martin (Cork South Central, Fianna Fail)
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——by any yardstick than for any previous generation since the foundation of the State. The Deputy should consider that.
When we talk about small businesses and so on it must be borne in mind that the most fundamental decision the Government took was to reduce corporation tax to 12.5% in budget after budget, which affects all businesses.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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That was done long before this Government came into office.
Micheál Martin (Cork South Central, Fianna Fail)
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The Deputy's party objected to it.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Not at all. That is crazy.
Micheál Martin (Cork South Central, Fianna Fail)
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In budget after budget, Deputy Howlin's party leader criticised the then Minister, Charlie McCreevy, for reducing corporation tax.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Deputy, you will have an opportunity to make your contribution.
Brendan Howlin (Wexford, Labour)
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——to yield to hear the truth?
Micheál Martin (Cork South Central, Fianna Fail)
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I will not yield for any revisionism from Deputy Howlin. I have no intention of yielding.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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I ask Deputy Howlin to resume his seat.
Brendan Howlin (Wexford, Labour)
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——that the 12.5% rate was negotiated by the rainbow Government. That is a fact.
Micheál Martin (Cork South Central, Fianna Fail)
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That is rubbish.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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I ask Deputy Howlin to resume his seat. He will have an opportunity to speak when the Minister has concluded.
Brendan Howlin (Wexford, Labour)
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I will ask the former Minister for Finance, Deputy Quinn, who negotiated it.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Deputy Howlin, please.
Micheál Martin (Cork South Central, Fianna Fail)
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With respect, the then Minister, Charlie McCreevy, took decisive decisions in budget after budget——
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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They got rid of him.
Micheál Martin (Cork South Central, Fianna Fail)
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——to bring down that rate from where it was at around 30% in 1997 to 12.5% today.
Micheál Martin (Cork South Central, Fianna Fail)
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He was criticised for doing that in some budgets.
Micheál Martin (Cork South Central, Fianna Fail)
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I will produce the scripts showing where he was criticised.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Minister, without interruption.
Micheál Martin (Cork South Central, Fianna Fail)
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The reality is that that is the corporate tax rate of today and it scores a first in any competitiveness analysis of Ireland in the overall story.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Because we introduced it.
Micheál Martin (Cork South Central, Fianna Fail)
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That must be factored in in terms of all the other issues Deputy Perry referred to in his contribution but it is always ignored in terms of contributions from the other side of the House and the atmosphere that has been created by the Government in respect of employment creation, both indigenous and foreign direct.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister should move on to the next point.
Micheál Martin (Cork South Central, Fianna Fail)
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Over 440,000 jobs have been created since 1997——
Brendan Howlin (Wexford, Labour)
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We created more jobs per month before the Minister's party came into power.
Micheál Martin (Cork South Central, Fianna Fail)
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——because we had the right philosophy and the right approach across the taxation scene, whether capital gains, with which Deputy Howlin's party had difficulties, corporation tax or personal income tax, which again scored a first recently in the national competitiveness report's analysis of Ireland's competitiveness against our peers across the globe.
Brendan Howlin (Wexford, Labour)
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The Minister should have stuck to the script.
Micheál Martin (Cork South Central, Fianna Fail)
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I could go on and on——
Brendan Howlin (Wexford, Labour)
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That is what Charlie Haughey said but he did not go on very much longer.
Micheál Martin (Cork South Central, Fianna Fail)
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He achieved a great deal more than some people on Deputy Howlin's side of the House.
Micheál Martin (Cork South Central, Fianna Fail)
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I do not think it is revisionism.
Micheál Martin (Cork South Central, Fianna Fail)
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Please, Deputy Howlin.
Brendan Howlin (Wexford, Labour)
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He might even be mentioned at the Ard-Fheiseanna. The picture will be back.
Micheál Martin (Cork South Central, Fianna Fail)
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I hope Deputy Howlin's picture will be back at his party's Ard-Fheiseanna.
Brendan Howlin (Wexford, Labour)
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It will be like Chairman Mao coming back.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Deputy Howlin, you have a 20 minute slot when the Minister's slot has concluded.
Micheál Martin (Cork South Central, Fianna Fail)
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Deputy Howlin should be the last to talk about Chairman Mao, in fairness.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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It is important we let the Minister put this stuff on the record.
Micheál Martin (Cork South Central, Fianna Fail)
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We believe in open and fair competition. It is one of the central keys to both a successful economy and a good deal for consumers. Our decision of last week to repeal the groceries order because it is anti-competitive and anti-consumer is another demonstration of that. The path of least resistance would have involved trying to fudge the issue but we felt the evidence was overwhelming and that action was required. There is a dramatic contrast between this clear stance and the rather incredible contortions the self-described consumer champions in Fine Gael put themselves through.
Micheál Martin (Cork South Central, Fianna Fail)
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Having spent a large amount of time and money telling everyone how they were willing to take tough decisions in favour of the consumer, Fine Gael's behaviour on the groceries order showed that the last thing it is willing to do is take a tough decision.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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What is the Minister on about?
Micheál Martin (Cork South Central, Fianna Fail)
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This year alone it has managed the incredible feat of having three entirely different positions on the future of the groceries order.
Brendan Howlin (Wexford, Labour)
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We would like to see the Minister's position.
Micheál Martin (Cork South Central, Fianna Fail)
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We even got an illustration of that this evening. Deputy Crawford's contribution is very clear and I am reading between the lines——
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I raised a point of order——
Micheál Martin (Cork South Central, Fianna Fail)
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——in terms of what he said about the situation.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I did not question the decision.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister has not abolished the order yet.
Micheál Martin (Cork South Central, Fianna Fail)
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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.
Micheál Martin (Cork South Central, Fianna Fail)
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No, it is an important point.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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It is a bit rich for Fianna Fáil to tell the Leader of the Opposition not to interfere with a statutory authority.
Micheál Martin (Cork South Central, Fianna Fail)
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To be effective, the Competition Authority needs evidence rather than mere suspicion of wrongdoing. It is important that complainants to the authority provide as much information as possible. The authority has published on its website and in its annual report information on how to make a complaint. All complaints are subject to a screening process. Any objective analysis of the Competition Authority's record in dealing with such complaints must take into account that competition cases are inherently complex. It does not investigate matters by relying solely on information already in its possession but must engage in an evidence gathering process. Imposing a statutory deadline for completion of investigations would inevitably compromise this process. Within the context of an investigation, parties retain a right of reply. Imposing deadlines that do not provide an adequate period for parties to consider and respond on the position taken by the authority would compromise that right of reply.
The setting of a statutory deadline for completing a competition law investigation would also set such investigations apart from all other agencies in the State with a responsibility for investigating breaches of the law, whether criminal or civil. Why should the investigation of an alleged competition law offence be treated differently to an allegation of fraud, assault, theft, murder, smuggling or tax evasion? Voluntary compliance with competition law is an important and frequently overlooked part of the authority's work. The essence of civil enforcement is to ensure compliance with the law in the speediest, most efficient way possible. In the civil area, court proceedings are, and always should be, measures of last resort.
Compliance, on the other hand, means the parties in breach commit to changing their behaviour rather than forcing the authority to the expense of challenging them in lengthy court proceedings. Examples of compliance of this nature include Statoil, Independent Newspapers, The Irish Times and Irish Actors' Equity. In all of these cases, the authority subsequently published enforcement decisions to provide transparency and predictability in the enforcement of the Competition Act, resulting in greater legal certainty and in the reduction of compliance costs to undertakings.
I am aware the Competition Authority has recently been considering the idea of an annual review of competition in the light of its broader statutory functions in the area of competition advocacy, as set out in section 30 of the Competition Act. The purpose of such a review would be to provide an annual status update on developments affecting competition in liberalising and restricted markets and provide a simple forum where the full impact of State restrictions on competition could be synthesised regularly. In any event the authority's advocacy division plays an important role in areas where the State, either through direct involvement in the economy or through regulatory systems, may restrict competition. The authority is also made aware of some public restrictions on competition through its own study and observation of individual markets.
While the authority continues to deal with its caseload of competition issues arising from the existing stock of regulation, there is also a regular flow of proposals for new legislation. The importance of the authority's expertise was recognised by the Oireachtas in 2002 when, in the Competition Act, it gave the authority the specific function of advising the Government, Ministers and Ministers of State about the implications for competition of proposed legislation. Ministers receive the advice of the Competition Authority on how proposed legislation may impact on competition.
Kathleen Lynch (Cork North Central, Labour)
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No wonder they cannot take action.
Micheál Martin (Cork South Central, Fianna Fail)
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We do not accept Deputy Hogan's proposals on the category of super complaints. There is nothing stopping anyone from making a complaint to the Competition Authority. The studies undertaken by the authority in banking, insurance and engineering are all bearing fruit, leading to substantive and significant reforms.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Those sectors are quaking in their boots.
John Curran (Dublin Mid West, Fianna Fail)
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I thank the Minister for Enterprise, Trade and Employment for the opportunity for getting a word in edgeways.
John Perry (Sligo-Leitrim, Fine Gael)
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The Deputy should consider himself lucky.
John Curran (Dublin Mid West, Fianna Fail)
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I welcome the opportunity to debate this motion on competitiveness in the economy and the Competition Authority. I unfortunately did not hear Deputy Hogan's contribution but did hear those of Deputies Enright, Crawford and Perry who referred to areas where prices have increased. Increasing prices are not a measure of competitiveness and those Deputies only looked at one side of the argument. The issue of excessive charging is one we take seriously. The Government took seriously the high cost of motor insurance and addressed it. The outcome was that insurance prices have dropped.
Brendan Howlin (Wexford, Labour)
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Some credit must be given to Deputy Cassidy and his committee for that. He worked very hard on the matter.
John Curran (Dublin Mid West, Fianna Fail)
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The motion notes "the continued presence of excessive charging resulting in higher prices and reduced spending power for consumers". I disagree with this incorrect statement. If that is what Deputy Hogan's motion is based on, he is going nowhere. Deputy Hogan and his colleagues spoke for a considerable time on a range of issues that reflected increasing prices.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Will the Deputy tell me why? He claims he did not hear my contribution.
Michael Ahern (Cork East, Fianna Fail)
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He heard the Deputy on the monitor.
John Curran (Dublin Mid West, Fianna Fail)
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Increasing prices is only one side of the equation. Consumers' spending power, as measured by any reasonable economist or international survey, has not diminished but increased.
From 1997 to 2005, the increase in costs has been approximately 30% while average earnings have increased by 50%. Often we talk in terms of percentages which do not have a real impact. However, one survey was conducted by the Swiss bank UBS in 71 cities worldwide on take-home pay and its purchasing power. One part of the study examined the average working time required to purchase a product of universal significance, in this case a big mac. Nairobi was the cheapest location to purchase a big mac but one would have to work for 181 minutes to earn it. In EU capitals, it took on average 26 minutes of work to purchase one. In Dublin, however, the average time was 14 minutes. Prices and wages cannot be divorced in this argument. Deputy Enright claimed Ireland was a high-cost economy but equally we pay ourselves well.
Kathleen Lynch (Cork North Central, Labour)
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We do in our foot.
John Curran (Dublin Mid West, Fianna Fail)
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Ireland is a low tax economy which unfortunately escapes recognition from Members on the other side of the House. When it is referred to, they argue about stealth taxes. To talk about stealth taxes is to misunderstand the situation. We have a choice as to how we raise our taxes. If low income tax rates are available, individuals have more purchasing power which creates and stimulates an economy. For too long we did not have that situation.
Kathleen Lynch (Cork North Central, Labour)
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The choice of whether I pay the ESB bill or heat my home.
Brendan Howlin (Wexford, Labour)
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The choice of putting oil in the tank or plugging in the fire.
Michael Ahern (Cork East, Fianna Fail)
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How many houses did the Deputy buy in Croatia this summer?
John Curran (Dublin Mid West, Fianna Fail)
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We are a low tax economy.
Brendan Howlin (Wexford, Labour)
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The Government has been in power for too long.
John Curran (Dublin Mid West, Fianna Fail)
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The percentage of our GDP, the growth that goes on tax, is 30%. It is 40% in other EU member states.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The motion refers to the powers of the Competition Authority as laid out in the Competition Act 2002. The Act gave appropriate powers to the authority. The extent of the authority's activities can be seen in its 2004 record of 24 warrants and 58 summonses issued. It was the first enforcement agency in Europe to secure a criminal conviction. What is in place is working. There is a need to constantly review this in light of changing legislation, such as the groceries order.
The contributions so far have referred to the efficiency of the court system and the various people brought before the courts by the Competition Authority. However, that is a matter for the courts. At least the authority is doing its job. Deputy Perry referred to the Committee of Public Accounts, which has nothing to do with the issue.
John Perry (Sligo-Leitrim, Fine Gael)
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It relates to value for money.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It relates to other issues in the economy which are being dealt with by the Competition Authority. Taxation was referred to which does not fall under the authority's remit. None of these general economic issues can be introduced in a debate on the Competition Authority. Other Members referred to local authority charges. In the last local government elections, Opposition councillors in some local authorities claimed they would halve these charges. However, I note these charges have not been reduced in those local authorities.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Where was that stated?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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They have no intention of reducing the charges.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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They could be reduced.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy knows it would be a cosmetic exercise. I will be watching it very closely.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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They will be reduced. I will also watch it.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy is into cosmetics. There will not be much in-depth change to the charges regarding the promise made.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Deputy is into depth.
Kathleen Lynch (Cork North Central, Labour)
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He is into Elizabeth Arden.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The manner in which this competition runs through the economy is an issue. The area of telecommunications, the provision of ESB and similar services should be examined. These markets should be opened as this is where the real competition will take place. These will be proper cost-effective services to industry and those who are creating jobs in this country. Such an opening will assist them greatly, whereas this debate will not. I indicate my support for the Government motion, and whatever changes come about in the context of a developing economy must be reflected in the powers given to the Competition Authority.
Brendan Howlin (Wexford, Labour)
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I propose to share time with Deputy Lynch.
I welcome the opportunity this debate presents to discuss the structure of competition in the economy. This debate has rambled well beyond the narrow confines of the Competition Authority, which is good. It is important to examine how Ireland is currently operating from the consumers' perspective.
The Minister for Enterprise, Trade and Employment, Deputy Martin, is entirely dislocated from the views of ordinary people. The Fianna Fáil press office must be keeping its focus groups from him and he cannot be in the inner core. The mood of people is one of intense anger. The people feel they are being ripped off by stealth taxes and increased charges. They feel the official rate of inflation is fiction, as people can see in their daily cost of living that despite a healthy economy and good wages, their money is being eroded. At least taxes were overt when Ministers for Finance declared a certain rate of tax and people knew the lie of the land. Now taxes are being imposed stealthily, which is difficult for people to get a grip on.
It is not good enough for the former Minister for Enterprise, Trade and Employment, Deputy Harney, to speak of getting on one's bicycle and shopping around. This may be feasible for some but if one is in a car sheltering from pouring rain, for example, and running between appointments or trying to collect children, one cannot do an inventory of various petrol stations to find the cheapest. It would be well and good if one was in a State car and not have to be aware of the cost of petrol.
Michael Ahern (Cork East, Fianna Fail)
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They did not have a car in the Deputy's time.
Brendan Howlin (Wexford, Labour)
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I have come to expect brazenness from some on the Government benches at this stage. However, the Minister's statement that his Government introduced a corporation tax rate of 12.5% and that the Opposition fought it is incorrect.
Michael Ahern (Cork East, Fianna Fail)
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The Deputy's party wanted a rate of 25% or 26%.
Brendan Howlin (Wexford, Labour)
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I remember it at the time being negotiated by Deputy Quinn and the rainbow coalition when in government. I have not seen such brazen affrontery since I read on a Fianna Fáil website that the party introduced the Electoral Act 1997 and that it was in favour of placing a ceiling on election expenditure and donations. That party kept the Bill, which I brought to the House, on Committee Stage for a year because it was bad law, according to both the Fianna Fáil and Progressive Democrats spokespersons. Shortly afterwards it was not only good law but it was their law.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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That was not the first time.
Michael Ahern (Cork East, Fianna Fail)
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Tell us some policies and we will put them into effect.
Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister of State rests his case. He is speaking well.
Michael Ahern (Cork East, Fianna Fail)
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The Deputy is good at talking.
Brendan Howlin (Wexford, Labour)
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This debate is important and it is a useful consideration. The Minister of State has only a passing interest in the Competition Authority, but as he is the only Minister present, he might pay some attention to what is being said.
The operation of the Competition Authority should be closely analysed. It beggars belief that the Minister produced this amendment. If one was to read this amendment and the Minister's speech tonight one might think that everything is perfect and that we have the most vigorous competitive environment in the world, the most robust law and therefore the most competitive society, but the proof of the pudding is in the eating, and it is clear in the list of prosecutions that whatever power the Competition Authority has is not being exercised. How many convictions have there been? We should get these facts.
The Minister mentioned the power of the Garda Síochána. The law is so robust that when the Competition Authority and its sleuths are finished, there will be divisions of the Garda Síochána to ensure competition. How many specialist gardaí are there dealing with competition policy and law? What prosecutions have the Garda Síochána been involved in and how many investigations have taken place? Where is the proof? Let us see it.
I wish to deal in particular with the issue of predatory pricing. The Minister talked about this matter all this past summer, although I am not yet sure of his opinion. He is constantly content to attack the Opposition's view on such matters but I am still unclear of his transparent view of the issue. I thought I would know at the end of the Minister's speech tonight where he stands on predatory pricing, but that was not the case.
Predatory pricing is defined as "reducing prices below their market value as a competitive weapon to drive weaker competitors out of the market". The definition of "fair" market value is the cost price with some reasonable profit margin. One might think that predatory pricing is unlawful, as the Minister seems to believe, but it is not, as the Competition Act 2002 only prohibits acts where there is an abuse of dominant position. According to the Competition Authority, section 5 of the Act prohibits the abuse of a dominant position, but it does not prohibit the attainment of a dominant position. A firm is considered dominant when it reaches 40%, according to one court case, but the Minister has stated that there could be a localised dominant market. It was argued that being prescriptive with the legislation was to weaken it. Is the idea that the definition of dominance should be a State secret? This is the first time I have heard a Minister state that an Act will be weakened through clarity and that it will be stronger by being unclear.
Is it considered abuse of a dominant position when a firm can raise prices unilaterally because it knows that customers have few, if any, satisfactory alternative sources of supply? Is it so if a person has little option but to pay the higher price? We do not know. The Act is not breached when a firm's vigorous competition lets it sail away from less efficient rivals. This is apparently robustness in the market. If a strong player crushes opposition by what is perceived as fair means, it is not labelled as predatory pricing. The Government has committed to outlawing predatory pricing, but I do not know how it will be done. The Minister's reliance on section 5 of the Competition Act 2002 is of concern.
I wish to mention the attitude to the groceries order, and the Minister's views are particularly interesting. According to anybody who is asked, the Minister has abolished the groceries order, although it will come as a shock that the groceries order has not been abolished. Just because one says it like the queen of hearts does not mean it happened. The Taoiseach confirmed to me in the House last week that this would require primary legislation. The Taoiseach also said reinstating some of the elements of the original groceries order that we do not wish to abolish would require an amendment to the Competition Act 2002.
After all the fanfare and ballyhoo and the brazen effrontery of the Minister in attacking Deputy Hogan for not knowing and changing his position on the groceries order, what is the Government's position? The Government will abolish the order some day and will replace it with something. It will not be this year as legislation will clearly not be enacted in 2005. It will be replaced by amendments to the Competition Act 2002 but we do not know what they are. This is not clarity on competition policy or knowing where one is going. It is a pity the Minister is not present to answer these questions. Perhaps he will get around to doing so before the close of the debate.
I am in favour of competition as it is extremely important. We have seen its benefits in terms of air fares which is the quintessential example everyone points to. However, I do not believe in a market that is entirely unregulated and where competition is the only objective and goal. It is important to say that there is sometimes a need to regulate in the common good. The view that restricting, inhibiting or preventing competition is always bad must sometimes be addressed as one can act in the public interest to inhibit competition. This is not so in all cases but it is a point of principle I wish to put on the record.
There is an important qualification of this presumption. I believe in the regulation of markets in the common good and interest so that we do not have dominant players predating on weaker players, suppliers squeezed out of the market or a lack of consumer choice. It is a normal consequence when an industry, such as the taxi industry, is deregulated that regulations are put in place to ensure some referee is in the market and that it is not completely dog eat dog. This is something that needs to be said before we adopt the notion that competition should not be qualified or that open and unbridled competition is intrinsically good in all circumstances and at all times.
This Fine Gael motion addresses the issue of time limits on the Competition Authority's responses to complaints. Deputy Hogan has suggested a timeframe of 30 days, which is modelled on the United Kingdom's enactment concerning the Office of Fair Trading. The idea to have a timeframe for an initial response is good. Not all investigations or complaints can be processed in a period of 30 days, which is not the Deputy's intention, but a complainant could get some response in that time. I spoke to an individual today who has been pursuing a complaint about anti-competitive behaviour by a major corporate body for eight years. This is not good enough. There must be some finality even if it is by way of explanation about the complexities of investigations.
We could usefully debate the role of the Competition Authority. Under legislation, it seems there are three pillars of activity, namely, advocacy in terms of competition, dealing with proposals for mergers and acquisitions to ensure they are not anti-competitive and enforcement. I do not have the time to develop my points but, in terms of advocacy, one could say the Competition Authority has done a reasonable job. We could debate whether the authority has been effective in all circumstances in the vetting of mergers but, by and large, one would give it a positive mark. However, in terms of enforcement, the judgment I must bring to bear at this point in time is that the authority has not been robust. Part of this is a resource issue and part is a build-up and gradualist issue so that we can come to terms with the requirements of a competitive environment.
I will cede my last five minutes to Deputy Lynch. I am shocked by the level of complacency witnessed in the Minister's attitude to this motion. It was not one of engagement with real issues in which we must work together as an Oireachtas to make our market environment function in the better interests of consumers. I regret that this is the Government's response.
Kathleen Lynch (Cork North Central, Labour)
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I thank Deputy Howlin. I also thank Fine Gael for tabling this motion. Listening to the Minister for Enterprise, Trade and Employment and looking at the raft of different organisations that have been introduced in respect of consumer protection through the years, the Competition Authority being the overall authority but the most recent being the consumer strategy group, and the Director of Consumer Affairs, which we have had for many years, it would lead one to believe that the consumer was well protected in Ireland. However, the consumer is not protected at all.
As Deputy Howlin said, one would imagine we were living in Valhalla from listening to the Minister's speech, a Viking paradise where nothing goes wrong and everything is perfect. When something goes wrong, one has automatic access to an area where redress can be found. This is untrue. The majority of people in this country, who now work longer for the same money and diminished lifestyles, find they have no control. They believe no one has control over their costs of living. We are not speaking about commodities that are traded on a monthly market, such as oil. We are speaking about the price of electricity.
In one of the exchanges that took place, the Minister said it is about choices and that his Government puts more into people's pockets so that they can choose. It is not much of a choice if it must be between paying an ESB bill or not.
Brendan Howlin (Wexford, Labour)
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Or pairs of shoes for children.
Kathleen Lynch (Cork North Central, Labour)
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Heating or not heating one's home is not much of a choice. Sending one's children to school with shoes on their feet or whether to give them school uniforms are not choices. Taxing a car, which might be one's only way of getting to work because there is no public transport, is not much of a choice. The Government and a previous Minister for Enterprise, Trade and Employment continually told everyone that, whether it was on the price of drink at Christmas, getting into different venues or the cost of petrol, we should shop around. One cannot shop around for certain items. In my experience as a mother and someone who has raised a family, I have never been able to find a doctor who undercut his neighbour. They are all the same approximate price and, depending on the location, are exactly the same price. One would wonder where is the consumer protection in this respect.
Where is the Government's protection for consumers concerning private medicine? Where is the protection for consumers in respect of health insurance, petrol or home heating oil? Health and education costs increased by 6% last year. Petrol increased by 9%. ESB and other utilities increased by 15%. We do not trade these on an open market on a monthly basis but they are areas over which the Government has control. This Administration controls the increases. It insisted that development levies be introduced on the building of new houses. At the same time and in the same budget, it removed the first-time buyer's grant which meant the cost of the average house to the first-time buyer increased by €12,000 in one year. Yet the Minister for the Environment, Heritage and Local Government stands up and tells the House of how concerned he is about the cost of housing. He is not at all concerned and I think at long last people have come to terms with the fact he is not concerned.
Ireland has the highest rate of VAT and everyone pays it, not just those of us who are well paid, but people who are on the minimum wage. The poor, misfortunate immigrants who are not even getting the minimum wage also pay it.
There are elderly people whom we will be told to keep an eye on for fear they will be found dead from the cold. This Government does not give a damn about the fact they cannot afford to heat their houses. The Government could do something about that.