Dáil debates

Tuesday, 8 November 2011

Competition (Amendment) Bill 2011: Second Stage

 

Question proposed: "That the Bill be now read a Second Time."

6:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

The purpose of the Bill is to strengthen the enforcement of competition law in Ireland. Breach of competition law is a white collar crime and, as with all other forms for crime, those who commit it must be punished accordingly. The legislation will provide a more effective deterrent and an improved sanctions regime for those who engage in price-fixing, cartels, abuse of dominant position and other anti-competitive practices. Under the terms of the EU-IMF programme of financial support for Ireland, the Government was required to bring forward legislation to strengthen the enforcement of competition law by the end of the third quarter of 2011. I am happy to inform the House that the publication of the Bill on 29 September met this commitment.

In terms of competition law enforcement, we are not starting from scratch. The measures I propose in the legislation build on what is already a strong enforcement regime. Ireland is unique in Europe in having criminalised anti-competitive behaviour. Since the introduction of the Competition Act in 2002, the Competition Authority has a good record. From the point of view of other member states, the authority's record is enviable. A total of 32 criminal convictions have been secured since 2002 in respect of cartel behaviour in the form of price-fixing by home-heating oil companies in the west and by car dealerships in Leinster and countrywide.

Crimes under competition law are often viewed as being victimless in nature. However, where the operation of the free market is restricted by collusion or other nefarious practices, the result is that consumers, whether it is to heat their homes or purchase cars, pay more than should be the case. We all are the victims of such crimes. The State and the Members and I as taxpayers are the victims if companies engage in bid-rigging in respect of public procurement contracts for the building of roads, for the fitting-out of hospitals and schools or, indeed, for any of the services purchased by the State.

During the sentencing in 2007 in a price-fixing case, Mr. Justice McKechnie stated that the crime in question was particularly pernicious as it was against consumers in general and not just one or two individuals, and went on to state the activities had, in his view, "done a shocking disservice to the public at large". I share Mr. Justice McKechnie's view that "there are good reasons as to why court should consider the imposition of custodial sentences in such cases". He stated, "I see no room for a lengthy lead in period before jailing convicted persons becomes commonplace under this legislation", and I agree.

Currently the courts can impose fines up to the greater of €4 million or 10% of turnover and impose a custodial sentence of up to five years. These are significant penalties making our enforcement regime one of the strongest and I look forward to the day when the rigours of the law are fully applied.

I wish to turn to the provisions of the Bill and explain what each is designed to achieve. Section 1, the definitions, and section 7, the Short Title, commencement and collective citation, are standard legislative provisions while sections 2 to 6, inclusive, are the core provisions of the Bill.

Section 2 amends the penalties set out in section 8 of the Competition Act 2002 and provides for large increases in fines for competition offences across the board. I propose to increase, from €4 million to €5 million, the fine for criminal conviction for hardcore offences and double the maximum prison sentence for such a conviction from five years to ten years. Fines for summary convictions are increased from €3,000 to €5,000 while the daily fine for a continuing contravention is also increased in respect of both summary and indictable offences.

As a further indication of how seriously I view these crimes, I propose that the Probation of Offenders Act 1907 will no longer be capable of applying to competition law offences. That Act allows a judge to dismiss a proven case based on the trivial nature of the offence, and in such cases a conviction is not recorded against the defendant. I see nothing trivial about price fixing, bid rigging or an abuse of a dominant position to the detriment of competitors and consumers alike. Judges will no longer have the option to apply the Probation of Offenders Act where the authority or the Director of Public Prosecutions has proven a case. The conviction will be recorded and the guilty party punished in accordance with the enhanced enforcement regime.

From detection to investigation to prosecution, bringing an offender to justice can be a long, complex and expensive process. Investigations can span years as evidence is gathered and examined in a forensic manner, and witnesses must be questioned and their statements scrutinised in detail to determine whether the behaviour breaches the Act and to build a case for the prosecution. This work is carried out by specialist investigators, economists and legal experts within the Competition Authority in association with members of the Garda Síochána, including the bureau of fraud investigation. The cost to the State in undertaking such a painstaking investigation can be sizeable. I therefore provide that the court shall order a person convicted of an offence under the 2002 Act to pay to the Competition Authority, or ComReg where the anti-competitive practices are in the electronic communications sector, the cost of undertaking the detection, investigation and prosecution of the offence. The court shall measure the costs and expenses. Where there are special and substantial reasons for not doing so, I propose that the court may decide not to order the payment of such costs.

Sections 3 and 4 result in the separation of the public and private enforcement regimes which at present are contained in a single section, section 14, of the 2002 Act. Section 3 strips the public enforcement right of action from this section 14, leaving it to provide for a right of private action for aggrieved persons, while section 4 re-casts the public right of action for the Competition Authority and ComReg.

In so far as section 3 amends section 14, an aggrieved person may bring an action in the Circuit Court or High Court for relief by way of injunction, declaration and-or damages, including exemplary damages, where he or she shows loss as a result of anti-competitive behaviour prohibited by section 4 or 5 of the 2002 Competition Act. Where, on foot of a private action under section 14 of the 2002 Act, as amended by section 3, a court finds that an undertaking has abused a dominant position, the court may require the undertaking to discontinue the abuse or to adopt measures for the purpose of ceasing or adjusting the dominant position by, for example, requiring the sale of assets of the undertaking. Clarity is also provided that the term "injunction" includes an interim injunction, an interlocutory injunction or an injunction of indefinite duration.

Section 4 inserts a new section 14A into the 2002 Act which gives the competent authority, whether it is either the Competition Authority or ComReg, a right to pursue civil enforcement measures for infringements. Mirroring the amended private enforcement regime which I have just described, the Competition Authority or ComReg also has a right to apply to the Circuit Court or High Court in respect of any agreement, decision, concerted practice or abuse that is prohibited under section 4 or 5 of the 2002 Act and in addition by Article 101 or 102 of the Treaty on the Functioning of European Union. Where a case is proven, the court may order an interim or interlocutory injunction or an injunction of indefinite duration or give a declaration that the behaviour in question is in breach of section 4 or 5 of the 2002 Act or Article 101 or 102 of the treaty. The court may also require the discontinuance of an abuse of a dominant position or require corrective measures to be taken by the undertaking.

Europe-wide there are well-recognised difficulties in pursuing private litigation for damages in respect of competition law breaches. I want to make it easier for persons to take such private actions in this jurisdiction. I provide that where following proceedings under Part 2 of the 2002 Act for a breach of section 4 or 5 or Article 101 or 102, a private litigant, taking a follow-on action in respect of the same breach, shall by virtue of section 5 of this Bill be able to rely on the court's finding of a breach and it shall not be necessary for the second litigant to prove also that the conduct was prohibited. By easing an element of the burden of proof facing a private litigant, I seek to facilitate an increased number of private actions, thus to some extent easing the burden on the State resources in pursuing public enforcement but also ensuring the State is a facilitator for subsequent private actions.

At present, a person convicted on indictment of a breach of competition law is automatically disqualified under section 160 of the Companies Act 1990 from being a company director or from being in any manner involved in the promotion, formation or management of a company. That section also provides for a discretionary disqualification for summary company law offences. In section 6 of the Bill, I propose that this discretionary disqualification provision be extended to all contraventions of section 4 or 5 of the 2002 Act and Articles 101 or 102 of the treaty. In keeping with the discretionary disqualification provisions set out in section 160 of the 1990 Act, the High Court may decide itself or on foot of an application by the Competition Authority or ComReg to make a disqualification order for such period as the court sees fit. This additional sanction will act as a deterrent for those engaging in or contemplating engaging in anti-competitive practices and ties in with the overall thrust of the Bill.

I want to send a clear and unequivocal message to business persons and consumers alike that anti-competitive practices will not be tolerated. Offenders will be prosecuted and feel the full brunt of the law. These new deterrents should give further pause to would-be and current cartelists and I strongly urge the courts to follow, where appropriate, the words of Mr. Justice McKechnie and to apply the full rigours of the law.

In addition to the measures set out in the Bill to meet the EU-IMF commitment, I inform the House of two complementary measures that will enhance the enforcement of competition law. On 3 October, I commenced the single remaining section of the 2002 Act yet to be commenced. Section 10 provides for the provision of certain documentary evidence to juries during trials on indictment for competition law offences but it could not be commenced pending the installation of the necessary audio-visual technology in court rooms. Such technology has now been installed, making it possible for jury members to be given transcripts of counsels' opening and closing statements and of the trial judge's charge to the jury along with any charts, graphics, etc. presented as evidence during the trial. As with any trial for white collar crime, complex evidence can be presented and the availability of documentary evidence will assist the jurors in their deliberations.

The second complementary measure I am pursuing involves the application of the provisions of the Criminal Justice Act 2011 to competition law arrestable offences. The Act is designed to deal with white collar crime and its extension to competition law will greatly assist the investigation of alleged breaches. Gardaí will be able to suspend the 24 hour detention period available to them to question a suspect. During such a period of suspension, evidence obtained during questioning can be examined and compared to other evidence gathered during the investigation. The suspect can be recalled for further questioning at a later date provided that, in total, the combined periods of detention do not exceed the permitted 24 hours.

Other sections of the 2011 Act that will apply to competition law offences concern the production of documents and the manner in which they are to be identified and categorised. Provision is also made for the determination of legal professional privilege issues arising from the disclosure of documents. I am working with my colleague, the Minister for Justice and Equality, on this matter, as he has ministerial responsibility for making the necessary order under the Criminal Justice Act.

Following the Bill's enactment, my next legislative priority in this area will be the consumer and competition Bill to give effect to the amalgamation of the Competition Authority and the National Consumer Agency, NCA. As both bodies were established under statute, it is necessary to give effect to the newly merged body by way of primary legislation. At its meeting on 5 July, the Government approved the Bill's drafting. Since being announced as part of the rationalisation plan for State agencies during the 2009 budget speech, my Department has continued to work with both bodies to ensure a smooth transition from the two separate entities to a single dual functioning body responsible for competition and consumer protection.

The Bill will also update the existing competition law on foot of a review of the operation and implementation of the Competition Act 2002, strengthen the public interest test in respect of media mergers in line with the report of the advisory group on media mergers, make some minor amendments to the consumer protection legislation and provide for a code of practice for doing business in the grocery goods sector.

While this all-encompassing approach to the draft legislation has to some extent delayed the legislation for rationalisation of the two agencies, we will be better served in the long run by a single legislative measure that establishes the new agency and provides for a combined and updated consumer and competition code. Deputies are awaiting publication of the Bill and may seek to avail of the opportunity presented by the Bill before us to progress issues contained in the other Bill. However, I urge them to wait. The matters to be included in the comprehensive consumer and competition Bill will be considered and debated in due course and, no doubt, in great detail, as is appropriate.

I look forward to working with Deputies on Committee and Report Stages of the Bill before the House and I will be happy to reply to questions that arise. In the meantime, I commend the Bill to the House.

7:00 pm

Photo of Willie O'DeaWillie O'Dea (Limerick City, Fianna Fail)
Link to this: Individually | In context

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[...]

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

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

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

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

[...]

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

[...]

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

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

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

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

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

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

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

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context

Ba mhaith liom fáilte a chuir roimh an t-Aire agus cuireann Sinn Féin fáilte roimh an Bille seo atá ag iarradh iomaíochas an tír seo a feabhsú. Fáiltím freisin Bille a oibríonn in éadain caimiléireacht agus a cruthaíonn níos mó freagracht agus cuntasacht i measc an phobal gnó. Fáiltímid reachtaíocht a íslíonn costais gnó do gach duine, muintir gnó agus custaiméirí freisin.

However, we in Sinn Féin have serious concerns regarding this legislation. We believe the legislation needs to be strengthened and, more importantly, must form part of concurrent policy initiatives that enhance competitiveness, promote economic growth and deliver jobs.

It is recognised that corrupt practises that undermine our economy are not the sole preserve of the private sector. For years cronyism has had an undue influence on the economic management of this State, with successive Ministers placing personal advantage above that of the State and successive Governments handing over our economy to bankers, speculators and developers.

This issue has been exposed by McCracken, Moriarty et al and more recently with the fiasco in the banking sector. It is a reflection on the previous Government that the IMF and EU had to push for draft legislation to tackle corruption.

I am sure the irony of the IMF-EU calling for measures to tackle price fixing, cartelism and the abuse of dominant market position is not lost on anybody in this House. The troika, we are told, is the only body we can turn to in this situation. The troika is not open to negotiation and imposes so-called solutions, including profiteering interest rates. It is a body that the Government should, if it could, put under the provisions of the Bill but that is a debate for another day.

Sinn Féin supports the measures in this Bill to tackle corrupt practises. However, the provisions of the Bill do not fully address the issue of corrupt practises, nor will it lead to greater competitiveness in this economy. It is right that stringent provision is made in criminal law to convict and penalise those guilty of the most obvious corrupt practises. It is right that the Bill increases penalties for those who pursue corrupt practises which negatively affect our people and our economy.

The intent behind this legislation is to strengthen competition law enforcement by ensuring the availability of effective sanctions to deal with infringements of competition law. Sinn Féin is concerned that the Bill does not provide for civil fines, such as those for infringements to competition as called for by the Competition Authority. The Competition Authority sought the provision of civil fines to deal with abuses of the so-called non-hardcore infringement. Central to this is the abuse of dominant market share, including a refusal to supply, predatory pricing and exclusivity agreements.

We remain concerned that the absence of a provision for civil fines will impact on the ability to stop these types of abuse. Many large, well-capitalised businesses can engage in predatory pricing to close down smaller local businesses, thus developing a market share that inhibits choice and competition resulting in higher costs to consumers.

This is a real issue for many local businesses, farmers and suppliers working alongside multinational firms. The development and implementation of a civil fine mechanism would deal with the abuse of a dominant position. It would strengthen the provisions of the Bill and further safeguard consumers and local businesses.

I hope the Minister will revisit this suggestion and amend the Bill to provide for civil fines to tackle corrupt practises alongside the more stringent provisions he has outlined. I am sure his officials have the ability to redraft this legislation within the Constitution to deal more stringently with the issue of abusing dominant market positions.

Multiples create a top level price and force all suppliers underneath that. This is a toxic, artificial market equilibrium which has the effect of forcing out suppliers. Many multiples advertise that they are major supporters of Irish suppliers but still force local farmers and small businesses to supply below cost. This is not support; it is, in fact, the destruction of local markets. The proof of this is that growing acreage and the number of growers in the State have shrunk in practically every horticulture sector over the last 20 years. This has happened for two reasons, namely, cheaper imports and the abuse of a dominant market position.

Many farmers selling to international multiples do not have a choice: they are being dictated to. If they seek any level of renegotiation, they are at risk of losing their contracts. Retail prices are being held steady, or in some cases increasing, while supplier prices have been forced down. There is a strong feeling amongst suppliers that the implementation of existing competition law is one-dimensional.

If there is no recourse to civil fines or there are other issues that impede fair competition legislation from being developed, there is an obligation on the State to find other mechanisms and solutions. We are concerned that the Bill does not oblige the Government to respond to the issues raised by the Competition Authority. Particular issues that impede competitiveness may require specific Government action and-or legislation in the future.

Best practice in Europe places a responsibility on government to respond to a report by the relevant competition authority within a specified timescale. In Italy, the relevant competition authority has the ability to table legislation for consideration. In this State there is no obligation to consider, let alone act upon, the recommendations of the Competition Authority.

If the Government is serious about dealing with corrupt practises, it should include a clause on the obligation to respond to recommendations of the authority. Such a response must outline the Government's proposed actions with regard to each recommendation.

My further concern deals with the Bill being taken as a stand-alone element to promote a more competitive economy and deliver growth and jobs. The legislation is to be welcomed in so far as it tackles corruption, but it will not on its own deliver growth and jobs, drive down costs for individuals and deliver on competitiveness. To date, deregulation in the energy market has forced prices upwards. Deregulation in the taxi market has left prices high and resulted in an increase in the number of taxi drivers, each of whom is struggling to make a living.

Competition on its own does not equate with lower costs. The selling-off of telecommunications networks across the State delivered huge profits for some individuals and businesses but resulted in increased bills and a lack of investment which now means our broadband infrastructure lags behind that in the rest of Europe. The impact of previous sales of assets should cause the Government to pause for thought. In these cases, competition in service provision has actually undermined our national competitiveness and the economy. This legislation will only contribute to reduced costs and increased value to the economy if it is implemented alongside additional policy interventions.

I worry that this House often spends hours debating the colour of the carpet while ignoring the elephant in the room. We are tinkering at the edges of competition in a very minor way, although much greater issues need to be dealt with. We cannot promote economic growth while taking €3.6 billion out of the economy in the next budget. We cannot continue to pay off bondholders and at the same time allow indigenous businesses to grow and become more competitive. It is right to look at competitiveness within the economy, but, importantly, we need to address how competitive we are on the global stage. To date, the Government has continued to undermine our economic competitiveness. In a downturn we need investment rather than austerity.

The determinants of competitiveness are education, infrastructure, energy provision, indigenous business and innovation which have all suffered owing to a lack of investment under the Government. We still await the commencement of work by the Government on tackling upward-only rent reviews and there are regressive business rates. Each of these factors affects the competitiveness of small businesses.

The rate of nvestment by the Government in education, as a percentage of GDP, continues to be lower than the OECD average. This is true in the primary and secondary sectors which comprise the foundation of our knowledge economy and the key to the future competitiveness of the State. There is below average investment in the third level education sector, the key driver of research, development and innovation, yet the Government is seeking to increase student fees. The Minister needs to explain how continued under-investment in education promotes competitiveness. It is another example of the disconnect between the Government and reality. The previous Government was disconnected also. It claimed it wanted to build a knowledge economy, but it took money out of the education system and built a construction pyramid instead. The current Government promises a smart economy, yet it cuts the education budget in order to pay money to speculators in the bond market. How smart is that? I am proud that Sinn Féin was to the fore in ensuring there would be no rise in student fees in the North. If we are to promote innovation, research, development and learning, we need to get the foundations right. We need to tackle corrupt practice, but we also need to invest in education, at the very least at the level of the OECD average.

If we are to grow an economy and promote competitiveness, we need to update the quality and reduce the cost of telecommunications. The cost of telecommunications in the State is almost 10% above the EU average. Only 0.5% of broadband connections are made through fibre; the OECD average is 12%. If we are to compete with other nations and are serious about innovation as a driver of employment, we need to invest in infrastructure. That is why Sinn Féin promoted broadband roll-out as part of a stimulus package. This would have an immediate effect on the progression of a schools building programme by delivering jobs immediately, enhancing our competitiveness and promoting innovation, research and development in the medium and longer term.

We have been successful in attracting foreign direct investment and this work must continue. We have yet to realise fully its contribution to the economy. There are vacancies in certain global corporations based in the North and the South, and the local supply side is not properly plugged into foreign direct investment. This area must be developed. Global corporations are employing some of our most gifted and best educated. They benefit from and commercialise the expertise of Irish workers. However, this has been to the detriment of indigenous business. Expertise developed by the education system that should be building Irish-owned businesses has been lost to global corporations. This is a form of an internal brain drain. We need to incentivise the development and growth of indigenous businesses and support research and development and investment in innovation by Irish-owned companies to allow them to compete and grow in the global market. It is worth remembering that high-tech industries do not locate in Silicon Valley owing to the cost base or a favourable tax environment; they do so because of the networks and high-tech expertise that create a desirable level of competitiveness at that location.

We face a challenge to develop networks of research and expertise. Sustainable foreign direct investment and indigenous business development will benefit from the development of an ecosystem of expertise and excellence. Maximising our potential as a centre of expertise and excellence requires the maximisation of our resources at this time of financial difficulty. The use of our research and development resources across the island is disjointed and inefficient. We have universities competing for students across a similar range of subjects on an island of just 6 million people. Research and expertise are spread too thinly between competing third level institutions. An all-Ireland skills strategy implemented across universities and centres of research and development would replace competition with co-ordination, deliver greater value for money and promote economic growth and expertise-related competitiveness. Such co-ordination would also allow for the greater draw-down of EU support and increase access to programmes such as the Seventh Framework Programme. I urge the Government to pursue this matter urgently with a ready and willing Northern Executive, particularly the Minister for Employment and Learning.

I thank the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, for giving us the opportunity to discuss this Bill. There is much in it that Sinn Féin can support and there is much to tackle corruption to safeguard local business and deliver savings to the people. We believe the Bill can be further strengthened by providing for civil fines. However, in the absence of a consistent, comprehensive approach to promoting competitiveness in the economy across all Departments, the Government is effectively tinkering at the edges. I hope the Minister will review the legislation to deal more effectively with the abuse of dominant market position and work with his colleagues across the floor of the House to lay the foundations for economic growth, job creation and enhanced competitiveness. Níl a dhóthain ann sa reachtaíocht seo agus ní dhéanfaidh sé an-difríocht do phostanna agus do thacaíocht i gcúrsaí eacnamaíochta. Caithfidh an Rialtais i bhfad níos mó a dhéanamh.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
Link to this: Individually | In context

I am sharing time with Deputies Patrick O'Donovan and Heather Humphreys.

I welcome the opportunity to speak on this Bill. I was tempted to reread it to find the section on third level fees, having listened to the previous contribution-----

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context

That is a Government commitment.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
Link to this: Individually | In context

-----but I appreciate when one plays the same broken record, bits will be repeated, or when one uses the same script every time one comes into the Chamber, it is handy to cut and paste similar sections.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context

It is handy to cut education.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
Link to this: Individually | In context

I welcome this Bill. This amending legislation is one the county could have had sooner. It highlights the fact that, as a country, we had lost competitiveness. I was interested to read a reference in The Economist last week that we are not improving our competitiveness, but that is not the case. For the first time in a number of years relative to our main competitors, particularly in Europe, we have significantly increased our competitiveness. While we are all aware of the importance of bringing in foreign direct investment, there are several pillars to that. They are all of equal importance but restoring competitiveness is crucial to the recovery of our small indigenous sector and to attracting more foreign direct investment. I welcome that this amending legislation is before us. This Bill also highlights there are positives and a focus from the EU-IMF deal in that for too long we were drifting along. Elements that were part of the troika deal with our country were included in our party's election manifesto and, subsequently, in the programme for Government. Competitiveness is one element in that respect.

The Minister touched on the specifics. I would like to highlight one area in the banking sector, and I am not referring to this sector because Deputy Mathews is in the Chair. I received a representation regarding our banking system. Competition in banking has been lost to a certain extent because we have had to restructure the banks, particularly the two pillar banks. AIB and the EBS have been merged. I welcome that the EBS reduced its interest rates by 0.25% today but AIB, which is the umbrella bank, has a base standard interest rate of 3.25% whereas the EBS interest rate, prior to today's reduction, was 4.95%. Two banks under the same umbrella are charging their customers different rates. In this sector there is effectively no competition at present bearing in mind that people are not in a position to change mortgage lenders. I encourage the Minister to consider measures to address that to allow for a more fair approach, given that people are now effectively customers of the same institution.

We must also move to restore our competitiveness and to get the banking sector back up and running, on which the Government has started to made good progress. Great progress has been made on the third area of importance, that of ensuring we have a good and strong supply of well-educated people in the labour market. The final area of developing a strong economy is to have a fair tax system in place. The Government's commitment to keeping our corporation tax rate low encourages enterprise and competition.

I compliment the Minister on bringing forward this Bill and encourage him to continue to bring forward measures that will allow all enterprises to be competitive which in turn will benefit the people who pay for the goods and services. As a peripheral island nation, we probably have to work harder than some of our European competitors at being competitive. I encourage the Minister to continue on that journey.

Speaking from the perspective of having a business, I recently checked my mobile phone bills and noted there has been a significant reduction in that cost element through increased competition. It took a while for that reduction to come about. Competition yields benefits. While five and ten year sentences will not be handed down in all instances of the practices outlined in the Bill, and one would hope they would not be required, they send a clear signal that the Government expects and demands better competition within our economy.

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick, Fine Gael)
Link to this: Individually | In context

I acknowledge the presence of the Minister and welcome the proposed legislation. I welcome the proposal to increase the sentences handed down to people who engage in the practices spelled out in the Bill. It is regrettable we have had to reach the level of the country being practically in the receiver's court for this legislation to be brought forward. The Minister has long being a proponent and an exponent of increasing the country's competitiveness going back to when he was on the Opposition benches. It is regrettable the previous Government did not take on board some of his suggestions during its tenure of office and if it had, we might not have some of the practices to which the EU and IMF had to have drawn to their attention when the memorandum of understanding was being drawn up.

Reference to prison sentences for such practice leads one to talk about white collar crime. It is regrettable there is still nobody behind bars for wrecking the economy of this country. I am sure that point is raised by people with whom the Acting Chairman and all other Deputies are engaged. I know other Members share regret about that. There is an element of frustration among people in that the economy is a basket case but nobody has been held to account before the courts. I know the matter is under investigation but that fact is a matter of great regret.

Given the constituency I represent, one of the issues of concern to me and that is close to my heart is food production. The farming organisations have been very vocal with the Minister's Department and the Department of Agriculture, Food and the Marine in this regard. We are now relying more than we did previously on the food and agribusiness sector to get this country back to work. The input the food industry can make to getting this country out of receivership must be recognised by the Minister's Department, the Department of Agriculture, Food and the Marine and the State. Practices of below cost selling, to which the farming organisations and farmers draw our attention, cause a great deal of angst to the farming organisation and farmers.

The Minister said that he hopes ultimately a reduction in costs and an increase in competitiveness will be achieved, but many of the costs imposed on businesses are within the grasp of the Government and local authorities. One need only reflect on some of the costs businesses have to bear. I have raised this point time and again in terms of the layers of bureaucracy in place. All these layers have to be paid for and, ultimately, the service user has to pay for them. I have raised with the Minister the number of agencies with a remit of creating employment. They all have to be funded out of the public purse. The Government gave a commitment in the programme for Government to reduce the number of quangos, which I and, I am sure, other Deputies would like to see happen. The dequangoisation, so to speak, of this country needs to happen at a much faster pace than it is happening. When people pay a development charge for a connection to a sewerage system, for a road opening licence or whatever, they ask, as a business person, what they get for that and it is difficult to pinpoint and identify the service they get.

One needs to ask how effective regulators have been. In some instances one could almost identify cases where they have been counterproductive. An artificial floor has been maintained for the purchase of utilities or services. We have to ask whether the regulatory system is counterproductive in terms of exacerbating the country's uncompetitiveness. Deputy Tóibín called on us to face the reality of the situation.