Paul Coghlan (Fine Gael)

I welcome the Minister and thank him for outlining his perspective on this Bill. We will have to differ substantially on a number of points. I begin by expressing my concern at the speed at which this important measure is being rushed through the House. The Bill was printed and circulated yesterday. We are taking Second Stage today and Committee and Remaining Stages tomorrow. Such a timescale for the consideration and discussion of such an important measure is an affront to this House. It frustrates any meaningful consideration of the legislation in circumstances where amendments must be tabled directly at the conclusion of the Second Stage debate, with little time to take significant legal advice in regard to the implications of the proposed legislation. I am often concerned when Bills are rushed through in this manner at the end of a session that we end up with poor and ineffective legislation. I fear that will be the case in this instance, given the introduction of what is a complex piece of legislation, albeit spread over only eight sections.

The Fine Gael position on this legislation is best expressed in the motion I tabled before the House on 29 September 2005. In the context of this legislation, it is important that I restate that motion:

That Seanad Éireann believes that the groceries order should be replaced with a new law to take account of changes in the Competition Act and modern trends in the grocery trade, to include the following:

1. that all discounts appear on invoices so that the benefits of food competition can be fully passed on to consumers; and

2. that our communities are protected from predatory pricing by major multiples in order to see choice and diversity in the food sector where multiples and local shops can compete on a level playing pitch.

The Bill we are expected to consider today achieves one of these aims by revoking the groceries order, but completely fails to deal with the issue of predatory pricing.

This legislation follows on from the publication of the Consumer Strategy Group report and a public consultation process initiated by the Department. The Department then prepared a report, A Review and Report of Public Consultation Process, in October 2005, which was released by the Minister at the time he announced his decision to revoke the groceries order. He described the report as a comprehensive analysis of the issue and stated, "There really was no option available to the Government other than a decision to revoke the order".

The report of the consultation process runs to 197 pages and has 13 appendices. It amounts to an historical account of the groceries order, an assessment of the key arguments for its retention and abolition, and some final conclusions. It is important that I refer to this speech as it is pertinent to some of my comments on the Bill. The report clearly helped form the Minister's opinion on this legislation and reflects his Department's perspective on the topic. Regrettably, I must conclude that the report, as a piece of a research, has all the hallmarks of seeking to justify a previously determined conclusion, rather than presenting an objective piece of analysis. It does not take a balanced approach to the subject and tends to disproportionately favour the comments and observations of those whose arguments support the revocation of the order. The biased undercurrent in the report must be addressed as it has given rise to the introduction of the provisions in this Bill, which are reflective of a particular state of mind in both Earlsfort Terrace and Parnell Square.

In his statement yesterday, the Minister said:

The sooner we can get this legislation on the Statute Book, the sooner consumers will begin to see the benefit of greater competition in the trade in the form of lower prices.

I am surprised at the Minister's conclusion in this regard as the report prepared by his officials specifically noted that they were unable to determine the impact of the groceries order on the rate of inflation, the absolute prices of grocery goods at retail level in Ireland or the comparative prices of such goods relative to those in other jurisdictions. In particular, they were reluctant to draw a firm conclusion in regard to the impact of the order on inflation and price levels. The officials also went on to say that they could not quantify the impact of the removal of the order on prices, despite concluding that they wanted it to be removed. Since the publication of this report and the release issued by the Minister yesterday, he seems to be predicting lower prices for consumers. I would be interested to know how much he expects prices to fall as a result of the revocation of the order. Surely he must have some idea of the type of savings consumers can secure as a result of the changes he is introducing today. If so, he must clearly state this on the record.

The report also appears to adopt a tone that any submissions received from the trade in the consultation processes could somehow be discounted because they came from vested interests. This is a dangerous precedent to adopt and it ill behoves a Department to undertake such subjective analysis with trite dismissal of the views counter to those prevalent in the Department at a given time. There is a similar dismissal of the arguments presented in favour of the order by some of the charitable groups such as the Society of St. Vincent de Paul, Crosscare and Combat Poverty. The views expressed by these charities are dismissed in the report as being misguided. The overall approach emanating from the report is that "we know better". Similarly, the views expressed by MEAS about the order restraining the promotion and sale of alcohol are curtly dismissed.

The dismissive attitude of the report to policy arguments that may be used in favour of the retention of the order extends to denying there are problems in the UK in regard to adequate retail services. I was interested in the Minister's comments on the matter in his statement. The Department seems to have engaged in some sort of voodoo analysis of statistics of retail provision in parishes throughout the UK. It has determined that contrary to a general understanding, there is no problem in the provision of retail facilities in Britain.

I must take serious issue with this observation. As anyone who has travelled across Britain will know, there is a major problem with the availability of retail shops. A number of years ago, I carried out a study on behalf of the Oireachtas Committee on Enterprise and Small Business and met a whole range of groups, with the assistance of the Irish Embassy in London, to assess the impact of trading practices in the United Kingdom. I can confirm that on this aspect the Department has got it wrong. Trading practices and planning practices in the UK have caused serious difficulties with the retailing provision in the UK. I am aware of statistics produced by the UK Department of Trade and Industry in 2002, which confirmed that more than 40% of independent food, beverage and tobacco retailers had closed.

The DTI in the UK has also produced statistics on business start-ups and closures between 1994 and 2002 which indicate that 30 general food stores close every month. These statistics indicate that 2,500 food, beverage and tobacco wholesalers have ceased trading over the past decade and that 50 specialist food shops close every week. I suspect that if the Department's analysis on the impact of below cost selling in the UK was subject to robust and independent analysis, the result would be very different.

I am surprised at the tone of the report on which this legislation is based and that it seems so one-sided and predetermined in reaching a particular outcome. It is hardly surprising when one notes that the Department had engaged the services of a Trinity College academic to carry out an analysis of the submissions before the Department. That academic previously produced a report in 1999 entitled A Rationale for Repealing the Groceries Order.

Perhaps the area of most concern in terms of where the analysis in this report is reflected in the legislation relates to the treatment of predatory pricing. The report produced by the Minister's officials clearly states that they do not believe any additional measures are required in respect of predatory pricing. It concludes that predatory pricing is prohibited by the Competition Act, but notes that this prohibition only occurs where there is dominance. It suggests that a company with a market share of less than 35% is not likely to be dominant and believes that this prohibition is sufficient and does not need to be strengthened.

The report also concludes that there may be instances where persistent below-cost selling without a predatory intent may have a negative impact on market structures and place participants at a disadvantage. In doing so, such practices may act against the broader interests of consumers. Despite this finding, the report does not believe this activity should be outlawed in the Competition Act because of the risk of inhibiting genuine price competition. I find this extraordinary.

In this legislation the Minister is purporting to inhibit certain unilateral conduct on the part of non-dominant undertakings in the grocery trade, which it is feared might emerge following the revocation of the groceries order. In his statement yesterday he notes that these practices would not be captured by section 4 of the 2002 Act because the conduct did not involve agreements or concerted practices, or by section 5 because they were not the conduct of a dominant undertaking. Surely the same logic and rationale applies to the practice of predatory pricing.

The Minister has proposed to outlaw the demanding of "hello money", resale price maintenance and unfair discrimination in the retail grocery trade, on the basis that these are unilateral conducts which could be carried out by a non-dominant undertaking. What is predatory pricing when practised by a non dominant undertaking? Under the proposed legislation, any large multiple in Ireland would be free to engage in predatory pricing with impunity against a smaller competitor. None of the Irish multiples at national level has a market share approaching the 35% specified by the Department of Enterprise, Trade and Employment.

The Minister claims that dominance can also be examined at local level. When the Competition Authority assessed dominance in a recent case in Drogheda, the authority determined that a company with a market share of 65% was not dominant. The determination of the Department of Enterprise, Trade and Employment and the Competition Authority must be cold comfort to any smaller retailer trading close to or alongside a larger competitor. The approach by the Department, the authority and the Minister is to advance legislation that essentially legalises and institutionalises unfair trading in the retail grocery trade. As far as this legislation is concerned, it will distort competition by giving legal protection to the enormous market power of some of the largest players in the grocery market globally.

The Minister is wrong on this aspect. As far as the grocery trade is concerned, the Competition Act will not operate to outlaw predatory pricing. When the Minister initially introduced the legislation and announced the revocation of the order, he stated that he was doing so on the basis of a report produced by the consumer strategy group. He said he was acting to ensure that consumers receive the benefit of off-invoice discounts. Fine Gael was and is happy to support this objective.

However, the Minister's legislation does much more than what is required by the Consumer Strategy Group. I fear this legislation is so one-sided and imbalanced that it firmly tilts the playing field in favour of larger players. In his press statement yesterday, the Minister stated that he wanted to secure a new competitive environment that would be fair for all but the competitive environment that will be established once this Bill is passed in its current form will not be fair to all. In fact, the legislation will institutionalise and legalise unfairness. In doing this, the Minister is advocating legal change that is unnecessary and destructive in the context of the public policy objectives that must be addressed in this debate.

The Minister's position on this legislation also involves setting considerable store by the Competition Authority and its effectiveness. I must admit I do not share his enthusiasm for its effectiveness but rather share Senator Ross's observations last Sunday that the authority has an inflated reputation. As an entity, the Competition Authority has let down consumers. It has not produced the scalps that we are entitled to expect and seems to allow itself to become distracted with never-ending studies and costly investigations about niche areas.