John Gerard Hanafin (Fianna Fail)

As the reservations about the removal of the Restrictive Practices (Groceries) Order 1987 which were expressed at meetings of the Joint Committee on Enterprise and Small Business have been comprehensively dealt with by the Minister, Deputy Martin, I warmly welcome the introduction of the Competition (Amendment) Bill 2005. The Minister said recently that the order had acted against the interests of consumers over the past 18 years, so it was time for consumer interests to prevail. When he announced that he had secured the approval of the Government for the repeal of the 1987 order in its entirety, he said it was an important day for Irish consumers and a liberating day for Irish competition policy. The most important reason for repealing the order is that it has kept the prices of the vast majority of grocery products at an artificially high level by allowing suppliers to specify minimum prices below which products cannot be sold. The legislation that has been published by the Government will remove our anxieties about unfair discrimination, the payment of advertising allowances and "hello money". The concerns of many people about the effect of the repeal of the order on independent outlets have also been comprehensively dealt with. I welcome the Minister's efforts to underpin his decision to repeal the order by referring to the Competition Authority's report.

The Restrictive Practices (Groceries) Order 1987 has acted against the interests of consumers. It is being repealed in a manner that will ensure that the anxieties of many people are comprehensively dealt with, as I have said. The current formation of the market means we are paying more than we should for consumer goods. As the Minister said, the prices of textiles and foodstuffs to which the 1987 order does not apply seem to be the same in the Irish market as in the European market. While there may be local reasons for some variations, there is no explanation for the differences in the price of foodstuffs. The Competition Authority has stated that it is no longer acceptable that State intervention in a key sector of our economy should be based on an administrative convenience with no economic rationale to support it.

Predatory pricing is an anti-competitive practice that is outlawed by the provisions of the existing Competition Acts. The 1987 order, which is incapable of addressing the threat of predatory pricing in a proportionate way, was designed to protect the position of the independent retail grocer. However, almost 2,500 grocery stores have closed in the first 15 years of the order's operation. It is natural that we all have anecdotal evidence in this regard. When I was in Holyhead recently, I asked a taxi driver about the circumstances of retail units in the town. He told me that many consumers in the town have started to avail of the services of a Tesco Extra shop that has opened outside the town.

I welcome the Competition (Amendment) Bill 2002. The ongoing need of consumers to uphold fair practice and competition will ensure the Bill's success. The joint committee was treated to a great deal of contradictory anecdotal evidence during its hearings. It has been claimed that 70% of the towns and villages in the UK do not have a local shop, but I am aware that almost 87% of rural households in England live within 4 km of a petrol station, most of which have a convenience store attached, and 79% of such households live within 4 km of a supermarket. There is a fear in the public consciousness that small independent retailers will be affected by the repeal of the Restrictive Practices (Groceries) Order 1987. The Minister has made it clear, however, that the evidence available to him suggests the contrary.

Predatory pricing is defined throughout the world as the act of a dominant firm. It involves the sale of products below some measure of cost for the purposes of eliminating or harming competitors. If predatory pricing is to succeed, the predator must at some point be able to increase prices to whatever level is necessary to recoup his losses. Not all low prices and certainly not all permanently low prices can be considered to be predatory. There is international case law to support the Competition Authority's conclusion, as outlined in its report, that below-cost selling for the purposes of measuring whether predation exists involves selling products below their purchase price after all discounts, rebates, allowances and suppliers' payments, however and whenever paid, have been taken into consideration. The authority's report states that the forms of low-cost or below-cost selling which are deemed to be legitimate are promotional selling, loss-leading, matching a competitor's prices, disposing of old or perishable stock and testing the market for new products. When we note such forms of activity in years to come, we will have to bear in mind that not all low-cost pricing is anti-competitive. We should be careful not to assume that prices are low for reasons other than the holding of a promotion, the disposal of perishable stock or the matching of a competitor's prices.

Off-invoice discounting, which is a prevalent practice in the retail trade, involves suppliers giving retailers discounts, rebates or allowances on the purchase price of the products they are supplying. Such payments are not shown on the invoice that accompanies the goods to the retailer's premises at the time of sale. This is probably comprehensively dealt with by the Competition Act 2002, section 4 of which prohibits agreement or concerted practices that have the effect of preventing, restricting or distorting competition. This includes price fixing, limiting supply or applying dissimilar terms to similar transactions.

Section 5 prohibits any undertaking from abusing its dominance in the market for goods in the State or any part of the State. For example, a small retailer in a rural town could be considered dominant if the market for groceries was such that consumers would not travel outside the town to buy groceries. Specific abuse prohibited included price fixing, limited supply or applying dissimilar terms to similar transactions. Predatory pricing is an abuse of dominance under section 5.

Under competition law, if a retailer believes he or she is the victim of predatory pricing, he or she has a number of legal options, including making a complaint to the Competition Authority, seeking a private injunction in the High Court or seeking compensation in the courts. The Competition Authority has extensive powers in this regard.

Another area that has been comprehensively dealt with by the Minister and for which there will be further legislation, is resale price maintenance. This is an anti-competitive practice by which suppliers seek to specify minimum prices below which their products may not be sold. It is prohibited by sections 3 and 4 of the groceries order. However, by complete contradiction, article 11 of the order legitimises the practice by specifying that a retailer cannot sell below the price on the invoice. By putting a price on the invoice a supplier effectively fixes the minimum resale price. This is the essence of resale price maintenance. Resale price maintenance would be an abuse of dominance under section 5 of the Competition Act.

A further area of concern is unfair discrimination. The groceries order permits the supplier to offer supplementary terms, effectively off-invoice discounts. The report concludes they are applied in a secretive, arbitrary and discriminatory way. Unfair discrimination would be an abuse of dominance under section 5 of the Competition Act. There was a further anxiety in regard to advertising allowances. These are anti-competitive practices by which a supplier pays a retailer for advertising, stocking or providing permanent display space for the supplier's goods. These are practices which could be regarded as an abuse of dominance under section 5 of the Competition Act.

This is a welcome Bill. Notwithstanding the public perception that the independent retailer will be severely affected, the reality in the UK is that those retailers who provide convenience stores and longer opening hours are growing by 25% per year. I look forward to the years ahead when there will be full competition backed up by legislation where the consumer can benefit.