Seán Sherlock (Cork East, Labour) | Oireachtas source

I thank the Cathaoirleach for his invitation to address the House in regard to the recently published report of the Oireachtas Joint Committee on Agriculture, Food and the Marine entitled Report on the Grocery Goods Sector - Increasing Equity and Transparency in Producer-Processor-Retailer Relationships. The Minister, Deputy Richard Bruton, cannot be here today to contribute to the debate as he is on an important trade mission to India. He sends his apologies.

I welcome the publication of the committee's report, which considers a wide range of issues and makes a series of 13 recommendations which primarily fall for consideration by two Ministers, namely, the Minister for Agriculture, Food and the Marine, and the Minister for Jobs, Enterprise and Innovation. As the report itself notes, it focuses on four key areas. These are the proposed code of conduct in the grocery goods sector, pricing and its impact on primary and secondary suppliers, support for local produce, and labelling. In my contribution today I will concentrate on the issue of regulating certain practices in the grocery goods sector, which falls within the remit of the Department of Jobs, Enterprise and Innovation. I will also briefly address some of the issues raised in the report relating to policy responsibilities of other Ministers, namely, the Minister for Agriculture, Food and the Marine and the Minister for Health.

The Government is strongly of the view that it is important to ensure there is a balance in the relationship between the various players in the grocery goods sector, with a view to ensuring that Ireland continues to have robust agrifood and retail sectors. This is a particular priority given the importance of these sectors to the national economy. Regulation of certain practices in the grocery goods sector is intended to achieve such a balance, taking into account the interests of all stakeholders in the grocery goods sector, including the consumer, and the need to ensure there is no impediment to the passing on of lower prices to consumers.

As the joint committee's report notes, the issue of regulating certain practices in the grocery goods sector has been on the table for several years. The central issue has been the question of whether a voluntary code of conduct was required or, on the other hand, whether a statutory response should be pursued. Views differ on this aspect, as the report notes. In May 2011, the Minister, Deputy Bruton, published the Travers report, which addressed the issue of attempts to seek a voluntary code of conduct. The report found that there did not appear to be any likelihood of such a voluntary code being agreed. To this end, a draft statutory code of conduct was prepared as the basis of a public consultation process.

The unlikelihood of a voluntary code being agreed was also recognised by the commitment in the programme for Government to regulate - I emphasise the word "regulate" - for certain practices in the grocery goods sector. At the time of the publication of the Travers report, the Minister recognised that regulation of the grocery goods sector was a highly contentious issue and there was an inevitable strain in the relationships between suppliers and retailers. These relationships should be built on solid principles of mutual opportunity and fair competition, which does not always happen. The Minister expressed his disappointment that there had been no agreement on a voluntary code, regulation by Government being always the option of last resort. He added that where regulation is contemplated, it should be forensically designed to avoid unnecessary costs for consumers and businesses and ensure a fair balance between them. As the report of the joint committee shows, these views remain as valid today as in 2011.

The committee's report notes developments at EU level on the issue of the relationship between various parts of the food supply chain. In September 2013, a voluntary initiative on principles of good practice in the food supply chain was launched and adopted by certain European associations. However, not all elements of the supply chain signed up to this initiative, mirroring the different views on the value of a voluntary system that emerged in Ireland from the Travers report process. In a parallel exercise, the European Commission published its Green Paper on Unfair Trading Practices in the Business-to-Business Food and Non-Food Supply Chain in Europe earlier this year. The Commission also commenced a public consultation process to gather the views of market participants on the occurrence of these practices, their possible effects and the most effective remedies, if required. That consultation process was guided by a range of questions to respondents, including queries as to whether they considered unfair trading practices to be pervasive and whether there was consumer detriment in the presence of such unfair commercial practices.

Given the diversity of respondents involved in the exercise, there was little consensus on any of the range of questions. The Commission is currently considering the results in order to decide whether it will initiate any proposals in this area. However, none of this precludes any member state from taking measures it considers necessary. Such complementarity between EU work and national work is recognised by the Commission. Obviously, we will all take an interest in the implementation of the voluntary initiative and the impact of its development over the forthcoming months. It will not, however, halt the implementation of the commitment in the programme for Government.

To give effect to that commitment, work is at an advanced stage on the drafting of the consumer protection and competition Bill. That legislation will provide for the amalgamation of the Competition Authority and the National Consumer Agency, implementation of the recommendations of the advisory group on media mergers, and amendments to both competition and consumer legislation. It will also contain enabling provisions to allow the Minister to regulate certain practices in the grocery goods sector. It is hoped the Bill will be published by the end of the year for debate in the Oireachtas in early 2014. While the exact wording of the legislation is not yet been agreed by Government, I propose to address several of its proposed provisions that are germane to the issues raised in the joint committee's report.

The first point to make is that the Government, in accordance with its programme for Government commitment, will not be legislating for a voluntary code of conduct.

Statutory regulation of certain practices will be introduced. Although not finalised, it is likely that these will take the form of a series of regulations, with associated sanctions, rather than a code of conduct. This links in with the main recommendation of the committee.

Second, the report calls for the appointment of an independent ombudsman to oversee and enforce the regulations. As the House will appreciate, the establishment of a new stand-alone State body to oversee this issue would, in the current economic climate, not be feasible for reasons of scarce financial resources, duplication with enforcement of existing legislation in the Competition (Amendment) Act 2006 on activities that prevent, restrict or distort competition in the grocery goods sector, and the need to ensure that there is no unnecessary proliferation of public service bodies. Hence, as has already been noted in previous comments on this matter in the Oireachtas, the amalgamated Competition Authority and National Consumer Agency, NCA, will be the independent body assigned the responsibility for overseeing and enforcing these regulations.

This new body will be given the powers to enforce the regulations. However, in enforcing any regulations, the basic tenets of fair procedure and natural and constitutional justice must be upheld. It is important to note that the introduction of any regulations does not, and cannot, guarantee anything regarding the prices received by any given link in the supply chain. Negotiations on price will remain an issue between the contracting parties, as happens in any commercial relationship. The intention of the new regulations will be to regulate certain practices, not set prices.

On the issue of disclosure of margins by retailers, the contents of the financial statements of companies are governed by relevant EU company law directives and regulations and by the applicable accounting standards. The requirements regarding the preparation and publication of the accounts of limited companies and groups are determined by the first, fourth and seventh EU company law directives and by the EU IFRS regulations. These requirements are largely reflected in the Companies Act 1963, the Companies (Amendment) Act 1986 and the European Communities (Companies: Group Accounts) Regulations 1992, as amended.

The EU eleventh company law directive, implemented as the European Communities (Branch Disclosures) Regulations 1993, addresses the requirements applicable to branches of EEA companies. Irish subsidiaries of EEA companies can submit the audited group accounts of their parent to the Registrar of Companies instead of their own individual accounts, provided certain conditions are met. EEA companies that have an Irish branch are required to submit only the company accounts to the Registrar of Companies. Irish companies that are subsidiaries of EEA companies and which are themselves parent companies need not produce consolidated accounts provided certain conditions are met. There are similar provisions for subsidiaries of non-EEA companies. In such cases the consolidated accounts of the EEA or non-EEA group must be submitted to the Registrar of Companies.

There are no plans to amend this disclosure regime in respect of specific sectors in the economy as this would be open to accusations of discrimination and, were it to be required generally in the economy, it could have implications in terms of business costs and attracting foreign direct investment. Most of the other issues, such as an all-Ireland market for contracted winter milk and closer relationships between the multiples and local producers, are policy matters for the Minister for Agriculture, Food and the Marine. However, on the first point, I understand that the supply of milk for processing, North or South, is being monitored with the ending of milk quotas in 2015. On the second point, I understand that the development agencies have been active in promoting closer links between multiples and local producers. On the issue of minimum prices for alcohol, the House will be aware that the Minister for Health has proposed such a move in his recent initiative on the issue of misuse of alcohol. The Minister for Health also has a role in food labelling. I am sure both Ministers will take note of the points raised today in respect of their areas of responsibility.

I look forward to hearing the reactions of the House to the report and its views on its recommendations. I will relay these to the Minister, Deputy Bruton, on his return from India to allowhim to consider them in the process of finalising the proposed legislation. Of course, the issue will be debated further when the Bill comes before the Oireachtas for debate in the new year.