Written answers

Tuesday, 15 June 2010

Department of Enterprise, Trade and Innovation

Grocery Industry

8:00 am

Photo of Jimmy DeenihanJimmy Deenihan (Kerry North, Fine Gael)
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Question 106: To ask the Minister for Enterprise, Trade and Innovation his plans to introduce a code of practice which will protect smaller grocer outlets from aggressive low pricing by large retailers; and if he will make a statement on the matter. [25336/10]

Photo of Batt O'KeeffeBatt O'Keeffe (Cork North West, Fianna Fail)
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The Renewed Programme for Government contains a specific commitment to "implement a Code of Practice for doing business in the Grocery Goods sector to develop a fair trading relationship between retailers and their suppliers" and "to review progress of the Code and if necessary to put in place a mandatory code". The introduction of a Code is intended to ensure that there is a fair balance in the relationships between the various stakeholders in the grocery goods sector. The Code is not intended to protect one stakeholder over another nor is the Code intended to prevent stakeholders such as retailers and suppliers from engaging in robust contractual negotiations as happens in most other sectors of the economy.

The Government will give effect to this commitment by including a specific provision in the legislation, currently being prepared to merge the National Consumer Agency and the Competition Authority, which will allow for the introduction of a statutory Code of Conduct in the grocery goods sector. I expect to publish this legislation later this year.

In the interim period, until the legislation is enacted, the opportunity will be taken to explore with all relevant stakeholders the possibilities of agreeing a Voluntary Code. To this end I recently appointed a facilitator to engage with stakeholders in relation to the drawing up of a Voluntary Code.

The Government recognises the importance of ensuring that there is a fair balance in the relationships between the various players in the grocery goods sector, particularly given the importance of this sector to the national economy. The introduction of a Code, as provided for in the Programme for Government, is intended to achieve such a balance taking into account the interests of all stakeholders including the interests of the consumer.

Insofar as the issue of prices is concerned, Government policy has consistently favoured the promotion of competition and consumer choice as the best way of tackling high prices. Previous policies which sought to control prices by legal instruments such as maximum price control orders, as applied particularly in the 1980s, were not effective as the experience was that maximum permitted prices often became the minimum price and price inflation in that era was in double digits.

In support of the policy of promoting competition, competition law prohibits undertakings who hold a dominant position in the market from abusing that position of dominance. In this regard undertakings who engage in practices such as predatory pricing with the aim of eliminating competitors and, following such elimination to significantly raise prices, may be engaging in an abuse of dominance. Persons who have evidence of undertakings engaging in an abuse of dominance should bring that evidence to the attention of the Competition Authority in order that it may be investigated. It is important to point out, however, that predatory pricing should not be confused with competitive pricing which is the result of a properly functioning market. The purpose of competitive pricing is to retain market share whereas predatory pricing is aimed at driving efficient competitors out of the market by abusing a dominant position.

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