Wednesday, 5 June 1991
Dáil Éireann Debate
“(1) Subject to the provisions of this section all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade in goods and services and which have as their object or effect the prevention, restriction or distortion of competition within the State are prohibited and void, and in particular those which”.
Mr. Taylor: Before I reported progress I had drawn attention to the fact that section 4 (1) deals with anti-competitive agreements, decisions and concerted practices. The prohibition deals with activities in the State or in any part of the State. That is at variance with section 5 where the equivalent prohibition dealing with abuse of a dominant position refers to “in a substantial part of the State”. All these variations could, quite clearly at some stage, result in litigation. Uniformity in both sections would be appropriate and the description in section 4 would be the better of the two. The limitation in section 5, making the requirement to be “in a substantial part of the State” is not the best description because the word “substantial” is not a good word to use having regard to the fact that a good deal of argument could take place as to what exactly it meant, what part of the State it referred to, and whether territory or population might be involved in its use.
Amendment No. 10 is quite distinct in its intent and purport from any of the  other amendments. It would insert after the word “effect” in line 16 “or a decision of an association or an undertaking which has as its object or effect”. In this amendment I am trying to cover a possible legal loophole in section 4 as it stands.
To be caught by section 4 (1), even with the amendments proposed by Deputy Barry or the Minister, would require two or more undertakings to come together to make an agreement, to devise a concerted practice or to make a decision between themselves. In other words, we are talking about a multiplicity of organisations coming together to reach a decision. The plurality is used throughout —“all agreements, decisions or concerted practices between undertakings or associations”. However one important position could arise which would escape the net of section 4 (1) and that is a position where a single large organisation make a decision to introduce an anti-competitive measure. An example would be the representative organisation of the vintners, motor dealers, or the oil companies, the members of which agree to comply with any directives issued by the board which could be appointed in such a way that it is not representative of each of its constituent members. The board of that single organisation then meets and issues or adopts a resolution which would bring into force an anti-competitive measure which would otherwise be in breach of section 4 (1). This would not be covered by section 4 (1) as that would not amount to an agreement made between undertakings or associations but rather to a decision of one organisation. Consequently, there must be a serious risk that they could escape the net which is intended to catch that kind of activity.
My amendment does not seek to delete anything but rather to introduce a new element to close off that escape route for a single umbrella organisation which may decide to bring such a practice into play which could become widespread even though technically it would not arise directly from an agreement, decision or concerted practice made between undertakings or associations. The word “between” is very important and clearly  implies that two or more undertakings or associations will be involved in making an agreement. The example I have put forward would not involve the making of an agreement but rather a governing body adopting such a policy which would not be caught by section 4 (1). It seems that it presents a possible escape route.
Mr. O'Malley: On amendment No. 10, Deputy Taylor has referred to a single large entity which decides to introduce a restrictive practice and to a collective body making a decision but the fact of the matter is that that would amount to a decision of an association.
Mr. O'Malley: Article 85, and amendment No. 9 reflects this, states that “the following shall be prohibited as incompatible with the Common Market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States.” If the Deputy looks at amendment No. 9 he will note that, if accepted, subsection (1) would read “all agreements between undertakings, decisions by associations of undertakings and concerted practices.”
Mr. O'Malley: Decisions by associations include of necessity a decision by an association. One cannot have a decision between two bodies or undertakings. If they agree on something it is an agreement but if one body, group or association make a decision, assuming it is a decision made for the wrong purpose, it will be caught by the section. The Deputy mentioned the example of the vintners' association where they all agree to charge the same price or put up the price by the same amount. Theoretically, they do not make the decision. Some body or representative group make the decision. They say they are just told that that is the decision and that they do not take part in the decision making process.
Mr. Barry: With due respect, I know a little about what goes on in associations and that is not the way it happens. What happens is that those who participate in a business or profession come to a decision which is not handed down.
Mr. Taylor: This point has been made also by the Law Society committee which was referred to previously. I am not trying to make a political point but rather trying to be helpful, to make sure that we get the best possible legislation and that it contains no loopholes. That is the object of the exercise and there is no political point scoring involved on this issue. The Minister's amendment is closer to what I want but I am still not quite happy that it fully meets what the Minister intends to do. Perhaps, by a very slight variation of his own amendment it could be tied up. What worried me is that it could be interpreted to mean that it would require more than a single decision of one organisation because the plural is used. Perhaps, if it had, “all agreements,  between undertakings, decisions by an association or associations of undertakings and any concerted practices” that would copper-fasten it. If we could, without undue inconvenience, copper-fasten the provision and get rid of any possible doubt, it would be advisable to do that.
Mr. Barry: I want to return to the points the Minister made before we broke for Private Members' Business when he did not accept amendment No. 8. I asked that the words of Article 85 of the Treaty of Rome be inserted in subsection (1). Those words are, “which may affect trade in goods and services and which have as their object or effect the prevention, restriction or distortion of competition within the State”. I suggest the wording in my amendment is more appropriate. The words “between Member States” are used in Article 85 of the Treaty of Rome and the wording of my amendment is almost precisely the same. It is in keeping with the spirit of what the Minister has been saying, that we want to get as close as we can to the EC legislation. I ask the Minister to look again at my amendment which states:
...which may affect trade in goods and services and which have as their object or effect the prevention, restriction or distortion of competition within the State are prohibited and void, and in particular those which.
I wish to amend it because I have a further amendment that would allow an appeal from a decision of the Competition Authority by somebody who applies for a licence and is refused. I want to amend amendment No. 13 to comply with that. Under the Bill as it stands a person who applies for an exemption or a licence — I will come back to the words “exemption” or “a licence” later because they are not in conformity with what the EC say — has no way of appealing a decision. Whether it is the intention or a mistake, the Authority have the final say. A person who applies for a licence and is turned down cannot appeal against that decision and must accept the Authority as the final word. However, if one is granted a licence and somebody objects to the granting of the licence one can appeal; at least I think I am correct when I say that. In an effort to give equal treatment to both parties I have tabled this amendment.
The closer we stick to the wording in the Treaty of Rome the better and for that reason I suggest we delete line 39 and the words “market conditions” from line 40 and that section 4 (2) should read as follows:
The Minister keeps repeating that he  wants to keep as close as he can to the European Community legislation but he changes small things where the reason for the change is not obvious. It would be far better if he stuck to the wording of Article 85 which uses precisely the words I have used. I suggest that the Minister copy this wording unless he has some good reason relating to this country why it should be changed.
Mr. Rabbitte: My amendment No. 14 is an alternative to Deputy Barry's amendment No. 13, I understand it cannot be moved but I would like to discuss it briefly. Before I do, may I go back to the question that I raised originally on Deputy Barry's amendment No. 8 which concerns the phrase in the Bill “in any part of the State”. When replying the Minister said a situation could obtain whereby somebody is guilty of an abuse of a dominant position or whatever form of anti-competitive practice in 25 out of the 26 counties but because he was not doing it in Donegal he may be able to evade being made amenable to the law. I have some difficulty in understanding that because the section referring to anti-competitive agreements and other activities that distort competition refers clearly to “competition in trade in any goods or services in the State”. I would have thought that “in the State” encompasses anywhere in the State where somebody is alleged to have entered into any such agreement.
My fear, and I made the point on Second Stage, is that we are importing Articles 85 and 86 into Irish law. They were designed for a far larger market on a European scale and what we are effectively doing is leaving the term open to the possibility that distortions of competition could happen in a market that is smaller than the national market. I put that question to the Minister but he did not reply to it. I asked whether that could mean in the case I instanced that a brewer in Cork could be accused of being in breach of any of the concerted practices in the context of County Cork only and not in the context of the wider markets.  I do not understand why the words “in the State” are not sufficient. I ask the Minister to be patient with my lack of clarity and ability to understand it and to explain it to me again.
Deputy Barry seeks to rewrite the subsection concerned. Section 4 (2) provides that the Authority may in accordance with section 8 grant a licence in the case of any agreement or category of agreements, any decision or category of decisions and any concerted practice or category of concerted practices which in the opinion of the Authority, having regard to all relevant market conditions, contributes to improving the production or distribution of goods or the provision of services. I am seeking to add at that point the phrase “serves to create a temporary environment to nurture and develop new ideas of economic endeavour and compensates State companies for social obligations which are imposed.” There are two separate things there. My view is that market share alone is no longer a sufficient yardstick of competitiveness. Ease of entry might be a far more reliable yardstick. In this case we must take this legislation in isolation from the wider question of industrial policy, the impact of the Companies Bill and so on. Any industrial legislation should have the twin objectives of trying to maintain existing employment and trying to contribute to job creation in new areas. In so far as this strives to meet the first need, it prepares Irish companies to compete more effectively post-1992 and thereby seeks to maintain existing employment in fitter and leaner companies. I do not believe it facilities new entrants to the marketplace. It is basically concerned with competitiveness as between existing companies rather than new entrants to the marketplace. For example, in areas where we are overwhelmingly importers, a cornerstone of industrial policy has been to try to create new companies in the area of import substitution or to develop existing companies in that area, thus creating new jobs. If we try to build such new companies, there ought to be a temporary period in which they would be exempt and would have a temporary  environment to nurture and develop new areas of economic endeavour. Otherwise I do not see it as being practical. Unless there is some protection given to a company which attempts to develop and take on import substitution. I do not believe the company will make the effort.
My second point relates to the phrase “compensates State companies for social obligations which are imposed.” Many State companies have social obligations imposed on them. Whatever one's political or ideological point of view, this happens to be a fact in respect of such enterprises as An Post, Iarnród Éireann, the bus companies and Telecom Éireann. There is a social obligation to deliver letters in the hills of Kerry and the wilds of Mayo just as in the populous urban areas. We have to accept that. I can presume that it could be a profitable business to run a bus on choice routes in Dublin but whether a private operator would want to run a bus from Ballina to Belmullet I greatly doubt. I have similar doubts about whether ATT would want to provide and service a telephone half way up Errigal, which is an obligation imposed on Telecom Éireann. If we are talking about levelling the playing pitch we must have regard to this question and take into account the element of social obligation. I do not believe that the State companies can discharge that social obligation without being afforded the opportunity of cross-subsidisation. That means they make profits where they can and lose in other areas. Taking on board old age pensioners with a free pass is not something a private operator would do. If we are to have a level playing pitch that point must be taken into account. If PAMBO are to be invited in by the Minister's colleague, the same obligations must be imposed on them otherwise there will not be fair competition and the purpose and thrust of this Bill will be distorted.
Mr. Barry: I do not agree with much of what Deputy Rabbitte has said. I refer first to section 4 (2) which provides that the Authority may in accordance with section 8 grant a licence. The word “licence” is used throughout the Bill,  whereas the explanatory memorandum uses the word “exemption”, as does the Treaty of Rome. The Minister gave an explanation earlier for the use of the words “additional” and “supplementary”. The explanation was that the word “additional” was more in tune with case law. In this case I would think that “exemption” is the more correct term. We are exempting a category of trade from the provisions of this Bill. The competition authority should make an exemption rather than grant a licence.
While I am not unsympathetic to the purport of what Deputy Rabbitte is saying, it is not practical to grow a company behind protective walls and then launch it into the EC to compete. It will have to dive into the water at first hand. The companies to which Deputy Rabbitte is referring are already subject to the rules of competition of the EC because they are probably exporting. This Bill will apply to quite a number of companies. Anybody who is importing is doing so from companies which are subject to EC law. Anybody who is exporting is subject to EC law. We are talking about a fairly narrow range of companies and undertakings which are internal to the State and not trading outside it.
Mr. Barry: That is fine, but I do not  think rebuilding protection walls around industry is the answer. We need to build strong competitive industries with all the difficulties there are. If they have to be helped they can be helped in another way but not by protection. We have suffered too much from that in the past and we should not go down that road again.
In regard to compensating State companies for social obligations which are imposed, what has been going on for the past 50 or 60 years since State companies started to be formed is that the Government have been placing social obligations on State companies and not identifying them as properly the bill of the Government and not of the companies. We have been seriously demoralising State companies here for 50 years by asking them to take on these social obligations and then complaining when they turn in losses at the end of their financial year. What should happen in the example given by Deputy Rabbitte of the bus from Belmullet to Westport is that that run should be put up for tender and Bus Éireann and private enterprises should be asked to quote what subsidy they want for the run and the enterprise offering the most competitive price would then get the route. I do not think it is right that Bus Éireann should be told to run a bus between Belmullet and Westport when they are paid by way of a block grant and castigated publicly for not running an efficient company. Such procedure is extremely unfair to State companies. If there are social obligations it is the responsibility of the Government to pick up the tab for them as they do in the case of free travel. CIE do not, out of the goodness of their hearts, take people free on trains and buses. There is a negotiated figure in that respect every year between the State carriers and the Government. That should be done in all State companies. The Government should recognise their social obligations and pay for them directly out of taxation and not ask State companies to carry them internally in their balance sheet. That is the difference between where Deputy Rabbitte stands and where I stand.
Mr. O'Malley: I had dealt with up to amendment No. 11 before Private Members' Business began. I do not know whether people want me to go back over what I said. There were some references to some of the earlier amendments.
Deputy Rabbitte asked about the phrase “any part of the State.” He contrasted the difference between sections 4 and 5 where section 5 refers to a substantial part of the State. Of course they are referring to two different things. Section 5 reflects the wording in Article 86 and deals with the abuse of a dominant position. If the dominant position exists in the State as a whole, that is fair enough; but if the dominant position were only to exist in a small part of the State, I do not think it would be reasonable, nor did Article 86 envisage it as being reasonable, if it was not a substantial part of the Common Market. Therefore I think it should be referred to as a substantial part of the State. If, for example, someone has a dominant position in half a county or something of that kind, I do not think that would be enough. That is why the reference in section 5 is to a substantial part.
So far as the reference to the State or any part of the State in section 4 is concerned, and which is included in amendment No. 9, this phrase has apparently been criticised by the CII because they claim that it leaves open the possibility that distortions of competition in a market smaller than the national one would be actionable. The CII are quite right in saying that distortions of competition in a market smaller than the national one would be actionable. That is the intent of the words and the choice, of course, was deliberate because regional or local distortions of competition should be covered by the Bill and I do not think anyone would seriously disagree with that.
There were three objections to the proposals that are contained in amendment No. 13 which is in Deputy Barry's name.  First, it is the intention that the Authority and only the Authority will grant exemptions by way of licence. The court would be involved as an appeal forum only from the grant of a licence and not from the refusal to grant a licence and, therefore, will not itself be in a position to grant licences. The reason for that is that it is thought, not just as a matter of commercial policy but also as a matter of judicial policy or of jurisprudence, that it is appropriate that the granting of these licences should obviously be open to review by a court but should actually take place on the part of the Authority rather than on the part of the court. There was lengthy discussion with the Attorney General on that point and it has been thought appropriate, after much consideration, to have it that way and it is probably reasonable. It is not a straightforward thing but it is not unreasonable.
Deputy Barry raised objections to the use of the word “licence” but that word or term is being used to underline the administrative as distinct from the judicial character of the Authority's decisions and it was necessary to underline that for legal and constitutional reasons. The more sensible word, in my view, would have been “exemption” and I think the Attorney General would have agreed with that. However, it was thought necessary and appropriate to underline the administrative as opposed to the judicial nature of the Authority's function and that is why the word “licence” is used.
Finally the deletion of the words “which in the opinion of the Authority having regard to all relevant market conditions” deprives the subsection of the context in which the Authority would be making these decisions and while those words do not appear in the Treaty there are supplementary provisions to Article 85, in particular regulation 1762, which deal with decision making powers of the Commission. Here I am talking about the European Commission. The additional words here are necessary for sense to be made of the subsection.
There is a further amendment, No. 15, in my name which is intended to correct  a printing error. The word “undertaking” appears in the singular where it should have been in the plural. In order to follow as closely as possible the meaning of section 3 of Article 85 a semi-colon has been substituted of the word “or” between the sub paragraphs (a) and (b).
Mr. O'Malley: The remaining amendment in this group is amendment No. 14. It seems to attempt to introduce a basis for exemption from the prohibitions which is clearly not contained in Article 85. It seemed to be a thinly disguised form of protectionism for certain companies. That is not acceptable. I agree with Deputy Barry that if you are trying to assist companies to grow, putting protectionist walls around them, whether tariffs or non-tariff barriers, is really no good. There are other ways one can encourage companies, but I do not think one can use exemptions from the laws of competition. It will be no good to them in the long term and the proof is the large number of corpses littered around the  field of Irish industry of those who thrived while they were behind protective barriers but found it very difficult to live in the open world.
Mr. Barry: The Minister referred to Article 85.3 and changed the wording in section 4 (2) (a), (b) and (c) of the Bill for a reason that is not apparent to me. I ask him to comment on his response to my amendment No. 13 and the fact that I have said the people who are refused an exemption should have the right to appeal to the court. The Minister said the Authority were a quasi-judicial body and in that case I thought it appropriate that there be an appeal against a refusal. It is difficult to understand why a third party can appeal to a higher court against the granting of a licence by this quasi-judicial body yet some body who is refused a licence cannot appeal that decision to a superior court. There is no apparent even-handedness in dealing with the two types of application. I hope the Minister can reconsider because given the nature of this authority and no matter how qualified the people appointed are, there will be suspicion that they were the Minister's friends and were appointed to the authority for political reasons. It is important then that it be obvious that there is an appeal against that decision so that everything is seen to be above board.
I imagine the number of times there will be a refusal for a licence granting or exemption granting — I prefer that word and I am not wholly convinced by the Minister's explanation for that, especially if he prefers that word himself — will be extremely limited. If the Authority are to work properly they will be explaining to people precisely why they are refused and in very rare cases that explanation will not be accepted and will be disputed. Where it is disputed there should be a public open articulation by a superior  court of the reasons that licence or exemption is not being granted. People must feel they have had a fair deal in matters as sensitive as this when they have spent their lives building up a business and feel it can continue only if they are exempted from the provisions of this Bill. It should be quite obvious to impartial observers and disinterested persons that the granting of a licence would not be warranted in that case.
Mr. Taylor: I agree with Deputy Barry on the question of the appeal. I find it somewhat difficult to see the reason for the distinction drawn between the granting of the licence and the refusal of the licence. I take the Minister's point that it was considered at great length by the Attorney General, in consultation and so on, but be that as it may, at the end of the day, it is a judicial or quasi-judicial function that the Authority are exercising here and much could depend on it. The employment of many people could depend on it.
I do not see on what basis a distinction is drawn when a judicial or quasi-judicial body give a decision to provide that if the decision goes one way it is appealable but if it goes the other way it is not. I am trying to think back over the various quasi-judicial bodies we have in the State, and they are legion, but I can think of none where a decision one way is appealable and another way is not. Maybe there are some such cases and I cannot think of them. The only thing that approximates to it is a criminal trial where the prosecution cannot appeal against the acquittal. Numbers of people complain about that. Apart from that, the rules of basic fairness require that if the grant can be appealed, so the refusal can be appealed. Why not, if it is basic to what we are talking about, because in the occasional case, the Authority can get it wrong? If they can occasionally get it wrong in granting the licence they can get it wrong in refusing it too, and an appeal is always a sort of overall safety valve that is there for the occasional case that goes wrong. Why vest the very substantial power in the Authority and say  they are to be the final court of appeal, even though they have only heard the matter at first instance, as it were, and very substantial consequences may flow from a mistaken view cannot be dealt with on appeal? I do not necessarily agree with Deputy Barry that because the reasons are given very few appeals would be taken. I would not say that follows because reasons are given in every High Court decision and quite a number of them are appealed to the Supreme Court.
Very often the High Court has been overruled by the Supreme Court and the Circuit Court is overruled by the High Court. What is so special about this Authority that they are being told that when they refuse an application for a licence in no case would they ever have got it wrong? They may get it wrong on the odd occasion — it is almost axiomatic that they must get it wrong on the odd occasion. Every other court in the land does. Might it not, therefore, even in an occasional case, constitute a very serious injustice on the firm or company who were applying for the licence? It seems a bit unfair and unusual and it is somewhat hard to take.
Mr. O'Malley: I will try to deal with that point again. We could debate these points all night. On the face of it, the system is unusual and I queried why it was that way. At first sight, I did not see why it should be that way. The system has been examined at great length, not just over a week or two or a month or two but over the past year or more. I can assure the House that the decision to do it this way was not taken lightly. It is only at a superficial level that it seems strange; when you analyse it, it is not. I want to explain it in the following way.
The grant of a licence is the grant of an exemption from observance of the law. To grant someone the right not to observe the law is a serious matter. If you grant a licence you affect far more people than just the two or three parties to the amendment who are seeking the exemption. You also affect all their competitors who may be put at a severe disadvantage competitively and will thereby be  deprived of what would otherwise be their right to damages, to prevent the parties concerned breaching the law. Therefore, you affect a whole range of people. If the Authority decide not to grant an exemption they do not thereby allow the law to be circumvented or nonapplicable. It says that the parties concerned and all the other parties are, therefore, subject to the law, no one is at a disadvantage and the fact that you are not able to appeal that decision does not put you in a worse position than you are in as an ordinary citizen subject to the law.
There is a very strong distinction between the two. This is why it is appropriate that one of them should be appealable while the other should not. In a sense there is nothing to appeal in regard to the other one. If there is a refusal you are back where you started but if you are granted a licence you are in a terrifically advantageous position not just with the people who are part of the anti-competitive agreement which has been approved of but as against all your competitors. It is only right that they should have the right to appeal. A person who applies for an exemption and is refused has, in practice, the right of appeal through the current practice of applying for a judicial review. However, it is not as broad because the principles will not arise there. They would only arise if there was a flagrant disregard of the procedures or something of that kind. It is not appropriate that courts should grant an exemption from the law on grounds of public, economic or commercial policy. If there is going to be an exemption from the law it should be by the Authority. I have described the Authority as quasi-judicial in that sense but they will also be administrative. I am at some pains to lay emphasis in the Bill on the administrative nature of the Authority and not entirely on their quasi-judicial aspects.
Mr. Barry: The Minister has not put forward a convincing argument in this regard. I accept his assurance that the Attorney General has gone into this aspect very thoroughly. One does not  lightly turn down the opinion of the Attorney General, the senior law officer of the State. If two undertakings, to use the word in the Bill, apply in good faith for an exemption from the terms of the Bill — I use the word “exemption” deliberately because from the Minister's point of view it is a better word than “licence” in this case — presumably the Authority would take into account all the arguments in favour of giving the licence. However, they may grant the exemption to one undertaking and not to the other. That decision can be appealed as the Authority will have taken evidence from other people, institutions and concerns which will be affected by the granting of such an exemption. If the Authority still decide to grant the exemption those people can take the matter to court in an effort to have the Authority's decision upended and the exemption turned down.
I have listened carefully to what the Minister has said, but given that all the circumstances are the same, both companies apply for the exemption in good faith and the Authority have taken evidence — the authority are comprised of human beings—it does not seem fair that the Authority can grant the exemption in one case but not in the other. As Deputy Taylor said, even the Supreme Court, the highest court in the land, which has a huge volume of case law to guide it can occasionally get it wrong. The authority will perhaps be manned by people who are not from a legal background — we do not know who will man it — and if they refuse to exempt an undertaking from the law, the person who applied for the exemption may feel that because his case is just, his business is destroyed, his staff are out of work and he has lost money he has no other recourse but to accept the word of these people who, even though they would obviously seek advice, may have no legal background or training. I cannot see how the distinction the Minister has drawn is valid. I understand the legal argument he has made but it does not hold water from the point of view of the normal fairness of application of law in this country.
Mr. Taylor: The Minister's response does not convince me to any greater extent than it convinced Deputy Barry. With regard to the question of the judicial review which was mentioned by the Minister, this will be of very little help in meeting this kind of situation. I know this remedy is there but it only has a very limited application. To succeed in an application for a judicial review one would have to be able to show that the Authority acted in bad faith, did not consider the application fairly or whatever. That would be very exceptional and would be unlikely to be used.
The way the Minister puts it, as though it was giving someone a licence to break the law, is at the root of the thinking behind this idea. I do not think it is fair to look at it that way as that is not the way it is. It will not be a licence to break the law because the law makes provision for the exemption. That is a right to be considered under section 4 for the licence. It is not left there to be determined in some arbitrary way by the Authority, that if they like the look of your face they will grant you the exemption but if they do not they will refuse the exemption. The section lays down the very criteria which the Authority will have to examine in coming to their decision as to whether they will grant the licence. For example, they will have to have regard to the promotion of technical or economic progress, or the improvement of the production or distribution of goods. The criteria are laid down and the Authority are obligated to look at the facts and apply those criteria to them.
It must surely follow if an applicant for a licence meets those criteria he is entitled, as of right, without favour to anybody, to have those criteria applied to his position and to have the Authority adjudicate on his application in a judicial manner. If they fail to do that, or if the applicant thinks they failed to do that, then it follows that he should be able to appeal. It is not a licence to break the law but a licence to avail of the law as it is presented to him.
An analogy might be the case of a landowner who wants to develop land  which might have some restriction attached to it and which, as the law stands, without a special planning permission he would not be entitled to develop. I am not going into the merits or demerits of any particular application. If his application to the county council for permission to develop the land is granted that is something new that is being granted to him. On the other hand, if he is refused are we saying he should not be entitled to appeal that decision because he is no worse off than he was in the first place, he has not lost anything so why give him the power to appeal to An Bord Pleanála? However, such a person has the power to appeal and rightly so. It is possible that he will lose the case but that is the luck of the draw.
We are talking about vested rights to have one's position determined in accordance with the law. The objective judicial criteria are laid down. The Minister made the point that a refusal could not be that serious a matter for very many people. Deputy Barry knows more about the setup in these matters than I but it is conceivable that very many people could be involved. One could be talking about two or three companies that may have thousands of employees who could be adversely affected in some circumstances. I cannot think of a specific case but it could well be if a company do not get the licence a substantial volume of employment might well be affected. If that has to be, and it is determined eventually on appeal, so be it. To cater for the occasional case where the Authority may get it wrong — anybody can get it wrong — in interpreting and determining whether an applicant in a case meets the criteria specified in the section, I cannot for the life of me see why it should not be open to appeal.
Mr. Rabbitte: I was offering earlier in relation to the point Deputy Taylor made at the beginning about the Minister's reference to the fact that this was effectively a licence to break the law. I wonder whether that is fair or accurate. It is not like the Trade Disputes Act where immunities are conferred for an action  that would otherwise be unlawful. The action in this case would not be otherwise unlawful or break the law because there are a number of reasons adduced in the Bill that justify any of those agreements, or category of agreements, being entered into. It might be no more than good commercial practice. It might be desirable in a particular industry that there are those agreements in operation. It may not be feasible to function otherwise.
I would be interested to hear how the travel trade, for example, would react if they were refused to have the agreements in place reinforced. We are all aware in this very small country in which we operate that it is not beyond the powers of the imagination to believe that the Authority might react quite differently to one such set of agreements than they would to another. We all have our areas of expertise, preference, presumed knowledge and so on. We could conceivably have the Authority being of the view that a particular agreement is justified for any of the reasons listed in this paragraph. However, in another case they could form the opinion that it was not so justified and refuse the licence. In that circumstance the Minister is suggesting the applicant would have no recourse.
The Minister suggested this morning that I was exaggerating when I said business was only becoming alerted to it now. I know all of the arguments about the 80 per cent of the traded sector who have lived with this and so on but that is not the point at issue. For certain sectors I suggest it is cause for alarm to find that they have no recourse where they are refused. That could have very serious implications.
I will not want to sit down without resisting the attempt by the Minister, and Deputy Barry, to dismiss my amendment No. 14 as being some kind of thinly disguised attempt at protectionism. I do not now, and never have in the past, argued for protectionism of any kind in industrial policy or tariff walls or anything else. That is not the point. The point is whether anything we are doing in this Bill facilitates new entrants into the marketplace.  I was arguing that ease of entry is a far more reliable yardstick of competitiveness than some of the other yardsticks about which we have been talking. I am talking about new companies being given a temporary period when they can be nurtured without being subjected to the full brunt of competition. That was all that was implied in my amendment.
The second aspect related to the social obligations imposed on State companies. The Minister chose not to deal with that point. Deputy Barry suggested he would do it differently and he may well be right. The fact is that as we are today it is not done in the way Deputy Barry would like to see it done and we have to deal with the situation as it exists today.
Without repeating the arguments I have made it perfectly fair to say that if people are arguing for a level playing pitch then State companies ought to be given the benefit of such a level playing pitch. Was it PACtell who wanted to buy Cablelink from RTE? Is the Minister seriously suggesting that if PACtell came in and were successful in competition with Telecom Éireann they would not want to hook in to the national cable system of Telecom Éireann? There is no way that any new company coming in here would set up their own cable network. The level playing pitch argument works both ways and regard must be had to the circumstances in which State companies find themselves. It may well be that Deputy Barry's way is the sensible way for us to tackle this question in the future, but until such time as we do then the point I have made must be answered.
Mr. Barry: I wish to point out to the Minister that exemptions under Article 85.3 of the EC competition policy in the Single Market lists the exemptions they see. First, the agreement must contribute to the improvement in production or distribution or economic progress; in other words, there must be clear objective advantages involved such as the reduction of costs or an increase in the production capacity. Second, a fair share of the resulting benefits must be allowed  to consumers and this includes not only ultimate consumers but also trade purchasers, for example, in the form of lower price or an improvement in the quality of the goods and services concerned. Only restrictions of competition which are indispensable in order to achieve beneficial results will be allowed.
They are criteria that will have to be taken into account by the new Competition Authority. There could be legitimate argument whether those criteria were applied objectively in particular cases. It is a mistake not to allow this right of appeal to a higher court against the decision to refuse an exemption. It is not as if it would be a frivolous appeal because there is nothing frivolous about spending three days in the High Court, with all the legal back-up that is required. It is an extremely serious and expensive business and would not be undertaken lightly. The Minister should amend this section to allow that appeal to take place. In the interests of fairness it is necessary for an even-handed approach or, as Deputy Rabbitte said, a level pitch approach in this matter. This consequential amendment should be accepted.
In page 4, subsection (1), lines 14 to 16, to delete all words from and including “all agreements” in line 14,  down to and including “undertakings” in line 16 and substitute “all agreements between undertakings, decisions by associations of undertakings and concerted practices”.
This amendment relates to section 4 and the various matters that are prohibited under that section. I am seeking to insert a new paragraph (f) which reads: “create, directly or indirectly, artificial barriers to entry to an industrial or commercial sector, including the use of excessive brand advertising.”.
My argument relates to the measure of competitiveness we use. Anything that puts artificial barriers in the way of new entrants to the marketplace is not in the best interests of this economy. Artificial barriers, could comprise a number of different matters — in section 4 the Minister lists a number of matters. If somebody has a monopoly of raw material, technical expertise or whatever, they too constitute barriers to entry. Specifically I would argue that the use of excessive brand advertising is tantamount to a barrier to entry, especially in low technological threshold companies where advertising is used to such a level of soak-age that one simply could not compete  as a new entrant. The building societies could be given as an example.
We are bombarded with so much advertising every night from the main building societies that one would get the impression they are offering a different service or that the service they offer varies in a substantial way. It does not vary in any significant way, but the inordinate level of very expensive advertising would certainly cow any new entrant to the marketplace. He simply would not be able to compete. What is the purpose of this? Not only is there monopoly in some cases but there is oligarchy in the case of the building societies.
The big soft drinks companies use a similar tactic in the United States and across the world. The distribution curve of Coca Cola and Pepsi, to all intents and purposes, is equivalent to the distribution curve of the industry but the impression is created of a fantastic competitive environment.
This amendment which seeks to include an additional practice that ought to be prohibited should be taken on board by the Minister. Any artificial barriers to entry of new companies ought not be facilitated. That is the acid test of competitiveness. It is all very well to say you have a share of the marketplace, but the real test in terms of competitiveness is whether some new body can enter and survive. This is a matter that needs to be addressed. I could instance the case of tobacco companies where there is a similar low technology threshold but again by sheer level of advertising the circumstances are created where competition is virtually snuffed out.
Mr. Barry: Deputy Rabbitte is dealing with a subject very close to my heart. I have no problem in empathising with the points he is putting forward but I am not sure if what he says is very practical. It is part of the industrial policy of the Government and the IDA that we should build brand leaders that would be strong enough to take over a significant share of the market abroad and create high quality  brands in the European market and throughout the world. I gather from something Deputy Rabbitte said earlier that he would subscribe to that strategy for increasing employment here. If we feel we should do that, using Ireland as a base to launch into Europe, it would be difficult to stop foreign companies from doing the same. Unfortunately in the commercial world in which we live, part of the investment must be made establishing the companies and not just in bricks and mortar, personnel and knowhow. There must also be a large marketing budget if one is to make any impression on the market. That may not be very desirable. Deputy Rabbitte might think it is not one of the strict criteria that should be applied for commercial success. It may be that the element of goodwill has no tangible worth and that it should be knocked off the balance sheet.
In all, there are good arguments to be made in favour of all those views, and many smaller business people would certainly throw their caps in the air with delight if such a thing could be brought about. However, I am not sure it is practical in the world we live in. Much as I would dearly like to support the amendment for those reasons — and I certainly accept the spirit of it — I am afraid the practicality of what is suggested is not on at the moment, even though it does relate to a very serious problem that has to be faced in the future, particularly in the food sector.
If we want to build strong brand names, then it is essential but it is not enough to have high quality foods, it is essential but it is not enough to have good packaging, it is essential but it is not enough to have good marketing, and it is also essential to provide significant sums of money for advertising in order to break into the markets of Britain, Germany and France. Slow progress will be made on the first three elements, but if big companies are to be created here then I am afraid they will have to be backed by big advertising  budgets. The Government, industry and particular firms and sectors will have to face up to that fact if we are to make our mark in Europe.
The growth of these firms is the way to get employment but the cost is huge, and that has to be faced up to. One will not dent the markets in any of the four big countries in Europe — France, Britain, Germany and Italy — by spending less than £5 million sterling on advertising and that sum is well beyond the capabilities of most companies other than the multinationals. If the Government are serious about strong brand names — and they are right to encourage amalgamation to strengthen firms, to produce quality brands and to put the emphasis on quality, marketing and packaging — something more is needed.
I am speaking of food because that is the area I know best. The supermarket chains that dominate the retail trade, not as much in other countries as they do here, will accept quality products. They have very strict quality guidelines, they inspect the premises where the goods are produced, they will want to have a say in the design of the labelling and packaging of a product, they will want to know about the market strategy of a company and how much has been invested, they will ask the producer what is being done to assist them in the sale of a product on their shelves and they will want to know the producer's advertising budget for a product in a certain area. I am digressing a little from Deputy Rabbitte's amendment, but we must wake up to that reality or we will still have more than 250,000 people unemployed. Besides goods, packaging and marketing we also have to make an investment in advertising. That is regrettable but it is a fact.
Mr. O'Malley: The amendment adds a specific example of what might be an anti-competitive practice to those already contained in Article 85. That is an undesirable departure in itself for the following reasons.
 The general rules of Article 85 are sufficient as competition rules at Community level. I believe they should be sufficient for this State. It would be possible to provide a long list of what different people consider to be anti-competitive practices, but I believe it better to stay with normal concepts, particularly when there are 34 years of judicial enforcement and decision making behind the existing concept. I do not disagree with what Deputy Rabbitte said in regard to advertising and the crushing, pointless, idiotic advertising of major brands that goes on all the time, purely to force out competitors or prevent others from arriving on the scene.
The inclusion of specific rules not contained in the Treaty could give rise — I believe would give rise — to our courts giving undue weight to some practice over others. It might serve to limit the discretion and the general nature of the prohibitions. The amendment suffers from the problem that lies in the existing restrictive practice orders in as much as it addresses a particular problem that may become irrelevant over time. What is contained in article 85 of the Treaty has stood the test of time.
Deputy Rabbitte is anxious that people have freedom of entry to the market. He instanced the heavy, excessive advertising — brand advertising — as a way of keeping out competitors. However, if section 4 (1) in its entirety could be properly applied in this country for the first time, then that would provide the greatest guarantee of entry for our people who were competent. It has worked in the European Community and it can and will work here. I do not want to go beyond that, not because I disagree with what Deputy Rabbitte says but because I want to try to apply the basic principles of the Treaty as much as they can be applied, within reason and given the differing circumstances. If additional criteria are added, particularly to something like this, then all kinds of significance would be read into the additions as  against existing criteria. If the criteria are opened up, when do we stop? Other practices are equally objectionable to those mentioned by Deputy Rabbitte, and they cannot all be included. That would be to go back to the old days of the 1972 legislation and earlier enactments which were unsatisfactory. We would be back to the days of making restrictive practice orders rather than expressing general principles.
Mr. Taylor: I am becoming increasingly irritated as the debate goes on because of the apparent slavish devotion that is being developed towards Article 85 of the Treaty of Rome. If we were so dedicated and so devoted to the Treaty then surely we would have complied with it long before now? If the Treaty were gospel to such an extent, then why have we waited so long before bringing in a Bill to deal with it? Of course the Treaty is the guideline, but we do not have to follow every comma, every semicolon, and every dot in exactly the same way. The fact that a particular wording worked well for the whole Community does not necessarily mean that an improvement could not be made in its general application in Ireland.
I do not understand the point being made that the generality of the prohibition would be affected. The layout of the wording of section 4 introduces a generality and then rightly goes on to say that without prejudice of the generality of the facts of the position stated above the following more specific items would contravene.
In a sense Deputy Rabbitte's amendment is in two parts. First, if the final phrase, “including the use of excessive brand advertising” is left out and one deals with the amendment up to and including the word “sector”, I think that is probably included in the general prohibition set out in the beginning of section 4(1). The only part that brings in a new, more specific element is the excessive use of brand advertising. In his reply the  Minister conceded that that is a valid point and that it has an anti-competitive effect. If that is so, I do not understand why one should follow Article 85 slavishly, because that particular factor, which happens to be a very serious one in this country, perhaps is not so serious in other countries like France or Germany. It certainly is here. The Minister concedes that. Why not include it? We are not talking about opening up the thing to a whole multitude of additional specifics. There is only one before us. If it has a role to play and if it would be helpful to the position of this country it would be fair enough to include it.
“(2) The Competition Authority established by this Act (`the Authority') and the Court on an appeal from a decision of the Competition Authority may in accordance with section 8 grant an exemption for the purposes of this section in the case of—
which contributes to improving the production or distribution of goods or the provision or supply of services, or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and which does not—
Mr. Barry: Yes, except for one point. I asked the Minister why the wording in the Bill is different from the wording in Article 85 of the Treaty of Rome. I reproduced the wording of Article 85 in my amendment. Why did the Minister find it necessary to change the wording in paragraphs (a), (b) and (c) since we have been slavishly following Article 85 all evening. That is the right approach because competition law is based on Articles 85 and 86 of the Treaty of Rome.
Mr. O'Malley: I did not change it. I do not go around putting words here and there. The draftsman thought it was easier to read. He has to be given some discretion and he put in paragraph (a), (b) and (c) which were not in the Treaty of Rome. It is not a mortal sin and makes it a bit easier to read. It does not change the effect of it.
Mr. Barry: I understand that, of course, but I am entitled to draw attention to the point raised earlier and which the Minister did not answer. I did that and the Minister answered the point. I am entitled to reply to that now and say that if we had decided all along that Articles 85 and 86 should be the basis for this Bill, then the Minister——
An Leas-Cheann Comhairle: Deputy Barry appreciates that if he quotes his entitlement to reply to the Minister, the Minister can quote his entitlement to  reply to Deputy Barry, and we could have this all night. The provision for such an impasse is provided in the structures that we have whereby Deputy Barry can raise this matter on Report Stage.
Mr. Barry: I am entitled to point out the difference between what the Minister said in reply to Deputy Taylor on an earlier point and what he is saying now. That is all I am doing and I am entitled to do that. The Minister said he wanted to follow closely Article 85 and when he had the chance to do that he did not do it. That is my point.
Browne, John (Wexford).
Coughlan, Mary Theresa.
de Valera, Síle.
Fitzgerald, Liam Joseph.
Gallagher, Pat the Cope.
|Kitt, Michael P.
Noonan, Michael J.
O'Malley, Desmond J.
O'Toole, Martin Joe.
Wilson, John P.
Belton, Louis J.
Browne, John (Carlow-Kilkenny).
Cosgrave, Michael Joe.
De Rossa, Proinsias.
Enright, Thomas W.
Mac Giolla, Tomás.
Sheehan, Patrick J.
|Last Updated: 23/05/2011 01:44:14||Page of 127|