Wednesday, 28 February 1996
Dáil Éireann Debate
6. Mrs. O'Rourke asked the Minister for Enterprise and Employment the terms of reference and timeframe he has set for the Director of Consumer Affairs' investigation into the distribution of magazines, books and recorded music following concerns about the absence of savings for consumers because of the weakness of sterling. [4637/96]
Minister of State at the Department of Enterprise and Employment (Mr. Rabbitte): The terms of reference of the investigation, announced by me in the House on 15 February last and referred to by the Deputy, are to undertake a survey of the retail prices of UK magazines in Ireland, to ascertain the movement of these prices in the period since 1 January 1994 in the light of the appreciation of the punt vis-á-vis sterling and to determine the components of these prices by reference to such elements as cost from the producer, applicable value added taxes, importers-distributors and retailers profit margins. The survey is currently in progress and its findings shall be available to me by the end of March. It is my intention to publish the findings.
The two firms which control distribution apply a formula for the pricing of foreign magazines. In the past the Competition Authority took the view that arrangements put in place by the distributors “constituted the fixing of prices, a practice which is specifically mentioned as being prohibited under section 4(1)”— Competition Authority Report 1993, Annex 5, page 156 refers. One distributor subsequently withdrew  the request for a Competition Authority decision.
Mr. Rabbitte: When the report of the Director of Consumer Affairs on this matter becomes available I will, as necessary, refer it to the Competition Authority. I also wish to warn the distributors against perpetuating any anti-competitive practices which result in higher prices to the consumer and to advise that if any such practices are in place I expect them to cease forthwith and to see a benefit to consumers in terms of lower magazine prices. If the investigation by the Director of Consumer Affairs finds that consumers are in effect being overcharged I assure the House I will take whatever steps are open to me.
Mrs. O'Rourke: I thank the Minister for his frank reply. The reason I put down the question was to ascertain the terms of reference of and timeframe for the investigation. Is the Minister concerned that the intent of the survey could be circumvented by an immediate reduction in prices? I am glad the survey will cover the period from January 1994 but I would like to know what system will be used to ascertain the prices of magazines at that time.
Mr. Rabbitte: The Director of Consumer Affairs is due to report to me by the end of March and it is my intention — I cannot see any reason not to do this — to make his findings public immediately after that.
On the efforts of the main distributors to circumvent the survey by bringing prices more into line with the present exchange rate, I would welcome such a move. Both sides of the House are concerned to ensure that the consumer gets a fair deal and if prices are reduced as a result of the initiation of the survey then I welcome such a move.
On the question of how one ascertains what has happened since 1 January  1994, I presume the inspector or inspectors appointed by the Director of Consumer Affairs to carry out the survey have a well established methodology for finding out the price of magazines over the period. It is on these written available records that they will make a judgment about whether the respective movement of the punt and sterling has been reflected in the prices charged.
Mrs. O'Rourke: The Minister will have been as interested as I was in the immediate reaction of one of the two distributors as reported in the newspapers the following day. I welcome the concern expressed about consumers but this brings me back to an earlier question I put to the Minister, Deputy Bruton, about the number of random happenings in this area over which the consumer has no control. One cannot adopt a centralised approach but is there any way the Director of Consumer Affairs can be alerted about what is happening? The problem has existed since January 1994 and this survey has only been initiated following certain inquiries. Over the past 15 months many consumers have not benefited from the strength of the punt vis-à-vis sterling. Is there any way to prevent the random happenings in this area?
Mr. Rabbitte: Competition in the marketplace is meant to provide the best deal for the consumer. The difficulty in this case is that there are two operators involved in the marketplace. The view of the Competition Authority is that they should apply a formula.
In the view of the Authority the arrangements between Easons and Newspread which involved agreement on purchase prices for foreign  exchange, an agreed addition for wholesaler margins and the same standard selling price to newsagents for each magazine, notwithstanding the fact that a small minority of newsagents could negotiate lower purchase prices, constituted the fixing of prices, a practice which is specifically mentioned as being prohibited under section 4(1).
Unfortunately that was no more than obiter dicta by the Competition Authority, as its attempt to make a finding was obstructed successfully at the time. However, this formula exists and if the Director of Consumer Affairs concludes as a result of the survey that it is leading to higher prices to consumers than ought to be the case then I will take whatever action is open to me and is necessary.
Mr. Rabbitte: The matter was withdrawn at that time by one of the companies concerned. The companies went to the High Court to stop the Competition Authority investigation. When the case was over the companies withdrew the notification of agreement that had prompted the Competition Authority investigation in the first place.
Miss Harney: I support the Minister in what he is trying to do. It was clear that when Deputy Bruton made a decision in relation to Statoil, he was free to make a decision to stop something happening. He rightly made the decision from the competition point of view. What powers has the Minister,  Deputy Rabbitte, in a situation like this to intervene to stop something happening?
Mr. Rabbitte: Once the competition legislation is through the House, enforcement procedures will be available and we will be capable of dealing with situations such as this. Under existing pricing legislation, I have power to introduce a price display order as is the case, for example, in relation to petrol products to which the Minister, Deputy Bruton, referred. I have power to introduce a notification order, requiring persons engaged in selling publications to notify the Minister of any increases they propose to make in the prices at which they will sell magazines. I can require the notification to be given to the Minister within a specified time prior to the increase becoming effective. Finally, I have power to fix the maximum price of magazines. The legislation under which I have this power limits it to situations in which the Government is satisfied that the condition of the national economy is such that it is necessary to maintain stability of prices generally. The power is somewhat circumscribed, but it is there, nonetheless.
Miss Harney: Normally I am not in favour of price control; I like to think competition in the market provides adequate price control. However, the Minister should give very serious consideration to using one or other of those powers because it is clear that a cartel is operating in relation to magazines and short of a ministerial decision to use powers, the matter will not be resolved.
Mr. Rabbitte: I assure the Deputy that the purpose of the survey was to do precisely that. With regard to the pricing formula, which Deputy O'Rourke asked me about, both firms in this case apply a formula for pricing foreign magazines which was recommended by the National Prices Commission in 1983. That formula is the sterling cover price at the rate of exchange of purchased currency plus 5 per cent uplift, plus  VAT. That is how the Irish selling price is calculated.
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