Wednesday, 10 July 1991
Seanad Éireann Debate
Minister for Industry and Commerce (Mr. O'Malley): The Competition Bill, 1991 is a central instrument in the Government's programme to revitalise the economy and encourage growth. The Bill embodies new concepts for many in business or in professional practice here and for many it will involve new thinking in the way business and commerce is carried out in this country.
The Bill embodies a radically changed approach to competition law in Ireland. The old system, based on the Restrictive Practices Acts and Orders, was unsatisfactory, cumbersome and applied only to a limited extent of economic activity. It was based on a trade-by-trade approach——
Mr. O'Malley: ——and, like many other European countries, our early  experience of competition law was both tentative and cautious. This approach is no longer appropriate to the needs of our economy today. The scale and complexity of business has changed and there are new challenges and demands on our economy.
We are changing our approach for a tried and tested system now used by many of our European partners and based on Articles 85 and 86 of the Treaty of Rome. The new approach stems also from the long established anti-trust tradition in the US from which the founding principles of competition law have been drawn.
The Competition Bill prohibits anti-competitive activity and the abuse of a dominant position in the market. It is a straightforward system of prohibition providing direct recourse to the courts for anyone adversely affected by the anti-competitive activities of others. The Bill will apply to the public and private sector alike and to all economic activity engaged in for gain in producing goods or in providing services.
By introducing this legislation we recognise that a marketplace driven by competition is essential if Ireland is to achieve sustainable economic growth. We recognise also that the creation and maintenance of an institutional and legislative framework which promotes strong market rivalry and competition is one of the most positive things that Government can do to promote growth, foster development and generate prosperity.
The Programme for Government includes a commitment to the introduction of legislation to give effect in domestic law to provisions similar to Articles 85 and 86 of the Treaty of Rome after the Fair Trade Commission presented a report to Government. This Bill delivers on that commitment. The Bill is a significant part of the effort being made by the Government to prepare Irish companies for the increased competition which will follow on the completion of the Internal Market in 1992.
The rules contained in Articles 85 and 86 already apply to those sectors of the economy which are engaged in trade at Community level, but there is no reason  why any sector should be sheltered from the discipline imposed by these competition rules. It is interesting to note that those sectors of the economy which have been exposed to competition are the most dynamic and have made a real contribution to economic growth. With the Competition Bill it is proposed that all sectors of the economy be exposed to the cutting edge of competitive markets.
In its study of competition law published at the same time as this Bill, the Fair Trade Commission in discussing the specific benefits which might be expected to flow to Ireland from introducing a more active competition policy stated, in Chapter 3:
Much of domestic activity may have been insulated from competition up to now. This is the case, in particular, with services. The development of full competition in most sectors within the EC is very likely. By acting quickly to bring about competition of domestic level, it is possible that Irish enterprises will improve their prospects of survival and development in the future; Because so much of economic activity has not been subject to competition law, it might be expected that the benefits of changing the law will be very significant in the early years and will give a substantial boost to the economy. The stimulus, and the experience of competition in the domestic market should better equip Irish enterprises, and particularly Irish management, to participate actively in world markets. One of the features of the successful exporting economies, Japan and Germany, is the intense competition in their home markets.
It is of significance that the Programme for Economic and Social Progress recognises that “a modern efficient market economy requires a satisfactory legal framework in the area of...competition policy”. Specifically, the programme points out that the application of the same competition rules, as already apply to those engaged in trade at Community  level, will stimulate competition in the remaining sectors of the economy so that the traded sectors will not have to bear the costs imposed by anti-competitive practices in more sheltered local businesses.
Existing legislation is based on the concept of what is called a control of abuse system. It does not ban any particular activity until it has been investigated. Such investigations have been undertaken on a sector-by-sector basis and have led to the making of Restrictive Practices Orders for particular sectors. However, large areas of the economy have never been subject to investigation, much less to action. This type of fragmented and piecemeal approach needs to be radically changed. Anti-competitive practices and agreements and abuse of dominant positions that operate in domestic business activity need to be outlawed as they are at Community level under the Treaty of Rome. In order to provide a comprehensive, but not confusing, system the former Acts and Orders will be replaced.
I will not detail here the numerous and time-consuming steps that are usually involved in taking action against anti-competitive practices under existing legislation. I have done so on a number of occasions in the past and Senators, no doubt, will be familiar with them at this stage. It is clear that the difficulties and delays are considerable.
The Fair Trade Commission has made clear its support for the application of the principles of Articles 85 and 86 to domestic business. However, the commission's report took an approach to administration and implementation that was very closely based on the EC model. While the philosophy behind Articles 85 and 86 is fully acceptable to me, I consider that administration need not follow the EC model but should be adapted to our own circumstances. Indeed, given the differences between the role assigned to the EC Commission under the treaties and to various organs by our Constitution, it would be impossible to replicate the treaty system exactly.
Given that the central idea of the Bill is  drawn from the Treaty of Rome I cannot describe what is proposed as totally novel. Indeed, a number of proposals have been introduced in the Dáil which had the same objective as this Bill. In the preparation of the Bill I have examined these earlier proposals including my own, and there is a necessity in legislating to ensure that any new system works and I have tried to take account of the comments made about earlier ideas. To the extent that there is novelty in the Bill it relates to its approach to administration and implementation. This can be seen as the detail of the Bill is examined.
Part II of the Bill, comprising sections 4 to 9, is the heart of the Bill. Section 4, in line with Article 85 of the Treaty of Rome, prohibits and makes void anti-competitive agreements, arrangements and practices. A list of examples is given that includes price fixing, sharing markets and price discrimination. This list is not exhaustive and, as with Article 85 of the Treaty, is intended as indicative examples of what is broadly prohibited. The section allows exemptions from this prohibition to be given by the Competition Authority. A licence to exempt any particular arrangement can only be given if the benefits of the arrangement clearly outweigh the anti-competitive effects. An essential feature is that consumers must have a fair share of the resulting benefit. In no circumstances can an exemption be given if it would allow the possibility of the elimination of competition in respect of a substantial part of the products or services in question.
This section was amended on Committee Stage in Dáil Éireann to bring the wording used as close as possible to that of the treaty. The amendments to this effect did not come from one side only. There were suggestions also for more specific rules outlawing particular anti-competitive practices. I argued against these as they would quickly become out of date and might lead the courts to give undue weight to the listed practices at the risk of ignoring others.
Section 5, which is based on Article 86 of the treaty, prohibits the abuse of a dominant position in trade in the State or  a substantial part of it. Unlike section 4 there is no possibility of an exemption being granted against this prohibition. The Bill will not allow, under any circumstances, the abuse of a dominant position.
I think I need to say something in detail here about what is meant by a dominant position. The term “dominant postition” is not defined in the Treaty of Rome and no definition is offered in this Bill. It is not possible, in advance, to set precise criteria such as percentage market share that would allow “dominant position” to be defined for all markets. Very few markets are so static as to allow the sort of analysis. Although not defined in the treaty, the concept is clear.
In a number of cases the European Court of Justice has addressed this issue and defined a dominant position as an economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained in the relevant market by giving it the power to behave, to an appreciable extent, independently of its competitors, customers and, ultimately, of its consumers. This description clearly brings out the point that it is the issue of relationships within a market that is central to determining whether there is dominance.
I want it to be clear that it is the abuse of a dominant position, and not the existence of such a position that is prohibited here. A dominant position can exist so long as it is not abused. Behaviour in the market is the issue being addressed. There have been mischievous attempts to argue that this represents a policy aimed against the growth of companies in this country. Nothing could be further from the truth. The Government recognise that the development of large firms with the advantage of economies of scale are vital for our economy particularly in the traded sector.
It is quite clear from this that there is no conflict between competition policy as expressed in the Bill and industrial development which the Government continue to promote. Competition policy should not be seen as an isolated regulatory system. It is an inherent part of a  modern economic system and essential as an element of economic development.
The enforcement mechanisms proposed in the Bill are designed to ensure effective action without imposing undue burdens in compliance or enforcement. The system will be transparent and objective. Section 6 allows any person who suffers loss in consequence of a breach of sections 4 or 5 a right to damages or an injunction to restrain further damage. It offers an advantage over existing arrangements because it gives a direct remedy to those aggrieved and does not require action by any official authority. This section lays down that an action may be brought in the High Court or in the Circuit Court for cases brought under section 5.
I have decided to give the Circuit Court jurisdiction for cases involving the abuse of a dominant position as early as possible. This is to ensure that the law is made accessible to all both from a financial and a logistical point of view. At the same time we will have to allow for some certainties to be established in the case law. Let us remember here that we are talking about an entirely new body of domestic law. There are concepts which will have to be applied to domestic, as distinct from Community trade, for the first time. This may take some short time. The case law of the European Court of Justice will be invaluable to our courts but they will have to build up experience of applying it in a domestic context.
One of the core features of the Bill is its enforcement mechanism. This was debated at length in the Dáil where there were many calls for giving an enforcement role on both the Competition Authority and to the Director of Consumer Affairs and Fair Trade. I firmly rejected those suggestions. What I have proposed is a system of private enforcement which represents a balance safeguarding economic rights and liberties. Damages can only be awarded if damage has been caused. This is a very simple and basic premise. It would not be consistent with the scheme of the Bill nor with the principles behind it to establish an elaborate  and costly policing or enforcement agency.
I believe that giving an enforcement role to the director would rapidly become a crutch on which business, in particular big business, would hang their cases and I suspect that even those who would be in a strong position to take a case would wait for the State to do the work for them. The same arguments apply with respect to an enforcement role for the Authority. Indeed, because the Authority carries out the role of adjudicating on applications and licences, it would be particularly inappropriate and unwise to give it the role of prosecutor also. If there is a residual concern about enforcement and the readiness to take an action in certain cases, I would point out that section 6 (4) of the Bill gives the Minister power to take such action.
The Competition Authority, which is dealt with in Part III and in the Schedule to the Bill will decide whether exemptions in respect of anti-competitive agreements should be granted. The procedures to be followed are set out in sections 7 and 8. In order to ensure transparency these sections provide that decisions made by the Authority to grant licences will be published. These decisions will be open to review by the High Court as provided in section 9.
The Fair Trade Commission will be replaced by the new Competition Authority. Section 11 allows the Authority to carry out studies at the Minister's request. Section 12 requires the Authority to report to the Minister for Industry and Commerce each year and that he publish these reports.
Paragraph 6.3 of the Schedule permits the Authority to regulate its own procedure. Much of the detail relating to procedures and administration will, therefore, be decided on by the Authority itself and has been excluded from the main body of the Bill. There are very good reasons for this. It would not be appropriate to enshrine in primary legislation rigid rules and regulations for the new Authority. A new system such as the Authority must have the flexibility to  respond to and to adjust its own procedures to ensure optimal efficiency and fairness in its deliberations. The Authority will be carrying out a quasi-judicial function in making its decisions. We should not unduly rush the more important of these decisions. If we were to make rules in advance setting strict and short deadlines for the Authority's decision-making, this could cause difficulties and uncertainty if the deadlines were not met
I see no reason to clutter our primary legislation with this type of detail. The only way it could be changed if it proved unsuitable would be through primary legislation. I am confident that the new Authority will carry out its tasks with efficiency and speed and with regard to the needs of the business community. It should also be noted that the procedures of the Authority can be regulated if necessary by the Minister under section 23 which also requires that these regulations be laid before each House of the Oireachtas.
The concept of control of monopolies, with mechanical and artificial criteria for determining when they exist, as provided in the Mergers, Take-overs and Monopolies (Control) Act, 1978, will be replaced by a control on the abuse of a dominant position. Section 14 sets out how this will be done if there is a fundamental structural problem arising. This section permits the Minister, following receipt of a report from the Authority, to prohibit the continuance of or require the adjustment of the dominant position. This provision is supplementary to section 5 in Part II, which concentrates on behaviour, and I expect it to be used only in serious cases. Abuses of a dominant position in the market constitute a grave threat to economic life and I expect that those affected will use their rights to take an action in the courts. To ensure transparency in section 14 cases, the Minister will be required to publish reports received from the Authority.
The introduction of these new concepts and straightforward mechanisms will make much of our previous restrictive practices legislation redundant. These  Acts and Orders can be repealed. This is provided for in section 22. This section, and section 2 which deals with commencement, were amended on Committee Stage in the Dáil to make certain that the repeals provided for can take place on a phased basis. The amended sections enable the Minister to retain a particular restrictive practices order and enforcement provisions for as long as necessary. I have had representations made to me particularly about the retention of the Restrictive Practices (Grocery) Order, 1987. This order is being reviewed at the moment by the Fair Trade Commission. I made it clear previously that I do not intend repealing that order before I have fully considered the commission's report on its review and taken its views into account.
The Bill will also amend some of the provisions of the Mergers, Take-overs and Monopolies (Control) Act, 1978. Experience with its operation, particularly in recent years, has demonstrated the need for certain changes. These changes are principally in the area of timing of notifications, the supply of information to the Minister for Industry and Commerce and enforceability. Section 15 and 16 deal with these points.
The criteria against which a merger is to be assessed by the Competition Authority are set out in a clearer fashion in section 17 than was the case in the Schedule to the 1978 Act. In addition to examing the impact on competition, the Authority will be required to give views on concrete issues such as the impact of proposals on the level of employment.
A change will also be made in respect of publication. Under the 1978 Act reports of the Fair Trade Commission on merger cases have not been published. Reports on such cases by the Competition Authority will now be published, but confidential business information will not be disclosed. This will ensure that assessment of significant merger proposals is carried out in a transparent way. These changes were advocated by the Fair Trade Commission in the report of its study of competition law.
The 1978 Act will be amended by  section 19 to take account of the EC Regulation on the Control of Concentrations. This Regulation, No. 4064/89, which has been in force since 21 September 1990 gives the EC Commission exclusive jurisdiction, with some rare exceptions, over very large cross-Border mergers in the Community. Three criteria establish the scope of the regulation: (i) World wide turnover of all the undertakings concerned must total at least 5,000 million EC, about IR£3,800 million; (ii) At least two of the undertakings must each have a turnover of 250 million ECU, about IR£190 million; (iii) Community control does not apply if each undertaking has two-thirds of turnover in the same member state.
Assessment of proposals is carried out by the EC Commission in consultation with the relevant authorities in each member state. A proposal that creates or strengthens a dominant position will be prevented if effective competition is impeded to a significant extent, whether within the Common Market as a whole or in a substantial part of it.
Parts I and V of the Bill contain standard provisions in relation to citation, commencement, repeals, expenses and deal with authorised officers. Section 21 allows for “dawn raids” by authorised officers. This is a power available to the EC Commission in carrying out its duties under Articles 85 and 86 and I think it is essential that authorised officers be similarly given every legal assistance in carrying out their duties under the Act. The Schedule, as I mentioned earlier, sets out the details of the Competition Authority's composition, rules and powers.
Overall, I believe this is a well balanced piece of legislation. It seeks to enhance the climate of the marketplace by introducing into it a legally protected requirement for competition. It is neither unduly intrusive nor constraining on business activity. It allows those engaged in economic activity the freedom to do so but within a system that will require them to conduct their business with due regard to the rights of others. The Bill provides a clear set of guideline rules and the means  to be exempted from those rules in appropriate cases and its coverage should be universal as far as principles are concerned.
Like the Constitution which protects the rights of citizens against the power of certain institutions of the State, particularly the Executive, I hope that the Competition Bill will act as a framework to prevent the abuse of economic power and, at the same time, protect the interests of the consumer. Furthermore, I believe that in introducing this legislation we are putting in place an essential piece of the machinery necessary to achieve a properly competitive economy. This will allow us to achieve real economic growth and allow the economy to perform to its full potential.
There are always winners and losers when changes are made. The only losers this Bill will produce are those who have in the past sheltered from competition and imposed the resulting costs on the rest of us.
Mr. Howard: In responding to the Minister's speech on Second Stage there are a few points I want to make. I share some of his enthusiasm for the Bill. It is important legislation and it will have widespread implications for a wide range of commercial interests and indeed for consumers.
I will not dispute that there are very worthwhile provisions in the Bill and indeed the objectives of the Bill itself are worthwhile. There are, however, a number of criticisms and a number of reservations I wish to enter at this stage in the discussion. The first relates to a point I made on the Order of Business today. This Bill arrives to us in the Seanad very much on a “take it or leave it” basis. It was published on 12 April last and the Dáil dealt with it between 30 April and 3 July. As the Minister acknowledged, it was amended in the Dáil in a number of aspects. He took account of some points that were raised there and well argued and he made some amendments also himself to the Bill. By virtue of the fact that we are here today discussing Second Stage and, as I understand it, Committee  Stage of the Bill will be taken in the Seanad next week, bearing in mind that the Dáil will rise next Friday for the summer recess and the Minister's statement made elsewhere that he wants the measure on the Statute Book before the summer it is very clear that the Minister does not intend to accept amendments.
Mr. Howard: I must enter these reservations at this stage. I believe the credibility and the standing of this House is at issue here. Having made these points I will not be in further conflict with the Chair's feelings in the matter and I will move on to other points.
There are a number of important bodies in the commercial and business life of the country who have made representations and submissions to all of us in relation to the impact of this measure. Many of them have complained that there has been a lack of consultation between the Minister and his Department and between the organisations, bodies and trade associations that will be affected by the terms of this measure. They have argued that they have felt that an input from them has not been allowed and they are concerned that some of the fears they have expressed have not been dealt with in a manner that would satisfy their concerns. I will allude to some of these reservations and fears that have been expressed as I go along in the confident expectation that the Minister when replying will put at ease not only my fears but the fears of the organisations I will mention.
The Bill has quite a number of positive aspects. One thing that gives me satisfaction is the fact that it will apply to public and semi-State undertakings in so far as they provide a service as well as to the private sector and that the monopoly or dominant position, and perhaps the abuse of a dominant position where it arises by a State body in the supply of services, is covered in this measure. I am concerned that the legislation should involve both the public and the private  sectors. I noted from the Official Report of the Dáil that the Minister felt that certain services provided by local authorities would come under the scope of the Bill but, as the debate developed, that did not appear to be the case. Perhaps the Minister will clarify where services by local authorities are included and excluded and the reasons.
I accept there is need to outlaw certain unacceptable practices which have emerged on the commercial and business scene in recent years. It is not necessary for me to pinpoint these as they are well known. I accept in full the Minister's contention that in a market-orientated economy competition is necessary. Very few business people will complain provided the pitch is level and there is a fair opportunity for everybody. I accept the Minister's point that the domestic sectors which have been exposed to competition have proved to be the most dynamic and have contributed most to economic growth.
Abuse of the dominant position comes under this measure. It has caused major difficulties and will continue to do so unless it is contained and controlled in the economy. The consumer's interest is best served by being supplied with a good product and a good service at a reasonable price. The Minister should retain the right to investigate abuses. I am not sure if that right is, to some extent, diluted by this measure but that is a matter that can best be teased out on Committee Stage.
I understand that the Fair Trade Commission will become the new Competition Authority. I noted with interest that in a recent public statement the Chairman of the Fair Trade Commission gave as his view that the primary functions of the new Competition Authority would be first, the licensing of exemptions and, secondly, the issue of certificates of negative clearance. There is a good deal of uncertainty in the business community as to the effect this measure will have on business. There is a widespread belief in business and among traders that the only safe way to operate will be either to have a licence of exemption or a certificate of negative clearance. If  there is validity in that point of view — and time alone will show — this new body will be deluged with applications either for a licence or a certificate. The Minister should assure the House that the Competition Authority will have the necessary financial and other resources to discharge their functions in the event of that development. If that proves to be the case, we are setting up a substantial bureaucratic machine and bureaucratic machinery has not always worked to the advantage of the business environment.
The Minister referred to the restrictive practices order in relation to low cost selling in the grocery trade. That is being reviewed by the Fair Trade Commission. He will decide whether to retain, amend or repeal it when the Fair Trade Commission's report is available to him. There is widespread concern in the grocery trade that repeal of that order would lead to disastrous consequences for small stores and shopkeepers. RGDATA have complained that their concerns and reservations in relation to this measure have not been given due weight and that they have not had sufficient opportunity to make their case. I refer to their communication which I am sure most of us received dated 7 May, 1991. There is no doubt that they are deeply and genuinely concerned about the future prospects of their members, small shopkeepers and family grocers in particular. They are deeply apprehensive about the Minister's stated intention to remove in time the ban on below cost selling. They outline their fears as to why the Bill will not work, their fears for the future of their members, for employment in the trade and the eventual effect on prices.
The industry employs 43,000 people. It is a tough, competitive trade and long hours are worked to provide a service to the public. They make the point that in recent years the retail environment has been made more competitive by the 1987 groceries order which introduced the ban on below cost selling. They point to four positive results of that: 4,000 extra jobs have been created in the sector since 1988; greater investment, approximately  £60 million, in the modernisation of shops over the past two to three years; a reduction in the dominance of the multiple chains which reduced the hostage-like dependence of suppliers.
They go on to outline what they fear will happen should the ban be removed. They say that the removal of the ban would be catastrophic for their trade and for the public and that a new series of price wars with consequent job losses in the retail trade and among suppliers would result. They say there will be less investment as instability increases; illusory prices misleading consumers; the elimination of competition and an increase in dominance of the major multiples and the closure of independent retailers with the consequent loss to the community. They say not only are they concerned at the proposed abolition of the ban on below cost selling but they are also concerned at the Minister's proposal that the industry should police itself. They say that for any competition legislation to be effective there must be what they describe as an independent statutory referee and they refer to the recent milk voucher war as proof of this.
They also express the view that the Competition Bill will not function successfully for a number of reasons. They say that the food trade will be unable to police itself, that it is unrealistic to think suppliers will bring their customers to court and risk permanently delisting. They have emphasised this in many public statements in recent weeks. They also say that small retailers cannot afford High Court costs if they are being deliberately put out of business. However, the Minister moved to that by way of amendments made in the Dáil. They made the following comment:
The removal on the ban will result in job losses at both retail and supply level due to renewed aggression and subsequent bad debts. The courts are already overburdened and ponderous. The legal process will be too slow for the speed/dynamics of the trade. Below cost selling can be initiated with an outlet with 5 per cent of the market,  so “abuse of a dominant position” is not relevant. What do we need?
Maintain the present Restrictive Practices (Groceries) Order, 1987 and appoint a “watchdog” within the new Competition Authority. The latter is necessary as the Office of Consumer Affairs and Fair Trade will be gone.
This organisation represents an industry which employes 43,000. They have expressed major reservations and are of the opinion that they did not get an opportunity to put their point of view across. It is a matter of concern that RGDATA feel that due weight was not given to their points of view.
It is recognised that below cost selling is not a struggle between equals. It is the law of the jungle where the strongest — in this case multi-national chain stores — survive. We know many small businesses which have gone to the wall. The Minister informed us that he is considering the report of the Fair Trade Commission on the ban on below cost selling. He will make a decision shortly in relation to that. I understand that he gave a commitment that if he was amending the order he would come back to the Dáil and seek its approval for it. I am not too clear what assurance he gave in relation to repealing the order in full. What will be the position if he decides to repeal the order? Will he bring it back to both Houses?
There is another organisation with a very high standing in the business and commercial field, the Confederation of Irish Industry. They circulated a newsletter on 28 May. I feel obliged because of the importance of that body to put on the record of the House some of the reservations they expressed.
CII welcomes the proposed abolition of the “Control of Abuse” system and its replacement by the “Prohibition” System in the belief that this will  increase the efficacy of the Competition system and control abuses by those enterprises in a position to act independently of competition. The CII recommends, however, a continuation of the Groceries Order alongside the new competition measures as recommended by the Fair Trade Commission in their recently published study on competition law.
The CII are particularly concerned about the effects of the additional cost which this measure will put on the commercial sector as every company, firm, trader or private individual engaged for gain will be required to examine all agreements and practices to establish whether such agreements have either as their objective or effect the prevention, restriction or distortion of competition and then if in any doubt to seek a licence or certificate from the Competition Authority. That is very much in line with a point I made at the beginning of the deliberations that there is widespread belief within the business community that it will be necessary to have either a licence or a certificate of exemption. The CII echo that point of view and emphasise the additional costs this will put on the industry. I would point out that failure to notify the Competition Authority exposes the enterprise to liability for damages, and exemplary damages and agreements may be prohibited. I will deal with the question of guidelines later in the discussion.
They state that the likely flood of notifications will result in a backlog of cases to the Competition Authority similar to the experience of the European Commission. There will be delays and, more importantly from the point of view of any businessman, uncertainty which may inhibit business activity, investment and so on. Under the heading “Enforcement”, they state:
Under European law, if a company feels that another company is abusing a dominant position it can complain to the European Commission. The Commission may then undertake an investigation of the complaint. This is a relatively cost-effective way for an  enterprise to use the law to protect itself.
Complaints that do end up in court will be extremely costly for both parties... Requiring the Courts to implement policy will impose additional burdens on the administration of the Irish Court system, already the subject of comment and criticism.
I read a statement by a prominent lawyer some weeks ago who made the interesting observation that the Judiciary are not trained to deal with the intricacies of commercial operations. There is an absence of case law that the courts can refer to. He said he was confident that, over time, they would acquire that expertise but in the meantime it would be a somewhat hit-and-miss affair. The point the CII are making is that those who are caught in that hit-and-miss process will be in a most unfortunate situation. It is an interesting point and well worth raising.
In dealing with section 6 the Minister referred to “any person who suffers loss” but later he reverted to the word used consistently throughout the Bill, that is, an “aggrieved person”. I have no problem with a term that refers to a person who has suffered loss but I have every problem with the definition of “aggrieved person”. The CII — and we are on common ground on this — referred to “aggrieved person” and said the provision permitting an aggrieved person to have recourse to the courts is too broad. They would seek to reduce the scope of the definition of “aggrieved person” to cover only the parties to a prohibited agreement or a person suffering damage as a result thereof. I noted with particular interest that the Minister referred to a person who had suffered loss. If that was considered as a replacement for the term “aggrieved person” in the Bill I would be happy.
 The CII complained about the lack of consultation and said they do not feel there was adequate consultation with the industry about this important legislation. They are concerned about the undue haste with which the Bill is being pushed through the legislative process because it does not allow for adequate time in which to assess adequately the implications of the Bill and they have a number of other observations to make which are of interest.
In relation to certificates they say: “the distinction between a licence and a certificate is, therefore, that if an agreement infringes section 4 (1), it requires a licence; if it does not infringe section 4 (1) it may be granted a certificate”. That comes back to the point that there is widespread fear among the business community that they must have a certificate or a licence. In view of the fact that there is likely to be a considerable number of applications for either a licence or a certificate, is the Minister prepared to put a time limit on the period within which an application for either will be adjudicated on by the Competition Authority?
In relation to appeals the CII say: “an aggrieved person may appeal to the High Court against the granting of a certificate”. This temporary or uncertain status of a certificate leads to uncertainty. The authority should have the final word in relation to certification and there should be an appeal to the High Court on a point of law or procedure only.
As regards the term “aggrieved person” they say it is drafted in very broad terms. Any person who is “aggrieved” may initiate damages. However, it is too broad because such a person only needs to be aggrieved, not “injured” or “suffered loss”. The right of action should be restricted to persons who are a party to agreements or who are subsequently injured as a result of a prohibited practice. I look forward to the Minister's observations on that.
We should examine how the Bill will work and anticipate problems that may arise in relation to it. For example, what is meant by “concerted practices”? It will  be difficult to prove conclusively that concerted practices exist. Is it sufficient for the Authority to be of the opinion that concerted practices exist? Does it require something more than a person simply to be of the opinion that concerted practices exist? Could we have some examples of concerted practices?
The term “aggrieved person” is far too general. In making a complaint or initiating an action a person should be in a position to show they have suffered damages or loss. Otherwise, it simply allows cranks to initiate actions against shops, stores, etc. without having to show that they have suffered loss or damage in any material way. It may well be an imaginary action they are complaining about.
Section 4, is really implementing Article 85 of the Treaty of Rome. I am not aware that the right of action is in accordance with the terms of that treaty. I am not aware that similar provisions exist in any other EC country. I believe the Government, for some reason, have decided to introduce the type of action that is in the Bill and perhaps the Minister will indicate the reason.
I referred earlier to the CII document and the absence of a yardstick by which the courts can determine what are described as damages or exemplary damages. How are they to be assessed? In the absence of guidelines, plaintiffs in an action will be expected to produce very detailed particulars in relation to a claim for an injunction or damages under this section. The cost of providing these detailed particulars, which involves the employment of accountants, solicitors, barristers and so on, can be extremely expensive for the companies involved particularly as these actions can be initiated by a person described as aggrived but who may in reality have suffered no loss.
Section 9 does not permit a party refused a licence or a certficate by the Competition Authority to appeal that decision. I know the Minister dealt with this at length in the Dáil but to deny that right of appeal is contrary to natural  justice and procedure. I find the position unsatisfactory.
I do not intend to deal with that part of the Bill concerned with takeovers, monopolies, mergers and so on, largely because I agree with it. I want to deal at some length with the powers that have been given to the Competition Authority. We know that the Fair Trade Commission will be renamed the Competition Authority. I am concerned in some cases, and not clear in others, about the precise powers this Authority will have in discharging their duties and in dealing with the public.
The powers that can be given to authorised officers and to the Authority are wide-ranging. These powers go deeper and beyond what the law in this country has attempted up to now. On the position of members of the Authority and its authorised officers, what protection will exist for these members and officers as if in the discharge of their duties they are guilty of abuse or wrong-doing? I am asking about the availability of protection for members of the Authority and authorised officers where necessary before I go on to a contrary situation that I fear might arise.
Members of the Authority will be appointed by the Minister, and will include a chairman and not more than four and not less than two members. Among its function will be the summoning of witnesses to attend before them. A summons must be signed by at least one member of the Competition Authority and they can examine an oath witnesses before them. In this regard any member of the Authority is authorised to administer an oath and, in effect, to act as a commissioner for oaths. To the best of my knowledge commissioners for oaths are generally solicitors and are appointed by the High Court. What precise authority will the members of the Authority have in the administration of oaths, the summoning of witnesses and particularly on the examination of oath of witnesses attending before them? What is the source of that authority? Will they be appointed, as commissioners, for oaths are, by the President of the High Court? Will they be commissioners for oaths in  the full sense or will they constitute some other category of law enforcers we have not had up to now?
The Authority can require a witness to produce any documents under such person's power or control. This undoubtedly may well be necessary in view of our experience in certain well-known cases in recent times. Nonetheless it is an invasion of the confidentiality between clients and their professional advisers, whether solicitors, accountants or others. What will be the position of solicitors and accountants in that situation?
I want to deal now with the provisions for non-compliance with the requirements of the Authority. If a person fails to appear before the Authority having been duly summoned, if they refuse to take the oath, if they refuse to produce any document in their power or control which has been requested by the Authority or if they refuse to answer any questions, they can be found to be in contempt of court as if the Authority were a court and empowered to commit for contempt of court. They will be guilty of an offence and liable on summary conviction to a fine not exceeding £1,000 or imprisonment not exceeding six months or, at the discretion of the court, to both fine and imprisonment. The powers to summon witnesses to be examined on oath and to require production of documents are the equivalent of powers conferred on a judge appointed by the Government and exercising his powers in the court of law. The Competition Authority in these circumstances will be functioning as a court of law. Lay people will be acting as judges without the knowledge and experience of a judge in a court of law. We may be in danger here of breaching a long-standing constitutional separation of the judicial and executive functions of State and I do not believe Seanad Éireann should lightly acquiesce to such a fundamental change in the application of the law.
A person who does not appear before the Authority or refuses to take an oath or to produce documents or answer questions will, in effect, be in contempt of  court. Who does the sentencing here? Is it the Authority or is it a court of law? In either case what appeal procedures are open to the individual concerned? A penalty or term of imprisonment can only be imposed by a judge in a court of law in which case the member or duly authorised officer of the Competition Authority will have to give evidence against such persons to obtain a conviction.
It appears the Competition Authority may only prove that a person was summoned as a witness and defaulted in attending but will not have to state why such person was summoned in the first instance. I would like clarification on that point. Am I correct in assuming that they do not have to give a reason for a summons? Is it sufficient for the Competition Authority to prove that the witness refused to take the oath required by the Authority without giving the grounds for requesting such an oath? It appears that these offences become absolute offences in such a case, namely, that what was requested by the Competition Authority was not complied with and that there is no duty or obligation on the Authority to give its grounds for summoning in the first instance. There appears to be no provision whereby a witness summoned to attend before the Competition Authority may attend with his legal adviser or may conduct such hearing through his legal adviser. Again, I would like to know the precise position on that aspect.
The Authority has almost the same powers of inquiry as a court of law dealing with a criminal offence. There appears to be no provision for a witness to appeal against a summons to appear before the Competition Authority. I would like the Minister to confirm if that is the case. It is unjust not to make provision for a person to appeal against a summons to attend before the Competition Authority and provision should be made for it. Our judicial system provides for such a situation and why then should an exception be made here?
It appears from the way the legislation has been drafted that the Competition Authority can do no wrong. It would  appear to have absolute power of inquisition. If the Authority at some stage goes off the rails, how does the Minister bring it back on? How does he restrain it? Perhaps amendments should be considered to provide against such a situation developing. I would not expect it to go off the rails, bearing in mind the people who will constitute the first Authority but it is a possibility that should be borne in mind and provided for. Accordingly, I hope that amendments can be introduced that would allow a person summoned to attend to speak through his legal adviser with proper legal representation and with a right of appeal against any decision made by the Competition Authority.
With regard to authorised officers, both the Minister and the Authority can appoint such officers to carry out functions under the Bill. An authorised officer may apply to the justice of the District Court to obtain a warrant authorising him for the purpose of obtaining information in the exercise of any of the functions of the Competition Authority or the Minister under the Bill as follows: enter and inspect premises at or vehicles in or by means of which any activity in connection with the business of supplying or distributing goods or providing a service, or in connection with the organisation or assistance of persons engaged in any such business, is carried on. This is the equivalent of a warrant usually granted to a member of the Garda Siochána investigating an alleged criminal offence. The warrant provides that the authorised officer can gain access to any premises where the business is being carried on or to offices in connection with the organisation or assistance of persons engaged in such business. The Minister in his speech used the rather fancy term of “dawn raids” and that is the provision being made.
Reference is made in section 21 (1) (a) to powers in connection with the organisation or assistance.... That appears to imply that banks, solicitors and accountants, etc. can merit major investigation with invasion and intrusion caused to one's business advisers and to parties assisting such business.
requires the person who carries on such activity and any person employed in connection therewith to produce to the authorised officer any books, documents or records relating to such activity which are in that person's power or control, and to give to the authorised officer such information as he may reasonably require in regard to any entries in such books, documents and records.
These powers constitute the powers of a court of law where witnesses are obliged to bring documents to the court and to be examined in relation to them. In effect, officers appointed by the Minister or by the Authority will be acting like a judge in a court of law, compelling witnesses to provide this information.
There are further powers for authorised officers under the same section. They can inspect, copy and take extracts from any book, document or record. They may require a person who carries out an activity in connection with the business of supplying and distributing goods or providing a service, or indeed any persons employed in connection therein, “to give to the authorised officer any information he may require in regard to the persons carrying on such activities (including, in particular, in the case of an unincorporated body of persons, information in regard to the membership thereof and its committee of management or other controlling authority) or employed in connection therewith.” The details of what is required here need clarification. The Minister should explain the meaning of the words “in connection with the organisation or assistance of persons engaged in such business” as contained in section 21 (1) (a).
I want to raise with the Minister the position of a person who becomes caught up in this situation and who is genuinely unable to assist the authorised officers. If there is no information to impart but if the authorised officers refuse to accept this and maintain that the person concerned is being unco-operative, what  recourse does an innocent person have under such circumstances? What power of appeal does he have and how may he vindicate himself?
I also ask the Minister to clarify what is meant by the words “and any person employed in connection therewith to produce to the authorised officer any books, documents or records relating to such activity which are in that person's power and control” as referred to in section 21 (1) (b). References to persons employed in connection therewith could mean persons who provide services to the party carrying out the activity, namely solicitors, accountants and trade organisations. Will the Minister amend this to mean persons directly employed by the person who carries out such activity and excluding those who provide independent services?
Any person who impedes the organised officer and does not comply with his requirement shall be guilty of an offence incurring a £1,000 fine or 12 months' imprisonment or both. It appears that an absolute offence can be committed in that the authorised officer is given absolute power in such proceedings and may declare, without evidence, that he was obstructed or impeded. He may contend that when questions were asked replies were not given or that when documents or books were requested they were not produced. Similarly, he may claim that when an explanation of entries in books or documents was requested it was not provided. In each case, on the word of the authorised officer the court is empowered to convict and impose a fine or imprisonment. The terms and provisions appear to have been drafted on the basis that a criminal offence is being investigated. Will the Minister respond to these points?
I have raised a number of issues that were of concern to me and to others also. It has been necessary to bring these matters to the attention of the House and the Minister to seek clarification that may well assuage genuine and perhaps well-founded fears. The fact that I have raised questions on some aspects of the Bill does not mean I disagree with the parts of the  Bill about which I have been silent. I accept the need for a Competition Authority with the powers necessary to do its duty but I believe that in a few instances we are giving this Authority powers that are unprecedented in our judicial system. This departure from practice may be dangerous.
I was anxious to establish the protection available to authorised officers and to members of the Authority who may act illegally or who abuse their position to the detriment of innocent members of the business community. It is a two-way situation there. Powers of extraordinary depth and range are being provided under this Bill to officers which may affect many people not involved in the matters being investigated. If an officer believes, quite wrongly, that some person is obstructing him, since conviction appears to depend on the officers' opinion what protection is afforded the innocent party? No protection appears in the Bill's provisions as far as I am aware and I stand open to correction on this. That is a serious matter.
I regard this as a lengthy and complicated Bill, introducing complicated and far-reaching changes. It will have major effects on trade and business, given the sweeping powers included in its provisions. Judicial powers are being given to what will be a non-judicial body, namely, the new Competition Authority and its authorised officers under sections 4 and 8.
I regard it as unbalanced that in the granting or refusing of licences or certificates a third party may appeal or object to the granting of a licence or certificate but in the case of a refusal the party directly affected has no right of appeal. I am concerned also about possible abuse of the dominant position, and the investigation and actions open to the Minister. Something occurred to me when I was reading about the abuse of a dominant position. The GAA are having a bonanza with replays and so on and if I or a member of the public were to write to Croke Park wanting two tickets for the hurling or football final and if they wrote back saying I was not entitled to them,  that they had their own system of allocating tickets then I think the GAA would be caught fairly and squarely under this legislation. It would be an interesting development.
In connection with the abuse of a dominant position I will mention a personal experience some time ago when importing a second-hand car. I arrived to pay the duty on it and the Revenue Commissioners got on to the motor manufacturers or importers to ask the list price of a new car of that model and since this price is deliberately inflated I was caught for a rate of duty beyond what I pay in the normal course. However, if I were to go to the people who supplied the Revenue Commissioners with that list and said: “I want to buy that car, here is the cash,” I would get it for thousands of pounds less than the list price. That is a clear case of abuse of a dominant position and I would be delighted if such people were apprehended under this legislation.
The investigation and actions open to the Minister under sections 5 and 14 regarding abuse of the dominant position require detailed debate and examination preferably at Committee Stage, and the same is true of many other parts of the Bill. It would appear that the House will not have the opportunity to amend this Bill and I regret that. The Minister has indicated that he wishes to have the Bill before the recess and the Dáil will not be in session after Friday to take any amendments that may be made here next week. Despite the need for the Competition Bill and despite the many valuable aspects of the Bill which I fully acknowledge, in view of the disability that this House has been placed it may well be its duty to refuse the Bill a Second Reading but before coming to that conclusion I await the Minister's response.
Dr. McCarthy: I welcome this Bill and commend the Minister for bringing it before this House. In this area of business, fair trade and company law, a virtual minefield of complexities, it is most satisfactory that this Bill is presented in relatively simple and uncomplicated sections, yet clearly addressing problems  not previously addressed in this country. I thank the Minister and his officials, parliamentary draftsmen and in particular the Fair Trade Commission.
On 9 December 1987 the then Minister for Industry and Commerce, Deputy Albert Reynolds gave a commitment in the Dáil that a full and comprehensive investigation would be made of Irish competition regulations and that that investigation would be instituted. The Fair Trade Commission undertook this commission and did it extremely well. They embarked on comprehensive and detailed discussions with representatives of the European Commission, the United Kingdom Office of Fair Trading, the Spanish, Norwegian and US authorities, the competition authorities of Sweden, Greece, Portugal and France and further information was obtained from The World Law on Competition published by Matthew Bender in the annual report of the Committee on Competition Law and Policy of the OECD. This shows the detail investigation conducted by the Fair Trade Commission before any legislation was put before the Houses of the Oireachtas and that this Bill has not been introduced in a hasty or ill judged reactionary attempt to improve existing legislation by introducing legislative change alone. If that were so it might not necessarily achieve the objectives of the single purpose of this legislation which is to give Ireland a competition law comparable with other developed countries and which will I hope be as rewarding in economic benefits as similar legislation has been to the economies of many of our international competitors. As the Minister said, competition is the lifeblood of any economy and to exclude, prevent, muzzle or bury it would cause long term stagnation in many sections of our economy. Irish companies who will have to face up to the highly competitive standards as a result of this legislation will benefit enormously in the long term and will ideally be more prepared to face up to the challenges that the Single Market will undoubtedly impose on all of us from 1992 onwards.
I am sure it is quite correct in a broad  sense to say that this Bill is modelled on Articles 85 and 86 of the Treaty of Rome and that the implementation of these Articles in the EC context has benefited both suppliers and consumers. Irish companies which had been subjected to the competitive effects of these Articles of the Treaty have generally grown and prospered. Taking that as a model it would surely be similarly beneficial for those companies who are orientated solely towards the domestic market to face the rigours and challenges of unrestricted competition from wherever that competition might come. I am particularly glad that regulatory functions under the Bill will be taken into the Department of Industry and Commerce. This is fair and independent practice although such regulations are perceived by some as a mechanism to stifle or muzzle the Authority. The caption on the front of one of our more prominent business journals is unbecoming to any responsible business journal, but the writer also suggested in an interview in that journal, that Members of this House and of the Dáil do not possess the intellectual capacity to tease out the intricacies of this particular Bill. So much for the super-intellectualism of some journalists.
I am glad that the principles embodied in Article 85 of the Treaty of Rome are incorported into this Bill providing an exemption procedure whereby certain types of agreements may be exempted or granted licences even if they appear to be anti-competitive, if in the totality of circumstances they would offer wider and larger benefits to the consumer. There is a classic international example of this in the joint venture involvements at European level in the Channel Tunnel construction notwithstanding whatever other hiccups might have developed there. This is a joint venture between ten major construction companies in the United Kingdom and France to construct a Eurotunnel which exemplified effective cooperation among many competitors to the overall good of the community which will benefit from the facilities provided by that tunnel.
 The development of competition law will probably have major effects. It will bring about a new relationship between the legal people, the barristers and lawyers, and economists in the analysis of cases, which is something new here. If one looks at the presentation of competition law in the European Community one finds that law is the servant of economic theories and philosophies. This is what will happen here as a result of the implementation of this legislation.
The Bill, broadly, prohibits all anti-competitive arrangements. I am glad that the abuse of dominant position in the market is being dealt with. Within the Bill we have examples of what these abuses are. They include price fixing, limiting or controlling markets, sharing markets and imposing unfair purchase or selling prices. Also included, although not cited directly, are activities such as predatory pricing or any new forms of anti-competitive activity. The Bill generally sticks to the tried and tested models of Articles 85 and 86 of the Treaty of Rome which have served the community well.
The Bill will apply to every sector, individuals and companies alike, and equally to the private and public sectors. It will apply to every undertaking engaged, for gain, in the supply of goods and the provision of services. The activity engaged in must be for what is normally considered commercial gain and must be able to affect trade in the State or in any part of the State. That rule applies to banks, building societies, publicans, chemists, shops, supermarkets, lawyers, architects and all professions. I am glad to see that the Bar Council have agreed to abolish their practices of fee fixing.
By prohibiting anti-competitive activity the whole economy stands to benefit. Increased competition promotes growth, innovation and productivity. The downstream effects of a competitive environment are very positive — we have only to look at the other countries with strong competition legislation, for example, Germany and the United States. The Bill also confers new rights on individuals or undertakings to assert  their liberty to engage in economic activity and to defend themselves against anti-competitive activities engaged in by others.
I am glad the Bill provides for the taking of private actions in the Circuit or High Court and that action can be taken by an individual, a group or an organisation. This puts the power directly in the hands of those who are affected and they will not have to wait for the State to take a case for them. This also allows not only for injunctive relief but also for damages, including exemplary damages. Giving such a power to the State would have been costly and against the fundamental principles of the Bill which recognises the economic rights of individuals. In any case, if the Director of Consumer Affairs and Fair Trade or any other agency had this power, it is likely that people would wait for him or her to take the action. It is also important to note that the Minister has a right to take a representative or class action under section 6 of the Bill.
I believe this is very excellent legislation. There have been considerable changes in company law since the present Government came to office. I compliment the Minister on, first, introducing the Companies Act which had been lying around for far too long and is now part of the legislative procedure. Now we have this Competition Bill which will supersede many of the piecemeal regulations we have had over many years.
I do not have the least objection in principle to the principle of competition. However, I am profoundly sceptical about the significance of competition or, indeed, the idea as it is applied in practice. The whole idea of competition comes from Adam Smith who wrote a magnificent treatise on the Wealth of  Nations some 200 years ago. The problem with Adam Smith is that, like the Bible, you can quote what you wish from him and leave out what you do not like. This is where this whole idea of competition and the unseen hand comes from.
One of the more interesting letters that appeared in the columns of The Irish Times recently was one from ex-professor, or perhaps emeritus Professor Patrick Lynch about some recent economic commentaries. He complimented not an economist but Fr. Seán Healy of the Conference of Major Religious Superiors for beginning to address some of the modern realities unlike, he said, most of the profession of economics in this country who were still operating on the basis of theories of 20 years ago.
I think there is a little in this Bill of the theories of 20 year ago, and a good deal of the theories of 200 years ago. The theory of the market economy is that the self-interests of individuals, operating within a free market, result in an optimum distribution of resources, expenditure, consumption and so on. Adam Smith called it the “invisible hand”. The regulatory mechanism for that system is, we are told, competition. This view is not the monopoly of one sector of the economy or the other. As Senator McCarthy quoted, some of those countries that are the models for social democracy in Europe are as keen on competition as many of those who would see themselves, like the United States, as being on the opposite extreme of the economic argument. So we are not involved in a profound, nonsensical, ideological argument.
I am quoting from J.K. Galbraith and Nicole Salinger, Almost Everyone's Guide to Economics. When he says, “almost everyone” he is leaving out a large section of the profession of economics because they would not like what he has to say about that profession. I suspect he was hoping they would not read it. It says:
I suppose if Adam Smith discovered that 200 years ago, when he first formulated his theory, we have reason to be grateful that we now have the legislation to try to counter-balance that tendency. The interesting contradiction is that Adam Smith's theory also assumed that competition was, by defination, self-regulating. The final area of the basic theory of the sale of goods or of the economic system is that, since competition and the market bring the best possible results, you want as much of both as possible. The greater the trading area, the more competition, then the stronger the market. Also, the greater the opportunity for specialisation and division of labour, the greater the efficiency. The corollary of this is profound commitment to extensive, if possible worldwide, free trade. That is the theory. At this stage one would counsel all Governments to be very wary of economists, particularly this Minister, for whom I have considerable respect for his intellectual independence and indeed his displays of political independence on occasions in the past. A recent appointment by him of an economist to a body that should have a profound influence on our future industrial policy is one that suggests to me that he is not half as wary as he ought to be of economists. In the same book Professor Galbraith has some very interesting things to say about economists.
Mr. B. Ryan: He is and, therefore, has an insider's perception of economics. One has to be extremely wary of the claims of economic theory. I have a very interesting lecture in my possession by a Nobel Prize winner on the increasing absence of any reliance on empirical information by many economists. Their models are exciting mathematical models. This is, unlike the profession I am in or the profession Professor Raftery  used to be in where, if you have a theory, you actually have to test it out with the facts to see whether it is a good theory or not. However, an increasing volume — apparently — of economic writing is conveniently saying: “Well, we do not have any sufficient empirical evidence to justify this theory but we still think it is a good idea and should be tried out.” If we did that in the area of the real sciences we would be in a state of considerable disaster very quickly.
Regrettably, a large amount of what is put out as economic fact is no more profound than opinion and if we are looking at something like competition we would want to keep our eyes fairly wide open. Some of us on the left — as always, I exempt myself from this criticism — could legitimately be accused of wearing ideological spectacles in terms of our adjudications on reality, but there is an increasing tendency now for those who would be on the other side of the economic divide to wear equally tunnel visioned ideological spectacles; one could even say, to find themselves in an ideological haze. The problem about competition is that only economists are really in favour of it. People who engage in economic activity will take every possible evasive action to avoid competition. It is not just a tendency of some nasty people. I do not want to keep quoting Galbraith; I simply like the book because it is written by somebody with some authority. It is an understandable tendency of any human being to try to liberate their own wealth or, indeed, the price they get for their labour from the marketplace. That is an almost irreversible tendency.
When you look at what Adam Smith meant by competition it was that in the provision of any goods or service there were sufficient providers in the marketplace so that the absence of one would make no difference to the marketplace. That is what he meant by that scale of competition. That theory was developed largely in relation to situations where businesses were owned by individuals, with small-scale agricultural and industrial production. When you consider that Adam Smith has considerable  hostility to the idea of a joint stock company or the precursor of the modern limited company because of what he saw as its instinctive predatory and self-preservationist nature, you realise that what we were being presented with as a model probably never existed, and rarely exists today.
For instance, in the same book Galbraith says: “Around half of all economics lectures begin with the statement, ‘Let's assume competition.”’ If we could assume competition the world would be very different. The problem about competition is that it means different things to different people. As the same Professor Galbraith has said, many senior American corporate executives are forever talking about how tough it is in the marketplace but most of them would not recognise the marketplace if they were in it because they are usually in a position to fix their own income.
The whole theory of competition is that it is effectively self-regulating and that legislation of this kind, well-intentioned though it is, is simply to fine tune here and there in the odd place where an excess takes place. If you were to accept that all the time in many areas, even in large areas of economic activity, competition either does not exist or is extremely imperfect, then the scale of work involved in this would be enormous. We have to assume that that is not the case. The interesting thing is that Professor Galbraith assumes in the United States — and I use the United States because the Minister adverted to the American anti-trust legislation as being the bedrock of all of this — about 50 per cent of economic activity has moved into such market control or market dominance that it is no longer regulated by competition.
I have referred to what he had to say about anti-trust legislation in the United States and its effectiveness or otherwise. The truth is that large corporations do not compete in the way the market wants them to compete. They compete on the margins with glossy advertising and so on. They do not compete on price because the natural self-interest not of  the capitalist — and this is where the left is enormously deficient — but of the bureaucracy at the head of large corporations is far too cautious and wary. Also, the state that is meant to regulate them knows that the disappearance of one of them from the market would not be without effect on the market, because they are so big. Once you have the regulatory authority, for example, the state, knowing that the large corporation has such a dominant market role that its disappearance would have a huge effect on the economy, you no longer can have competition in the way the theory suggests.
There are later economic theories that deserve considerable scrutiny also. The extension of this theory is the bedrock of the European Community. As the Minister said, the basic principles of this legislation are taken from the Treaty of Rome. They are the principles of competition and of not allowing a company to abuse a dominant position. I cannot but say, slightly ironically, that it is hardly something to boast about, that we are putting into legislation a law which says that nobody should abuse the dominant position. I take that as read. The issue is whether we should allow people to enjoy or to achieve a dominant position.
Because, like a number of things we have done in this country, it is clouded in a slightly ideologically simplistic view of competition I fear that the consequences of this legislation may be to inhibit development in some areas. I am much more concerned about another effect. In the competitive marketplace, not everybody competes as an equal. Professor Galbraith, in the same book, specifically identifies one area, that is, those who sell their labour. The point he makes as an illustration is that if somebody had a product to sell, the product would probably keep, he does not have to sell it today. In a real competitive economy if you are selling your labour and you cannot get work, then you go hungary. As he said, that is an inconvenience that cannot get work, then you go hungry. an ideal market, if such existed, different people participating in the marketplace,  particularly those who have to sell their labour, are at a disadvantage. Which is why, he says, many even neo-classical economists have reluctantly accepted the idea that trade unions are a good thing.
The trouble is that the competition we seem to be getting keen on here is as much based on a sense of having a grudge against trade unions as it is on the benefits to the consumer. Whatever else one might say about the United States, it at least counterbalances its free market ideology with a legislative provision for a minimum wage. This means you cannot simply use your capacity to extract cheap labour to improve or enhance your competitive position. There is a plateau below which you may not lower your wages bill. We do not have such a provision in this country. As a result, we have the much lauded private sector airline paying its airline pilots not much more than one and a half times the average male industrial wage. Apparently this is a good thing. It can also make demands from its workforce about when they work, the hours and their flexibility. This must be enormously disruptive to family life and must cause strain and stress.
In terms of what makes this country worth living in it is not in our long term interest to march off in an ideological pursuit of competition based on the exploitation of considerably cheaper labour. As there are 250,000 unemployed people in the country you will inevitably get people to work for very low rates of pay. If this were to extend through the community, you would simply end up with increasing numbers of poorly paid workers unable to be the consumers of those goods and services which were allegedly coming to them more cheaply. The corollary of a good active competitive market is good active labour legislation which protects workers. Otherwise there may be no protection for the workforce where there is competition between companies, to the extent that it can exist, in which large numbers of the goods and services are provided by what can only be described by that most awful word, an oligopoly; in other words, it is  not a monopoly, but the numbers involved are so small that they actually dominate the marketplace.
If somebody gets the idea of putting local authority services out to tender, for instance, that may well induce less than responsive trade unions to agree to intelligent work practice. It may also, on the other hand, facilitate the provision of services by companies who do not feel obliged to pay people who are unskilled and poorly trained a reasonable wage. If we are to have local authority services put out to tender, provided all those tendering are prepared to agree to pay the workforce of their tendering company the trade union rate for the job, that would be a very interesting idea. But competition based on the easiest option in our society, cheap labour — which you will always get in a society with 250,000 unemployed people — is competition on the backs of the poorest, not competition between thrusting entrepreneurs. It is a competition of exploiters.
It is no surprise that the major supermarket chain which is most often identified as having the lowest prices for the standard basket of household purchase is the one which has been lambasted by the Labour Court for its attitude to part-time labour. I do not believe that that is the sort of society we want. Therefore, I do not believe that competition without protection of the labour force is a good thing.
I feel very strongly that economists should be treated with some scepticism, unless they can produce evidence to support their theories. Evidence does not mean simply saying that two things happen at the same time, therefore one causes the other. For instance, there is an economist abroad, towards whom the Minister seems to show some approval, who says that the increases in public sector pay are causing the decline in growth in our economy this year. The fact that the two things happen together does not mean that one caused the other. The fact that ice-cream sales and drownings increased during the summer does not mean that eating ice-cream caused people to drown. You have to prove  cause and effect. It is a quality that seems to be lost in many economists.
If we are going to laud the idea of competition we must ask ourselves first whether we realise and accept that economic activity is meant to be for the benefit of human beings, not for their subjection. Any vigorous competition must be based on humane and proper protection for our workforce. Second, we must believe that it is of some use to us.
This country is denuded of virtually every major international airline, with the biggest British airline having pulled out of the country because price competition on the Dublin-London route had become too severe. This is an airline which until this year was enormously profitable. It is one which many people of a different ideological position from myself used to hold up as a model of successful privatisation and which did not have the constraints Aer Lingus would have in terms of being a State body. British Airways pulled out of the Dublin-London route and the Cork-London route because price competition had become so severe. I am fascinated by the argument that the consumers are better off in this country because we do not have British Airways and have marginally reduced prices in some areas. I thought the Minister of State had enough of this House to do her for the rest of her life.
Mr. B. Ryan: She has my sympathies. She has spent more time in this House than I have. The point I was making is that the introduction of Ryanair seemed a great idea to everybody, to sort out the public sector trade unions. I am fascinated by the idea that the unions dominate Aer Lingus. If you want to sort out some of the ageing bureaucrats at the top of the trade unions, I would be the first to support that campaign. Most Members of the Oireachtas are quite happy to do business with them. The trouble is that where there are well organised trade unions, members negotiate good conditions of work for themselves. I am intrigued by the fact that a private sector  competitor has been encouraged to reduce the profitability of Aer Lingus, perhaps quite legitimately, because Aer Lingus operated a price fixing arrangement with British Airways. However, to do this to a company that has actually been more successful at creating employment than most other companies in the private sector in recent years, and to reduce its access to profits which could be used to extend its other profitable and non-travel activities, is carrying ideological obsession to the point of nonsense.
I am also intrigued by the obsession with competition. There is almost a correlation here; the more people are keen on competition, the more they want to defend the Common Agricultural Policy. I would like to hear from some of my colleagues in this House, in Fianna Fáil, Fine Gael and the Progressive Democrats, how they reconcile their belief that free market competition is good with the resolute defence for something that is the direct antithesis of free market competition, namely the Common Agricultural Policy, which penalises consumers with high prices, penalises taxpayers with huge surplus stocks and gives some farmers a good living. Is it the case that competition is good for trade unions and bad for farmers? I would like to hear an explanation of the logical consistency of both positions because most Members in front of me are in favour of competition but not for farmers. That confirms what Professor Galbraith said, that everybody thinks it is a good idea for everybody, except themselves. As he said, the only people who believe strongly in real, free competition are economists in secure State-funded academic jobs who do not have to deal with it themselves.
I welcome this legislation; nobody could argue with it in principle. However, on a couple of occasions when I was thinking of buying a computer, I discovered that when you add up the question of currency variations, VAT etc., there was what was described by a friend of mine as “the Paddy factor”, the extra  25 per cent added to the price after everything else has been dealt with, which we are told is because of the extra transport costs. When one then discovers that Belfast is 100 miles further from where the computer is being sent than Dublin and that it is still being sold 20 per cent cheaper in Belfast, one realises that there is a supplier who has a monopoly and who has an Irish agency and can, therefore, slip a convenient 25 per cent on to the price. There are whole areas of Irish activity where there is a considerable need to open up the activities to proper scrutiny.
Mr. B. Ryan: I have no objection to competition, provided it is not at the expense of the most vulnerable in our society, like the cheap labour used in contract cleaning or in many of the late night stores and the extraordinary exploitation of part-time workers by Dunnes Stores. I have no objection to competition as long as it is not at those people's expense. If it involves efficiency, good management and organisation, it is a good thing. We tend to perpetually identify the appalling quality of our management as one of our problems but then all our remedies deal with everybody else's problems, wages, the public sector and so on and the appalling quality of our management does not get us anywhere.
We can raise the theory of the abuse of the dominant position and so on. I am somewhat sceptical about the significance of saying in law that nobody will be allowed to abuse the dominant position. I actually took for granted that in no area of our society, in a democratic society, would we allow any group or individual to abuse their dominant position. For example, many people beat a lot of drums about the trade unions and the fact that they should not be allowed to abuse their dominant position to the extent they do. Yet, we hear the two big Irish banks argue that their charges are reasonable because they are not as high as those in Germany, while at the same time, they  charge the highest real interest rates in the entire OECD, according to the last report I read and nobody is prepared to do anything about it.
I tend to believe that this legislation, like most legislation, is for the small man, the small company and that the large players, because of the fact that they have what Professor Galbraith would describe as “market power”, will not be subject to similar regulation. I am convinced that the service in our banking sector for the individual customer has deteriorated disgracefully. I have had to queue more often in banks since they modernised their technology than ever I did. That is a dominant position and they are using their dominant position to pay off the appalling investment decisions they made outside the country. I am sceptical about legislation which says “they shall not” when that most regulated sector, banking, with the Central Bank keeping a watchful eye on them, apparently is allowed to abuse a dominant position to the extent that small businesses are squealing with pain because of the way they are treated. I am wary of the background to this. In regard to the licensed trade, I am sceptical about the dubious practices the major brewery here uses to persuade publicans to predominantly sell its products. Will any Government say to a major capital investor that they are abusing their dominant position?
This theory of competition, going back as far as Adam Smith, is logically driven towards a commitment to free trade and to competition in a larger and larger bloc. The Minister and some of my colleagues here have said that the introduction of competition in the home market may well improve the situation for Irish companies post-1992. My problem with that is that the economic theory which was used to justify the creation of the Single Market is increasingly under attack from within the profession of economics although most Irish economists choose to ignore it. I do not wish to quote Professor Galbraith again but he explains the way economics work. There is a considerable amount of authoritative academic work on trade which suggests that one of the  most sacred principles, the assumption that if there is free trade in the long term there will be equilibrium which will distribute the benefits evenly throughout the sector within which free trade takes place, is increasingly under challenge.
During my adult life, having observed even at a superficial glance, the United States, it is perfectly obvious that in a large-scale free market economy with no boundaries to trade, there has not been an even distribution of the benefits of growth throughout that economy. Therefore, one of the problems about the ideological commitment to competition, and the corollary of that, which is free trade, is that we are liable to sell ourselves down the tubes. The NESC report entitled Ireland in the European Community gives a terrifying forecast of the future. On page 348 of that report it states:
In summary, the new theory of trade takes account of those very features of the modern economy — increasing returns, external economies, the advantages of experience, monopoly power and the barriers to entry created by high capital and R & D requirements — which were originally used to explain regional inequality and divergence. Contrary to the impression created by the ‘Cecchini Report’ it is those new theories which include the possibility of cumulative processes of growth and decline. There is every justification for Cecchini's Committee drawing heavily on the new approach in identifying and estimating the aggregate benefits from completion of the internal market but, having done so, it behoved them to listen also to what the new theories say about the distribution of those gains.
There may well be more trade within the European Community after 1992 because of the competitive forces. There is no guarantee, in fact, there is considerable evidence to the contrary, that those aggregate benefits will result in any equalisation of economic performance within the Community. That is what bothers me about those who would have us ride on the steed of competition and free trade  into this apparently new dawn of great things in the future. The economic evidence is to the contrary, that a small country on the periphery which does not have the right to offer various forms of protection to its internal markets, which is told that the limits of support for its own infrastructure will be defined elsewhere, is not in a position to compete in terms of scale.
In conclusion, I would advise care in this area. It is grand if one is dealing with buttons, white goods, television sets or the panoply of consumer goods but it is entirely different when dealing with an area which has a natural semi-monopoly and it is detrimental in areas where there is a commodity which cannot be priced, for example, health care. There are what I can only describe as eccentric economists — and there are many of them in this country — who think we should privatise health care, that somehow if we introduce an element of competition into the health care system we will have a better system. Much to my amazement they cite the United States as an example of a successful privatised health care system. The fact is, of course, the United States health care system as a percentage of GNP is the most expensive in the developed world, heading towards 11 per cent of GNP in comparison, say, to Sweden and Ireland, at around 6 per cent and the United Kingdom at around 7 per cent. In spite of that, a large section of the United State's population do not have medical insurance. Approximately, 25 to 40 per cent of pregnant women in America do not go to a doctor until less than six weeks before their baby is born. Although they are a rich country, they have a very high mortality rate.
This legislation would be useful if the theory worked but it will not except in areas where consumers are being ripped off. However, if it is a prelude to a view of the future, this country will not benefit in the long term because it will not do the things the Minister wants it to do. It will not create the climate in which large scale competitive internationally trading Irish companies will develop. It says nothing about what I listed from the NESC report  such as the high capital cost of research and development or market entry. If we are to have only the same resources available to us as the rest of Europe, we will inevitably fall behind.
Incidentally, the Bill contains one of those mechanisms which will make entry to the market difficult. While everybody envisages the aggrieved person suing somebody who has indulged in anti-competitive practices, has anybody thought about the reverse, where the person who has a successful or dominant position in the market will use precisely the processes available in this legislation to undermine a potential competitor by suing them on the pretext that the new competitor is indulging in anti-competitive practices? This is a well known trick in the United States. I am acquainted with a businessman, in a totally and almost classically Adam Smith sort of business, making wire brushes and products like that. As his business began to grow the dominant company in that region in the United States sued him for being in breach of anti-trust legislation, not because the dominant company believed that but because they knew they could tie him up in the courts for years and at great legal cost. As my friend's company had been expanding and, therefore, were a capital consumer and the other company had developed and was not in need of capital, he effectively was forcing my friend to divert capital resources out of the company into the courts.
The legitimately aggrieved citizen will not be the only person who will use the courts under this legislation. The person who has a niche in the marketplace and who is rich because of previous success may well be able to use the judicial process outlined here to prevent somebody getting a similar foothold in the marketplace. That is the direct opposite to what is intended. It is presumably for such reasons that Professor Galbraith drew the analogy between those who are enforcing anti-trust legislation and poor old King Canute.
Mr. Cullen: I welcome the Bill to the Seanad. This legislation is long overdue. I congratulate the Minister on steering this legislation through the Dáil and now in the Seanad. The Minister by his actions, experiences and determination wants to see positive change in so many areas in this country, not least of which is the area of competition. Indeed, his track record with regard to deregulation of the airline market and the creation of competition in that area have brought tremendous benefits to ordinary consumers, contrary to what other people might like to think. There has been real and substantive change in that area — air travel has become far more available to the majority of people in this country.
We have seen what competition can do. Indeed, what pleases me in particular about this on a Government level is that the philosophy and the instruments needed for us as a people and for an economy to grow from strength to strength in the coming years are beginning to emanate from various Departments. That is long overdue and is an essential ingredient to ensuring that, say, Ireland Incorporated has a chance of survival within the EC, being a major player in that area as well as being capable of looking after its own interests in the greater international arena.
It is often forgotten that Ireland is basically a trading nation and as such, this legislation can only assist our growth. Growth is a key element in the creation of jobs which is, as everybody knows, at the root of so many of our problems. While at times legislation like this may seem in some way distant, in fact, it is a very tangible and substantive way of making a direct contribution to broadening our ability to do things in a more positive way, thereby creating more employment.
I had the privilege of introducing a similar Bill in the Dáil on behalf of the Progressive Democrats in 1988 and I am delighted to see that the Minister has embodied all that philosophy in this Bill. Obviously, this is a more extensive Bill. The Bill I introduced in 1988 was supported by Fine Gael and I hope they will  be in the same mood when this Bill is being passed here.
Competition is the life blood of economic growth and I do not believe anybody would deny that. From the day we are born we are involved in a competitive environment. It is by a balanced and fair competitive environment that we grow and expand, and the same applies to economic life. I was amazed to hear some other speakers, particularly the previous speaker, say that competition is only a theory, that it relates only to academics and that in reality nobody is practising competition. That is the greatest load of bunkum that I have heard in this House for some time and it has no basis. Competition exists in every facet of life.
In relation to Senator Ryan's analogy that there should be competition where trade unions are involved and not in other areas, trade unions themselves embody competition in inter-trade union rivalry. It is ironic that such rivalry has unquestionably improved the ability and outlook of trade unions in recent years, particularly with the creation of SIPTU and the amalgamation of much smaller unions to give them a more focused drive in the marketplace and a clearer identity of what they are trying to achieve. If there was no competition between them we would never have evolved to the stage where the trade union movement is taking a much more forceful and positive view trying to create jobs and new industry and in forging ahead. That has been the core reason for competition in that area.
Competition exists in all walks of life. What we have not had is a basis by which competition should occur, some simple rules and regulations to ensure that there is competition in a very fair and balanced way. There should be some authority for the small individual, the individual who is trying to start a new business, to get on his feet, to create employment, to make a contribution to the market place and to provide a service for the consumer. That type of competition has not been allowed to grow because of the dangers of anti-competitive practices which have existed, and do exist in our marketplace and  because the abuse of a dominant position clearly reigns in many areas of activity.
At last, because of the introduction of this Bill a new Competition Authority will be set up which will ensure, in particular, that the individual has the simple right of redress to ensure that this growth cannot be stunted by major players in the marketplace. Surely that must be welcomed by all sides of the House.
A clear anomoly also existed in that Articles 85 and 86 of the Treaty of Rome have only applied to companies that were involved in the export market. It is ridiculous that over the last number of years those Articles applied only to companies that exported their products and not to companies concerned solely with the domestic market. The Minister is right in saying that those companies which were subject to Articles 85 and 86 of the Treaty of Rome showed greater growth and have been leaner and fitter in attacking the marketplace. They have been conscious of competition, growth, employment and research and development, and that has created employment in the domestic market. Because those companies had to be keener, fitter and more aware of the competition they faced on international markets they have had to put resources into their companies to take on foreign companies, and that has created more employment. This has improved our technology base and all round ability to be successful. If that is the case, then the application of a similar law to Irish companies which operate on the domestic market should be welcomed as it would benefit those companies.
It is peculiar to the psyche of Irish people that when something new is introduced — whether it is good or bad, and more particularly when it is clearly good, their concentration seems to focus on the potential negative aspects that may or may not arise. We fail to look at the opportunities such legislation will create for companies who wish to operate in the marketplace. The benefits of this legislation greatly outweigh the very few potential negative aspects.
As a young person who emigrated I find it consistently disappointing that we  are still so negative about change. We have no confidence in the ability of our people, our management, trade unions or workers. We have been successful in many areas not alone on the domestic market but on the international market also. We should not be afraid of this type of legislation. We should welcome it, get involved in it and use it to our commercial advantage in the interest of creating and increasing employment. That is what we must focus on and not on the so-called negative aspects that, by and large, do not exist.
The Minister referred to Japan and Germany as being the two most successful exporting economies in the world and I agree with him. I also agree with his assertion that it is because of the intensity of competition in those markets that they are successful, but that alone has not made them successful. One of the greatest restraints on economic growth here is our banking system. Germany and Japan have an equity based banking system whereas our banking system is based purely on secured lending. That totally different philosophy has engendered competition. While this Bill will make a substantial impact on our market, there is a need for other mechanisms in the marketplace if we are to be as successful as Japan and Germany.
In the past ten years our banking system has failed in the area of job creation and economic growth. It has consistently blocked new ideas, new companies struggling to get off the ground. It has not sought to widen its base and thus become an integral part of employment creation and economic growth in this country. I do not accept that the banks are in business solely to make a profit and that is their only concern. If the banks in other economies can take this approach, why can the Irish banking system not do likewise? They have been operating in a cosy, comfortable environment and have had no real competition. They have not had the concern or ability to expand into other areas of business and see their role in a totally different way. I believe the banking  system in this country will have to see its role differently. It is going to have to see a fundamental change in its approach to the marketplace and the introduction of this type of competition legislation will, I hope, force them to see the type of change that is necessary. Post-1992, which is now very close indeed, I want to see competition by other European banks on the marketplace in this country.
Why we have such a high level of interest rate in this country is beyond my understanding. I do not profess to be an academic or an economist, but for years we were told it was because inflation was rampant that we had the worst rate of inflation and we had all sorts of problems. As a people, we largely accepted that. Now we have practically the lowest inflation rate in Europe and we still have the highest interest rates prevailing. This is unacceptable. There is no defensible argument, in my view, against this kind of nonsense, because that is all it is.
The banking system in this country is going to have to get up into the marketplace and take a leaf out of the economies of Germany, Japan and the United States of America, get involved in a more direct way on an equity based system to help companies expand and grow. They have the resources to do it. They have the expertise already working the banking system. I am not saying the banks when they get involved on an equity base within a company should see their role as totally a financial one, but they should apply some of their resources in manpower and in skills to make them available to these companies on the basis that it would help these companies to grow. This, in itself, would be a major step forward. They do not have to stay there forever. There always is a cut-off point where their role would be complete. In some companies it might only take six months, some perhaps a little longer; but I am not suggesting that they become shareholders in every operation on a permanent basis. They should be able to move resources in, get growth, make a profit if necessary and withdraw from a company and reinvest elsewhere in other words, make the finances work in the marketplace but  particularly make them work to help to create job creation, to use money to create jobs.
If we could reduce unemployment, without question Ireland would be the finest country in Europe to live in. Even with those difficulties, we still have some of the greatest assets, which many European countries envy but we are hamstrung in our ability because of our large number of unemployed and the drain on resources from the State and from all of us as individual taxpayers, particularly the PAYE taxpayer. Yet, small, insignificant drops in unemployment levels make an enormous impact in other areas, even in confidence, in the confidence of all of us in our outlook and in our own economy. These are the aspects that must be looked at.
That type of philosophy, which this Bill sets down as a clear marker for the Irish economy, is the philosophy which we as a party have professed since our foundation. These are the type of mechanisms that are being put in place in the marketplace to allow greater freedom for economies to grow and to give people a greater ability to grow. If we as a people — and that includes all of us — do not take up the opportunities this type of legislation is creating for us, then it is our failure; it is not somebody's else's failure.
This Bill deals with the anti-competitive agreements and practices that exists in a wide range of areas in the marketplace, and that is as it should be. The areas of anti-competitive practices are wide-ranging. People have spoken about the legal profession for years and there has been a reference to the licensed trade but it is the principle that underlines anti-competitive practices that cause me the greatest concern. The one thing I am pleased about in this Bill is that the Minister has had the courage to apply this legislation both to the public and the private sector. For too long in many aspects of legislation introduced in this country we tend to block off secluded areas and give all sorts of ridiculous reasons why they cannot be under the same legislation as the rest of us. This measure is a very positive step forward  and I see great benefits for the public sector as well as the private sector in its application.
With the introduction of this legislation, has the Minister the ability retrospectively to look at areas? For instance, I am thinking of the size of two supermarket chains this country which clearly have a dominant position. I am not saying they are abusing that position. I think the subtlety with which the Minister stated the position here to day is correct: we are not trying to stop large companies existing but what we do want to ensure is that the potential abuse that may cause is avoided. That is the correct way forward but I believe there is a serious question. We have seen it in the bread price war. We have seen it with the milk problems in the supermarkets. Indeed, the Director of the Fair Trade Commission has already expressed concern about this on numerous occasions over the past number of years.
Is it time to limit the growth in that area? Can this be done now under this legislation? Can it be done retrospectively, actually to reduce companies' positioning the marketplace? Is it possible under this legislation to go in that direction? It may not be necessary to do so, but I am simply posing the question if it is possible to do so. If it is, I think that general signal should be sent to the marketplace — that there are concerns with areas of activity and that if companies are going to abuse their position in the future then action will be taken, not just to prevent them doing so but to ensure they will actually have to reduce their dominant position to a satisfactory level in the marketplace.
I accept that a dominant position is a very subjective thing. You cannot say that because a company may have 10 per cet, 20 per cent, 40 or 50 per cent of the market that is the criterion alone which would give it a dominant position in the marketplace. You could very well have quite a small company, but with an extremely talented workforce and an extremely talented management team who, because of their ability through the structures within their own company,  have had the potential to grow to tremendous influence in the marketplace. You cannot say that because they have been successful for those reasons and are a major player in the marketplace they should be reduced in size. That is not what I am driving at. What I am saying is that size in itself is not a criterion. It is how they behave in the marketplace. If that directly affects not just the consumer but affects the ability of other companies to compete and to maintain their employment and even to increase their employment, and if a large company's activity is actually reducing employment in other companies without necessarily affecting the consumer, then to my way of thinking that is an abuse of a dominant position. It may not necessarily affect the consumer but it directly affects employment in the marketplace and a company's ability to operate. That should be emphasised in this legislation.
I am concerned with the emphasis that has been laid here today on the licensing ability of the new Competition Authority. The impression being given here this morning is that every company in the country is going to be running to this Competition Authority to seek a licence to exclude them from the competition legislation. That should not be the case. Indeed, I would see it as a mechanism of last resort to be used to influence the marketplace. That message must be sent out into the marketplace quite clearly and I think any instructions to this new Competition Authority should make the Department's view quite clear. I do not believe that the Competition Authority should have a hugely interpretative role. That is not to say that they should not have flexibility; but I think that the interpretation the Minister and the Department are putting on this legislation should be signalled more clearly in the marketplace because I fear that the emphasis is all on the one area which is a less significant aspect of what this competition legislation is trying to achieve. In regard to whoever would approach the Competition Authority to seek to put themselves in a position where they do  not have to be subjected to this legislation, the criteria must be the strictest and it must be most seriously investigated to ensure that they are not simply using this legislation for their own self-interest without any real concern for either general competition or the consumer in the marketplace.
I think there is a wrong emphasis in the marketplace. Rightly or wrongly, small business in the marketplace has been overawed because of the emphasis on this aspect of the legislation. I think there is a need for clarity and greater emphasis on the other side of what this legislation is trying to achieve. I believe that the Authority's role in the marketplace is to ensure that the existing conditions allow for the fullest use of this legislation. I shudder to think that it is there as some kind of a referee, or that it will get totally and utterly bogged down in one role, such as “This is our boy to ensure that we can avoid everything else in the marketplace”. Even that perception must be guarded against because, if it is to be used or abused in that way, it would be detrimental to the operation of this legislation.
There is need for greater emphasis on the other side and a broader role for the actual Competition Authority itself. I am not satisfied that there has been enough consideration — at least heretofore in print, at any rate — given to the greater role of the Competition Authority. That could be looked at to give the Authority a much more expansive role in the marketplace. I know the Minister stated that it must be flexible enough to put its own structures, etc, in place. I do not have any difficulty with that, but I think guidance from a Department is also very necessary. This Minister is well known in the marketplace for his views and I want to see that type of view implemented in the marketplace.
I also agree that under the Mergers and Monopolies Act, for which the Competition Authority will be responsible, they should — quite correctly, in my view — have regard to the employment impact of any mergers. That is an extremely important point and is a central element  in regard to what role the Competition Authority should be carving out for itself in the marketplace. Indeed, when many companies look at mergers the first thing that seems to be on the agenda is the shrinking of employment, because it is easy to save resources, but it is not always the case that it becomes a more efficient and more dynamic organisation. There is a role for the Competition Authority to clearly point out that companies should have a greater regard for the employment area and a greater understanding of what exactly they are trying to achieve within the context of employment levels in terms of company growth, and I am talking about market share growth as well. These two things at times seem to be unrelated when one sees mergers taking place. There is an automatic and foregone conclusion before anybody does anything that jobs are going to be shed, be it on the factory floor or in management, because nowadays everybody seems to be subject to this. Again, I would emphasise the Competition Authority's role in having greater regard for the impact on employment levels, in particular where mergers occur.
The Minister has the power in the legislation, if he feels there is a problem in the marketplace, to instruct the Competition Authority to act, or to act directly himself. The only thing that worries me about that is this: is it open to different Ministers to put different ideological interpretations on what he or she may like to see occur in the marketplace? It always worries me, when powers are given to Ministers, that they could go in the opposite direction to the general thrust of the legislation. I have a general concern in that area. I am not quite sure how one overcomes it, but the possibility exists and I dislike it intensely. The fact that we have an over-centralised bureaucracy, with a mania for power in so many departments, and a great unwillingness to relinquish or devolve power, has always concerned me. I get particularly concerned when I see great latitude being allowed to Ministers. I wonder if my interpretation is correct and what  constraints may be on the Minister to act in that area.
I welcome the signal the Minister has sent into the marketplace in regard to the strong but I think fair lobbying by RGDATA on a number of issues. The ban on below cost selling has been the main concern in that area. I congratulate the Minister on speaking with those people and listening to myself and many other TDs and Senators from both sides of the House expressing concern in that area. The Minister's definite commitment to allow a phased implementation of the legislation to see how it will work in the marketplace is right. It was clearly identified there was a danger that an overnight removal of the ban on below cost selling might allow large companies to get a grip on a situation before anybody had time to react. I think that was a sensible approach. I commend the Minister for listening and I also commend RGDATA for making a fair and balanced case in regard to that issue.
We are heading into the Single Market. That will mean competition in many walks of life that have not been subjected to it before. I see this legislation as very much part of that process. I referred earlier to this legislation covering State monopolies. I do not have a problem with State involvement in many areas of public life, but what I do have a difficulty with is the notion that competition cannot exist where many State monopolies exist. I firmly believe that that is just ridiculous nonsense. I do not believe that it is in the interests of the taxpayers that monopolies should be allowed to exist in any area. There should be and must be competition. I am thinking of areas like energy, which I know the Minister for Energy is looking at, transport, which I know the Minister for Tourism and Transport is looking at, and the postal services. All these areas have an opportunity now, with the existence of this legislation, to face competitive competition — if that is the right way to put it — in the marketplace.
There are resources within the State and the private sector but no one area has all the answers or all the resources.  It is a combination of those resources in both areas that will get the best results for this country. I want to see that type of competitive partnership between the State and the private sector.
There is one area not addressed in the Bill. The legislation will cover public State companies, but how do you draw the line where major State subsidies exist? How do you decide there is fair and real competition if a company is getting substantive State subsidies and using those subsidies to create a dominant and, I can assure you, an abusive dominant position in the marketplace? Where under this legislation will companies have the capacity to deal with that? How does the existence of huge State subsidies to State Companies come in when one wants to create competition between private sector companies and State companies? I do not think that has been addressed in the context of this Bill. Where is the bottom line? What are the criteria to be used in judgment?
Notwithstanding the fact that the situation has improved in the recent past, in too many areas it is very hard to break down the accounts of many State companies to see precisely where subsidies given in one area are being used to prop up activities of the company in other areas. It is very difficult to break them down and thus it is difficult to apply strict and fair competition between aspects and activities of various State companies with genuine activities in the marketplace. I would like to see that question addressed. I do not want to go into an area of activity in which, the House will know, I am involved myself, transport — that is for another day. I am dealing with this Bill on the broadest canvas, but nevertheless these are fair questions which should be asked of State monopolies and how this competition legislation will ensure that real and fair competition can exist in the marketplace. I will be particularly interested to hear the response in relation to where State subsidies exist.
I am delighted this legislation has been introduced. I was privileged to introduce a similar Bill in the other House on behalf  of the Progressive Democrats but this Bill is obviously more extensive. I am convinced it will be to the greater benefit of the market here and in particular to the small operator, the small shopkeeper, the small grocer. I see this as the first acknowledgement of the need for the small entrepreneur, who does not want the State, who can open up a small business. It might not create huge employment, but enough of them can create considerable employment. This legislation offers great encouragement. It should instill confidence in the ability of the State to provide the correct environment for small companies to prosper, to grow and to create employment. I look forward to the completion of the measure in this House and its passage into law. We will all be better off for its existence.
We recognise also that the creation and maintenance of an institutional and legislative framework which promotes strong market rivalry and competition is one of the most positive things Government can do to promote growth, foster development and generate prosperity.
I concur with that view. I believe competition will bring out the best in people whether in sport or in business. Of course, sometimes it can bring out the worst also. That is why we have to have rules of the game and a referee.
It is hardly surprising that, once again, I disagree with Senator Ryan, who I am sorry, is not in the House. I am astonished to hear him say that only economists want competition. I do not classify myself as an economist, but I recognise the value of competition. Perhaps he should have stood outside Páirc Uí Caoimh last Sunday evening when there were 50,000 people coming out after a good, competitive game and tried to sell the theory  to them that there should be no competition. I think he would need many people to protect him It is a crazy notion to say that we do not want competition. It can, of course, bring out the worst in people, too, as we saw with Boris Becker in tennis or as we see occasionally in football matches between Cork and Kerry. In the case of this Bill I see this regulatory Authority as the referee and the Competition Bill as the guidelines by which we must operate.
It is not surprising that once again we are treated to blind, hard left-wing ideology, the sort of conventional wisdom of the hard left. The trouble about conventional wisdom is that by the time it is conventional it is no longer wisdom. Have the hard left learned nothing from what has happened in eastern Europe and the Soviet Union? The moderate left in Britain and across Europe have learned. I wish our people would learn a little too.
I agree with most of what Senator Cullen had to say. He referred to lending and high interest rates and the fact that our banks lend only when matters are fairly secure. That is true. There is very little risk-taking in banking in this country and very little venture capital around. Somebody once described an Irish bank manager as being a person who would give you an umbrella on a fine day and want it back on a wet day. That is an accurate description. But, having said that, I say to Senator Cullen and the Government that foreign banks, too, like to get their money back.
I was extremely disappointed our Government ensured that the foreign banks would get their money back in the arrangement that was arrived at in the Anglo-Irish Meats situation. That means that foreign banks who gave unsecured loans of hundreds of millions of pounds to Anglo-Irish Meats, are now guaranteed their money back by forcing a situation where Anglo-Irish Meats will have to make £90 million profit per year, which can only be achieved by the dominant position which Anglo-Irish Meats enjoy, which in turn will enable them to depress the price of cattle to the producer. In  effect, the mistakes made by gambling on the Stock Exchange in London and in Dublin money got from international banks will not cost the bankers money, but the poor farmer will have to pay for it. It was a particularly bad arrangement which will end in disaster for many people, but presumably not the banks and not Mr. Goodman.
Given the commitment of the Minister to competition, the fact is that the biggest offenders with regard to monopoly situations in the country are the State-owned companies. We have a monopoly as far as the supply of electricity is concerned, as we have with regard to gas. Until very recently the same situation applied to air transport, railroads, Bus Atha Cliath and so on. If Senator Ryan tried to convince the air travellers that competition was a bad thing. I believe he would get his answer very quickly.
Let me give an example where a little competition would do a lot of good. It costs virtually as much to get a return ticket from Cork to Dublin as it does from Cork to London, because there is no competition allowed on the Cork/Dublin route. Let me give a better example. There is very limited competition allowed on the Irish-Brussels route — in fact there is virtually none. It costs roughly £500 to get a return ticket. In the last two years on two occasions I got a return ticket with an 11 hour flight programme to parts of the United States for considerably less than £500, because there is competition on the North Atlantic route. Aer Lingus — and more power to them — rose to the challenge when competition was allowed on that route and it did them good, and Aer Rianta benefited enormously. They made huge profits as a result of competition and the number of travellers using that airline increased also. Of course, the travellers benefited too. It is nonsense to say that competition is not good for the consumer or that only economists are in favour of it.
I would like to see the situation with regard to the State monopolies tackled. There are very good reasons for this. We have only to look at what happened a  few weeks ago when a relatively small number of people in the ESB — not poorly paid people I would remind Senators but very well paid compared with national average wage rates — caused a national strike, caused the supply of our energy to be cut off, caused pandemonium in factories, homes, transport, etc. That should never happen again and one of the most effect ways to ensure that is to have alternative supplies. My proposal would be to split the generation side of the ESB into several different units, allowing the transmission grid, which would be separated from generation, to buy from a number of different sources. In addition it is imperative, not only for security of supply at a competitive price, and that we connect to the British grid, which in turn is connected to the mainline European grid. That is the kind of security we can get from alternative supplies, and that is the only means we have of getting competitively priced energy.
In that respect also may I refer to the other source of energy, another State monopoly, An Bord Gáis. As a nation we have a duty to ensure that we have an alternative source of gas. That means connecting to mainland Britain which in turn is connected to the European grid, which in turn is connected to Siberia. Let us get a really secure and competitive energy source.
Let us look at communications. It cost exactly twice as much to make a telephone call from Dublin to Luxembourg as it does from Luxembourg to Dublin, but no matter what way you twist the map it is the same distance both ways. I know An Bord Telecom are making fine profits at present and part of the reason for those fine profits is the fact that our telephone charges are uncompetitive. The United States have the best telephone service in the world and this service is provided at a very competitive price. They have a very large market which is something that the left will not like, and they have achieved that position by competing with a number of different telephone companies. Senators will recall  that the United States Government broke up what used to be affectionately referred to in America as “Ma Bell”, the Bell Telephone Company.
In the United States today if you pick up the telephone in your hotel and ask for an international call the first question you are asked by the operator is “which company sir?” I remember the first time I was asked this question I wondered what the operator was talking about. I had to ask her and she asked me which telephone company I wanted to use because there are different rates of charge. Being ignorant of these facts I mentioned the only one I knew since I did not know anything about the difference in price. That competition is what keeps them efficient and on their toes.
If you move into a flat or as they prefer to call it, a condiminium and you ask for a telephone they will ask if you want it now or in one hour's time, what colour and many of other questions. Within the time it takes to write and post a letter to An Bord Telecom they would have arrived with the telephone, installed it and gone again. That is the kind of service this country needs if we are to compete on an equal basis with companies which operate in the grid, in the US, Japan and Germany. We badly need to bring competition into the State monopolies.
How would Senator Ryan convince all those young people who work in Dublin and like to go home at the weekends to meet their girlfriends, boyfriends, play football or hurling matches or whatever, now that they have a taste of very cheap transport from private bus operators from Dublin to Leitrim or Mayo or wherever, that that is bad for them? I would like to see him try. Bus Átha Cliath and Bus Éireann, are trying to compete and they have brought their prices down. Do you think they would have brought them down if there were not private operators? No more than Aer Lingus would have brought down their prices if Ryanair had not been set up.
The point I am making is that we need competition but we need to do something urgently about State monopolies. Let me give one final example where a State  monopoly is just as likely to abuse its position as a private monopoly. I refer to afforestation. Great efforts are made by the Community and by the Government to encourage private planting because by a very significant margin, we had the lowest level of private ownership of forests in the Community somewhere between 5 to 8 per cent. It is changing substantially now because there has been a considerable increase in private planting. Before the rush of private planters into the marketplace we had about 5 per cent private ownership, the rest was State ownership. In Germany, by contrast, 85 per cent of the forests are privately owned, and the average for the Community as a whole is in excess of 50 per cent. It is a very good idea to encourage private entrepreneurs, individuals, privately owned companies, insurance companies, pension funds, banks or whatever, to get involved in this area. Immediately this happened they found themselves up against what I would call unfair competition from the semi-State body, Coillte Teoranta. Coillte Teoranta enjoyed a privileged position in that their staff were already very familiar with grant approvals and had the inside information they had gained from experience. In addition, they were already harvesting so they had a cash flow to work on. They had already got, as we know, a State asset at a seriously discounted price. That put them in a very unfair competitive position and suddenly the prices people were paying for land for planting shot through the roof, putting many of the private planters out of business or deterring them from doing any more planting. In general, I am in favour of competition but we should forget one that the State itself is probably the greatest culprit in the marketplace as far as abusing a monopoly situation is concerned.
A number of speakers referred to concern about below cost selling and I share that concern. I am glad to hear the Minister has decided to have a second look at that situation and that he will be prepared to phase in the legislation rather than have it implemented in one fell swoop as far as below cost selling is concerned.
 I would like to protest at the speed with which this Bill is being rushed through. It is a very important Bill and for that reason it is not right that this House is put in a position that it cannot table amendments since the Dáil will not be sitting after this week. Senators can conclude from that the matter was brought to a conclusion too quickly. There has not been adequate consultation with industry about such important legislation. I believe it would have been preferable if we had waited until the report of the Fair Trade Commission on competition law had been published. It is also regrettable, as I see in the CII document, that none of the recommendations about the grocery trade by the Fair Trade Commission was taken up and incorporated into the Competition Bill. I am concerned about the undue haste with which the Bill is being pushed through the legislative process. It does not allow adequate time in which to assess adequately the implications of the Bill, either for the legislators or for people who will be bearing the brunt of this, namely, industry.
In regard to enforcement of the provisions, there is an easier way of doing it. Under European law, for instance, if a company feels that another company is abusing a dominant position it can complain to the Commission and the Commission may then undertake an investigation of the complaint. This is a relatively cost effective way for an enterprise to use the law to protect itself. Companies in Ireland who are trading internationally already know that. What we are proposing now for the national situation will not allow for this initial procedure. The only option a so-called aggrieved person will have is to go to court. The person cannot complain to the Authority, cannot ask the Authority to carry out such an investigation. The Competition Authority cannot carry out an investigation on its own initiative. There is no summary procedure for dealing through the courts with complaints of anti-competitive behaviour. It is unclear why the Bill has not given the Competition Authority power to hear complaints or carry out investigations on its  own initiative. Such an approach would promote more actively the principles contained in the Bill which I fully support. It is not clear why there is such a radical departure from European Community practice and the recommendations of the Fair Trade Commission report. I urge the Minister to consider expanding the powers of the Competition Authority for that reason to accommodate a speedy and cost effective administrative system for dealing with anti-competitive behaviour.
Of course, it will cost money to implement the Bill. It is imperative for that reason for the business community in particular and for the proper implementation of the compliance procedures of this legislation that resources are made available to the Competition Authority and to the courts to ensure that they can adequately discharge their responsibilities. Anybody who has experience of dealing with the courts, the delays that occur and so on, will readily appreciate the concerns of industry about these kinds of delays where their business is concerned. I urge that adequate resources he put in place to ensure that matters are dealt with expeditiously.
I am disappointed to find that the Competition Bill does not repeal all existing legislation and consolidate the law in one measure. That would simplify the matter and help us all to understand what is going on, not to have to cross-reference from one Act to another.
The Bill is likely to create some uncertainty for business given that the concepts are expressed in broad principles, leaving interpretation to the courts and we all know how courts can differ in their interpretation of legislation. The business people have real reason for concern in that respect. There are no definitions and licences and certificates are open to attack in any event in the High Court.
Agreements and practices which predate the Bill will have to be looked at, reviewed and held up against the Bill whose provisions are, as yet, vague and imprecise. The ability of an aggrieved or  so-called aggrieved person or any undertaking to appeal to the courts to question the decision of the Authority in relation to licences and certificates caused increased uncertainty for business particularly given the possibility of the imposition of exemplary damages.
Senator Howard dealt at length with the term “aggrieved person” and I agree with him. It is a very inexact science to work on. The scope of that definition of “aggrieved person” should be more precise and it will present many difficulties in the future.
There are many other aspects of the Bill that are worth commenting on. I congratulate the Minister in taking the initiative in this area. I would have preferred, however, if the Bill had been delayed until we had the report of the Fair Trade Commission. I would have preferred if this House had been shown a little more respect and the Bill had came to us in a manner in which we could have had time to have our amendments tabled and considered. I would have preferred, having consulted with industry, if there had been more discussion with industry, not for the sake of delaying the Bill but to allay the genuine concern among industry, and they have every right to be concerned.
I would like to point out my own particular concern about something Senator Cullen also mentioned, that is, the growing power of the multiples. They are now in a very powerful situation to put excessive leverage on the suppliers. They get small suppliers totally locked into dependence on them. They can then force prices down until the supplier is virtually out of business. They can extend the credit time they were getting free of charge so that the consumer is paying on the nail going through the check-out while the supplier is paid three, four or five months later. There are abuses there.
If we want to think of one specific example we had the milk dispute recently in which the bottlers I thought, behaved particularly stupidly when, for once in his life, Ben Dunne was trying to be generous. What happened was that with  their dominant position in the marketplace and so few of them in it, they were able to force the bottlers to give them a 35 per cent discount over what they would give the milk man who gets up at 5 a.m. and starts delivering milk to the door. Just think about it. In addition to that, the bottlers had to pay “hello money” a big sum to get inside the door to supply the product to Ben Dunne's and the other multiples and load the cold cabinets for them. The consumer then unloaded it, paid for it on the way out and Ben Dunne and the other multiples paid for the milk several months later. That is, in my view, abuse of their power in the marketplace.
Of course, the bottlers handled it very badly, they should have stood together against this kind of extortion but to try to resolve the problem by forcing Ben Dunne to continue making an excessive profit on the milk was equally stupid. There are many cases out there to be looked at, particularly where so much of the trade is now going through so few hands because this represents a real danger to the producers and, in the longer term, to the consumers.
Mrs. Honan: There is general welcome for this legislation. I would like to thank the Minister for putting this important Bill before the Seanad today. However, like my colleagues, Senator Howard and Senator Raftery, I am concerned that this House has been asked to pass this legislation with such haste. I have been a member of the Seanad since 1977 and I believe it is wrong that we are not even given the chance to put down an amendment that may be accepted after discussion. I am a firm believer that when Bills have gone through the Seanad having been fully debated and amended we got better legislation. I see this Bill as important as the Companies Bill with the same effects for the nation. That is another reason we should have been given enough time to fully debate this Bill.
The Bill prohibits all anti-competitive arrangements and the abuse of dominant positions in the marketplace. This has  been said by some of my colleagues already this morning. David Kingston, chief executive of Irish Life, said the other day that any competition should worry you or you are not doing your job properly. With the greatest respect to David Kingston, he is right. Nobody knows what competition is better than elected representatives. Those of us who intend to stay here for another term, and those who have survived, know all about competition. It is nice to read his quotation but we are well aware of what competition is.
We are here to pass legislation that will benefit our people. I would like to have seen more consultation with interested parties before this legislation went to the Dáil. I may be incorrect in saying that there was not sufficient discussion with people directly interested to see that this Competition Bill was properly put in place, but I am sure the Minister had consultation with various bodies and groups, such as CII and other industrial units, but that is not what we have been told. I am sure the Minister will defend himself in his reply and tell us at length how much consultation he had with the people who are now saying there was not enough discussion.
I welcome the substantive amendments made in the Dáil. I understand that on Committee Stage the Minister, put in place the retention, for the time being, of the groceries order and on Report Stage he permitted some cases to be brought to the Circuit Court where appropriate.
The Minister should have taken more note of what is done in Europe in the area of competition law rather than in America. Sections 4 and 5, I understand, follow Articles 85 and 86 of the Treaty of Rome and section 6 is a mirrored version of US legislation.
Who will this Bill affect? It will affect every individual. It will affect companies equally in the private and public sectors. I understand my good friends and supporters, the local authorities, are not covered by this Bill. I would like the Minister to tell me if that is to their benefit or loss. I am horrified when I see  Ministers excluding local authorities from legislation. This legislation applies to banks, building societies, publicans, chemists, shops, supermarkets, lawyers, architects and all professionals. Here we have lawyers whole heartedly approving this legislation. I am worried when I see solicitors and lawyers totally supporting a Bill. There is no better man than the Minister for Industry and Commerce to be worried about things. When I see lawyers and the legal profession in total support of this Bill, that is a good reason for me to take a harder look at it.
I worry deeply about the role of the banks, I ask the Minister and the Government to take them head-on. For some weeks we have been asking for a discussion in this House on the role of the banks. The banks do not seem to have to account to anybody. As one of my colleagues said this morning, they are even less civil to us than they were years ago. There was a time, whether you had a bank draft or a few quid in the bank, the bank official was civil to you. Now we have managers and their hierarchy above them and whether you have money in the bank or owe them money, they are not civil any more. The banks will have to be taken on. Small firms need money to create jobs. We see the extraordinary profits the banks make at the end of the year. There is no better man than the Minister to take somebody on if he decides to do so and I appeal to him to take them on. They have a dominant position.
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