Thursday, 8 March 2012
Seanad Éireann Debate
Minister for Jobs, Enterprise and Innovation (Deputy Richard Bruton): The purpose of this Bill is to strengthen the enforcement of competition law in Ireland. A breach of competition law is a white collar crime and, as with all other forms of crime, those who commit it must be punished accordingly. This legislation will provide a more effective deterrent and an improved sanctions regime for those who engage in price fixing, cartels, abuse of dominant position and other anti-competitive practices.
Under the terms of the EU-IMF programme of financial support for Ireland, the Government was required to bring forward legislation to strengthen the enforcement of competition law by the end of quarter three of 2011. The publication of this Bill last September met this commitment. Since then, my officials have engaged with officials of the troika on developing amendments which have further strengthened the enforcement capability of the Competition Authority.
In terms of competition law enforcement, we are not starting from scratch. The introduction of the measures I propose builds on what I believe is already a strong enforcement regime. Ireland is unique in Europe in having criminalised anti-competitive behaviour and since the introduction of the Competition Act in 2002, the Competition Authority has a good, indeed enviable, criminal enforcement record, seen from the viewpoint of other member states. A total of 32 criminal convictions have been secured since 2002 in respect of cartel behaviour in the form of price fixing by home heating oil companies in the west and by car dealerships in Leinster and countrywide.
Crimes under competition law are often viewed as victimless but where the operation of the free market is restricted by collusion or other nefarious practices, the result is that consumers, whether in heating their home or buying a car, pay more than should be the case. We are all the victims of such crimes. The State, and Senators and I as taxpayers, are the victims if companies engage in bid-rigging in respect of public procurement contracts or any of the services purchased by the State. In 2007, Mr. Justice McKechnie referred to price fixing as “particularly pernicious as it was against consumers in general and not just one or two individuals”. The activities in question had, in the view of the judge, done a shocking disservice to the public at large. I share Mr. Justice McKechnie’s view that “there are good reasons as to why courts should consider the imposition of custodial sentences in such cases”. The courts can impose fines up to the greater of €4 million or 10% of turnover, and a custodial sentence of up to five years. These are significant penalties that make our enforcement regime one of the strongest there is and I look forward to the day when the full rigours of the law are fully applied. It is interesting to note that during the sentencing in the price fixing case referred to, Mr. Justice McKechnie commented that he could see no room for a lengthy lead-in period before jailing convicted persons becomes commonplace under this legislation.
I turn now to the provisions of this Bill, as passed by the Dáil, and will explain what each is designed to achieve. Sections 1, definition, and 10, Short Title, commencement and collective citation and construction, are standard legislative provisions while the core provisions of the Bill are contained in sections 2 to 9.
Section 2 amends the penalties set out in section 8 of the 2002 Competition Act and provides for larger increases in fines for competition offences across the board. I propose increasing the fine for criminal conviction of hardcore offences from €4 million to €5 million and doubling from five to ten years the maximum prison sentence for such a conviction. Fines for summary convictions are increased from €3,000 to €5,000 and the daily fine for a continuing contravention is also increased in respect of both summary and indictable offences.
As a further indication of how seriously I view these crimes, I propose that the Probation of Offenders Act 1907 will no longer be capable of applying to competition law offences. That Act allows a judge to dismiss a proven case based on the trivial nature of the offence, with the result that in such cases a conviction is not incurred against the defendant. I see nothing trivial about price fixing, bid rigging, or an abuse of dominant position. These practices act to the detriment of competitors and consumers alike. Judges will no longer have the option to apply the Probation of Offenders Act where the Competition Authority or the Director of Public Prosecutions has proved a case. The conviction will be recorded and the guilty party punished in accordance with the enhanced enforcement regime.
From detection to investigation to prosecution, bringing an offender to justice can be a long, complex and expensive process. Investigations can span years as evidence is gathered and examined in a forensic manner. Witnesses must be questioned and their statements scrutinised in detail in order, first, to determine if the behaviour breaches the Act and, second, to build a case for the prosecution. This work is carried out by specialist investigators, economists and legal experts within the Competition Authority, in association with members of the Garda, including the bureau of fraud investigation. The cost to the State in undertaking such painstaking investigation can be sizeable. I am, therefore, providing that the court shall order a person convicted of an offence under the 2002 Act to pay to the Competition Authority or ComReg, where the anti-competitive practices are in the electronic communications sector, the cost of undertaking the detection, investigation and prosecution of the offence. The court shall measure the costs and expenses. However, where there are special and substantial reasons for not doing so, I am proposing that the court may decide not to order the payment of such costs.
Sections 3 and 4 result in the separation of the public and private enforcement regimes which currently are contained in a single section, section 14, of the 2002 Act. Section 3 strips the public enforcement right of action from this section 14, leaving it to provide for a right of private action for aggrieved persons, while section 4 recreates the public right of action for the Competition Authority and ComReg.
In so far as section 3 amends section 14, an aggrieved person may bring an action in the Circuit Court or High Court for relief by way of injunction, declaration and-or damages, including exemplary damages, where he or she shows loss as a result of anti-competitive behaviour prohibited by sections 4 or 5 of the 2002 Act or by Article 101 or 102 of the Treaty on the Functioning of the European Union. Where, on foot of a private action under section 14 of the 2002 Act, as amended by this section 3, a court finds that an undertaking has abused a dominant position, the court may require the undertaking to discontinue the abuse or to adopt measures for the purpose of ceasing or adjusting the dominant position by, for example, requiring the sale of assets of the undertaking. Clarity is also provided that the term “injunction” includes an interim injunction, an interlocutory injunction or an injunction of definite or indefinite duration.
Section 4 inserts a new section 14A into the 2002 Act, which gives the competent authority, which is either the Competition Authority or ComReg, a right to pursue civil enforcement measures for infringements. Mirroring the amended private enforcement regime I have just described, the Competition Authority or ComReg also have a right to apply to the Circuit Court or High Court in respect of any agreement, decision, concerted practices or abuse that is prohibited under sections 4 and 5 of the 2002 Act and Articles 101 and 102 of the treaty. Where a case is proven, the court may order an interim or interlocutory injunction, an injunction of definite or indefinite duration or give a declaration that the behaviour in question is in breach of section 4 or 5 of the Act or Articles 101 or 102 of the treaty. The court may also require the discontinuance of an abuse of a dominant position or require corrective measures to be taken by the undertaking.
Section 5, introduced as an amendment to the Bill in the Dáil, provides that the High Court can make a court order in respect of an agreement entered into by the Competition Authority and an undertaking. This will go a long way towards further strengthening competition law.
Where the authority carries out an investigation into an alleged breach of the Competition Act, it can and does enter into commitments or agreements with the undertaking under investigation. This undertaking, without an admission of liability, will agree to either cease and desist from certain behaviour or agree to act in a particular manner. In return for this agreement, the authority agrees not to initiate proceedings under this Competition Act, thus avoiding the significant legal fees and the deployment of huge resources that a criminal or civil prosecution entails. Such agreements are enforceable as a matter of contract law. However, should the undertaking renege on its agreement, the authority is required to go to court to ensure the undertaking complies with the terms of his or her agreement. This involves an examination of the alleged anti-competitive behaviour which can involve complex economic evidence.
What the Bill now provides is a statutory mechanism which will permit the authority apply to the High Court for an order to give court backing or support to the agreement. If the undertaking breaches the order, such breach would be a contempt of court. In these circumstances the authority could apply to court to have the undertaking penalised for the breach. Breach of a court order can ultimately be punished as a contempt of court with remedies such as committal and attachment for persons or sequestration for assets. Rather than being a hearing on the merits of the competition and economic aspects, a contempt hearing would relate to the breach of the terms of the court order.
The section also provides guidance to the High Court on the factors it must take into consideration when deciding on an application. It provides for third party rights to have the order varied or annulled where the third party is affected by the order, and it contains a seven year sunset clause for a court order with the possibility of renewal.
Sections 6 and 7, which were also introduced to the original Bill as amendments in the Dáil, both contain a cross reference amendment arising from the introduction of separate civil enforcement regimes — section 14 for private rights of action and section 14A for public enforcement. Section 6 also extends from 14 to 35 days the time limit within which the Competition Authority is required to provide a copy of any of the books, documents or records seized by the authority during a search carried out during an investigation. When the authority carries out an investigation into alleged breaches of the Competition Act, its authorised officers, on foot of a District Court warrant, are entitled to seize and retain books, documents and records, including records that are held electronically. Since the introduction of the 2002 Act, there have been significant developments in the area of technology and computing.
The authority has found it increasingly difficult to make and return copies of electronically stored records within the 14 day deadline contained in that Act. The problem is made worse when the authority has to conduct multiple simultaneous searches at different sites. Given the exponential development in computing and the fact that the authority is increasingly having to seize ever larger and more complicated computer systems during its investigations, this issue is likely to grow in the future. This has led to a number of searches that were planned to be put on hold while alternatives can be looked at. Extending the deadline provided for in section 45(7) to a period of 35 days is a practical solution and will also help to strengthen the enforcement of competition law in Ireland in keeping with the commitment to the EU-IMF.
Europe-wide there are well recognised difficulties in pursuing private litigation for damages in respect of competition law breaches. I want to make it easier for people to take such private actions in this jurisdiction. I am providing that where, following proceedings under Part 2 of the 2002 Act for a breach of section 4 or 5 or Articles 101 or 102 of the treaty, a private litigant taking a follow-on action in respect of the same breach shall, by virtue of section 8 of this Bill, be able to rely on the court’s finding of a breach and it shall not be necessary for the second litigant to also prove that the conduct was prohibited. By easing an element of the burden of proof facing a private litigant, I am seeking to facilitate an increased number of private actions, thus to some extent easing the burden on the State resources in pursuing public enforcement but also ensuring that the State is a facilitator for subsequent private actions.
A person convicted on indictment of a breach of competition law is automatically disqualified under section 160 of the Companies Act 1990 from being a company director or from being in any manner involved in the promotion, formation or management of a company. That section also provides for a discretionary disqualification for summary company law offences. In section 9 of this Bill I am proposing that this discretionary disqualification provision be extended to all contraventions of sections 4 or 5 of the 2002 Act and Articles 101 or 102 of the treaty. In keeping with the discretionary disqualification provisions set out in section 160 of the 1990 Companies Act, the High Court may decide itself or may decide on foot of an application by the Competition Authority or ComReg to make a disqualification order for such period as the court sees fit. This additional sanction will act as a deterrent for those engaging in or contemplating engaging in anti-competitive practices and ties in with the overall thrust of this Bill.
I want to send a clear and unequivocal message to business people and consumers alike that anti-competitive practices will not be tolerated. Offenders will be prosecuted and feel the full brunt of the law. These new deterrents should give further pause to would-be and current cartelists and I strongly urge the courts to follow, where appropriate, the words of Mr. Justice McKechnie and apply the full rigours of the law.
The concept of civil fines was debated at some length both before the publication of the Bill and during the various Stages in the Dáil. By way of background, the memorandum of understanding with the EU-IMF contains a number of structural reforms, of which legislation to strengthen competition law is just one. The purpose of these structural reforms is to open up competition in all areas of the economy and to increase the deterrents for anti-competitive practices. The initial intent of the European Commission in seeking a commitment derived from its desire to see the introduction of civil fines in respect of competition law.
Breaches of competition law are criminal offences, prosecuted to the high standard of beyond reasonable doubt with substantial monetary and custodial penalties available to the courts where a defendant is found guilty. Elsewhere in Europe, the national courts or the national competition authority can impose punitive fines in respect of breaches of competition law. Such a regime is in keeping with their civil law systems. I am advised by the Attorney General that the concept of civil fines is not in keeping with the Constitution and common law system. Therefore, in order to comply with the spirit of the EU and IMF commitment, a suite of alternative enforcement measures was drawn up to strengthen the effective enforcement of Irish competition law. These are in the Bill before the House.
The Attorney General has advised introducing legislation to decriminalise sections 4(1)(d) and (e) and section 5 of the Competition Act 2002, otherwise known as non-hardcore offences, and to introduce civil fines to lower the burden of proof from beyond all reasonable doubt to the civil test of on the balance of probability would pose constitutional difficulties having regard to the protections afforded by Article 38.1 of the Constitution. The Competition Authority and troika have acknowledged that there are constitutional problems with civil fines.
On the wider competition arena, following enactment of this Bill my next legislative priority in this area will be the consumer and competition Bill to give effect to the amalgamation of the Competition Authority and the National Consumer Agency. As both bodies were established under statute, it is necessary to give effect to the newly merged body by way of primary legislation. The Government approved the drafting of the Bill in July 2011. Since being announced as part of the rationalisation plan for State agencies during the 2009 budget speech, my Department has continued to work with both bodies to ensure a smooth transition from the two separate entities to a single dual functioning body responsible for competition and consumer protection.
The Bill will also update existing competition law on foot of a review of the operation and implementation of the 2002 Act, strengthen the public interest test in respect of media mergers in line with the report of the advisory group on media mergers, make some minor amendments to consumer protection legislation and provide for a practice for doing business in the grocery goods sector. While this all-encompassing approach to draft legislation has, to some extent, delayed legislation for the rationalisation of the two agencies, we will be better served in the long run by a single legislative measure that establishes the new agency and provides for the combined and updated consumer competition code.
I know Senators are awaiting publication of the Bill and may avail of the opportunity of the Bill before us to progress issues contained in the other Bill. However, I urge them to wait. The matters to be included in the comprehensive consumer and competition Bill will be considered and debated in due course and, no doubt, in great detail, as is appropriate. I look forward to working with Senators on the Bill before the House and will be happy to reply to questions that arise. I commend the Bill to the House.
Senator Mary M. White: I welcome the Minister. Fianna Fáil welcomes the Bill. However, we cannot support it because it does not go far enough. Many aspects of the Bill, including changes to fines and penalties, are more about generating headlines than protecting consumers or improving competition. A comprehensive consumer and competition Bill is needed, as previously promised by the Minister.
The Bill provides for new and additional sanctions and penalties for breaches of competition law in Ireland. The IMF and EU programme for July 2011 contains the following commitment: “Government will introduce legislation to strengthen competition law enforcement in Ireland by ensuring the availability of effective sanctions for infringements of Irish competition law.” Articles 101 and 102 of the treaty on the functioning of the EU, as well as ensuring the effective functioning of the Competition Authority, which will be merged with the National Consumer Agency, would address this. However, Ms Noreen Mackey, a legal adviser to the Competition Authority, states: "It is crucial that this agency is properly equipped with powers that enable it to be both effective and efficient in carrying out its statutory mandate." However, the reality is that this Bill does little to address the requirements of the memorandum of understanding of the EU and IMF and Ms Mackey's concerns. The key problem in competition law enforcement in Ireland lies not in the maximum possible level of penalties, but in the low likelihood of detection and punishment, something the Bill does not address. It is the same old story. We have a lot of regulation but are not good with enforcement.
There are no provisions in the Bill for civil fines. The Competition Authority has no remedy available to it, other than declaratory and injunctive reliefs, and there is no provision in the 2002 Act for civil fines and penalties for breach of competition law. The advantage of the civil route is that the burden of proof is lower than that required in criminal law. The problem of having juries in criminal trials understand the complexities and nuances of competition law are removed. However, the Bill has no provision for civil fines or pecuniary penalties. The amendments will have little or no meaningful effect on strengthening enforcement. The one area the Competition Authority has specifically identified as being seriously lacking has not been addressed in the Bill.
The Minister referred to the Fine Gael manifesto. It refers to a new consumer and competition commission and states: “To save taxpayers money and to strengthen and streamline resources, Fine Gael will merge the Competition Authority, the National Consumer Agency, the Broadcasting Authority of Ireland, the Commission for Communications Regulation and the Commission for Energy Regulation into a single, more powerful, competition, consumer and utilities commission.” The Minister seems to be intent on doing that. We want to know why today's Bill has been published separately to a comprehensive consumer and competition Bill. Why does the Government believe a penalty of €5 million rather than €4 million will have an impact on hard-core offences? Why is the prison term being increased? It serves no practical purpose and is more window dressing.
In all cases to date, not one person convicted of an offence under the relevant subsection of the 2002 Act has seen the inside of a prison cell. Any sentences that have been imposed have been suspended and none lasted more than 12 months. It is unlikely that the amendment introducing a ten year sentence would have any teeth in strengthening competition law enforcement in any real or meaningful way. The Competition Authority stated on a number of occasions it will not bring criminal prosecutions for non-hard core offences. Any increases in penalties introduced by the amendment are effectively meaningless because no proceedings will ever be brought.
As I said, the Bill makes no provision for civil fines due to constitutional considerations. Will the Government hold a referendum to amend this, as Fine Gael promised in its manifesto? The Competition Authority is concerned about this. Will the Government allow authorised officers of the Competition Authority to be present at and participate in the questioning of suspects detained by the gardaí in regard to alleged competition offences as requested by Ms Mackey?
People want to see people pay the price for breaking the law, such as being put in jail. Let us get our act together on enforcing the regulations. As the previous Government was not great at enforcing the regulations either I am not picking on the Minister. We are very bad in comparison with Germany. I do not want to go into the cases where companies have had to pay large fines. Ireland is very poor at it and we need to improve and get our act together on this aspect of our competitiveness.
Senator Deirdre Clune: I welcome the Bill which is another step towards ensuring the nation and the economy become more competitive. The EU-IMF agreement requires a number of structural reforms and strengthening our competition law and enforcement will form part of these changes.
The Bill deals with white collar crime and such offences must be prosecuted. This type of crime affects consumers and anti-competitive practices also have an effect on the economy and businesses through price fixing, cartels or abuse of a dominant position. In its annual reports the National Competitiveness Council points to the need to tackle anti-competitive practices, including sheltered professions.
The provisions of the Bill strengthen the 2002 Act and introduce new measures. The Competition Act 2002 provides for sanctions and the Bill will strengthen these. The maximum prison sentence on conviction of an offence will be increased from five years to ten years. As the Minister stated, a body convicted of competition offences will pay some of the costs associated with the very lengthy and costly investigations that can occur. The Minister outlined how it will be easier for individuals to take a case against anti-competitive practices and this will go some way towards tackling non-hardcore offences.
Many people have contacted us with regard to the content of the Bill. We are aware of headline offences such as cartel practices and price fixing and the Competition Authority has had some success in tackling these. This is the body responsible for implementing the legislation and ensuring anti-competitive offences are tackled. Non-hard core offences such as abuse of a dominant position or an agreement between competitors to share commercially sensitive information must also be tackled. Other such offences include trying to influence a company’s behaviour through dictating the price of products to a retailer, predatory pricing, exclusive dealing, making the sale of one good conditional on the sale of another and refusal to supply an order to eliminate a trader or retailer.
The Competition Authority report was published two weeks ago and outlined a number of cases brought to its attention. It becomes aware of cases through its investigations or through people making complaints to it. Last year it dealt with 212 cases, of which 99 were resolved at source and 113 continue to be assessed. Many complaints were made about petrol and diesel prices with allegations of price fixing. However, when the Competition Authority investigated the matter, it found that it came down to competitors in an area checking each other’s prices and matching or bettering them. As this is probably a good thing for consumers, not all cases are anti-competitive.
The provisions of the Bill deal with non-hardcore offences and will make it easier to ensure convictions. Many non-hardcore offences are resolved voluntarily, although cases can go to court. The difficult cases involve cartels and price fixing and these do go to court and can end up in criminal convictions. These cases are very difficult to investigate as much secrecy can be involved and they require time, expense and expertise as the burden of proof in criminal cases is beyond reasonable doubt.
The Competition Authority held a conference last autumn on its perception of the need for civil fines because there is a gap in this area. The Minister clarified this in his contribution. On the advice of the Attorney General it would not be in keeping with Article 38.1 of the Constitution.
This House recently debated the Health (Provision of General Practitioner Services) Bill 2011 and we expect the Legal Services Regulation Bill 2011 to come before the House shortly. These Bills represent steps to ensure competition in the medical and legal services areas. We are beginning to tackle the sheltered professions which are always the target of the Competition Authority to ensure consumers, businesses and the economy can benefit from these competitive measures.
Senator Sean D. Barrett: I welcome the Minister to the House. This is the second time he has been here this week. With the support of the IMF, the Minister is tackling a deep-seated problem in the economy, which is that it suffers from too much lobbying and too many cartels. The typical reaction around the Cabinet table is to ask how competition can be prevented rather than promoted. The Competition Authority must gain the powers to impose competition on Ministers who protect their sectors. There has been a rash of such incidents.
I will take the example of the Public Transport Regulation Act 2009 which substituted direct award contracts for competition. It is a public service contract without a competitive tendering procedure and this is totally anti-competitive. The former Minister, Noel Dempsey, brought the Bill before the house and the then Senator, Deputy Paschal Donohoe, opposed it very strongly. Worse than this, the Competition Authority did not speak out during the screening regulatory impact analysis and all other Departments either said nothing or were broadly in favour of the Bill. It is not good enough that individual Ministers can opt out.
We were supposed to have competition at airports. The former Minister, the late Seamus Brennan, wanted competing terminals at Dublin Airport. A total of 13 or 14 applications were received but the competition was cancelled and strangely enough the State awarded itself the monopoly contract and nobody disagreed. We used to defend the indefensible in terms of airline competition. In the 1980s, there was a parliamentary revolt against legislation that put people in jail for two years and fined them £100,000 for charging travellers less than Aer Lingus did. I am delighted that the Parliament intervened.
One wonders about the degree of what the Minister for Public Expenditure and Reform, Deputy Howlin, calls the regulatory capture of Departments, particularly by companies that are owned by those Departments. I deplore what Aer Lingus exercised in the past and what CIE and the Dublin Airport Authority, DAA, do now. I also deplore the health insurance situation. We are in breach of regulations and European court rules on competition. Even the Supreme Court decided against it. The reason is that successive health Ministers believed they needed to justify firms within their bailiwick. VHI, which has a monopolistic power and protection, is keeping people in hospital beds for 10.6 days while the Milliman report claimed that 3.7 days would be enough.
Monopolies are grossly inefficient, produce too little, charge too much and create excess rents for the people being protected. In Ireland, we are far too keen to listen to lobbyists and offer protection. This has damaged the competitiveness of the economy. Like Senator Clune, I welcome our intervention in the GP medical card list issue as well as the small measures on veterinary deregulation.
That the school bus contract was not put out to tender led to a court case. The failure of the energy regulator to examine the considerable earnings at management and worker level in the ESB reduces the economy’s competitiveness. Is the regulator captured? Is the Health Insurance Authority, HIA, a captured regulator? Someone who has been refused health insurance by a competitor on the grounds that he or she is too old has never been produced as a witness, yet the policy assumes it is the case. The same situation obtains in the transport sector. Sometimes people look back nostalgically on when we had a telecommunications monopoly. The Culliton report found that, as a share of GDP, telephone charges were approximately twice what they were in the rest of Europe. They are now in or around the average. One gains from competition.
We must examine those regulators who are not delivering. If they have been captured by the producers in their respective sectors, they should be absorbed by the Competition Authority. The incumbents will always be against new entrants. We need a public service tradition in Ireland similar to that espoused by Professor Alfred Kahn in the US, where one takes on the established airlines and allows in newcomers to discipline the incumbents. Otherwise, one is charged too much and overall economic competitiveness is reduced. I have cited some examples — I will send them to the Minister via the internal mail — of companies in our construction industry that were hopelessly uncompetitive when bidding for tenders at Enniskillen Airport. According to the National Competitiveness Council, NCC, problems are posed by excessive costs. For example, our business premises are twice as expensive as those in the UK.
There is a tradition of protectionism in Ireland. For example, it used to be that one could speak with a major solicitor, he or she would approach the then Department of Industry and Commerce on one’s behalf and one would immediately be given a quota and a high tariff would be placed against imports. This tradition of clientelism should have been jettisoned a long time ago. The unsheltered sectors of the economy can bear no more. The IMF is correct in advising us in that respect. There are many restrictive practices.
The first place that competition policy should be introduced in Ireland is at the Cabinet table. Ministers should put more business out for competitive tendering and open up to the markets. Ireland’s bureaucratic tradition is deeply hostile to competition. In the Swords Express case, Mr. Justice Bryan McMahon stated that the company attempting to run buses between Swords and Dublin was doubly discriminated against by the Department of Transport in the exercise of its functions.
Let us open up to the markets. We will support the Minister. Increasing a fine from €3,000 to €5,000 will not deter people much. If the Minister wants a higher number than €5,000, I would support him. Let us take this matter seriously. There should be an all-of-Cabinet approach to halting restrictive practices, protectionism and regulatory capture. The IMF is right — it is an in-built feature of the economy. For example, when there was a monopoly, there was one bus per day between Dublin and Galway. There are 45 services now. This entails 44 more bus drivers, 44 more buses full of happier customers and so on. We addressed aviation first. Ryanair will carry approximately 85 million passengers this year, which is 2.5 times more than British Airways, the largest airline in Europe. Ryanair had first mover advantage because the Houses decided not to continue the policy of protecting Aer Lingus from competition. That policy existed even before Aer Lingus was founded. A man called Crilly wanted to fly into Ireland, but he was told it was not going to be because we were going to have a national airline.
Sectors must be opened up to competition. This is how a small island economy that is trading on a world scale and into the Brazil, Russia, India and China, BRIC, countries will survive. However, the culture of lobbying is ingrained in our political system. I hope that the Government will quickly introduce its measures to control lobbying. The lobbying on 29 and 30 September 2008 on behalf of the banks was the greatest ever instance of lobbying in terms of its effect on GDP per capita, yet it did nothing for the rest of the economy. We have found out that 60% of the rescued banks' current lending is to the construction industry.
The type of dynamic economy that the Minister wants to build requires an end to this kind of clientelism. I commend him on any radical measure he wishes to take in this regard. The IMF is correct in that we have been lax to date. We need a stronger competition policy and stronger Competition Authority than we have had heretofore.
I broadly welcome the Bill, the purpose of which is to strengthen competition law and enforcement through increased sanctions. I hope that the Bill will prove an effective deterrent to white collar crime such as price fixing and cartels, which are not of much benefit to the State or the consumer. Providing conditions in which businesses can continue to thrive through fair competition practices is an imperative, given the situation in which we find ourselves. Fair competition gives businesses an incentive to improve their standards and ensures that the consumer gets the best bang for his or her buck. Any measure that improves services and increases value for money must be welcomed.
As the Minister stated, section 2 of the Bill provides for a significant increase — from €4 million to €5 million — in the fines that can be imposed for hardcore offences. The maximum prison sentence that can be imposed following conviction is to be doubled from five to ten years. I welcome these measures. I also welcome the increase in the level of fines following summary convictions for certain competition offences and the increase in the maximum daily fine that will apply should the offender continue in contravention of the law. These measures will cause people who are considering chancing their arm by engaging in anti-competitive practices to think twice.
As we all know, investigations take time and cost the State a significant amount of money. The Minister cited a good example of this. I welcome the measure whereby, following a conviction, an offender must pay for the cost of the investigation and prosecution. I also welcome the provision whereby, should a small business wish to pursue follow-up action in respect of a proven breach of the competition legislation, it would not need to prove that breach again. This measure will save on costs and time. Most importantly, these changes to the legislation will make it easier for ordinary people and small businesses to make claims against companies that are found guilty of price fixing.
Section 5, which relates to the course of action following an investigation that has found a person or business to have been acting against the law, provides significant deterrents. It also allows for agreements between the Competition Authority and the people or businesses under investigation, subject to a High Court order. Any person or business breaching the High Court order will be held in contempt of court. This is a welcome provision.
It is regrettable that we are not allowing for the imposition of fines by the courts. The Competition Authority advocated for the provision of civil fines in non-hard core cases. Currently, a person or business found guilty of committing a non-hard core offence cannot be fined. This means that while they may be given a slap on the wrist and instructed to discontinue their anti-competitive practices, no financial sanction can be imposed upon them. The Minister has stated that there is constitutional reason for this. However, the non-imposition of financial sanctions in this regard is unfortunate. Perhaps the Minister will re-examine this during the passage of the Bill.
Another proposal worthy of consideration is that proposed by the Irish Small Business Alliance in its submission on the Bill prior to it coming before this House, namely, the introduction of financial reward for information, such as is provided for in the whistleblower legislation, which would assist in the detection of and investigation into cartels, leading, perhaps, to convictions. I take this opportunity to inform the Minister that I will be unable to attend the meeting in Limerick tomorrow.
Senator Thomas Byrne: Certain parties in this House have for many years lived off the spectre of former Tánaiste and esteemed former Member of this House, Mary Harney. They have time and again criticised her for what they perceived to be right wing economics and dreadful health policy. It is, therefore, hilarious to hear Labour Party and Fine Gael Members of this House support what is essentially a tinkering around the edges of a Bill introduced ten years ago by her on foot of legislation in which the former Progressive Democrats Party was involved ten years previous to that.
The reality is that this legislation has in the meantime failed completely because no one has been imprisoned for breach of competition law. Cartels, price fixing, sharing of markets and bid rigging is wrong. While everyone pays the price for this, the matter is not taken seriously in this country. People should be imprisoned and know they will be imprisoned for breaches of competition law but that is not happening in this country. This is not happening because we have adopted what is civil law in Brussels as criminal law in Ireland, which is unsuitable.
There is complete confusion in regard to what offences will or will not be prosecuted. We should in this regard be setting out in legislation a range of simple offences which can be easily understood by the public and criminals involved in price fixing. Price fixing is going on all around the country and the Minister must be aware of it. However, nothing is being done about it. Not enough effort is being made to educate the members of the public about this to enable them report it and the Competition Authority does not have sufficient resources. Legislation in this area is much too complicated and this Bill does nothing to clarify and simplify it.
As stated by my colleague, Senator Mary White, this is mere window dressing. What difference does it make if the maximum fine in respect of hard core offences is €4 million or €5 million? It will make no difference. We can fine the ordinary people of this country €20 for non-payment of the household charge but we cannot introduce fines in respect of price fixing or civil offences under competition law. I accept that civil fines would not be suitable in respect of price fixing. It is frustrating that it is always possible to introduce fines by way of legislation in respect of breaches of law by ordinary citizens but it is not possible to do likewise in respect of people who are robbing us left, right and centre. A way is always found to get money from, say, the widow in Roscommon to whom Senator Leyden often refers.
This Bill is only window dressing. No one has yet been imprisoned for breaches of competition law and no one is likely to be imprisoned under this legislation because it is far too complicated. The legislation is much too complex in terms of its provisions in respect of economic analysis and exemptions. We need to agree to fix prices, a breach of which, if big enough, will be considered anti-competitive and in breach of Irish and European law. It should be as simple as that. However, it is not that simple. We need more education of gardaí in this area. As this is criminal law, the Garda Síochána should be much more apprised of it than it is and should be able to take criminal prosecutions without reference to the Competition Authority.
The American Sherman Act, introduced more than 100 years ago by former President Roosevelt, has been very successful. Local police forces and the FBI have taken restraint of trade or monopolisation cases under that legislation, in respect of which many people have received lengthy prison terms. This has not happened in Europe because Europe is not concerned with criminal law. It also has not happened here because we have adopted civil law in Europe as criminal law here, which has not proven effective. The policy introduced by former Tánaiste and Minister, Mary Harney, was well intentioned. She was always criticised for this by Fine Gael and Labour Party members and it is wrong for those parties to now tinker around the edges of her policy. It is time for more radical policy change.
I agree with the decision of my party spokesperson to oppose this legislation, not to send the message that Fianna Fáil is pro-cartels or pro-price fixing but that we are more opposed to them than are the Government parties and that we believe people should be greatly penalised in that regard. The Government should be providing the Competition Authority with more resources in order that it, along with Government and the Garda Síochána, can stamp out this practise. Fianna Fáil is opposing this legislation on the basis that we want to see a tougher approach taken to this practice which is doing terrible damage to society.
I hope the IMF is listening to this debate. I do not believe it is appropriate that we are introducing legislation which is mere window dressing. The Government has missed the opportunity to introduce legislation which could be easily understood by offenders and juries and which would have made a difference to the economy. Senator Barrett has outlined the benefits of competition to the economy, which we wholeheartedly support. We do not believe this legislation goes far enough and are calling for the introduction of much more radical action in this area.
Senator Colm Burke: I welcome the Minister to the House. I also welcome this Bill. The Minister gave a comprehensive overview of the legislation in his opening statement. I agree with Senator Thomas Byrne that former Tánaiste and Minister, Mary Harney, made a valuable contribution in this area.
On competition, I was fortunate enough to be apprentice to the solicitor who took one of the first anti-competitive cases to the European Court in 1974. The case involved the Irish Sugar Company, which had decided it was no longer going to sell sugar to wholesale distributors but would sell it directly to retailer, which the European Court held was anti-competitive.
I welcome the provisions set out in sections 3 and 4 of the Bill which empower ordinary individuals to take action if necessary. The only difficulty I have in this regard is the cost to the individual of taking such an action and, in the event of a case being lost, him or her being liable for the cost of taking the action. I recently filed a complaint with the Competition Authority in respect of another State agency, VHI. A new private hospital is for the first time in 95 years to open in Cork. While two health insurance companies have agreed to cover use of facilities at that hospital by their customers, VHI has refused to do so, which is anti-competitive. The Competition Authority is dealing with the detailed complaint which I filed with it on this matter.
This is where the Competition Authority can play a very important role in ensuring that one or two businesses or enterprises do not control what happens in an area. There is a lack of competition in the private health care area in Cork, and it is important that this new facility is allowed to open. The only way that can happen is if VHI customers are allowed to use that facility. I look forward to the investigation by the Competition Authority on the issue as it is important to bring down the cost of health care in the country. I understand that as part of the process, VHI is revisiting the issue and the company that wants to open a hospital has brought down its prices. This proves that where there is competition, prices are forced down, and in the health care area we must bring down the costs.
With regard to anti-competitive practices, one or two issues are arising which cause their own problems. There is the question of the HSE negotiating with GPs, and I understand there are some limitations as it would be seen as anti-competitive if the Irish Medical Organisation negotiated directly with the HSE with a view to an overall contract. That is causing some difficulties but I am not sure how this will be approached in future. The Department of Education and Skills can negotiate directly with teachers and agree a salary scale but there is a problem because the HSE cannot negotiate with doctors because they are employed under contracts. That causes a problem in moving the negotiations forward.
This is a welcome change in legislation and it is required. The Minister has already outlined the constitutional problems with regard to the civil arena and a constitutional amendment might be required if we took on board the concerns of Senators White and Byrne. That is not available now, unfortunately. This legislation is welcome and gives the opportunity for the ordinary individual to take his or her own action. It would also give far more power to the Competition Authority, and that is long overdue. I thank the Minister for bringing forward the legislation.
Senator Feargal Quinn: I am a believer in competition and have been all my life. In general the Minister has got the balance right in this and it is not easy to achieve what he set out to do. In 1936, my father opened a grocery business and fell out with his father, who was also in the grocery business, as my grandfather thought it unethical to cut the price of groceries; he believed people should compete only on service and not on price. When I opened in business that was the law in Ireland, and resale price maintenance meant that one could not sell below a legitimate price established by a supplier. We have a tradition in Ireland of avoiding competition, which has not always been to our benefit.
On one occasion in Dundalk I remember selling below cost, in which I was a great believer, and causing a war between the trades in the town. As other retailers went below cost and we went lower again, it was a chain reaction. All of the people in that part of the world came to shop in Dundalk and it benefited the whole town as we found a way to compete with each other. The difficulty now is getting the balance right for what is in the public good.
Senator Reilly recently held a function in the audio-visual room and spoke about the danger to our main streets and high streets and the devastation caused by small shops having to compete with the big supermarkets on the outskirts of town. I understand her point and why she was concerned as I have visited the main streets in towns. They are a desert in many cases, with many empty shops. This is because large stores have been built on the outskirts of town. What can be done about that? Should we hinder the competition that benefits the community, consumers and families who wish to buy food at a lower price? That is not the right answer but we should not encourage the development of stores outside towns. If we continue to do so we will demolish town centres and create retail deserts. The same idea applies with the new order on the size of supermarkets, and slightly larger supermarkets are now permitted. In most parts of Europe there is no such control on the size of supermarkets, leading to great increases in their power. That does not help the small trader, people without a car or those who cannot shop anywhere except locally.
In Ireland there is a tradition of the State supporting anti-competitive practices, and Senator Barrett provided some great examples. He touched on the example I remember most, which is the airlines. Between Dublin and London the air fare was always over £200, with only two state-owned airlines — Aer Lingus and British Airways — running the service. No other airline was allowed to compete in what was an accepted practice. We thought we understood the practice but it was not until Peter Sutherland in the European arena decided to release competitive forces that the likes of Ryanair were given permission to enter the market. We can now see what has happened in the business, and there is a similar scenario in the telephone business. The State owned the telephone company and we had the worst service in Europe. It was not until competition was developed that we saw change.
How do we get the balance right? Although we are unwilling to do it enthusiastically, if we allow full competition in postal services, as decreed by Europe, the companies set up to compete with An Post will deliver at a low price but only in the cities. They will not deliver half way up a mountain and there will not be a postal service in the rest of the country. There is a balance to be struck and we should consider how to achieve competition that is of benefit to everybody.
There is one aspect of competitiveness I will speak to, which relates to the European Union and our system. We must examine the work of rating agencies, as the European Union is not doing enough in this area. There should be regulation of bond rating agencies and strict penalties should be imposed for fraudulent ratings. One ratings agency has stated that our upcoming referendum is “credit-negative” in spite of the fact that it is a purely democratic act. If the European Union is imposing the legislation before us today as part of our obligations, it should address even more damaging issues, such as the rating agencies.
In another amazing development, Iceland’s former Prime Minister Haarde became the world’s first leader to be put on trial on charges of negligence over the 2008 financial crisis. He was Prime Minister from 2006 to 2009 and is accused of gross negligence and failing to prevent the collapse of Iceland’s top three banks, which were heavily involved in risky investments in the US. I do not know if that is a question of competition but we should have stronger legislation.
Returning to the legislation, one could question if the current penalties of up to five years imprisonment have enough dissuasive effect. Ms Claire Waterson of William Fry made an interesting observation, stating that the proposed provisions on follow-up cases — actions for damages where breach has already been established — are to be welcomed from the private litigants’ perspective. She indicates, however, that the provision will primarily apply where there have been prior enforcement proceedings by the Competition Authority or the Director of Public Prosecutions. As public enforcement is infrequent in Ireland — we have heard enough about that today — private litigants will continue to face significant evidential difficulties in cases where there is no court case decision. Will the Minister comment on that?
Senator Feargal Quinn: I wanted to mention the rating agencies. In general, the Minister is heading in the right direction and it has been interesting to hear the criticisms. He is getting the balance right and it is too simple to argue that competition, without some balance, on its own is the only answer.
Senator Kathryn Reilly: Sinn Féin welcomes legislation which will promote national competitiveness, tackle corruption, hold business leaders to account and reduce costs to people and businesses. However, we believe there are parts of this legislation which are weak and lacking in a couple of key areas. In that respect, we will table amendments to strengthen the legislation in certain areas. We will probably table amendments in regard to civil fines as an option for the Competition Authority, the lack of obligation on the Government to respond adequately to issues raised by the Competition Authority, the failure to properly resource the Competition Authority and the stand alone nature of this legislation.
We support the measures in this Bill to tackle corrupt practices but we do not believe it does enough to tackle these practices and it will not necessarily result in a fairer and more competitive environment. We welcome the tougher criminal penalties available to those engaging in corrupt practices because they undermine our economy and penalise ordinary workers and consumers.
The intent behind this legislation is to strengthen competition law enforcement by ensuring the availability of effective sanctions to deal with infringements of competition law, but the major flaw in this Bill, which critically undermines it, is the lack of provision of civil fines as requested by the Competition Authority which sought the provision of civil fines to deal with the so-called non-hard core infringement. Central to this is the abuse of dominant market share, including refusal to supply, predatory pricing and exclusivity agreements. We remain concerned that the absence of a provision for civil fines will impact on the ability to deal with these types of abuses. The development and implementation of a civil fines mechanism would deal with the abuse of dominant position and it would strengthen the provisions of the Bill and further safeguard consumer and local business. The role of civil fines is to punish corrupt practices where the burden of proof is too onerous to reach. They are a medium-strength provision which should be utilised and I hope the Minister will look at this again.
We are concerned the Bill does not oblige the Government to respond to the issues raised by the Competition Authority. Issues that impede competitiveness may require Government action and/or legislation. Best practice across Europe places responsibility on a government to respond to a report by the relevant competition authority within a specified timescale and the relevant competition authority has the ability to table legislation for consideration. In this state, there is no obligation to consider let alone act on the recommendations of the authority. If the Government is serious about dealing with corrupt practices, it should consider including a clause on the obligation to respond to recommendations of the authority with a response which must outline the Government’s proposed actions with regard to each recommendation. Again, we see no reason this gaping hole cannot be amended in the legislation.
This legislation places much responsibility on the Competition Authority but the question must be asked: is it fit for purpose? Is the Government committed to supporting it with adequate resources and responding to the issues it raises? Like other speakers, we support this legislation but we do not believe it goes far enough. If the Minister could consider that along with our amendments on Committee Stage, it would be much appreciated.
Senator Diarmuid Wilson: I welcome the Minister who referred to the EU-IMF programme of 28 July 2011 which contained the commitment that the Government would introduce legislation to strengthen competition law enforcement in Ireland by ensuring the availability of effective sanctions for infringements of Irish competition law and articles 101 and 102 of the Treaty on the Functioning of the European Union as well as ensuring the effective functioning of the Competition Authority which will be merged with the National Consumer Agency.
The Bill does very little to address the requirements of the memorandum of understanding to which the Government agreed on 28 July 2011. The key problem in competition law enforcement in Ireland lies not in the maximum possible level of penalties, but in the low likelihood of detection and punishment, which this Bill does not address. We all agree competition is critical in the marketplace and the prevention of cartels and collusion in business allows new entrants into the economy and we all know new entrants which survive will create employment.
Senators Barrett, White and Byrne referred to the opening up of sectors to competition. It is not too many years ago when I, as a young person in Cavan, wanted to travel to Dublin but the only transport available was CIE which later became Bus Éireann. It cost an arm and a leg to get to Dublin until that route was opened up to the private sector. That reduced dramatically the cost of travelling to Dublin and increased the number of buses provided by CIE. Aer Lingus had a monopoly but when that sector was opened to competition, Ryanair dramatically reduced the cost of travelling, in particular travelling between here and Britain, for which Aer Lingus was charging an arm and a leg. Others sectors were mentioned by other Senators.
We all agree markets must be opened up but we must look at our planning laws. Senator Quinn referred to the delegation from the chamber of commerce in Cavan that my colleague, Senator Reilly, invited here a number of weeks ago which was concerned about out of town shopping and these multinationals providing huge shopping centres which are drawing people out of the town. Eventually, shops in the town will have to close and when that happens, we will be left with a monopoly. We have all seen what has happened in England where people living in some country towns must travel up to 40 miles to shop because the small shops in the towns have closed, in particular as a result of Tesco. Tesco is trying to build huge shopping centres on the outskirts of our relatively small towns which will result in the shops in the towns closing because they will not be able to compete.
Senator David Norris: I welcome the Minister. I am glad I heard the last remarks of my distinguished colleague, Senator Wilson, which I endorse wholeheartedly. It grieves me that we have these chains, many of them from Britain, which have an aggressive policy of undercutting the competition. They have loss-leading brands, they create hypermarkets and they drain the life out of small towns and even out of the centre of cities. I am lucky there is still a corner shop in my neighbourhood but it is extremely rare. That devalues our community. It is not directly related to competition but an allied issue is the question of below cost alcohol selling on a mass scale which is absolutely appalling and has led to casualties and death.
I heard most of the Minister’s speech and I gather substantial amendments were made during the passage of the Bill through the Dáil in regard to private litigants and so on. I have been briefed by a group called the Irish Small Business Alliance. The title of its submission, a submission on the Government’s abysmal failure to enforce Irish competition law 1991-2012, is a trifle undiplomatic. I am not an idolatrous follower of competition. I think there are circumstances in which it is absolutely disastrous. I do not think we should make a little tin god of it. Sometimes it is appropriate but it must be recognised that it is not always in the interests of the consumer. I remember speaking on the competition Bill when it was originally introduced by the then Minister, Mary Harney. What struck me was that there was free range for everybody else, but missing from the Bill was a suggestion there had to be a competition for the position of chairman. The position was not to be publicly advertised but I managed to get it amended to ensure the Competition Authority satisfied its own regulations.
One of the first people to chair the Competition Authority was Dr. John Fingleton, whom I knew from Trinity College followed by William Prasifka. Dr. Fingleton indicated that advancing better practices cost about €4 billion a year, and that was in 2004. The point that this group makes, however undiplomaticly, is that it is very difficult to enforce competition legislation, unless the mechanism of enforcement is properly financed. The Irish Small Business Alliance suggests this does not happen, in other words, that the office of the Competition Authority is inadequately resourced. Will the Minister comment on that, unless he has already done so while I was engaged with people from the US? The director in the year 2000, Mr. Patrick Masterson, resigned saying he could no longer continue as director of competition enforcement due to the failure to provide adequate resources to enable him to do his job properly. The OECD report in April 2001 stated that strengthening competition law in institutions had been compromised by lack of resources, unclear independence and inconsistent leadership. Mr. Declan Purcell, the then Competition Authority chairman said in October 2010 the authority’s ability to carry out its statutory and other functions “... is seriously and regrettably compromised ... I simply feel that some facts need to be recognised and acknowledged. With the current level of resources we have ... we are no longer in a position to investigate and assist the DPP ... We will be doing well if we can conclude one major investigation in the non-criminal enforcement.” I understand that only two detective Garda are seconded to assist them in this latter role.
On the introduction of civil fines, I have been briefed that the Minister is resistant and unyielding and has not given any reasons, but if I have understood his speech correctly, he has introduced them. The Minister quoted legal advice from the Attorney General that there would be a constitutional problem and as I understand it he has placed at least a section of the advice received from the Attorney General on the record. I know there is a tradition of not releasing information, but I ask that the broad outlines could be made clear to the Irish Small Business Alliance. I know it is related to the burden of proof. In other laws, there is the possibility of private prosecution, for example in acts of terrorism there has been a number of cases, for example the Omagh bombing, where it proved impossible to meet the test, the people who were brought before the courts failed, but then the people who could demonstrate injury could go before a civil court. I wonder if it is possible to resolve this situation and introduce some similar measure? It has happened in other areas as well where civil suits have been brought, following the collapse of a trial in the criminal court which requires a higher level of proof. Will the Minister consider this suggestion?
I hesitate to suggest that we encourage informers, who do not have a good reputation, but we are using them for income tax. How about a reward for those who reveal uncompetitive practices? Mr. George Stigler states that regulatory capture is endemic and many corporations regularly breach regulatory laws, confident that they will not be caught or if they are, the financial benefits derived from the breach will exceed the cost of the fines and so on. That shows the power of the major corporations as against the individual. I have always stood for the individual and there is no conflict between that and being a good businessman. If you do not believe me, look to my righthand side, this is Senator Feargal Quinn, who ran an extremely successful business on the basis that the customer is king.
Senator Michael Mullins: I welcome the Minister to the House. It is appropriate to discuss the Competition (Amendment) Bill 2011 at a time when competition is the word on everybody’s lips and we are a little more competitive than we have been for many years. We need to continue to remain competitive in all aspects of business if we are to bring about economic recovery in the years ahead.
The Bill is designed to strengthen the enforcement of competition law in Ireland. Breaching competition law is a white collar crime and the punishment should fit the crime. It is regrettable that we have seen many examples of white collar crime in the past decade, with very few people ending up behind bars. Contrast that with what happens in America. Very shortly after the Lehman Brothers debacle, we saw several high ranking banking officials behind bars. We experienced a similar situation and to date we have seen nobody brought to book or made to pay the price for reckless decisions which have devastated the lives of so many in this country.
This Bill will provide a deterrent for cartel price fixing, through abuse of the dominant position and other anti-competitive practices. I am astounded that since 2002 there have been only 32 criminal convictions for price fixing. These high profile cases were in the home heating oil business and car dealerships in Leinster. The victims of price fixing are the ordinary people of Ireland, the people who are trying to heat their homes during a period of escalating oil prices or people who drive cars. We need to take a tough approach. I agree with Members on the other side of the House that we are not taking a tough enough approach. I hope that when the Bill is passed, the Minister will keep the enacted legislation under constant review to ensure it remains fit for purpose as time goes by. We have seen examples where competition works well, the airline industry is one example. If it were not for Ryanair, we would still be required to pay what people regarded as a small mortgage to go to see their relatives in England. The private bus operators were mentioned also and they operate very efficiently and effectively in County Galway. Let me contrast that service with the dominant position, where there is no competition, of Irish Rail. It costs twice or two and a half times as much to make any journey from Galway by train as it does by bus. Senator Burke referred earlier to the situation in the health insurance market. We must stamp out uncompetitive practices.
I commend the Minister for the actions he has taken to date. People who are indulging in uncompetitive practices and are in breach of the law will take heed that the Government is serious about stamping out such practices. I implore the Minister not to leave this Bill as a finished product. We need to keep this under constant review and continue to focus on where there are breaches and where we need to strengthen the legislation. I commend the Minister for the work he has done to date. He has honoured a commitment that was made in the programme for Government and, while it might fall short of what some people on the other side of the House are looking for, I have no doubt it will go a long way in addressing this major issue.
Senator Terry Leyden: I welcome the Minister and his senior officials. It is excellent that he has taken time out from his very busy schedule. I realise how busy his schedule is because I was in that Department for a while. Senators would say that having the Minister present is useful. In fact, it is great to have him here to say a few words and listen to this excellent debate on competition.
What I find regrettable is that we are being forced to introduce this Bill. It surprises me that Ireland, as an independent State, did not have strong enough competition laws up to now, so that the troika had to insist on new legislation. Nonetheless, we are introducing the required legislation.
I would like to hear the Minister’s view on below-cost selling, which has been mentioned by many speakers. The provisions in this regard were revoked by a previous Government. The Joint Committee on Enterprise, Trade and Employment, chaired by former Deputy Donie Cassidy, of which I was a member, came out strongly against revoking that legislation. The motive behind it was to create more competition, which is reasonable, but there is no doubt that alcohol is being sold below cost in most supermarkets, to the extent that publicans in most small towns have to get their drink from the supermarket. It is not really a practical proposition for a publican, who would buy wholesale, to buy it cheaper from Tesco, Dunnes, Aldi or Lidl. I do not expect a response on this but I ask the Minister at least to examine the possibilities for dealing with it.
There is no doubt in my mind that the cost of drink increases the consumption of alcohol, and not just among young people. Drinking at home has become the norm, and sales of wine have become very high. I have no objection whatsoever to any adult drinking — it can be very pleasant — but the Minister should consider the point that younger people have access to alcohol. I know the Minister’s colleague in Government has proposals in this area.
Very low prices can undermine the viability of a service. This happened on the Dublin-Galway bus route. It is the Department of Transport, Tourism and Sport that licences the buses, but the prices were undermined so much that a company was nearly put out of business. Competition is fine but, as Senator Norris said, it is not the most important thing, and it can result in people being deprived of a service.
I carried out work in a previous Seanad which I called a name and shame campaign. I went around and rang different places to find out the prices of diesel and petrol in various towns, and I found that different towns consistently had the same prices for diesel and petrol. There was little competition, by accident or design. It is hard to prove these things and hard to obtain prosecutions under competition law because these matters are conducted over the telephone, not at meetings.
With regard to airline prices, large airlines such as Air France or Aer Lingus can be dominant in a certain market, such as flights to Paris. Thanks to Michael O’Leary and Ryanair there is competition to some extent, but not to the extent of having a comprehensive services such as those of the two major airlines. I realise this is not the Minister’s area, but competition does come under his remit. He will find the prices are practically equal, and they go up at the same rate when demand increases. I believe there is some sort of collaboration between those major airlines with regard to access to cities such as Dublin, London and Paris, and particularly the Paris route. Michael O’Leary deserves great credit, as he has revolutionised the whole airline industry. There is no doubt about it. We should be proud of his work. The Government would be well advised to utilise his talents in some Department or in some other way, because he would be a breath of fresh air. In fact, if someone would vacate his or her Seanad seat, I would recommend him strongly——
Minister for Jobs, Enterprise and Innovation (Deputy Richard Bruton): I thank the Senators for a very good debate. The original debate on this was probably in 1776, when Adam Smith published The Wealth of Nations, in which he said it was to not the virtue of the butcher, the baker or the candlestick maker that we owed our dinner, but to the invisible hand of competition. He also commented that business people never come together but to collude against the public interest. He had a fairly jaundiced view of the way in which competition can be manipulated. It may be 236 years later, but the debate here has also shown up the double standard that we sometimes apply on this subject. Some Senators were calling for rigid enforcement of competition law and jail for those in breach, while others were saying they were not so sure free competition should be allowed with regard to planning laws or in the grocery trade. When it came to below-cost selling, which is effectively State-enforced fixing of prices at a certain level, everyone was raising doubts. The double standard that we apply in this debate is very real. I take Senator Norris’s point that we cannot set up competition law as the tin soldier that governs everything, but, to be fair to Senator Barrett, that tin soldier has been remarkably silent over the years in this country, and we have a lot of ground to make up. This is a tricky area. Senator Quinn put his finger on it: we all like competition when it does not visit our particular door, but when it is in an area in which we feel we are entitled to behave in a certain way, we are not so sure about the level of competition we want to see. That is true in so many walks of life, and it is a challenge for those of us in public life who are trying to act as an arbiter between the different forces in our community. That is what makes this an important debate.
I appreciate the points made by Senator White, who wants to see civil fines but also wants to see people in jail, which would happen if these were criminal offences. The difficulty with wanting these two things is that it undermines the case for civil laws. As Senator Byrne said, a former Minister, Mary Harney, introduced criminal sanctions for breaches of competition law, but that implies that such behaviour is a criminal offence. We cannot then slip in the back door and say we are going to apply a different standard of proof than in other criminal cases. We cannot ride the two horses together. That is the point the Attorney General has been making.
Deputy Richard Bruton: That is the difficulty. It was not just this Attorney General but the Attorney General who advised the Senator’s party in Government who took this view. We cannot decide that a certain behaviour is criminal and then say we are going to pursue it in a different way. That is the ultimate difficulty with the case for civil fines. Several people have quoted the EU and the IMF elements of the troika as suggesting that they are keen to see civil fines. Their more recent submissions have acknowledged not only that civil fines are not possible but that they endorse what is contained in the Bill. As we have developed the Bill we have included comments from the troika.
Senators Clune and Barrett raised the wider issue of competition policy as opposed to competition law. Both Senators credibly pointed to the fact that much of the anti-competitive provisions have to do with public policy rather than collusion or price-fixing or any other issue. Rules govern behaviour in certain sectors whether transport or otherwise. To take up a point made by Senator Leyden, we have not been too good at enforcing these changes. The momentum for implementing the Competition Authority’s recommendations only gathered when the EU and the IMF came along. Reform in the legal and medical areas has gathered momentum and there are proposals in respect of the planning guidelines. We are examining the waste sector now and the need to have better competition rules there. There is still a mix of local authorities as both regulator and service provider at same time. This completely breaches the principles of competition law. We are mending our hand and it is more than a critique of our political system that our hand has been forced on this matter. To be fair, the late former Deputy and Minister, Seamus Brennan, was probably the odd man out because he leaned against the consensus in this area. However, he did not always get the greatest recognition for his efforts.
Several people have highlighted the need for more investigation of sheltered sectors and the issue of the resources of the Competition Authority. The recently published action plan for jobs includes an action for the Competition Authority identify areas in sheltered sectors of the economy where there are problems and to commission studies on them. New recommendations will be produced. While people rightly point out that there have not been many actions, in its recent annual report the Competition Authority commented on some of the investigations. Seven active investigations into criminal breaches of competition law are under way. Two of these include investigations into anti-competitive activities in the liquid milk markets and in the concrete and cement industries. People have concerns in these areas and the Competition Authority is investigating them.
Others raised the point that while it was well and good and a good feature of this legislation that on the back of injunctions or actions taken by the Competition Authority civil actions can be pursued without having to establish proof in one’s case, this will open up the door to more civil cases being taken whereby people can get compensation for the damage done to them. In a related matter, in many cases the Competition Authority settles before going the final step of prosecuting in the courts. We are creating a situation whereby if there is an agreement or settlement outside the courts, breach of that is, of itself subject to prosecution not as a breach of the Competition Act but rather as a contempt of court. This strengthens our ability and the ability of others to take follow-on actions in this territory. These changes will make a difference. I realise others, including Fianna Fáil Senators, believe there should be a great deal more but they have failed to acknowledge the steps being taken in this legislation. Fianna Fáil Senators have called for the creation of simple offences. Senator Byrne has called for this in particular. However, if he wishes to come forward with proposals there will be other competition legislation shortly.
I do not pretend to be an expert on this matter but in my experience it is not that the offence of price-fixing is complicated but rather, as Senator Terry Leyden suggested, it is difficult to prove collusion simply because prices are the same. These are different things. The act of collusion is the offence, not having the same price and a mere similarity of price does not constitute an offence. People should come forward with proposals by all means. We are developing a second competition Bill which will be before the House in due course and we are open to listening to suggestions.
Senator Burke raised several issues, including the effects of competition law. This is an area where the law is biting the tail of some people, in particular by preventing open negotiations on prices by an association of self-employed people. It represents a breach of the rules to come together to negotiate on prices. I understand that the former director of the Competition Authority came up with a formula by which certain negotiations could still proceed. It has been possible to continue to hold negotiations in this area without breaching the principles of the Competition Act.
It was interesting to hear Senator Feargal Quinn’s comments on the ethics between the generations and people’s expectations about the role of price and resale price maintenance. I remember when that became part of the legislation. This underpins that there are two sides to these stories and we are trying to pick a way between them.
I will welcome Senator Reilly’s amendments. We can debate in more detail the issue of civil fines and the reason they have not been possible in Irish law. They have not been possible in many other areas as well. I understand that revenue is the only field in which civil fines have been deemed acceptable. The Senator raised the issue of whether there should be a greater obligation to observe the recommendations of the Competition Authority. I agree that should be an obligation to respond and this should be done in a timely manner. However, as in the discussion on planning guidelines, people take other issues into account. Senator Reilly also remarked on the difficulty of town centre locations being damaged by larger out-of-town malls and supermarkets. Under the strict law of competition that is what should take place. However, other public policy issues must be taken into account. Senator Wilson commented on this issue as well.
Senator Michael Mullins raised the issue of the lack of convictions. I hope there will be more. Senator Mary White argued that the low probability of being caught is a problem. That is true. It is difficult to take a successful prosecution in this field. These are not easy cases to prove, of that there is no doubt. However, it is simplistic to dismiss increasing the penalties as if this will make no difference. Generally, when one is calculating the effectiveness of measures in this area one multiplies the probability by the penalty and the result represents the deterrent. If we increase the penalty, even if we do not greatly improve the probability, we certainly increase the deterrent. Therefore, there is a benefit to increasing the fines. Their presence underpins the Senator’s view and that of many others that we wish to see people in jail for these offences.
Deputy Richard Bruton: Senator Michael Mullins also raised the issue of banking prosecutions. Such prosecutions must be taken under different legislation. The offences are clear. The issue is convicting people of a breach of the law. We know what the offences are.
Senator Leyden raised the issue of below-cost selling. It was right to remove the ban because it was a restriction on competition. When the State says something written on an invoice becomes the price that must be paid, it is like the resale price maintenance espoused by the grandfather of Senator Quinn. I would not support reintroducing it on a general basis. Alcohol is a different issue for a different public policy reason than competition. Difficulties remain in enforcement because people produce different products at different cost levels. A measure cannot interfere with the ability of people who can produce something more cheaply being able to take advantage of their superior competitive ability in the marketplace. There will be tricky issues to be negotiated in putting that together.
We will return to the civil issue on Committee Stage. Senator Byrne held the former Minister, Mary Harney, up to criticism for introducing criminal sanctions based on European civil offences. Ironically, many EU member states are looking to Ireland as an exemplar of introducing criminal sanctions in the competition area and regard it as something of a path breaker in how it has addressed the issue. There are two views on that issue.
The debate was very good and showed the full range of views. It is an area in which Ireland has been lax. We need to create a culture of compliance. This will not always involve penalties and fines. Senator Leyden referred to naming and shaming when companies fail to play fair with consumers. Such measures are just as important as the terms of criminal acts.
We can create an environment in which people are much more conscious of the need to be competitive and fair, which does have barriers to entry and which does not assume that professions can regulate the numbers of people entering their codes or just because they are wonderful people should not know what prices are charged for services. The notion of being able to see transparently what prices are charged for a service is an entitlement of any patron, whether one is a plumber or a barrister. We need to create an expectation that the same rules prevail for everyone.
I thank Senators for the debate and look forward to Committee Stage to discuss some issues in greater detail. There is no doubt that with the second competition Bill we will be able to address some of the other issues about which Senators are concerned.
|Bacik, Ivana.||Barrett, Sean D.|
|Bradford, Paul.||Brennan, Terry.|
|Burke, Colm.||Clune, Deirdre.|
|Coghlan, Paul.||Comiskey, Michael.|
|Conway, Martin.||Cullinane, David.|
|Cummins, Maurice.||D’Arcy, Jim.|
|Heffernan, James.||Higgins, Lorraine.|
|Keane, Cáit.||Kelly, John.|
|Moloney, Marie.||Moran, Mary.|
|Mulcahy, Tony.||Mullins, Michael.|
|Noone, Catherine.||Ó Clochartaigh, Trevor.|
|O’Keeffe, Susan.||Quinn, Feargal.|
|Reilly, Kathryn.||van Turnhout, Jillian.|
|Byrne, Thomas.||Leyden, Terry.|
|Mooney, Paschal.||Norris, David.|
|Ó Domhnaill, Brian.||O’Brien, Darragh.|
|Power, Averil.||Walsh, Jim.|
|White, Mary M.||Wilson, Diarmuid.|
|Last Updated: 08/03/2013 14:36:45||Page of 10|