Seanad Éireann - Volume 147 - 05 June, 1996
Competition (Amendment) Bill, 1994: Second Stage.
Question proposed: “That the Bill be now read a Second Time.”
Minister for Enterprise and Employment (Mr. R. Bruton) Richard Bruton
Minister for Enterprise and Employment (Mr. R. Bruton): This Bill was first introduced in 1994 and it has undergone a number of changes since then. The Bill was concerned with two issues in 1994, the exemption of mergers from the Competition Act and the introduction of proper enforcement proceedings to underpin the existing 1991 Act.
When the Bill was introduced in 1994, the merger provision caused considerable controversy. Many people were concerned that the exemption of mergers from the Competition Act would have opened the opportunity for many mergers to pass through, allowing large companies to acquire smaller ones without proper scrutiny. This caused a degree of debate across the House. On taking Government, we undertook to review that element in discussion with the social partners and that has been done. I have decided to drop that element from the Bill and to establish a mergers and competition review group to look at that, among a number of other issues relating to competition law.
The second major new element in this Bill introduces criminal offences and penalties in respect of competition law violations. Ireland has stood out for a number of years as having a weak competition law. When that was corrected by the 1991 Act we provided legislation that only introduced the notion that the Competition Authority would certify and licence certain agreements. We also allowed for third parties to take court action. However, we did not introduce, like other countries, enforcement procedures where an independent third party, such as the Competition Authority, could take enforcement actions and investigate third party complaints and on foot of those investigations, take the necessary steps to deal with alleged  abuses of competition. The reliance of the 1991 Act on private actions by individuals in the court has proved less than fully effective and this Bill is changing that.
The major issue, as an introduction to this Bill, is to stress the importance of competition and effective competition laws. We are a small open economy dependent on trade. Increasingly, what is traded are no longer manufactured goods but services. The competitiveness of our exports is dependent not only on the direct production of goods and services but increasingly on non-traded services provided to business in the direct trading sector. It is important that we establish a broad competitive environment in Ireland.
The Culliton and various NESC reports emphasised that the competitiveness of our economy does not depend solely on labour costs or any one dimension but on competitiveness across a range of both public and private sector activities. It is important that we sustain the strong competitiveness of our economy with a system of law that says that anti-competitive agreements are not acceptable, that they restrict production and employment, increase the cost to consumers and business and damage the economy.
Estimates regarding the potential gains from a more competitive environment in the Irish economy indicate that conservatively 1 per cent of GNP would be saved if more effective competition law was in operation. This would amount to £360 million a year. Any loss of employment or excess charging on that scale is unacceptable and effective and modern competition law, with proper sanctions, must be enforced to deal with the problem. This is the background to the Bill and the reason the Competition Authority is being given enforcement powers. The Bill will also provide for the imposition of fines in serious criminal cases.
Most Senators appreciate it is not realistic to expect a third party, a small  player or even a consumer, to have the resources to challenge a much larger player, anti-competitive agreements or abuses of dominant positions in the courts. This was never a practical avenue and it is not surprising in retrospect that few companies have been in a position to take that route to try to enforce their rights and ensure there was no anti-competitive behaviour. It is correct that provision is made not just for direct action by an individual who claims to have suffered damage going to the High Court but also for the appointment of a director of competition enforcement. The director will have powers to act on behalf of consumers and companies which are being damaged by anti-competitive behaviour.
The Bill contains proposals to introduce new powers of enforcement through the appointment of the director of competition enforcement. The Bill also gives the Competition Authority power to undertake wide ranging investigations on its own initiative. Hereto-fore, such investigations could only be conducted at the explicit request of the Minister. It is unsatisfactory that competition law is dependent on political action. A strong independent agency, which is committed to ensuring that competition law is effectively pursued, is required.
The new changes will not be achieved without cost. A major change which is required to underpin the legislation is the provision of additional resources, for example, an increase of 50 per cent in the staff of the Competition Authority. This will ensure a much more effective pursuit of competition law. The investment of these resources will be fully justified by the potential improvement in economic performance.
As I mentioned earlier, I have established a competition and mergers review group. Its work, which will start when the Bill is enacted, will be extremely important. Many serious matters need to be addressed in this area, not least the consolidation of competition and mergers legislation which is currently spread over a large number of statutes,  including the 1978 legislation relating to mergers, the 1991 competition legislation and this Bill. The review group is chaired by Mr. Michael Collins, SC, and is representative of various bodies, including large and small firms, consumers, trade unions, the legal profession, academics and my Department. It will obtain the views of all interested parties in the competition field and will make recommendations on the medium to long-term effectiveness of all our competition legislation, particularly the mergers legislation in the context of legislative consolidation.
The House will be aware that the original proposals were an attempt to balance the claim that there was excessive bureaucracy — it was described as double jeopardy — in relation to mergers under mergers and competition legislation and the concern that large companies would have a clear field to take over small companies without proper scrutiny. This is an important area which requires the group's attention. It will look at things like the groceries order and take into account changes and developments at EU level and world-wide competition policy. At EU level there is a considerable move to try to consolidate their own competition law and to promote new areas of national competence. There is a lot of change in this area and it justified a review by a well qualified group which I have put in place.
The Competition Act, 1991, is based on Articles 85 and 86 of the Treaty of Rome. Throughout the old cumbersome procedure of the restrictive practices legislation a Minister introduced specific orders to govern competition in a particular sector and those orders created criminal offences which the Minister could pursue. In practice this proved to be very unwieldy. It did not get to grips with many anti-competitive practices in the economy. It was very slow to respond and there were few effective enforcement procedures undertaken under it. That was repealed in 1991 and instead we went with Articles 85 and 86 of the Treaty of  Rome. Those Articles essentially made it illegal to enter into anti-competitive behaviour or anti-competitive agreements and they made it illegal to abuse a position of market dominance in the marketplace.
The basic elements of the competition law were the introduction of those concepts into Irish law. The Competition Authority was established to implement it. Its principal functions under the Act up to this have been to either certify agreements that are notified to it which are not anti-competitive or, alternatively, where the agreement was in principle in breach of the Act to licence it as an acceptable agreement on grounds that there were other issues in the public interest that superseded the anti-competitive aspects. That was the basic machinery of the original legislation.
This Bill is filling a deficiency in the original legislation. We are to have a Competition Authority that not only does the reactive things of leasing through agreements notified to it and deciding upon them but it also has the active powers of investigation responding to third party complaints of anti-competitive behaviour and, ultimately, of taking enforcement action either under the civil code or, in extreme cases, under the criminal code. The old system of depending on third parties to take actions has proved ineffective and we are correctly moving on from that stage in our competition law.
I would like to draw the attention of Senators to specific provisions of the Bill. Sections 2 and 3 set out the offences and penalties with regard to breaches of the rules of competition, that is dealing with the criminal aspect of the legislation. Section 7 gives the Authority public enforcement powers under the civil code and also in relation to summary offences in the criminal code. Section 8 allows the Authority at its own initiative to study and analyse any practice or method of competition. Section 9 provides for the appointment of one permanent member of the Competition Authority with the title Director  of Competition Enforcement who will concern himself with the enforcement aspect of the Authority's work.
Section 2 provides for the creation of a criminal offence in respect of breaches of the rule of competition and section 3 sets out the penalties. It creates offences where an undertaking breaches the existing competition law as defined under sections 4 and 5 of the old Competition Act. Effectively, what were originally civil offences are now becoming criminal offences with separate provisions in relation to good defences in order to provide for the change in making something a criminal offence. Sections 4 and 5 are being transposed to a criminal section.
Section 4 of the original Act spells out offences in relation to anti-competitive behaviour. Those offences refer to rules of competition and state that all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State are prohibited and void, in particular those which directly or indirectly fix purchase or selling prices or any other trading conditions, limit or control production, technical development or investment, share markets or sources of supply, apply dissimilar conditions to similar transactions with other trading parties, thereby placing them at a competitive disadvantage and agreements which make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature and according to commercial usage have no connection with the subject of such contracts. The original section provides for those specific offences and for a more general offence of anti-competitive agreement.
The other element, abuse of dominant position, which will now be criminalised in certain cases under this Bill again refers to section 5 of the original legislation. In addition, section 5 (1) provides that any abuse by one or more  undertakings of a dominant position in trade for any goods or services in the State or in a substantial part of the State is prohibited and shall be an offence. Such abuse may consist in directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions, limiting production, markets or technical development to the prejudice of consumers, applying dissimilar conditions to similar transactions with other trading parties thereby placing them at a competitive disadvantage and making the conclusion of contracts subject to acceptance by other parties of supplementary obligations which by their nature and according to commercial usage have no connection with the subject of such contracts.
Prosecution for a criminal offence under the above headings will be initiated either at the level of summary conviction or conviction on indictment. Summary proceedings would be initiated in the District Court by the Competition Authority in less serious cases. Where on summary conviction an undertaking is found to be guilty it shall be liable to a fine not exceeding £1,500 or where the undertaking is an individual, he or she shall be liable to a prison sentence not exceeding six months plus the fines or either of those punishments.
Where conviction on indictment is involved, cases would be taken on behalf of the State by the Director of Public Prosecutions on foot of a file prepared by the Competition Authority and, where conviction results, the provision is for a fine not exceeding £3 million or 10 per cent of turnover — whichever is the greater — of the undertaking in the financial year ending in the 12 months prior to the conviction. Where an individual is convicted on indictment, the same fine and percentage applies but there is also, at the discretion of the court, provision for a term of imprisonment not exceeding two years or both.
There has been a good deal of debate about these criminal sanctions, specifically debate concerning the higher level of proof required in order to obtain criminal convictions. The debate  centred on whether criminal offences should be confined to a limited number of specific offences — that is, per se offences — along the line of US competition law, whether criminalising a civil offence raises the burden of proof to beyond reasonable doubt and whether the good defences provided in section 3 undermine the chances of possible conviction.
With regard to specific offences, the offences which we are creating are more specific than those which exist under US competition law which has been developed on the basis of case law. We sought legal advice about the best way to create a criminal offence. Our advice was that the existing sections 4 and 5, which have their root in competition law have more specific offences and provide for a more general possibility of the courts recognising, as case law evolves, particular types of anti-competitive behaviour that were not envisaged by the original authors, would have the opportunity to evolve case law based on the specific cases with which it was presented. We have taken advice and are of the view that this is the best way forward. In some cases it creates specific offences, such as price fixing, and in others it gives the courts scope to evolve law. That is a sensible and pragmatic way to deal with this issue.
As regards the burden of proof, a much higher burden of proof is required to prove a criminal case than is needed to take a civil action. A criminal case must be proven beyond a reasonable doubt. This is a difficult hurdle to cross, and rightly so, because a criminal offence is very serious and carries with it the potential of imprisonment. There will be a need to establish proof beyond reasonable doubt. In the case of a conviction on indictment, this must be obtained when a jury has been convinced beyond reasonable doubt that an offence has taken place. It is right that the criminalising of such offences be incorporated in the Bill because of their potential gravity. These offences can affect people's livelihood and have the  potential to be seriously damaging. On the other hand, it must be recognised that, if such offences are criminalised, the legislation must contain requirements relating to proof.
Some people have made the contention that the ante will be raised in civil cases if tests are introduced to examine whether criminal offences are proven beyond reasonable doubt, which they must be. This argument, advanced by people within and outside the Houses of the Oireachtas, was assessed and we are satisfied that it does not hold water. Proof will be required in civil cases on the balance of probability as it always has been. There is no support for the proposition that where an individual set of events gives rise to potential civil and criminal liabilities the civil claim falls to be determined on the same standard of proof as the criminal claim.
Another issue which gave rise to concern was that relating to good defences. In that area, the Bill provides for a good defence for defendants in criminal cases under specified conditions. A defendant, for example, can prove that he did not know, nor in all the circumstances of the case could he be reasonably expected to have known, that the acts concerned done by him would constitute a breach of the competition legislation. Concern was expressed that this was an easy escape clause and would undermine the effectiveness of the Bill. However, the important issue here is that the defendant will have the opportunity to prove this. It is most likely in such cases that he would be subject to cross-examination and to prove by reference to the legislation that he did not know, nor in the circumstances of the case could he be expected to have known, that what he was doing was in contravention of competition law. A defendant who chooses to use this defence will be required to establish that that is the case. This will not undermine the effectiveness of the legislation.
It is incumbent on us to provide a good defence clause in cases where new criminal offences are being established. Such cases involve certain specific  offences but they also give the courts potential to consider new areas of anti-competitive behaviour which have not been envisaged or listed. To balance this, there must be a reasonable provision relating to good defences. That balance has been well struck in the Bill.
Concerns were also expressed about potential avoidance of the provisions of this legislation through the way in which companies were constructed, or by their directors stating that they had no responsibility for decisions taken by someone down the line and that the buck does not stop with those who control the company. This matter was the subject of considerable concern during the Committee Stage debate in the Dáil. Under the penalties provision I am providing to meet those points by making it possible to link the undertaking to people working there down to a director, manager or similar officer level in regard to an offence. The provision is that where a person is proceeded against, it shall be presumed until the contrary is proved that that person — the director or manager — consented to the committing of the offences, unless they establish the opposite is true.
In the definition of “director”, a director includes a person in accordance with whose directions or instructions the directors of the undertaking concerned are accustomed to act. The purpose of this provision is to ensure that those who are influential in the running of a company but are not listed as directors are encompassed by this Bill. Concerns were expressed in the Lower House that we should have effective ways of pursuing those who control companies but are not listed as the directors.
Expert evidence is another area related to a reasonable prospect of achieving convictions. A great deal of concern was expressed in the Lower House that the convention of criminal courts has been to not admit expert evidence. It was believed that would undermine the possibility of effectively pursuing competition law because, due to the technical nature of the offences,  the evidence presented to the court by the Competition Authority, for example, would be a very important element in a case. I have provided explicitly for the admission of expert evidence in criminal commercial cases, which has not been the norm to date. I have made a provision, subject to the court's discretion, that such expert evidence will be admitted if the witness appears to the court to possess the appropriate qualifications relating to the matter at issue.
This section also provides that the court has jurisdiction to rule out the admissibility of such evidence when it considers the ends of justice would be best served by so doing. In other words, we are not trying to circumscribe the court to say it must admit expert evidence in all cases but are introducing a presumption it will admit expert evidence unless it would be unfair to so do. Under the section, the expert cannot express an opinion as to the guilt or innocence of the party concerned. The expert will provide technical expertise regarding offences and some of the agreements in place, but will not reflect specifically on the guilt or innocence of the person concerned.
Section 5 introduces the notion of category certificates, which business will generally welcome. Category certificates mean it can be provided en bloc that certain types of agreement are not anti-competitive in nature. That avoids businesses having to submit detailed notification of all the individual agreements within that class. For example, certain areas of mergers would benefit from a category certificate because they would not have to make individual notifications to the Competition Authority and wait for certification. That provision will be generally welcomed because it will reduce the bureaucracy of competition law and improve the flow of work through the Competition Authority.
Section 7, as I mentioned earlier, is probably the key section as it extends the right of civil action under the existing section 6 of the Competition Act,  1991. It provides that either the Minister can take an action in the High Court or a damaged individual can take a court action. I strongly believe it is inappropriate for Ministers to be the determinants of those actions. It is not appropriate for our competition law to be dependent on ministerial action and intervention in business in this way. We need a strong, independent, arm's length competition enforcement agency. Therefore, we are providing that the enforcement powers will be extended beyond the Minister, or third parties, to include the Competition Authority. That is typical practice throughout Europe and will be broadly welcomed here.
It will ensure that if small suppliers or small players who are being victimised cannot, because of various relationships or their lack of resources, take effective court actions, there will be an independent third party capable of taking those actions on their behalf. This will be a welcome improvement in the existing competition provisions.
The Authority can now take civil action for an injunction or a declaration by the court for breaches of sections 4 and 5 of the Competition Act, 1991. This provision will also benefit the Competition Authority where it succeeds in taking a civil action and achieves a declaration that a practice was anti-competitive. It also gives the damaged party an opportunity to take an action and claim compensation. Under the Bill, the aggrieved person will have a right of action against an undertaking and against any director, manager or other similar officer who authorised or consented to anti-competitive activity.
In relation to consent, where it is proved that an activity unlawful under this Bill was carried out by an undertaking it shall be presumed, until the contrary is proved, that each director, manager or other similar officer authorised or consented to that activity. These provisions are being inserted to make directors responsible for their activities. The issue of consent was debated in the  Lower House where it was felt strongly that the onus should be placed on a director or manager to demonstrate whether they had authorised or consented to anti-competitive behaviour rather than the other way round. This approach was agreed to and has been incorporated in the Bill.
Section 8 allows the Competition Authority, on its own initiative, to study and analyse any practice or method of competition. Under the 1991 Act, the Authority had to await a request to them by the Minister. This provision gives the Authority better scope to initiate investigations and studies and generally promote a more competitive economic environment.
Section 9 deals with the appointment of one permanent member of the Competition Authority with the title of director of competition enforcement. I am also providing for the appointment of back-up staff, including professional economists, to ensure the Office of the Director of Competition Enforcement is effectively staffed. Some concern was expressed that the same body should not be engaged in certifying, licensing and enforcing. However, the office of the director of competition enforcement will be separate from the Competition Authority. The duties of the director are clearly set out in section 9 of the Bill. The idea of licensing and enforcing is not new. The Environmental Protection Agency licenses and enforces also. The decision on whether an offence took place or a liability was incurred is a matter for the courts and not for the Authority. I do not see a problem here and I am satisfied we have struck the right balance. Section 10 provides for the payment of fees for merger notifications to the Minister under the Mergers and Take-overs Act, 1978.
In my survey of this Bill, I hope I have given some flavour of what the legislation is about. We are living in a global market where competitive forces are increasing daily and we have to be effective. We have to bench-mark ourselves against the very best. There is no room for a non-trading sector which  practises anti-competitively and adds to business and consumer costs.
Ireland must have a strong competitive culture which is backed by proper competition legislation that is independently executed by an organisation such as the Competition Authority. This legislation will benefit the economy in the long term and respond to reports such as the Culliton and the NESC which have encouraged us to go down this route. I commend this legislation to the House.
Unfortunately, because of a Government meeting, I will have to leave the House at a certain stage but I will be taking careful note of what is said and I will respond to issues raised in my absence.
Mr. Fahey Mr. Fahey
Mr. Fahey: I thank the Minister for his worthwhile explanation of the sections of the Bill. I read his contribution when he was in Opposition when the legislation was first introduced in 1994. I am pleased that he has incorporated some of what he said then into this Bill.
It is especially welcome that the Bill is aimed at correcting the shortcomings in the 1991 Act by providing for civil enforcement of that Act in the public interest. There are major anti-competitive and restrictive practices in this country which are a high cost to the Irish economy. It is losing up to £300 million per year, or 1 per cent of GNP. This is of major significance to a small economy. I welcome efforts to root out these anti-competitive and restrictive practises which, with increased competition from overseas, limit the ability of Irish industry to compete.
I also welcome many specific aspects of the Bill. There is a provision which adds to current legislation by conferring the right of action on the Competition Authority in the case of breaches of sections 4 and 5 of the Competition Act, 1991. In addition to allowing the Authority to respond to third party complaints, it enables it to initiate action at its discretion. This is a significant  improvement on the 1991 Act. It should greatly increase the Authority's ability to react swiftly to the anti-competitive situations.
In this increasingly complex world it is vital that the Competition Authority can respond quickly and effectively to changing developments and consequently the provisions in the Bill which allow for a more pro-active authority. It is in all our interests to ensure a proper system of checks and balances in commercial life.
I am also in favour of the section which allows the Authority to undertake research on its own initiative. Section 7 provides that the Minister may appoint a director of competition enforcement. This will give it the ability to undertake investigations on its own initiative or at the Minister's request. As the role and scope of the Authority develops it is likely that such an appointment will be considered worthwhile. However, if this individual is to be truly effective, he or she must be well resourced. While I am pleased to note that the Minister has given some indications of the type of additional resources which will be provided, I would have preferred if he had detailed more clearly the arrangements for the resourcing of the Authority.
This is good legislation. The Minister is to be complimented for the way in which he has strengthened the original legislation which was introduced in 1994. I could not but recall the debate we had on the consumer credit legislation some months ago where we put in place good legislation for the improvement and enforcement of a much more attractive climate for consumer credit. However, we have not put the resources in place to make that legislation as effective, consumer friendly and beneficial to the economy as it might be.
The sections of the Bill detailed by the Minister contain good proposals. However, how effective will we be in implementing this legislation? While the Minister advised that additional resources would be available — there will be an increase of 50 per cent in  staff, etc. — if the legislation is to be effective the Competition Authority will have to be adequately resourced. Since the introduction of this legislation a strong lobby consisting of lawyers, economists and spin doctors from the big companies are flaunting anti-competition and anti-restrictive practices in this country. It will, therefore, take a significant effort to implement the legislation. While I accept and welcome the provisions in the Bill the Minister should detail the kind of resources he will make available on its enactment and the way in which they will be deployed. He should also spell out more clearly how he will tackle the big boys in the anti-competition area.
One only has to look at the semi-State sector to see how the big boys operate. While there have been responses to change by the bigger semi-State organisations, such as the ESB and Telecom Éireann, they are not interested in facing up to competition. They want to maintain that status quo. It is frustrating that the efforts to bring about competition are being continually thwarted by many companies. In addition, many other sectors are also cleaning up their act because anti-competition legislation of the kind one finds in the USA or in Europe is alien here; it will be difficult for some of the bigger companies to change their competitive practices.
It will be very difficult to implement the provisions of this legislation effectively. Nevertheless, I compliment the Minister on the mechanisms he has put in place. The competition and mergers review group, under the chairmanship of Michael Collins, SC, which will begin its work when the Bill is enacted, is a welcome development. It will tackle many of the areas about which I have expressed concern.
Sections 2 and 3 deal with offences and penalties relating to breaches of rules of competition. The increased penalties are welcome. The powers given to the Authority in section 7 for public enforcement are a strong weapon which has not been available to date. Section  9 provides for a permanent member with the title of “Director of Competition Enforcement” which is also a welcome development.
Since the introduction of the Competition Act, 1991, it has been possible for firms and persons to have recourse to the courts to seek redress from those involved in anti-competitive activity. This Bill develops this measure by introducing the concept of criminal sanctions, stiff fines and imprisonment for such offences. How will this be policed and how much will it cost?
The courts system already experiences difficulties with backlogs of cases and serious criminal activity cannot be brought to court quickly. One wonders what priority will be given in the courts to cases involving anti-competitive behaviour. A heavy workload is to be put on a courts system already bursting at the seams. Such cases are likely to be pushed into the background and sidetracked despite the Minister's best efforts to ensure that does not happen.
There may also be difficulties providing proof of the anti-competitive practices which the Minister described in his speech. He referred to practices which would be targeted in particular, including those which—
... directly or indirectly fix purchase or selling prices or any other trading conditions, those which limit or control production, technical development or investment, those which share markets or sources of supply, those which apply dissimilar conditions to similar transactions with other trading parties, thereby placing them at a competitive disadvantage and agreements which make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature and according to commercial usage have no connection with the subject of such contracts.
Given the practicalities of price fixing or production control, it may be difficult to prove that people are in breach of the specific practices the Minister outlined.
 One of the most worrying trends in Irish business is the development of wholesale cartels in certain industries. I am aware of examples in which the suppliers of specific products are involved in a nationwide cartel and they are sharing out the customer base in a price fixing arrangement. However, it would be difficult to prove that is being done. I wonder how effectively proof can be provided for the courts for such practices.
The Minister also referred to other abuses, such as “... directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions, limiting production, markets or technical development to the prejudice of consumers”. Will the Minister indicate how he sees the Competition Authority and the other policing arrangements being put in place getting to grips practically with those problems?
Prosecution for a criminal offence under the Bill at the level of a summary conviction initiated through the District Court by the Competition Authority is good for less serious cases. The provisions for more serious cases, convictions on indictment, which will carry a fine not exceeding £3 million or 10 per cent of turnover, are also good, assuming they can be properly policed.
With regard to the issue of the burden of proof, I note the concerns the Minister has expressed in drafting the Bill and those expressed on Committee Stage in the Dáil. I would be grateful if the Minister would expand on the practicalities involved. There is an easy escape clause from the offences provision because the top lawyers will be able to get around many aspects of the Bill. I worry about the language used by the Minister when he said a defendant would have to prove “... by reference to the legislation that he did not know, nor in the circumstances of the case could he be expected to have known, that what he was doing was in contravention of competition law”. Good arguments and excuses will be advanced  to escape guilt in anti-competitive practices cases.
The Minister's efforts to make the legislation as watertight as possible are welcome. I would like him to indicate the level of resources that will be provided to implement the Bill, to make it effective and achieve the desired results.
Mr. Farrelly Mr. Farrelly
Mr. Farrelly: It is two years since this Bill first came before the Dáil and in that time a number of things have changed. When in Opposition the Minister made comments about the Bill and he has endeavoured to make the changes he felt necessary to bring the legislation into line with the further development of the economy. I welcome the establishment of the mergers and competition review group, which will be an ongoing body to look at the overall position, take on board changes which are required and have them implemented.
This legislation is interesting. Over the last 12 months or so the Minister has been criticised for not agreeing to a merger or purchase of the Irish Press titles because he wanted to prevent them becoming part of a monopoly. When we consider what the Bill is trying to do, we see the decision made in that instance was correct, although the Minister and his colleagues felt the wrath of many pens for not allowing this monopoly to be formed. The decision was correct because, as a result of it, a competitor newspaper was launched, the Evening News; if he had not made that decision, there would be no competitor in the marketplace. No individual or group should have full control of any area, in the press or otherwise. I fully support the line taken by the Minister; the fact that he bore the brunt of criticism makes his decision even more correct.
A proposal was made to Fingal County Council recently for the provision of a new terminal at Dublin Airport. This is another example of possible competition but the biggest single objector was a State owned monopoly. The Minister says we are losing up to 1  per cent of GNP or £300 million per year from anti-competitive practices. How will we gain that money back if we do not provide competition?
Mr. Fahey Mr. Fahey
Mr. Fahey: It will take great effort to catch Aer Rianta with this legislation.
Mr. Farrelly Mr. Farrelly
Mr. Farrelly: It will but there are other examples. Many companies are frustrated and annoyed about monopolies. Aer Rianta is in business in other countries; if the same protection it has here was afforded to companies in those countries, would it be as successful today? I say it would not. I take my hat off to private sector companies who wish to get into competition if they see a niche in the market.
I take on board Senator Fahey's point that the legislation is good but there are issues relating to its implementation. Cases currently before the courts are being put on the long finger and this Bill could lead to more of the same. At the lower end of the scale, where a minor offence has been committed, is there a case for on the spot fines? If an inspector finds a company is in breach of a regulation he could levy a fine payable to the State, which would prevent further clogging of the courts.
Senator Fahey also asked how we would prove a company had directly or indirectly imposed unfair purchase or selling prices or other unfair trading conditions. Multinationals have caused job losses by setting unfair purchase or selling prices. They have made decisions or entered agreements to purchase substantial amounts of product over a period of months and later decided not to go ahead with the purchase. They are fully aware that people have lost jobs and companies have failed as a result of being dependent on one outlet for their goods. Those companies have then been taken over, often by the multinationals which caused their problems. Will the mechanisms the Minister is putting in place ensure that this will not happen or, if it does, that the substantial fines mentioned in the Bill will be imposed and paid by the companies concerned?  No one in either House would deny that sharp practice in certain areas has led to events such as I described.
The Minister informed us that he intends increasing the staff by 50 per cent; what is the current number of employees? He has established a review group — how often does he expect it to report? To whom will it report? When it makes proposals, what mechanism will be in place to implement them? I welcome the Minister's decision to appoint a person to oversee this work — the group will be under the chairmanship of Mr. Michael Collins, SC.
It is important to give the lead and to inform the general public and those who will be affected by this particular legislation that it will not be left on the shelf to gather dust and no action will be taken when people do not obey the rules. Would it be possible for the Minister to inform us each year of the number of cases, if any, that were reported and investigated and fines imposed? I do not believe this legislation will be successful unless the Minister shows the people concerned that he means business and that the legislation will protect jobs in monopolies and in other areas that I have mentioned. I believe jobs are not being protected. On the information already given, the penalties imposed under this Bill are severe but it is only when they are implemented that we will know if the legislation has teeth. I would ask the Minister to consider the possible clogging up of the courts system. I wonder if on-the-spot fines up to a certain level might be considered. If this were agreed to, it would relieve a substantial amount of work and reduce the number of cases coming before the courts. The sooner we have on-the-spot fines for driving offences, the sooner the more serious cases will be dealt with in the courts, and more quickly than at present.
I welcome the legislation. I concur with and congratulate the Minister on bringing forward many of the ideas he enunciated in the other House in 1994. I believe the legislation is all the  stronger for it but I would like the Minster to give his opinion on the implementation of many aspects of it. I would not like to think we were passing legislation that would not become forceful as soon as possible and, with the staff the Minister intends employing, ensure that people are protected and that monopolies are kept from growing in certain areas. We have quite a few of them, and some of them have not given a fair view of what is happening in many areas of Irish life.
Mr. Quinn Mr. Quinn
Mr. Quinn: I welcome the Minister but I am afraid I cannot extend the same welcome to the Bill. I believe this legislation is fatally flawed. If it is passed, it will be bad for the customer, bad for the economy and bad for our legal system. The only way forward is to throw this Bill out completely and to start again with a clear grasp of the principles involved. I have deep sympathy with the Minister because I know he has put a lot of work and effort into this. However, what has happened is that he has built this legislation on a foundation of sand. He has to go back to the original principles and start again.
Let me begin by nailing my colours to the mast. I am strongly in favour of competition; I am in favour of the State encouraging and promoting competition and of prohibiting and punishing commercial behaviour that is genuinely anti-competitive. Unlike many people, I have no doubts or reservations about the benefits of competition. I believe effective competition is the best friend of the customer. All businesses should be customer driven but many of them are not. Competition is an excellent discipline that forces businesses to put the customer first and always to act in their interest. It is a tough and painful discipline but it is rewarding for the customers and the businesses they patronise. Competition spawns win-win situations. Effective competition produces lower prices but that is far from the end of it. Nowadays, businesses have to compete on a whole  range of fronts. They compete on quality, service, the range of goods they offer and innovation. On every front the customer benefits. If we have the interests of the customer at heart, we should always be in favour of competition and promoting the maximum amount of competition.
We have to realise that our culture is not particularly friendly to competition; quite the reverse is true and this has been mentioned by Senator Farrelly and Senator Fahey. If we look back at our economic history since independence — and I have no intention of pre-empting the expertise of Senator Lee in this regard but in his book he often touches on this — we find that we have been remarkably energetic in the way we have perpetuated monopolies, created new ones and protected the interests of both old and new. Only a few short years ago we were claiming that monopolies were the only way forward in telecommunications, postal services, energy, transport, broadcasting and, until very recently, voluntary health insurance. We put a lot of energy into protecting those monopolies from the real world of competition and we would probably still be doing so if the EU had not stepped in and liberalised the European marketplace.
I was in Paris yesterday and listened to Peter Sutherland address a large gathering. He did a marvellous job representing Ireland. He made the point that the reason the EU has had to move in to break up monopolies and put in competition is that not only Ireland but most states try and protect their own.
Even today, our new found zeal to deregulate key sectors and dismantle all those monopolies we had in the past has a very tentative feel to it. We go forward at a snail's pace, so much so that I often think the patron saint of deregulation should be St. Augustine. Let us put the words in his mouth: “Oh Lord, make me competitive — but not just yet”. That is the way we tend to act in Ireland. When we do deregulate, it is often to put a duopoly in place instead of a monopoly. We have at last awarded  a second mobile telephone licence but let us not kid ourselves. We are a long way from turning that market into a genuinely open marketplace.
Another way in which our culture is anti-competitive is shown in the way people often succeed in using the rhetoric of competition to actually restrict the amount of competition they have to face. Let me make it clear that I believe nobody should be allowed to abuse a dominant market position. We should be alert against this and crack down on it at every opportunity. Equally, we should be vigilant against being misled by those who want to resist all change by pleading that they are being competed against unfairly. Unfortunately, in this day and age some people still believe that the marketplace owes them a living simply because they have been in that marketplace on their own up to now. Some people even think that the marketplace should always owe them a living even if they fail to perform. When we give in to this sort of thing, we act against the interests of the customer which should always be paramount.
As Senator Fahey said, the State is not absolved from all blame. A short few years ago Aer Lingus and British Airways had a monopoly on the Dublin/London route and argued very strongly that there should be no more competition because it would endanger jobs. Thankfully, a colleague of the Minister's created competition. The outcome is that more people than ever are travelling on the Dublin/London route at a much lower price and the number of people employed is much greater. That came about from competition, not protection. Senator Farrelly mentioned the possibility of another terminal in Dublin Airport.
We must find a way to encourage and create competition because everybody benefits. The customer is rarely served by attempts to freeze the marketplace. The true marketplace is inherently dynamic and changes in response to customers' changing needs. It is against this background that we should approach competition legislation, that is, with a  clear view that the customer's interest is what should dominate our thinking and a sober realisation that our history in this area has not been very good. Our culture has not been particularly supportive of open markets and free competition.
How did the Principal Act, which this Bill proposes to amend, deal with this challenge? It was far from ideal. If I ask how much it has benefited the customer, I am not sure there is much evidence that it has at all. What it certainly has done is put yet another straw on the long suffering camel's back. It has increased the cost of doing business by putting in place another bureaucratic hoop through which companies must jump. It has provided them with yet another distraction from their fundamental task of competing for the customer's business by meeting the customer's needs. There is no greater indictment of the approach enshrined in the Principal Act than the massive backlog of licence applications that has built up as a result. The broad way in which the Act is drafted means that one must apply for a licence for virtually any activity. It does not make sense.
The Act's strategy was to declare illegal practically everything and let companies apply for a licence exempting them from it. The sheer number of applications for licences — the last figure I saw was in the region of 1,300 — should surely show us how far from practical reality were the drafters of the Act. My purpose in mentioning this is merely to point out that the legislation on which we seek to build is not perfect. We are amending an Act that has not yet proved itself in the central key task of promoting the customer's interest and which, despite that, has had a high price tag attached to it which ultimately the customer has to pay.
The central thrust of the amending Bill is to criminalise certain practices which are prohibited by the Principal Act. Up to now only a civil action could be taken against an offender. The Minister has explained this very well today. The idea is to create criminal offences  out of anti-competitive activities. I want to make it clear that I have no problem whatsoever with the principle; in fact, I am in favour of it. In anti-competitive activity the injured party is usually the customer and customers are often understandably slow to take on big companies. This is not like liability cases where lawyers are prepared to act on a no foal, no fee basis.
It makes sense that the State, on behalf of the customer, should have the power as the Minister is proposing to prosecute anti-competitive activity and not leave it to the civil courts. However, this Bill makes a horse's collar of doing just that. It puts us into a perfect catch 22 situation. Either there will be no successful prosecutions, in which case it can hardly be claimed as a deterrent to anti-competitive activity, or there will be successful prosecutions and they may well be totally unjust.
It is worth noting the intensity of the objections to this Bill from the legal profession. Senators will be aware that the Bill has been exhaustively discussed since it was first introduced in quite a different form almost two years ago. A whole issue of Competition magazine has been devoted to this topic and in April a high powered seminar of legal luminaries turned their attention to it. Of course, there has also been a lengthy debate in the other House.
Everybody is terrified, and rightly so, of the vagueness of what has been criminalised. Instead of defining precisely what offences are to be punished, this Bill in effect leaves it up to the courts to decide what constitutes an offence. More precisely it leaves it up to a jury to decide what constitutes anti-competitive activity. For the first time in our legal history, therefore, this Bill is attempting to establish the notion that a jury should rule on a matter of opinion rather than on fact. That is a momentous change and not one that should be taken without full knowledge of the consequences. In my opinion, it is not a step that we should take.
 If, God forbid, I should lose the run of myself after the outcome of this debate, or maybe the Order of Business tomorrow, and take out a gun and shoot the Leader of the House, Senator Manning, the legal position would be very clear. What constitutes murder is precisely defined by law. A jury would have to rule on the facts, such as whether I did it and whether I was insane at the time. These are facts in the ordinary sense of the word. If we pass this Bill we will be asking juries to interpret facts in an area which is notoriously difficult to interpret. The jury would be asked not whether I shot Senator Manning but whether some actions I took in the past might at some indeterminate time in the future be likely to be held as against the customer's interest.
Fairly late in the day, the Minister realised the folly of putting such a burden on any jury. However, his cure is worse than the disease. It is to allow the evidence of expert witnesses. Expert witnesses can be useful in matters such as ballistics to decide whether I shot somebody or to decide the sanity of an accused but in this case we are talking about economists. I hope I do not upset the Minister by referring to economists; I know his background as an economist is very strong. We should not be happy with the notion of economists in effect deciding whether people are to go to jail. We all enjoy reading what they to say in the newspapers but I do not think many of us regard their utterances as infallible.
This is the murky road down which this legislation is leading us. It abdicates from the task of defining the offences precisely and opts to let the courts decide and make the law. It is no wonder lawyers are objecting. They know it is not the proper function of the courts. They know that so well that they turn their back on what would certainly be a lucrative playground for barristers. Where would this abdication to the courts leave the world of business? It would leave it with a deep sense of uncertainty. How can one keep the law if the law will not say what it is, but it  will be decided when we get people into court. What kind of arrangement is that in a country which claims to be in favour of business?
Not only does the Bill seek to make criminals out of business people without telling them what constitutes wrong, but it also seeks to make criminals out of people who had nothing to do with it. At a stroke the Bill would extend greatly the liability of company directors and executives who would be presumed to be personally guilty and liable, irrespective of whether they knew about a practice of which the company was convicted. What happened to the presumption that one is innocent until proven guilty? The Minister enshrines the other principle. The Minister said:
Where it is proved that activity, unlawful under this Bill was carried out by an undertaking it shall be presumed, until the contrary is proved that each director, manager or other similar officer authorised or consented to that activity. These provisions are being inserted to make directors, etc., responsible for their activities.
The onus of proving one's innocence is on the accused.
The Bill puts yet another burden on companies, increasing their costs and distracting them from their true mission. It greatly increases the personal liability of people working in business, defining a radically new concept of guilt just for them. It creates the serious doubt that any successful prosecutions could be brought under this legislation thereby removing any deterrent effect it might have and bringing the whole cause of promoting competition into disrepute. It creates worrying new precedents in our criminal justice system which have clearly not been thought out fully.
What are the benefits in return? At the end of the day, will the customer be any better off? I doubt it. Will Ireland have become genuinely a more competitive place? I doubt that even more. We are being asked to pay a high price without receiving the corresponding benefit.  That seems utter madness to me. We need competition legislation which promotes and protects the interests of the customer but this Bill is not it. I cannot support it and I urge my colleagues not to do so either. I believe this Bill is flawed. I know the Minister has put a great deal of work into it but he should go back to the Principal Act and start from scratch. I find it impossible to support the Bill as it stands.
Ms O'Sullivan Ms O'Sullivan
Ms O'Sullivan: Everybody would accept that commercial law and competition legislation are difficult areas. This can be seen from the fact that the Bill has taken a long time to go through the Dáil. It was introduced in 1994 before the change in Government and it has only now come to the Seanad. On Committee Stage in the Dáil there was a great deal of debate on the issues raised by Senator Quinn and others. I understand that people have different viewpoints on this issue. Nevertheless, the OECD, NESC, Programme for Competitiveness and Work and the Culliton report argued there is a need for changes in our current legislation.
The nettle must be grasped particulary given that we are a small open economy, must grow rapidly and are heavily dependent on exports. We need effective competition legislation which deals with the current problems facing firms trying to exist in such a competitive market. Difficulties increase every day as a result of preparing for economic and monetary union, worldwide trade extending and developing all the time into new areas and countries and competition emerging from these areas and countries. Because we have a small population and are on the edge of Europe, we must depend on competitiveness not just at home but on a worldwide market. We must adapt to change. I would not presume to have the historical knowledge of Senator Lee but we moved from being a protective to an open economy and this was necessary as time progressed. We could not have continued protection.
 This Bill faces the issues which must be faced. It is somewhat changed from the legislation which was introduced in 1994. The first main component of the 1994 Bill has been continued and strengthened in this one. The main intention of the previous Bill was to change the system whereby it was up to private individuals and firms to take cases where they felt there were anti-competitive problems. In this Bill the Competition Authority will have the power to make regulations and take action. Firms will not be dependent on being able to afford to take action themselves. In the past few cases were successfully taken because it is difficult for a private firm, particularly a small one, to take such actions.
We are all aware that the vast majority of firms in this country are small and medium enterprises and we must protect them. We must achieve a balance between adequate protection and allowing firms to grow and compete. I understand why the Minister has referred the second main component of the original legislation, dealing with mergers, to an expert committee, the competition and mergers review group. This issue was difficult to deal with because a balance is necessary between, on the one hand, allowing small firms to merge, grow and develop and giving them the kind of freedom where they do not have to refer to different pieces of legislation rather than one Act and, on the other hand, the need for proper control of competition. I would like to know what is the timescale of the review group and when the Minister hopes to be able to deal with the issue because it will have to be dealt with sooner or later. I accept that at this stage the Minister felt the need to acquire more expertise in this area.
This Bill must be effective. I do not have any great expertise in the area of company and competition law. The Competition Authority is being given wideranging enforcement powers, staffing and finance. It is correct that an independent body like it, rather than  the Minister, should be involved in day to day enforcement. It will have expertise in the people appointed to it.
The Bill deals with three areas — certifying, licensing and enforcing. It is important that a director of competition enforcement has been given the separate function of enforcement because this is a separate issue. What will be the director's relationship with the rest of the Authority. Will he or she have an equal role with the other members of the Authority with regard to certifying and licensing? There were licensing difficulties in the past. A court case was taken with regard to petrol companies. Those who operated individual garages under the umbrella of petrol companies had difficulty establishing how they could operate competitively and what their relationship was with their parent companies. I would like the Minister to elaborate on how the Competition Authority will operate with regard to individual firms who operate under franchises from larger companies. I am not sure how these companies are covered in the Bill and I would welcome further information on this.
On the question of mergers, it would be difficult for small firms to have full knowledge and power with regard to what they seek to achieve. Senator Quinn referred to the part of the Minister's speech dealing with criminal offences and case law. Obviously he has more day to day expertise in this area but I understood from what the Minister said that specific offences are listed in section 5. However, I take the point that they are not limiting and that others might be developed under case law. That would be the case under US competition law which also has a criminal element in it. It was through case law that specific offences were built up in the American system. Competition law operates relatively well in the US, although I do not know if the situation is exactly the same here. The area of criminal offences under competition law is new to us.
As the Minister said, in criminal law one is dealing with a higher level of  proof than in civil law. Therefore, there will have to be clear proof that the person involved knew they were committing an offence, as opposed to the civil law where a lower level of proof applies.
We need to strike a balance between the right of companies to grow and the danger of dominance in the market. We are all aware of the dangers where companies take over smaller ones thus achieving a dominant position. That is not good for the customer who is, in effect, at the mercy of the larger company and who may have had more choice when a number of smaller companies were operating. The legislation must get the balance right by ensuring that no one company achieves a dominant position.
We are in an era where competitiveness is the order of the day. In terms of services — and airlines are good examples — competitiveness has been good for the customer but there is also a need for social protection. In the health care area, for example, weaker members of society must be protected even though they may not be a great proposition from the point of view of those delivering the service. That is particularly true in health care where a person may have great needs but not great buying power. In those and in other areas, we have to protect the customer in a way that does not provide for total free market competitiveness. One must balance protection with competition.
I look forward to the rest of this debate. It is breaking new ground and inevitably differences of opinion will arise. There is a need to amend the legislation and to provide for clear rules that are properly enforced. In that way firms will have freedom to compete with each other both here and abroad in a way that will provide for stronger firms and more job opportunities here. In that regard, the legislation should ensure that those who compete do so on an equal basis, having the opportunity to develop and build more jobs for our people.
Mr. Lanigan Mr. Lanigan
 Mr. Lanigan: Competition is desirable in any business because it drives trade. No one was satisfied with the monopoly that existed in the public services, whether in the airline industry, postal services or telecommunications. The public has not been well served in these areas due to the lack of competition.
The greatest revolution has taken place in the airline industry. When Ryanair set up in competition on European and cross channel routes, not alone was it good for Aer Lingus but it was very good for the Irish travelling public as well as for visitors. Competition brought only a sense of reality to Aer Lingus, but I do not think there is a full sense of reality in that company yet. This has been seen in the controversy over the seating of Delta staff members on particular planes. This arose after protracted negotiations to try to get Delta Airlines on board with Aer Lingus which has to have major financial benefits because of Delta's operations throughout America. In addition, it enables Aer Lingus' transatlantic passengers to reach internal US destinations which are not currently serviced by Aer Lingus.
Competition has been beneficial to the State and to Aer'Lingus' staff, but it has also proven to be a bonus for Aer Rianta and for the travelling public. We have had a serious lack of competition in public services. Unless and until competition is introduced into these areas there is no point introducing this type of Bill which will not be of major help in these areas. I am not too sure what has happened since 1994. The only public acknowledgment was the use of the Competition and Mergers Bill when the Irish Press Group got into trouble. It was suggested that further involvement of capital by Mr. Tony O'Reilly or the Independent Group would be bad for newspaper consumers. I am not too sure how true this would have been but because of the Minister's intervention under the legislation the Irish Press Group failed to obtain Irish capital which was on offer and which could have saved the group. There is a definite  correlation between the Minister's legislation and the demise of the Irish Press Group. Obviously, that was not good in terms of the competition and mergers situation.
I do not agree with the criminalisation of people in industry. It is tough enough to be in any business at present without being turned into a criminal because of evidence that might come to light. I am not too sure if the committee being set up under the Bill would have the legal and commercial expertise to beat the big boys in industry at international level. I have a funny feeling that if they employ people with international expertise, the amount of money the Minister is talking about giving to this Bill would have to be doubled, trebled or quadrupled. I have no doubt that in the end they would not be able to beat the financial and legal expertise in international company law that could be brought forward by someone involved in a case of the type mentioned in the competition area.
I am not too sure what the issuing of category certificates means. Does it mean that anybody who wants to purchase another business would have to go through a formula to get a certificate to say they could go through with talks? How far would negotiations have to go before a certificate would be issued? We are reaching a stage where a person who becomes a company director must be a fool or a knave. Under company law a company director could be struck off, thrown in jail or fined. It is difficult to get outside people to join State or semi-State companies because of restrictions placed on those appointed as directors of companies.
There were areas where a lack of competition was necessary, particularly in the technical area where people serviced equipment. People had sole agreements with the manufacturers of the equipment which gave them a monopoly. I am not sure if, under EU regulations, such monopolies were broken or if the customer has benefited; perhaps the lack of sole agreements has not  helped in the repair or maintenance of equipment.
As regards the director of competition enforcement, where will we get somebody of such calibre to do that job unless we pay them a commensurate sum to what they would get if they worked for a multinational or a large Irish trading company in a competitive world? Perhaps there is a person who wants to give their expertise.
This Bill will not make a difference to 99.9 per cent of the people. We have an open economy and there will be mergers in the future. Competition will be eliminated as it has been to a large degree in the grocery and allied trades. The customer is getting good value from the small number of major stores. Having said that, there is no real competition between the major stores who share 14, 21 and 9.5 per cent of the market. I am not sure of Musgraves' share, but it is catching up with Supervalu and Value Centres. While there is a choice, it is really only between the four main stores. Suppliers must supply the four main chains or they are not in the game. Competition means many things to many people.
What we really need is competition where the customer gets the best value at the best price. I would like to see comparison shopping done by independent people, especially in the non-food area. Sometimes the cheapest item on the shelf might work out to be the dearest item in the long term. As I said, this Bill will not make that much difference to 99.9 per cent of the people. I have no great worries one way or the other but we should consider this matter a lot more before we pass this Bill.
Mr. Howard Mr. Howard
Mr. Howard: I begin by associating myself with an observation made by Senator Lanigan about the Aer Lingus-Delta arrangement. At this delicate time, I join with him in saying I hope common sense will prevail and that the obvious long-term benefits will be seen to outweigh any perceived short-term disadvantages. This is serious legislation and I do not agree with Senator Lanigan  that it will not affect 99.9 per cent of the people. The Minister gave a lengthy Second Stage speech from which he departed on a number of occasions to clarify parts of the Bill. Nonetheless, it has implications which we must seriously address.
In that context, a number of points made by Senator Quinn deserve to be fully considered as should the implications which might arise from them. However, I do not agree with him that this legislation should be thrown out. Nevertheless, I share some of his concerns and, strangely enough, some of what I have to say will echo a number of the reservations he expressed.
I recall the passage of the 1991 Competition Act as I contributed to the debate. It is important to recall that the emphasis and discussion at the time was that we were obliged to bring in the legislation to give effect to Articles 85 and 86 of the Treaty of Rome. We should remember that was the motivating force at the time and everything else was incidental. The Competition Authority was set up as a result of the 1991 Act and it has been successful in certain aspects of its dealings with the public. However, obviously gaps emerged in its capacity to deal with situations which were unacceptable from a consumer view point. Since the coming into effect of the 1991 Act we have had an opportunity to consider what improvements are needed and what disadvantages should be removed. This Bill attempts to improve and develop the 1991 Act.
I would like to return to some of Senator Quinn's points. I do not agree the Bill should be thrown out; I could not do so from where I stand.
Mr. Quinn Mr. Quinn
Mr. Quinn: The Senator's heart is in the right place.
Mr. Howard Mr. Howard
Mr. Howard: He spoke about the encouragement of competition and the situation in Telecom Éireann and Aer Lingus. The encouragement of competition to the advantage of the consumer is the Minister's objective. In pursuit of that objective, we must be careful that  we do not build into the legislation anything which may cause serious concern later.
Senator Quinn said the Competition Authority would be an added layer of bureaucracy and that its effect would be to increase costs to business. This may be the case. He also indicated that its key task was the protection of consumer interests and that the Principal Act had failed to deliver on that. It has partially failed and I hope to give examples of this later.
The Senator was concerned about unjust convictions. I want to deal with that issue on Committee Stage because I am concerned with such aspects, as the evidence of the so-called experts, how we will define them and their role and function. We must also recognise that the Bill excludes these experts from expressing an opinion of guilt or innocence. Why then are we bringing them in? We must first define their capacity and ability, but we already do that in a satisfactory way. Why do we then say that their opinions on guilt or innocence must be discounted?
Senator Quinn also expressed his concern about leaving it to a jury to decide on the offences. We must discuss this matter in greater detail on Committee Stage. Section 2 purports to define the offences. It is as long a section as I have seen in any legislation since I came to this House; it runs to four pages. We must get down to the nitty gritty of that section if we are to do our duty as a responsible House.
I would like a better explanation why mergers have been removed from the scope of this legislation. It has been referred to a review group, which is expected to report in due course and undoubtedly legislation will follow from that. However, there is no adequate explanation for this in the Minister's speech. I have no problem with subjecting the abuse of a monopoly or dominant position in the marketplace to criminal law provided we ensure the system is adequate to protect the interests of those concerned.
 I accept that the broad competition environment about which the Minister spoke is necessary and desirable. On the issuing of licences and certificates, Senator Quinn said there was a backlog of 1,300 applications. It was necessary to put in that requirement. However, I am aware of only one case of a decision by the Competition Authority being challenged before the High Court and that has not yet been heard.
I support giving power to the Competition Authority to enforce competitive practice on behalf of the consumer. While the principle is all right, I am concerned about the methods which would be employed under the Bill. Up to now the restriction on the Authority to act when there was an abuse of a dominant position was restricted by the direction of the Minister; I spoke against that aspect of the 1991 legislation.
I welcome the additional resources being given to the Authority because it has been seriously understaffed. We will have to define the role of the director of competition enforcement on Committee Stage. Senator Lanigan was concerned about the calibre of the person appointed to that position and, to get the type of individual who would act effectively in this job, he wanted to pay them a very attractive salary. I would be more concerned to have the role of the director more clearly defined and we can do that on Committee Stage.
Will the person who occupies the role of director of competition enforcement be additional to the present membership of the Competition Authority? Is it proposed to increase its membership? These questions are interlinked but are not the same. With the workload that may arise under this legislation, this may well be a necessary course to adopt.
The Competition Authority has been engaged in issuing licences and certificates. Will that function continue or is it proposed that it will be refined, redefined or altered in any way? If it is, I would like to hear the Minister's reply.
I said a number of times that I very much regard this as a Committee Stage  Bill. We must go through all of section 2 in great detail and be satisfied as to what extent we can define the parameters of the offences rather than leaving it to a jury or court. The £3 million fine or 10 per cent of turnover on indictment are substantial and will act as a deterrent. However, we must deal with enforcement.
The Minister attempted to define all the offences in one page of his speech but they run to four pages in section 2. If a section is four pages long, many aspects will require elaboration and the Minister's one page explanation was not adequate.
There is also the matter of the burden of proof and, to a degree, Senator Quinn referred to that. Of course, one could always take the view that only experience will show to what extent the legislation was adequate. The House is obliged to define what is meant by experts. Who are these people and what practical or academic qualifications will they require before they can be accepted as experts? If the practical, business and academic qualifications required to be an expert are established, the legislation then denies them the right to express a view as to guilt or innocence. This is difficult to understand in terms of the purpose of the legislation and I intend to raise this matter on Committee Stage. If an expert is produced in a court case but they are denied an opportunity to give an opinion as to whether guilt or innocence is involved, why are they in court? This is my problem with this provision.
In relation to the presumption of guilt of every director, manager or similar officer, how far down the line does it go? What does the term “similar officer” mean? The position is clear regarding a director and a manager, but there is a presumption of guilt in every case until proven otherwise. This is a sweeping measure. The legal profession has expressed various opinions on this legislation but has anybody given a view on whether the presumption of guilt until proven otherwise provision is constitutional?  I look forward to the opportunity to discuss the Bill in greater detail on Committee Stage.
Minister of State at the Department of Enterprise and Employment (Ms E. Fitzgerald) Minister of State at the Department of Enterprise and Employment (Ms E. Fitzgerald)
Minister of State at the Department of Enterprise and Employment (Ms E. Fitzgerald): I thank Senators for the high quality of the debate, which was informed by good commercial experience in some cases. I listened with interest to the contributions. The Bill received an extensive airing in the Select Committee on Enterprise and Economic Strategy and it was also debated on Report Stage in the other House recently. Changes suggested during those discussions have been taken on board and the Minister, Deputy Bruton, who will take Committee Stage in the House, will listen carefully to Senators' points. I hope a better Bill will emerge as a result of the lengthy discussions.
The Bill arises from the commitment in the Programme for Government to strengthen the Competition Authority. The Bill's main feature is that it will address the lacuna which existed that only private individuals could take a competition case. The legislation provides that the Competition Authority can act in the public interest. This is an important safeguard because it is often difficult for small businesses, which may be particularly squeezed by competition, to take a case. It is also difficult for people to take cases against suppliers given that the cost of legal action in this country can be prohibitive; it can even be prohibitive for Governments.
It is important to establish an independent body backed by an expert staff. On the enactment of the Bill it is intended to increase the staff of the Competition Authority by 50 per cent, including appropriate legal expertise, economists and clerical back up. The appointment of the director of competition enforcement is also important and the Minister is considering the reconstitution of the Competition Authority on the completion of this process.
Reference was made to mergers and competition and how the two are balanced.  In this regard I am reminded of screaming Lord Sutch's policy which asks why there is only one monopolies commission. There is a tension in providing for increased competition, which is in consumers' interest because it helps Irish companies to compete internationally if there is competition in the domestic market, but there is also the issue of securing companies of sufficient scale, such as those in the food industry.
Senator Quinn, who is familiar with this area, recommended more mergers of major food co-ops so they can acquire a sufficient scale to engage in the research and development of new products, such as new yoghurts and desserts, to line supermarket shelves and compete with food multinationals. There is an underlying tension between the need for greater competition in the interest of jobs and the need to ensure Irish companies can be of sufficient scale. The two areas are being separated for this reason.
On completion of the Bill it is intended that a mergers study group will be established and it is expected — Senator O'Sullivan raised this point — that it will take between a year and 18 months to tease out its work. It is important to ensure a competitive climate, but also that the development of business on a sufficient scale is not prejudiced. This relates to businesses which are competing in world markets in what economists call contestable markets; there can be competition even if there is only a single supplier in Ireland.
Senator Fahey raised the difficulty of proving cases. Following the changes made by the Bill, case law will build up over time as the matter evolves. Regarding the additional resources for the Authority, it is important that expert witnesses can be called. Senator Howard asked about expert witnesses and their qualifications. Ultimately, it is a matter for the courts to accept if a person's expertise is valid under the provisions of the Bill. This applies to expert witnesses in many other areas, such as medical and legal expert witnesses and people who testify in personal injuries  cases regarding the future employment prospects of an individual following an accident in the context of the person's previous employment. The courts are well accustomed to dealing with expert witnesses and sifting through differing testimony. This aspect can safely be left to the courts.
Senator Fahey asked if the loophole in section 3 — this relates to the so-called escape clause and somebody saying they acted in good faith and did not act in order to oppose competition — was too big. A person who presents this type of defence will be subject to the usual cross-examination in court; such a defence must stand up. The measure was included on the basis of legal advice to ensure the constitutionality of the offences and penalties provision.
Senator Howard asked about the constitutionality of the Bill. All Bills prepared by the draftsman in the Office of the Attorney General go to the legal advice section of the office and do not emerge until they have been stamped as meeting, in the opinion of the Attorney General and his advice staff, the test of constitutionality. Ultimately, it is for the Supreme Court to decide if a measure is unconstitutional and the Government is always in its hands. However, no legislation ever appears before the House unless it is based on the best advice available to the Attorney General that it is constitutional.
Senator Quinn asked about the resources to address the shortcomings of the 1991 Act and I covered this point. Legal advice was obtained in relation to points raised in the other House and the Department is satisfied that the Bill's provisions are watertight. The Senator also raised the vagueness of offences. The intention is that the legislation is clear. The courts will be the final arbiters and they will make judgements based on the views of the Oireachtas as expressed in the written text and as case law builds. Directors will be able to prove their innocence and the Bill provides for this.
Mr. Quinn Mr. Quinn
 Mr. Quinn: Directors will have to prove their innocence; that is against justice.
Ms E. Fitzgerald Ms E. Fitzgerald
Ms E. Fitzgerald: We are satisfied of the constitutionality of the provisions. It will be possible for a bona fide person to satisfy the courts. Our courts have been exemplary in their interpretation of the law and somebody who is bona fide will have no difficulty satisfying the courts. Senator O'Sullivan raised the question of franchising. It will come down to each individual case because there are different set-ups in relation to MacDonalds, etc., but the provisions of the Bill apply to all types of company whether they are franchised or not. No distinction is drawn in the legislation.
Senator Lanigan asked about a category certificate. A category certificate is simply a set of rules within which activities can take place without breaching competition law. He also raised a point in relation to the Irish Press. I would contest very strongly the view that it was the Competition Authority or actions on foot of its recommendations by the Minister which led to the demise of the Irish Press. We have to look back at how that company was run and the unwillingness of investors to move into the company given that the original directors held a lien on the titles. I am glad to see we have competition again in the Dublin evening paper market. Competition in the media is particularly important not only as it effects normal consumer competition but also in relation to what kind of tins of beans do you buy but it is particularly important in relation to freedom of expression and the openness of the public to different ideas. I welcome the re-emergence of competition in the newspaper market; long may it continue.
This Bill will strengthen lacunae that existed in the 1991 Bill. It will ensure a strengthened Competition Authority in terms of staff and resources, expertise, a dedicated competition enforcement officer. I hope that as a result of this Bill we can continue to see increasing economic competitiveness. We can ensure  competitiveness extends not only to the open sector of the economy where there is natural competition on open markets but that we have competition in the more sheltered section of the economy where domestic businesses are simply competing with each other. The cost of the sheltered sector of the economy are the inputs into the open sector of the economy. The open sector of the economy is a taker of world prices and if its costs are artificially inflated because on the domestic market we have an absence of competition then our competitiveness in our very important export markets is being undercut. This is important not only for consumer confidence but also for the performance of this economy. We have enjoyed an unprecedented economic boom over the last couple of years which has been export led and led by improvements in our competitiveness, but we need to ensure that our legislative structure and our administrative systems encourage and reinforce that competitiveness and  that we have legislation which is adequate to that task. This Bill marks an important step forward in that respect.
The contributions to this debate have been very detailed. This was a Second Stage debate that was, to some extent, like a Committee Stage debate. On Committee Stage these points will be teased out in further detail. I look forward to enhanced legislation being enacted which will improve the situation in this area.
Mr. Quinn Mr. Quinn
Mr. Quinn: Vótáil.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: The question is: “That the Bill be now read a Second Time”. Will the Senators who are claiming a division please rise?
Five or more Senators stood.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: The division will proceed.
The Seanad divided: Tá, 21; Níl, 13.
Tellers: Tá, Senators Cosgrave and Wall; Níl, Senators Henry and Quinn.
 Question declared carried.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: When is it proposed to take Committee Stage?
Mr. Manning Mr. Manning
Mr. Manning: Next Wednesday.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: Is that agreed? Agreed.
Committee Stage ordered for Wednesday, 12 June 1996.
Sitting suspended at 5.30 p.m. and resumed at 6 p.m.
Seanad Éireann 147 Competition (Amendment) Bill, 1994: Second Stage.