I welcome the Minister to the House and thank him for coming in to take this matter on the Adjournment. The issue relates to retailers with sizeable buying power and their ability to compete unfairly against small individual retailers. This issue was highlighted over Christmas in the case of below-cost selling of vegetables and fruits by some retailers. Some retailers in my town point out that they cannot even buy at wholesale prices from suppliers for the same price at which multiple chain retailers can sell the same product. This below-cost selling may sound like a good idea for consumers, but as we know from our experience of the below-cost sale of vegetables over the Christmas period, the multiples are able to sell below cost and squeeze small suppliers and retailers out of the market. Then, when the multiples have got rid of the competition, they can charge whatever price they like.
This practice occurred many moons ago in regard to the sale of petrol and gasoline in the United States, to the point that monopolies were created. We now have retailers that are squeezing the small guys out of the market. Their mantra is that they are doing a service for consumers, but in the long run it will be the consumer who pays higher prices, due to the lack of competition from small retailers.
The Senator has raised an issue that is narrower than provided for in the response I have here about what is happening in the retail sector.
The Minister can give me the abridged version as it is late.
Since the abolition of the Groceries Order in 2006, retailers are free to charge what they choose. Therefore, below-cost selling is no longer illegal and I do not have any powers to set minimum prices. The reason the change was made was that the order was seen to uphold high prices rather than promote competition or protect consumers.
Robust competition and cutting prices is not illegal. However, the practice to which the Senator referred, of predatory pricing, as it is known, where dominant players seek to use price cuts to eliminate another competitor, is entirely illegal and would be in breach of our competition law. This applies to a specific situation and requires us to establish dominance and the fact that it is predatory. Much of what happens in the market is that opportunistic pricing strategies are pursued for a short period on a certain product. This is not illegal and it would be difficult to see that it is damaging to consumers’ interests. Therefore, it is only if it becomes an anti-competitive instrument that there would be a question of assuming powers to deal with it.
There is a wider issue on which I am introducing legislation and this concerns fairness in the supply chain for the retail sector. At times, suppliers feel they are in a weak position and that unfair conditions are applied or contracts are changed without notice. I propose to use statutory powers to introduce regulations that will define what practices must be pursued. The merged competition and consumer authority will be the enforcement agency in that regard. Inevitably, one must prove that such breaches occurred and regulations still require the onus of proof. Over the years, there has not been much evidence offered in this area and there have not been complaints of the practice of which the Senator complained, predatory pricing, brought to the Competition Authority.
We propose to introduce fair rules in this area. An attempt was made to introduce a voluntary code of practice, but it did not gain much support. Under the programme for Government, we are bringing in statutory regulations and they will be enforceable. This will come before the House shortly as we are finalising the drafting of the Bill. Hopefully, it will be approved by the Government and brought to the House in the near future. The issue covered in the Bill is slightly different to that of selling below cost. In the case the Senator highlighted that occurred over the Christmas period, there was a dispute as to whether the retailers were absorbing all the costs themselves or putting a squeeze on their suppliers. Putting the squeeze on suppliers is the area that will be regulated, but retailers can still choose to sell at whatever price they like, once they are not engaging in either predatory pricing as a dominant player, which would be illegal, or breaching the regulations we will introduce in due course.
I thank the Minister for not reading his entire speech. The abridged version was more welcome and is appreciated. I welcome the fact regulations are being introduced in regard to suppliers and protecting them. My concern is that small retailers just cannot compete. When a supermarket can sell a litre of coca cola at a price at which the local retailer cannot buy it, this is a problem.
It is up to the industries themselves, the small retailers associations and the suppliers groups to encourage their members to use the instruments available to them when this law is introduced to tackle those uncompetitive and unfair practices. If they do not blow the whistle on such practices, there is nothing the Minister or anyone else can do about it. I thank the Minister for coming to the House to address this matter.
Do I get a chance to respond again?
Catherine Noone (Fine Gael)
I am afraid not.