Competition policy is not a panacea for inflation, the chairman of the Competition Authority said yesterday. Dr John Fingleton said competition policy helped create structural conditions that supported low inflation and high growth.

But he added: "In recent months, high inflation in the non-traded services sector has been highlighted, throwing increased attention on the level of competition. Many commentators attribute problems to the absence of competition.

"While this may be an accurate comment, it would be wrong to think that competition policy can quickly bring down prices or that it is a panacea for inflation."

At a briefing to explain the new Competition Act, which underlines the authority's work, he said greater rivalry among existing firms or new entries enhanced consumer choice and encouraged productivity growth. "The authority focuses on two complementary approaches: enforcement, to address the behaviour of firms; and advocacy, to tackle State restrictions on competition," he said.

Dr Fingleton said the biggest change under the new law related to the scrutiny of mergers, which transfers to the authority from the Department of Enterprise, Trade and Employment. The new Act makes price-fixing by hard-core cartels a serious criminal offence, with sanctions including a €4 million fine or 10 per cent of a firm's turnover and a similar fine or five years' imprisonment.

It requires co-operation agreements between the statutory authorities and abolishes the notification system, which required comanies to notify the authority of co-operation agreements.