Comment: Paul Kelly of the Irish Business and Employers' Confederation (Ibec) recently recommended in this newspaper that many elements of Government need to talk to each other when it comes to developing a coherent policy for the Irish food industry. It is clear from his article that the many elements of Ibec urgently need to have a frank discussion with themselves when it comes to developing Ibec's policy.
On April 24th last, Ibec issued its 10-point plan to control business costs. Quite logically, at point seven of that plan, Ibec proposes "more aggressive implementation of competition policy in sheltered sectors [of the economy]".
However, Ibec's commitment to any competition policy, let alone "aggressive" policy towards sheltered sectors of the economy, rings hollow with Kelly's continued defence of the Groceries Order, one of the most blatant pieces of protectionism ever seen on the Irish statute books.
Ibec is correct to look for a strong food sector in Ireland that supports economic growth and employment. Ibec is also correct to suggest that stronger competition policy can assist in reducing business costs and help with international competitiveness.
However, using anti-consumer and anti-competitive laws is the wrong way to achieve that objective. That type of protectionist model, promoted by some people in Ibec, is reminiscent of Irish economic policy of the 1930s and 1940s.
Any suggestion that removing the Groceries Order has been a failure is both hypocritical and illogical. Those who opposed the removal of the Groceries Order (including Ibec) have recently claimed that their opposition was justified because prices have risen since the law was removed last March. This is illogical for a number of reasons but most importantly because there is no substantive information on food prices since the removal of the Groceries Order. These recent assertions by groups such as Ibec ignore the fact that the most recent information from the CSO on food prices covers less than a six-week period without the Groceries Order.
The Groceries Order was removed because it kept food prices artificially high over an 18-year period. This was pointed out by many independent national and international organisations including the Department of Enterprise, Trade and Employment, the National Competitiveness Council, the National Consumer Agency, the OECD, the Consumers Association of Ireland as well as the Competition Authority.
Contrary to Kelly's assertion, the Competition Authority's analysis of this area was neither selective nor questionable as it was based on a comprehensive analysis of the time periods the Groceries Order was in force using the best available data from the CSO.
Of course, the arguments now being put forward by Ibec and others to justify the Groceries Order are also hypocritical. The main line of reasoning previously put forward to defend the Groceries Order was that removing it would cause many small shops around the country to close precisely because prices would inevitably fall. Indeed, Ibec's subgroup, Food & Drinks Industry Ireland, argued in this newspaper that convenience stores would disappear from the Irish landscape.
Now they claim they want to see prices fall. Ibec needs to make up its mind if falling food prices is good news or bad news.
It is also important to remember why the Groceries Order was removed in the first place. The Groceries Order did not simply ban selling below cost, as its proponents contended; in many instances, it actually banned selling at above cost. It required the director of consumer affairs to prosecute retailers for passing on discounts they received from suppliers.
The successful prosecution of two supermarkets in January 2004 for providing discounts on baby food is a perfect example of why the Groceries Order had to go. If this logic was applied in other sectors, for example clothes, it would make post-Christmas sales a criminal activity.
In too many areas, Ireland has not willingly embraced competition. European Directives forced the introduction of minimum levels of competition in the telecommunications and energy sectors. In other areas, such as taxis and pharmacies, legal advice or court actions precipitated change.
The protectionist arguments put forward by Ibec's Food & Drinks Industry Ireland are particularly short-sighted. As the Government's Enterprise Strategy Group highlighted, there is a specific need to increase the international competitiveness of the domestic food processing industry. Stronger competition at the retail level drives stronger competition at the food processing level. This improves their ability to compete internationally and is the best way to protect jobs and value for the Irish food sector in the long term.
I'm in full agreement with Ibec that there are no "quick fixes" to the problem of high costs and falling competitiveness in Ireland. Long-term solutions are required.
As one wing of Ibec has pointed out, competition policy is one of the essential ingredients to improve productivity and, as a consequence, helps to bring down inflation. I would very much welcome Ibec's wholehearted support for the Competition Authority's objective of reforming the wide range of areas in the Irish economy where competition is absent, limited or restricted.
William Prasifka is chairman of the Competition Authority.
