The Competition Authority has welcomed the decision to rescind regulations restricting the opening of new pharmacies. But the move has been condemned by the Irish Pharmaceutical Union.

The decision to end the restrictions was announced yesterday by the Minister for Health, Mr Martin. The Tánaiste, Ms Harney, said last year that the move would come within the lifetime of the Government but there had been speculation in recent weeks that that deadline would not be met.

Mr Martin made the unexpected announcement after he received legal advice from the Office of the Attorney General that the restrictions were ultra vires. The advice was sought after the legal basis for the regulations was questioned during legal challenges.

The restrictions were among a number of issues being considered by a Pharmacy Review Group set up last year following an OECD report that criticised restrictions in the pharmacy sector.

"The Review Group is now being asked to report as quickly as possible, in the light of the new situation," Mr Martin said.

"This is good news for the community," said Mr John Fingleton, chairman of the Competition Authority. "We have campaigned for these regulations to be withdrawn for several years."

The authority felt the restrictions, which in effect prohibited the opening of a new pharmacy within a certain distance of an existing one, save in certain circumstances, were "deeply anti-competitive" and helped keep prices high.

Mr Fingleton said the change would not involve any reduction in the protection that exists for consumers. Pharmacists will still have to have the same qualifications to operate.

A spokesman for the Irish Pharmaceutical Union, which had campaigned for the retention of the restrictions, said it was a "retrograde step for pharmacists, for the community and ultimately the State will pay a high price for this".

He said the move would have a minimal impact on price and that free market forces would have a negative effect on the quality of service.

The union had no idea why the Minister made this decision just three months after setting up a review group. He said the Minister had known for some time that there had been problems with the legality of the restrictions.

Mr Fingleton said restrictions on persons who had qualified outside the State from opening pharmacies should also be rescinded in line with a call in last year's OECD report on competition in the economy.

The removal of the restrictions comes as Ms Harney is considering a report from the Competition Authority on the purchase of the Unicare pharmacy chain by the German group Gehe, in a deal rumoured to be worth €127 million (£100 million). Ms Harney has until February 25th to make her decision.