The law banning the below-cost selling of some groceries costs households an average of €481 each a year, the Competition Authority said today.
In its submission to the Minister for Enterprise, Trade & Employment the Competition Authority recommends the removal of the Groceries Order.
Food covered by Groceries Order rises in price while food not covered falls (Retail food prices June 2001-June 2005 - from CSO data)
Competition Authority Chair John Fingleton said: "The Groceries Order pushes up food prices in Ireland, and is against the interest of consumers and the economy.
"The successful prosecution of two supermarkets in January 2004 for providing discounts on baby food is a perfect example of why it needs to be abolished."
"If this logic was applied in other sectors, for example clothes, it would make post-Christmas sales a criminal activity," he added.
High prices for food in Ireland are in stark contrast to other retail sectors where prices have fallen. Between 2000 and 2004 the cost of food and non-alcoholic drink rose by 9.6 per cent compared with a drop of 15.9 per cent for clothing and footwear.
However the Food and Drinks Industry Ireland (FDII) rejected these claims today saying that the Competition Authority presented no evidence that abolition of the Groceries Order would lead to savings for consumers.
Rosemary Garth, Director of FDII said: "Today's assertions by the Competition Authority about the Groceries Order are misleading, selective and ignore a number of fundamental facts. Food prices fell in Ireland by 0.7 per cent and the cheapest countries in EU 15 (Spain, Portugal and Greece) have bans on below cost selling."
The FDII goes on to say that 80 per cent of food consumed in Ireland is sourced domestically and therefore subject to Irish costs, whereas only minimal amounts of clothing or household consumer durables are manufactured in Ireland. The FDII believes that the fall in inflation for items not covered by the Groceries Order is directly linked to reform of the Common Agricultural Policy and insist that "Higher prices in Ireland are directly linked to our cost base."
The Competition Authority goes on to point out that where competition is allowed food prices are falling but where competition is prevented prices continue to rise.
If the level of inflation on food items not covered by the Groceries Order had been applied to those items whose prices are kept high by the Order, the average household would have saved €481 in the 12 months between June 2004 and June 2005. This corresponds to savings of €577 million across the economy.