No need for code of practice, says competition body

Grocery sector:Competition Authority questions need for ombudsman

THE COMPETITION Authority has dismissed a proposal made by Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan earlier this year that a new code of practice for the grocery sector should be introduced.

In a consultation paper submitted to the Department of Enterprise, Trade and Employment, the Competition Authority - an official agency which comes under the aegis of the Minister's department - criticises Ms Coughlan's proposal.

In August, the Tánaiste published a draft code of practice for the sector, which included the appointment of an ombudsman to arbitrate disputes between consumers, retailers and suppliers. At the time, the Minister said she was publishing the draft legislation as a response to "significant public debate on grocery prices, North-South price differentials and other developments in the grocery goods sector".

The proposals were also intended to address concerns raised about the relationships between suppliers and retailers, she said.

In the consultation document produced by the Competition Authority in response to the Minister's calls for submissions on her proposals, the authority "questions the rationale" for modelling the Irish code of practice on the approach taken in the UK, arguing that "the features and competitive dynamics of the grocery sector are different in Ireland from in the UK".

It also claims that independent reviews have found the UK code of practice "is not being utilised by the sector and is therefore largely ineffective".

The document criticises the proposed code on a number of counts, in particular its implications for consumers. Arguing that the proposed code of practice limits the "natural tension between retailers and suppliers", it says price adjustments may "slow or indeed stall."

"In this regard, consumers, as result of a code of practice designed to protect suppliers, may face higher prices than might otherwise be the case."

On the specific issue of an ombudsman, the Competition Authority claims this would involve costs that "would either have to be paid for by the exchequer, ie taxpayer, or the industry, which in turn will pass these costs on to consumers".

The report also points out that the State already has specific legislation in place concerning the grocery sector - Part 2A of the Competition Act 2002. It argues that "much of the conduct at issue in the proposed code of practice is already prohibited by legislation" and proposes that, rather than create a new State body, the Minister should strengthen the existing legislation.

Noting there has been a reluctance by suppliers to bring private actions or make complaints to the authority under the existing legislation, it suggests the Act should be amended to encourage private actions to be taken by injured parties.

The Competition Authority says it "would be happy to discuss its concerns and proposals with the Tánaiste and the department".