Report paves way for action on anti-competitive practices

For all of its 660-odd pages there really was not much to get excited about in the report on competition in the professions published by the Competition Authority last week.

I doubt it comes as much of a surprise to anyone to learn that the medical and legal professions are riddled with anti-competitive practices that push up prices. Of course some of the details highlighted by the Indecon consultants are interesting. These include a table showing that more than half of Irish solicitor's practices saw their income increase by at least 25 per cent between 1999 and 2001, while income at 4 per cent of practices rose by more than 200 per cent.

Another interesting titbit is that 66.7 per cent of insurance companies and 60.4 per cent of solicitors believe there is virtually no price competition among barristers.

But the truth is that many, if not all, of the significant barriers to competition identified by the consultants for the Competition Authority were well known and flagged as far back as 2001 by an OECD report on regulatory reform in Ireland.

But to dismiss the Indecon report as being of little value because it doesn't tell us anything we did not already know would be to miss the point. What is important about the report is that it is a potentially significant step towards something finally being done about what is seen as a major brake on the Irish economy.

What the Indecon report represents is some form of independent assessment of the issues raised by the OECD and opens the way for the Government - and the Tánaiste in particular - to do something about them.

The next step is for the Competition Authority to produce its own recommendations, based on the Indecon report, and any further representations it may wish to entertain. After that it is up to the Government to implement the recommendations.

The road map is the way the report of the Motor Insurance Advisory Board was handled. This report was translated into 70-odd recommendations. The agency or body responsible for implementing each of them was identified and a timeframe for doing so was also identified.

The final part of the strategy was to try to put a value - in terms of lower insurance premiums - on each action, which would allow a certain amount of accountability. It is still too early to say whether this approach will bear fruit, but it seems an eminently sensible way to proceed.

The problem is that motor insurance is a very different commodity to both medical and legal services. The vast majority of adults have to buy motor insurance annually and are acutely aware of the cost.

Thankfully most of us don't have to buy legal or significant medical services every year. As a result the sort of public pressure that produced political action on motor insurance is unlikely to develop over the recommendations of the Competition Authority about the professions. It would be surprising - but welcome - if a pressure group was to run candidates in the next election campaigning for reform of the legal profession. In the absence of this sort of political imperative the impetus to reform the medical and legal professions will come down to the determination of the Tánaiste to push through change. She is not short of reasons to do so. There has been a lot of comment in recent months about the need to underpin the competitiveness of the Irish economy. The global slowdown combined with a strong euro and high inflation has greatly undermined the attractiveness of Ireland as a base for export manufacturing, which is the bedrock of our economy.

In this context controlling inflation is a key policy objective of the Government. On that basis it is something of a no-brainer to tackle the issues raised by Indecon, which could - according to the consultants - bring down the cost of legal and medical services by up to 30 per cent. But the Tánaiste may think twice before rushing to take on such powerful bodies as the Law Society or the Irish Hospital Consultants Association.

The first reason is that the economic case for deregulation is far from proven in Ireland. In the last few years vested interests have been tackled such as the taxi drivers and large industries, such as electricity and telecoms, opened up to competition. But the prices of these goods have not come down.

The real reason is that the Tánaiste can expect to be fought pretty much every step of the way by the lawyers and doctors, who are very well equipped to take her on. It may not be lost on Ms Harney that many members of her party, the Progressive Democrats, are drawn from the ranks of these professions.

As her PD colleague Liz O'Donnell once put it: "If you take on every vested interest you pretty soon run out of constituents." The cynical would also argue that the Tánaiste might not find much support for taking on the professions given their representation in Cabinet. Four members of the cabinet are lawyers: John O'Donoghue, Dermot Ahern and Brian Cowen are solicitors while Michael McDowell is a senior counsel.

But the Tánaiste has shown her mettle in the past, particularly in her investigation of the various issues exposed by the uncovering of the Ansbacher accounts. Let us hope she will not be found wanting when it comes to taking on the lawyers and medics.