Do we need more layers of competition regulation?

The Competition and Consumer Protection Bill 2014 (Bill) was published by the Minister for Jobs, Enterprise and Innovation on March 31st. The Bill makes a number of key changes to the application of competition law and consumer protection law in Ireland, and may be enacted as soon as next month.

To improve co-ordination between consumer protection and competition policies, the Bill dissolves the Competition Authority and the National Consumer Agency to establish a combined competition law and consumer protection body known as the Competition and Consumer Protection Commission (CPCC).

The Bill does not change the main Irish competition and consumer law requirements and rights, which include the prohibition on anti-competitive agreements and abuses of dominance; and the consumer law prohibitions on unfair, misleading and aggressive commercial practices.

However, the Bill does increase the criminal investigation powers to enforce competition law in Ireland. This includes allowing An Garda Síochána to make more effective use of detention periods where a suspect is being questioned and to apply to court for an order requiring any person with relevant information to produce documents, answer questions and provide information. In addition, telecoms and internet companies are now required to retain competition law-sensitive records for up to two years and to disclose on request; and it is an offence to withhold information about serious competition law breaches.

Until now, legal professional privilege prevented the authorities from taking legally privileged materials. The Bill allows the CPCC to take possession of materials that a business and its advisors claim are legally privileged and then have the High Court decide if such privilege really exists.

Whether or not these somewhat draconian enforcement powers are really needed by the CCPC and the Garda is doubtful given the extensive enforcement powers already available to them.

The Bill also changes the thresholds for the requirement to notify mergers to the CCPC with a greater focus on the effect of the merger on competition in Ireland. The Bill gives additional time for the CCPC to decide on notified mergers and this may significantly lengthen the merger review process in practice, though possibly counter-balanced by flexibility in when a notification can be made.

Notable changes

Two notable changes made by the Bill concern media mergers and the treatment of commercial transactions involving grocery goods.

The Bill makes substantial changes to the way media mergers are assessed. The Minister for Communications, Energy and Natural Resources will have the final say on notified media mergers with the involvement of the Broadcasting Authority of Ireland in contentious mergers. The CCPC will only review the competitive effect of a media merger as opposed to the key “media plurality” test assigned to the minister under the Bill (framed by reference to diversity of content and diversity of media ownership in Ireland).

The changes to the substantive and procedural assessment of media mergers under the Bill are drawn largely from the Report of the Advisory Group on Media Mergers in 2009. This new regime adds significantly greater technical and regulatory scrutiny to a wider range of media mergers and aims to match international best practice, as well as taking account of technological developments.

However, the media mergers changes might also be regarded as: (i) too technical and onerous on merging parties to apply; (ii) creating uncertainty as to when a notification is required; (iii) involving a potentially very lengthy review process; (iv) providing for a difficult mix of media plurality and competition-related grounds for review; and (v) involving too many regulatory and third party views to be factored into the assessment in contentious mergers.

The key consumer protection change is the power given to the Minister for Jobs, Enterprise and Innovation to make regulations to specify that certain procedures must be followed in commercial relationships between smaller and larger grocery goods companies. The change is aimed at preventing practices such as the unilateral alteration of contracts by retailers, requiring “hello money” for space on supermarket shelves and suppliers being required to bear the cost of promotions by retailers.

Relationships will continue to be based on commerce and prices will continue to be set by negotiations but now the inclusion of certain terms in written contracts, requirements for record-keeping and strong enforcement powers for the CCPC are designed to bring some balance to the supposed “inequality” between suppliers and retailers in the grocery goods sector. Breach of these provisions will be an offence.

It is unclear whether these grocery goods changes are needed in practice given the already substantial consumer protection law provisions in force and it remains to be seen whether these measures will be any more effective than the current competition law-specific grocery goods measures. However, the new powers bring with them greater powers of sanction and would in theory impose a tougher regime than the current controls.

While developments in markets necessitate change and improvements in systems are to be welcomed, it is hard not to draw the conclusion that the Bill will graft another layer of extensive regulation on business in Ireland where effective powers and mechanisms for enforcing and applying competition law, consumer protection and merger control already largely exist.

Alan McCarthy is a partner in A&L Goodbody’s Competition, EU & Procurement Group