Competition Authority faults Groceries Order

THE Competition Authority has rejected criticism from retail traders and called on the Government not to renew the Groceries Order, which bans all below-cost selling by food retailers.

In a discussion paper, the authority said its new powers allowed it to stop predatory pricing, which would include all below-cost selling that was damaging to the consumer, whereas the Groceries Order actually contributed to stifling real competition.

The suggestion met with strong criticism from retailers, who said allowing below-cost selling would put smaller shops out of business. The grocery and dairy lobby group RGDATA said the authority was irresponsible - and remote from commercial reality. The business lobby IBEC said a change could mean 23,000 job losses

The farming body, ICMSA, said it feared large supermarkets would force down the price its members could get for food supplies so it could, in turn, sell them below cost, and damage the fabric of rural Ireland by closing small shops.

The Groceries Order, introduced by the Government in 1987 in the wake of the H Williams collapse and the supermarket price wars that followed, prohibits below-cost selling, price control by manufacturers, price discrimination and "hello money".

"The Groceries Order has had its day," said the chairman of the authority, Prof Patrick McNutt.

In its submission to the Government, the authority says the ban on below- cost selling in effect allows suppliers to set the minimum price at which retailers can sell their goods, a practice prohibited under the competition laws of virtually all developed countries.

Under the Groceries Order, the Competition Authority argues, supermarket chains get significant discounts on goods, but keep these off the invoice sheet. This allows them not to pass the savings on to customers.

"The view of the authority is that the order actually has anti- competitive effects," said Mr Pat Massey, the body's chief executive.

Prof McNutt rejected IBEC's suggestion that 23,000 people could lose their jobs in the grocery sector if the law were changed, adding there was no evidence for this and that competition was usually good for employment.

The discussion paper says the ban on refusal to supply in the Groceries Order is also a blunt instrument. This practice can be anti-competitive, its says, as where a manufacturer refuses to supply because of pressure from other retailers, this can now be dealt with under the Competition Act. But, it argues, some refusals to supply are perfectly competitive - for example, if supplying additional outlets merely increases distribution costs without any rise in sales.