Competition Law

AT FIRST glance it appears hat the new chairman of the Competition Authority, Professor Paddy McNutt, has honed his intellect firmly in the groves of academe: a long stint at University College Galway, two years in Oxford University and a three-year tenure at the University of Ulster as Professor of Political Economy.

Prof McNutt has also found time in his crowded academic life to provide independent consultancy on competition law and strategic management. He also assisted in adjudicating the Statoil takeover of JET.

Prof McNutt was an adviser on the Government side in the disputed fuel distribution takeover, but will not be more specific. The proposed takeover of Conoco's interests in Ireland (it owned the JET stations) was rejected by the then Competition Authority. It feared a low-price competitor would be removed from the market.

Statoil subsequently went to the High Court, but withdrew the case when a proposal put together by Maxol, saw the JET stations acquired by both Statoil and Maxol. It is understood that Prof McNutt helped the Department of Enterprise and Employment in evaluating the proposal.

The professor expects plenty more mergers and acquisitions issues to cross his desk when he takes up his five-year tenure as chairman of the authority next month.

"Many mergers occur because bigger firms need more economies of scale in order to be competitive," he says. "There will also be more joint ventures and strategic alliances - in many cases it makes good business sense."

Prof McNutt believes each case should be examined on its own merits. "You can't be too heavyweight, but that doesn't means firms should have carte blanche to do what they want."

Prof McNutt takes over the role of chairman from Mr Paddy Lyons. He also has a new authority and is backed by recently much-strengthened competition legislation.

The new legislation - passed into law last June - means those who breach competition law could be jailed for up to two years and businesses can be fined up to 10 per cent of turnover. A new director of competition enforcement, Mr Patrick Massey (a former member of the authority) will have powers to search premises and initiate prosecutions.

The power to prosecute has been paraded as an important provision by the Minister for Enterprise and Employment, Mr Bruton who steered the legislation through the Dail. He has pointed out that up to now small businesses have not been able to afford the high cost of legal action and the risks involved.

Prof McNutt believes the legislation greatly reinforces the authority.

However, he also believes that competition law and industrial policy should go hand in hand. "What you want is good competition policy in line with good industrial policy."

The new powers of the Competition Authority have not been universally welcomed. The amended Act imports criminal sanction into the enforcement of competition law. A high standard of proof, establishing guilt beyond reasonable doubt, is now required before a conviction can be secured under the terms of the Act. Doubts have been expressed chiefly by outgoing chairman Paddy Lyons, that such a standard can be readily obtained. Critics of the amended Act say it is unworkable.

Prof McNutt believes that his academic background can be used to advantage in his new post. He says he is very familiar with much of the economic theory of competition policy and he can distill this into concrete measures to ensure open competition.

Competition policy should be looked at from two points of view, according to Prof McNutt: it should be in place to protect the consumer and also as a means of securing a degree of competitiveness in the economy.

He talks about the different approaches to competition issues - that of the US, where competition policy originated in the form of anti-trust law, and the European approach which is contained in the Treaty of Rome and seeks to promote a single market by controlling anti-competitive practices and outlawing the abuse by companies of dominant positions in particular product markets.

But, he says, competition policy, both domestic and EU, should not be anti-business. The constantly changing nature of the Irish economy means the Competition Authority must be mindful of EU competition policy when implementing domestic competition law.

Prof McNutt believes that there are probably "pockets of anti-competitive practice" in Ireland. Areas he will be examining include the financial services and insurance sectors as well as the travel sector.

He stresses that this does not necessarily mean anti-competitive practices are taking place in these sectors, but the sectors are worth investigating.

He points out that the EU is preparing a Green Paper on the issue of vertical agreements - agreements between undertakings at different levels of the economy such as exclusive distribution agreements - examining whether they harm competition. "If you say that such agreements do harm competition then there are anti-competitive practices taking place in Ireland," he says.

Prof McNutt says Irish companies should draw up a compliance policy to ensure that they comply with competition law and preferably have it signed by the board of directors. Coincidentally, this was a point emphatically made by Minister Bruton when he addressed a conference on competition policy in Dublin earlier this week.

Prof McNutt says the authority will advise companies on competition policy if asked. He also sees a possible consultative role for the authority regarding the privatisation of State assets. "There are so many things taking place in both the public and private sectors that the authority shouldn't necessarily be a private sector agency, he says.

Many state bodies will not survive, he says, unless they downsize and seek strategic alliances. However, he says privatising state assets is not necessarily the solution - moving from a public to a private monopoly will not assist an anti-competitive undertaking, he says. But he argues that there is "no reason why a public utility cannot be as successful as a privatised one.

One of those joining Prof McNutt in his new post is Dr Bill Prasifka, a specialist in competition law with William Fry, solicitors. Industry sources describe him as an advocate of the Chicago school of anti-trust policy which adopts a more hands-off approach to competition. Prof McNutt readily admits that he and Dr Prasifka will not always agree on competition policy issues.

"I'm sure we will have many interesting intellectual debates. I hope we don't always see eye to eye. It is important that we (the authority) all have different viewpoints and argue the merits of each case."

Also joining the authority is Ms Isolde Goggins. She previously worked with the EC Commission and Telecom Eireann and is leaving her post as senior manager with Ericsson Systems Expertise in Dublin.

The three members, all of whom are under 40 years old. have been appointed for a five-year term to the full-time posts which carry salaries of £48,900 for ordinary members and £60.900 for the chairman.