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The Groceries Market in Ireland William Prasifka Chairperson

Overview . . What is the Groceries Order. Objectives. Consequences. Removal of the Order. The Way Forward. Groceries Market in Ireland. Groceries Market in Ireland. Groceries Sector in Ireland. The Irish overall retail sector grew by an average of 5.5% per year reaching a value of 23.8bn in

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The Groceries Market in Ireland William Prasifka Chairperson

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    1. The Groceries Market in Ireland William Prasifka Chairperson Presentation at the Czech Competition Conference 28-29 November 2006, Brno

    2. Overview

    3. Groceries Market in Ireland

    4. Groceries Sector in Ireland The Irish overall retail sector grew by an average of 5.5% per year reaching a value of €23.8bn in 2005 The food & grocery retail sector grew by an average of 4.1% per year, reaching €12.7bn in 2005 Food & grocery share of total retail expenditure dropped by 3.4 percentage points to 53.3% in 2005 Tesco is the only non-Irish operator in the top four

    5. Groceries Retail Market in 2005

    6. Market Share and Concentration levels in the retail groceries sector

    7. The Groceries Order

    8. What is the Groceries Order 1987 Amended several times since its first introduction in 1956. Introduced new regulations relating to supplier retailer relationships. Introduced ban on selling below the “net invoice price”.

    9. The Ban “Off-invoice discounts” were a common feature of the retail trade, typically lump sum and not-product specific Therefore, retailers were forbidden from passing on to customers off-invoice discounts they receive from the supplier The term “net invoice price” was introduced as an administrative convenience, to make it easier to enforce the ban the invoice would represent easy proof before a court!

    10. Objectives

    11. Objectives of 1987 Order Primary objective was to restore a balance in the trade: “Although I would not normally favour intervention in the market place, I believe that the new provisions in this groceries order will go a long way to redressing that balance… between manufacturers and multiples and …between multiples and independent grocers.” Albert Reynolds T.D., Minister for Industry and Commerce, October 1987 “Although we have examined the effects of a prohibition in considerable detail, they are difficult to predict with certainty… We cannot overlook, however, the views of manufacturers and independent retailers that it would make a significant difference to them”. Restrictive Practices Commission, 1987

    12. Objectives of 1987 Order Protect consumers from anti-competitive practices of retailers Competition Act was introduced only in 1991 Protect the retail “landscape” Prevent unfair discrimination Protect jobs within retail industry Economy characterised by high unemployment – order introduced as method to prevent intense competition resulting in further unemployment.

    13. Effects of the 1987 Order

    14. Effects of 1987 Order Facilitated collusion in retail sector market. Suppliers now only needed to agree wholesale price. Groceries Order insured that retailers could not sell below the invoice price. Monitoring and Policing of cartels was undertaken by the Director of Consumer Affairs. Retailers penalised in passing on discounts to consumers The two main retailers fined for reducing the price of nappies and baby food.

    15. Removal of the Order

    16. Removal of the Order In March 2005: public consultation by the Department of Enterprise, Trade & Employment (DETE) October 2005: DETE recommended the abolition of the Order and the amendment of Competition Act This came into force on March 2006

    17. Removal of the Order Quotes from bodies supporting the Order “We must avoid allowing ideological economists, who have never set foot on a factory floor, to seduce politicians into naďve policies” Paul Kelly, Director of Food and Drink Industry Ireland. “We need to make a choice about what kind of country we want to live in, a collection of vibrant communities or retail deserts in which those of us who do not live in a city will have to travel 10 miles to buy a pint from the county mega-store” Rosemary Garth of Industry confederation IBEC

    18. The Way Forward

    19. The Way Forward Groceries Monitor Project The Minister asked the Competition Authority to review and monitor the sector to see how it responds to the new legislative environment As a result, the Competition Authority has undertaken a project to monitor the groceries sector

    20. Recent Trends in Groceries Items Prices

    21. The Way Forward Trends in grocery prices since April 06: CPI has increased by 2.1% The prices of items previously covered by the Groceries Order have gone down by 0.7% The prices of items previously not covered by the Groceries Order have gone up by 1.5%.

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