1. Competition Issues in the Agri-Food Sector Monday 10 th April 2006 Declan Purcell Director, Advocacy Division The Competition Authority

2.  Enforcement of EU and Irish Law  Article 81/Section 4 on agreements, especially cartels  Article 82/Section 5 on abuse of dominance  Mergers  Substantial lessening of competition in the relevant market  Promotion of Competition  Tackling State restrictions on competition  Compliance with competition law

3. Work in Agriculture & Food  Consolidation in food processing sector  Animal Medicines  Food Retailing – the Groceries Order  Agricultural inputs, farmers as consumers  Animal Medicines  Veterinary Services  Fuel, other professions, banking, insurance, telecoms

4. Issue 1 - Consolidation  Arguments for consolidation  Scale  Efficiency  Competition Policy and consolidation  Uses an effects-based approach  Protects consumers from adverse market effects  Strongly supports competition and new entry

5. Consolidation - cases  Beef Processing  BIDS Case (and others) challenged  Dawn-Galtee Merger cleared  Monaghan Mushrooms (Merger) Case cleared

6. Consolidation Summary Key Issue : Market-led rationalisation vs Forced or orchestrated action Key Test : When efficiencies and effects on competition are added up, will prices to consumers rise

7. Issue 2 - Animal Medicines  August 2005 proposals controversial, concerns expressed on both supply and demand side  Minister’s October 2005 announcement welcome –  Minister to await the outcome of EU exemption negotiations before deciding finally re who can write prescriptions  In the meantime, vets to issue separate invoices for (a) prescribing, (b) dispensing  Licensed merchants can supply some prescribed medicines from January 2007  Prescription life extended from 1 to 6 months

8. But still some concerns  The proposed regime is still over-restrictive  Concerns about confining the writing of prescriptions to vets. Shouldn’t concentrate monopoly power like this in one group of hands  EU Directive doesn’t require this – in fact, specifically leaves it open to MS to allow others to prescribe  Not really an answer to rely on some future, uncertain, unproven EU exemption regime

9. Other concerns  Requiring vets to prescribe 2 or 3 brands not the answer –  even requiring two or three brands is potentially anti-competitive  why not ingredient-based ?  or more generics ?  Animal v. human medicines –  humans – more liberal prescribing rules planned  animals - more restrictive prescribing rules planned

10. Issue 3 – Food Retailing and Distribution  Farm prices low and stable  But prices to consumers higher than they need to be  So what (or where) is the problem ? In the food distribution sector ? In food retailing ?

11. The Groceries Order  Competition Authority focused on one aspect of the problem – the Groceries Order Introduced 1987 Prohibited the selling, or advertising for sale, of grocery goods below net invoice price [in other words, prohibited the passing on discounts to consumers]

12. The Groceries Order  Applied to - Grocery goods for human consumption Intoxicating liquor not for consumption on the premises Household necessaries other than foodstuffs  Did not apply to – Fresh fruit and vegetables Fresh and frozen meat, Fresh and frozen fish

13. Grocery prices  Ireland is one of the most expensive places to buy food in the Eurozone.  The cost of food in Ireland has risen while prices in other retail sectors have fallen.  Higher rate of increase in the price of items covered by the Order.  Farm gate prices are not to blame, they have remained relatively stable. Bottom line – Groceries Order cost average householder up to €500 a year.

14. Groceries Order now gone  Repealed by the Competition (Amendment) Act 2006  But some prohibitions remain…………….  …..any attempt to force resale price maintenance…….  ………discriminatory treatment of suppliers……………..  …………….having to pay for advertising / display……..  ……..…………..hello money  All subject to a “Competition Test” in each case.

15. Stakeholders can be pro- active Respect and use competition law – Work within competition rules to attain efficiencies – Use competition law to raise objections, e.g. mergers and dominant firms – Continue to support competition and culture of regulatory reform – Use Competition Authority to assist new consumer focus

16. Competition Issues in the Agri-Food Sector Monday 10 th April 2006 Declan Purcell Director, Advocacy Division The Competition Authority