Time to change the competition laws

The new chairman of the Competition Authority Isolde Goggin, will have a tough job successfully merging the Competition Authority and the National Consumer Agency

The publication of a bill increasing the penalties for anti-competitive behaviour represents the latest stage in the government’s shake-up of Irish competition law and regulation. However, with the EU breathing down its neck it will almost certainly be forced to do much more. Dan White reports

News

18 October 2011

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Increasing competition in the “sheltered” sections of the economy was one of the key conditions of last November’s bailout deal with the EU and the IMF. Our new masters looked at such things as Irish legal costs – which are amongst the highest in the developed world, hospital consultants salaries – more than twice those in Germany, and many of the other rotten boroughs that make doing business in Ireland so expensive and demanded that we change our ways.

So what has happened in the intervening eleven months? In July the government announced plans to merge the Competition Authority and the National Consumer Agency to create a new Consumer and Competition Authority.

NCA’s purpose unclear

Ever since it was first founded in 2006 it has been unclear what the NCA was actually for. Formed as a hurried response to the public outrage generated by Eddie Hobbs’ Rip-Off Republic TV series of the previous year, it never seemed to do much apart from occasionally publishing price comparisons of dubious worth.

Its response to the collapse of the Home Payments firm summed up the NCA’s utter uselessness. The NCA called a meeting of all the regulatory bodies, none of whom had managed to detect Home Payments despite it having traded for 48 years, to discuss the collapse, which cost Home Payments’ customers and banks a total of €10m.

Quite clearly this was a bureaucratic mutt that badly needed to be put out of its misery.

The Competition Authority failings

The Competition Authority has also had its problems in recent years. Its worst moment was undoubtedly the revelation that it was unable to object to the Topaz takeover of Statoil in 2006, an acquisition which gave Topaz a potentially dominant 35% share of the motor fuel market, because it missed the legal deadline. Apparently someone in the Competition Authority failed to realise that there are only 30 rather than 31 days in the months of September. Honestly you couldn’t make it up.

However, despite any problems it may have had, we need the Competition Authority. It is vital for the future health of the Irish economy that there exists a body with the powers and the capacity to curb anti-competitive behaviour. Not surprisingly there is considerable unease within the Competition Authority at the prospect of a merger with the NCA with the authority’s outgoing chairman Declan Purcell describing it as a “shotgun marriage” last June.

Positive omens

Since then the omens for the new body have been mildly positive. Earlier this month Enterprise Minister Richard Bruton announced that the new chairman of the Competition Authority was to be Isolde Goggin, the former chairman of telecommunications regulator ComReg. She will also be the chairman of the new Consumer and Competition Authority when the merger of the two bodies goes through in the new year.

After the problems experienced by both of its predecessor organisations in recent years it was vital that the Consumer and Competition Authority was headed up by a bureaucratic “big beast”. Goggin certainly fits that particular description having acquired a reputation as a toughie during her time with ComReg. She is also familiar with the terrain having previously served as a member of the old Competition Authority before her appointment to ComReg.

Enterprise Minister Richard Bruton announced that the new chairman of the Competition Authority was to be Isolde Goggin, the former chairman of telecommunications regulator ComReg

Prison sentence for anti-competitive practices

Her position will be further strengthened by the tough new penalties Richard Bruton is planning to introduce for those found guilty of anti-competitive practices. These include an increase in the maximum prison sentence from five to ten years and an increase in the maximum fine for hard-core offences from €4m to €5m.

Quite clearly these penalties, if they are imposed, will act as a deterrent to all but the most determined monopolists. Ten years in the chokey is serious time.

But will they? Unfortunately the omens are not good. Three years on from the banking collapse and no-one has even been charged. It took 14 years for former NIB boss Jim Lacey to be disqualified as a company director. Why should the renamed Consumer and Competition Authority prove to be an exception to the sloth, which seems to characterise most Irish regulatory bodies?

Good job at ComReg

We shall have to wait and see. However, Goggin’s former ComReg bailiwick is one of the few Irish regulatory bodies that is generally reckoned to have done a decent job. While it was unable to prevent the asset-stripping of Eircom, with disastrous knock-on effects on that company’s investment in broadband, by successive owners, it did at least preside over the introduction of competition to the Irish telecommunications market, something which has had a beneficial impact on all of our telephone bills.

How will she perform in her new role? Further evidence of this government’s good intentions on the competition front was provided by the publication of the Legal Services Regulation Bill, which strips the Law Society and the Bar Council of their disciplinary role and hands it to a new independent body instead. However, the ferocious campaign of opposition to the bill mounted by the Law Society is evidence of just how hard entrenched bodies will fight to protect their privileged positions.
Next up are government plans to lift the restriction on the number of GPs allowed to treat public patients. Word on the street is that the medics are gearing up to fight this much-needed reform every inch of the way.

Anti-competitive behaviour not extinct

Meanwhile reports that the Competition Authority is investigating claims from a whistle-blower of an alleged cartel in the concrete industry demonstrates that, despite the best efforts of various regulatory bodies in recent years, anti-competitive behaviour is still not extinct.

In other words, Isolde Goggin has it all to do. Not only does she have to successfully execute a potentially tricky merger between two very different organisations, she then has to fashion a body that will, for the first time, enforce competition law with sufficient vigour so that the incidence of anti-competitive behaviour is at the very least substantially reduced.

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