Adjudicating the competition

The Irish Competition Authority is in its formative years, but is now starting to flex its enforcement muscles, writes Vincent Power. Vincent Power is a partner and head of competition law at A&L Goodbody.

Last year was interesting in terms of competition regulation. The European Union (EU) competition system continued to carefully control competitive conduct but, more significantly, the Irish system began to mature.

The European Commission (EC) has controlled large-scale acquisitions to the exclusion of EU member states since 1990. In some ways, this did not really matter for Ireland until 1997.

During the past year, the Tesco/Quinnsworth, Woodchester/GE Capital and Guinness/Grand Metropolitan deals were supervised by Brussels – without the Irish government having any right of veto.

On 1 March, the Irish government lost more power to control acquisitions affecting the country, when the financial thresholds within the EU's Merger Control Regulation fell.

Control of acquisitions is moving from member states to the EC exclusively. This will mean that the Irish Minister for Enterprise, Trade and Employment will have a smaller role to play and an “Irish solution to an Irish problem” will no longer be a real option.

Another challenge from Europe in 1997 came against the behaviour of two “Irish champions”. It fined the Irish Sugar Company for price-fixing and restricting sugar imports.

Further, the EC threatened to fine Telecom Eireann and issued a “statement of objections” to the company on aspects of its pricing policy.

The most significant fines to date in Ireland have been against the semi-state sector rather than the private sector. Clearly, the Irish semi-state sector will be subject to more scrutiny in the years ahead and may face substantial fines, unless it pays greater heed to the requirements of EU competition law.

The Irish competition law system was established in 1991 and updated in 1996. However, the system only began to mature in 1997. The system has a long way to go, but it is on course.

The Competition Authority has started to flex its enforcement muscles over the last year. But it has seen fewer notifications than might be expected in a “tiger economy”.

Can it really be the case that only in the region of two dozen agreements in the entire Irish economy required notification to the Competition Authority during the whole of 1997?

Despite this, the Competition Authority did make life difficult for trade associations last year. The Irish Travel Agents' Association, the Irish Road Haulage Association and the Vintners Federation of Ireland all came under the Competition Authority's spotlight. Some associations were “dawn-raided”. Trade associations should be warned to brief themselves on competition law and establishing a compliance programme, or else risk having their members fined or, in some cases, imprisoned.

It was a good year for some complainants too. Since 1996, individuals have had the ability to complain to the authority about unfair economic behaviour. The anonymity of complainants seems to be well preserved.

But those who had their complaints rejected by the authority may feel aggrieved at receiving no explanation for the rejections. These complainants may still resort to court action to remedy those situations left unresolved by the authority.

The EU and the Irish systems can, and do largely operate in tandem. The drinks industry is a prime example of this multiplicity. The industry was centre stage in competition law terms during 1997.

At a global level, Brussels and Washington cleared the Guinness/Grand Metropolitan merger only after undertakings were given to make share and brand disposals. Share disposals are to be made in Ireland. At a national level, Guinness' bid for United Beverages is still before the competition regulators and faces an uncertain future following complaints from almost all quarters of the industry.

At a local level, the regime for publicans' licences has been studied by the Competition Authority with a report expected in the near future that could fundamentally alter the century-old system of licensing.

The Irish Minister for Enterprise, Trade and Employment must be careful not to allow dominant “national champions” to be created which are inefficient at home so as to supposedly allow them to have the scale to take on competition abroad. It is only by being used to competition at home that one can seriously compete abroad.

The EU system is continuing to control the mighty and the meek. In 1998 it will look towards various mergers pending in the accountancy and telecom worlds but will, as always, have its eye on pricing.

More significantly, the Irish system has started to mature. The dawn-raids have started and the warnings have gone out. The jail sentences have yet to come. No one went to prison for breaching competition law in 1997 but who knows what the future may bring?