All change

The new chairman of the Irish Competition Authority has five areas of vital importance to address, says Vincent Power

On 27 January 2006, Bill Prasifka was appointed chairman of the Irish Competition Authority, a role he will take up at the end of this month. The appointment sees him following in the footsteps of John Fingleton, who was a strong advocate for change and who has recently been appointed chief executive of the Office of Fair Trading (OFT) in the UK. While Fingleton’s advocacy skills have been widely admired, Prasifka needs to build on these during his chairmanship.

The public wants tangible results and benefits from competition. So, Prasifka will have to start delivering on the promise of the past five years. The difficulty of delivery should not be underestimated. That period required the rhetoric of the virtues of competition, but the next will require brave moves as well as hard cases to be fought and, most importantly, won. The authority will have to be seen to have real and relevant victories in terms of opening up Ireland to competition.

Five key issues will have to be tackled by Prasifka. They are: criminalisation of competition law; the studies conducted by the authority; the relationship with government; the wage negotiations/ price-fixing among certain producers; and liberalising infrastructure.

First, criminalisation of competition law was introduced in 1996 and strengthened in 2002. It is not working as well as the advocates of change predicted and promised. This is not the fault of individuals, but of the system. Few cases have been taken in the 10 years because the standard of proof for criminal cases – beyond reasonable doubt – is difficult to achieve and the evidence is hard to compile. Cartel cases are difficult to mount and involve many co-defendants. It is not surprising that Ireland has been the first country in Western Europe to take such cases; others have seen the difficulties and shied away. In one case pending before the Irish courts, there are more than two-dozen defendants.

Prasifka will have to decide whether the authority should be engaged in the criminal cartel hunt that has absorbed so many resources, but is so important. Instead, he might seek a change in the law to bolster his armoury. It may be that the authority could be given powers to propose that those whom it believes have breached competition law would contract to pay a certain penalty, otherwise the authority would send the matter to the DPP and announce to the world that the file has gone there. If the party allegedly in breach failed to pay the penalty, the authority could sue for the money as a contract debt in civil law and this would avoid the whole criminal machinery coming into play. It would be more effective and efficient as well as being cheaper than the current system.

Second, the ‘studies’ which were such a hallmark of the authority during the past five years are a useful concept, at least in theory. However, there is a clear need for more targeted, precise and less academic studies that can be conducted within tight timescales. Apart from delays, the professions studies have been criticised, rightly or wrongly, as ideologically driven or influenced by considerations in other countries that do not arise in Ireland. Therefore, the studies area needs to be tackled by Prasifka and he must bring the existing ones to a sound conclusion, but the tool should not be abandoned.

Third, the relationship between regulators, such as the Competition Authority, and politicians and the civil service is becoming more difficult. The regulators are moving through their teenage years and those who brought them into the world are finding it difficult to cope with the fact that they have minds of their own. Some of the criticisms of government policy made by Fingleton’s authority must be difficult to take for some politicians. Whether those criticisms are right or wrong, the relationship looks like it will become more strained. There are signs that some in the Oireachtas (the Irish Parliament) and in the judiciary have been somewhat concerned with some of the authority’s comments in recent times. Prasifka will have to navigate this issue very astutely, but his experience as aviation regulator means that he knows what he is getting into.

There is also the tricky issue of producers, such as farmers and others, who negotiate with government through unions or associations comparable to unions. These producers are regarded by the authority as individual competitors. The authority has taken, or threatened to take, cases against these producers for acting collectively while the Irish Government continues to negotiate with them as a group. The law needs to be reviewed in this regard because we cannot continue to have two arms of government approaching them in different ways.

The chances are that Prasifka will be very different from Fingleton. He will be no less committed than his predecessor, but may take fewer cases and not engage in so many studies. He may also be less interventionist and activist. He was a member of the authority from 1996 to 1999; the world has changed radically since then. It will be fascinating to see how he tackles the new era where the authority has more resources, more powers and more demands on it to open up Ireland to competition.

Vincent Power is head of the EU and competition group at A&L Goodbody