Report to Minister: Government officials pressed for the repeal of the Groceries Order in a report to Minister for Enterprise Micheál Martin.
They said in the report that consumers would gain from "downward pressure" on retail prices if the Order was removed. But they went on to say that it was not possible to quantify the extent of the benefits.
The report said that the 2002 Competition Act should be "significantly strengthened" by specifically prohibiting resale price maintenance, unfair discrimination in the retail trade. It also called for a prohibition on "hello money", an upfront payment demanded by retailers as a condition of doing business with suppliers. Each of the recommendations were endorsed as Government policy when Mr Martin brought the report to yesterday's meeting of the Cabinet.
The report found that the Order acted against consumers' interests by eliminating price competition between shops and driving consolidation in the food market.
It said that wholesalers gave off-invoice discounts to retailers but added that retailers were prevented by the Order from passing those discounts on to consumers.
"This is a serious restriction on the freedom to trade. Off-invoice discounting is a practice that, in consequence, acts against the interests of consumers," the report said.
"The ban on selling below the net invoice price means that a form of resale price maintenance operates in the Irish grocery trade. This is in serious conflict with other provisions of the Order.
"Resale price maintenance is also an anti-competitive practice that can attract criminal sanctions under the terms of the Competition Act, 2002."
The officials said there was "significant reason" to believe the existence of cause and effect in the chain between the Order and higher rates of food inflation in Ireland, relative to other retail sectors and to food inflation in Britain.
"The fear that the removal of the Groceries Order will herald the emergence of large-scale hypermarkets at the expense of the small independent retailer is, we consider, unfounded and suggests a misplaced faith in both the intention and scope of the Order."
While acknowledging the concerns expressed by anti-poverty groups about the possible impact of the Order's removal, the report cited "independent research" in Britain which said there was no reason to suspect that access to affordable groceries would be more difficult in the absence of a ban on below-cost selling.
In an assessment of submissions on the Order to Mr Martin, the report dismissed the argument that the Order's removal would result in a "ghost town" effect in urban centres due to small independent retailers going out of business.
"It is suggested in these submissions that Ireland will end up like the UK where, it is alleged, seven out of ten towns and villages have no local shop . . . We conclude that the statistic is wrong and is a serious and manifest misrepresentation of actual research undertaken by a UK government agency."
The officials were reluctant to make firm conclusions on the impact of the Order on food price inflation, but said an analysis of inflation trends would support the case for repeal.
"We note that Irish food inflation in the period since 1996 is the third-highest in the EU [pre-accession 15] and is almost three times higher than in the UK. We do not believe that this can be adequately explained by higher input costs in the Irish retail sector."
