Why is Government refusing to review beef sector competition – Naughten

In Agriculture, News by Denis Naughten

Denis Naughten has said he is “deeply disappointed” at the Government’s refusal to carry out an independent review of the operation of the beef processing sector in Ireland, in line with a Dáil agreement of 15 months ago.

Raising the issue in the Dáil recently, Denis Naughten pointed out: “In September 2019, I secured unanimous support in Dáil Éireann for a motion on the beef sector that called on the Minister for Business, Enterprise and Innovation, under section 10(4) of the Competition and Consumer Protection Act 2014, to request the Competition and Consumer Protection Commission to carry out a market study and analysis on the nature and scale of consumer and beef farmer issues in the beef market and make recommendations”.

Yet to date this has not been implemented as Minister of State, Robert Troy, on behalf of the Government is saying that the CCPC has already considered complaints about the operation of the beef sector and found no evidence of anti-competitive practices.

Denis Naughten added: “As someone who submitted such a complaint to the CCPC with regard to the operation of feedlots, I’m fully aware of the difficulty in providing documentary evidence of anti-competitive practices and that is why we need the Competition and Consumer Protection Commission to do a broad independent review of the industry rather than waiting for a whistle-blower to come forward.”

Responding to the Minister in the Dáil, Denis Naughten said: “Is the Minister of State honestly telling me that he does not have concerns regarding the operation of the offal sector in this country? Every farmer in this country believes that a monopoly is operating in the offal sector. That has a controlling influence on the kill in this country. It is imperative that we have a separate independent inquiry and it should not be dependent on farmers finding evidence.

“What Dáil Éireann called for in September 2019 is a complete independent review of the operation of the meat industry in Ireland, separate from all of the interested parties which can make clear recommendations on how this sector should operate in future.

“We have had enough tinkering at the edges by the Beef Taskforce, whose work I’ve no doubt will be positive, but ultimately will not alter the margin the farmer receives. Let no-one forget this is the very body which agreed to an application for PGI status for Irish beef which is not exclusively based on the suckler sector.

“We need someone from outside like the CCPC who can compile a detailed independent assessment of the functioning of the market and make evidence-based recommendations as to how the Government may address the current issues in the beef sector.

“If the industry is operating as it should, what has Government to worry about? Why will it not follow through on what was unanimously agreed 15 months ago?” asked Denis Naughten.

ENDS.

Editor’s Note:

Dail Question & reply

Tuesday, 10 November 2020

Ceisteanna Eile – Other Questions

Beef Industry

Denis Naughten (Roscommon-Galway, Independent)

  1. To ask the Minister for Trade, Enterprise and Employment the requests he has received in the past 12 months from his ministerial colleagues to carry out a market study under section 10(4) of the Competition and Consumer Protection Act 2014; and if he will make a statement on the matter. [35118/20]

Denis Naughten (Roscommon-Galway, Independent)

In September 2019, Dáil Éireann unanimously supported a motion on the beef sector that called on the Minister for Business, Enterprise and Innovation under section 10(4) of the Competition and Consumer Protection Act 2014 to request the Competition and Consumer Protection Commission, CCPC, to carry out a market study and analysis on the nature and scale of consumer and beef farmer issues in the beef market and make recommendations. This has yet to be implemented.

Robert Troy (Longford-Westmeath, Fianna Fail)

The Competition and Consumer Protection Act 2014 enables the Minister for Enterprise, Trade and Employment to request the CCPC to carry out a study or analysis of any issue relating to consumer protection and welfare, any practice or method of competition affecting the supply and distribution of goods or the provision of services, or any other matter relating to competition and to submit a report to him or her.

No requests have been made by the Minister to the CCPC to carry out a market study or analysis in the past 12 months, nor has any other Minister requested to use those powers to request the CCPC to carry out a study for them.

In August 2019, the then Minister for Business, Enterprise and Innovation, Deputy Humphreys, made a request to the CCPC to carry out a study of the public liability insurance market in Ireland. This study was requested as the issue of increases in public liability premiums for businesses was raised with her as a potential systemic threat to the existence of many businesses. Concerns were also expressed about the roles of insurance firms and intermediaries in the increased levels of public liability insurance premiums.

The study will compile a detailed assessment of the functioning of the market and make evidence-based recommendations as to how the Government may address the current issues around the cost and supply of public liability insurance. The CCPC commenced a wide range of activities to complete this study, including meetings with representative groups, public bodies, industry representatives and customers; conducting customer focused market research among a representative sample of businesses, community groups and sports organisations; issuing a public consultation paper to obtain the views of key stakeholders; analysing data that are available on the market; and undertaking desk-based research. We expect the chairperson of the CCPC to provide the report in the coming weeks.

Denis Naughten (Roscommon-Galway, Independent)
Fourteen months ago, the Minister of State and everyone else in this House supported the proposition that an inquiry into the beef sector take place in this country. At the moment, we are telling beef farmers to come forward with the evidence and present it to the CCPC. I made a submission to the commission but the reality is that unless a whistle-blower comes forward to provide documentary evidence, it cannot instigate an investigation into the beef sector. Does the Minister of State believe that there are anti-competitive practices in operation within the beef sector? I believe that there are. The Government has a mechanism by which it can ask the CCPC, at the stroke of a pen, to go in, look at the industry as a whole and carry out a report. Let us see once and for all what is going on.

Robert Troy (Longford-Westmeath, Fianna Fail)

I am aware that during a debate on the challenges facing the beef sector in the Dáil on 18 September 2019, the Deputy tabled an amendment to a motion, agreed to on 26 September, proposing that the CCPC carry out a market study and analysis on the nature and scale of beef farming issues in the beef market and make recommendations. A request for the CCPC to undertake a market study or analysis under section 10(4) of the Competition and Consumer Protection Act 2014 is not a substitute for the commission undertaking its statutory functions by investigating an alleged breach of competition laws that are used by the commission in different situations.

In 2019, the CCPC received a significant number of complaints about the beef sector and, as a result, commenced a detailed, extensive examination. The majority of the complaints related to five core issues: the similarity in the base price per kg offered by processors to beef farmers across all beef processing plants, dissatisfaction with the qualitative criteria for the payment of in-spec bonuses applied by beef processors to the importing of foreign beef, the operation of feedlots, distortion of competition and the impact of a reported monopoly in offal processing.

Denis Naughten (Roscommon-Galway, Independent)

I will come back to my core point. There are two ways that a thorough investigation can be carried out. One is if documentary evidence comes forward, and that can only happen if we have a whistle-blower within the industry. The other option is for the Government, through the offices of the Minister and the Department, to direct the CCPC to carry out a market study and inquire into the sector. Is the Minister of State honestly telling me that he does not have concerns regarding the operation of the offal sector in this country? Every farmer, man and woman, in this country believes that a monopoly is operating in the offal sector. That has a controlling influence on the kill in this country. It is imperative that we have a separate independent inquiry and it should not be dependent on farmers finding evidence.

Robert Troy (Longford-Westmeath, Fianna Fail)

I can relay to the Deputy what has been relayed to me by the CCPC. It has reviewed the beef sector and following an extensive review and assessment of all the information it gathered, the CCPC announced in June 2020 that there was insufficient evidence of a breach of competition law to warrant taking any further action at that time. It stated that it would not launch an investigation into the reported practice in the beef sector.

One of the first bodies I met on being appointed Minister of State in this Department was the CCPC. One of the first questions I asked its representatives was about their attitudes to, and concerns about, the beef sector. They forwarded me a report, which I have read and am happy to forward to the Deputy. I am happy to go back to them again, based on the question that the Deputy has asked. If he has specific information that can help the CCPC, I am also happy to relay that to them.

 

Statement from the CCPC on Report referenced by Minister Troy.

CCPC Concludes Examination of Beef Industry Complaints

JUNE 5, 2020

The Competition and Consumer Protection Commission (CCPC) has today written to over 200 individuals, including the Independent Farmers of Ireland, the Beef Plan Movement, and the Irish Farmers Association, regarding the outcome of an extensive examination of reported issues within the beef sector. Following an extensive review and assessment of all the information gathered on foot of the complaints received, the CCPC has formed the view that there is insufficient evidence of a breach of competition law to warrant taking any further action at this time.

The CCPC’s role is to investigate allegations of anti-competitive behaviour and to determine whether there is sufficient evidence of a breach of competition law to warrant the initiation of court proceedings.  The CCPC does this, on foot of a complaint or on its own initiative, by first making inquiries and assessing whether or not there is evidence to suggest that a breach of the law has occurred or is occurring. If there is evidence suggesting that a breach of the law has occurred or is occurring, the CCPC may initiate an investigation and/or seek remedial action from the parties to bring the conduct to an end. If there is no evidence to suggest that a breach of the law has occurred or is occurring, the CCPC will close its inquiries without affecting the right of complainants from taking private action.

In 2019, the CCPC received a significant number of complaints about the beef sector and as a result commenced a detailed and extensive examination. The majority of these complaints related to five core issues;

  • the similarity in base price per kilo offered by processors to beef farmers across all beef processing plants which was indicated as evidence of the existence of a cartel operated by beef processors;
  • dissatisfaction with the qualitative criteria for the payment of “in-spec” bonuses applied by beef processors;
  • the importing of foreign beef;
  • the operation of feedlots distorts competition; and
  • the impact of a reported monopoly on offal processing.

In addition to assessing the information provided to us the CCPC took various steps to obtain further information from other sources in order to assess the concerns raised in the complaints and to determine if there is evidence of a breach of competition law to enable the CCPC to open a full investigation. These steps included conducting extensive research and open-source intelligence gathering, meeting with some beef farmers and their representatives as well as a number of public bodies and industry experts, including Teagasc, Bord Bia and the Department of Agriculture, Food and the Marine (DAFM). The CCPC also consulted with the European Commission to discuss market conditions across the EU.

An overview of the issues examined

In relation to allegations that a cartel is in operation in the industry, in order to prove the existence of a cartel the CCPC needs to have tangible proof of an agreement between competitors to coordinate their activity, such as written agreements between competitors to fix prices to show that a cartel exists. Information showing that beef processors charge similar prices does not, in itself, constitute evidence that a cartel is in existence.  Despite considerable engagement with various beef industry stakeholders, the CCPC found no evidence of a cartel agreement between beef processors in the State.

The CCPC also found no evidence to show that the criteria applied by beef processors for the payment of “in-spec” bonuses breaches competition law. Currently, over 90% of Irish beef is exported and many overseas customers require assurances in relation to traceability and animal health. The various cuts of beef from a single carcass are exported to multiple customers located in different countries. In most instances, the standard set by the most demanding customer sets the standard for all beef cuts from a carcass. The CCPC also understands that a review of the current customer requirements with respect to the “in-spec” bonus criteria is currently underway as part of the Beef Task Force’s work.

A number of complainants stated that beef imports from other EU Member States were suppressing beef prices. Ireland exports the vast majority of its beef production with approximately 37% of all beef exports sold to other EU Member States. Similarly, Ireland also imports beef from other countries. Imports are not in themselves anti-competitive and do not come under the remit of competition law.

The CCPC also examined the practice of feedlots following allegations that beef processors were procuring cattle from feedlots to put downward pressure on beef prices at certain times of the year. Feedlots are an alternative source of supply for beef processors and they provide security of supply at certain times of the year.  They are owned by beef processors or by farmers who have supply contracts in place with beef processors which guarantee a set price for cattle which meet agreed carcass specifications. The information available to the CCPC indicates that feedlots represent only a small proportion of total national beef production and are therefore unlikely to raise material concerns.

Finally, the CCPC examined concerns that a single firm holds a dominant position in the rendering and offal sectors. For competition law purposes, a firm is in a dominant position if it has the ability to behave independently of its competitors, customers, suppliers and, ultimately, the final consumer.  It is not illegal for a firm to hold a dominant position. However, a firm in a dominant position which engages in abusive conduct is considered to have breached competition law.

The process of rendering and harvesting offal are distinct activities from beef processing. The use or disposal of all Animal-By-Product (“ABP”), including offal for human consumption, is strictly regulated in the interests of public and animal health by DAFM, the Food Safety Authority of Ireland and the Environmental Protection Agency.

The CCPC has identified a number of specialist operators active in the processing of ABP and offal in Ireland. Based on the information currently available to the CCPC, these operators do not appear to share a common ownership structure. The CCPC has not found any evidence of conduct by these operators that would raise suspicions that they have engaged in anti-competitive behaviour.

Examination closure

The CCPC has completed its assessment of all the issues raised. Given the level and nature of the concerns expressed the CCPC has written to all complainants detailing the outcome of this assessment.  Complainants have also been advised that the CCPC’s decision does not preclude any person from lodging a fresh or related complaint with the CCPC in respect of an alleged breach of competition law.  The CCPC’s decision is without prejudice to any action it may decide to take in future on foot of the receipt of any new complaint or new information relating to an alleged breach of competition law in the beef sector.  The CCPC will consider any such complaint and any relevant competition concerns on a case-by-case basis.