New competition law will not rescue consumers from rising prices

Legislation will make the comepetition authority a more effective enforcer

Fri, 18 Mar, 2022 - 14:14

Ronan Dunne

The ever-increasing cost of living has dominated recent discourse in Irish politics. This has been pushed to the top of the agenda as inflation soars globally, driven by rising fuel and food prices. Russia’s invasion of Ukraine has only served to exacerbate an already precarious situation.

It is against this backdrop that we increasingly hear politicians throwing out soundbites about “price gouging”. This is generally done without any substantiation of the claims being made, a populist move to make headlines. Bord Gáis Energy’s recent price increases for their electricity and gas products are a pertinent example. They have been heavily criticised though reflect wider international trends in global wholesale energy costs.

But words have meaning. Price gouging describes a situation, in competition law, where a business is accused of abusing a dominant market position through excessive pricing. It is, as a matter of law, a serious offence, should it, in fact, exist.

This is where the Competition and Consumer Protection Commission (CCPC) steps in. The CCPC is charged with investigating allegations of Irish competition law breaches. Its powers derive mainly from the Competition Act 2002, which is now the subject of a major legislative overhaul.

Rogue operators

In late January, the Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar, introduced the Competition (Amendment) Bill 2022. This is a long-awaited piece of legislation described, in the Tánaiste’s words, as a “ground-breaking new law [which] will give our competition authorities the power to crack down on… rogue operators.” The Bill will transpose the EU’s so-called ECN+ Directive into Irish law. ECN+ was designed by the European Commission to ensure that national competition authorities across the EU become more effective enforcers. It requires certain minimum thresholds and decision-making tools be provided to such authorities to ensure their effectiveness.

Ireland has been a laggard in implementing ECN+. The deadline for transposition of the directive was 4 February 2021. However, this is a case of better late than never. ECN+ will improve the CCPC’s effectiveness primarily because it will allow the CCPC impose administrative fines for breaches of Irish and EU competition law.

Cumbersome process

Until now, Ireland has been one of a small number of European countries that only allowed a business to be fined by the courts for breaches of competition law. This has led to a cumbersome process with investigations run by the CCPC but any decision to prosecute dependent on the DPP. Further, breaches have to be proved to the higher criminal standard.

Assuming the Bill is implemented, fines can now be imposed by the CCPC for breaches of Irish and EU competition law on an administrative basis. These fines will be levied by reference to the lower civil standard (i.e., proving a breach of competition law on the balance of probabilities, as opposed to beyond all reasonable doubt). An appeals system to the courts is included in the Bill, but the working assumption is that these new measures will significantly increase the effectiveness of the CCPC.

Given the rising tensions around living costs, competition law is increasingly being mooted as a means to control pricing. In introducing the Bill’s second reading in the Dáil, Minister of State with special responsibility for Trade, Robert Troy, stated that: “For too long, the State has been seen as soft on rogue businesses and those seeking to game the system.” Minister Troy then went on to specifically call out the insurance industry, saying, “We see continued frustration with the high cost of insurance in this country which is driving many small enterprises and community groups out of business. The impact on local employment and creativity when this occurs can be profound.”

He then highlighted the CCPC’s recent investigations into the insurance market.

Despite some of the most significant reforms made in the law pertaining to competition, consumer rights and personal injuries in recent years, premiums have not dropped sufficiently and uniformly despite assurances made by the insurance sector… It also shows the need for legislation which I am introducing today.

Clearly, politicians see a role for a beefed-up CCPC in enhancing competition in Irish markets and driving down prices. But Rome was not built in a day. Ireland is already over a year late implementing ECN+ and any new regime will take time to bed in. Investigations require time as evidence is gathered and assessed, and they are much more difficult to successfully conclude than glib soundbites might suggest. Indeed, the fruit of what is sown now with the Bill’s enactment may only be reaped in the life of the next government.

So while there is no doubt that the new Bill is a welcome measure, it will not act as a silver bullet for consumers facing price increases in the here and now.