Groceries cost you €500 extra a year

HOUSEHOLDERS are being forced to pay almost €500 a year more for groceries because legislation is preventing competition in the sector, the Competition Authority (CA) has said.

The authority believes the Groceries Order, introduced in 1987 to prevent below-cost selling, is costing consumers up to €577 million a year - the equivalent of €481 per household.

The order was designed to prevent major retailers, such as supermarket chains, putting small firms out of business by engaging in predatory pricing.

But in a submission to Enterprise Minister Micheál Martin, who is reviewing the order, the CA argues that it keeps prices artificially high.

“The Groceries Order is a relic from an era of protectionism, weak economic performance and national insecurity, when protection from competition was clung to like a safety blanket,” the submission states.

“This anti-competitive restriction is very costly for consumers and the Irish economy.”

Speaking yesterday, CA chairman John Fingleton said the conviction of Dunnes Stores and Tesco in January last year for illegal discounting was “a perfect example” of why the order should be abolished.

The District Court fined both companies €2,100 for below-cost selling when a prosecution was taken by the Director of Consumer Affairs, who is responsible for enforcing the order.

“If this logic was applied in other sectors - for example, clothes - it would make post-Christmas sales a criminal activity,” Mr Fingleton said.

The order does not affect fresh produce like meat, fruit and vegetables, but covers standard grocery goods, including alcohol.

The Consumer Strategy Group, a Government-appointed body which also recommended the order be abolished, estimated 75% of items in a typical shopping basket are covered by it.

According to the CA, the cost of food items covered by the order has increased by 7.4% since June 2001.

By contrast, the prices of food items unaffected by it have fallen 4.1% in the same period. The CA believes prices could fall if retailers were freed of the order.

But others disagree, including the Irish Business and Employers Confederation, the Irish Small and Medium Enterprises Association and, significantly, the Joint Oireachtas Committee on Enterprise and Small Business.

They believe doing away with the order would threaten small retailers and reduce consumer choice.

Interested parties had until the end of July to make their arguments to the Department of Enterprise, Trade and Employment.

More than 300 submissions were made, with a decision expected by autumn.

Financial adviser Eddie Hobbs said on his TV show, Rip-off Republic, on Monday night that the order was one of the reasons living in Ireland was so expensive.

He urged people to send unused nappies to Mr Martin’s office in protest.

This is because the Director of Consumer Affairs tried, but failed, to have nappies classified under the order this year.