Sarah Harte: Government’s mission should be a more competitively-priced Ireland

The Competition and Consumer Protection Commission's promised new powers must be underpinned by extra funding and the political backing to make life more equitable for all

Interest rates and the price of groceries and fuel attract much of the attention — but a lack of competition affects all aspects of life in Ireland, including access to law. Stock picture: Sondem/Alamy

Gawping at pictures of Rupert Murdoch in the Daily Mail (known as the scroll bar of shame) floating around the Med with his new girlfriend made me think of monopolies because it turns out that his latest squeeze Elena Zhukova was formerly Roman Abramovich’s mother-in-law. Absorbing this high-level news, it struck me how connected these Titans are, and how they impact our world in ways we can’t even imagine.

Over the last several decades there has been a significant concentration of corporate power globally. And when markets become too concentrated, the quality of goods and services can weaken, with consumers paying the price.

Currently, many battles are being waged in both Europe and America against monopolies. US president Joe Biden hasn’t made much headway, but the European Commissioner for Competition Margrethe Vestager is generally considered to have made a fist of bringing big monopolies to heel.

In June, Ireland came second in the 2023 world competitiveness ranking, reflecting our pro-business landscape which attracts foreign direct investment. However, Ireland came 19th for infrastructure.

And how is our Competition and Consumer Protection Commission (CCPC) faring in enforcing domestic and EU competition law? It’s supposed to ensure Irish consumers get bang for their buck when it comes to things like heating our homes, buying food, banking, or when we need legal services.

Fianna Fáil TD and finance committee chairman John McGuinness: 'The bank levy was to bring in €150m — it’s bringing in a little over half of that because the banks have left the country.' File picture: Oireachtas TV

In June, supermarkets were examined for anti-competitive practices, but the CCPC found no evidence of price gouging, which would have surprised some shoppers. Although consumers here experienced less than 70% of the food price hikes faced by some European neighbours, prices remain over 18% higher than in December 2020.

The commission said it had no role in monitoring price levels in Ireland due to a lack of powers, leaving businesses free to set their prices for goods and services. It should be given those powers that might ensure greater transparency around pricing in Irish supermarkets. ‘Commercial sensitivities’ could be balanced in the legislation to avoid being leveraged as a get-out-of-jail card.

In June, the ESRI published its quarterly economic commentary highlighting the possibility of “anti-competitive behaviour” in the energy market with firms failing “to pass on a wholesale price decrease to boost profits”.

Electric Ireland reportedly wanted to limit price increases to Irish consumers but, as a former state monopoly, was prevented from doing so due to EU competition law. Sock picture: Alamy

It was reported that Electric Ireland, the retail arm of the ESB, wanted to limit price increases to Irish consumers but, as a former state monopoly, was prevented from doing so, ironically, by the intricacies of EU competition law. This doesn’t explain why other energy providers couldn’t shield customers from price hikes on wholesale markets if they chose to.

Recently, Oireachtas finance committee chairman John McGuinness said banks in Ireland should be penalised for failing to pass on interest rate increases to their customers’ savings. These comments followed reports that Irish banks ranked last amongst the UK, US, and 18 other European countries in passing on interest rate gains to Irish savers.

To put it in context, Irish banks have passed on just 7% of rate increases to savers compared to 43% in Britain. As the Higher Education Minister Simon Harris said, the Irish banks are “complete and utter laggards” when it comes to passing on interest rates.

Could this be connected to several banks leaving the Irish market, resulting in less competition? However, when the CCPC investigated merger activity in 2021 it produced a report with opaque conclusions and a promise to keep an eye on the banking sector.

Last week, Bank of Ireland raised interest rates for savers up to 3% with a drum roll but the new rate is available only for one year before it reverts to 2%. But what about the other banks? And could a hike in mortgage rates follow this announcement? Let’s see.

It’s never been clear why the Government can’t impose conditions on the licences they grant to banks without which they can’t operate.

Legal services are another area where lack of competition severely hurts the Irish consumer, something the Troika picked up on. 

In 2006 the watchdog (then called the Competition Authority) produced a scathing report on anti-competitive practices in the legal profession, commenting “the legal profession is permeated with unjustified and disproportionate restrictions on competition”.

Specifically, it spotlighted “known anti-consumer practices as barristers and solicitors charging fees in proportion to one another and solicitors charging fees as a percentage of the award that their client receives”. For example, junior counsel (barristers) charge two-thirds of the senior counsel’s fee “regardless of the work done”.

What has changed, 17 years on?

In 2023, 17 years after this report, this, and many other anti-competitive practices, continue unchecked. This matters because, to paraphrase the report, legal services are “essential to access justice, a fundamental value in society”.

Legally, where there is indirect coordination, collusion, or tacit agreement around the fixing of prices, then a cartel may be operating. This is criminal behaviour under both Irish and European competition law. And it’s enough if evidence shows patterns and practices from which it might be inferred that parties coordinate their prices.

From the outside, it appears the CCPC has generally pursued relative minnows for anti-competitive behaviour such as electrical contractors and garlic importers. 

CCPC needs more powers...

A cursory look at their enforcement list shows an intense focus on car dealers rather than say, lawyers. But bashing the CCPC is cheap. Its work is undoubtedly complex and at times frustrating because various factors have impeded it in battling anti-competitive behaviour.

The CCPC has lacked the necessary resources and proper powers to function properly because of political indifference to a lack of competition in certain sheltered areas of the economy. For instance, successive governments have displayed a marked hostility to the notion that lawyers should compete on costs which is a serious, ongoing deficit in our democracy. It prevents ordinary people from asserting or defending their rights.

Also, the CPPC is under the aegis of the Department of Enterprise, Trade and Employment. Proximity always brings its challenges. In a small country, the danger of regulatory authorities getting too cosy with the industries and sectors they regulate is heightened.

...but it needs more funds too

The CCPC is set to get a range of new powers courtesy of a new Competition (Amendment) Act 2022 including the power to levy increased fines when businesses engage in anti-competitive behaviour.

It’s been described by the Government as ‘radical’. In reality, no amount of legislation bestowing enforcement powers will work unless the CCPC has a proper budget and sufficient personnel. It must also be truly independent with the gung-ho attitude to go after businesses, companies, traders, and service providers including professionals.

In summary, it needs more teeth, it needs to use those teeth and it needs a government willing to let it do its job. A key role of government is to push against corporate instincts and those of powerful groups and too often ours has often been deficient at this.

Making Ireland a more competitive place for normal people should be the mission of the government and not just the CCPC.

• The full report on competition in legal services published in 2006 by the Competition Authority (now the Competition and Consumer Protection Commission) is available online here, in a PDF file.