Introduction.
The main provisions of Ireland’s competition legislation are contained in the Competition Act 2002. The main features of the Irish legislation are:
Prohibitions and Penalties for Anti-Competitive Behaviour.
The basic prohibitions on anti-competitive behaviour are contained in sections 4 and 5 of the 2002 Act. Section 4(1) prohibits and renders void ‘all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, or in any part of the State’. Section 5 prohibits ‘any abuse by one or more undertakings of a dominant position in trade for any goods or services in the State or in any part of the State’.
The Act makes a clear distinction between practices such as price-fixing, market sharing and bid rigging on tenders, which might be described as ‘hard-core’ cartel practices, and other types of behaviour. Managers and directors of firms convicted of engaging in ‘hard core’ cartels may be imprisoned for up to five years. Firms engaging in cartels and all other types of anti-competitive behaviour remain face fines of up to €4m or 10% of turnover whichever is greater.
It makes obvious sense to distinguish between cartel behaviour and other practices. Cartels are anti-competitive by definition. They involve rival businesses secretly agreeing to charge higher prices to their customers and are a conspiracy to defraud consumers. Unlike many violent crimes, participation in a cartel is not the result of a rash decision in the heat of the moment. Cartels are organised and operated by individuals and companies who calculate that they can earn substantial profits from such behaviour. In contrast the effects of non-cartel behaviour are far less clear cut. Exclusive distribution and other types of vertical agreements, may in some circumstances be anti-competitive, and in others may simply increase efficiency. Similarly there is frequently a fine line between aggressive competition and abuse of dominance. Arguably criminal sanctions for non-cartel behaviour should be revoked.
Section 6(2) of the Act provides that:
‘In proceedings for an offence…it shall be presumed that an agreement between competing undertakings, a decision made by an association of competing undertakings or a concerted practice engaged in by competing undertakings the purpose of which is to-
has as its object the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State or within the common market, as the case may be, unless the defendant proves otherwise.’
Effectively this provision seeks to create a presumption that cartels are anti-competitive. There is some risk that this provision might not stand up to legal challenge.
Section 6(3) provides that it shall be a good defence that ‘the agreement, decision or concerted practice, having regard to all relevant market conditions, contributes to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and does not - impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives, afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.’
Such a defence is appropriate in non-cartel cases. Cartels, virtually by definition, are not efficiency enhancing and do not benefit consumers. The Act nevertheless permits defendants in cartel cases to argue that they satisfy the requirements for exemption. Undoubtedly this is likely to greatly complicate such cases and make successful prosecutions far more difficult. In the United States cartels are deemed per se violations of the antitrust laws and this undoubtedly facilitates successful criminal prosecutions of individuals involved in such activities.
The Act provides that where a Court finds that an undertaking has abused a dominant position, it may, either at its own instance, or on the application of the Authority, order the break-up of the dominant firm.
Investigative Powers.
By virtue of the fact that the maximum penalty for engaging in a cartel is five years imprisonment, the Gardai may arrest and detain individuals suspected of participating in such arrangements for questioning for up to six hours with the possibility of a further six hour extension under the 1984 Criminal Justice Act. The absence of powers to question individuals was a major stumbling block in cartel investigations in the past.
Merger Controls.
The Act gives the Competition Authority responsibility for deciding on mergers. The Minister has certain powers in respect of media mergers. Click here for details on the merger provisions.
Competition Advocacy.
The Act provides that the Authority may
There is no requirement on public bodies to implement the Authority's recommendations. Whether such powers will be sufficient in the face of extensive lobbying by vested interests remains to be seen.
© CompEcon Limited 2002.
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