Ireland was among the first countries to introduce criminal sanctions against hard-core cartel offences and one of the first EU member states to adopt the economics-based substantial lessening of competition (SLC) test of merger control. The competition landscape is provided for by the Competition Act 2002 and discharged principally by the Competition Authority and the higher courts. The use of professional economists has grown rapidly and there is a strong ‘infrastructure’ of specialist legal-economic services in respect of horizontal and vertical agreements, dominance, merger control, market studies, compliance programmes and other aspects of competition work.

Competitiveness agenda

Undoubtedly the most important and far-reaching event in the past year has been the arrival of the 'Troika' and the commencement of the National Recovery Plan - a comprehensive package of austerity measures involving the Irish authorities working under a detailed rescue strategy drawn up in agreement with the European Commission, the European Central Bank and the International Monetary Fund.

As well as setting out action plans with timetables to deal with the crises in the banking sector and the public finances, a central pillar of the National Recovery Plan is competitiveness, necessitating a key role for competition reform. The plan specifically mentions the legal, medical and pharmacy professions, and also provides for enhancing competition in open markets and encouraging growth in the retail sector.

Development of the Competition Authority

Notwithstanding the positive developments in the Irish competition environment over the last decade, the Competition Authority has faced opposition on a number of fronts, which is not surprising in a small country with well-organised vested interests. Until the arrival of the Troika, it was felt that competition policy had only muted support from the previous government: with a staff complement of almost 60 people, the actual number of staff at the Authority currently stands at less than 40 and has little growth potential owing to the embargo on public sector recruitment, one of the manifestations of the severity of the austerity measures taken in response to the economic crisis.

However, with the Troika in town and a new government showing commitment to the competitiveness agenda, there is a sense that competition is coming to the fore of the policy agenda again and the minister for enterprise, who has a postgraduate degree in economics, is currently in the process of bringing the senior management of the Authority up to complement.

There is no doubt that the new head of the Authority will face a significant challenge in re-building the organisation and in managing the proposed merger with the National Consumer Agency, which makes sense in principle because it will bring together the demand- and supply-sides of market reform. Perhaps the biggest challenge will be advocating the message of competition in the midst of the most turbulent economic conditions in living memory.

Noteworthy recent developments

Merger notifications were up in 2010 on the previous year by more than one-third and a positive trend continues in 2011, which is interesting as a potential indicator of economic recovery because merger notifications tend to be regarded as a ‘leading’ indicator of economic performance, heralding possibly better times ahead.

In October 2010, the Centre for European Law and Economics published the findings of a survey showing that the Competition Authority, along with the Netherlands Competition Authority, was ranked first in the EU for institutional efficiency of its merger review system. With reduced staff numbers, the Irish Authority is performing admirably in discharging its merger control function; but this means diverting resources away from other functions, which could prove challenging if the number of merger notifications continues to grow.

The Authority has been publicly consulting on its Guidelines for Merger Analysis and on its Cartel Immunity Programme. The latter is an important tool in the investigation and prosecution of cartels in Ireland, which continues to be top priority for the Authority. To date, 33 criminal convictions have been handed down to 18 undertakings and 15 individuals, with total fines of more than €600,000, and suspended prison sentences ranging from three to 12 months. The Merger Guidelines date back to 2002 and the Authority is also consulting with practitioners on a new Strategy Statement for 2012-14.

The Competition Authority’s long-running case against the Beef Industry Development Society concluded in 2011. The message here is that any plan to restructure an industry by agreement between competitors is likely to restrict competition and therefore breach national and European competition law.

The coming years will be very exciting for practitioners - not least specialist economists - as the Irish competition environment continues its evolution.

PMCA Economic Consulting