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Ceisteanna—Questions. Oral Answers. - Oil Company Takeover.

Wednesday, 28 February 1996

Dáil Éireann Debate
Vol. 462 No. 3

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 3. Mrs. O'Rourke Information on Mary O'Rourke Zoom on Mary O'Rourke  asked the Minister for Enterprise and Employment Information on Richard Bruton Zoom on Richard Bruton  the reason for refusing the Statoil takeover of Conoco; and if he will make a statement on the matter. [4635/96]

[695]Minister for Enterprise and Employment (Mr. R. Bruton): Information on Richard Bruton Zoom on Richard Bruton The proposed takeover of Conoco by Statoil was notified to me on 9 November 1995 as required by the Mergers, Takeovers and Monopolies (Control) Acts. Having given careful consideration to the proposal I decided, on 22 December 1995, to refer the matter to the Competition Authority for investigation and report in accordance with section 7(b) of the Mergers, Takeovers and Monopolies (Control) Acts, 1978 and 1987 as amended by the Competition Act, 1991.

I received the report of the Competition Authority on Friday, 9 February. The Authority concluded and unanimously recommended that the proposal should not be allowed to proceed. In making this recommendation the Authority was of the opinion that the proposal would be likely to restrict competition and thus operate against the common good and that it would not be possible to overcome this potential threat by imposing conditions.

The following are the main reasons given by the Authority for recommending prohibition: first, the proposal would be likely to reduce competition and choice in the market for motor fuels within the State and this would adversely affect consumers and thus operate against the common good.

Second, the motor fuel market is already highly concentrated. The market share of the top four firms in 1995 was around 70 per cent. The proposal would result in a reduction in the number of significant suppliers from six to five and would increase market concentration resulting in a four firm concentration ratio of between 83 per cent and 86 per cent.

Third, Conoco has a reputation of being a low price operator while Statoil is seen as a high price operator. In the Authority's opinion the probability is that Statoil would not alter its strategy and that the strong price competition which in the past was offered by Conoco would simply disappear, lessening the competitive pressures on the remaining suppliers.

[696] Fourth, the proposal would lead to some reduction in employment although the total is unlikely to be high, approximately 35 plus.

Having given careful consideration to the unanimous recommendation of the Authority, I decided to accept its recommendation. Accordingly, on Friday, 16 February, I made an order under section 9 of the Act which prohibits the proposal absolutely. I met with the parties to the proposals, with their legal advisers, that morning and informed them of my decision. The order was laid before the House of the Oireachtas on Friday, 16 February and copies of the Competition Authority's report were placed in the Oireachtas Library. I am satisfied that the interests of the consumer and the common good are best served by prohibiting the proposed takeover.

Section 12 (1) of the Act provides that where the Minister makes an order under section 9 (1) an appeal on a point of law may be made to the High Court against the order within one month of the coming into effect of the order by any enterprise referred to in the order.

Mrs. O'Rourke: Information on Mary O'Rourke Zoom on Mary O'Rourke On behalf of Fianna Fáil, on the first occasion we have had an opportunity to do so in public, I convey our sympathy to you, a Cheann Comhairle, on the recent sad event in your life.

I thank the Minister for his comprehensive reply. I understood from his press announcement on the figures — a subsequent reading of the Competition Authority report confirmed this — that the study embraced 200 garages. I have been informed that this list was flawed in that at least 82 of the garages surveyed were then offering petrol at a reduced price. It was, in effect, what one would describe as an askewed study.

Will the Minister confirm that the proposed takeover was notified on 9 November?

Mr. R. Bruton: Information on Richard Bruton Zoom on Richard Bruton Correct.

Mrs. O'Rourke: Information on Mary O'Rourke Zoom on Mary O'Rourke As the Minister decided on 22 December to refer the [697] matter to the Competition Authority I wonder about the long timelag.

What is now the accepted norm for the number of players in the market? Business people must know whether they are operating satisfactorily within the rules of the Competition Authority. For instance, if they control 24 per cent of the market will they be deemed to be operating in contravention of these rules? Is there a capricious percentage?

The Minister spoke about the need for justice for the consumer on whose side I am on, but there is also the matter of natural justice for the person who does not know who made the complaint against him. For example, a person who makes a planning application to the county council, can study the letters on file from the person who lodged the objection. It seems that one cannot do this in the case of the Competition Authority, its report is full of blanks. I understand the need to delete sensitive business material, but in common justice the name of the person who makes a complaint against a company should be known.

Mr. R. Bruton: Information on Richard Bruton Zoom on Richard Bruton With regard to the sample, the data was provided by Conoco; it was included in details provided by one of the parties to the submission. I have no reason to believe it was a skewed sample.

On the issue of delay, from the time a merger is first notified to when I will be in a position to decide whether to refer it, there will be a necessity — and there was in this case — for further submissions of material from the representatives of the proposed merging parties. This information was assembled in the period between November and December. We would, therefore, have been in a position to take a considered view as to whether there might be a risk to competition in the proposal. It was at this stage I decided, on balance, there was a concern that should be referred to the Competition Authority.

The Deputy asked if this had created a precedent. There is some misunderstanding in this area. It is clear we are [698] dealing with a merger and it is not to be confused with, for example, the issue of dominance in a market, which is specifically dealt with in competition law and concerns the ability of one player in the market to act independently of others. This is not what is at issue in the case of a merger. What is at issue here is the decision by two companies, one to take over the other or to merge. The issues raised will depend on the specific conditions of the marketplace. The Deputy will know from having read the report that the authority looks at the overall concentration in the market generally and the impact of this merger, for example, in relation to pricing, where it had a specific concern that the takeover of a company that was a low price player in the market would damage competition.

With regard to the question of natural justice in making public various submissions, the position is that the Competition Authority draws its conclusions, not on the basis of submissions but on the basis of its assessment of a range of information submitted by any party affected. It would go beyond the scope of this question to consider whether, in future law, changes should require the publication of every such submission. This would be unlikely to be possible because of the confidential nature of many of the issues likely to be raised. However, the overall direction of change in competition law is an issue for another day.

Mrs. O'Rourke: Information on Mary O'Rourke Zoom on Mary O'Rourke I understand the need for confidentiality, but not with regard to who made the complaint. In ordinary concerns, for example about planning permission, the aggrieved person writes to the local authority and the person seeking the permission has the right to see the letter or submission. It is an open process, which is not the case here.

There are blanks on every page of the report. Some of these are justified, but natural justice is not served when the complainants are not referred to by name, company or whatever. This is just [699] as capricious for the consumer as the decision the Minister reached in this matter.

During the recent debate on the amendment to the Competition Act, 1991, I put forward an amendment, subsequently moved by my colleague, Deputy Ned O'Keeffe, to the effect that the Minister would ensure that redress could be sought through an appeals system. For example, if one does not wish to pay water rates, one may appeal against the full rating of service or water charges to the county manager or county secretary. Similarly, if one is refused a medical card one can appeal to the county medical officer. There is a right of appeal in all matters where it is feared injustice might occur. It appears that the Competition Authority operates in a secretive fashion with regard to disbursing information or ensuring that justice is done.

Mr. R. Bruton: Information on Richard Bruton Zoom on Richard Bruton The names of persons who make submission are only deleted on grounds of confidentiality. The Deputy is aware that a number of those who made submissions were named, but in some instances confidentiality was required. However, the ultimate report and findings of the Competition Authority are based on the impact on the consumer and the common good. It is the authority that makes the recommendations and sets out the reasons, which are concerned entirely with the market for petrol and motor diesel.

The important point made by the authority, which I have accepted, was that if the merger proceeded consumers would have to pay more for petrol and products on which they already spend £750 million. This was the primary concern motivating this decision. I am sure the Deputy supports me in that we could not allow petrol consumers to face the threat of rising costs.

Mrs. O'Rourke: Information on Mary O'Rourke Zoom on Mary O'Rourke I agree with the Minister on the matter of price, but I [700] disagree with him on how the conclusions were reached or on the authenticity of the data which led to the conclusions.

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