The government-appointed Competition and Mergers Review Group (CMRG) recently published its fourth and final Discussion Paper, in which it reviewed the operation of the Restrictive Practices (Groceries) Order 1987. This order prohibits certain allegedly restrictive practices (eg, 'below-cost' selling by retailers and the payment of 'hello money' by suppliers) in the grocery trade.


The Groceries Order is the sole remnant of the restrictive practices legislation which applied in Ireland before the enactment of the Competition Act 1991. The earlier legislation established a 'control of abuse' regime, which prohibited specific practices in specific industries, while the regime introduced in 1991 is a 'general prohibition' regime modelled on the EC competition rules. As a result, the grocery trade is the only economic sector in Ireland in which market behaviour is governed by rules other than those contained in the 1991 act. This situation prevails because of the intense lobbying for retention of the order undertaken by the grocery trade - both retailers and suppliers - in 1991.

This lobbying re-commenced when the CMRG came to examine the arguments for and against retaining the order last year. It received more submissions on this topic than on any other it has been asked to consider. The submissions made by those involved in the grocery trade were invariably in favour of retention. Those received from independent commentators (including the Competition Authority) generally favoured repeal of the order, leaving the grocery trade to be regulated by the Competition Act alone.

Supporters of the order argue that it has had significant beneficial effects, which include the following:

  • the protection of consumers against confusing 'loss-leading' practices;

  • the preservation of small independent retailers;

  • an increase in the number and quality of Irish suppliers of grocery goods; and

  • the limitation of further expansion by the multiple supermarkets.

They argue that this has benefited consumers by providing them with a larger number of good quality retail outlets than would have survived in the absence of the order. This in turn resulted in more price competition than would otherwise have prevailed. Opponents of the order argue that it restricts price competition and maintains supplier and retailer margins above competitive levels.


The CMRG commissioned a firm of economic consultants to examine the effect on the grocery trade of the ban on 'below-cost' selling by retailers. The consultants concluded that it was not possible to establish a causal connection between the order and the beneficial effects claimed by its supporters. However, given that the order prohibits below-invoice (rather than below-cost) selling, and given the current level of supplier and retailer margins, they also concluded that the repeal of the order would not result in any major impact on consumer prices or trade margins. They therefore recommended repeal of the order.

The CMRG clearly had difficulty weighing up the conflicting arguments and its conclusions were not unanimous. It put forward for discussion a majority proposal that the ban on 'below-cost' selling should be repealed. However, it coupled this with a recommendation that a retailer cannot refuse to sell grocery goods to any customer - a measure clearly designed to ensure that the removal of the ban on 'below-cost' selling will have minimal impact on small retailers. It also proposed that some of the other 'fair trade' provisions of the order (in particular the ban on 'hello money' and the requirement that retailers respect suppliers' credit terms) should be maintained in force.

For further information on this topic please contact Gerald FitzGerald at McCann FitzGerald by telephone (+353 1 829 0000) or by fax (+353 1 829 0010) or by e-mail [email protected].
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