Grocery prices to drop from today after order's abolition
Published 20/03/2006 | 00:11
SHOPPERS can look forward to savings of around ?100 a month when the Groceries Order is abolished from today. For almost 20 years the controversial order kept grocery prices artificially high by banning retailers from selling goods below cost. It has been blamed for making Irish grocery prices amongst the highest in Europe.
SHOPPERS can look forward to savings of around ?100 a month when the Groceries Order is abolished from today.
For almost 20 years the controversial order kept grocery prices artificially high by banning retailers from selling goods below cost. It has been blamed for making Irish grocery prices amongst the highest in Europe.
Some consumer experts have predicted an initial series of price-cuts following the order's abolition and believe shoppers will save up to ?1,200 a year.
Enterprise and Trade Minister Micheal Martin yesterday signed the order to bring in the Competition Act 2006 which will take effect from today and finally abolish the Groceries Order 1987.
"The single most important reason for getting rid of the order is that it has kept prices of groceries in Ireland at an artificially high level by allowing suppliers to specify minimum prices below which products could not be sold."
Small retailers had lobbied against the abolition of the order warning it would force them out of business, reduce competition and strengthen the power of the huge supermarket chains.
However, Minister Martin said it was essential to guarantee fair competition.
"Our competition laws are not designed to protect competitors. They are designed to protect competition," he said. Mr Martin said he has asked the Competition Authority and the Director of Consumer Affairs to monitor the grocery trade in the forseeable future to see how it responds to the abolition of the order.
The new legislation strengthens the 2002 Competition Act by specifically prohibiting the fixing of minimum retail prices, unfair discrimination in the grocery trade and the payment of advertising allowances.
It will also ban the practice of providing "hello money" whereby suppliers pay money to retailers to secure selling space on their shelves.
However, Paul Kelly, director of Ibec's Food and Drink Industry Ireland (FDII), said the new legislation "won't work".
"While well intentioned, it won't work as the amendments will be impossible to police; action can only be taken after the damage is done," he warned.
A source at RGDATA, the association of small retailers which had campaigned for the retention of the order, said yesterday that the abolition will not be good news for consumers in the long term and will only lead to "price gimmickry".
"It's not going to lead to any long-term reductions in food prices, which are already at a relatively low level . . . Even the Minister has refused to say there will be any price reduction." He added that the first group to feel the full force of the new legislation will be producers who deal with the larger retailers.
He said the "gloves will be off" when the supermarket chains renegotiate the terms of their deals with these producers.
In the first 15 years of the Groceries Order nearly 2,500 grocery stores went out of business. Experts suggested this showed the market had changed structurally and independently of whether or not the order existed. Last year the Irish grocery market was worth ?12.7bn, up 5.3pc on 2004 with an annual grocery spend per capita of ?3,078.
The abolition of the order will allow retailers to negotiate tougher deals with suppliers, who can no longer dictate the lowest prices at which their products can be sold.
However, the UK-based Institute of Grocery Distribution has warned that the Groceries Order is only partly to blame for our high prices, which sees the Irish consumer paying on average 10pc more than their British counterpart.
It pointed to Ireland's high level of VAT at 21pc, additional transport costs due to its island status and the inability to achieve strong economies of scale owning to population size.