Business Irish

Monday 20 November 2017

Commissioner puts public procurement in her sights as she sets out to smash cartels

Isolde Goggin is the chairperson of Ireland's anti-cartel watchdog - where they're gearing up to get more aggressive. She spoke to Gavin McLoughlin

Isolde Goggin:
Isolde Goggin: "If only 5pc of procurement processes were subject to bid rigging, the extra cost to the Irish taxpayer would be in the region of €100m a year." (Cartoon by Jon Berkeley)
Gavin McLoughlin

Gavin McLoughlin

Isolde Goggin's job is to smash cartels. Sounds glamorous, right?

Her workplace is not glamorous. The Competition and Consumer Protection Commission (CCPC) - of which she is chairperson - is based on Parnell Square in an old Georgian building that looks beautiful on the outside, but is not so beautiful on the inside.

Early next year they're moving home to something a little more salubrious. It's a symbol, perhaps, of a new era.

The CCPC was established in 2014 - a marriage of the old Competition Authority and National Consumer Agency. The late Minister for Finance Brian Lenihan Jr announced the plan as far back as 2008.

Then came the moratorium on public sector recruitment.

Staffing has been a serious issue in recent years - in 2010, the Competition Authority's headcount was at its lowest since 2003. But now the CCPC is in the middle of a recruitment drive - adding 23 staff on top of a headcount that stood at 86 last September. Some 15 roles have been filled thus far.

"Just seeing those new faces around the place is great, because it's been a struggle, like for everybody else, with scarce resources over the last couple of years," Goggin says.

"But I am quite proud of the fact that I think we did manage to do a lot even with the scarce resources - we didn't just throw in the towel. And we got the amalgamation done at the same time, because that takes resources."

Now Goggin expects the CCPC to get more aggressive, carrying out more so-called 'dawn raids' and other investigations, though she points out that the number of raids has been picking up.

Since its inception in October 2014 up until December last year, the anti-cartel arm of the State reviewed 74 allegations and opened two large-scale formal investigations.

The most high-profile move involved a visit by the Commission to an Irish Cement premises in Co Meath, in connection with alleged anti-competitive practices in the bagged cement sector. Irish Cement - a subsidiary of Ireland's biggest company CRH - has cooperated fully with the investigation. It took the CCPC to court and successfully secured a ruling that some of the seized material couldn't be used in the investigation, which continues.

The CCPC is appealing that ruling to the Supreme Court.

Strengthening competition enforcement was part of the Troika's diktat during the bailout programme and, now that the CCPC is up and running, the pressure is on to deliver results.

Perhaps the greatest task facing Goggin is the banking sector. After the General Election, the CCPC was asked to work with the Central Bank to try and stimulate more competition. That process, which is likely to involve discussions with the IDA about attracting new entrants, is under way.

"We would like to concentrate on what you can do to improve the situation. I don't think we need any more analysis of the past," says Goggin.

"We had the banking crisis and I think the causes are very well known. There was a crash, we had a two-pillar banking strategy, whereby competition was basically sacrificed in order to ensure the stability of the financial system.

"We didn't object to that at the time - it was a crisis situation. But this is what a banking system with limited competition looks like now. So what we would really like to concentrate on is to see how we can encourage more entry into the sector.

"We certainly wouldn't feel that things like putting a cap on standard variable rate mortgages would encourage entry - I think you certainly have to try to not make things any worse than they are at the moment."

Goggin (56) has a background in engineering. After college she worked as an engineer in Eircom and later found herself at the European Commission.

"At the time, there was a lot of deregulation of the telecoms industry," she says. "Historically it had been run by big government departments, where there was very little innovation, and they actually made it very hard for anybody to come along with a new idea - a new phone or a fax or whatever.

"So that was just starting to break up and people were being allowed to interconnect networks - that kind of gave me the whole idea of being interested in competition, and particularly the role of innovation."

She became a member of the old Competition Authority in 1996, leaving in 2002 to join communications regulator Comreg, where she became chairperson.

"By 2011, they were advertising for the post of chairperson of the Competition Authority to become the chairperson of the combined agency. I was very interested because I'd seen a lot on the competition side . . . and when I was in Comreg I had a lot of dealings with the consumer side, because there's a huge amount of consumer issues in telecoms, lots of ways in which people are not necessarily being given the information they need, or they're not necessarily on the best package - all that kind of thing.

"I just thought it was a really interesting opportunity to bring those sides together. And then the amalgamation of the two organisations was a big challenge as well, as you'd expect.

"I think, at that time in 2011, we expected that it would happen imminently, but in fact it was October 2014 before we got the legislation enacted to bring us together."

One of Goggin's biggest fears is the potential losses to the State - €100m a year at conservative estimates - arising from suspected bid rigging in the lucrative domain of public procurement.

Goggin has made public procurement the Commission's top investigative priority - but it's an area that is notable (here and elsewhere) for its lack of prosecutions, let alone convictions.

"We've had various complaints over the years, and we've done various investigations, but we haven't had a successful prosecution," admits Goggin, who adds that the prosecution rate may rise if the data environment improves.

"International experience would tell you that public procurement is something that tends to be very prone to cartel activity, and particularly prone to bid rigging, where people decide 'look, there's six of us here in the market, if we all really compete we're not necessarily all going to survive - why don't we just have a little gentlemen's' agreement that this time you'll get it, the next time I'll get it, and so on?'

"And that kind of cartel activity can add a lot to costs. It's estimated that it adds between 20pc and 30pc to costs, so even if that was only going on in a small fraction of the Irish public procurement area it would be a lot of money.

"If only 5pc of procurement processes were subject to bid rigging, the extra cost to the Irish taxpayer would be in the region of €100m a year."

The CCPC has written to the Department of Public Expenditure and Reform to make the case for a data analytics-based system, which would make it easier to track activity in the sector over time.

"At the moment, in order to detect bid rigging, we'd basically be reliant on a whistleblower - obviously, we want to encourage that and for people to come and talk to us if they know of this kind of thing going on.

"But we also know that the Irish State could use software a lot more cleverly than we do at the moment, to detect patterns like that, because what tends to happen is people look at one bid. But you need to look the historical pattern in order to detect whether there's some kind of 'pass the baton' going on."

It may not have flexed its muscles fully yet, but the mere whiff that the Commission is rooting around a sector has the business fraternity reaching out to their lawyers. Just in case.

And Goggin is rooting: as well as banking and procurement sectors, she has the motor and waste industries in her sights.

Last year, the CCPC was contacted 3,500 times by consumers about the motor sector - with issues including difficulties with deposits and financing, potential car clocking and the selling of crashed cars. This has led the Commission to undertake public information campaigns to ensure consumers know their rights when buying a car, and what to ask for when they do.

"Again, we don't have as much information in this country accessible to consumers as we could have," she adds. "There are private companies which make odometer readings available from, say, cars imported from the UK for a price. You've got to pay for a check, but if the cars are going through the MOT and the NCT we'd like to see a situation where the mileage is recorded and people can get access to that, so that there's a check-back."

The shift to pay-by-weight in the waste sector is causing major headaches. On the perennially thorny issue of waste, Goggin says there's been "a lot of issues", much of it driven by a lack of proper communication between waste companies and consumers.

"It's just the information, are people being given clear information as to what they're expected to pay, what they're liable for?" she says. "The companies have obligations to give consumers proper information - and we'll keep on their tail."

I ask whether she'll go back looking for more resources once the current recruitment drive has been filled. Wouldn't that it make it easier to avoid difficult decisions about prioritising some investigations over others?

"When we have the new resources, it'll take some time to absorb those and train them up and get them to full speed, but I think we'll be grand then," she says. "We'll be able to do a lot. But we're still going to have to prioritise - we prioritise now.

"On the consumer side, we get a lot of complaints. We get a lot of competition complaints as well. Quite often you think there could be something there, but the evidence just isn't there. So you're always saying 'I'm doing this rather than that. I'm doing this because I think it has a bigger impact on consumers'.

"We're doing this because it's a big detriment to consumers, because the ball is squarely in our court and we're best-placed to do something about that.'"

It's not just enforcement, she adds. Goggin says the Commission, which does "a lot of chasing", needs to shore up its business engagement functions.

"We would like to be able to have resources to go around to business associations, go around to people and say 'look, this is what you have to do' - pre-empt the issues, tell people what their obligations are," she adds.

"Many companies - often quite large companies - either didn't know their obligations or hadn't told the people on the frontline what they were, and there's really no excuse for that."

'Be yourself, don't sweat the small stuff...'

My hobbies are...

"I do a bit of running, very slow running. Also a bit of hill-walking, and I read a lot."

The book I'm reading is...

"I'm reading John Rae's Arctic Correspondence, 1844-1855, edited by Ken McGoogan. Is that really obscure? I'm kind of an armchair polar explorer, I like reading a lot about the Arctic and the Antarctic and the people who went there.

"John Rae is this great character - because he wasn't an explorer, and he wasn't in the Royal Navy, and he didn't necessarily think of himself as going out to find the North Pole or whatever. But he went up to the High Arctic - and he learned a lot from the indigenous people there, and he spent time exploring and ended up very involved in the search for Franklin."

My music taste is...

"I'm stuck irretrievably in the early 1980s. The Cure, the Jam, The Clash, Blondie, the Pretenders . . . I never moved on from those days."

The best piece of career advice that I've received is...

"Be yourself and don't sweat the small stuff."

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