I thank the Chairman. Members of the committee have been furnished with a copy of my opening statement, which I do not propose to read in full, but rather to highlight some key points. We welcome the opportunity to appear before the committee and to assist it in its work.
The committee is interested in issues concerning competition in the liquid fuel sector. The Competition Authority has been very proactive in this sector for a number of years and I wish to bring some of that activity to the attention of committee members. It was in the liquid fuel sector, specifically with regard to home heating oil, that the Competition Authority secured its first ever criminal conviction of a cartel before a jury, which was followed by a number of subsequent convictions. The heating oil cartel case was initiated after the Competition Authority received a complaint in 2001. There is still an ongoing case in the home heating oil cartel case, which gives members some indication not only of the effort required in bringing a case but also the time involved between the initiation of a prosecution and its final resolution.
As part of the activity, it was alleged, among other matters, that there was an increase in the margin on the price of home heating oil and that this was effectively agreed to by the distributors in the Galway city and county area. The Competition Authority investigated the matter, undertook searches, took witness summons and received a lot of evidence under oath. This resulted in a file that was prepared for the Director of Public Prosecutions, who recommended a prosecution in 2003. Later in 2003, the DPP decided to prosecute 24 suspects for their involvement in the cartel. To date, in this one cartel alone, there have been 17 convictions and fines imposed of approximately €120,000 in total.
I draw attention to some very important characteristics of this case, which is a classic example of a cartel case. It was very highly organised. Cartel members even appointed one particular person to police the price-fixing regime, namely, Mr. J. P. Lamb, who had previously worked in the industry and was secretary to the cartel. His role included booking hotel rooms for secret meetings of the cartel and policing the illegal pricing agreement to ensure that cartel members adhered to the terms agreed.
With a cartel, the agreement is to fix the price above the competitive level. Therefore, occasionally there would be an incentive for cartel members to cheat on the cartel and take business away from others. If a cartel is to be sustainable and profitable, it must have a mechanism to police enforcement, which gives an indication of how organised this activity can be, and has been, in this country.
Evidence also emerged from the jury trial that members of the cartel, including Corrib Oil, the largest oil company in the cartel, approached non-participants to join the cartel and explained the advantages of membership. Corrib Oil and one of its directors, Mr. Eugene Dalton, were among those convicted for their part in the conspiracy.
It is important to realise that when we prosecute these cartels, we are subject to the rules of criminal procedure and the standards of proof that are required under the criminal process in this country. It is not enough for us to act on suspicion or anecdote. We need hard information before we can invoke our formal powers. It is a high standard but we have found that with the right kind of information and a lot of hard work by our staff members, we can bring cases to a successful conclusion.
I wish to address briefly the issue of retail pricing policies in the petrol fuels area. The Competition Acts prohibit agreements that restrict competition or allow concerted practices, that is, parties who act in a collective manner. However, sometimes the line between normal competitive behaviour and price fixing or concerted practices is difficult to define. For example, there is nothing wrong with parties deciding unilaterally to charge similar prices. This type of parallel pricing can be found in many areas, especially those which share characteristics such as transparent pricing, undifferentiated products and stability of demand, and where the sellers' cost and business structures are the same. As the retail motor fuel sector has many of these features, it is not surprising to find parallel behaviour there.
It is our job as an enforcement agency to make the distinction between parallel behaviour and illegal price fixing or concerted practices. We need evidence to make this distinction, however. We need more than suspicion or speculation but where we have this information, we can use our formal powers to bring enforcement to this area. We have been encouraged by the reception of the courts to the cases that we have pursued in the area of price fixing. In a case which was prosecuted at the beginning of last year, the District Court and the High Court found that price fixing is a serious crime against consumers and a type of activity for which criminal sanctions are appropriate. However, while we are encouraged by the progress we have made to date, we are aware that much work remains.