Opinion: below-cost selling ban in tune with sustainable food production

The groceries order or ban on below cost-selling was introduced in 1988 following the collapse of the H Williams supermarket group.

It was abolished by Micheál Martin as Minister for Enterprise in 2006 based on a very strong campaign by major supermarkets and liberal economists, suggesting that the order had become a straightjacket preventing Irish consumers from experiencing lower prices.

Eurostat figures from 2004 to 2005 showing that Irish food and grocery prices were 120% of EU average prices were used to bolster this notion of rip-off Ireland.

Approximately one year later, in fairness Micheál Martin admitted that this had been a mistake and that he now realised that the core simplistic case made by big supermarkets for abolition of the ban, which was that if allowed they would sell all products at lower prices, was no more than a commercial jingle.

Commitments

Significantly, the Fine Gael and Green manifestos for the 2007 and 2011 elections contained explicit commitments to reintroduce a ban on below-cost selling under new fair trade legislation.

Though both parties served in Government, albeit separately, no such legislation has been introduced.

Instead, what we got from the Government in 2016 was the new grocery regulations introduced by then-minister Richard Bruton.

Instead of a legally enforceable ban on below-cost selling and loss-leading, we have a very much 'down with that sort of thing' piece of aspirational legislation.

Incidentally, Eurostat figures for 2018 and consistently over the period since 2006 show Irish food and grocery prices running at 120% of EU average.

Squeezing food industry returns

In a number of articles over the last three years, I have made the argument that while not necessarily benefiting consumers because they buy a basket of goods, a key factor in squeezing food industry returns and farm incomes has been systemic below-cost selling and loss-leading of fresh products, such as meat, liquid milk, cheeses and fresh vegetables.

It is interesting to see recent reports and calls endorsing this view.

Power report

Jim Power’s analysis of the beef sector calls for a ban to be introduced, the IFA campaigned throughout 2019 for a ban and ICMSA president Pat Mc Cormack has pointed out that a new piece of legislation banning below-cost selling has been introduced in Spain.

So, clearly, a consensus is building around the need for a ban and also, clearly, this momentum is being reflected across the EU, with France having introduced legislation two years ago and now the Spanish regulations.

Ireland has a great opportunity to add weight to this momentum, not least in the context of the Food Wise 2030 review currently taking place.

Again, as per previous articles, the continuing destruction of fresh food value by loss-leading and below-cost selling completely goes against consumer/regulatory demands for ever-higher food standards.

Innovation

Moreover, it totally undermines the business case for investment in innovation in food products, which will again be a hot topic in the agri-food strategy to 2030 process.

Adoption by Ireland in conjunction with other EU member states of a formal enforceable ban on below-cost selling would also sound a wake-up call to the commission to rebalance its proposed new green deal.

A new green deal for Europe, as it stands, containing lots of new regulations focused on production restrictions and increasing compliance costs, but including no specific measure to support cost recovery through a quid pro quo on food prices, is not fair or balanced.

An EU-wide ban on below-cost selling, in contrast, is very much in tune with the concept of sustainable food production in the 21st century.

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