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COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT Report (Continued) APPENDIX 5 Marketing Organisation There is no reason why Northern Ireland red meat marketing should not emerge as a role model in this segment. It all depends on highly professional marketing conducted in a context where roles are clear, co-ordination is good and entrepreneurial flair is tempered with discipline. The tasks and agreed roles are set out in two tables in the following section. Marketing Defined Marketing "Finds needs and wants – and fills them profitably" It is a function with a misleadingly simple definition comprising a complex array of interlocking tasks. It is perhaps not surprising to find a degree of confusion over roles between the various players involved in the NI red meat marketing task.
The roles and responsibilities set out in the table lead to several important conclusions: 1. The primary responsibility for the many faceted marketing task lies with the trading companies who decide what markets to address, what to sell, to whom and at what APPENDIX 6
APPENDIX 7 REPORT OF A QUINQUENNIAL REVIEW OF THE LIVESTOCK AND INDEX Page CHAPTER 1: EXECUTIVE SUMMARY 2 CHAPTER 2: INTRODUCTION 17 CHAPTER 3: BACKGROUND TO LMC 19 CHAPTER 4: ACCOUNT OF LMC ACTIVITIES 21 CHAPTER 5: PRIOR OPTIONS 24 CHAPTER 6: ISSUES ARISING IN REVIEW 30 CHAPTER 7: FINANCIAL MANAGEMENT 43 ANNEX J COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT THE PARTICULAR CIRCUMSTANCES FACED BY WRITTEN SUBMISSION BY: On Friday 22 September, Officers of the Livestock and Meat Commission appeared before the Committee for Agricultural and Rural Development to contribute to the further consideration of "the particular circumstances faces by the pig and beef Industries". Specifically, LMC was invited to address the following issues:
During the course of the Evidence Session, two matters were raised by Committee members which were not specifically tabled for discussion: 1. The standard of classification within Northern Ireland slaughter plants. 2. The allegation of cartel activities by the Northern Ireland beef processing sector. Following the receipt of a draft transcript of the evidence, we wish to contribute further comment as follows: 1. Classification Mr Kane: ". our grades are being downgraded by one and a half grades." As clearly stated in the Minutes of Evidence, beef carcases offered for trade within Europe are required under European legislation to be classified according to the European grid system. The responsibility for the enforcement of the regulation is placed upon the competent authority and, in the case of Northern Ireland, supervision is carried out by the Department of Agriculture and Rural Development. A classification service is offered to the Northern Ireland industry on a commercial basis by LMC and this service, by agreement between the meat processors and the farming unions, is universally used throughout all slaughtering plants in the Province. LMC Officers in carrying out their duties are subjected to oversight and scrutiny on the interpretation of the standard by the competent authority and by periodic visits by European Union experts. We must advise that the allegation the LMC has "pushed cattle grades down in the Province by a grade and a half" is unfounded, unsupported by any evidence and blatantly untrue. If the Committee believes the contrary, we would urge that they instigate a further visit by the European experts for further adjudication of the classification standard within Northern Ireland. While we recognise the urge for Northern Ireland politicians under current Government arrangements to participate in cheap electioneering, we would ask Committee members to consider the potential damage which these false allegations can do. Committee members should be aware that virtually all customers of the Northern Ireland industry are sourcing carcases in reliance upon the operation of the classification system. Allegations such as those made receive wide publicity and inevitably come to the attention of our customers. Furthermore, it is the policy of the European Commission to monitor development in regions and member states and we are aware that they monitor press reports and other sources of information which might highlight departures from proper standards of conduct under the regulations. Against a background where the operation of the classification system in Northern Ireland by LMC is acknowledged to give benefit of doubt to the producer where carcases are on the margin between grades (and repeated supervision and inspection confirm this to be the case) we would highlight to Committee members that the conduct displayed by some members in dealing with classification can only serve to undermine the credibility of our industry in the eyes of both customers and regulators. We would suggest that votes bought from the producer community through sensationalising false allegations through your Committee activities only gives rise to expectations in the farming community that classification interpretation can be changed when it cannot. Such votes could be very dearly bought through a diminution of confidence in the ethics and standards of our industry. 2. Cartel Activity The Chairman: "The Office of Fair Trading has admitted that there was a time when there was a cartel working; ." Mr Paisley Jnr: "Could the cartel have affected that in any way?" The Chairman: ". you did not seem to know that the Office of Fair Trading had, in the past, thought that there was a cartel." The Chairman: ". The Office of Fair Trading now admits that it was convinced that there was a cartel. That is a very serious thing which you know you gave information to, but you did not know the outcome, ." The Chairman: "It did come to that conclusion." During the Evidence Session, considerable reference was made to the possible existence (present or past) of a price-fixing cartel in regard to Northern Ireland red meat processors. The record of the evidence highlights clearly that LMC is unaware of any hard evidence which might prove this matter one way or the other. We want, however, to specifically highlight the explicit statements of the Chairman and Committee that the Office of Fair Trading have drawn the conclusion that a price-fixing cartel has existed. The Chairman was highly critical of LMC Officers for their failure to be aware of such a conclusion by the Office of Fair Trading. Following the Evidence Session, LMC has made immediate contact with the Office of Fair Trading, who have advised that they have in fact not "come to that conclusion". I attach herewith under Appendix 1 a copy of a letter received from the Director of Cartel Investigations at the Office of Fair Trading. You will note in the second paragraph of this letter the statement that "these enquiries failed to produce sufficient evidence to commence a formal investigation under the terms of the legislation dealing with price-fixing agreements at that time, the Restrictive Trade Practices Act 1976". The letter goes on to deal with the further and more current consideration of an allegation made by the National Beef Association. Committee members will wish to note that on neither occasion have the Office of Fair Trading yet found sufficient grounds to conduct an investigation, never mind to formally conclude the existence a price-fixing cartel. We would wish again to highlight to Committee members the damage which is being done to our industry through the perpetual repetition of allegations of this nature. We would urge the Committee if evidence of cartel activity has been placed before them that they input this urgently to the Office of Fair Trading, who are the only body to our knowledge who can reach an authoritative conclusion on the matter. While such allegations remain unproven, it is difficult to contemplate how our industry can move forward in harmony to advance some of the very commendable actions being contemplated by the Committee.
OFFICE OF FAIR TRADING 10 October 2000 Dear Mr Rutledge NORTHERN IRELAND ASSEMBLY AGRICULTURAL COMMITTEE Thank you for your letter of 3 October addressed to my colleague Mr McNabb enclosing the draft transcript of your appearance before the above Committee, during the course of which this Office’s name was mentioned in relation to an alleged cartel within the Northern Ireland cattle slaughtering sector. You request an update regarding our considerations of the complaints we have received about this matter. In 1997, following two separate complaints alleging that a group of slaughtering plants in Northern Ireland fixed the prices that they were prepared to pay producers for their cattle, we began to make informal enquiries to which you kindly provided pricing information. These enquiries failed to produce sufficient evidence to commence a formal investigation under the terms of the legislation dealing with price-fixing agreements at that time, the Restrictive Trade Practices Act 1976 (the RTPA). However, during the course of our enquiries documentary evidence was received that suggested the slaughtering plants had fixed charges for the removal and disposal of specified bovine offal from slaughtered cattle. A formal investigation was started in relation to this matter and as a result in August 1999 the Northern Ireland Meat Exporters Association, the trade body representing the slaughtering plants, gave undertakings to the Director General of Fair Trading on behalf of its members that they would terminate their fixed charge agreement and that they would not revive this agreement or enter into similar agreements in the future. A copy of the press release issued by the Office at the conclusion of this investigation is attached. We are aware that the National Beef Association has recently made public the fact that it has complained to the Office about a price-fixing cartel in the cattle slaughtering sector. In order to ensure that the progress of our investigations is not hampered by premature publicity we do not discuss the progress of on-going complaints with external bodies including other government departments and agencies in the UK. We will in due course let you know the outcome of our consideration of the NBA’s complaint. I should also point out that from 1 March 2000 the RTPA was replaced by the Competition Act 1998. For the Office to be able to use its formal powers of investigation under the Competition Act, we must have some evidence that an alleged cartel was operational after 1 March 2000. I hope that this letter is helpful and I am happy for you to provide a copy of it to the Agricultural Committee. If you would like to discuss any aspect of the letter, please do not hesitate to contact Mr McNabb (direct line 020 7211 8943). No 31b/99 17 August 1999 SLAUGHTERHOUSES END FIXED CHARGE AGREEMENT Seven Northern Ireland slaughterhouses have ended a restrictive agreement that set the charge for the removal and disposal of specified bovine offal from slaughtered cattle. Complaints from farmers led to an investigation by the OFT’s Cartels Task Force of a fixed levy, currently £5, for each animal slaughtered in plants operated by the members of the Northern Ireland Meat Exporters Association. The levy had been deducted from the price that the plants paid farmers for their cattle. John Bridgemen, Director General of Fair Trading said: ‘Government regulations require that offal, which could be infected with BSE, is removed and disposed of by slaughtering plants. In normal circumstances an agreement to fix charges would have been referred to the Restrictive Practices Court. In this case I have decided to accept undertakings from the operators because it became clear during our investigation that the agreement was made in ignorance of the law. Furthermore the slaughtering plants have now voluntarily terminated the agreement. The members of the association have also given undertakings that they will not revive this agreement or enter into a similar agreement in the future. Business in general should note that ignorance of the law will not be a protection against financial penalties once new competition legislation comes into force next year. My office will have greater powers after 1 March to obtain information and act against agreements to fix prices or charges. Businesses of any size may be liable to penalties if they enter into such an agreement.’ NOTES 1. Under the Restrictive Trade Practices Act 1976 (the Act), particulars of agreements made before 9 November 1998, between persons carrying on business in the UK in the supply of goods and services, must be furnished to the Director General of Fair Trading for registration if two or more parties to the agreement accept certain kinds of restriction on their commercial freedom. In the case of agreements made on or after 9 November 1998, particulars must be furnished only when they contain price-fixing restriction. For this purpose, an agreement need not be contractually binding; oral and informal agreements may be caught Failure to furnish particulars of an agreement within the time limits specified by the Act render the restrictions void and unenforceable. In addition anyone adversely affected by the operation of such an agreement may have grounds for action in he civil courts. 2. Section 1 of the Act, subject to certain exceptions, requires the Director General to refer all registered agreements made before 9 November 1998 to the Restrictive Practices Court for a ruling as to whether the restrictions are against the public interest. The Court may order the parties not to enforce, or try to enforce, the restrictions and not to make any similar agreement. 3. Any breach of a court order, or of an undertaking accepted in lieu of an order, may constitute contempt of court. 4. The Competition Act 1998, which was enacted on 9 November 1998, will replace the Restrictive Trade Practices Act. This new Act prohibits anti-competitive agreements and behaviour – such as price fixing – and abusive conduct by dominant firms. These prohibitions will take effect on 1 March next year. The Act provides the Director General with new powers to investigate breaches of the prohibitions and to impose penalties of up to 10 percent of UK turnover. These powers should lead to a more efficient and effective competition law regime. 5. As part of the campaign to identify secret price-fixing and market-sharing cartels, the Office set up the Cartels Task Force. It can be contacted on a 24-hour telephone/fax hot-line number 0171 211 8888.
The OFT publishes a wide range of consumer leaflets which are available free from: OFT, PO Box 366, Hayes UB3 1XB 0870 6060321 Information about publications: http://www.oft.gov.uk External Link Disclaimer: The Northern Ireland Assembly does not exercise any editorial control over the websites listed above and therefore cannot be held responsible for the information, products or services contained therein. |
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