Colm’s columns

Colm Rapple
Irish Mail on Sunday November 9, 2008

The Irish consumer is being short-changed again. So what’s new? Nothing you might say. We have grown used to it. But this time the culprit is the Government, although that’s not particularly new either. Consumers have been ill served by successive governments in the past so we shouldn’t be surprised at another anti-consumer development, the proposed merger of the National Consumer Agency and the Competition Authority.

It’s not a new idea. It’s an option that was considered by at least three high-power expert groups in recent years. They all advised against it. Now it is being foisted on the consumer on the pretext of a cost saving exercise. But it’s unlikely to shave more than a couple of million off the Government’s budget and the potential cost to the consumer greatly exceeds the potential savings.

The National Consumer Agency was only formally established eighteen months ago although it existed in an embryo form for a year or so prior to that as it assumed the functions of the old Office of the Director of Consumer Affairs.

It was heralded by the Government as a major advance in consumer protection but the Agency has far fewer powers and less teeth than was originally recommended by the Government appointed Consumer Strategy Group. It’s recommendations were initially watered down by a committee of civil servants each representing the sectional interests of their own Departments and client businesses. Then they were further emasculated in the drafting of the legislation which brought the Agency into being and the strong recommendation that it remain a totally independent body, is now to be set to naught.

The Consumer Strategy Group examined the possibility of combining a consumer protection body with the Competition Authority but came down strongly against it. It recognised the “possible” cost savings that might arise (and it’s use of the word “possible” was no accident) but it foresaw major disadvantages.

Competition policy on its own, it said, is not the solution to all consumer problems. It needs to be complemented by a range of advocacy and promotional activities. It expressed a fear that consumer issues would receive lower priority in a combined organisation.

A similar view was expressed in an internal analysis compiled by the Department of Enterprise, Trade and Employment whose remit covers consumer protection. Merging a consumer agency with the Competition Authority would not be the best way of “achieving a dynamic and forceful consumer policy”, it concluded, stressing that the “new Agency must be independent with a core statutory mandate to raise the profile of consumer issues and to present a strong consumer voice”.

Mind you that didn’t stop the Department rowing back significantly on the original Strategy Group’s recommendations.

The Agency’s ability to impose on the spot fines for breaches of consumer law was limited to failures by pubs and filling stations etc. to comply with price display orders. It wasn’t given the power to seek closure orders against errant companies and rogue traders.

More importantly perhaps, in the light of the current proposals to yet again raise gas and electricity prices, the Agency wasn’t given the right to challenge decisions of other regulatory authorities such as those overseeing energy, transport and telecoms even in matters of major consumer interest.  The Strategy Group strongly recommended that the Agency be given such powers but all the existing regulators were represented on the civil service committee which decided against it.

Particularly interesting in the light of this latest merger proposal was the decision to stymie the Strategy Group’s proposal that the Consumer Agency be given the right to order the Competition Authority to carry out market studies if consumers were believed to be suffering from anti-competitive behaviour.

Who’s going to call the shots when the two organisations are merged? The likelihood is that the consumer agency will be the one to lose out.

The Consumer Strategy Group estimated that consumers are losing over €800 million a year or over €200 per person each year simply as a result of purchasing faulty goods and unsatisfactory services.   The actual cost per head is considerably higher when account is taken of the losses due to excessively high prices.

It’s obvious that an effective consumer protection strategy can yield a very high return.

It’s not as if the National Consumer Agency is costing a lot of money. This year it has a budget of €10 million. The Competition Authority with which it is to be merged is getting by on €6.8 million, presumably because of its narrower and far less public remit.

The Government hasn’t said how much it hopes to save from the merger. But it can hardly be more than a couple of million. Both bodies have separate budget allocations for next year with a combined cut of €1.8 million but it’s not clear if that assumes some merging of functions or simply a trimming of their existing separate operations.

Either way it is clear that the potential savings are minuscule while the proposed change flies in the face of all the expert advice. If anything there is a case for further strengthening the role of the National Consumer Agency, reasserting its independence and giving it some of the extra powers originally recommended by the Consumer Strategy Group.

Stronger laws combined with resources necessary to enforce them would yield returns more than sufficient to cover the additional costs. The Government is being cent wise and euro foolish.

This entry was posted on Sunday, November 9th, 2008 at 4:07 pm and is filed under Consumer protection. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.