Irish Beef Deal Goes Against EU’s Own Standards

By Patrick Brogan

The EU is often accused of being tougher on smaller businesses than it is on big corporations. This ruling will do nothing to dispel that image.

I often get the impression that Ireland is becoming the EU‘s guinea pig. A sort of social laboratory. We were the first nation to bring in a smoking ban. Then there were the egregious bank bailouts. This has become more in focus because of the special treatment Deutsche Bank received. They refused a bailout and now are facing fines for selling toxic loans and will be sacking thousands of staff. Then there was the now infamous Apple tax ruling. And more recently, the European Commission approved merger between ABP Food Group and Slaney Foods International.

Why is This Important?

For a number of reasons. The first one is it is EU approved. A lot of European nations have repeatedly thrown their toys out of the cot over Ireland’s corporation tax rate. What can I say? We are a generous nation. Since the EU correctly pointed out that Apple only gave the Irish taxman a tiny fraction of the 12.5% tax rate they should have, a lot of commentators have said that this is an attack on Ireland’s corporation rate.  This is given more credence when put under the microscope.

Something is rotten in the state of Denmark. Well, not rotten, more inconsistent. The Commissioner for Competition in the EU is Margrethe Vestager. She is Danish. She has doggedly challenged other countries’ corporation tax methods. Which is where the Apple ruling originated. I have my own views on tax and I generally disagree with it as a concept. For the most part, it is used to pay off interest on bank loans that were created out of thin air. However, if somebody has to pay tax it may as well be big corporations.

Earlier, it was mentioned that a lot of people are complaining that this was a way of attacking the Irish corporation tax. Margrethe Vestager has said she has no problem with Ireland’s corporation tax as long major conglomerates pay the full amount. Which is fair enough. Also, Ireland has long been a tax haven. Most Irish people don’t like to admit this, but any naivety on the matter went out the window after the double Irish affair. Looking into these two issues was important and viewed on their own merits you would say the EU was right to do so. If the EU is consistent, they would challenge Denmark’s tax system, too.

Danish companies are not taxed on their worldwide income, only the income made in Denmark itself. The same rule applies for multinational companies that move their headquarters to Denmark. So that’s 22% on income in Denmark and 0% on money made outside Denmark. That’s not really that different from Ireland’s sweetheart deals.

Given that Ireland was all over the papers after the Apple tax scandal, you would be forgiven for thinking that it was the only European country involved in such controversies. It certainly is not. The UK has also become a tax haven, but the difference is the EU has not challenged them on this. The EU can hide behind the fact that Britain is leaving the organisation, which is undoubtedly going it make it more a haven if the banker May has her way, but this has been going on for years. For example, Amazon made £5.3 billion and was taxed £11.9 million. Google made £3.8 billion and got a tax bill of just £20 million.  Are these not double standards? If the EU is worried about fairness, why not give us back some of the fisheries?

The European Commission states that “competition policy is about applying rules to make sure businesses and companies compete fairly with each other. This encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality.” It does this through stopping monopolies and cartels.  The Commission tries to stop any company having over 15% of market share, especially when it comes to mergers. “The market share thresholds are: 15% combined market shares on any market where they both compete.” Although they regularly fine Google, the American search engine giant is responsible for over 90% of European internet searches and European powers are powerless to stop this. But they are not powerless to stop mergers. Going by their own rules, the Commission should have stopped this merger.

The Irish Farmers’ Association (IFA) president, Joe Healy said the decision “flies in the face” of a report conducted by PMCA Economic Consulting which stated that the meat market is characterised by weak competition. Given that ABP/Slaney will control 25.8% of slaughtered cattle in Ireland and 36.2% of premium cattle, it will only weaken competition further. Also, it is in breach of  the European Commission guidelines on cartel control of 15%. Is there something untoward going on here?

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Larry Goodman; A Friend of Dictators

So, who is Larry Goodman? A man who tries to be secretive, and for good reason. Rarely is he in the news for his positive deeds. Controversies hang around this man like the bad smell of the bad quality meat his companies exported around the world for years.

He has a number of business interests in this country and abroad, like the Blackrock Clinic and the building that houses the Bank of Ireland headquarters on Baggot Street. His main area of interest is the food industry, though. Many of his dealings have been well publicised in this country. From the marking of beef with wrong labels, the abuse of EEC laws, questionable use of the tax system and allegations of undue influence over the political system. Charlie Haughey seemed very susceptible to his ‘charm’. His company is already one of the biggest meat producers in Europe.

When Larry Met Saddam

While Goodman enjoyed a cozy relationship with a megalomaniac running this country, he was also meeting and greeting tyrants in other countries. The most notable of these is Saddam Hussein. It’s interesting the concessions the Government of the time was willing to make to support Goodman. They underwrote the $134m contract Goodman’s company had signed with Saddam. This was in the 80s, when Iraq was at war with neighbouring Iran, so the likelihood of Iraq defaulting on the deal was high. It wasn’t until the Iraqi army invaded Kuwait that the Iraqis defaulted. The Irish Government later changed their position on underwriting the contract. This led to Goodman’s company nearly folding and increased tension within the Government which helped to lead to its collapse. The Beef Tribunal was later set up to look into this affair.

Given all the controversy here, you would think that Larry Goodman would want to let the matter rest. He did not. He has sought compensation for the deal and was eventually given $72m by the Iraqi Government, ie the taxpayers of that country America nearly destroyed.

Beef Tribunal

The Beef Tribunal is part of a history of long, drawn-out tribunals in which nobody seems to get punished in this country. After the investigative journalism programme World in Action focused on Goodman and his company, it became increasingly difficult to ignore the numerous allegations against him and his dealings. Although Goodman was never convicted of any wrongdoing, it did shed a light on his favourable treatment. It was quite clear he received a lot of benefits, particularly from Albert Reynolds and Charlie Haughey. Why, is another matter. Given what we learned about these two men and the amount of cash they took off businessmen over the years, the answer seems pretty obvious. We also learned that the meat exported to the Arab world was not in line with Islamic ritual slaughter, amongst other things. The Beef Tribunal cost the Irish taxpayer millions.

The Horse Meat Crisis

Yeah, another scandal. One plant run by a Goodman owned company was found to have contaminated beef which contained horse meat. Another plant in Co. Monaghan was found to have rotten green meat which was en route to Poland. These are just a fraction of the scandals this man has been connected to. Everyone looking in can see the wrongdoing, apart from successive Irish governments. Why is that? Well, it’s obvious given our banana republic reputation, a reputation well earned. I can think of no basis as to why this man, with a name that disproves nominative determinism, should be given more influence over the beef or any other industry.

The Reaction

For such a big deal, there are very few willing to speak on the matter, and those that do, don’t view it in a positive light. The IFA and the PMCA report both call upon the Competition and Consumer Protection Commission (CCPC) to investigate the deal, along with the Competition Markets Authority (CMA) in the UK. When I emailed the CCPC they said it was a matter for the European Commission, who had already investigated it. Many in the industry are critical of the deal, with Edmond Phelan, the National Beef Chairman of The Irish Cattle and Sheep Farmers’ Association (ICSA), referring to the deal as a form of servitude. These strong words sum up how many farmers feel about the industry as a whole.

What the IFA Said

Below, are extracts from a number of reports the IFA released;

“The ‘footprint’ of the parties (ABP and Slaney/ICM) is extensive in meat processing in Ireland and the UK, not to mention the competition implications of the proposal in retail markets in Ireland, the UK and the EU, owing to the fact that most of the beef and lamb meat produced in Ireland is exported. This, in turn, necessitates the view elaborated in the PMCA report that the proposal, if it is notified to the European Commission, should also involve the Irish and UK competition authorities.

“IFA President Joe Healy has called on Agriculture Minister Michael Creed to immediately intervene with the Competition and Consumer Protection Commission (CCPC) to insist that they seek the referral of the ABP/Slaney case from DG Competition in Brussels back to Ireland for investigation so that serious issues around competition in the sale of cattle are fully investigated.

“Joe Healy said farmers cannot understand why the Irish Competition and Consumer Protection Commission (CCPC) refused to investigate the case. He said, “The CCPC turned a blind eye to the serious competition issues in the Irish market for the purchase of cattle.  They effectively washed their hands of the ABP/Slaney deal by leaving it to the Brussels authorities”.

“Joe Healy deplored attempts by the CCPC to wash their hands of the ABP/Slaney deal and ignore the serious competition issues in the Irish market by leaving the investigation of the case to the Brussels authorities.”

Frustration

I tried to contact as many people as possible in relation to this article to give it a well-rounded, balanced analysis. This was difficult to do as a number of people never got back to me. At the time of writing, nobody has answered my questions directly. The IFA emailed me reports that they had issued. I’m still waiting on a response from Edmond Phelan, but I was talking to him over the phone. His position appears to be crystal clear from reports the ICSA already issued. There was no response from Phil Hogan’s office, after numerous emails. There was no response from one of his assistants, Bernie Kilcoyne, to see where I should be directing the questions. After emailing the European Commission I was pointed to Margaritis Schinas, the Chief Spokesperson of the European Commission and Deputy Director-General of the Commission’s Directorate General. Again, no response. So much for a transparent Europe.

The Department of Agriculture responded thusly;

“The Minister is very much aware of the importance of competition in the beef and lamb sector. For this reason, it is critically important to have a robust legal basis for the evaluation of proposals for mergers and acquisitions in these sectors. The competent authority in this case was the European Commission’s Directorate General for Competition.

“The Minister noted the outcome of the Commission’s decision last week on this particular case. He also noted that the proposal has been analysed in accordance with the established procedure under competition law rules. The analysis took into account the impact of the merger on competition in the beef and lamb sector. It also examined potential impacts on consumers by assessing the potential impact on competition in the downstream markets relating to the sale of fresh meat.

“Without prejudice to this particular case, it is generally accepted that there are inequalities in bargaining power along the supply chain. The European Commission has established a High Level Forum on the Better Functioning of the Food Supply Chain to look at these issues. Ireland will play its part with other member states and with industry stakeholders in the deliberations at this forum. In addition , the Minister has recently established a legal framework for the recognition of Producer Groups in the Beef Sector, and an amendment to Ireland’s Rural Development Programme to encourage the establishment of such groups is at present being considered by the Commission.”

Take from that what you will. The reason this is frustrating is because, although it is clear from the various statements that the Commission’s own framework is universally seen as flawed, there are details being held back. Like, if the Commission goes against its own thresholds, who then holds these decisions accountable? Is Larry Goodman bad for the Irish and European food sector, and if so, why was this merger approved? Personally, I think the silence is deafening on this matter. Something is clear though, the EU is not an open organisation.

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What it Means for Irish Consumers

The EU says it is looking to strengthen European companies as they compete with Brazilian rivals in this sector. This is part of the reason we are seeing larger and larger mergers. However, it is becoming obvious to those of us who watch the EU closely, they are favouring larger corporations not because it is trying to strengthen Europe. Angela Merkel has been very vocal in her support of TTIP and CETA, trade agreements that would open the door for large multinationals from across the Atlantic to flaunt current European regulations on a wide range of categories, including workers’ right and the environment, and effectively crush smaller European businesses.

PMCA suggests a number of areas where the market could be improved with integration and increased auctioning, just a few of many. Will the EU heed this advice? It is unlikely seeing as they rejected the main point of not letting the merger happen in the first place.

All of this is bad for you, the consumer. This deal, amongst others, has shown that the EU is telling us they are pro competition and regulation that benefits us all as consumers and as citizens while in practice, the very opposite is happening. An excellent example is a report that came out this week about Irish media ownership. Something is rotten in the states of Europe.

 

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