Privatisation

Former State Monopolies

The period from the 1980s onwards saw the privatisation of certain former state monopolies.  The pressure for privatisation came from European Union state aid rules and internal trends in international economic policy.

Irish Ferries was privatised in the mid-1980s.  When Irish Shipping was wound up, Irish Ferries acquired the British and Irish Steam Packet Company Ltd.  Irish Steel was sold to Ispat.

The Agricultural Credit Corporation and the Industrial Credit Company, which had been established as state banks to industry and agriculture, respectively in the 1930s, were sold to financial institutions.  Irish Life Assurance was sold to Permanent TSB, the Trustee Savings Banks which was in state control, and de facto ownership was sold to Irish Life and Permanent.

An Bord Telecom was created in 1984 when An Post and An Bord Telecom were established from the former Department of Posts and Telegraphs.  Legislation in 1996 allowed for private entities to invest in the company.  In 1999, legislation facilitated the creation of a new company, which was floated on the stock exchange.

In 2004, Aer Lingus was established as a public company.  In 2006, the Aer Lingus was floated on the stock exchange. It is now a wholly owned subsidiary of International Airlines Group (IAG).

In some cases, the State retained special rights under the company’s constitution, giving veto power over a particular matter.  This occurred in relation to the State’s shares in the case of Aer Lingus, and in relation to sugar beet quota, in relation to Irish Sugar Ltd.

EU Required Regulators

States have the right to apply regulation for the general good.  EU legislation has required that the State open up certain markets.

EU requirements for transparency and competition in services provided by former state-owned monopoly has required the establishment of an independent regulator.  This occurred both in sectors where there had been privatisation, such as the aviation and telecom sectors, and in sectors where the principal state player, electricity, had been retained.

The regulation places obligations on the regulatory bodies in the areas concerned.  These relate to in relation to

• public service obligations,
• strategic matters, such as security of supply,
• consumer protection and price control,
• environmental matters,
• use of energy sources; for example, there are minimum renewable source energy requirements.

Most such as ComReg protects competition as well as being regulators.ComReg,  the communications regulator, has gone through a number of incarnations.  The Minister appoints the present entity.  It is independent but subject to certain limitations in terms of ministerial directions and accountability to the Oireachtas committee.

The health insurance market has been opened up to EU-based providers. The Health Insurance Act provided for risk equalization.  The legislation has been the subject of challenges, and the regulations have been changed on a number of occasions.  See the sections on  Health Insurance under the heading Health.

Dominant Position

European Union legislation sets out the details of the regulatory scheme in some sectors in the context of its state aid and competition rules. The European Union sets parameters in relation to competitive markets.

Where there is a market player with a potentially dominant position, the European guidelines allow the regulator to make requirements to regulate the market in terms of transparency, pricing, access, etc. The nature of regulation changes as there is more competition. There is still a single entity which holds key energy network infrastructure in gas and electricity. In contrast, in telecommunications, significant competition has emerged between network providers.

European Union states must regulate state monopolies of a commercial character so as to ensure that there is no discrimination regarding the conditions under which goods are produced and markets operate.    States must refrain from introducing new measures contrary to the principles laid out. ComReg protects competition and is a regulator.

Competition

States must not enact or maintain and enforce measures contrary to the competition principles in the EU Treaty.  Undertakings which are entrusted with services of general economic interest or are revenue-producing monopolies are subject to competition rules as long as the rules do not obstruct them in the performance, legally or in effect, of the obligations vested in them.

They must show that the treaty rules that obstruct the performance of functions in the interests of the community are not thereby affected.  The mere fact that there is a natural monopoly is not enough.

Its operation must be proportional and reasonable, having regard to the economic viability of providing the service of general economic interest without seeking to protect the body.

Restriction of competition is only permissible where it is necessary for providing a public service of general economic interest.  Therefore, they would only potentially apply to key services such as certain elements of the postal,  health, insurance, telecommunications and transport sectors.

The above limitation on general competition is only permissible if the derogation from competition rules is justifiable.  The restrictions on competition must be necessary and proportionate.  The onus is on the state to prove that this is so.

The competition rules apply to undertakings.  This implies an economic function and not only a business undertaken for gain.  A commercial entity will be an undertaking even if it does not seek or is not entitled to make a profit.  In contrast, purely regulatory entities are not undertakers.

There may be borderline cases between undertakings and purely regulatory bodies.

Regulatory Bodies

Regulatory bodies charge fees such that they have the characteristics of service providers.  The fact that charges are made for the services does not mean that the entities are undertakings.  The question is whether the function is regulatory or administrative, rather than commercial or quasi-commercial.

Where the state goes beyond acting in the exercise of regulatory functions and involves itself in economic activities, that is likely to be an undertaking.  If a private entity could equally undertake the function, it is more likely to be classified as an undertaking.

Undertakings may be subject to general competition law if they are in a dominant position.  This predominant position is unlawful.   The sections of the competition law.