Under pressure from Ikea, Wal-Mart, and Costco, the Irish government has relaxed its seven-year-old cap on the size of retail stores. The changes apply to certain areas of Dublin and eight other towns.
The cap, which was adopted on a temporary basis in 1998 and made permanent in 2001, restricted stores selling food (including hypermarkets, which sell both food and non-food merchandise) to no more than 3,500 square meters (38,000 square feet) in Dublin and 3,000 square meters (32,000 square feet) throughout the rest of the country. Non-food stores were limited to 6,000 square meters (65,000 square feet).
The policy was designed to protect the viability of town centers, ensure that retail outlets would be accessible by public transit, and maintain competition by preventing a few large superstores from dominating the country’s retail trade.
On January 5, Ireland’s Minister for the Environment, Dick Roche, announced that the cap on supermarkets and hypermarkets would remain in place, but that size restrictions on non-food retailers would be lifted in four sections of Dublin and in certain areas designated for urban renewal within the gateway towns of Athlone, Cork, Dundalk, Galway, Letterkenny, Limerick, Sligo, and Waterford.
In a statement, Minister Roche said that the size limits “did not allow for the development of some retail formats in the Irish market, thus having the effect of restricting competition and the potential choice available to Irish consumers.”
The policy change follows more than a year of public debate.
It was a victory for the Swedish furniture giant Ikea, which waged a vigorous campaign to overturn the cap. Noting that its outlets in Scotland and Britain attracted thousands of Irish shoppers each year, the retailer said it was eager to build in Ireland, but under no circumstances would it open a store smaller than 300,000 square feet. If the cap stood, Ikea threatened to erect a string of mega-stores just across the Republic’s border in Northern Ireland.
Costco and Wal-Mart also lobbied in favor of lifting the cap, as did the National Competitiveness Council, an advisory committee established by the government in 1997 that is made up of corporate executives. The NCC argued that the size cap was partly to blame for the country’s high rate of inflation.
Supporters of the cap included independent retailers, led by the Irish Small and Medium Enterprises Association (ISME), which countered that inflation was occurring throughout the economy, not just in retail, and much of the increase in prices was due to rising wages and higher costs for insurance and other services.
ISME also argued that, in a country with fewer than 4 million residents, limiting the size of stores was necessary to ensure that consumers would be served by multiple competitors. The association contended that the cap supported job creation, because, unlike Ikea and other global chains, small retailers source much of their inventory from Irish manufacturers.
Several minority political parties fought to maintain the policy as well. A spokesman for the Labour party said superstores would drive up the cost of public services, while a leader of the Greens argued that lifting the cap would worsen car-dependence and “lead to a situation where three or four mega-stores. . . could dominate the retail business throughout Ireland.”
With the size cap rolled back, the National Competitiveness Council has now turned its attention to eliminating the other pillar of Irish retail policy, the Groceries Order. Enacted in 1987, the order bars supermarkets from below-cost selling, a tactic used by large chains in other countries to drive smaller competitors out of business.
The NCC contends that the policy keeps food prices high. But supporters, led by the small grocers association RGDATA, counter that food prices have been advancing at a slower rate than prices in other sectors of the economy. “Those who seek to blame the Groceries Order and the Retail Planning Guidelines for the high price of food have failed to produce any statistical data to back these claims,” said the group’s director, Tara Buckley.
- Ireland’s Retail Size Cap Policy
