Ireland May Rescind Superstore Ban

Date: 1 Jul 2003 | posted in: Retail | 0 Facebooktwitterredditmail

Ireland’s Environment Minister Martin Cullen has announced that the government may lift a five-year-old nationwide policy banning superstores.

The policy, adopted as a temporary measure in 1998 and made permanent in 2001, prohibits stores over 3,500 square meters (38,000 square feet) in Dublin and 3,000 square meters (32,000 square feet) in the rest of the country. Certain retail warehouses, such as do-it-yourself home centers, are allowed to build up to 6,000 square meters (65,000 square feet).

Minister Cullen has commissioned a report on the policy and will consult with other government officials before making any changes. No timeline has been announced.

Mary Harney, Minister for Enterprise, Trade and Employment, has said the government may also drop the 1987 Groceries Order, which prohibits below-cost selling (a tactic large companies with ample financial resources might use to undercut smaller rivals and drive them out of the market).

Both policy changes are being driven by concerns about inflation, which is running above 4 percent. Supporters say the policy changes would increase competition and drive down prices.

But those who favor keeping the size cap and the ban on below-cost selling say the move is little more than a gimmick aimed at deflecting attention from the real sources of inflation, which are government-run industries. Prices for public transit and state-produced electricity rose by about ten percent last year. The state sector accounts for an estimated 59 percent of the inflation rate.

In contrast, food prices grew just 2.2 percent, or half the overall inflation rate. Ireland enjoys robust competition in the food sector, with more than 6,000 independent grocers. Food prices are somewhat high in certain areas, but industry groups attribute the problem to crumbling transportation infrastructure and thin population densities, not lack of competition.

Lifting the size cap would likely attract major global retailers, including Wal-Mart, the third largest grocer in England. Foreign chains would “find the Irish market an easy target as they could use their huge resources to quickly establish themselves by an initial heavy investment in below-cost selling,” contends the Irish Small and Medium Enterprises Association, which vehemently opposes the changes.

Critics say the changes would not only eliminate thousands of independent merchants and decimate town centers, but would also harm the Ireland’s farmers and manufacturers. They point to the German grocery chains Aldi and Lidl, which entered the Irish market four years ago and source 90 percent of their products outside the country.

The Swedish furniture chain Ikea has played a major role in the debate over the size cap. Ikea claims it logs thousands of Irish customers at its English stores and says it would like to build a store in Ireland more than ten times the size of the current cap. Ikea has threatened to locate just over the border in Northern Ireland if superstores continue to be banned in the Republic.

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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.