CCPC report finds weaker services competition
A report from the competition watchdog has found that competition in “several important areas” of Ireland services sector has weakened in recent years.
The study by the Competition and Consumer Protection Commission’s (CCPC) looks at how competition in the non-financial-services sector has developed over a 15-year period.
According to the State of Competition in Ireland, concentration and average mark-ups have risen across many service industries since 2016, meaning that certain industries have businesses holding increased market power.
As of 2022, the top four businesses had an average market share of 37% – up 12 percentage points since 2008.
Digitally intensive industries
The CCPC says that the trend is most pronounced in more digitally intensive industries such as information and communications, and professional, scientific, and technical services, such as accounting and legal services.
The figure for the top four businesses in professional, scientific, and technical services rose from 18% to 44% between 2008 and 2022.
In contrast, arts, entertainment, and recreation saw a drop of more than eight percentage points.
Global trends
“This pattern is not unique, mirroring similar trends observed across other advanced economies,” the report states, citing broader global trends driven by globalisation and rapid technological change.
“These forces have enabled leading businesses – particularly in digitally intensive industries – to scale quickly, leverage innovation, and reinforce their market share,” it adds.
The report notes, however, that the potential influence of country-specific factors cannot be ruled out.
“In Ireland, barriers such as financial capacity, regulatory burdens, and legal fees have been identified as major challenges for entry, while financial capacity and knowledge-sharing barriers affect expansion,” it states.
Mark-ups
The report shows that mark-ups – the difference between price charged and cost of production – increased in three areas between 2008 and 2022.
The biggest rise came in professional, scientific, and technical services – up 8.2% since 2008. Accommodation and food shows a 7.7% increase over the same period.
The report finds that, throughout the period, digitally intensive industries have maintained higher average mark-ups compared with less digitally intensive industries.
Legal services
The report says that Ireland’s legal framework is one of four ‘barriers to entry’ for businesses – the others being incumbency advantages, financial capacity, and supply-chain access.
“Improvements to the legal-services sector, alongside reforms to the courts system, should reduce costs for consumers and businesses alike,” it states.
The CCPC describes the speed at which legal services are delivered as “critical” for businesses, “as delays can hinder investment decisions and slow market entry”.
CCPC chair Brian McHugh described the report as “a warning” about weakening competition in some sectors.
“In the CCPC, we will use the findings of this report to help us focus our activities on areas where increased competition can have the biggest impact,” he said.