§ Mr. Frederick Mulley (Sheffield, Park)
I beg to move, in page 5, to leave out lines 40 to 42.
The effect of the Amendment would be to exclude the exception conferred by subsection (1) of the Clauseto any agreement to which the only parties are inter-connected bodies corporate or persons carrying on business in partnership with each other.My prime objective in moving the Amendment is to seek some guidance from the President or the Parliamentary Secretary about what they estimate the necessity for this exception to be and whether or not they are satisfied that no possible loophole is likely to arise as a result of this exception being granted.
Reference to Clause 30 gives us the interpretation of "inter-connected bodies corporate". There is no similar definition to be inferred for the word "partnership".
Reference to Section 154 of the Companies Act 1948 reveals that the definition of inter-connected bodies corporate is fairly tight. The House should know that in order to qualify for this definition of inter-connected body corporate a company is deemed to be a subsidiary of anotherif, but only if,—(a) that other either—
- (i) is a member of it and controls the composition of its board of directors; or
- (ii) holds more than half in nominal value of its equity share capital; or(b) the first-mentioned company is a subsidiary of any company which is that other's subsidiary.It therefore seems to me that where the holding or major company has complete control of the board of directors of a subsidiary company, it is unlikely to 2100 make any agreement with it which would fall to be registered under the Bill. On that ground the exception seems to be unnecessary. Similarly in the matter of partnerships, it would surely be unnecessary for two partners in partnership to make agreements of a restrictive character which would fall to be registered under the Bill. The only partnership agreement which I can imagine where this would be necessary is one which might have in it the usual restrictive clauses, on a geographical basis, about practising after the end of partnership. If the only purpose is to exempt that kind of partnership agreement, it could be done much more simply than it is done here.
We must approach the Bill with some suspicion. That is only natural, because industry has practised these restrictive measures for so long that it will naturally seek to preserve as many of them as it can. One prominent member of a trade association said to me, when the matter was first being discussed, that he had the choice of either accepting the Bill or of going to the Temple and trying to find a way round it. I think that, as a matter of fact, he went to Lincoln's Inn.
It is no secret that a number of very prominent company lawyers have already been retained, and quite properly, by trade associations to advise them of possible ways in which they might get round the Bill. I do not make any complaint about that. Obviously, if Parliament passes a law, it is open to anyone to get round it if they can do so, but we have a responsibility to see that there are no such loopholes.
Before we pass this subsection, I think we ought to know very clearly that there is no possibility of a loophole being used through the various complications of company formation and so on. We all know that it is possible, by having a series of subsidiary and holding companies, and starting with a 51 per cent. holding and £1,000, with ten such companies to be controlling a concern worth perhaps £.100,000, and, with non-equity shares, perhaps a much bigger capital holding still.
It seems to me that in any industry or trade it might be possible to get some very phoney holding companies which would give them a way of avoiding registering their practices under this Bill. I am quite sure that it would be the wish 2101 of both sides of the Committee that we would not want, perhaps through an oversight, to let that kind of practice emerge, and I should welcome from the President an assurance on what the purpose of these two lines is intended to be. If we are to have a strict interpretation of the Companies Act, they seem to be unnecessary, and, if we are not to have a very strict interpretation, it is a fact that it is likely to lead to many new holding companies. This Amendment may be the wrong way of dealing with the point, as I think there is on the Notice Paper an Amendment dealing with amalgamations being approved in the case of inter-connected companies, and having to get the sanction of the Board of Trade. We should like an assurance that this matter is under consideration.
§ Mr. P. Thorneycroft
We have now reached the stage in the Bill which deals with excluded matters. So far, we have been dealing with what has been in the Bill, but now we are coming to what is left out. May I say that I agree entirely with what the hon. Member for Sheffield, Park (Mr. Mulley) has just said. We need to watch this Clause very carefully in order to see that we do not let something out which the whole Committee feels ought to be left in.
There is another thing which we ought to watch. We do not want to make registrable every ordinary commercial arrangement in this country. We do not want to do that, because it is not policy to do so, because we might ruin the chances of getting any effective implementation of the policy of the Bill if we attempted to do that.
Clause 6 (1) excludes the nationalised industries, and quite rightly. Parliament has decided that they are nationalised, and if Parliament ever wants to denationalise them, Parliament can do so, but we cannot refer them to the Court to decide that.
It also excludes, secondly, matters which are expressly authorised by Statute. Again, quite rightly, because Parliament has passed some Act, whether it be the White Fish Authority Act or whatever it may be, and has expressly authorised some acts to be done by Statute—and no one would suggest that that ought to be within the compass of the Bill—
§ Mr. Mulley
I am sorry to interrupt the right hon. Gentleman, but I was not 2102 suggesting that the first two categories should be excluded.
§ 10.15 p.m.
§ Mr. Thorneycroft
I appreciate that. I was, perhaps, rather straining the case, but I want the Committee to be clear what we are doing. We are excluding all things which obviously ought to be excluded.
I come to the third category which, in my submission, equally obviously ought to be excluded—partnerships or interconnected bodies corporate. If we included them there would be a flood of registrations. Every partnership in the country would be registered. Of course, those partnerships amount to agreements, and most of the agreements would be caught by Clause 5, but the last thing that we want to do is to submit the maze of ordinary commercial arrangements to the examination of the Court or any tribunal. The same applies to inter-connected bodies corporate, which, as the hon. Member very fairly said, have to come within the compass of Section 154—I think it is—of the Companies Act to qualify. If they are entities for that purpose we want them—and it is our purpose to see that they are—outside the Bill. If they are big and very dangerous in that way they will be caught by the Act of 1948, which is still preserved.
This is a new and difficult piece of machinery that we are constructing, and I would ask the Committee to be careful with it. While we must be careful not to let out any range of agreements we must legitimately catch, we must, at the same time, be scrupulously careful not to overload the Registrar and the Court with the maze of ordinary commercial arrangements which could not be submitted to it or to the House.
§ Mr. Mulley
Would the right hon. Gentleman give some instances of restrictive agreements which he thinks ought to be included and instances of others he thinks ought not to be included? It is possible to have a group of companies under the control of a board of directors of only one of the companies. Will he gives examples of restrictive agreements between partners? It is all very well to say that we may overload the Registrar, but the Amendment does not necessarily involve doing that, and I think we want a more lucid answer to it before we can let the matter go.
§ Mr. Thorneycroft
It may be that partnerships would not require to be covered, and if they did not, it would not matter very much if they were excluded. We should not be doing any great damage by excluding them, but I can imagine a case of inter-connected bodies corporate, such as a holding company with subsidiary companies, which would have agreements about some of the matters mentioned in paragraphs (a) to (e) of Clause 5 (1) about what the prices of their goods should be, etc.
If such a group were a monopoly and controlled more than one-third of the trade in which it was engaged, there might be a case for having it examined by the Monopolies Commission, but we cannot have a situation in which all the internal affairs of companies or partnerships are to be examined by the Court. It will have a busy enough time without delving into all of those.
§ Mr. Gresham Cooke
I can give the hon. Member for Sheffield, Park (Mr. Mulley) a very simple example. It could arise in his own city. Suppose a large steel company had acquired two subsidiary companies, both of which made springs. For economy's sake there could be an agreement by which one of the subsidiaries specialised in large springs, springs for the railways, for instance, and the other company specialised in smaller springs, springs for watches, let us say. The holding company would bring the two subsidiaries together and they would draw up a schedule laying down which company would supply springs for one industry and which subsidiary would supply springs for another, the watch industry, let us say. That would be a carefully drawn and sealed agreement between the subsidiary companies.
That is of the sort of ordinary commercial arrangements from which there are many benefits in securing increased production of specialised products, ordinary commercial arrangements which no one would want to see registered under the Bill.
§ Sir L. Ungoed-Thomas
There has been a useful discussion on this matter. I agree with what the President said about the inter-connected bodies corporate. Of course, my hon. Friend the Member for Sheffield Park (Mr. Mulley) realised that between inter-connected 2104 bodies corporate there might be an arrangement of this kind. But what we are all concerned about is that this exception should be used as a let-out for avoiding registering in cases where registering really should take place. That is the whole purpose of bringing the Amendment forward for discussion.
I am in some difficulty still about finding a case where persons carrying on a business partnership would, as partners between themselves in the course of carrying on that business, make agreements or arrangements which would bring them within Clause 5. It is a little puzzling, whereas it is quite easy to see that some kind of arrangement might be made by members of an association or between various people whereby they made a partnership and, therefore, excluded themselves from the operation of Clause 5.
I agree that there is a balance of difficulty here, because one does not want to hit at inter-connected bodies corporate or partnerships where a perfectly legitimate purpose is involved. If the President of the Board of Trade would clear the partnership point particularly, we would be obliged, because that is the aspect of the case which, so far, has not been covered by the right hon. Gentleman.
§ Mr. P. Thorneycroft
There is some force in what the hon. and learned Member says. It is difficult to conceive of a case of partnership having restrictions of this kind. If there were such restrictions we are all agreed they should be excluded, because one cannot have a partnership being examined in this way for the purpose of the Bill. If there are no such restrictions, it really does not matter. Their exclusion here will do no harm. I will certainly think over the point which the hon. and learned Member makes, but for the time being I suggest that we make it clear for caution's sake that neither the interconnected body corporate nor the partnership should be caught within the mischief of Clause 5.
§ Amendment, by leave, withdrawn.
§ The Chairman
I think that it would be convenient to discuss with the Amendment the proposed new Clause entitled "Licences to amalgamate".
§ Mr. Wade
I agree, with respect, Sir Charles, that the Amendment should be considered in conjunction with that proposed new Clause, which is on the Order Paper in my name and the name of my hon. Friend the Member for Bolton, West (Mr. Holt).
This is a rather formidable subject to raise at this hour. It would perhaps be easier to talk on it for an hour rather than for about ten minutes, but I shall endeavour to exercise restraint. I am moving the Amendment primarily to draw attention to an aspect of restrictive trade practices and monopolistic trends which in my view does not receive adequate attention.
I appreciate the difficulty which the President of the Board of Trade has to face in considering how to deal with industrial empires. I agree with the right hon. Gentleman that it would not be practicable to apply the procedure of registration and examination by the Court to an agreement between different parts of an inter-connected body corporate. The arrangements of such a body are matters of internal organisation into which the Court set up by the Bill could not very well be expected to inquire, but it does not follow that nothing can be done by the large combines, and I do not think it follows that no consideration should be given to one of the serious consequences which may follow the passage of the Bill, namely, the encouragement to firms to merge.
It has been recognised for a long time by those who have studied this problem that procedure of the kind envisaged in the Bill will not alone suffice. In order that it should be effective some attention must be paid to the problem of amalgamation. It may seem a revolutionary proposal in this country to suggest that there should be some form of licensing before mergers are permitted, but the problem must be faced.
Only recently I returned from Luxembourg, where I had some interesting conversations with members of the High 2106 Authority of the Coal and Steel Community and with members of its staff. It seems clear that those who were responsible for drawing up the Treaty establishing the European Coal and Steel Community recognised the fact that some provisions must be made. It was recognised that, in addition to drawing up provisions for dealing with restrictive trades practices, something must also be done about mergers, and that the provisions for dealing with restrictive trade practices would not be effective if mergers could take place without regard to the effect which they would have on the policy of the High Authority, namely, that of creating a common market and encouraging competitive enterprise.
I shall not quote from the Treaty, although I had intended to do so. This point is dealt with in Articles 65 and 66. The relationship between a policy dealing with restrictive trade practices and the problem of mergers is shown, and the conclusion is reached that there must be some control over mergers if the provisions dealing with restrictive trade practices are to be effective.
The proposal that I am putting forward is a modest one. I am raising this matter primarily to draw attention to a weakness in the Bill, namely, that the unintended effect may be to encourage firms to merge in order to avoid the obligation to register. The conditions which would have to be satisfied under the proposed new Clause are reasonable ones. If the principle were accepted, other provisions might have to be added. For instance, I should welcome the insertion of a provision that there should be an appeal to the Court from a decision of the Board of Trade.
In this country we prefer to find a precedent if we can. There is something which has some bearing on this subject and which might be regarded as a precedent. As the Minister knows, when applications are made by a company for a change of name, permission has to be obtained. I understand that the applications are considered more carefully than they used to be because of the practice of buying up companies in order to get taxation benefit resulting from losses. That is on all fours with this point, and I can see the day when it may be necessary to introduce a system whereby an application has to be made for permission 2107 to merge before a merger is permitted.
Something along those lines may have to be adopted if we are to overcome the inherent weakness in the Bill, namely, that it may have the effect of encouraging firms to amalgamate in order to avoid the necessity for registration.
§ 10.30 p.m.
§ Mr. Walker-Smith
The Committee may have thought, from the way in which the hon. Member for Huddersfield, West (Mr. Wade) moved his Amendment, that he was not very optimistic of is commending itself to the judgment of the Committee. It certainly is, as the hon. Member himself confessed, a very revolutionary proposal to subject every process of amalgamation of companies so as to become an inter-connected body corporate within the meaning of Section 154 of the Companies Act, 1948, to the procedure of investigation and licensing by the Board of Trade. As the hon. Member and the Committee will know, there is no existing power for such licensing, and it follows from that that there is no machinery or procedure within the Board of Trade with which to apply the sweeping proposal which the hon. Member suggests.
As the Committee will appreciate, the provisions of subsection (2, a) of the new Clause would impose on the Board of Trade a very difficult judicial function indeed. That being the case, I think that the Committee should be concerned to consider how far such a very difficult and novel departure would be justified in the event.
The hon. Member seems to expect a possible crop of amalgamations to avoid the necessity of registration of restrictive agreements within Part I of the Bill, but the Committee will appreciate that so far as restrictive trade agreements are concerned, they are effective in the ordinary way in proportion as there is a multiplicity of parties in them so as to create a really effective restriction.
It follows from that that the mere amalgamation, for example, of two companies which happen to be parties to a restrictive trade agreement would not of itself have any great effect in that way, because two companies with an agreement between themselves, if they are relatively small companies, would not 2108 have any appreciable effect in restraint of competition. If, on the other hand, they are large companies, and they amalgamate to produce a still larger unit, they enter into the other sphere which is covered by Section 3 (1, a) of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, and as such they then become liable to investigation by the Commission; because what is then at issue is not the effect of agreements, but the conduct of a single entity.
Therefore I hope that the hon. Member, having raised this matter, properly and in a lucid manner, will be reassured that the danger is less than he anticipates, that there is this other power to deal with monopoly power proper under the 1948 Act, and that that being so, this very novel and difficult machinery should not be incorporated into our company law.
§ Mr. Mulley
I was rather surprised that the Parliamentary Secretary seemed to base most of his objection to the Amendment on the ground that it was novel and, perhaps, revolutionary. I rather suspect that in private meetings in rooms upstairs similar words have been applied by his hon. Friends behind him to the whole body of the Bill. Surely, the test as to whether it is good should not be whether it is novel or revolutionary if we are really to do something about making British industry efficient. I agree that there may well be more powerful arguments of a practical character, but they were not deployed by the Parliamentary Secretary with his usual force and lucidity.
There may well be an increase in amalgamations if the parts of the Bill aimed at eliminating restrictive practices succeed. That has been the recent experience of the European Coal and Steel Community, which has been pursuing a policy of eliminating selling cartels on lines similar to those we have in mind, and it has been found that there is a considerable tendency for firms to amalgamate as a consequence. If one breaks up a cartel, it is a natural result to find the firms going towards monopoly.
What is suggested in the Amendment may not be the right way of going about the matter, but there is substance in the point, and the matter should be watched. I am sometimes worried when things are brushed aside by Ministers who have 2109 to see that Measures work. We cannot dismiss everything because it is revolutionary or because it is thought that it will not happen. If we had twenty Clauses in the Bill which did not work but which meant that we had covered every loophole, the additional provisions would have been well worth while.
Like the Parliamentary Secretary, the organisations concerned have very good legal advice, and if the Bill succeeds there will be a tendency towards amalgamation, and we should, therefore, ensure that all loopholes are stopped. The matter deserves the attention of the Committee. Although we cannot be sure about certain events taking place, this is a new field, and we should be prepared for all kinds of eventualities. If, when the Bill became an Act, we found that a single loophole remained uncovered, we should have spent all this time on the Bill without achieving our objective.
§ Mr. E. Fletcher
I was sorry that the Parliamentary Secretary appeared to belittle the fears which have given rise to the Amendment. The President will appreciate that this is not an easy subject to deal with, and it may well be that the Amendment does not provide the best method of dealing with the problem. I hope that the President will give thought to the matter at a later stage of the Bill. He must realise, as has been pointed out in many sections of the Press, that one of the likely results of the Bill will be a tendency for large companies to amalgamate.
I will give only one example. I shall not deal with it at any great length because we shall have to say more about it when we come to the provisions relating to resale price maintenance. The President must be aware of the dilemma in which he finds himself as a result of later Clauses dealing with that subject. That has a bearing on the Amendment.
Whereas he is, quite properly, banning collective resale price maintenance, he is leaving individual resale price maintenance and making such contracts enforceable, even against persons who were not parties to the original contract. It is highly likely that one result of the later Clauses will be that in the case of an industry in a relatively small number of hands—the tyre industry is a good example, although there are three or four large companies engaged in that industry 2110 —if the present practice of collective resale price maintenance is stopped by the Bill there will inevitably be a tendency for the firms to amalgamate in some way in order to obtain the benefit of individual resale price maintenance.
The President knows that that is the sort of thing with which we are concerned tonight. Whereas, as I say, I have some doubts whether this Amendment is the best way of dealing with the problem, there is no doubt that it is a very real problem. I should have felt happier if the Parliamentary Secretary had said something which indicated that he was aware of the difficulty and that he was sympathetic to our efforts to find a solution to it. It is no use deceiving ourselves about this matter. Unless some solution is found to the very real problem before we finish the Committee stage of the Bill, the Bill will be wide open to abuse.
§ Mr. Roy Jenkins
I think that the Parliamentary Secretary was a little complacent in his attitude towards this Amendment which, I think, raises a very important point. Like my hon. Friend the Member for Islington, East (Mr. E. Fletcher), I am not sure that I would go all the way with the hon. Member for Bolton, West (Mr. Holt) and, in particular, accept the detailed provisions of his new Clause or say that they would work in the form in which they are put forward. But I think that there is a real point of substance here, namely, that while the Bill proposes to make it harder for there to be a cartel, it will encourage people to have a trust in place of a cartel.
What my hon. Friend the Member for Islington, East said about Clauses 19 and 20 was very relevant to this point. There is the great danger that amalgamation will be encouraged for purposes of defeating this Bill. I thought, in particular, that the most unconvincing part of the Parliamentary Secretary's reply was his view—this was the impression which he left with the Committee—that it does not matter too much if there are amalgamations as a result of this or any other matter because if it is amalgamation leading to fairly small results there will not be increased restrictive practices to any great extent. On the other hand, if it should be on a large scale it could perfectly well be dealt with under the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948.
2111 I am bound to say that this seems a most extraordinary argument. It is perfectly true that the Monopolies Act exists as a method for dealing with monopolies which have more than 33 per cent. of the market, but surely our previous experience would not suggest that we should be satisfied with that position. What about the tyre industry, about which we all hear a good deal? That industry is in a position in which it can be dealt with under the 1948 Act. It has not been pushed there by this Bill. It has been there a long time. But the fact that we have a report does not mean that automatically we have dealt with all the problems of the tyre industry.
We are still less likely to deal with the problems of those industries which may in future be pushed into that position. Therefore, I hope that the President will say a word on this point to meet some of the genuine fears which we hold, and will assure us that the Bill will make it a little less possible to have cartels. I am sure the Government do not view with complacency amalgmations which result in the creation of monopolies within the terms of the 1948 Act, merely because that Acts exists. If that is so, while we may remove certain things from the purview of the Bill and make a little less congestion in that way, we shall greatly increase the amount of congestion under the 1948 Act.
§ 10.45 p.m.
§ Mr. P. Thorneycroft
We are indebted to the hon. Member for Huddersfield, West (Mr. Wade) for moving the Amendment, because it raises a point of real importance, and one which everybody who has studied the matter is conscious of, namely, the fact that the more effective legislation is in dealing with the ring, the more danger arises that firms may amalgamate and move into the monopoly field. Everybody knows that that problem exists, and I do not think that anybody has a really perfect or watertight solution. The hon. Member for Huddersfield, West very fairly said that the Amendment was intended merely as a basis upon which the argument could proceed.
We have had a useful discussion upon the matter, and I think we all admit that the problem exists. There are various 2112 methods by which it may be dealt with—there is, indeed, the 1948 Act—but none of these methods is completely satisfactory. I hope that in view of our discussion, and with the assurance I can give that we are conscious of the problem, the hon. Member will agree to withdraw the Amendment.
§ Mr. Wade
I raised this subject in order that it might be aired. We have done well to discuss the matter in just over half an hour. I was not entirely happy about the speech of the Parliamentary Secretary, who seemed to be rather overconfident about the safeguards provided by the procedure under the 1948 Act. I do not share his confidence upon that subject. The subject has been considered by the Committee, however, and I therefore beg to ask leave to withdraw the Amendment.
§ Amendment, by leave withdrawn.
§ Mr. P. Thorneycroft
I beg to move, in page 5, line 42, at the end to insert:(2) This Part of this Act does not apply to any agreement which constitutes or forms part of a scheme certified by the Board of Trade under Part XXIII of the Income Tax Act, 1952 (which relates to contributions and payments under schemes for rationalising industry).This does not concern a very important point, but it is one which we should get out of the way when dealing with exceptions to what is registrable. The Amendment deals with redundancy schemes, and where the Government approve of a redundancy scheme I think that it would be better to exclude it from the Bill; otherwise we are bound to have a conflict between the Government's decision, which is debatable in the House, and the decision of the Court. I believe that there is an absolute safeguard here, and I do not believe that it would be anybody's wish to have a conflict of the kind to which I have referred.
§ Sir L. Ungoed-Thomas
This refers to the case where the Board of Trade makes a decision upon the ground of national interest and the Minister thinks that a rationalisation scheme should be approved. As hon. Members on this side of the Committee have been pressing all along that the right body to make these decisions upon grounds of national interest is the Government and not the Court, we welcome the Amendment.
§ Amendment agreed to.2113
§ The Deputy-Chairman (Sir Rhys Hopkin Morris)
It may be for the convenience of the Committee to take together with this Amendment the further Amendments, in lines 43, 44 and 45: in page 5, line 43, leave out "contract for the sale" and insert "agreement for the supply"; in line 44, leave out "of" and insert:supply or purchase of goods, or for an option to sell supply or purchase";in line 45, leave out from "manufacture" to end of line 47 and insert:to goods, not being an agreement under which restrictions in respect of transactions of the same description are accepted by two or more parties".
§ Mr. Mulley
Since time is precious, I do not want to elaborate the point of the Amendment. It was put down in order to try to discover from the President what subsection (2) means, because its meaning is by no means clear. We thought it would be valuable if he could tell us exactly what it means in less legal language.
§ Mr. P. Thorneycroft
I welcome the opportunity to say a few words on this subsection. Clause 6 (2), as drafted, is intended to exclude the ordinary contract of sale. Before we deal with the drafting, I hope that on the merits at any rate the Committee will agree that we certainly ought to exclude the ordinary contract of sale. It may well be that in a contract of sale there are mutual restrictions, but everybody would agree that if we so drafted the Bill that contracts of sale were registrable we should not see the start, let alone the finish, of the operations on which we are engaged for dealing with restrictive practices.
I have put down Amendments on behalf of the Government, and these are being discussed with the Amendment of the hon. Member for Sheffield, Park (Mr. Mulley). I fully realise that he put his Amendment down simply for the purpose of promoting a discussion. The reason we cannot accept it is that it would mean that all contracts of sale would be registrable.
§ Mr. Thorneycroft
I put down some Government Amendments, and I should like to explain their purpose. It is to extend the exception to a rather wider type of transaction. We think that it is not enough to exclude contracts of sale. We should exclude sole agency arrangements and forward selling agreements. They are not contracts of sale, but they are very common and very ordinary arrangements in business circles. We certainly do not want them all put on the register; it would be chaotic if we had them all there.
A manufacturer may say to a retailer, "You agree to sell only my goods and I agree to sell only to you". It is the commonest form of arrangement between manufacturers and traders throughout the country. It is a normal and reasonable trading practice. I can imagine circumstances in which there was a monopoly exercising monopoly powers in this way. This would be suitable to be dealt with under the ordinary monopolies arrangements, but it would be hopeless to try to register all these arrangements.
The agreement is two-sided. The seller says that he will supply only to that particular retailer and the retailer agrees that he will stock only goods of that particular seller. The transactions subject to restriction are different. The supplier agrees not to supply other retailers and the retailer agrees not to buy from other manufacturers. They are different types of transaction in respect of which the restriction is accepted.
The second type of agreement is where there is no contract of sale but there may be a long-term contract to buy. The users may agree to buy 80 per cent. of their requirements from a particular manufacturer, and the manufacturer, in return for a long-term arrangement of that kind, agrees to sell at a fixed price. It is not strictly a contract of sale, I have been informed—I think rightly—but a long-term arrangement for dealing with trade of that character.
I hope that the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) will follow this point, because it is rather complicated. The restrictions here affect different types of transaction. One restricts the purchase of the goods from other manufacturers by agreeing, "I will take 80 per cent. from you." The second affects the price 2115 charged to the retailer or user. They are restrictions affecting different types of transaction. If it is agreed that we should exclude these agreements—a large mass of agreements—the simplest way to do it is by means of the Amendments which I have put on the Order Paper. This is done first of all, by extending "sale" to "supply." That is a fairly obvious way. Instead of having "contract for the sale" we should have "agreement for the supply," which will cover sole agency arrangements and long-term agreements. Next, by ensuring that at least two of the parties accept the same kind of restriction; that is to say, we would exclude the case where one person says, "I accept the kind of restriction which merely limits me not to buy from other manufacturers," while the other accepts a different type of restriction about the price at which he sells. In order to come within the mischief of Clause 5, one must have two people who accept the same kind of restriction in respect of the same kind of transaction.
I think that the Amendments do what we seek to do. First, I hope that the Committee will agree that we should exclude the contract of sale. Secondly, I hope that the Committee will agree that we do not want to have on the register the sole agency arrangements and the long-term agreements. I believe that these Amendments achieve that aim. As the subsection stands, it excludes the contract of sale, but it is necessary to have these Amendments to exclude the sole agency and long-term selling arrangements.
§ Mr. E. Fletcher
This is the most difficult Amendment with which we have had to deal today. Clause 6 (2) in its original form is completely unintelligible, and I am not surprised that the President of the Board of Trade wants to change it. I have had several letters protesting about the language of the subsection. The Secretary of the Urban District Councils Association wrote to say:My Law and Parliamentary Committee, the Association's Parliamentary agents and myself have read and re-read sub-clause 2 of Clause 6 of the Bill and fail to comprehend what it is intended to provide. It is observed that an Amendment has been put down in the names of several Members to delete sub-clause 2, and the Law and Parliamentary Committee asked me to approach you with a view to the debate 2116 on that sub-clause being utilised to make the Government say what they think the clause does.I have had several similar letters.
In all fairness to the President of the Board of Trade, I think that he has done his best, but in my view the Clause as he now proposes to re-write it is far more unintelligible than it was originally. I doubt whether a single hon. Member opposite understands what it means or could give a clear analysis of it. I would prefer to wait until the Committee stage is resumed in order to read what the President says he thinks the Clause is intended to do, because it is very difficult to follow what he said. My first impression is that it does not do anything like what the right hon. Gentleman things it does, but makes matters far worse and more unintelligible than they are at present.
I should like to illustrate what I mean. The first Amendment leaves out "contract for the sale" and inserts "agreement for the supply" and the President thought that necessary to achieve his end to extend the scope of the words, "contract for the sale." It was implicit from what the President of the Board of Trade said that "contract for the sale" of goods will be covered by his new phraseology "agreement for the supply" of goods. But that is a complete fallacy. One can have an agreement for the supply of goods, or one can have a contract for the supply of goods. The two are totally different. If one buys a piano, one buys it and does not enter into an agreement for the sale of it.
§ 11.0 p.m.
§ Mr. Philip Bell
The difficulty of "contract for the sale" is that one cannot sell something that does not exist; but if one makes an agreement to supply, one can, for example, supply a motor car one has got or one builds; but one cannot contract to sell a motor car one has not yet built.
§ Mr. Fletcher
There is a diversity of commercial transactions one can enter into if one wishes. The problem here is to define what is meant, and the problem of the right hon. Gentleman is to put the matter into intelligible language.
§ Sir Lionel Heald (Chertsey)
Does the hon. Gentleman suggest that an agreement for supply does not include a contract for sale?
§ Mr. Fletcher
In a Clause of this importance it is desirable that it should be made clear that it does. What I am suggesting is that what the President wants to do here should be done in intelligible language. His first shot was wide of the mark, and I do not think his second shot is any better. I do not think the President will ask the Committee to accept his assurance that his new phraseology gives effect to his objective. I think it will need a great deal of further consideration not only by this Committee but by the various organisations and bodies up and down the country. I would like to hear what they say about it before the Committee is asked to accept this.
§ Mr. P. Thorneycroft
There is no question that an agreement for supply does cover a contract for sale. The purpose of this Amendment is quite simple: namely, to extend the ordinary contract of sale to the sole agency and the long-term agreement.
I think there is some force in the point made about the clarity of the drafting. I am satisfied that these Amendments do achieve the end I have in mind. I agree that it may prove possible to do this in a better way. I think there is some confusion, judging from the letters I have received, as well as those received by the hon. Gentleman the Member for Islington, East (Mr. Fletcher). I would suggest to the Committee that it should accept these Amendments, but I will certainly bear in mind the very powerful and pertinent points which have been made. Not only do we want a Clause in this Bill which carries this matter out, but it must carry it out with reasonable clarity.
§ Sir L. Ungoed-Thomas
I am not quarrelling with the objective which the President has in mind. I think I would be happier if the sale agency in the long-term contracts were defined as such instead of being covered by the omnibus term "agreement for the supply". Once we give such an omnibus term, goodness knows what can be hitched up with it. I would approach the term "agreement for the supply" with some hesitation.
2118 What we are particularly concerned about here is how far the object of the Bill can be defeated by bringing an arrangement within this subsection. That is our primary purpose in moving the deletion of the Clause after being satisfied as to its exact meaning.
May I put this specific case to the right hon. Gentleman? Imagine an agreement between A, B and C for the supply of something, subject to terms which are within subsection (5)—agreement as to price, agreement as to the area, or anything of that kind—but an agreement in this form: that A, B and C agree to self to D—which may, indeed, be a company put up by A, B and C. There one has an agreement for sale, conditions: attached to goods which are the subject of the agreement to sell but nevertheless obviously within the objection aimed at by subsection (5). Because if the arrangement had been made between A, B and C for a contract to sell the goods to D, but merely an arrangement that on any sale of goods by A, B and C then the conditions would apply, it would obviously be within the iniquity of Clause 5. It does not, therefore, escape Clause 5 by canalising the goods through a contract of sale to which A, B and C are parties and D who is the purchaser, and attaching thereto, of course, conditions within Clause 5.
I have thought a good deal about the subsection as it stood originally in the Bill, but on the whole I think that the case I have put would come within the subsection and would therefore escape the provisions of Clause 5 when it should not do so. Does the same thing apply under the Amendment? Because what we are concerned about is giving a loophole to subsection (5) by arrangements which could come within subsection (2) of Clause 6, although we recognise that there may be perfectly legitimate transactions which ought to be excluded. But if those legitimate transactions are to be excluded, this should be in terms which are intelligible to anybody reading them, and which are limited to those legitimate transactions and do not allow the subsection to be used for the purpose of driving a coach-and-four through Clause 5.
§ Mr. P. Thorneycroft
I sympathise with the sentiments expressed by the hon. and learned Gentleman. We do not want to draft this Clause in a way which would 2119 allow something which ought to be within the mischief of the Clause to get out. In the case of the three suppliers, A, B and C, instanced by the hon. and learned Gentleman, there is no doubt that if that were mutually restrictive—if there were an arrangement for a common price—I am taking this by stages—as to anything from paragraphs (a) to (e) of subsection (1), that in itself would be registrable. That is the important thing to register—to try to get at the root agreement between the three men. They will not evade the need to register that arrangement simply by entering into a contract of sale, because it will be a mere application of the root agreement which they have reached.
I must confess to the hon. and learned Gentleman that I am a little anxious. I think that the contract of sale itself in that case is also registrable, which I think may please him. I think it is for consideration whether it really ought to be. I am not sure, when we come to look at this even more closely, that it would not be better to concentrate on the root agreement itself, and not to try to catch up any of the individual contracts of sale done under it.
However, we need not concern ourselves with it at the moment. The answer to the hon. and learned Gentleman is a satisfactory one, that the Amendments put down here are not such as to evade for these people the mischief of subsection (1) of Clause 5.
§ Lieut.-Colonel Wentworth Schofield (Rochdale)
I support my right hon. Friend's Amendment simply because it covers almost completely the next Amendment, which I have put down, and to some extent—I am not quite sure to what extent—another Amendment of mine, in page 6, line 6, where I propose a new subsection. I would ask my right hon. Friend, however, what the precise effect will be of the Clause when it is amended.
This subsection (2), when amended, will read as follows:This Part of this Act does not apply to any agreement for the supply of goods, or for the application of any process of manufacture to goods, not being an agreement under which restrictions in respect of transactions of the same description are accepted by two or more parties.2120 It would seem that the subsection in its amended form will have the effect of removing from this part of the Bill any contract for the supply of machinery or equipment on lease or hire; but I cannot quite see whether it will take out of the Bill certain hire-purchase arrangements or lease arrangements which involve certain conditions. For instance, there are some agreements under which the rates of hire payments for machines vary according to the quantity of articles which are manufactured by those machines. It is commonly provided in such a lease arrangement that during the period of the lease any spare parts or new parts which are required to keep the machine in full working order must be obtained from the supplier of the machine or the equipment. I hope that I am right in assuming that, despite the conditions of leases such as those, they will be taken out of Part I of the Bill. I should be glad if my right hon. Friend could give me a definite assurance to that effect.
There is nothing new in the practice of leasing machinery or equipment. It is a practice which is widely adopted in many industries throughout the country. Many examples could be found—for instance, in the boot and shoe industry; packaging machinery; textile machinery; business accounting machinery; sound recording machinery; machinery for earth moving; scaffolding; and a host of other sorts of machinery. I cannot believe that the Registrar would wish to have his register cluttered with agreements dealing with such matters as these, and I hope my right hon. Friend will be able to assure me that the Clause, when amended, will exempt agreements of that kind.
§ Mr. Jay
I understood the right hon. Gentleman to tell us when we were debating Clause 5 that the sole agency agreement would be excluded from the scope of the Bill, but he appeared to say in this discussion that it was necessary to have these Amendments of his to this Clause to exclude sole agency agreements. If they are excluded by the word "mutual" in Clause 5, why do they have to be excluded again?
§ Mr. P. Thorneycroft
The answer to that is the way this has been drafted. As I said at the beginning of our discussion today, we are drafting the Bill so as to 2121 provide in Clause 5 for what is to be included and to provide in this Clause for what is to be left out. It could be argued that it was clearly excluded under Clause 5. It is thought that for clarity in this matter—and that is what is being sought—we should make it clear beyond peradventure in this Clause that the sole agency is out.
If I might answer my hon. and gallant Friend the Member for Rochdale (Lieut.-Colonel Schofield), who raised the other points, I think the purpose of his Amendment is really covered by this in its entirety. I am not talking about where people accept mutual restrictions to make arrangements of this kind—and a number of manufacturers are doing that—whether for sale, hire, or anything else, but to expedite a contract of sale. That is not included. We want to intend to exclude both the sole agency agreement and contract for hire, which is also an agreement to supply. There is no reason why they should not be treated in exactly the same way, and that is why we have somewhat widened these phrases, so that these normally cover arrangements which really should be kept out of the register, and I think it is important that they should.
§ Mr. Hector Hughes
It seems to me that one of the essential differences between an agreement for "the supply of" and a contract for "the sale of" goods is that one is for valuable consideration and the other need not necessarily be so. I am sure that the hon. and gallant Gentleman the Member for Rochdale (Lieut.-Colonel Schofield) will agree that a contract for sale of goods must be a contract for the sale for valuable consideration, while an agreement for the supply of goods need not necessarily be that.
An agreement for the supply of goods may be an agreement for the sale of goods, and I am not at all satisfied with the Minister's explanation, which did not persuade me. It seems to me that he has rather slavishly taken this phrase—"agreement for the supply"—from Clause 5. He has told us many times this evening that one is the in-Clause and the other the out-Clause. Five is the in-Clause and contains the expression "agreement for the supply." Six is the out-Clause and contains, to his astonishment apparently, the phrase "contract 2122 for sale." Having made that astonishing discovery in Clause 6, he lifts the phrase "agreement for the supply "from the in-Clause 5 and puts it into the out-Clause 6, so that they will be in accord with each other.
But the right hon. Gentleman did not give us any explanation. He did not give the explanation, which is the true one, either (a) that one copies from one Clause into the other, or (b) that he realises a contract for sale must be for valuable consideration. He offered to the Committee some astonishingly complicated argument about the supply or arrangement for the long-term supply of goods. It is obvious that the long-term or the short-term supply of goods has nothing to do with it. One may have a contract for the sale of goods which is a long-term one for valuable consideration, or a contract for the sale of goods for a short-term duration, both for valuable consideration.
The Minister seemed to think that because one has an arrangement for the supply of goods at some distant point of time, therefore it is not a contract for sale. That is not true at all, and it would be far more persuasive of him to admit that he has just realised the discord between the in-Clause and the out-Clause. The in-Clause has this phrase, which he now seeks to import into the out-Clause, and in doing that he is perfectly logical and would be almost persuasive.
§ Sir L. Ungoed-Thomas
It has been useful to consider these Amendments. It is an extremely difficult matter to follow, and I feel, like my hon. Friend the Member for Islington, East (Mr. E. Fletcher), that it is almost impossible to come to any clear-minded conclusion at this stage. We should certainly want to consider carefully what the President of the Board of Trade has said.
In the illustration which I gave, if the line could be drawn in what the President called the "root" arrangement and the contract of sale, even though the root arrangement did not appear anywhere except in the contract for sale, there would be a good deal to be said for his argument; but I am not at all satisfied that that can be done.
Time is getting on, and I think the convenient course would be to accept the Amendments for the time being. The 2123 President has said that he will look at the drafting aspect before Report, at which stage, having had the opportunity of considering what has been said in this debate, we can then see how far these various Amendments carry out what is really our purpose.
§ Mr. Mulley
I find myself in a little difficulty. Before this discussion began I thought I understood the first three lines of the subsection, but after the discussion I am not at all sure that I understand anything of it. I stress upon the President of the Board of Trade that people have got to follow the Bill when it leaves the House, and firms and associations must be advised on how they stand for the registration of goods. It is important, therefore, to look at this matter carefully so that we can send out a form of words that is more intelligible than the present wording. If we all want the Court to get on with its proper job, it must not be held up in having to go to another court to discover what the new Act means.
In view of the President's conciliatory mood today, it would be more than I can do to press the Amendment, and in view of his assurances in addition, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Amendments made: In page 5, line 43, leave out "contract for the sale" and insert "agreement for the supply".2124
In line 45, leave out from "manufacture" to end of line 47 and insert:
to goods, not being an agreement under which restrictions in respect of transactions of the same description are accepted by two or more parties".—[Mr. P. Thorneycroft.]
§ The Chairman
The next Amendment to be called will be the second Amendment on page 2798 of the Order paper, in the name of the hon. Member for Islington, East (Mr. E. Fletcher) in page 6, line 1, to leave out subsection (3).
§ Sir L. Ungoed-Thomas
I beg to move, That the Chairman do report Progress and ask leave to sit again.
We have had a long and rather stiff discussion about all this, and I think we are on the brink of the "silly season". It would be as well if we came with fresh minds to the further work that has to be done. I hope, therefore, that the Government agree that at this stage the best course is to report Progress.
§ Mr. P. Thorneycroft
I agree with the Motion. We have made some progress with two of the most complicated Clauses in the Bill. We have got through a considerable portion of both of them. I would like to have concluded them both, but I think we will probably make better progress next time if Progress is reported now.
§ Committee report Progress; to sit again upon Monday next.