§ 4.2 p.m.
§ The Secretary of State for Industry, Trade and Regional Development and President of the Board of Trade (Mr. Edward Heath)I beg to move Amendment No. 31, in page 3, line 28, to leave out "six" and insert "twelve".
This is the first of a number of Amendments to Clause 3, which deals with loss leadering. No doubt we shall have an opportunity to discuss the matter fully when we come to a later Amendment on the Notice Paper. Therefore, I will confine my remarks to this specific point.
The Amendment extends the period after loss leader selling during which a supplier is entitled to withhold goods from six months to 12 months. I think, therefore, that hon. Members who want to take action about loss leadering will agree that this will be an improvement to the Bill. It takes account of certain types of goods which are sold at only one period of the year for a particular season or purpose. We have come to the conclusion that this would not be covered by the original arrangement in the Bill of a six-months period, but that it would be covered by a 12-months period. I hope that the Committee will accept the Amendment.
§ Mr. Charles Loughlin (Gloucestershire, West)Would the right hon. Gentleman give one or two examples of the goods to which he refers which are sold once a year?
§ Mr. HeathThe obvious ones which have been brought to our notice are all the goods sold at Christmas time or at the New Year, such as calendars, diaries and goods for celebrating the festive season. But it also applies to a number of goods sold at seasonal holiday resorts, and so on.
§ Mr. Leslie Hale (Oldham, West)The Secretary of State was less happy in his reply to the important intervention of my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) than even he normally is, because he quoted the example of a diary for 1964 as the sort of thing which could not be sold at a reduction before 1965.
§ Mr. HaleThat is exactly what the right hon. Gentleman said.
Let us clearly understand what we are discussing. I have told the Committee before that many years ago I appeared as an advocate before the Motor Traders' Association on behalf of a motor trader in my district. The motor trader was alleged to have broken what were then the resale price maintenance conditions imposed by the industry. He had been a reasonably prosperous man. He had invested the whole of his personal fortune in the garage and suddenly, because of a breach of the regulations—and, to be fair, it was a fairly persistent and deliberate breach of the regulations; I do not want to minimise it—he was brought before a tribunal of traders some miles away, who could put him completely out of business, who could prevent his garage from being sold to anyone else, add who could completely ruin him and deprive him of everything that he had.
My hon. Friends will say that this is an argument for the abolition of resale price maintenance. It is one of the arguments which has impressed me in favour of the Bill. But under this Clause we are going through the reverse process. The Secretary of State said that under Clause 2 one must not withhold goods under certain conditions. Now we are dealing with Clause 3, which says that one can withhold goods under certain conditions. I should have thought that, in view of this contradiction, it was absolutely essential that we should know the circumstances under which the withholding should take place.
Therefore, the right hon. Gentleman says, "We will deal with this curious thing called loss leaders", which is something that I have not come across. Even now it appears to be a somewhat vague concept, although apparently recognisable when one sees it. The astonishing 1023 definition of Christmas goods as something which cannot be sold at a reduction at Easter or Whitsuntide adds to the complexity.
Clause 2 states that a supplier cannot withhold goods from a trader solely on the ground that he has been cutting prices. I should be out of order if I were to develop the point, but it is essential to postulate the argument in this context. The hon. and gallant Member for Buckingham (Sir F. Markham) dealt with this matter effectively on Second Reading. He said that this Clause was meaningless, ineffective and could not be enforced, because if we tell a man that he cannot withhold goods if he states a ground he will not state a ground. He could still withhold goods on any other ground or by saying, "Your last cheque was a week late." [HON. MEMBERS: "Order."] I am grateful for this attention. This is a serious matter of individual liberty. A supplier cannot withhold goods on the ground that a trader has not sold them at maintained prices, but he can withhold them on the ground that the trader's last cheque was two days late.
Everyone will say that that is the position today and that it is open to any wholesaler to exercise his own freedom of choice as to the retailers whom he will supply. Clause 3 specifically states that the withholding of goods in certain circumstances is legal. In other words, we are back to the Motor Traders' Association in reverse. If a supplier finds that a wholesaler has been dealing with loss leaders, he can say, "I shall not supply you with goods". The right hon. Gentleman said that that would last for six months.
A supplier has not to prove—we are not to use words of certitude in this connection—but must have "reasonable cause to believe". If he says that he was told by somebody, that it was reported or that he had read an advertisement purporting to come from the retailer, presumably he would have reasonable cause to believe.
Do not let us forget that the alliance between wholesalers is not entirely competitive. The retailer who is on a black list may well be on everybody's black list. Let there be no misunderstanding. 1024 This is a Clause which specifically declares that the black list is legal. It virtually encourages it.
The Secretary of State tells us that the Government originally decided upon a period of six months—in other words, that a supplier had to have reasonable cause to believe that the trader had been selling loss leaders, whatever they were, during the last six months. Now, the right hon. Gentleman wants to make it 12 months. How does somebody answer these charges? The wholesaler will be entitled to wait for 11 months and then say, in December, "I was told in January, and had reasonable cause to believe last January, that you were selling diaries, which were subject to resale price maintenance, at a cheaper price because they were out of season".
The right hon. Gentleman fairly said that many of these points must be developed later, and I do not want to be repetitive or to anticipate the argument. It may be said that there is a clearance or seasonal sale, but there is no definition of a season. It may be once a month, once a quarter or once a year, in which case it becomes an annual sale. The whole thing is full of incertitude. It demands no proof. The whole thing not only leaves the retailer at the mercy of the wholesaler, which, to some extent, he always was, but he is now to be at the mercy of the wholesaler, with Government encouragement.
Indeed, the wholesaler could say that he is a virtuous wholesaler and has read The Times article, which, strangely enough, appeared on All Fools' Day, and has come to the conclusion that he should exercise a wise and appropriate discretion and give pleasure to the present Government—although it is not likely to be quite the same Government when the application of these provisions commences.
The right hon. Gentleman has given no argument for the extension to 12 months. He has merely said that some people buy things at Christmas time. One has to go back a long time to check on these things. Is there any argument against the proposition that this extends the period of uncertainty, increases the doubt and makes the position of the retailer almost intolerable? It makes things virtually impossible for the retailer, confronted with a withholding of goods of all kinds, not merely the goods which 1025 have been the subject of loss leadership selling, and confronted with ruin on the basis of an accusation that he is reasonably believed to have done something 11 months previously.
This is an astonishing Amendment. I do not know the views of my right hon. Friends, to whom I always listen with great attention, but my view is that this is an Amendment which cannot be justified. Certainly, it is one which, as yet, nobody has sought to justify.
§ Mr. William Clark (Nottingham, South)I welcome the Amendment, particularly inasmuch as my right hon. Friend the Secretary of State has explained that it will cover loss leaders in seasonal trading. There is, however, a slight inconsistency in the Bill, which I should like to have explained. In Clause 7, when the court gives or refuses an exemption, there is a time limit of two years. If loss leadering is proved, why cannot we have the same withholding of goods for two years rather than for 12 months? As I read my right hon. Friend's Amendment, goods can be withheld for only one year. I should have thought that two years was better. Can my right hon. Friend kindly clarify this?
§ 4.15 p.m.
§ Mr. Geoffrey Hirst (Shipley)I rose to correct the impression given by my hon. Friend the Member for Nottingham, South (Mr. W. Clark), but I see that my right hon. Friend the Secretary of State is ready to do so. I am happy to leave it to him and, in consequence, will limit my remarks. I thank my right hon. Friend for his Amendment. As far as I am aware, this is the first combined operation that we have had on the Bill and I am delighted that we are both signatories to the same Amendment. It is an important matter.
The hon. Member for Oldham, West (Mr. Hale) engaged in his game of rounders—in fact, he did his own fielding—but it is obvious that to be fair in this matter, and so that a true judgment may be taken, there must be a sufficiently long period to account for seasonal trading. The idea of Christmas crackers is all fun and games, but it begs the question. It is a question not of selling goods at Christmas, but of covering a person's business long enough in its trading to account for seasonal sales.
1026 As my right hon. Friend the Secretary of State will deal with the point raised by my hon. Friend the Member for Nottingham, South, I will leave that alone. I was, however, agitated because my right hon. Friend had the wrong impression. I am grateful to my right hon. Friend for helping us in this small measure.
§ Mr. HeathIn reply to my hon. Friend the Member for Nottingham, South (Mr. W. Clark), Clause 7 does not give a limitation of two years on the exemption which may be granted by the Court. It states that fresh application may be made either by the Registrar in the case of an exemption being granted or by the firm concerned in the case of exemption being refused after a period of two years provided that there is, in the view of the Court, a material change of circumstances. It is not, therefore, a two-year limitation on an exemption which is granted. It is not, therefore, comparable to the matter with which we are dealing, and I suggest that on other grounds to extend the period to two years would be too long.
There was, perhaps, a degree of confusion on the part of the hon. Member for Oldham, West (Mr. Hale) concerning his friend the motor trader, who seems to have been concerned with a process of collective enforcement of resale price maintenance., which was abolished by the 1956 Act, the enforcement by somebody who is granted exemption by the Court under the Bill, because he has completely separate powers of enforcement under Section 25 of the 1956 Act, the person who sells below the recommended price, which is quite permissible under the Bill, and the person who is loss leadering, which is defined either in the Bill or in the Amendment that we will discuss presently. Without going into those details, the important point is that the period of 12 months should be long enough to cover loss leadering in those seasonal goods.
§ Mr. LoughlinI am sorry to pursue the point further with the right hon. Gentleman but the Bill refers to a period of six months and the Amendment specifies 12 months. If the right hon. Gentleman wishes to get the agreement of the Committee to his Amendment, it is reasonable that he should give us at least an indication of the goods to which it will refer.
1027 It is not good enough simply to mention seasonal goods, because not having any knowledge of distribution I do not know what the right hon. Gentleman means by seasonal goods. Possibly, many other hon. Members must likewise plead ignorance. Again, somebody spoke of crackers. I was not sure whether he was referring to Christmas crackers or to fireworks. The right hon. Gentleman, however, referred merely to seasonal goods, to diaries, Christmas cards and other Christmas stationery. That is not a runner, either. The right hon. Gentleman has a responsibility, if he desires to get an extension of time, to tell us why. It is not good enough simply to say, "Seasonal goods". Will he tell us one or two of the goods to which he wants to make this provision apply?
§ Mr. HeathI am sorry that the hon. Member does not understand what seasonal goods are. Whatever period there is will apply to all goods, whatever their nature, other than those which are exempt. If the period is six months, goods are withheld for six months. In the case of goods supplied only once a year for a particular purpose once a year, if the period in which they can be withheld is only six months, that does not have any effect on the retailer. It is to make this a deterrent to loss leadering and to have an effect on the retailer that we have extended the period to 12 months, so that it has an effect the next time. This is the reason why I have suggested that the period should be extended to 12 months.
Calendars are an example of goods supplied mainly once a year. This is not a question of a reduction in price, for that is permitted below the recommended price. We are considering loss leadering and we shall discuss the definition of that later. One could take the example of buckets and spades at the seaside, or anything required for a particular festive season. It will be realised that there is a wide range and that it is right that these things should be covered.
§ Mr. George Darling (Sheffield, Hillsborough)About 30 names are attached to the Amendment, although only six appear on the Notice Paper. My hon. Friends had put down a similar Amend- 1028 ment, but it has now been taken over by virtue of the fact that the name of the Secretary of State is now at the top of the list.
The reason we put down the proposition that in the loss leader Clause the period during which the supplier should have a reasonable case if loss leadering had been going on should be 12 months, instead of six months, is that when we deal with later parts of the Clause there will be grave difficulties about defining clearance sales and so on, and we could do a better job in 12 months than in six.
We will have to refer to the matter again when we reach later Amendments, and I do not want to have to go over the arguments again. As my hon. Friend the Member for Oldham, West (Mr. Hale) has said, we shall have to go into the wider aspects of this and other matters later, but, for the time being at any rate, it is our view that for the purposes of definition and so on it is much better to have a period of 12 instead of six months.
§ Mr. Roy Jenkins (Birmingham, Stechford)I follow the logical structure of the right hon. Gentleman's argument, but could he give examples of seasonal goods ever used as loss leaders?
§ Mr. HeathI shall explain to the House later why it is very difficult to instance goods which have been used as loss leaders. The experience of other countries shows that very few have ever been used as such. We are in agreement about that. We have taken this action in deference to those who felt that this was a danger in the removal of resale price maintenance.
§ Amendment agreed to.
§ Mr. HeathI beg to move Amendment No. 178, in page 3, line 29, to leave out "person" and to insert "other dealer".
This is a drafting Amendment which we have proposed to clarify the meaning. Instead of having the general meaning of "person", we have inserted "other dealer".
§ Question, That "person" stand part of the Clause, put and negatived.
§ Question proposed, That the proposed words be there inserted.
1029§ Mr. HaleI beg to move, as an Amendment to the proposed Amendment, after "other" to insert:
trader who to the knowledge of the dealet is carrying on a business as a retailer in goods of the class and description involved in such witholding where such other".This is just an attempt to improve the Clause, but that does not imply any approval for the Clause as a whole. It is merely that it is the duty of the Committee to try to improve Bills as far as it can, even if the general principle of a Clause is repugnant. The right hon. Gentleman gives a definition of the meaning of the Clause which in my view it cannot possibly carry. While I appreciate the way in which my hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) presented his case, the right hon. Gentleman suggested that the meaning of the Clause is that the wholesaler can withhold for a period only of six months, now amended to 12 months; but, once he has withheld what is to compel him to supply again?If once goods have been withheld and the retailer is off the books, there is no law in the land which compels the wholesaler ever to supply again. However the Clause is designed, the retailer has no right at the end of 12 months to send in more orders and say, "I demand that you supply me, because I have not broken the Clause in the last 12 months". The wholesaler can say, "I have wiped you off the books; I do not know you; I have other customers". There is no way of enforcing the supply of goods. This is a final and decisive step.
I am signally happy to say that the right hon. Gentleman has moved an Amendment which is an improvement, but it is not a very great improvement, because the definition of "dealer" is itself so fantastically vague as to include almost anybody who sells anything at any time. The right hon. Gentleman will argue perfectly fairly that in Clause 3 we are referring to a rather limited series of operations, which we had always regarded as limited and which he now tells us do not exist. This makes the argument rather more metaphysical than real, but we have to address ourselves to it because the decisive Amendments have not yet been reached and we have to consider the Amendments in the order in which they appear on the Notice Paper.
1030 A dealer is defined as someone who sells by wholesale or retail. I have not quoted the exact words, but that is what it comes to. If one sells by wholesale or retail, one is dealing. It does not matter what one sells—arms to the Yemen, second-hand, by the way, or surplus requirements, or soap; nor does it matter whether one sells at the door, or in the shop, and certainly some forms of auction are dealing within the meaning.
We are dealing with retailers and I wish that it could be borne in mind that in this Clause we are dealing with the up and coming shopkeeper who is trying to improve his business. I put down an Amendment to the Secretary of State's Amendment in page 3, line 30—at the end to add:
(c) save as in this section specifically declared nothing herein contained shall be interpreted or construed as reflecting on the character or a dealer solely because he seeks to make a profit or to advertise his own business.—which is declaratory of Tory principles on the propriety of making profits, and so on, but. I think, Sir William, that it will not hive the good fortune to catch your eye.However, at least it is not a crime to be in business, it is not a crime to carry on a shop and it is not a crime to try to attract customers. Yet what we are here saying is that action can be taken not only against the dealer, but any other dealer, and there does not have to be any proof of connivance, but merely a set of circumstances, and those circumstances may be geographical.
The House of Commons has a metropolitan mind. That is natural, but we are apt to consider circumstances in the case of urban streets, not in the area of Cumberland, for instance, where it is fairly commonplace for retailers to have a single collection and delivery of goods which are dished out to the retailers.
When I had the privilege of residence at Eskdale the local bus service did the shopping. In widely spread country areas there is nothing abnormal in one retailer buying on behalf of almost all the retailers in the district, sometimes making a very small charge and sometimes not. It would be monstrous if he were to be held responsible for what they did.
1031 4.30 p.m.
This is not a wrecking Amendment. It is designed to make as clear as possible a provision which, in principle, I do not like. We have heard the right hon. Gentleman's definition of "other person". He will say that it does not matter what one calls a person because this is a fairly limited ambit of trading activities which normally one would contemplate as being partaken in by someone as a retailer or as a wholesaler. I appreciate the difficulty of definition here, but I believe that this is an Amendment which the right hon. Gentleman could well accept. We wish to insert the words:
trader who to the knowledge of the dealer is carrying on a business as a retailer in goods of the class and description involved in such withholding where such other",In other words, the Bill would not, with our Amendment, subject a man to the possibility of ruin without any proof of connivance, without proof of knowledge and without proof that he had acquired the goods with the deliberate intention of dodging the Clause. No doubt that is also the object of the right hon. Gentleman's Amendment. Nevertheless, the Clause would, as he would have it, impose an unfair responsibility on the original buyer of the goods. In effect, it would mean that he would have to control the people to whom he sold those goods. Yet it would surely be impossible for him to control people whose relations with him may depend purely on geographical circumstances. Our Amendment is designed at least to limit this application and is surely reasonable, fair and a distinct improvement.
§ Mr. A. J. Irvine (Liverpool, Edge Hill)I support the Amendment moved by my hon. Friend the Member for Oldham, West (Mr. Hale). This is a complicated and difficult Clause and I was a little surprised that the Secretary of State treated his own Amendment as merely one of drafting. I believe that the question is larger than that and that my hon. Friend's Amendment would narrow the mischief of the Clause.
The Committee must recognise that the Clause as it stands makes lawful a withholding of supplies from a dealer who has not himself engaged in loss leading. It is important that that 1032 should be clearly recognised. It is a provision which goes very far. Goods might be lawfully withheld from a dealer if he supplies any goods to another dealer who is engaged in loss leading.
§ Mr. IrvineI am glad to have an indication of agreement from the right hon. Gentleman that that is the effect of the Bill as it stands.
It is important to recognise how far that goes. It is this which gives rise to the anxieties expressed by my hon. Friend the Member for Oldham, West. My hon. Friend believes it absurd to make it lawful to withhold goods from a dealer merely because he supplies any goods to another dealer who has engaged in the last 12 months in loss leading in the class of goods withheld. My hon. Friend does not think this proposal is right if the first dealer does not even know that the second dealer deals in the class of goods withheld. I agree with him.
I invite the Committee to agree with us in this respect and I draw its attention to the fact that my hon. Friend's speech was careful and restrained, as is the remedy which he recommends. He does not go the whole distance—as he might reasonably have argued that we should do—of saying that the first dealer in the case I have put forward must know that the second dealer indulged in loss leading in the class of goods withheld, but he does insist that the first dealer should know that the second dealer traded in that class of goods.
My hon. Friend's Amendment would be an improvement. It would narrow the mischief of the Clause and the Committee should feel grateful to him for moving it.
§ Mr. Charles Fletcher-Cooke (Darwen)I have a great deal of sympathy with the motive behind the Amendment moved by the hon. Member for Oldham, West (Mr. Hale), but it seems to me that its wording does not meet the mischief. In 99 cases out of every 1,000 one dealer will know that the other dealer is dealing with this class of goods if he sells those goods to him. Therefore, the hon. Gentleman's Amendment would be a 1033 futile remedy for what I believe to be a genuine mischief.
Surely, what the hon. Member really wants to achieve is that there should be proof that the first dealer is somehow in a plot with the second dealer. The Bill as drafted does not achieve that object because there is no complicity inserted in it as it stands. Yet the dealer is liable to this penalty without in any way being an accomplice in the mischief. There is something in his view but it is not contained in the Amendment, which, therefore, I cannot support.
§ Mr. HaleThe hon. and learned Member for Darwen (Mr. Fletcher-Cooke) will understand that I do not think that my Amendment goes as far as I would like, but that it was drafted, as my hon. and learned Friend the Member for Liverpool, Edge Hill (Mr. A. J. Irvine) has said, with restraint. It is not a very easy thing to draft an Amendment to deal with this point.
The hon. and learned Member for Darwen made a rather curious mathematical computation when he referred to 99 dealers out of 1,000. If, under our normal legal arithmetic, we give the benefit of the doubt to one person out of 100, surely it is worth doing for 901.
§ Mr. Michael Foot (Ebbw Vale)The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) made a powerful case. He claimed that the remedy suggested by my hon. Friend the Member for Oldham, West (Mr. Hale) would not cure the disease. Obviously, the hon. and learned Member thinks that there is a disease, so in that case he should have put down an Amendment to cure it. However, my hon. Friend's Amendment has given the hon. and learned Gentleman an opportunity to make the speech that he would have made if he had put down the Amendment that he should have put down, but did not put down, in order to remedy the disease that he has discovered. Obviously, we all agree that there is a disease. Nobody has dissented from that proposition.
My hon. Friend the Member for Oldham, West, in his usual blundering fashion, has put forward an imperfect remedy, and we hope that the Government will put forward their perfect remedy. We are doubtful, however, whether that will be the Secretary of State's attitude, first, because he has not 1034 leapt to his feet with his usual alacrity and, secondly, because those of us who could see the smile on his face a few moments ago saw that he was indicating to my hon. Friends, although he was doing his best to conceal it from many of his hon. Friends, that he did not think that there was such a thing as loss leadering at all.
Although the right hon. Gentleman had been puzzling himself to discover whether there was such a thing all these weeks, he had not discovered whether there was such a disease to be cured, but, if his hon. Friends wanted a few sops thrown at them, he would be glad to throw them Nevertheless, he had found it impossible to discover what loss leadering was. We shall have to wait for his speech on the subsequent Amendment to discover whether that was an accurate account of his views, but I do not think that he would dissent from them.
In the right hon. Gentleman's original Bill, which we have seen rather badly mauled for one reason or another, he indicated that he did not think that there was such a thing as loss leadering to any great extent, and I am willing to bet that in the Bill which existed in the Board of Trade pigeon-holes and which the right hon. Gentleman, so unfortunately for his party, withdrew from the pigeon-holes, there was no mention of a Clause about loss leadering, because it was difficult to discover what it was.
However, it has now been agreed by the Government that there is such a thing as loss leadering and that some remedy has to be provided against this danger. It is agreed so far by the Committee that we must deal with the position put forward by my hon. Friend and that we must protect the original retailer from being at the mercy of what may occur because of something done by some other dealer to whom he sells the goods. If the words put forward by my hon. Friend are not satisfactory to deal with the problem, surely the Government are prepared to say that they will table an Amendment which will incorporate the sense of what my hon. Friend said which has been supported from both sides of the Committee.
§ Mr. R. J. Maxwell-Hyslop (Tiverton)I do not think that this is nearly as 1035 complicated as it has been made to appear. The object of a manufacturer in cutting off supply is to prevent the continuation of loss leadership. If a wholesaler sells to a retailer and that retailer, without the knowledge of the wholesaler, indulges in loss leadership, all that the manufacturer will achieve by cutting off supply is cut off the part of his market represented by that wholesaler.
There would be no incentive for the manufacturer to cut off supply from the wholesaler who was in ignorance of the fact that one of the retailers to whom he sold was indulging in loss leadership. The debate about the terrible fate of the wholesaler who unwittingly sold to a retailer who without his knowledge subsequently indulged in loss leadership is somewhat chimerical and unreal, and we can accept Amendment No. 178 without any further alteration and with a clear conscience.
§ 4.45 p.m.
§ Mr. HeathI have studied the Amendment of the hon. Member for Oldham, West (Mr. Hale) with some care. There was some difficulty in understanding his purpose in the wording, but what has emerged in the debate is that there are two points with which we are dealing as a result of his Amendment. I spoke on loss leadering on Second Reading when—I repeat it for the benefit of the hon. Member for Ebbw Vale (Mr. M. Foot)—I said:
Clause 3 deals with loss-leadering, and the supplier's right to take action against that practice. Every country that has attempted to deal with loss-leadering has found immense difficulty in doing so, but most countries have found, in practice, that it has not been a significant problem."—[OFFICIAL REPORT, 10th March, 1964; Vol. 691, c. 270.]This is no new discovery. It has been well known for a long time by those who studied the matter. It was not a question of taking a Bill out of the cubby-hole of the Board of Trade. When I looked at the documentation of the Board of Trade I found the White Paper published by the hon. Member's own Government in 1951, which said that resale price maintenance ought to be abolished in toto—and that was a Government which he was supporting.The point raised by the hon. Member and by his hon. and learned Friend the 1036 Member for Liverpool, Edge Hill (Mr. A. J. Irvine) is already covered in the Bill, because it contains the phrase
has reasonable cause to believe that within the previous six months—amended to 12 months—the dealer or any person to whom the dealer supplies goods has been selling…If he is selling goods, he is aware of the fact that the other dealer is dealing in these goods. I am prepared to listen to examples as to where exceptions might arise, but from the point of view of knowledge and information the point is already covered in the Bill.My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) raises the question whether there is a situation in which the supplier will be justified in withholding goods from a dealer who does not know of another dealer who is loss leadering. The position here is that this is meant to be a deterrent to potential loss leadering, and, if the manufacturer in this case is to be able to enforce against the wholesaler, he has to have the power in this form. If he can do it only when he can show that the wholesaler has knowledge that the retailer is loss leadering, it will be extremely difficult for the manufacturer to enforce against loss leadering at all.
This is a question of balance, and I agree with my hon. Friend the Member for Tiverton that, in practice, manufacturers, wholesalers and retailers will not find it difficult to operate this provision because a manufacturer who finds a wholesaler supplying a large number of dealers, one of whom is loss leadering, will be anxious not to lose these outlets or to lose the services of that wholesaler, and he will naturally get in touch with the wholesaler and point out that this retailer is loss leadering and suggest to him that he should not supply that retailer. That is in the interests of the wholesaler, too, because he does not want to lose supply and to lose the remainder of the outlets.
This is the way in which it is likely to work, and I think that the subsection is satisfactory in trying to get a balance in deterring loss leadering by particular retailers.
§ Mr. A. J. IrvineBefore the Comittee comes to a conclusion, may I say that I take the right hon. Gentleman's 1037 point that he thinks that the danger which we have ventilated is met by the words in the Clause,
any person to whom the dealer supplies goodsHe argues that if the dealer is supplying the goods he must know that the recipient trades in these goods. I follow that point.But what he may not know, and what the Bill makes no provision for his knowing, is whether the second dealer to whom he is supplying the goods is in the practice of reselling the goods. There is, therefore, a lacuna which the Amendment of my hon. Friend the Member for Oldham, West (Mr. Hale) would stop up. I recommend my hon. Friend's Amendment to the Committee.
I think that the proposition which I have put forward in meeting the right hon. Gentleman's argument is not far fetched, for the reason that at this point we have moved well away from the wholesaler's level. We are dealing with relations between dealers and dealers, and it may be a transaction fairly far down the chain. It may well be that if, at the end of the chain, one dealer supplies goods of a particular class to another dealer, he may not know that the ultimate dealer recipient of the goods himself resells them. He may not know that to be the fact. It may, in some cases, be the fact. In others it may not, and at best it may often occur that the dealer will not know. I do not think that the right hon. Gentleman's argument on this point by any means meets the case which my hon. Friend the Member for Oldham, West, put forward.
§ Mr. F. A. Burden (Gillingham)With respect to the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine), I think that this matter is not nearly so complicated as it has been made to appear. The facts of trade are simple. The pattern of modern trade, particularly in the goods to which r.p.m. applies, is fairly obvious, and if one is engaged in trade one realises what the pattern is.
The pattern today has, in many instances, moved away from manufacturer to wholesaler to retailer, but in certain instances it still remains manufacturer and wholesaler, and sometimes manufacturer and retailer together. But 1038 almost invariably the link is well known. If a wholesaler supplies goods to a retailer who is loss leadering, he will very soon be made aware of that fact and will take action. Indeed, if he does not hear about it, almost inevitably it will be brought to the attention of the manufacturer and he will almost invariably know the wholesaler who was dealing with that particular retailer. The chain of knowledge is not nearly so obscure as some hon. Members would appear to believe. The dangers are practically non-existent, and I believe that the point is adequately covered by my right hon. Friend's Amendment.
§ Mr. Douglas Jay (Battersea, North)I have no doubt that the circumstances might be such as the hon. Member for Gillingham (Mr. Burden) has just described, but I should not have thought that we could say that there would be no cases in which the circumstances were not more complicated.
Do we understand that the Minister has given an assurance that he will look at the main point raised by my hon. Friend the Member for Oldham West (Mr. Hale) to see whether he can allow for this in a subsequent Amendment? What we are really anxious to secure is that a retailer does not have his supplies withdrawn because some other dealer, without his knowledge, is indulging in loss leader practice. That would be unjustifiable. If the right hon. Gentleman agrees to look at this again to ensure tilt t that does not happen I think that we shall be satisfied, but unless we get that, assurance I shall be disposed to advise my hon. Friends to press the Amendment.
§ Mr. HeathI shall have to disappoint the right hon. Member for Battersea, North (Mr. Jay), because he has been dealing with the second of the two points raised in this debate. As I understood, the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine) accepted my second point, and appreciated that one has to get a balance, but that this was the way in which the manufacturer would have the opportunity of deterring wholesalers from supplying dealers who were loss leadering.
The right hon. Gentleman then returned to the first point, which was the point raised by the hon. Member for 1039 Oldham, West (Mr. Hale), and this, I think, is, in effect, dealt with in the Bill. I think that the hon. and learned Member for Edge Hill was saying that there may be another stage in the chain of dealing, but the right hon. Gentleman was emphasising knowledge of the other chain, and what other people were doing.
This is a separate point from the question whether there may be others in the chain who are dealing. If there should be such an occasion, the Amendment to the proposed Amendment would not deal with it, because it refers only to the "other dealer", in other words, the supplier, the wholesaler, and the retailer.
§ Mr. HaleI raise this point in view of the speech of the hon. Member for Gillingham (Mr. Burden), who has just left the benches opposite. Nobody seems to have it in mind that there are an immense number of institutions—the reputable Lyons Corner House is one example—in which people carry on two businesses. There is a vast retail shop in front, and cafes behind. In every rural village one finds a garage and a shop. They are under the same management and are carried on on the same premises.
It is true that the village shop may not indulge in loss leadership, but it is not true to say that people who run establishments which contain cafés, places for the supply of all kinds of food, and cooked foods, frozen products, and so on, and have large shop fronts in which the owners carry on retail trades, may not be put in difficulty unless there is a clear definition.
§ Mr. HeathI agree that there ought to be a clear definition, but I suggest that the Bill gives that, because it deals with the supplier and any other dealer. As the supplier is supplying that dealer, he will know that the dealer is receiving those goods and is dealing in them. The wording suggested by the hon. Gentleman is, therefore, unnecessary, because that provision is already there. The supplier has knowledge of the fact that the man is dealing in these things.
That is the point with which the Amendment is concerned, that he has knowledge and is dealing in those goods. I think that the right hon. Gentleman 1040 accepted that, but he went on to say that the retailer himself might then be dealing with somebody else, and he asked whether that would be covered. In my view it would be, but this is separate from the other point, which is whether the supplier has knowledge that the retailer is loss leadering.
That is a separate point, and my reply to that is that under the Bill it would not be necessary for there to be what my hon. Friend described as complicity between the wholesaler and the retailer. The wholesaler may not be aware that the retailer is loss leadering, but the way in which the manufacturer in this case can take action is by saying to the wholesaler, "I shall withhold your supplies because the retailer is loss leadering". I believe that that is necessary to enable the manufacturer effectively to act in those circumstances, but again, in practice, there is no doubt that, because of the interests of the suppliers concerned, they would draw the wholesaler's attention to it, and it would then be up to the wholesaler to take action.
If a wholesaler refuses to take action, at least he knows that the retailer is doing it, the manufacturer knows, and the whole chain is covered. I believe, therefore, that what is set out in the Bill is clear and is effective.
§ Major Sir Frank Markham (Buckingham)This will give the green light to the black marketeer. I am talking not of the black market, but of the surreptitious loss leadering which is being carried on in so many ways. If a wholesaler is not aware of what a retailer is doing to another retailer, this will give the green light to black marketeering.
§ Mr. Eric Lubbock (Orpington)The right hon. Gentleman says that this machinery is necessary so that the manufacturer can take action against a wholesaler, even though he finds that that wholesaler has no knowledge of the fact that the retailer is selling these goods as loss leaders. If that is the purpose, would it not have been better if, instead of using this penalty on the wholesaler in the first stages, the Government were to draft this in such a way that a manufacturer had to serve notice on the wholesaler and thereby ensure that the wholesaler was aware that the retailer was indulging in this practice before 1041 going to the rather drastic extent of withholding supplies from the wholesaler who may not have knowledge of what is going on?
§ Mr. HeathI think that that would entail a complicated piece of machinery and complicated drafting to ensure that notices, and so on, were issued in these cases. I agree with my hon. Friend the Member for Gillingham (Mr. Burden) that the machinery of normal distribution will cover this in any case, because it is in the interests of everybody to do so, and that it will work naturally. I cannot agree with my hon. and gallant Friend the Member for Buckingham (Sir F. Markham) that this will lead to black marketeering.
Exactly the reverse is the case. It is the one thing which will enable a manufacturer to influence wholesalers and retailers so that there is no loss leadering. My hon. and gallant Friend has said that it has been going on all over the place, in many instances. That is not the case with resale price maintenance, because power of enforcement exists under the 1956 Act. Many people believe that anyone who sells something cheaper than they do is loss leadering, but that is not so. Loss leadering has a specific definition, which we shall come to later. We must distinguish between selling something more cheaply than other people and loss leadering, which is selling something at a deliberate loss for the purpose of doing in somebody else's product or somebody else's market. That is a different matter.
§ 5.0 p.m.
§ Mr. A. J. IrvineI would have thought that the argument which we have had on the Clause justifies the des-
§ cription of complexity which I applied to it at an earlier stage. It is unfortunate that the matter is obscure to such a degree. I do not want to be thought to have given away anything more than I had contended to concede in what I said earlier. I am satisfied that at the end of the chain of transactions of supply from one dealer to another there may be a case where a dealer supplies goods to another dealer without knowing that that dealer carries on the business of reselling that class of goods and without knowing, additionally—partly, perhaps, as a result of his ignorance under the first head—that he has been in the practice of indulging in loss leadering.
§ I cannot put it more clearly than that. There appears to be a loophole here, and the Amendment to the proposed Amendment, although not going the whole way in remedying the fault, goes at least some distance towards doing so. Therefore, it should be welcome to the Committee.
§ Mr. HeathI undertake to satisfy myself that the Bill as it is worded continues right through the chain of command. What I cannot accept is that knowledge of loss leadering is essential before a supplier can withhold supplies. But, on the first point, with which the hon. Member has said his Amendment to the proposed Amendment deals, I undertake to reconsider the drafting to make sure that it carries right through the chain, should there be another retailer after the first retailer.
§ Question put, That those words be there inserted in the proposed Amendment:—
§ The Committee divided: Ayes 195, Noes 258.
1045| Division No. 60.] | AYES | [5.4 p.m. |
| Ainsley, William | Bowden, Rt. Hn. H. W. (Leics, S. W.) | Croseman, R. H. S. |
| Allaun, Frank (Salford, E.) | Bowles, Frank | Cullen, Mrs. Alice |
| Awbery, Stan (Bristol, Central) | Boyden, James | Dalyell, Tam |
| Bacon, Miss Alice | Braddock, Mrs. E. M. | Darling, George |
| Barnett, Guy | Bradley, Tom | Davies, G. Elfed (Rhondda, E.) |
| Baxter, William (Stirlingshire, W.) | Brockway, A. Fenner | Davies, Ifor (Gower) |
| Beaney, Alan | Broughton, Dr. A. D. D. | Davies, S. O. (Merthyr) |
| Bellenger, Rt. Hon. F. J. | Butler, Herbert (Hackney, C.) | Delargy, Hugh |
| Bence, Cyril | Callaghan, James | Dempsey, James |
| Benn, Anthony Wedgwood | Carmichael, Neil | Diamond, John |
| Bennett, J. (Glasgow, Bridgeton) | Castle, Mrs. Barbara | Dodds, Norman |
| Benson, Sir George | Chapman, Donald | Doig, Peter[...] |
| Blackburn, F. | Cliffe, Michael | Donnelly, Desmond |
| Blyton, William | Corbet, Mrs. Freda | Driberg, Tom |
| Boardman, H. | Craddock, George (Bradford, S.) | Duffy, A. E. P. (Colne Valley) |
| Bottomley, Rt. Hon. A. G. | Crosland, Anthony | Ede, Rt. Hon. C. |
| Edelman, Maurice | Kelley, Richard | Reid, William |
| Edwards, Rt. Hon. Ness (Caerphilly) | Kenyon, Clifford | Rhodes, H. |
| Edwards, Robert (Bilston) | Key, Rt. Hon. C. W. | Roberts, Albert (Normanton) |
| Edwards, Walter (Stepney) | Lee, Frederick (Newton) | Robertson, John (Paisley) |
| Evans, Albert | Lee, Miss Jennie (Cannock) | Robinson, Kenneth (St. Pancras, N.) |
| Fernyhough, E. | Lever, L. M. (Ardwick) | Rodgers, W. T. (Stockton) |
| Finch, Harold | Lewis, Arthur (West Ham, N.) | Rogers, G. H. R. (Kensington, N.) |
| Fitch, Alan | Lipton, Marcus | Ross, William |
| Foot, Dingle (Ipswich) | Loughlin, Charles | Royle, Charles (Salford, West) |
| Foot, Michael (Ebbw Vale) | Mabon, Dr. J. Dickson | Shinwell, Rt. Hon. E. |
| Forman, J. C. | McBride, N. | Short, Edward |
| Fraser, Thomas (Hamilton) | McCann, John | Silverman, Julius (Aston) |
| Galpern, Sir Myer | MacColl, James | Silverman, Sydney (Nelson) |
| Ginsburg, David | McInneS, James | Skeffington, Arthur |
| Gordon Walker, Rt. Hon. P. C. | Mackie, John (Enfield, East) | Slater, Mrs. Harriet (Stoke, N.) |
| Griffiths, David (Rother Valley) | McLeavy, Frank | Slater, Joseph (Sedgefield) |
| Griffiths, Rt. Hon. James (Llanelly) | MacPherson, Malcolm (Stirling) | Small, William |
| Griffiths, W. (Exchange) | Mallalieu,[...] E. L. (Brigg) | Smith, Ellis (Stoke, S.) |
| Gunter, Ray | Manuel, Archie | Snow, Julian |
| Hale, Leslie (Oldham, W.) | Mapp, Charles | Sorensen, R. W. |
| Hamilton, William (West Fife) | Marsh, Richard | Soskice, Rt. Hon. Sir Frank |
| Hannan, William | Mason, Roy | Spriggs, Leslie |
| Harper, Joseph | Mendelson, J. J. | Stewart, Michael (Fulham) |
| Hart, Mrs. Judith | Milne, Edward | Stonehouse, John |
| Hayman, F. H. | Mitchison, G. R. | Stones, William |
| Healey, Denis | Monslow, Walter | Strauss, Rt. Hon. G. R. (Vauxhall) |
| Henderson, Rt. Hn. Arthur (Rwly Regis) | Moody, A. S. | Stross, Dr. Barnett (Stoke-on-Trent, C.) |
| Herbison, Miss Margaret | Morris, Charles (Openshaw) | Swain, Thomas |
| Hill, J. (Midlothian) | Moyle, Arthur | Swingler, Stephen |
| Holman, Percy | Neal, Harold | Symonds, J. B. |
| Houghton, Douglas | Oliver, G. H. | Taylor, Bernard (Mansfield) |
| Howell, Charles A. (Perry Barr) | O'Malley, B. K. | Thomas, George (Cardiff, W.) |
| Howell, Denis (Small Heath) | Oram, A. E. | Thomas, Iorwerth (Rhondda, W.) |
| Howie, W. | Oswald, Thomas | Thompson, Dr. Alan (Dunfermline) |
| Hoy, James H. | Owen, Will | Thornton, Ernest |
| Hughes, Cledwyn (Anglesey) | Paget, R. T. | Warbey, William |
| Hughes, Emrys (S. Ayrshire) | Pannell, Charles (Leeds, W.) | Watkins, Tudor |
| Hughes, Hector (Aberdeen, N.) | Parker, John | Weitzman, David |
| Hunter, A. E. | Paton, John | Wells, William (Walsall, N.) |
| Hynd, H. (Accrington) | Pavitt, Laurence | Whitlock, William |
| Hynd, John (Attercliffe) | Pearson, Arthur (Pontypridd) | Wilkins, W. A. |
| Irvine, A. J. (Edge Hill) | Peart, Frederick | Willey, Frederick |
| Irving, Sydney (Dartford) | Pentland, Norman | Wilson, Rt. Hon. Harold (Huyton) |
| Janner, Sir Barnett | Prentice, R. E. | Winterbottom, R. E. |
| Jay, Rt. Hon. Douglas | Price, J. T. (Westhoughton) | Woof, Robert |
| Jeger, George | Probert, Arthur | Yates, Victor (Ladywood) |
| Jenkins, Roy (Stechford) | Randall, Harry | Zilliacus, K. |
| Johnson, Carol (Lewisham, S.) | Rankin, John | |
| Jones, Dan (Burnley) | Redhead, E. C. | TELLERS FOR THE AYES: |
| Jones, T. W. (Merioneth) | Rees, Merlyn (Leeds, S.) | Mr. Lawson and Mr. Grey. |
| NOES | ||
| Agnew, Sir Peter | Burden, F. A. | du Cann, Edward |
| Allason, James | Butcher, Sir Herbert | Duncan, Sir James |
| Amery, Rt. Hon. Julian | Butler, Rt. Hn. R. A. (Saffron Walden) | Eden, Sir John |
| Arbuthnot, Sir John | Campbell, Gordon | Elliot, Capt. Walter (Carshalton) |
| Atkins, Humphrey | Carr, Rt. Hon. Robert (Mitcham) | Elliott, R. W. (Newc'tle-upon-Tyne, N.) |
| Awdry, Daniel (Chippenham) | Cary, Sir Robert | Emery, Peter |
| Balniel, Lord | Channon, H. P. G. | Emmet, Hon. Mrs. Evelyn |
| Barber, Rt. Hon. Anthony | Chataway, Christopher | Erroll, Rt. Hon. F. J. |
| Barlow, Sir John | Chichester-Clark, R. | Farey-Jones, F. W. |
| Barter, John | Clark, Henry (Antrim, N.) | Farr, John |
| Beamish, Col. Sir Tufton | Clark, William (Nottingham, S.) | Fell, Anthony |
| Bevins, Rt. Hon. Reginald | Cleaver, Leonard | Finlay, Graeme |
| Biffen, John | Cooke, Robert | Fisher, Nigel |
| Bingham, R. M. | Cooper, A. E. | Fletcher-Cooke, Charles |
| Birch, Rt. Hon. Nigel | Cooper-Key, Sir Neill | Fraser, Rt. Hn. Hugh (Stafford & Stone) |
| Bishop, Sir Patrick | Corfield, F. V. | Fraser, Ian (Plymouth, Sutton) |
| Black, Sir Cyril | Costain, A. P. | Freeth, Denzil |
| Bourne-Arton, A. | Coulson, Michael | Galbraith, Hon. T. G. D. |
| Box, Donald | Courtney, Cdr. Anthony | Gammans, Lady |
| Boyd-Carpenter, Rt. Hon. John | Craddock, Sir Beresford (Spelthorne) | Gibson-Watt, David |
| Boyle, Rt. Hon. Sir Edward | Critchley, Julian | Gilmour, Ian (Norfolk, Central) |
| Braine, Bernard | Cunningham, Sir Knox | Gilmour, Sir John (East Fife) |
| Brewis, John | Currie, G. B. H. | Glover, Sir Douglas |
| Bromley-Davenport, Lt.-Col. Sir Walter | Dalkelth, Earl of | Glyn, Dr. Alan (Clapham) |
| Brown, Alan (Tottenham) | Dance, James | Godber, Rt. Hon. J. B. |
| Browne, Percy (Torrington) | d'Avigdor-Goldsmid, Sir Henry | Goodhart, Philip |
| Bryan, Paul | Digby, Simon Wingfield | Goodhew, Victor |
| Buck, Antony | Donaldson, Cmdr. C. E. M. | Gough, Frederick |
| Bullard, Denys | Doughty, Charles | Gower, Raymond |
| Bullus, Wing Commander Eric | Drayson, G. B. | Grant-Ferris, R. |
| Green, Alan | Lucas-Tooth, Sir Hugh | Ropner, Col. Sir Leonard |
| Gresham Cooke, R. | McAdden, Sir Stephen | Russell, Ronald |
| Grimond, Rt. Hon. J. | MacArthur, Ian | Scott-Hopkins, James |
| Gurden, Harold | McLaren, Martin | Seymour, Leslie |
| Hamilton, Michael (Wellingborough) | Maclean, Sir Fitzroy (Bute & N. Ayrs) | Sharples, Richard |
| Harris, Reader (Heston) | McLean, Neil (Inverness) | Shaw, M. |
| Harrison, Col. Sir Harwood (Eye) | McMaster, Stanley R. | Skeet, T. H. H. |
| Harvey, Sir Arthur vere (Macclesf'd) | Macmillan, Maurice (Halifax) | Smith, Dudley (Be'ntf'd & Chiswick) |
| Harvey, John (Walthamstow, E.) | Madden, Martin | Smyth, Rt. Hon. Brig. Sir John |
| Harvie Anderson, Miss | Maginnis, John E. | Spearman, Sir Alexander |
| Hastings, Stephen | Maitland, Sir John | Stainton, Keith |
| Hay, John | Markham, Major Sir Frank | Stanley, Hon. Richard |
| Heald, Rt. Hon. Sir Lionel | Marples, Rt. Hon. Ernest | Stodart, J. A. |
| Heath, Rt. Hon. Edward | Marshall, Sir Douglas | Stoddart-Scott, Col. Sir Malcolm |
| Hendry, Forbes | Marten, Neil | Studholme, Sir Henry |
| Hiley, Joseph | Mathew, Robert (Honiton) | Summers, Sir Spencer |
| Hill, Mrs. Eveline (Wythenshawe) | Matthews, Gordon (Meriden) | Talbot, John E. |
| Hill, J. E. B. (S. Norfolk) | Maude, Angus (Stratford-on-Avon) | Taylor, Sir Charles (Eastbourne) |
| Hirst, Geoffrey | Mawby, Ray | Taylor, Frank (M'ch'st'r, Moss Side) |
| Hobson, Rt. Hon. Sir John | Maxwell-Hyslop, R. J. | Teeling, Sir William |
| Hocking, Philip N. | Maydon, Lt.-Cmdr. S. L. C. | Thatcher, Mrs. Margaret |
| Hogg, Rt. Hon. Quintin | Mills, Stratton | Thomas, Sir Leslie (Canterbury) |
| Holland, Philip | Moore, Sir Thomas (Ayr) | Thompson, Sir Richard (Croydon, S.) |
| Holt, Arthur | More, Jasper (Ludlow) | Thorneycroft, Rt. Hon. Peter |
| Hopkins, Alan | Mott-Radclyffe, Sir Charles | Thornton-Kemsley, Sir Colin |
| Hornby, R. P. | Neave, Airey | Thorpe, Jeremy |
| Hornsby-Smith, Rt. Hon, Dame P. | Nicholls, Sir Harmer | Tiley, Arthur (Bradford, W.) |
| Howard, Hon. G. R. (St. Ives) | Noble, Rt. Hon. Michael | Tilney, John (Wavertree) |
| Hughes Hallett, Vice-Admiral John | Nugent, Rt. Hon. Sir Richard | Touche, Rt. Hon. Sir Gordon |
| Hughes-Young, Michael | Oakshott, Sir Hendrie | Turner, Colin |
| Hulbert, Sir Norman | Orr-Ewing, Sir Charles | Turton, Rt. Hon. R. H. |
| Hurd, Sir Anthony | Page, Graham (Crosby) | Tweedsmuir, Lady |
| Hutchison, Michael Clark | Page, John (Harrow, West) | van Straubenzee, W. R. |
| Irvine, Bryant Godman (Rye) | Pannell, Norman (Kirkdale) | Vane, W. M. F. |
| James, David | Pearson, Frank (Clithroe) | Vickers, Miss Joan |
| Johnson, Dr. Donald (Carlisle) | Percival, Ian | Wade, Donald |
| Johnson, Eric (Blackley) | Peyton, John | Walker, Peter |
| Johnson Smith, Geoffrey | Pickthorn, Sir Kenneth | Walker-Smith, Rt. Hon. Sir Derek |
| Jones, Arthur (Northants, S.) | Pike, Miss Mervyn | Ward, Dame Irene |
| Joseph, Rt. Hon. Sir Keith | Pitman, Sir James | Watkinson, Rt. Hon. Harold |
| Kaberry, Sir Donald | Pounder, Ralfton | Webster, David |
| Kerr, Sir Hamilton | Powell, Rt. Hon. J. Enoch | Wells, John (Maidstone) |
| Kershaw, Anthony | Price, David (Eastleigh) | Whitelaw, William |
| Kitson, Timothy | Price, H. A. (Lewisham, W.) | Williams, Dudley (Exeter) |
| Lancaster, Col. C. G. | Prior, J. M. L. | Williams, Paul (Sunderland, S.) |
| Leather, Sir Edwin | Prior-Palmer, Brig. Sir Otho | Wills, Sir Gerald (Bridgwater) |
| Legge-Bourke, Sir Harry | Proudfoot, Wilfred | Wilson, Geoffrey (Truro) |
| Lewis, Kenneth (Rutland) | Pym, Francis | Wise, A. R. |
| Lindsay, Sir Martin | Quennell, Miss J. M. | Wolrige-Gordon, Patrick |
| Linstead, Sir Hugh | Ramsden, James | Wood, Rt. Hon. Richard |
| Litchfield, Capt. John | Rawlinson, Sir Peter | Woodhouse, C. M. |
| Lloyd, Rt. Hon. Selwyn (Wirral) | Redmayne, Rt. Hon. Martin | Woodnutt, Mark |
| Longbottom, Charles | Rees, Hugh (Swansea, W.) | Worsley, Marcus |
| Longden, Gilbert | Ridley, Hon. Nicholas | Yates, William (The Wrekin) |
| Loveys, Walter H. | Rippon, Rt. Hon. Geoffrey | |
| Lubbock, Eric | Robson Brown, Sir William | TELLERS FOR THE NOES: |
| Lucas, Sir Jocelyn | Roots, William | Mr. Peel and Mr. Batsford. |
| Proposed words there inserted. |
Mr. Heath: I beg to move Amendment No. 179, in page 3, line 30, to leave out from "been" to the end of line 38 and to add: |
§ The Temporary Chairman (Dr. Horace King)I think that it would be for the convenience of the Committee if, with this Amendment, we discussed new Clause No. 6—Loss Leadering.
§ Mr. HeathThis is the substantive Amendment, to which I referred earlier, on the question of loss leadering. I have already mentioned to the Committee, as indeed, I did to the House on Second Reading, the difficulty of dealing with the problem of loss leadering. Clause 3 safeguards the right of a supplier to refuse to supply a dealer who has recently been selling similar goods as loss leaders. We have defined loss leadering as selling at or below the price paid— this is in subsection (2)—
including any sums charged in respect of purchase tax or delivery, and after deducting any discount allowed on that purchase.That was the attempt which we made in the draft of the Bill to deal with this very difficult subject. There have been a number of representations made to us since the Bill was published, and during the Second Reading debate, and there are a number of Amendments on the Notice Paper putting forward various ways of amending the Bill—and some new ways of handling the matter.5.15 p.m.
What has been criticised, in particular, in the approach which we adopted in Clause 3, is the rigidity of the definition of loss leader selling. It has been represented to us that the loss leader seller is not necessarily, or normally, the man who is selling below cost. The man to whom objection is taken is the man selling at an unprofitable margin with the object of attracting custom for other goods. Again, I think the rigidity of the definition, as we have drafted it at present, could be disadvantageous in the reverse sense of bringing in sales which would not normally be regarded as loss leader sales. Perhaps I may explain that point.
A dealer who is buying quantities which are too small to qualify for a discount for quantity would technically be selling goods as loss leaders, even when he was selling them at a price which was the normal selling price of a store which could buy more cheaply. This is the difficulty of the rigid conception. If there is a retailer—who does 1048 not obtain discount because of the small quantities which he buys—who attempts to sell the goods at the same price as a store or a larger firm which is getting a discount, the smaller man would be loss leadering and the larger man would not. This is the problem which arises from this type of approach and from the rigidity which goes with it.
Some hon. Members, including some of my hon. Friends, and also the right hon. Member for Battersea, North (Mr. Jay) have tried to deal with this difficulty by adding on an arbitrary mark-up to the price paid on our definition. I suggest that this is not a good course to follow. First, it does not dispose of the rigidity in the situation; if anything, it adds to it. No mark-up is equally applicable to all trades, nor is it applicable to all the dealers in those trades. So, in an approach of this kind, the adding of an arbitrary amount adds to the rigidity and has the other disadvantages which I have described.
Moreover, in the particular case I mentioned of the small man who does not get a discount, in consequence it makes the disparity between him and the other person getting a larger discount even greater. For these reasons I suggest that there are disadvantages in the approach which we have adopted and in some of the Amendments on the Notice Paper, although we are not at this moment discussing them, and in particular the Amendment recently put forward by the right hon. Member for Battersea, North.
We have looked again at the problem and I have put down this Amendment. We want to improve the approach and, at the same time, we do not want to use those provisions as a means of putting obstacles in the way of genuine competition, or deprive the consumer of the advantages of lower costs which come from it. I think it possible to amend this Clause in a way which could still result in those advantages being obtained and which would avoid some of the disadvantages of the other approach, and so the provisions which I have included in the Amendment adopt a rather different procedure. What it does, fundamentally, is to redefine the question of loss leader selling. It is defined by reference to the purpose for which the loss leader sale was made.
1049 This is a concept which was embodied in the Amendment tabled by my hon. Friend the Member for Crosby (Mr. Graham Page). It was also the approach taken under the Canadian law with Canada's amendment of 1910. The effect of this Amendment would be that loss leader selling would have taken place when goods were resold—not for the purpose of making a profit on the sale of those goods, but for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods, or otherwise for the purpose of advertising the goods of the dealer. There would be two conditions in this new approach, new so far as the Bill is concerned. The object of the sale must be advertising or attracting custom and the seller must not be expecting a profit on the goods.
As this is an approach which has regard not simply to the price at which the goods are bought and sold, but to the intention with which they are sold, it is unnecessary to make specific mention of sales below cost. It is dealt with by the double approach and avoids the rigidity which is the criticism of the Clause in the Bill as at present worded and in some of the Amendments to the Amendment I have moved. This Amendment allows for two cases in which dealers may sell goods in the manner which in other cases would be regarded as loss leader selling, not in order to make a profit but to advertise and attract custom.
In the first case, they can do so at genuine seasonal and clearance sales. In the Bill as originally drafted we had, "seasonal and clearance sales" and a number of points were raised as to how this matter could be dealt with. I think that we have covered it as best possible by the introduction of the word "genuine". This exception does not include the case where goods are bought specifically to be sold as loss leaders during a sale. It does, of course, permit goods to be bought cheaply, a particular cheap line from a manufacturer to be sold cheaply in a sale. I am informed that that process goes on even in the best of establishments. That can continue, but the provision does not permit the purchase of goods to be sold for the purpose of loss leadering in a sale.
1050 The second exception applies where the manufacturer or supplier has authorised the low cost sale. If the manufacturer likes to give his consent for this to be done under the Amendment I have moved, it is perfectly permissible. A dealer may have a good reason for selling a line apart from a sale and if the manufacturer agrees that would be all right. It would be unjust if the dealer were treated as if he were loss leadering.
There are Amendments on the Notice Paper put down to subsection (2,b) of my Amendment. This is where the consent of the manufacturer is given. No doubt we shall be discussing those Amendments in more detail later, but I mention now that I recognise that there is a problem about the second part of this provision.
§ The Temporary ChairmanOrder. It will be made very difficult if the right hon. Gentleman starts even slightly to discuss the Amendments to his Amendment. We shall have an opportunity of discussing them later.
§ Mr. HeathI was about to say that I recognise the problem which we can deal with later.
I suggest that this approach is an approach which may be more acceptable in dealing with this difficult problem of loss leadering. I have tried to set out clearly the conditions in which it can be defined and to show the exceptions which can be made and also that the assent of a supplier may be obtained. This gives the supplier the right to withhold goods in the case of loss leadering. In the case of the man supplied feeling aggrieved, he is able to bring an action for an injunction or the Board of Trade as the Department concerned would be able to bring an action for an injunction. The man supplied would bring it under Chaise 4(2) and the Board of Trade would bring it under Clause 4(3).
In that case it would be decided by the Court whether the definition had been carried out, whether it was a genuine seasonal sale and the other things as laid down by the Clause. I hope that this would retain a proper balance between the interests of the supplier who wishes to prevent loss leadering and the interests of the retailer in carrying on his retail trade.
§ The Temporary ChairmanI think that it will help hon. Members, and be for the convenience of the Committee, if we discuss now generally the Amendment which has been proposed. There will be an opportunity later, after we have had a general discussion on this Amendment, for the Committee to discuss the Amendment in the name of the hon. Member for Oldham, West (Mr. Hale), in line 2 to leave out "or a similar", and the Amendment which goes with it in the name of the hon. Member for Shipley (Mr. Hirst) to leave out lines 14 to 16. It would help the Committee and avoid getting into confusion if we left the substance of those Amendments to subsequent debate.
§ Mr. HirstOn a point of order, Dr. King. Unless I very much misunderstood the list of selected Amendments supplied for our guidance the Amendment in the name of my hon. Friend the Member for Bournemouth, West (Sir J. Eden), in line 15, to leave out from "or" to the end of line 16 and to add
in the case of goods made to the order of a supplier of that supplier".is also included, as is the second Amendment in my name, in line 15, to leave out from "or" to the end of line 16 and to addin the case of goods made to the design of a supplier or to the order and bearing the trade mark of a supplier of that supplier
§ The Temporary ChairmanWe shall deal with those Amendments when we come to them. We shall be dealing later with the Amendment which seeks to leave out lines 14 to 16. The fate of the Amendment in the name of the hon. Members for Bournemouth, West (Sir J. Eden) depends on what happens to that Amendment. The second Amendment in the name of the hon. Member for Shipley (Mr. Hirst) will be taken with the first Amendment in his name and with the Amendment in the name of the hon. Member for Bournemouth, West. They will all be taken together and there will be an opportunity to divide the Committee if the hon. Members feel so inclined.
§ Mr. JayI am one who finds this matter complicated rather than simple as some hon. Member opposite said earlier today. Even the procedure seems somewhat complicated.
1052 The practice of loss leadering or, as one hon. Member opposite called it, "loss leadership," today seems, in one respect at any rate, to resemble the Loch Ness Monster. Some people passionately believe it exists, but other people insistently affirm that it does not. In these circumstances, the wise course for an independent and impartial observer is to suspend judgment, but to provide in our practical arrangements for the possibility that it may exist.
It was for that reason that I said on Second Reading that I think the right hon. Gentleman was right to put into this Bill some Clause allowing for loss leadering if it exists. If it does not exist this Clause will do no harm, it will in effect be null and void. If it does exist, Parliament will have provided for it. Our criticism of the Clause as it originally appeared was that it was a sham and would have been ineffective. If loss leadering had occurred it would not have been caught by the Bill as originally introduced. The right hon. Gentleman originally defined loss leadering in effect as selling by the retailer or the wholesaler below the cost at which he had purchased his goods, and in fact it would have been possible for him to sell at a loss to himself even though he did not sell at nearly so low a price as that. In our opinion, the original Clause did not meet the case, and we think that the Amendment that the right hon. Gentleman has now introduced is certainly an improvement on the hit-and-miss affair with which we started.
5.30 p.m.
We—as the right hon. Gentleman was allowed to say, whether in order or not —put down another Amendment which provided for what he calls an arbitrary "mark up" as the definition below which the loss-leadering would be held to occur.
I think that the hon. Member for Twickenham (Mr. Gresham Cooke) put down an exactly similar Amendment. We are not discussing them at the present time, but our view is that the right hon. Gentleman's Amendment is an improvement on his original Clause. But we are still not satisfied that it is as good as ours. However, in order to keep in order I shall at this moment not 1053 extol the virtues of ours so much as express doubts and questions about the Amendment the right hon. Gentleman has introduced. We have three main doubts about this which I express now, and which I hope the Committee will take steps to meet when we come to the following Amendments.
The first is whether we have now abandoned the objective test. We did not like the right hon. Gentleman's actual objective test, but that does not necessarily mean that some other objective test might not have been satisfactory. We have abandoned that one, and we are now basing the definition of loss-leadering in effect on the motive of the retailer or the dealer who indulges in the practice. He is to be adjudged to have indulged in loss leadering if he has in fact two motives—I ask the Committee to notice this—in order to satisfy the conditions. He has to have not one motive but two. First, he has to be acting not for the purpose of making a profit. That is not enough. He has also to be acting for the purpose of advertisement.
It is not enough to prove the point that the retailer is not selling for a profit. He has to be both not selling for a profit and selling to attract business under the definition in the right hon. Gentleman's Amendment. I should have thought that there would have been very considerable difficulties in proving in court a motive and proving a double motive. I also draw attention to the fact—here again, if I understood the complicated point that we have now reached correctly—that the onus of proof will be on the manufacturer. Someone will be taking proceedings against the manufacturer for withholding supplies. The manufacturer will be arguing in defence that he was justified in doing this because the retailer was indulging in loss leadering. For the manufacturer to make good his defence, he will have to establish that the retailer was loss leadering and he will have to prove doubly, on two points, what was the retailer's motive. We have some doubt whether this is a practical legal proposition and the best solution which can be found of this problem. That is our first criticism of the Amendment.
1054 Our second relates to the words which occur in line 2 of the right hon. Gentleman's Amendment
whether obtained from that supplier or not.I should like to ask the right hon. Gentleman whether we are not here in danger of going too far. It is extremely difficult to get a right balance in this matter. I understand that these words have the effect that if it is shown that a particular retailer is indulging in loss leadering, not merely may the particular supplier who sold these goods withdraw his supplies, but a manufacturer of similar goods may withdraw his supplies from him also, even if no loss leadering occurred in the case of his goods.One may well ask, if these words mean what they appear to us to mean, are we not here in danger in order to provide for loss leadering of reintroducing at least a touch of the collective boycott which we all agreed to get rid of in 1956? It would appear that if manufacturer A finds that retailer B is selling his goods at an unreasonably low price, not merely manufacturer A may withdraw his supplies but all other suppliers of these goods may withdraw theirs. If that is what it means, we ask whether that is going further than the Committee should.
§ Mr. Maxwell-HyslopWas not the point about the collective boycott that this was applied when the goods were sold by the retailer at infinitestesimally below or somewhat below the fixed retail price? This provision is confined to loss leadering rather than to price cutting where they are still making a profit?
§ Mr. JayThat is perfectly true, and that is why I said that it was not identical with the collective boycott which we outlawed before. It is not the same, but it permits a collective withdrawal of supplies under certain conditions, even by manufacturers whose goods have not been subject to loss leadering.
§ Mr. Angus Maude (Stratford-on-Avon)Did I understand the right hon. Gentleman to say that the word "description" means goods which may be not merely not of the same brand but only of the same general type and manufactured by somebody else? That is quite a new suggestion to me.
§ Mr. JayI was not at the moment coming on to that point, because I think 1055 that it arises on a later Amendment. I should have thought that the words
whether obtained from that supplier or nothad the effect that I am suggesting. If not, it is for the right hon. Gentleman to tell us.The third doubt that we have is this. Do we not perhaps by introducing the Amendment in this Clause run the risk of outlawing certain quite legitimate transactions which we do not really wish to prevent? May we not have a case where a retailer, large or small, quite legitimately decides because certain goods have become very difficult to sell or are nearly unsaleable, to sell these off rapidly at some considerable loss? This might not be done maliciously to damage other retailers or maliciously, if that is the right word, in order to damage the manufacturer. It might be done as a perfectly reasonable business transaction. I recognise that the genuine clearance sale is provided for, but we have some doubts whether all transactions of this kind would come under it.
I realise also that the right hon. Gentleman is providing for the case where the sale at below the recommended price or not at the agreed price is agreed by the manufacturer. Is he quite sure that there are no cases which we would regard as legitimate but which would be caught as loss leadering under this Clause? I understand that we are discussing the new Clause 6 of the hon. Member for Shipley (Mr. Hirst) in conjunction with this Clause. I would only say a brief word about them. I understand that this Clause goes rather further than the Bill in declaring loss leadering to be unlawful outright. But the Bill and the right hon. Gentleman's Amendment do not do that. They merely say that where loss leadering occurs, supplies may be lawfully withdrawn. They do not say that loss leadering practised by the retailer is in itself unlawful.
I agree here with the Minister rather than with the hon. Member for Shipley. It is going too far to indicate in the Bill that loss leadering as such shall be an unlawful practice, but no doubt we may discuss this further as the debate proceeds. I mentioned in Parliament that we still have on the Order Paper the Amendments which we put down to 1056 supplement what the right hon. Gentleman calls the arbitrary mark-up of 5 per cent. In our view a better solution might be to insert in the Bill both these provisions so that it might be possible to establish loss leadering as occurring under either the one criterion or the other. This would be possible, and we should like to argue at the next stage that it might be the best solution.
In our view the right hon. Gentleman has done better than he did on Second Reading, but we do not think that his Amendment is by any means perfect. We shall not oppose it, but we hope that it will be further improved by subsequent Amendments, both ours and some by hon. Members opposite.
§ Mr. R. Gresham Cooke (Twickenham)My right hon. Friend's Amendment is an improvement on the original subsection (2), which I never liked because it was tied to the price at which the retailer took the goods into the shop. If a retailer sells exactly at that price, he is loss leadering. If he has a large packet of cigarettes in the back of the shop and he has to take it through to the front to unpack it and to display it, them he is incurring certain handling charges in that operation. The rigid price index by which loss leadering was judged was in our view wrong. That is why my hon. Friends and I put down Amendments to add 5 per cent. in respect of the handling charge.
The right hon. Member for Battersea, North (Mr. Jay) said that there must be telepathy between himself and myself in that we both put down similar Amendments. He must have been sensible enough to pick up my ideas telepathically, because my Amendment is No. 38 and his is No. 41.
Subsection (2)—I am not speaking of the rest of the Amendment—is an improvement on the original.
§ Mr. R. T. Paget (Northampton)What does the hon. Member understand as the meaning of
not for the purpose of making a profit".Does that mean gross profit or net profit?
§ Mr. Gresham CookeThat is a matter for debate. I do not think that it would be gross profit. It means not selling at a loss.
1057 Many people have taken this question of loss leadering rather too lightly. It has been suggested that if it occurs it is not of very great consequence and that it can be dealt with. But evidence from abroad has shown that it can be extremely damaging to a manufacturer. I have drawn attention to the example of an electric razor in America some years ago, I believe the Schick razor, which was used as a loss leader throughout America. Retailers became so fed up with the loss leadering which went on that the number of dealers handling that razor fell from 35,000 to about 7,000. It can be damaging if certain goods are frequently treated as loss-leaders.
Subsection (2) is an improvement on the original, but I want to reserve my right to comment on the various Amendments as we reach them.
§ 5.45 p.m.
§ Mr. Peter Doig (Dundee, West)It seems to me that far from making this issue clearer the Secretary of State has made it more confused than before. The Bill was proposed in order that the consumer should get goods cheaper than he can get them now, but the Amendment seeks to prevent a person from selling these goods cheaper, which surely is a contradiction.
Secondly, this provision will be impossible to enforce. The right hon. Gentleman has already given us various interpretations by various people. My hon. and learned Friend the Member for Northampton (Mr. Paget) asked whether it was gross or net profit. Nobody has defined that. It seeks to prevent stores from attracting customers into their stores on the basis that they are selling one article as a loss leader slightly cheaper than elsewhere. In the first place, the customer knows that it is a loss leader only if he is familiar with the prices. If customers are familiar with prices and go in to buy these goods because they are cheaper than anywhere else, they are hardly likely to be taken in by other goods in the store which are being sold at a higher price.
The only people who will be attracted into the store are those familiar with prices, and if they are familiar with prices there is no danger of their being 1058 taken in through buying dearer goods in the store. In other words, the Clause and the Amendment are nonsense. They will bring the law into contempt, which is the worst thing which can be done, because it will be impossible to enforce the law and will encourage the "Smart Alecs" and deter the honest people. This provision does not help the customer.
Let us see the effect on small shopkeepers. The small shopkeeper pays more for his goods than the larger store because of the quantity in which he buys. He is at a disadvantage because he cannot possibly sell at the same price as others. Not so long ago Nescafé was sold all over the country at 3s. 6d. per 2 oz. tin. One day, out of the blue, one multiple store sold that article at 2s. 3d. I have no doubt that everybody jumped to the conclusion that it was a loss leader, but it is still being sold at 2s. 3d. At one stage it was as low as 2s. Id. The quality has not been reduced, because it is guaranteed pure coffee. [Laughter.] If it is not, then it is a case for the Minister because there is printed on the tin, "Guaranteed only pure coffee". There is also printed on the tin "2 oz." so that there has been no reduction in quality or weight. Yet these tins are still selling at 2s. 3d.
What is more interesting, the small shopkeeper, who I know for a fact could not buy fills commodity even for 2s. 9d. wholesale, is now selling it at 2s. 9d. or less. The public have benefited all round. The small shopkeepers must have benefited because previously they could not buy it for 2s. 9d., let alone sell it at that price. They must be buying it a t a lower price than before. Without this substantial cut in price—it may well have been a loss leader, for all I know—today the millions who buy these tins of coffee would have been paying at least 1s. 3d. per tin more than they now pay. This is what the Minister wants. Therefore, why does he introduce this Amendment and sacrifice his principles to try to satisfy some people?
§ Mr. Wilfred Proudfoot (Cleveland)Perhaps I c an help the hon. Gentleman. There was competition between manufacturers. Maxwell House came fresh from America, if he remembers the T.V. commercials of the time. There was a war on between manufacturers, which 1059 enabled this cut to be made at the retail end.
§ Mr. DoigI have been in this trade. The price was cut before Maxwell House came to this country, so what the hon. Gentleman says is nonsense. The Government are mistakenly concerned about small shopkeepers; they think they are helping them. In fact they are doing the exact opposite. If they do this, they will ensure that every small shopkeeper will go out of business.
Now, cigarettes. The large multiple which buys direct from the manufacturer gets double the discount granted to the small man who buys from a wholesaler. The Minister will no doubt say that he can sell cheaper so as to compete with the large multiple. I do not know how the small man can do that. If the multiple reduces its profit—it does not matter whether it is by 2 per cent. or by 5 per cent.—at the end of the day it will be able to sell cheaper than the small man can ever do. So the small shopkeeper will go out of business on this item. I know from my correspondence that this item is causing more concern than any other. If the Tories are concerned about the small shopkeeper, the last thing they should do is to support either the Clause or the Amendment.
What effect will this have on the big store? We are told that manufacturers can withhold supplies for one year. A big store has plenty of money. It will stock up for months and months beforehand. It will fill its store. It can then afford to sell cheaper. It will not care tuppence whether stocks are still supplied to it. It already has stocks. It can afford to act in this way. But the small shopkeeper cannot afford to act in this way. Again, he will be at a disadvantage.
There is nothing in the Bill which says that it is illegal for someone to give free gifs or that his supplies can be stopped if he does so. If the principle works as some people seem to think and if the housewife can be hoodwinked as some people seem to think, instead of selling an article for 9d. less than its proper price a trader can give away a free gift costing him 9d. If the trader has one of these walk-around stores such as multiples have, he can put a free 1060 gift right at the end of his store so that a customer has to walk right round the store before he comes to the free gift. The small shopkeeper cannot do this. Even if he tries to compete, he will still be at a disadvantage. In effect, the Government are putting it into the hands of multiples and are condemning small shopkeepers to go out of business.
Seasonal sales and clearance sales should not be confused. The two things are different. Take Christmas trees. It is difficult to define who would be the manufacturer of a Christmas tree. The Bill says that, if the manufacturer's consent is obtained, it is all right to cut the price. There might be some difficulty about talking to the manufacturer of an Easter egg.
Why should seasonal sales be exempted? This will encourage the smart alecs and operate against honest traders. I know that there are such things as seasonal trades, because I was connected with the wholesale trade for many years before I came here. Seasonal sales occur with Christmas trees. I know a firm in my town which had a substantial number of Christmas trees left over at 5 o'clock on Christmas Eve. If it had not reduced the price substantially, the trees would have been a dead loss. The firm decided at 5 o'clock to slash the price so as to avoid a dead loss.
§ Mr. Graham Page (Crosby)Are Christmas trees subject to resale price maintenance?
§ Mr. DoigAs far as I can see, the Bill covers everything. It does not say that Christmas trees are exempted. At any rate, I can find no such reference. There are many things to which resale price maintenance does not apply now but to which it will apply if the Bill is enacted. This is a serious matter. If the hon. Member for Crosby (Mr. Graham Page) were in a business of this type, where such losses occur from time to time, he would be very concerned about it, because it could hurt his business. There is only one way to cover oneself. If one is not allowed to sell cheaper in a bad season or on a bad day, one must increase the price every year to cover this loss. Therefore, the customer will lose again.
§ Mr. PagetSince Clause 1 has abolished resale price maintenance, are 1061 Christmas trees or anything else subject to resale price maintenance when we reach Clause 3?
§ Mr. DoigThey are, subject to the conditions which are put into the Bill, which were not there before and did not apply before.
Take hot cross buns and Easter eggs. I can assure the Committee that for a very large industry this is a serious matter. I worked in the bakery trade. I know the effect of this. Bakers must decide in advance how much they are likely to sell. Being optimists, they think it will be a great day; they think that the weather will be good over Easter. They decide to make a fairly substantial amount. In the event, it pours with rain for the two days of the Easter weekend and nobody wants to go out. Nobody wants to roll his egg. The bakers are left with thousands and thousands of hot cross buns which they cannot sell. [Laughter.] This may sound funny to some hon. Members, but I assure the Committee that bakers do not think it is funny when it happens to them. They slash the price so that they make it cheaper for customers to buy hot cross buns than for them to buy something else which will keep. The customers then buy hot cross buns cheaper. The customers benefit. This is what the Minister wants to happen, but it is what he will prevent. I could give dozens of examples of seasonal sales.
Presumably clearance sales will be limited by numbers. It is said that someone can have three or four a year. What happens to firms which own two or three different retail shops under different names? Presumably they would be allowed three clearance sales for the shop that goes under the name of Smith, another three for the branches which go under the name of Brown, and another three for the branches which go under the name of Robinson.
6.0 p.m.
We then have something which is even harder to define—common directors. When one pursues the evils of the Rent Act one often finds that a firm of solicitors will write saying, "We are writing on behalf of our clients and we are sorry to do this". One often finds on inquiring more deeply that the 1062 solicitors are the owners. In this case there will be common directors of different companies and it will be difficult to prevent them from shifting goods from one clearance sale to another if the goods have not been sold. The whole effect of the Clause will be to bring the Jaw into contempt.
We are old that if the manufacturer consents to certain things being done, that is all right. Are hon. Members not aware that under present trading conditions many manufacturers own their own retail outlets and are, therefore, at a distinct advantage? Are they not also aware that what is known as inter-company discounts are given whereby one company can obtain goods much cheaper than anyone else so that there is nothing to prevent that company's competitors from being put out of business? All this shows that the Clause will do nothing to help the consumer and small shopkeeper. It will react against them, and the best thing we can do is to reject everything concerning the Clause.
§ Mr. Maxwell-HyslopBefore proceeding, we should briefly rehearse what the advantages of avoiding loss leadership are to each, section of the community. My hon. Friend the Member for Twickenham (Mr. Gresham Cooke) mentioned one harmful effect of loss leadership—to the manufacturing section of the community—and, normally, if a product is consistently used for the purpose of lass leadership it will not pay any specialist stockist to stock it. He will stop stocking it and then, when the large outlets which use the product as a loss leader cease to use it as such, the manufacturer will find that he does not have any retail outlet for his products. As has been pointed out, this happened with the manufacturer of Schick razors, but that is only one example.
Another harmful effect which loss leadership can have—
§ Mr. Anthony Crosland (Grimsby)Will the hon. Gentleman give an example of an item not subject to r.p.m. in the whole of the grocery trade in this country where, in the last few years, a manufacturer has been damaged in the way he has described?
§ Mr. Maxwell-HyslopFor precisely the reason the hon. Gentleman mentions —because it has not been effectively subject to r.p.m.—the question does not arise. The question arises when one uses a product of one kind largely to sell a product of another kind. That was the point I was arriving at.
When a door-to-door salesman arrives at a house in answer to an advertisement for what appears to be a bargain object and then attempts, often successfully, to sell the occupant something completely different, after disparaging that which is advertised and which appeared to be such good value, the public recognises that this is socially undesirable as well as a dishonest trading practice. However, for some reason the public are somewhat slower to grasp that it is immaterial from the social and economic point of view whether this is done on the doorstep or in a shop.
The principle is the same if one uses loss leadership for the purpose of transfer selling, that is, if one gets oneself into houses or customers into one's shop by inciting them to buy something which appears to be a wonderful bargain and having done so persuades them to buy lots of other things they do not want to buy in addition to the thing one has advertised or, alternatively, having got them physically where one wants them, one disparages what one has used to attract them, to sell something more expensive. That is equally undesirable for the consumer.
We have had examples of where it is harmful to the manufacturer—because he has lost his retail outlet—where it is harmful to the consumer—for the reasons I have just explained—and where it is harmful to the distributive trade because it has probably laid in a stock—and for which, if the job is being done properly. it has included a stock of spare parts to service the product—and finds that, because a retailer who does not normally trade in that line of business, but is using the product as a lure, those who are able to offer proper service with spare parts find that they have invested in something which is being sold for loss leadership purposes and, from the point of view of the regular trader in the product, the article continues to be unsaleable for as long as loss leadership in that product continues.
1064 It is fair to remind the Committee that it is not just any one section of the community which is potentially liable to suffer harm from the process of loss leadership. In this connection, it must be remembered that there is a distinction between price-cutting and loss leadership. Price-cutting, technically, is still done with the intention of making a profit on what is being sold, whereas loss leadership is done with the intention of persuading the purchaser to spend more money than he or she intended to do when entering the shop.
§ Mr. J. M. L. Prior (Lowestoft)The hon. Member for Grimsby (Mr. Crosland) asked my hon. Friend to give an example of where in this country a manufacturer had lost as a result of the process of loss leadership in a retail shop. I think that probably the tea trade is a good example of this. Because of perhaps the better advertising and the size of the company, Typhoo has been able to get a larger share of the market. That company's teas are almost always sold at a cut price in the shops as loss leadership while the teas of some of the smaller firms are sold at the full price. A lot of the smaller manufacturers in the tea trade are being driven out of business for this reason. Here is an example of a manufacturer being adversely affected, even to the extent of being driven out of business.
§ Mr. Maxwell-HyslopI am grateful to my hon. Friend, because the food distributive trade is not one with which I am familiar, although I have had cases reported to me—I admit that I do not know whether they are true—of sugar being used as a loss leader, as a result of which some small grocers have stopped stocking sugar simply because they cannot sell it.
This is another example of the purchaser being put to inconvenience. The purchaser can no longer buy this commodity together with the other goods which are normally purchased from the same place. We arrive back at the conclusion that loss leadership has a number of characteristics, of which loss is only one. The primary characteristic is the intention of persuading the intending purchaser to buy something that he or she did not intend to buy in the first place. [HON. MEMBERS: "No."] Of course it is.
1065 The object of running a business is to make money. One does not lure someone into one's shop simply to sell something at a loss. It is done in the hope that the customer will buy something else and thus provide one with a profit.
§ Mr. A. E. P. Duffy (Colne Valley)Can the hon. Gentleman explain to the Committee why a higher price often acts as an inducement to would-be purchasers?
§ Mr. Maxwell-HyslopI was not speaking about higher prices. I was saying that when one attracts someone into a shop to buy something which is normally priced at, say, £19—perhaps a piece of household electrical equipment—and then one says that the service given by the manufacturer of the £19 article is appalling and that it is believed that at least 14 people have already been electrocuted using it—following that by explaining that one has in stock a better but similar article, but costing 23 guineas, that is an example of a customer being induced into a shop to spend more than he or she intended to spend when coming in in the first place. This is not a method of trading that I find commendable.
When one returns to what the Clause —
§ Sir Douglas Glover (Ormskirk)My hon. Friend is making a dreadful attack on reputable traders. Will he cite one case in which this practice goes on?
§ Mr. Maxwell-HyslopI am not aware that I have made an attack on any reputable trader. The whole point is that what I have been describing is not characteristic of reputable traders, but of disreputable traders—[HON. MEMBERS: "No."] I would describe traders who go in for transfer selling of the kind I have described as disreputable rather than reputable—
§ Mr. Denis Howell (Birmingham, Small Heath)Is the hon. Member aware that this morning I bought the tie I am now wearing from a shop which is only half a minute's walk from this building? When I asked for a half-guinea tie, the shopkeeper showed it to me, and then sought to persuade me to buy a better tie, asking, "Would you not like to see ties at 15s. or 1 guinea?" But I bought this one at 10s. 6d. There 1066 is nothing disreputable about it—[Laughter.] The only thing wrong with it is that it is the wrong colour.
The point is that that sort of thing is happening in every shop. The shop people get the customer in and then try to sell him something better than he went in to buy. That is normal trading practice. I never heard such nonsense as what the hon. Gentleman says.
§ Mr. Maxwell-HyslopThe hon. Gentleman's intervention is quite irrelevant. We were discussing the situation in which a loss leader was employed, and the hon. Gentleman has not given us any reason to suppose that the tie he purchased could ever sell itself to anybody for more than 10s. 6d.—
§ Mr. Michael Shaw (Brighouse and Spenborough)A letter I have here from a manufacturer in my constituency may illustrate my hon. Friend's point. He writes:
When we placed"—the particular commodity—on the market we decided to make our first into retail price maintenance and it was a good job we did. The line was so attractive and popular that the slick boys featured it and sold it with scarcely any profit to attract people into their shops. Reasonable traders could not be expected to have the same line on show in the same street at a higher price and had we not stopped price cutting the line would have been killed, for even Woolworth's were sorely concerned. The slick boys would have dropped the line once it had served its purpose, for they are always on the lookout for what are known as sneck lifters'.
§ Mr. Maxwell-HyslopI am grateful to my hon. Friend for that quotation, which gives the Committee the benefit of another example of that kind.
I do not subscribe to any magic figure of 5 per cent. What matters to the retailer is not only the actual percentage margin but the physical amount of money he makes. There are some very expensive items on which dealers may take a very much smaller margin. For instance—and I am open to correction here—I believe that in the motor trade if the local garage man is neither a distributor, an agent nor even a sub-agent for a manufacturer's brand, but someone locally orders that brand of car through him, he may get less than 5 per cent. on the deal; he carries no spares for the vehicle, but merely makes the introduction. To put that dealer in the class of those employ- 1067 ing loss leaders would be rather ridiculous.
I therefore could not give my support to the proposition that we should embody in statute law a magic percentage of 5, or any other percentage, because the difference between the types of commodity subject to resale price maintenance is so great that it does not seem reasonable—
§ The Temporary ChairmanOrder. The hon. Gentleman is now proceeding to an Amendment that we will discuss later.
§ 6.15 p.m.
§ Mr. Maxwell-HyslopThen I will return to loss leadership, and end, as I began, by welcoming this Amendment which, I think, as amended by a subsequent Amendment, will go some way to ridding us, where manufacturers wish to be rid of them, of trading practices of this kind. The Amendment does not make loss leadership itself unlawful; it does not prevent it. All it does is to enable manufacturers to use one particular weapon to prevent it should they elect to do so. I think that some hon. Members who have contributed to this debate may not always have had it in their mind that this is all that the Amendment does. It does not prevent loss leadership when the manufacturer does not judge that great harm is resulting from it.
That is my final point, and it is one that must not be overlooked, because there could conceivably be circumstances in which there might be loss leadership in a type of item, such as something rapidly becoming obsolescent not for reasons of fashion, which could be dealt with by a clearance sale, but for technical or other reasons. It might be desired to get rid of that item in some such way, and as long as the manufacturer concerned did not judge that his retail outlets or his goodwill with the purchasers was damaged, he would not withhold supply and enforce the conditions permitted by the Clause.
§ Mr. Roy JenkinsI found some of the remarks of the hon. Member for Tiverton (Mr. Maxwell-Hyslop) more convincing than others, and the one I found most convincing was when he said that he had no great knowledge of the 1068 retail trade. In those circumstances, I am not surprised that he touched but lightly on the interjections offered by his hon. Friends the Members for Lowestoft (Mr. Prior) and for Brighouse and Spenborough (Mr. Shaw), who made, at any rate, some attempt to provide supporting evidence for his argument. But I thought that when he said that he was grateful to his hon. Friend the Member for Lowestoft his gratitude was easily aroused, because his hon. Friend provided a powerful argument in support of the views that my hon. Friend the Member for Grimsby (Mr. Crosland) sought to put forward.
We were asked for an English example of loss leadering—the well-worn Schick razor case is cited so often that one is apt to think that there is no other example—but the hon. Member for Lowestoft quoted the case of the tea trade. He said that Typhoo tea was used as a loss leader to such an extent that all its competitors were being driven out of business. That seemed to be a very extraordinary piece of evidence in support of the case then being advanced by the hon. Member for Tiverton.
I must congratulate the Secretary of State on his flexibility and patience this afternoon. We have not seen the "iron-heeled" Secretary of State, or whatever he has been called. He began this afternoon by telling us that in his view the problem of loss leaders was not a serious one at all, and I agree with him. Since then the right hon. Gentleman has introduced a three-hour debate in a substantial speech, has contributed several Amendments to the Notice Paper and has previously had a Clause with two subsections, all designed to deal with this totally unsubstantial problem. Whatever else it indicates, it shows that the right hon. Gentleman is prepared to spend a good deal of the time of the Committee, whether with the assistance of the Chief Whip or not, to put up a front of listening to the nonsense of his hon. Friends.
Before coming to discuss in detail what the problem of loss leadership is, if there is a problem, and how serious it is, in so far as it exists, I ought to declare an interest. I declared an interest when I spoke on a Private Member's Bill at the beginning of February. I have not spoken on this Bill since and, 1069 therefore, I must declare that I have a connection with a retail group. Its interests are rather mixed, because the group has some supermarkets—and supermarkets are normally regarded as the predatory and likely beneficiaries of the Bill—but its main business is in departmental stores which, in America at any rate, have suffered much the worse from competition resulting from the abolition of r.p.m.
What is the loss leader problem, in so far as it exists? First, as the Government now recognise, it is certainly not selling below the cost of purchase. It indicates an extraordinary lack of awareness of the problem with which they were dealing, from the point of view of Parliamentary draftsmen, the right hon. Gentleman's Department and even the right hon. Gentleman himself, that when the Bill was drafted they thought that the problem of loss leadering was apparently the problem of selling below the cost of purchase. It is not so.
Where people do this for the purposes which have been outlined they sell below the cost of purchase in a great number of cases, and they do it whenever they have made a mistake in purchasing. Their object is to clear their shelves as quickly as they can. Any sensible retailer who wants to keep clean stock in these circumstances, once he has decided that a mistake has been made, must cut his prices over and over again until he gets rid of the stock. He may sell in these circumstances at a price 50 per cent. below what he has paid. This is not loss leadering. It is somebody paying for an error of purchasing judgment.
§ Mr. E. Fernyhough (Jarrow)It is not true to say that a loss leader is never sold below cost. Last year, thousands of tons of sugar were sold in this country, by many retailers, at below the purchase price.
§ Mr. JenkinsAs is so often the case with interruptions, and one is guilty of it oneself, if my hon. Friend had waited I would have covered that point. If I said that there was never a case of loss leadership as a result of miss-purchase, it was a mistake. What I intended to say was that the final point of loss leadership was not to sell below the cost 1070 of purchase, although sugar is an isolated example where sale below the cost of purchase has taken place on a large scale.
The crux is selling above cost of purchase so that one makes some gross profit, but not enough, so that there is no question of making any net profit. The net profit is nil or negligible, and the loss leader is sold so that expenses are not covered. But it is not very easy to define exactly when this is taking place, because expenses and adequate levels of gross margin vary enormously from trade to trade and even from retailer to retailer within a particular trade. One must be particularly careful that one is not dealing with a person who is said to be using a loss leader which would only be a loss leader for the less efficient retailer, who thinks that he is being penalised as a result of what is happening.
Quite apart from variations in margin from trade to trade, there is also the problem that a great number of retailers, without having any desire to indulge in the practice of using loss leaders, allocate their overheads in different ways between different types of goods that they sell. They may have certain reasons for keeping up a high level of trade in a particular department by selling goods at much lower levels than in another department. It is therefore extremely difficult to compare the facts.
§ Mr. BurdenThe hon. Member has made an interesting point which anyone who has any knowledge of wholesaling and retailing knows is perfectly valid. The retailer's accountants fix the notional mark-up which he should make. He fixes with his departmental heads the notional mark-up which they should make, and if prices are cut in one department the retailer has to average out by increasing prices in others.
§ Mr. JenkinsThe hon. Member was kind enough to say that I was making an interesting point. He has now made an interesting point. I am grateful to him for doing so, but it is not exactly the point that I was engaged in making.
Assuming that loss leadership, with all its difficulties of definition, exists to some extent—although its extent can be greatly exaggerated—what exactly are the dangers and disadvantages of the practice? I 1071 should like to look briefly at this problem from the point of view of three possible groups of people involved. First, there are the retailers other than the retailer who is selling the loss leaders. Secondly, there is the consumer. Thirdly, there is the manufacturer of the articles concerned. The Secretary of State, in his speech, rather indicated that it would be improper to use a loss leader to attract custom. That seemed to me a rather broad definition. What is improper and unsound is the use of loss leaders to drive out competitors. This is the point.
Let us suppose that we have a situation in one town where there are three stores of roughly equal size one of which uses loss leaders against the other two direct competitors. I do not think that the consumer would suffer at all.
§ Mr. Keith Stainton (Sudbury and Woodbridge)Ultimately.
§ Mr. JenkinsHe might even benefit. I pose the situation of three retailers of roughly equal strength occasionally using loss leaders against each other. I see no reason why this should produce a situation in which ultimately the consumer would suffer.
§ Mr. StaintonUltimately, a local monopoly could well emerge and that is something beyond the reach of national monopoly legislation. If hon. Members would think of towns and villages throughout the country I think that they would find that this is potentially a very worrying point.
§ Mr. JenkinsThis is another example where, if an hon. Member had waited, it would have been much less necessary to interrupt. I was simply laying down conditions in which there are three competitors of roughly equal size and I see no reason to assume in those circumstances that this condition would not exist—
§ Mr. R. E. Winterbottom (Sheffield, Brightside)If there are three similar shops in the same locality occasionally using loss leaders, the assumption that the consumer would benefit depends upon an analysis of the quality of the loss leaders. If the nature, substance and quality of the goods are similar in each of the three shops, my hon. Friend is right, but if a secondary line of goods 1072 is introduced in the place of a main line of goods then it is quite a different kettle of fish.
§ Mr. JenkinsIf the quality of the goods is reduced this might be a point, but in a situation in which there are three or more competitors of roughly equal strength one might have loss leaders used occasionally without any great effect on the pattern of trade.
The more dangerous situation—this is where the crux of the problem lies—is one in which there are not, say, three people of roughly equal strength but there is one retailer in a dominant position already in a locality who is anxious to mop up the smaller elements of competition which remain. Clearly, the danger of this situation can be accentuated if the dominant retailer has other substantial stores, if the store in the one locality is but a small part of his business, whereas the other people there are operating on their own without the same reserves.
The situation then, if there is a determined effort to use loss leading to drive the other people out of business—it is here, I think, and almost only here that the danger arises—could be such that the consumer would suffer considerable disadvantage. The number of retail outlets would decline, competition would be eliminated, and this could have great disadvantages from everyone's point of view.
6.30 p.m.
Now, the problem of the manufacturer. I should like to see more examples of how the manufacturers would suffer in this connection. The position of the manufacturers, of course, is at the heart of the problem. It is important to remember in all our discussions that the case for resale price maintenance comes, to a very large extent, from manufacturers masquerading in the small shopkeeper's clothes. It is the manufacturers who, to a very large extent, encourage the small shopkeepers to worry about it. I am bound to say that, apart from the hoary old case of the Schick razor, I know of no examples; and, if everyone was using Schick razors as a loss leader throughout the United States, I should have thought that a great number of them must have been sold, whatever else was 1073 happening. Apart from that, there have been practically no examples.
I am not arguing that loss leading cannot sometimes lead to considerable disadvantage. I have outlined the situation in which it could be used not to move against competitors as such but to move against competition itself in such a way that, ultimately, the position would worsen against the consumer and against other retailers.
§ Mr. Maxwell-HyslopThe classic case before the last war was of the "fighting companies" in the electric lamp manufacturing world whose object was not to produce good value for the consumer but to put out of business the regular manufacturers who were in competition with the "fighting company".
§ Mr. JenkinsI should not have thought that anything in the history of electric lamp manufacture could be in favour of those who wanted to defend a restrictive practice of any sort. I imagine that reticence about that would be the best policy for those who believe in restrictive practices whether in resale price maintenance or anything else.
There is a problem here, but it is of much smaller dimensions than is commonly assumed. The practice of loss leading is less widespread and will continue to be less widespread than is often assumed. The harm that can be done can be exaggerated, although I do not say that no damage can be caused in certain circumstances. It is, however, a problem which it is particularly difficult to deal with by legislation. I do not say that it is not something with which the Government should concern themselves, but I think that it calls for a rather different approach.
The American approach, by the Federal Trade Commission, might be a more satisfactory method. Under this system, a complaint can be made, and then the Federal Trade Commission is able to go into the complaint, looking at what is being done from the point of view of the retailer, manufacturer or whoever it may be, differentiating between certain practices which may, on the face of them, look almost the same but which, in fact, have different motive?, and different consequences.
1074 I feel that we should get away from the rigid approach of dealing with the problem too much in terms of margin. The right hon. Gentleman himself spoke about this, and I agree with him. The Federal Trade Commission goes into the matter and if it thinks that there is an abuse, it issues a "cease and desist" order which comes into effect within 28 days unless an appeal is lodged, in which case the question can go to the Federal court in certain circumstances.
It is a difficult problem to deal with by legislation, and that might be a better approach. However, it is not the approach which has been chosen. I say frankly that I am sceptical of the legislative approach in the Bill and in any Amendment which the Secretary of State has brought forward. The Amendment is better than the original Bill, and I think that it could be made a little better still by one or two further Amendments, although it could be made worse by others. On the whole, I think that we should not exaggerate the extent of the problem and we should be sceptical about dealing with it by legislation.
§ Mr. HirstWe have had a very interesting discussion, of almost Second Reading dimensions, and I do not wish to say very much at this stage. I am well aware of the procedural difficulties, which I naturally accept, or not being able to talk about the Amendments to the Amendment now before us. However, the Chair has very kindly selected my new Clause No. 6, Loss Leading, to be discussed with Amendment No. 179, and on this I should like to say a word or two in response to the right hon. Member for Battersea, North (Mr. Jay), who referred to it.
My hon. Friends and I considered that Clause 3 as originally drafted was not effective. Because we thought it ineffective, we put down the new Clause quite early in our proceedings. However, as everyone knows, one does not always hit quite the right point first time. We were anxious to include in the Clause all the possibilities which we could foresee at the time and make the thing more effective. I agree that it goes further than my right hon. Friend's Amendment, but I am not sure that the Amendment, although I broadly accept it, is altogether workable.
1075 I think that it will be more difficult to work, for obvious reasons, although I entirely accept his thinking in the matter. He is not prepared to go so far as the all-embracing sentence with which the new Clause starts, which would declare that loss leading is in itself unlawful. Of course, if one did accept that, it would make the whole situation much easier to control. However, I acknowledge that there are other arguments and I have been persuaded that it would go too far.
Therefore, I accept, as, I am sure, many of my hon. Friends do, the broad terms of the Amendment which we are discussing now, conditioned by the slight hints that we can discuss Amendments later. Some of us take exception to some words in subsection (2,b), and I think that there is every possibility that we can do something about it in due course. This is our difficulty at the moment in discussing the matter in detail, because we are governed by what may or may not happen when we come to the next stage of our debate.
I appreciate that, as my right hon. Friend said, this is a less rigid approach. Many of us felt somewhat concerned about the rigidity exhibited by Clause 3 as it stood. Of course, it has been difficult. I do not blame my right hon. Friend or anyone else, and I hope that no hon. Member on either side will blame my colleagues or me for trying to draft something different. We are all the time trying to get away from rigidity, but we were sensible enough to realise that there are difficulties in making the thing less rigid. There is no argument between my hon. Friends and my right hon. Friends in the Government or between both sides of the Committee in our desire to see genuine competition. Nevertheless, we felt that there was a danger in loss leading which could lead to unfairnesses between retailers and in certain manufacturing industries.
I have had some experience of such difficulties in my time. Although I am not connected with the business today, there was a time when I and those with whom I was associated found that loss leading on a particular line did lead to annoyance on the part of other retailers and interrupted our business considerably. We had to take action by 1076 putting the particular article on what was then called the Proprietary Articles Trade Association list to protect it—not that we wanted to do so, but because we were forced into that position by a substantial number of retailers saying to our travellers that, if this sort of thing went on with our line, they would not stock it.
It is a marginal point, but it is one about which I can speak, to a certain extent, from my experience. When one is in the retail distribution business there should be a fairly large measure of good will between the suppliers and manufacturers, on the one hand, and the retail customers, on the other. That is precious to any business. It makes a lot of difference to the type of person that one can get as a sales representative and to the general morale of one's business.
This is a very difficult thing to argue about. Many of us have had personal experience of it and many hon. Members will know what I am talking about. It is not obtuse or peculiar. There is a genuine advantage in having a tidy relationship and a happy atmosphere throughout the various chains of distribution. As I have said, I do not exaggerate the point. It is quite marginal and probably is not as important as many people think and will not be as important as many people fear.
But the honest answer is that there are possibilities, for obvious reasons, of a great deal of damage being done or an interruption or disruption of business if resale price maintenance went than there are at the moment. There is an understandable fear on the part of many people in the distributive trade that this happy and sound distribution system will be disrupted. If, as many of us think, this is a relatively marginal matter, there cannot be any great harm in trying to take steps to protect it.
If some advantage might accrue to the consuming public, we might have to take a different view, but this is a matter of honest difference. I spent 37 years in the distributive pharmaceutical business and I have some experience of it, although I am not in it now. I have already declared in this Committee the various interests which I have, and which are marginal compared with what they were before. If I felt that this proposal would be such a great boon and 1077 advantage to the consuming public, I should have the greatest possible difficulty, in spite of my allegiance to the people with whom I have dealt in business for many years, in maintaining the view that I hold with the strength and candour that I have often expressed in this Committee and outside. But I just do not believe that that will be the case.
If this is not a serious point, it does not really matter. There is a feeling in the country that something should be done about resale price maintenance. It has done a good job of work, and I thank my right hon. Friend the Secretary of State for having met us concerning principles, which I do not share with him, in this legislation.
As I say, if I thought that the abolition of resale price maintenance would be of advantage, I should have to examine my outlook. However, from my experience, I am convinced that this is a valid point, having seen the growth from the very early stages of the Proprietary Articles Trade Association and having inherited so much in the way of experience from my father and uncles and realising the chaos that there was before resale price maintenance came into operation and the disruption which there was in the retail trade and the concern of people who worked in the shops. As I say, I do not think it is as big as has been made out. It is, however, something which the Committee should face and we should take reasonable steps which do not invalidate the Bill's principles to meet it.
This is what we have been trying to do. My right hon. Friend has tried to meet us and agrees that this is a better way of going about the matter than was envisaged in Clause 3 as it was originally drafted. There is, however, some danger in the word "supplier", in paragraph (b) of the proposed subsection (2). If we cannot meet that, we shall have wasted all our time. But if we can meet it, and if we can allow my right hon. Friend to keep the validity of his own arguments and yet meet us in this Amendment, all the time and effort will have been worth while, and I for one am grateful.
§ 6.45 p.m.
§ Mr. WinterbottomWhile a cut-price policy does not involve a policy of loss leaders, nevertheless, in most cases, cut 1078 prices include a policy on the use of loss leaders. But in some cases loss leaders are used without any price cutting at all. That should be clearly understood. I want the Secretary of State to understand it, because unless he understands it he cannot realise how foolish is this new attempt to deal with the situation. It is a case of Tweedledum and Tweedledee. The attempt to deal with the matter in this Amendment and the attempt to deal with it in the Clause as originally drafted are bad. Both attempts are completely divorced from a knowledge of the problem.
Let me deal with loss leaders. I want to give two illustrations. One of my hon. Friends used sugar as an illustration. He was interrupted by my hon. Friend thy Member for Jarrow (Mr. Fernyhough). There were occasions in the past year when, by wise purchasing, some retail establishments were able to sell sugar as a loss leader against competitors and yet make a tremendous gross and net profit from the sale of that sugar. There have been times when, by wise buying on the market, they have bought cheaply and, due to the phenomenal rise in price they have been in a very happy situation vis á vis their competitors. How would we deal under this Clause with that type of loss leading?
§ Mr. ProudfootI do not think that anyone in this country is clever enough to buy sugar and to do that with it, because politics became involved with sugar a long time ago. That is not good buying; it is just good luck.
§ Mr. WinterbottomTo reply adequately to the hon. Member I should have to start on a process of education on the distributive trade which would take far too long for this debate.
I want to quote my own experience. There was a time when I organised a body of girls in the trade union movement. They were employed on prepacking commodities for grocery establishments, such as self-raising flour, pepper, and tea
Incidentally, I have analysed the pricing of Typhoo tea and have found that, to the manufacturers, there are no general variations in the prices of this tea or of Nescafé throughout the country. Thus, the argument concerning the manufacturer is quite right.
1079 I will now, however, return to what I was saying. There came along a very big—[An HON. MEMBER: "Wolf."]—firm which said to the owner that it required a certain number of cartons of self-raising flour, tea and coffee. He replied that he could not supply that firm since he was already supplying retail grocery businesses. He pointed out that he had insufficient staff with which to take on new work and that he had no room to expand.
He was told that the big firm would help him to find the capital to expand his business premises and to take on more staff. He agreed. Eventually, of course, that big establishment took over more and more until all the small grocers in the area were squeezed out and the whole of the packing was done for that establishment alone. When that happened, it insisted on a reduction in prices. When the owner of the packing business demurred, he was reminded of the fact that the big firm had supplied the capital for the plant he was using, so that it could enforce its will.
The owner of this packing business finally committed suicide. His place is still in the hands of the big firm. That is not a matter of resale price maintenance, but of direct price maintenance. How will this Clause apply to that? Because of the direct relationship between the firm and the packing business, the firm had complete control over wholesale prices. Such a firm can insist on a price conditioned by cut prices for the loss leaders in its shops. That is one of the factors we must take into consideration, but it has been completely omitted in the Bill so far.
In practice, r.p.m. has been abolished in the grocery trade for a long time. The Bill will prevent many small shops from dealing with the problems of stock turnover in the simple ways which they have used in the past. The Amendment refers to clearance sales. What are these? If a small grocer finds he has over-ordered he will "reduce to clear". Is that a clearance sale according to this Amendment? Does clearing one commodity constitute a clearance sale?
When I was manager of a shop I suddenly received £1,000 worth of shaving cream, to each packet of which was attached a free razor. If only I could 1080 have those razors now! There are a lot of people I see walking about the streets of London for which a use could be found for them. Certainly, I had no use for them at the time.
Eventually, I had to sell each packet of shaving cream, with razor, for 2d., just to get rid of the stock. Through the process of what is called "leakage", in a shop one has to find, over a long time, ways of meeting capital involved in such over-stocking so that stock-taking and turnover will be right. To keep my job I had to try all sorts of things to cover that £1,000. That is what will happen to the small shopkeeper. He will do all manner of things to preserve his identity and the service he gives, because of close proximity to the customers. If, by mistake, he over-stocks such things as Easter eggs, and has to reduce their price later so as to clear the stock, he should have some consideration. He will not get it under the Bill as drafted.
I do not approve of the original text of this Clause. But nor do I approve of this Amendment. I am on the horns of a dilemma. I hope that, even at this late stage, the right hon. Gentleman will find something which will clarify the question of clearance sales, because it is not what he says now which will count in the future. It is the wording of the Bill which will matter in the courts. I hope, therefore, that there will be clarification so that undue penalty will not be placed upon the small shopkeeper.
§ 7.0 p.m.
§ Mr. MaudeI confess that I find myself much more in agreement with the arguments of the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) than those of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), although I recognise that my hon. Friend the Member for Shipley (Mr. Hirst) made a persuasive and, I think, convincing case for doing something of a precautionary nature to deal with the problem of loss leadering, whatever may be its size and severity.
What worries me slightly—and this is the only reason that I intervene to seek some reassurance from my right hon. Friend—is that perhaps this Amendment goes, as suggested by the right hon. Member for Battersea, North (Mr. Jay), a little further than was originally intended in dealing with loss leadering.
1081 The hon. Member for Sheffield, Bright-side (Mr. Winterbottom) raised some pertinent points about clearances and reductions, but I believe that there are two more important points than those. The right hon. Member for Battersea, North questioned the words
…any goods of the same or a similar description, whether obtained from that supplier or not.He suggested that this might enable other manufacturers and suppliers of different goods, not necessarily of the same brand, to withhold supplies from the retailer on a basis which might come very near to that of a collective boycott or other conspiracy, such as we thought we had got rid of under the 1956 Act. I find it very difficult to believe that this could be held to be the meaning of the Amendment, but a number of my hon. Friends and hon. Members opposite would like some reassurance about it.The other point is that the definition in respect of seeking to attract customers may lend itself to a much wider interpretation than was intended. For example, I should have thought that the department store which, whether at a particular season or throughout the year, puts on a particularly attractive window display, often with a single theme running the whole range of the windows, does so often not simply to sell that particular class of goods, but to make the shop attractive and get people into it. It would have to be very careful to make sure that it could be judged to be trying to make a profit out of those goods, or, I suspect, it might find itself in trouble.
This is a matter which requires careful consideration and I hope that my right hon. Friend will be able to assure us that normal and innocent trading practices will not be penalised by the Amendment.
§ Mr. PagetI apologise to the Committee for my voice being in rather bad shape. I have found myself in more general agreement with the hon. Member for. Shipley (Mr. Hirst) than with anybody else who has spoken in the debate so far. Like him, I tend to take the view that, on the whole, people are inclined to know their own business best. When, over many years, one has 1082 seen emerge a system of trading such as that involved in resale price maintenance and methods of distribution which most of us would agree to be better than are to be found in other countries we visit, one cannot say that it is a bad system.
None the less, if the right hon. Gentleman decides that it is against the public interest, that is a decision which he is entitled to take. As the Minister, we make him responsible for the public interest and he is entitled to say, as he does in Cause 1, "Since I hold this to be against the public interest, you may not go to the Court to have it enforced". I would not argue that. Quite reasonably, we do the same with gambling. I never fed that one should make contracts with the idea of going to the Court. Frankly, I would rather be guided by my Quaker ancestors who said, "If thy friend cheat thee once, blame him; if he cheat thee twice, blame thyself".
Where I take violent exception is that in Clause 2 I find Parliament enacting that I should go to him to be cheated a second time, to the man who has defaulted on the contract I have made with him and with whom, because he has so defaulted, I am compelled to deal again. Therefore, I favour this provision simply because it is a limitation on the outrageous provisions of Clause 2, which I cannot believe we shall eventually allow to become law. Anything which limits the outrageous provision which says that I have to deal with a defaulter, with a man who has cheated on the bargain he has made with me and that for that reason I have to deal with him again, has my support.
I am concerned that the Clause should be so inefficient, as I think it is. In an intervention, I asked whether the profit mentioned in the phrase
not the purpose of making a profitin subsection (2) of the Amendment was a gross or net profit. The hon. Member for Twickenham (Mr. Gresham Cooke) said that the meaning was a matter for debate. We often find that inadvertently the meaning of what we legislate is a matter for debate, but that is hardly an argument for not debating it in advance. What we should try to do is to make our meaning plain.1083 I therefore ask the right hon. Gentleman, here and now, if he will help. In the words
not for the purpose of making a profitdoes he mean a gross or net profit? Surely that is a straight question to which we are entitled to a straight answer.
§ Mr. JaySurely net profit is what is meant. If the provision makes any sense, it must mean the profit the retailer makes over and above his costs. Can the right hon. Gentleman assure us that that is what he means?
§ Mr. Burdenrose—
§ Mr. PagetIt is very odd that the right hon. Gentleman should ask us to accept an Amendment in which the whole guts of the matter is whether it is a net or gross profit.
§ Mr. Burdenrose—
§ Mr. Burdenrose—
§ Mr. PagetI am sorry, but I shall not give way to the hon. Gentleman. If it is merely a gross profit, the argument is quite different. Is it gross or net?
§ Mr. Burdenrose—
§ Mr. HeathI will reply to all these points when I answer the debate. I cannot keep jumping up to answer each point in turn.
§ Mr. PagetI have never known a Minister who, when asked a direct question in Committee about the meaning of his proposal, has refused to state it. I have been here a very long time, even longer than the right hon. Gentleman, but I have never heard a Minister behave like that. If we have to assume that he has to wait for the Official Box 1084 to tell him what his proposal means, I must apologise for making a somewhat lengthy speech to deal with the matter upon the two bases.
The proposal is that action shall be taken against the supplier for refusing to supply goods to a certain customer. It is established, or admitted, that refusal to supply those goods is because the customer has been price cutting either the supplier's goods, or goods of the same class from another supplier. The burden of proof is then upon the supplier to prove that it comes within the price cutting in Clause 3 which is an exception.
Let us look at what he has to prove. If it is gross profit, he has only to prove that the goods were sold at less than the price paid for them. I presume that that would be a relatively simple thing to prove, but it would not establish what I think hon. Members on both sides of the Committee have asked for in this form of protection. It would not come anywhere near to protecting the supplier from having his goods used as loss leaders. I would assume for the moment that simply to say that it is gross profit here referred to is to put it in exactly the same position as it would have been under the Clause which has now been withdrawn, and I therefore assume that it must be net profit.
§ Mr. ProudfootWould the hon. and learned Gentleman like to say the period over which the net profit is assessed? Is it one day, one week, one month or one year? Because of that difficulty, his argument falls to the ground.
§ Mr. PagetOn the contrary, I should have thought that the argument for this Amendment falls to the ground because, as so often happens with interventions, that is the point to which I was coming. If the retailer has to prove that this is sold not at net profit—and I think that the words
not for the purpose of making a profitmust mean a net profit because one does not sell something for the purpose of making a profit if one sells it for the purpose of making a net loss—as the hon. Member for Cleveland (Mr. Proud-foot) asked, how does one arrive at it?We still do not know the procedure by which this Court will work, but if it is analogous to the way in which the 1085 High Court works in other Departments, the only way to arrive at it is to have discovery of documents. That would mean that the man charged with price cutting would have to disclose all the documents which were relevant to the question of what was a net profit. He would have to disclose all his books and accounts for an investigation by an accountant to see how overheads were carried and whether the profit amounted to a net profit or not.
7.15 p.m.
Is that really the sort of thing which it is fair to ask any trader to do for the benefit of somebody within his trade who is quarrelling with him and who is under no obligation not to make all these internal and secret matters of his books public? If this is to have any reality at all, it means that an investigation of the books of the retailer must be at the disposal of the wholesaler or the manufacturer who relies on this Clause.
The next point is the question of motive, which is the second thing which must be proved. The sale must not be for the purpose of advertising or for the purpose of encouraging the sale of other goods. I wonder how spare parts come into this. Are they sold with a view to encouraging the sale of other goods? Is the sale of spare parts designed largely to encourage the sale of motor cars, or whatever it is? Are spare parts organisations set up for that purpose?
We come next to the exceptions, and we are told that it is an exception if the sale is part of a seasonal or clearance sale. I have some idea of what a seasonal sale may mean, but I would be grateful if the right hon. Gentleman would tell us which sale is not a clearance sale. I do not pretend to have any special expertise on this, but as far as I am aware a shopkeeper buys a line to clear it by sale. What sale by a shopkeeper is not a clearance sale; a sale to clear what he has bought for the purpose of clearing by sale? If every sale made by a shopkeeper is not part of a clearance sale, what is it?
The right hon. Gentleman is really in favour of loss leadering or anything which would cut prices, on the sort of old Manchester school idea that anything which pushes down any price to a minimum is somehow to the benefit of 1086 the public. That is his real philosophy, Within that, of course, loss leadering is something which reduces prices on something, and, therefore, in his heart he is in favour of it. As a concession he put in a loss leader Clause which did not mean anything because it was applied simply to the point of a sale below costs price.
Under fire from his supporters the right hon. Gentleman has tried to replace that provision by fog. He has put forward another Clause which means nothing at all, which is utterly unworkable, which is nonsense, and the object of which is not to provide for anything in the Bill but to fob off his supporters who criticised it.
§ Mr. BurdenI think that the hon. and learned Member for Northampton (Mr. Paget) is in a little difficulty in expecting shopkeepers at the moment when they receive an article, to be able to determine what the net profit on it will be at the end of the year. The fact is that accountants tell a shop keeper what notional mark-up he should have, but whether or not a profit is obtained is not determined until the accountants have examined his books at the end of the year.
Subsection (2) of the Amendment says that
the use of goods as loss leaders is a reference to a resale of the goods affected by the dealer, not for the purpose of making a profit …The question whether it is net or gross profit is a matter for determination. It is impossible to determine early on whether there is a net profit.
Mr. HateWhich? carried out an interesting and instructive survey on sausages. There was a great variety of content, but it showed that quite a number are sold under resale price maintenance arrangements. Is the hon. Member saying that before a retailer of sausages decides whether to sell them cheaply he has to wait for 12 months to estimate his costings? Or is he really talking about an industry of which he knows something?
§ Mr. BurdenThe hon. Member is an eminent lawyer, but he does not know much about the retail trade. I doubt whether the retailer to whom he refers would sell only sausages. His profit would arise from the sale of the whole 1087 of the merchandise within his shop. Whether or not he would make a net profit over the year if he sold only sausages would presumably be determined by the number of sausages he sold. It is not worth labouring that point now. It is a matter of accountancy, and with great respect to the hon. Member he shows that he does not know much about running businesses.
I must declare an interest in this matter as a manufacturer and also a general warehouseman. But my manufacturing business does not deal in r.p.m. goods, and the wholesale business does so only to a very small extent. I believe that if the conditions indicated by my right hon. Friend come about as a result of the Bill I should benefit by the abolition of that method of trading.
The hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said that at the moment there was little indication of loss leadering to any extent. I am sorry that I missed my right hon. Friend's remarks about that argument. I gather that he said the same thing. But the hon. Member for Stechford then pointed out, quite legitimately, some of the difficulties that might arise if loss leadering continued. To some extent the Committee seems to have lost sight of the fact that the goods of any manufacturer who goes before the courts and is allowed to retain r.p.m. cannot become the subject of loss leadering. Neither can manufactured goods of any manufacturer who declares his intention of going before the courts, and which are now subject to r.p.m., be the subject of loss leadering before the courts have declared upon them.
Therefore, the main problem which may face many small retailers is that which faced small retailers in Canada when r.p.m. was completely abolished there. In the public image an r.p.m. article still bore a price and was still of a quality which had been recognised for many years and people cut the prices of those articles in order to attract business, without any intention of making a profit on them, thereby creating great difficulty for many small traders.
The great danger of loss leadering in this country would arise in the case of nationally-known and nationally-advertised goods which had formerly been 1088 subject to r.p.m. but which the courts decided should not continue to be so subject. In that case many large firms would be encouraged to slash the prices of those articles, because the public would continue to recognise their value. That is where great difficulties could be caused to the small shopkeeper. He would not be able to have a sufficient spread-over of articles to enable him to compete with larger firms in cutting the prices of such articles. In his case they might make up a very large part of his trade.
I hope that my right hon. Friend will keep a special watch on the situation during the period immediately following the abolition of r.p.m., because the whole thing will level off later, and many of the problems will disappear. To begin with, however, most of the large retail groups and stores will introduce their own branded lines to replace those cut out by the abolition of r.p.m.
What must also be remembered is that those lines will be sold with the full mark-up in the stores that produce them and have the right to possess them as their own branded lines. Difficulty will arise in respect of the already well-known branded lines, because the large retailers who previously bought them in bulk will prefer to have their own branded lines, and because of the cut-back in production the prices of the well-known branded lines will be increased to the small men. That is the major difficulty.
I am pleased that my right hon. Friend has shown flexibility here. I want to impress upon him again the fact that it is only in respect of those goods on which r.p.m. has been abolished that loss leadering can be employed; it cannot be used in respect of those goods where r.p.m. has been maintained. The danger period is the period following the abolition of r.p.m. on any branded line which is well known to the general public.
§ Sir D. GloverIt is true that the multiple stores will produce their own lines, but my hon. Friend should remember that they will have to come from somewhere, and that they will probably come from the same factories which now sell the well-known branded lines. He is an experienced distributor, and he will know that what will probably happen is 1089 that the same article will have one hat on in the independent shops and another hat on, under another name, in the chain stores.
§ Mr. BurdenI agree, but that will not prevent the activities that I have mentioned, because the goods will have different packages and different names, and the large stores will be able to charge what they like. That may lead to a form of "phoney" loss leadering. A smart trader may buy an article whose intrinsic value is 2s., but because it is produced under a different name, and specially for him, he will be able to mark it up at 3s., with a notice saying that the price is slashed to 2s. 6d., which will mean that the public will pay 6d. over the proper price, and still not get good value.
§ Mr. CroslandI doubt whether the Clause is enforceable or sensible. I want to echo the question that has already been asked, namely, to what extent can the Clause lead to some form of collective boycott, and not simply to activities by individual manufacturers? Let us suppose that a tobacconist cuts the price of a little-known brand of cigarettes, produced by a small manufacturer. Is it a possible consequence—since, in the normal way, he will also sell the products of the Imperial Tobacco Company and Carreras—that the large manufacturers will cut off his supplies? There is some doubt among hon. Members as to how far the Clause goes.
§ Mrs. Freda Corbet (Peckham)Any sensible tobacconist would not use such a line to attract custom.
§ Mr. CroslandThat does not affect my argument. Let us suppose that the tobacconist cuts the price of Players. Would that mean that in future he will not be able to get any Carreras?
§ Mrs. CorbetLet us suppose that he cuts the price of Players. I should have thought that in the case of a line of such wide consumption it would be fair for him to be denied supplies of Carreras cigarettes. That would really be a form of loss leadering.
§ 7.30 p.m.
§ Mr. CroslandI want to know what would be the effect upon the supplies of a wretched tobacconist if he cut the price of one brand, whether it was 1090 a product of the Imperial Tobacco Company or Carreras.
On the whole, I do not feel very enthusiastic on the Amendment because, like the Secretary of State and my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins), I think that the problem of loss leadering, loss leadership or whatever we are supposed to call it is enormously exaggerated in popular discussion. One reason why it is exaggerated among small retailers particularly is that they assume that loss leadering is going on when the large retailer is selling at lower prices only because he has a quantity discount or rebate.
A situation could easily arise, and constantly does, that because a large multiple store buys so much more cheaply, ii can sell at a price which gives it a [profit but at a price at which a small retailer could not sell except at a loss. In those circumstances, the small man naturally thinks that the multiple store or supermarket is going in for loss leadership, whereas it may be simply passing on to the consumer the advantage derived from quantity rebate. This is one reason why a great deal of unnecessary apprehension exists as to the extent of loss leadering as such.
My view is that expressed by the hon. Member for Gillingham (Mr. Burden), that what will happen immediately the Fill goes through is that when a manufacturer loses a case in the court, there will be a temporary spate of loss leadering on one or two sensational goods. Wit saw it, when the Bill was announced on whisky and the like. It may be a possible temporary danger, but it is not likely to last long and things will then settle down. Whatever the extent, however, I wish to take up one or two of the questions which have arisen about how damaging the practice is and to return to the point raised by my hon. Friend the Member for Stechford about what risk there is of serious damage to manufacturers.
I repeat my earlier question and the point I male when interrupting the hon. Member for Tiverton (Mr. Maxwell-Hyslop). The fact is that practically no examples are given from Great Britain of damage to manufacturers as a result of loss leadering. We read a great deal about how their production 1091 lines can be disrupted and how their forward planning is impossible because they do know at what prices retailers will sell. When, however, one comes down to facts, I know of no quoted instance of a manufacturer being seriously damaged in this way.
One or two examples have been given in the grocery trade of goods being used as loss leaders. The example of tea was given by the hon. Member for Lowestoft (Mr. Prior). As my hon. Friend pointed out, that proved the reverse—that the Typhoo tea manufacturer gained enormously compared with his competitor because the particular brand was used as a loss leader. Another example given by an hon. Friend of mine was that of sugar, which has been used as a loss leader over the last two or three years. It is the most traditional loss leader in our grocery trade. What sugar manufacturer has suffered desperately over the last few years as a result of this? I have noticed no sharp diminution, for example, of the profits of Tate and Lyle, who appear to view the whole situation with general indifference.
Take another example, probably the most common loss leader of the last five or six years, Nescafé or instant coffee as a whole. Two cases, Nescafé and Maxwell House, have persistently been used as loss leaders ever since r.p.m. broke down in the grocery trade. Nobody can say that these two items have been used as loss leaders and have damaged the manufacturers. Very much the reverse is the case. The use of these goods as loss leaders has tended to reduce the retail price and this has been one of the factors leading to the demand for this type of coffee in the last five years.
I emphasise this point because we have had several years without r.p.m. in the grocery trade. If the loss leader problem was as widespread and the results as damaging to manufacturers as some hon. Members opposite assume, we would have had a great number of examples of well-known manufacturers saying that they have suffered serious damage as a result. The fact is that no examples are ever given. This seems to me to be conclusive.
1092 My doubts about the wording of the Clause are not that it does not go far enough, but that it conceivably goes too far. It bans the use of prices as a promotional aid. None of us is against retailers using promotional aids in other respects. As one hon. Member said, we do not object to the use of elaborate window displays or to straight advertising. Some of us object to trading stamps, but many others do not. We do not object when a store in a constituency gets a film star or someone from "Coronation Street" to open it as a promotional device. In fact, in some cases, we do not object when prices are used as a promotional aid. Very often, a large store may have a car park for the use of which it makes no charge to customers. That, again, is a promotional activity which forgoes possible profit on the space taken up by the car park. All these forms of promotion are quite respectable and are part of the efficient competitive economy and generally we encourage them.
There is, however, one form of promotion—that people should cut prices in the way described simply to increase their share of trading in a locality—which is, apparently, wrong and wicked. This view goes very far and is inconsistent with the rest of our attitude to what retailers are expected to do. I am, therefore, unhappy about the Clause for this reason.
I very much follow my hon. Friend the Member for Stechford in saying that the right approach to loss leadering is not in those terms of practice, but is in terms of what one is trying to stop. I am not trying to stop in all circumstances the use of lower prices as a form of promotion. That seems to me to be quite wrong and to go much too far. One is trying to stop, first, what the Americans call predatory price cutting—that is, price cutting by a large store for a limited period deliberately designed to drive the small man out of business, with prices being raised again as soon as that has happened. That is our first object.
The second thing which we are trying to stop, if it exists, as to which I am sceptical, is the use of loss leaders on a particular article so persistently that a high-grade manufacturer really suffers from it. If that occurs, which I doubt, we are trying to stop it. I add also a 1093 third point which, I know, the Secretary of State does not consider relevant to the Bill and to the Clause, but which I regard as highly relevant, and that is double pricing. On grounds of honesty, we should have legislation to curb or restrict the practice of the retailer putting on a tin of Nescafé or anything else an imaginary price which is crossed out and a much lower price inserted, usually by hand. Double pricing is, generally, a highly dishonest practice by which the retailer is intended to give the impression that he has cut the price of goods far more than is the case.
As many hon. Members may know, the French have elaborate provisions designed to restrict the use of two prices. They provide in general that a retailer can put only one price on any goods unless he is cutting the price below the manufacturers' marked price. Only in those circumstances can the retailer show both the recommended price and, beneath the price at which he is selling the article. Apart from that exceptional case, the practice of double pricing with the impression of bogus price reductions, is prevented by law.
Double pricing not only confuses the consumer without giving any corresponding benefit, but it is one of the things which alarms the small retailer and gives him much more anxiety about his future than he would otherwise have. Therefore, if we were able to eliminate this practice, it would in some sense be a safeguard for the small retailer.
My solution, therefore, would not be that which is proposed in the Amendment, but would be threefold. First, I agree with my hon. Friend the Member for Stechford that ideally one needs a court, commission or tribunal before which either retailers or manufacturers must prove definite proof of injury, the injury being danger of being forced out of business on the part of the small retailer or total disruption of production in the case of the manufacturer. Any other form of price cutting which did not produce that positive and proved injury but was simply promotional could be permitted.
Secondly there should be legislation against double pricing to eliminate a great deal of dishonesty, hypocrisy and bogus price cutting.
1094 Thirdly, there is a point which has often been mentioned in these debates by the hon. Member for Cleveland (Mr. Proudfoot), about small retailers. I strongly plead that they should not take so pessimistic an attitude to loss leadering and r.p.m. If they have any gumption—as I am sure they have—they will follow the example of the grocery trade and band themselves together, as was done in the United States in voluntary chains and co-operative organisations of one kind or another.
One becomes exhausted by the rather defeatist pleading which goes on. The remedy has been exercised in a number of trades in this country, and in many trades in other countries. As soon as the Bill goes through, if there is a serious danger of loss leadering—which I think is exaggerated—I believe that the independents will respond by banding themselves together and fighting it out on their own ground.
§ Mr. Norman Cole (Bedfordshire, South)I put my name to this Amendment a week or two ago and, having heard the debate, I have found no reason to change my views. It may be well to remember the purpose for which this Clause, including this Amendment, is designed. It is designed to provide an alibi to the manufacturer who withholds supplies. We have gone a little way from that in trying to look at the definition of the alibi.
This is giving the manufacturer when he comes before the Restrictive Practices Court a defence when he is asked why he adopted practices referred to in Clause 2. This very much covers the purpose of the Amendment. It is not laying down the law for each and every person in the country to observe once the Bill becomes an Act. It does that certainly, but, more important in many ways, it lays down a framework for a manufacturer brought before the Court and asked to give reasons why he has acted in this way. It gives him an opportunity to produce a clear and definite reason. Whether the Court agrees is a matter for the future to show.
If I were a manufacturer in this position I should do what I think most hon. Members would do. I would link several parts of this Amendment together. The Amendment says: 1095
not for the purpose of making a profit on the sale of those goods, but for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods".Those two items live together. In this debate we have made very heavy weather of the question of, what is a profit? If a man has a tin of peas which he bought for 1s. and sells at 11d. or 1s. 0½d. the chances are that he is not making any profit within any commonsense definition of the term. He is certainly not making a profit arithmetically. Before the right hon. Member for Battersea, North (Mr. Jay) interrupts me, I should say that I am aware that ½d. is a twenty-fourth of 1s. The acid test is whether or not a man was making a profit on one article, or perhaps on five linked in a packet, and whether or not he could make a living if he continued in that way.
§ Mr. JayIf a man buys a tin of peas for 1s. and sells it for 1s. 0½d. he makes a gross profit. The point the hon. Member for Bedfordshire, South (Mr. Cole) is making is exactly what we are saying. We want to know whether the Bill says that is a gross profit or a net profit.
§ Mr. ColeIf the right hon. Member had listened to me, as I am sure he usually does, he would have noticed that I said ½d. is a twenty-fourth of 1s., but that it did not contribute a real profit to the man concerned. In discussing this Amendment we should not get bogged down. Judges are not foolish; neither is the Court. It will know if a man is selling either regularly or on one occasion only at a microscopic gross profit, that he is selling to attract custom.
7.45 p.m.
I return to the point about whether he is doing so to attract more customers to his establishment. I think most people can appreciate and evaluate that. If I were a manufacturer I should have people standing about in the shop to see how many customers bought the item concerned. I should not worry about halfpennies or shillings. This Amendment is perfect common sense. My right hon. Friend has been wise to call it profit and not to be too particular about it. This is a good shot at trying to cover an admittedly difficult procedure.
My hon. Friend the Member for Gillingham (Mr. Burden) pointed out one 1096 device which will grow when the Bill becomes law. I hope that hon. Members do not think that is the end of the story. The moment the Bill becomes law there will be a hundred and one different methods found to perpetuate those parts of trading which are legitimate in which resale price maintenance is found but which are in the public interest. They will be methods by which the dealer and the supplier can maintain their proper positions.
We cannot anticipate all the trains of thought that all those gentlemen will bring forward in future. The most we can do is to put a commonsense view. We should say to the judges, "This is what Parliament means." The judge will ignore our speeches and it is right that he should do so, but we should say, "This is what Parliament means in general and we expect you to apply it in a commonsense manner." The provision is designed for the use of the manufacturer to plead his defence. If he does not do so satisfactorily, he will be found to be breaking the law.
Reference has been made to goods put on the market and used promotionally. It is a fairly safe bet— I have an interest in this which perhaps I should declare—that if someone is using a loss leader promotionally he is doing so with the consent of the manufacturer of the product. He may be lined up with national advertising on television and in other ways. We should not overlook the importance of paragraph (b), at the end of the Amendment. There might be an out of date type of canned goods which a manufacturer would like to have removed from the market.
We should not assume that there will always be disparity of interest between the manufacturer or supplier and the dealer. Often, there will be amity among them in an effort to get rid of these things—to get them out of the way—but they cannot afford to throw them away. It is not the dealer who puts the reduction of 3d. on the manufactured packet. That is done by the manufacturer, to get rid of it.
§ Mr. LubbockSuppose an article becomes obsolete through technical change and the retailer finds that he still has some of those articles on his hands. He goes to the manufacturer 1097 and says, "May I sell this at a much lower price than that at which I bought it?" The manufacturer would have to consider what effect that would have on sales of new articles coming into circulation. He might refuse permission. The wretched retailer would then have these things on his hands.
§ Mr. ColeThat is a fair question and deserves a fair answer. If I were a manufacturer I should almost give those things away, so long as it did not damage my trade, or I would link them with a more up to date article. No manufacturer would like to have in the front of the shop out of date articles which merely show what is produced in the past. He would rather that they were absorbed and the retailer was compensated. If the goods are out of date it is in the interests of the dealer, the supplier, the distributor and manufacturer for them to vanish from the scene at the earliest possible moment.
I plead for a commonsense interpretation. The House of Commons is not a legal body. But I am quite certain that there will soon be a body of case law on the outstanding cases. No one in this Committee would feel himself incompetent to recognise a firm which was selling off things other than in a genuine clearance sale. I take the point made that every kind of business is a clearance sale. That is what people are in business for. We know that the public and judges understand the term "clearance sale", and to make heavy weather out of this matter is less than useful. This Amendment is a very good commonsense way of going on and I personally am in support of it.
§ Mr. G. R. Howard (St. Ives)I shall confined my remarks to one point. In moving this Amendment, my right hon. Friend, as I understood him—perhaps he could clarify this point—said that there were certain articles which could be bought definitely for the purpose of including in a sale. If I may put forward the point of view of the photographic trade, I have had it represented to me that there are certain companies which run clearance sales of bankrupt stock, and I am told that they supply bankrupt stock made to be put into these sales. How it is done I do not know, but if this is possible it worries me as to the definition of this phrase.
1098 Let us say that a large store is having a clearance or seasonal sale of something completely different from photographic material. It may at the same time undercut and sell as a loss leader photographic materials under the cover of other sales and in this way carry out loss leader sales of photographic material during the whole year. That really worries me. I know that the word "genuine" carries weight in the courts. I hope that the Amendment will cover it, but I am not quite sure that it will. I am told that there are countless cases of people who make a business of selling articles in clearance sales which go on for a whole year. I have a letter from the Photographic Dealers' Association which says:
Regarding 'clearance sales', there are some shop; which have 'clearance sales' throughout the year. They specialise in buying up bankrupt stock, or in having stock specially produced to be called 'bankrupt'.This is to me a worrying point. Perhaps my right hon. Friend can reassure me when he winds up the debate.
§ Mr. John Harvey (Walthamstow, East)I think that the speech of my hon. Friend the Member for St. Ives (Mr. G. R. Howard) and the kind of interruptions that we have had from the hon. Member for Orpington (Mr. Lubbock) tend to underline the importance of defining in the Bill what we mean by seasonal sales and clearance sales. I have put down an Amendment at a more appropriate place in the Bill, but I think that it would be helpful if we could have an assurance from my right hon. Friend that he agrees that, if the terms "clearance sales" and "seasonal sales" are to mean anything, we have to have something in the Bill to say what they mean. I hope that thought has been given in his Department to this, or that thought will be given to it long before we reach Clause 11, because I feel that everyone is entitled to have some idea of what those terms are intended to mean if much of what we are discussing in this Clause is to mean anything at all.
A number of hares have been started in this debate. The hon. Member for Dundee, West (Mr. Doig) and the hon. Member for Sheffield, Brightside (Mr. Winterbotiom), to mention but two, made some suggestions which I did not regard as feasible when we began this 1099 debate. The idea that in some odd way a vendor of Christmas trees with a lot of trees left on his hands on Christmas Eve could be prevented from disposing of them cheaply or that a baker left with a stock of hot cross buns, or cold cross buns, would be prevented from selling them cheaply is nonsense. I cannot conceive that these things can happen under the terms of the Bill, and I think that it is of some importance that my right hon. Friend should nail this sort of thing now before we start any more panics among the more jittery of the traders, who are entitled to wonder how a Measure such as this will affect their livelihood and who will be thrown into even greater confusion if we start the sort of hares that we have had when discussing this matter.
§ Sir D. GloverI intervene on this Amendment only because I put my name to it, and I think that it is an improvement on the Bill as originally produced. Personally, I would sooner that this Clause were not in the Bill.
Many of the things that I have heard expressed in this debate horrify me. As a retailer myself, I have always held the view that if I am fortunate enough to make a profit that is a good thing, but my real object and exercise as a distributor is to get the wool from the sheep on to the backs of human beings, at the most economic price that the person who is to wear the suit can get it. That is efficient distribution.
Distribution is a very expensive system throughout the world. It horrifies me when I think of the gross profit that we have to work on to get the goods from A to B into the basket or on to the back of the person who is going to buy them. I cannot see anything more immoral in distribution than one firm deciding to spend 2½ per cent. of its gross turnover on advertising and another firm competing with it deciding to spend 2½ per cent. of its gross turnover in cutting prices. They are both promotional.
If, instead of paying to advertising agents and newspapers perhaps £50,000 a year, one gives £50,000 in reduced prices to the public, the great mass of the public benefits and not one single advertising agency. When I hear speeches by hon. Members opposite 1100 about advertising being a completely non-productive effort and a thoroughly immoral practice, I do not share that view. I think that it is necessary to let people know what there is for sale. If that is accepted, it is an equally good thing for one person to decide that instead of advertising he will become known for offering extremely good value.
8.0 p.m.
Let us deal with one or two cases which have been raised. Mr. A has bought some goods and they do not sell. Fie thinks that if he cuts the price he will be accused of loss leadering and will have his supplies cut off. I have had this experience dozens of times. I say to the manufacturer, "I shall sell these goods at half price. If you do not like this, will you take them back?" Very few manufacturers have ever offered to take them back, and in the end I get permission to sell at half price.
This will happen when the Bill becomes law. If a retailer has something which is not selling, and he wants to get rid of it, he will not wait until the clearance sale at the end of the year but will write to the manufacturer saying, "I have bought a stumer in line B and I have a large stock which is not moving. I propose either to sell it at a reduced price, below cost, or you can have it back. I shall be glad to have your letter by return of post giving permission to sell at a reduced price because I am putting these goods in the shop window on Saturday." If a manufacturer has produced a bad line he will send out many letters saying, "Get rid of the stuff as soon as possible". This happens every day in distribution.
I believe that my right hon. Friend would perhaps have been wiser to have brought in a one-Clause Bill simply saying, "From August 1st resale price maintenance is illegal." Instead we have other Clauses all trying to protect individual retailers. This makes the law into a lawyer's paradise.
I do not believe that when the Clause becomes law it will involve many cases being brought before the Court. People seem to think that retailers and distributors are in such fierce competition that they never speak to each other. But I know quite well what will happen. Re- 1101 tailer A, having decided that he will run a loss leader, will be telephoned by retailer B, saying "You can carry on until Monday, but if it goes on after Monday I shall take action"; and on Monday he will stop doing it.
§ Mr. HaleThe hon. Member is ably denigrating the Amendment to which his signature is attached. In relation to firms which have no great strength or power, the effect will be to render Clause 2 nugatory, because people will be so frightened of proceedings under Clause 3 that they will carry out the obligations under Clause 2 conveyed to them not by the wholesalers but by printed instructions and by memoranda and stick-on labels.
§ Sir D. GloverI do not think that there is very much in that point. I am supporting the Amendment because there are fears—quite unnecessarily—among the independent retailers about what will happen to them as a result of the Bill. I support the Amendment to meet those fears, but I have explained what I think will happen when the Bill becomes law. The intention is to provide a broad feeling that there is some action which they can take, and I hope that this will encourage them in their belief that they have a future as independent retailers. I do not see a great mass of small independent retailers taking the matter as far as to proceed to the restrictive practices court.
My hon. Friend the Member for Gillingham (Mr. Burden) made a valid point about the manufacturers being asked by large organisations to produce a multiple's own brand. I am worried about what will happen in the first 12 months —I think that it will be 12 months but it may be six months—for some strange things may happen in retailing when the Bill becomes law. People will have a rush of blood to the head. Whisky will be sold at 35s. a bottle—and if I could buy some I should be only too happy to do so.
But it will not happen for very long, because in retailing there is very quickly found—I know that the hon. Member for Sheffield, Hillsborough (Mr. Darling), with his vast experience, agrees with me—the kind of profit needed on any individual article to make it worth while stocking it. People cannot afford to 1102 go on selling at a lower price unless they are doing it instead of spending money on advertising or in some other way. There will be a marginal difference in the prices.
But this Amendment gives a feeling of confidence to the small retailer. It is a big improvement on the Clause as originally drawn, and I hope that it will provide a far greater feeling of security for those to whom I have referred. For that reason I have put my name to it, and I have no difficulty in supporting it.
§ Mr. Edwin Wainwright (Dearne Valley)The hon. Member for Ormskirk (Sir D. Glover) has not read the Amendment. If he reads it he will find that it is of very little help to the small shopkeeper whom hon. Members opposite want to support. The small shopkeeper gets nothing out of the Amendment, which has been moved simply to try to convince hon. and right hon. Members opposite that it is a safeguard for the small shopkeeper.
I hope that the Minister will explain the Amendment more clearly. The Amendment gives me the impression that it is imply to help the large combines and the supermarkets more quickly to wipe out the small shopkeepers. It gives power to the manufacturer to be selective. It does not say that the manufacturer must take action against everyone who sells goods at a lower price than that at which they are supplied to him by the manufacturer. There may be two or three large firms of retailers in a district, and a large combine or supermarket may be selling goods at a reduced rate simply to attract customers in order that they will buy other goods. Apparently it can continue to do so.
Let us suppose that the large combine and supermarket continues to do this for six months, and that suddenly a small shopkeeper tries to compete and similarly reduces the prices of his goods. After six months the manufacturer or supplier can take action against him, which gives a very unfair power to the manufacturer and supplier over the small shot keeper. I am convinced that the Amendment seeks merely to try to convince right hon. and hon. Gentlemen who were opposed to the Bill that the Minister intends to try to help the 1103 small shopkeeper. I am satisfied that it does not.
The hon. Member for Ormskirk (Sir D. Glover) gave the impression that all retailers are of the same size. This is not so. Some retailers are large and substantial. They can fight supermarkets, to some extent. As they can give better and more personal service, they can compete with supermarkets. Smaller shop-keepers will not be able to compete with supermarkets if the Amendment is carried.
§ Sir D. GloverMuch of what the hon. Gentleman is saying is true. It is true today. Before the abolition of resale price maintenance, the individual shopkeeper, for whom I am sorry, finds it very difficult to compete with the larger store. However, the object of the exercise must be remembered. It is to get goods from the field or the factory into the hands of the consumer. It is not merely that the abolition of resale price maintenance is creating a change. It is the other way round; the public get cheaper goods.
§ Mr. WainwrightThe hon. Member forgets one important factor. There is such a thing as controlled supply as well as ordinary supply and demand. There can be an abundance of goods, but if the supply to the retailer is controlled, or if the supply from the retailer to the consumer is controlled, whatever price can be obtained can be charged. This does not mean that resale price maintenance can be abolished. More supplies going to the supermarket, with the result that the small retailer goes out of business, does not mean that the consumer will get a cheaper product. He might for a short time. My experience is that, wherever the supply of goods is in the hands of a few people, the price of those goods is not fixed at the price at which they could profitably be sold. Because competition has been removed, the price of the goods remains artificially high.
There is no guarantee that, in the event of the small shopkeeper going out, the price of goods will be, for any appreciable length of time, let alone permanently, lower than it is today. One period must be taken with another, because the cost of living increases by 3 per cent. 1104 or 4 per cent. every year. Whatever small benefit may result will be wiped out by the increase in the cost of living.
I hope that the Minister will explain to the Committee what was in, his mind in bringing forward this weak Amendment, which does not give any help to the small retailer. Power will still remain in the hands of the manufacturer and the supplier to make some concession to supermarkets and large retailers and hit the small shopkeeper whenever he wants.
§ Mr. PagetIt would be unfair to the hon. Member for Ormskirk (Sir D. Glover) if one summarised his speech by saying this. In fact, distribution takes place between reasonable people. Price maintenance takes place between reasonable people. The evils of price maintenance have not really arisen. If price maintenance were abolished, there might be a few hysterics for a short time, but we should only return to where we are now and that is why he would not take too tragic a view about it.
The hon. Gentleman would rather have no Clause at all, but, as the amended Clause means practically nothing, he does not object to it. This is quite a tenable point of view, but it is one which does not accord with those of his hon. Friends who seem to lay store by the provision.
§ 8.15 p.m.
§ Mr. HeathThis has been a wide-ranging debate of very great value indeed. My hon. Friends and hon. Members opposite have contributed a wealth of knowledge and experience on the whole subject of retailing, purchasing, manufacturing and consumption, and also a variety of views about loss leadering in particular, exactly what it is, what it does, to what extent it exists, and what its consequences are if and when it exists. This leaves me a comparatively small number of points with which to deal, because they are points which have been raised on the Amendment.
Perhaps I could deal with some of the specific points which have been raised before coming on to the three main ones which were raised by the right hon. Member for Battersea, North (Mr. Jay) and echoed by my hon. Friend the Member for Stratford-on-Avon (Mr. Maude) and the hon. Member for Grimsby (Mr. Crosland). There was, first, the ques- 1105 tion raised on a number of occasions about the definition of "sales". This was also very often connected with the point raised by one or two hon. Members opposite, in particular by the hon. Member for Orpington (Mr. Lubbock), as to what happens when a retailer has a considerable amount of stock on hand which, for perfectly valid reasons, he wants to dispose of at a much lower price.
On the question of the definition of "sales" raised by my hon. Friend the Member for Walthamstow, East (Mr. J. Harvey), I think there are later Amendments, so I will not go into that in detail. By the introduction of the word "genuine", if the matter is taken up by an aggrieved retailer the Court will be well able to decide whether it was a genuine sale. Similarly, a supplier who thinks that he ought to withhold supplies will be perfectly capable of judging whether the sales were genuine.
I think that there was some misunderstanding on the part of my hon. Friend the Member for St. Ives (Mr. G. R. Howard) that in future a dealer will be able to hold only something which is a genuine clearance sale or a seasonal sale. This is not so. People can have as many sales as they like all through the year. What we are dealing with is loss leadering in sales. People can go on having sales all the time, if they want to, and the consumer is not adversely affected, as some hon. Members opposite thought that he might be. So we are dealing only with the question of loss leadering.
My hon. Friend the Member for St. Ives also said that in some sales the retailers buy up stocks, sometimes bankrupt stocks, and then sell them cheaply. As I said in my opening remarks, there is nothing whatever to prevent retailers from doing this. If they wish to buy a particular line at a cheap price and sell it in a sale, they are at liberty to do so. Indeed, it would be to the disadvantage of the consumer if they were not. What it prevents them doing is buying up a cheap line and then loss leadering it in the sale itself. That is what we have prevented in the Amendment. I will come later to the question of definition.
§ Mr. JayWill the right hon. Gentleman clarify that point? If the retailer 1106 has some individual line of goods which he legitimately wishes to get rid of because they are not a successful line, can he sell those outright below the cost price and call it a clearance sale, even though the clearance relates to one particular line of goods and not to the other goods in stock?
§ Mr. HeathOn this point he would not be selling them for the purpose of advertisement. This is part of the definition of loss leadering. He would be selling them, as some hon. Members have clearly described, because he has made a mistake in purchasing, has bought a line of which he cannot dispose and finds himself with this on his hands and for valid reasons wishes to dispose of it below cost. That is not loss leadering in the sense we are discussing it, which is selling goods for the purpose of advertising with the consequences which have been deduced from that and discussed by hon. Members.
The right hon. Member for Battersea, North said that there were three doubts about the Bill which troubled him. The first was the question of the supplier who is involved in withholding supplies and that of the retailer who is aggrieved and who goes for redress. That supplier would have to prove that the man was selling not at a profit but for advertisement. The supplier in this case is really in the position of a defendant, because it is the aggrieved retailer who is bringing the case. The supplier must show that he had reasonable cause to believe that this was happening.
I should have thought that that was within the capacity of a supplier, who could show what the retailer was doing by way of using the goods as an advertisement or a bait. The supplier, knowing the price at which he was supplying the retailer, could say that he was not selling the goods for a profit but for the purpose of advertisement. Thus he must show that he had reasonable cause to believe that that was being done. As I say, I should have thought that that was a reasonable position in which a supplier should be rut when a retailer is involved in this sort of case or when the Board of Trade takes up a case if it considers that it should.
The second point of the right hon. Member for Battersea, North was 1107 whether this extended to a situation where the supplies were obtained from the supplier or another source. This matter was also raised by the hon. Member for Grimsby and my hon. Friend the Member for Stratford-on-Avon. The Amendment does extend to the other suppliers, but only for goods of the same or similar description. In other words, this would apply in particular, I think, to something like whisky. The withholding would apply not only to a particular brand of whisky but if one brand was used for loss leadering then this definition would include suppliers of other brands of whisky, who would be able to withhold supplies. However, they would not be able to do it as a collective arrangement because that would be covered by the Restrictive Practices Act, 1956.
§ Mr. JaySurely that would enable all the manufacturers, if not collectively at any rate simultaneously, to withhold supplies from the same retailer?
§ Mr. HeathThat is true, but they would not be able to do it by means of an organised agreement. [HON. MEMBERS: "Oh.") If they wished, they could withhold supplies of the same or similar description; and it seemed to us when drafting the Amendment— and the Committee has not yet discussed this in great detail—that it was much too narrow an approach to say that only that supplier could withhold that particular brand if it was being used for loss leadering, because loss leadering is used in general to deal with a particular type or description of article.
§ Mr. J. T. Price (Westhoughton)Does the right hon. Gentleman realise the implications of what he is saying—that as a matter of principle it would appear perfectly obvious to me that if proceedings were brought against a retailer by the Board of Trade for loss leadering it would be competent for that retailer to bring a counter-claim to the effect that he was the subject of a collective boycott and that that boycott was operating against him in breach of the 1956 Act? Apart from providing an extremely good wicket for the lawyers, does the right hon. Gentleman agree that that is the obvious deduction to make from his remarks?
§ Mr. HeathThat situation cannot arise, because there is no question of bringing an action against a retailer for loss leadering; and the hon. Member has not had the benefit of being present during all our discussions on this topic this afternoon. The supplier is able to withhold supplies in the case of loss leadering under the definition in the Amendment. I am saying that another supplier of goods of the same or similar description could also withhold supplies in a case of loss leadering.
§ Mr. Roy JenkinsSince the basis of all this is that the manufacturer should be able to protect himself against his whole trading position being changed as a result of his product being used as a loss leader, why should other manufacturers be put in the position described by the right hon. Gentleman? Is that position not close to being a collective boycott? Will the right hon. Gentleman look at this matter again to see exactly what position is likely to be created?
§ Mr. HeathIt is not a question of a collective boycott and if there were any question of a collective organisation arising that would come within the scope of the 1956 Act. It seems that if there is an attempt to loss leader in one brand of whisky, that will affect other brands. This was why we included the withholding of supplies as a definite act for goods of the same or similar description.
§ Mr. MaudeCould this apply, for example, to all shirts, because it seems that this goes too wide and should be looked at afresh by my right hon. Friend?
§ Mr. HeathGoods of the same or similar description would, I think, include all shirts. I think that all shirts would be shirts and would, therefore, be of a similar description. It is difficult to give definitions of this sort off the cuff.
§ Mr. William Wells (Walsall, North)In what sense is the Secretary of State using the word "description" in this context? A great deal of controversy has centred around the word "description", particularly under the Sale of Goods Act, and it would be useful for the Committee to know what meaning 1109 the right hon. Gentleman attaches to it and whether he intends to define the word more precisely at a later stage.
§ Mr. HeathWe have certain Amendments down for consideration later dealing with "similar kinds", "description" and so on, but perhaps it would be wise for me to remain in order and not comment on those Amendments until we reach them.
§ Mr. HaleIs the Secretary of State saying that because later Amendments appear on the Notice Paper it is not necessary for him to explain those amendments which are passed before that point is reached?
§ Mr. HeathI am saying that I am extending to the Committee the usual courtesy of trying to remain within the bounds of order. I have explained the position under the Amendment of the question of suppliers withholding supplies.
I come to the third point made by the right hon. Member for Battersea, North. He asked whether the Amendment would exclude justifiable trading practices. I have dealt with some of those which were specifically before hon. Members and which affected the small shopkeeper. The right hon. Member said he thought that these practices would lead to goods being sold more cheaply and that, therefore, they should be supported. There are, however, various ways in which these practices can continue. I have pointed out that it the retailer has made a mistake in buying he can dispose of that line, provided he is not within the definition of selling for advertisement.
8.30 p.m.
Secondly, it is permissive on the manufacturer, as my hon. Friend the Member for Ormskirk (Sir D. Glover) said. The suppliers are in touch with the retailers and know when the position arises that they need not take action in particular cases. Thirdly, they can approach the manufacturer and ask permission to carry on a sale of a particular kind that would otherwise be loss leadering. Then there are the seasonal and the clearance sales. These are all ways in which the normal methods of giving to consumers the advantages of cheap selling can be maintained, so I hope that the right hon. Gentleman will feel that 1110 the anxieties he first expressed are, perhaps, not as serious as he thought from the point or view of maintaining for the consumer the advantages of cheaper selling which, after all, is what we are trying to obtain from this Bill.
I think that those are the main points raised by the right hon. Gentleman and by my hon. Friends. The general reception of the Clause by the Committee has been, I think, that it is an improvement—or that this part of the Clause is an improvement—on the Clause as first drafted. The suggestion was made by the hon. Member for Stechford (Mr. Roy Jenkins), supported by his hon. Friend the Member for Grimsby, that we should have adopted, perhaps, American practice; in other words, a more administrative approach to this difficult question of loss leadering. On the other hand, in the general context of a Bill in which we are using a judicial procedure it is perhaps more in keeping to try to deal with this in the Bill itself. At the same time, no one has tried to disguise the difficulties of making it effective and flexible.
When we consider flexibility we come to the point raised by the hon. and learned Member for Northampton (Mr. Paget) and the right hon. Member for Battersea, North about the meaning of "profit". This, as I said at the very beginning, is the attempt to be flexible in the matter as against the more rigid approach we had at first, and it is otherwise exemplified. In the Canadian legislation, to which we have looked as a model, the word "profit" is also used without definition as net or gross.
What it means, as has been emphasised, is not selling at a loss but for the purpose of advertising, If one is to enter into a definition of what is net or gross profit one gets back to the position we faced with the more rigid wording we had to begin with. The point there fore is that we judge this upon the purpose of the retailer: was his purpose to make a profit?
This is a matter of judgment that contains various elements, and also includes the question brought up by the hon. Member for Stechford as to how the retailer chooses to spread his overheads, which is the right of any retailer. Many hon. Members are interested in the maintenance of the rights of retailers, 1111 and that is one of the rights he must maintain. Had he the intention of making a profit, or was he doing it for the purpose of advertising? That seems to us to be the combination that has been used elsewhere, and can be used here, on which a judgment can be formed.
Obviously, if he was not to make anything he would be selling for the purpose of making a loss. On the other hand, it may be that his calculations are wrong and that he sells at a loss without having that purpose. The definition therefore must be the two-sided one that his intention is to make a profit and that he has not the purpose of advertising. I believe that when we take those two together we do not have to go into the precise definitions which the hon. and learned Member for Northampton was so keen to have—
§ Mr. J. J. Mendelson (Penistone)On the point of definition, if the judgment is to be based on intention and purpose, a clear definition of what is meant by profit and whether it affects net profit is absolutely necessary, otherwise no such judgment could be made by anyone.
§ Mr. HeathWith great respect to the hon. Gentleman I think that the reverse is the case; the supplier knows perfectly well the situation of retailers generally who are selling his goods, knows the different kinds of retailers, sizes of retailers, self-service, and so on, and I believe that he can judge whether the man's intention is to make a profit or whether his real purpose is not to make a profit but to advertise. That is the test on which we must judge—
§ Mr. PagetDoes it not come back to the position that a manufacturer merely has to say, "I fixed this price as low as I could. Anybody who sells below this price is, in my view and in the light of my experience, not really trying to make a profit"?
§ Mr. HeathThe supplier may say that, and he may use that as his own definition of loss leadering, and say, "I never withhold supplies except in those circumstances," but I would not be prepared to say that that is a definition all suppliers may use, because I do not believe that it is—
§ Mr. PagetThe answer surely is that any supplier can take that definition. It means that it is open to any supplier to say that he is reasonably of opinion that a chap who sells his goods at below the recommended price is not trying to make a profit and that, therefore, he will not supply him in future.
§ Mr. HeathWith respect, I do not believe that that follows at all. We are dealing specifically with the definition of loss leadering, and the man must be selling not for the purpose of making a profit, but for advertising, and those are the grounds on which the supplier can withhold supplies. If the supplier himself likes to accept that definition on his own account that is entirely up to him, but I am not saying for a moment that that is the definition which all suppliers have to accept.
These are the main points that have emerged from the debate. The general view of the Committee is that this is a more effective way of dealing with this difficult problem than the version originally brought forward in the Bill. I hope that the Committee will accept it.
§ Mr. JayI have no wish to prolong the debate but I think that the right hon. Gentleman's answers on the question of profit are extraordinary and quite unsatisfactory. We are not concerned whether or not it is the purpose of the retailer in some sense to make a profit, but unless we know in what sense he intended to make a profit the whole Amendment is meaningless. I confess that I assumed when I first addressed the Committee that as a matter of common sense it must mean that the retailer intended to make a net profit after providing for his own costs. That seemed a reasonable interpretation and I expected the right hon. Gentleman to say that that was what the Amendment meant as a matter of English or of drafting in which case, subject to a later Amendment, it would have been satisfactory.
The right hon. Gentleman, however, does not give that assurance. If it does not mean net profit and if it means the gross margin which the retailer will earn we are back to the Clause in the Bill as first introduced. As the Bill was first introduced, a man was loss leading if he sold at or below the price which he had paid wholesale. If he bought at 1113 1s. and if he sold at 1s. or less than 1s. he was held to be loss leading. If the interpretation now is that we are dealing with gross profit it has only to be shown that he is selling at 1s. plus ½d. and he can argue that he is not loss leading. This brings us back to exactly the situation that we had under the original Clause.
I assumed when the right hon. Gentleman introduced the Amendment that it was bona fide and meant something different from the original Clause 3, but if this is the interpretation, it is a hoax on the Committee. I am not saying that it is a deliberate hoax. It may be that the right hon. Gentleman did not understand either the original Clause or this amended proposal but, rightly understood, it is a hoax on the Committee. It takes us back exactly where we were before, after a great parade of improvements and amendments. If the right hon. Gentleman cannot do better than this, I advise my hon. and right hon. Friends to vote against the Amendment.
§ Mr. HeathI must tell the right hon. Member for Battersea, North with great respect, that he has completely misunderstood what I was saying. I said that there are two tests in this matter of loss leadering. The retailer must be shown to be doing this not for the purpose of making a profit but for the purpose of advertisement. In using the word "profit" I did not want to be drawn into any specific description of net profit or gross profit because these themselves are matters very much open to discussion as to what should be taken into gross profit or net profit on any particular retail sale.
We tried in the first Clause to set out certain items and there was immediate discussion whether these were the items which should be taken into gross profit or not, but it is apparent that if the retailer does not make something over gross profit he will sell at a loss. Obviously, the supplier knows what the cost is to the retailer, and he knows that the retailer will have costs above that. He must form a judgment whether the retail sale is made not for the purpose of making a profit but for the purpose of advertisement. He can judge this without our trying in the Amendment to lay down a precise defi- 1114 nition—this is all I am saying—of what is net profit and what is gross profit. If he withholds supplies and the retailer is aggrieved and takes the matter to the Court, the Court must decide whether the man was setting out with the intention of selling not for the purpose of making a profit, allowing for the different factors involved, but for the purpose of advertisement.
That is a decision which the Court must take, and I believe that the Court is in a position to take it without our putting a precise definition into the Bill of all the things which ought to go into net profit or gross profit. That is all I am saying. I think that the right hon. Gentleman has completely misunderstood in saying that this is some bogus form of provision. It is not in the least. The manufacturer, looking at the situation, will decide whether a man is selling for a profit or for this other reason, and then, if his opinion is challenged, the matter must be decided by the Court.
§ Mr. JayI do not want to turn the debate into an altercation between the Front Benches, but we really must know where we are. It is true that, under the Amendment, there are two issues, first, whether the retailer is seeking advertisement, and second, whether he is seeking a profit. But the fact that the advertisement issue Irises does not alter the need at the same time to know what is meant by seeking a profit. The right hon. Gentleman now appears to be arguing that he really does mean net profit because he says that, if a retailer is making a loss, then the case would be established.
§ Mr. JayMay I finish?
He appears there to mean a net loss and he therefore implies that what he means in the Bill is a net profit. If he were to say that quite clearly, I think that we should be satisfied. He says that the Court has to decide, but, of course, the Court must know what it has to decide on. Otherwise, how can it reach a meaningful decision? If the right hon. Gentleman has said simply and plainly that, evidently, the Bill ought to mean and does mean net profit, we should be satisfied, but he has not said that. I think that he has confused 1115 us further and, far those reasons, we remain unsatisfied.
§ Mr. ColeThe right hon. Member for Battersea, North (Mr. Jay) did not return the courtesy which I extended to him, but I make no complaint about that.
I must point out to the right hon. Gentleman and his hon. Friends that the word "seek" does not appear in the Amendment. The point of the Amendment may well be met even though a man is making a profit, provided also that he is doing it from the point of view of advertisement. The reference in the Amendment is to the purpose not only of not making a profit, but
of attracting to the establishment…customers likely to purchase other goods…This is the ruling factor in loss leadering. Loss leadering does not mean that a man must sustain a loss. By the right hon. Gentleman's own interpretation of Clause 3 as it stood, goods could have been sold at the price at which they were bought, which would mean neither loss nor profit.I ask right hon. and hon. Members opposite to address their minds to the crux of the Amendment, which is that a man sells, at whatever price, for the purpose of attracting people to the premises to purchase other goods or otherwise for the purpose of advertising his business. The question of profit is a secondary matter, and the two issues will exist side by side.
§ Mrs. CorbetI have explained on other occasions my opposition to the principle of the Bill, but I must say that I am favourably impressed by this Amendment. I feel that we shall save something from the dangers which menace certain sections of the community.
I quite understand what the right hon. Gentleman means when he says that it is not really possible to put into the Bill a detailed indication of what net profit is. At any one moment, it is very difficult to say whether an article or series of articles sold in a shop will secure a profit for the shopkeeper on the total working of his shop. For instance, the price of electricity may go up in the course of a year. Overheads may increase. The cost of the labour employed in the business may rise. It 1116 is clear that a shopkeeper cannot estimate the net profit that he has managed to make except over at least a year's working. That makes it extremely difficult to put into the Bill the words "net profit".
8.45 p.m.
I take it that when the retailer brings the supplier before the Court because the supplier has failed to deliver goods to him the supplier then has to make good his case for not having supplied the goods. He will not run the risk of losing his action without ensuring that he has failed to supply the goods for good and legal reasons. He must, therefore, make sure that the reason why he did not supply the goods was that he was fairly certain that the dealer had sold the goods at a very low price for the main purpose of advertising.
Suppose that a retailer buys several thousand articles which he proposes to sell at a profit of a halfpenny on each. Although with a profit of a halfpenny—
§ The Temporary Chairman (Sir Samuel Storey)Order. The hon. and learned Member for Walsall, North (Mr. W. Wells must not keep passing between the hon. Lady the Member for Peckham (Mrs. Corbet) and the Chair.
§ Mrs. CorbetSeveral thousand halfpennies will not amount to a sufficient profit for the Court to say that this was the retailer's purpose. We must leave it to the Court to decide what were the retailer's motives and I think that we must leave it to the supplier who proposes to take this very drastic action to ensure that he withholds his goods only on legal grounds. I suggest to my hon. Friends that they might think again and, perhaps, decide not to oppose the Amendment.
§ Mr. HaleFirst, I wish to apologise to my hon. and learned Friend the Member for Walsall, North (Mr. W. Wells), who came across, in courtesy to me, to discuss a matter of immediate relevance on which a decision had to be taken.
Secondly, I wish to seek your guidance, Sir Samuel. Your predecessor in the Chair, 12 or 14 hours ago, at a rough estimate, said that he would call two Amendments in my name and the names 1117 of my hon. Friends the Members for Ebbw Vale (Mr. M. Foot) and Nelson and Colne (Mr. S. Silverman) to this Amendment. He also said that it would be convenient to the Committee if we discussed new Clause No. 6 entitled "Loss leading", to which somewhat limited attention has been paid, at the same time as we discussed this Amendment, although presumably the Question would have to be put later in the evening when we reached the new Clauses—if we make so much progress today. He then announced that the Question on a number of other Amendments to this Amendment would be put.
I find myself in some difficulty, and I think that my hon. Friends have some doubts, although they can express themselves with more competence than I could do, about whether it is appropriate for me to rise to move my Amendment now, or whether you, Sir Samuel, would think it more appropriate to put the
§ Question and let the Committee decide whether these words should be provisionally added before we discussed the whole series of Amendments, which would be more convenient. I do not want to lose the opportunity of discussing my Amendments, and I am only too happy to ascertain the wishes of the Committee.
§ The Temporary ChairmanThe position is quite clear. All the Amendments to the Amendment are to the second Question. Therefore, it is necessary for us to dispose of the first Question on the present Amendment and to propose the second Question on that Amendment, and then I will call the hon. Member to move his Amendment.
§ Question put, That the words proposed to be left out stand part of the Clause:—
§ The Committee divided: Ayes 196, Noes 256.
1119| Division No. 61.] | AYES | [8.50 p.m. |
| Abse, Leo | Edelman, Maurice | Jay, Rt. Hon. Douglas |
| Ainsley, William | Edwards, Rt. Hon. Ness (Caerphilly) | Jenkins, Roy (Stechford) |
| Albu, Austen | Edwards, Robert (Bilston) | Jones, Dan (Burnley) |
| Allaun, Frank (Salford, E.) | Edwards, Walter (Stepney) | Jones, Elwyn (West Ham, S.) |
| Awbery, Stan (Bristol, Central) | Evans, Albert | Kelley, Richard |
| Bacon, Miss Alice | Fernyhough, E. | Kenyon, Clifford |
| Barnett, Guy | Finch, Harold | Lawson, George |
| Baxter, William (Stirlingshire, W.) | Fitch, Alan | Lee, Frederick (Newton) |
| Beaney, Alan | Fletcher, Eric | Lee, Miss Jennie (Cannock) |
| Bellenger Rt. Hon. F. J. | Foot, Dingle (Ipswich) | Lever, L. M. (Ardwick) |
| Bence, Cyril | Foot, Michael (Ebbw Vale) | Lewis, Arthur (West Ham, N.) |
| Bennett, J. (Glasgow, Bridgeton) | Forman, J. C. | Lipton, Marcus |
| Benson, Sir George | Fraser, Thomas (Hamilton) | Loughlin, Charles |
| Blackburn, F. | Galpern, Sir Myer | Lubbock, Eric |
| Blyton, William | George, Lady Megan Lloyd (Crmrthn) | Mabon, Dr. J. Dickson |
| Boardman, H. | Ginsburg, David | McBride, N. |
| Bottomley, Rt. Hon. A. G. | Gordon Walker, Rt. Hon. P. C. | MacColl, James |
| Bowden, Rt. Hn. H. W.(Leics[...], S.W.) | Gourley, Harry | MacDermot, Niall |
| Bowles, Frank | Grey, Charles | McInnes, James |
| Braddock, Mrs. E. M. | Griffiths, David (Rother Valley) | McLeavy, Frank |
| Bradley, Tom | Griffiths, Rt. Hon. James (Llanelly) | Mallalieu, E. L. (Brigg) |
| Brockway, A. Fenner | Griffiths, W. (Exchange) | Manuel, Archie |
| Broughton, Dr. A. D. D. | Grimond, Rt. Hon. J. | Mapp, Charles |
| Butler, Herbert (Hackney, C.) | Gunter, Ray | Marsh, Richard |
| Callaghan, James | Hale, Leslie (Oldham, W.) | Mason, Roy |
| Carmichael, Neil | Hamilton, William (West Fife) | Mendelson, J. J. |
| Castle, Mrs. Barbara | Hannan, William | Millan Bruce |
| Chapman, Donald | Harper, Joseph | Milne, Edward |
| Cliffe, Michael | Hart, Mrs. Judith | Mitchison, G. R. |
| Collick, Percy | Hayman, F. H. | Monslow, Walter |
| Craddock, George (Bradford, S.) | Healey, Denis | Moody, A. S. |
| Crosland, Anthony | Henderson, Rt. Hn. Arthur (Rwly Regis) | Morris, Charles (Openshaw) |
| Crossman, R. H. S. | Herbison, Miss Margaret | Moyle, Arthur |
| Cullen, Mrs. Alice | Hill, J. (Midlothian) | Mulley, Frederick |
| Dalyell, Tam | Holman, Percy | Neal, Harold |
| Darling, George | Holt, Arthur | Oliver, G. H. |
| Davies, G. Elfed (Rhondda, E.) | Houghton, Douglas | O'Malley, B. K. |
| Davies, Ifor (Gower) | Howell, Denis (Small Heath) | Oram, A. E. |
| Davies, S. O. (Merthyr) | Howie, W. | Oswald, Thomas |
| Delargy, Hugh | Hoy, James H. | Padley, W. E. |
| Dempsey, James | Hughes, Cledwyn (Anglesey) | Paget, R. T. |
| Dodds, Norman | Hughes, Emrys (S. Ayrshire) | Pannell, Charles (Leeds, W.) |
| Doig, Peter | Hughes, Hector (Aberdeen, N.) | Parker, John |
| Donnelly, Desmond | Hunter, A. E. | Paton, John |
| Driberg, Tom | Irvine, A. J. (Edge Hill) | Pavitt, Laurence |
| Duffy, A. E. P. (Colne Valley) | Irving, Sydney (Dartford) | Pearson, Arthur (Pontypridd) |
| Ede, Rt. Hon. C. | Janner, Sir Barnett | Peart, Frederick |
| Pentland, Norman | Skeffington, Arthur | Wade, Donald |
| Prentice, R. E. | Slater, Mrs. Harriet (Stoke, N.) | Wainwright, Edwin |
| Price, J. T. (Westhoughton) | Slater, Joseph (Sedgefield) | Warbey, William |
| Probert, Arthur | Small, William | Watkins, Tudor |
| Pursey, Cmdr. Harry | Smith, Ellis (Stoke, S.) | Wells, William (Walsall, N.) |
| Randall, Harry | Snow, Julian | White, Mrs. Eirene |
| Rankin, John | Sorensen, R. W. | Whitlock, William |
| Redhead, E. C. | Spriggs, Leslie | Wilkins, W. A. |
| Rees, Merlyn (Leeds, S.) | Steele, Thomas | Willey, Frederick |
| Rhodes, H. | Stones, William | Williams, W. T. (Warrington) |
| Roberts, Albert (Normanton) | Strauss, Rt. Hn. G. R. (Vauxhall) | Wilson, Rt. Hon. Harold (Huyton) |
| Robertson, John (Palsley) | Stross, Sir Barnett (Stoke-on-Trent, G.) | Winterbottom, R. E. |
| Robinson, Kenneth (St. Panoras, N.) | Swain, Thomas | Woof, Robert |
| Rodgers, W. T. (Stockton) | Swingler, Stephen | Wyatt, Woodrow |
| Rogers, G. H. R. (Kensington, N.) | Symonds, J. B. | Yates, Victor (Ladywood) |
| Ross, William | Taylor, Bernard (Mansfield) | |
| Shinwell, Rt. Hon. E. | Thomas, George (Cardiff, W.) | TELLERS FOR THE AYES: |
| Short, Edward | Thomas, Iorwerth (Rhondda, W.) | Mr. Charles A. Howell and |
| Silverman, Julius (Aston) | Thompson, Dr. Alan (Dunfermline) | Mr. McCann. |
| Silverman, Sydney (Nelson) | Thornton, Ernest | |
| NOES | ||
| Agnew, Sir Peter | Duncan, Sir James | Johnson, Eric (Blackley) |
| Allason, James | Eden, Sir John | Johnson Smith, Geoffrey |
| Amery, Rt. Hon. Julian | Elliot, Capt. Walter (Carshalton) | Jones, Arthur (Northants, S.) |
| Arbuthnot, Sir John | Elliott, R.W. (Newc'tle-upon-Tyne, N.) | Joseph, Rt. Hon. Sir Keith |
| Atkins, Humphrey | Emmet, Hon. Mrs. Evelyn | Kaberry, Sir Donald |
| Awdry, Daniel (Chippenham) | Erroll, Rt. Hon. F. J. | Kerans, Cdr. J. S. |
| Balniel, Lord | Farey-Jones, F. W. | Kerr, Sir Hamilton |
| Barber, Rt. Hon. Anthony | Fell, Anthony | Kershaw, Anthony |
| Barlow, Sir John | Finlay, Graeme | Kirk, Peter |
| Barter, John | Fisher, Nigel | Kitson, Timothy |
| Batsford, Brian | Fletcher-Cooke, Charles | Lancaster, Col. C. G. |
| Beamish, Col. Sir Tufton | Fraser, Rt. Hn. Hugh (Stafford & Stone) | Leather, Sir Edwin |
| Bevins, Rt. Hon. Reginald | Freeth, Denzil | Leavey, J. A. |
| Biffen, John | Galbraith, Hon. T. G. D. | Legge-Bourke, Sir Harry |
| Bingham, R. M. | Germans[...], Lady | Lewis, Kenneth (Rutland) |
| Birch, Rt. Hon. Nigel | Gibson-Watt, David | Lindsay, Sir Martin |
| Bishop, Sir Patrick | Gilmour, Ian (Norfolk, Central) | Linstead, Sir Hugh |
| Black, Sir Cyril | Gilmour, Sir John (East Fife) | Litchfield, Capt. John |
| Box, Donald | Glover, Sir Douglas | Lloyd, Rt. Hon. Selwyn (Wirral) |
| Boyd-Carpenter, Rt. Hon. John | Glyn, Dr. Alan (Clapham) | Longbottom, Charles |
| Boyle, Rt. Hon. Sir Edward | Godber, Rt. Hon. J. B. | Longden, Gilbert |
| Braine, Bernard | Goodhart, Philip | Loveys, Walter H. |
| Brewis, John | Goodhew, Victor | Lucas-Tooth, Sir Hugh |
| Bromley-Davenport, Lt. -Col. Sir Walter | Gough, Frederick | McAdden, Sir Stephen |
| Brown, Alan (Tottenham) | Gower, Raymond | MacArthur, Ian |
| Bryan, Paul | Grant-Ferris, R. | McLaren, Martin |
| Buck, Antony | Green, Alan | Maclean, Sir Fitzroy (Bute & N. Ayrs) |
| Bullard, Denys | Gresham Cooke, R. | McLean, Neil (Inverness) |
| Bullus, Wing Commander Eric | Grosvenor, Lord Robert | McMaster, Stanley R. |
| Burden, F. A. | Gurden, Harold | Macmillan, Maurice (Halifax) |
| Campbell, Gordon | Hamilton, Michael (Wellingborough) | Madden, Martin |
| Carr, Rt. Hon. Robert (Mitcham) | Harris, Reader (Heston) | Maginnis, John E. |
| Cary, Sir Robert | Harrison, Col. Sir Harwood (Eye) | Maitland, Sir John |
| Channon, H. P. C. | Harvey, Sir Arthur Vera (Macclesf'd) | Markham, Major Sir Frank |
| Chataway, Christopher | Harvey, John (Walthamstow, E.) | Marples, Rt. Hon. Ernest |
| Chichester-Clark, R. | Harvie Anderson, Miss | Marshall, Sir Douglas |
| Clark, Henry (Antrim, N.) | Hastings, Stephen | Marten, Neil |
| Clark, William (Nottingham, S.) | Hay, John | Mathew, Robert (Honiton) |
| Cleaver, Leonard | Heaid, Rt. Hon. Sir Lionel | Matthews, Gordon (Meriden) |
| Cole, Norman | Heath, Rt. Hon. Edward | Maude, Angus (Stratford-on-Avon) |
| Cooke, Robert | Henderson, John (Cathcart) | Maudling, Rt. Hon. Reginald |
| Cooper, A. E. | Hendry, Forbes | Mawby, Ray |
| Cooper-Key, Sir Neill | Hiley, Joseph | Maxwell-Hyslop, R. J. |
| Corfield, F. V. | Hill, Mrs. Eveline (Wythenshawe) | Maydon, Lt.- Cmdr. S. L. C. |
| Costain, A. P. | Hill, J. E. B. (S. Norfolk) | Mills, Stratton |
| Coulson, Michael | Hirst, Geoffrey | Miscampbell, Norman |
| Courtney, Cdr. Anthony | Hobson, Rt. Hon. Sir John | Montgomery, Fergus |
| Craddock, Sir Beresford (Spelthorne) | Hocking, Philip N. | Morgan, William |
| Crltchley, Julian | Hogg, Rt. Hon. Quinton | Neave, Airey |
| Crowder, F. P. | Holland, Philip | Nicholls, Sir Harmar |
| Cunningham, Sir Knox | Hollingworth, John | Noble, Rt. Hon. Michael |
| Curran, Charles | Hornby, R. P. | Nugent, Rt. Hon. Sir Richard |
| Currie, G. B. H. | Howard, Hon. G. R. (St. Ives) | Oakshott, Sir Hendrie |
| Dalkeith, Earl of | Hughes Hallett, Vice-Admiral John | Orr-Ewing, Sir Ian (Hendon, North) |
| Dance, James | Hughes-Young, Michael | Page, John (Harrow, West) |
| d' Avigdor-Goldsmid, Sir Henry | Hulbert, Sir Norman | Page, Graham (Crosby) |
| Deedes, Rt. Hon. W. F. | Hurd, Sir Anthony | Panneil, Norman (Kirkdale) |
| Digby, Simon Wingfield | Hutchison, Michael Clark | Pearson, Frank (Clitheroe) |
| Donaldson, Cmdr. C. E. M. | Irvine, Bryant Godman (Rye) | Peel, John |
| Drayson, G. B. | James, David | Percival, Ian |
| du Cann, Edward | Johnson, Dr. Donald (Carlisle) | Peyton, John |
| Pickthorn, Sir Kenneth | Russell, Sir Ronald | Tilney, John (Wavertree) |
| Pike, Miss Mervyn | Scott-Hopkins, James | Touche, Rt. Han. Sir Gordon |
| Pitman, Sir James | Seymour, Leslie | Turton, Rt. Hon. R. H. |
| Pitt, Dame Edith | Sharples, Richard | Tweedsmuir, Lady |
| Pounder, Rafton | Shaw, M. | van Straubenzee, W. R. |
| Powell, Rt. Hon. J. Enoch | Shepherd, William | Vane, W. M. F. |
| Price, David (Eastleigh) | Skeet, T. H. H. | Vickers, Miss Joan |
| Price, H. A. (Lewisham, W.) | Smith, Dudley (Br'ntf'd & Chiswick) | Walker-Smith, Rt. Hon. Sir Derek |
| Prior, J. M. L. | Smyth, Rt. Hon. Brig. Sir John | Ward, Dame Irene |
| Prior-Palmer, Brig. Sir Otho | Spearman, Sir Alexander | Watkinson, Rt. Hon. Harold |
| Proudfoot, Wilfred | Stainton, Keith | Webster, David |
| Pym, Francis | Stanley, Hon. Richard | Wells, John (Maidstone) |
| Quennell, Miss J. M. | Stevens, Geoffrey | Whitelaw, William |
| Ramsden, Rt. Hon. James | Stodart, J. A. | Williams, Dudley (Exeter) |
| Rawlinson, Rt. Hon. Sir Peter | Stoddart-Scott, Col, Sir Malcolm | Williams, Paul (Sunderland, S.) |
| Redmayne, Rt. Hon. Martin | Summers, Sir Spencer | Wills, Sir Gerald (Bridgwater) |
| Rees, Hugh (Swansea, W.) | Taylor, Sir Charles (Eastbourne) | Wilson, Geoffrey (Truro) |
| Renton, Rt. Hon. David | Taylor, Frank (M'ch'st'r, Moss Side) | Wise, A. R. |
| Ridley, Hon. Nicholas | Thatcher, Mrs. Margaret | Wolrige-Gordon, Patrick |
| Ridsdale, Julian | Thomas, Sir Leslie (Canterbury) | Woodhouse, C. M. |
| Rippon, Rt. Hon. Geoffrey | Thomas, Peter (Conway) | Woodnutt, Mark |
| Robertson, Sir D.(C'thn's & S'th'ld) | Thompson, Sir Richard (Croydon, S.) | Worsley, Marcus |
| Roots, William | Thorneycroft, Rt. Hon, Peter | Yates, William (The Wrekin) |
| Ropner, Col. Sir Leonard | Thornton-Kernsley, Sir Colin | |
| Royle, Anthony (Richmond, Surrey) | Tiley, Arthur (Bradford, W.) | TELLERS FOR THE NOES: |
| Mr. Ian Fraser and Mr. Jasper More. |
§ Question proposed, That the proposed words be there added.
§ The Temporary Chairman (Sir Samuel Storey)In calling the hon. Member for Oldham, West (Mr. Hale) to move his first Amendment to the Amendment, I suggest that we should discuss his second one at the same time.
§ Mr. HaleSir Samuel, I happily accept that suggestion to make a small Amendment but ask that I may discuss them consecutively and continuously rather than at the same or similar time as the original Amendment.
I beg to move, as an Amendment to the proposed Amendment, in line 2, to leave out "or a similar".
I was interrupted this morning when I was painting a portrait of my grandmother—which, in view of the regrettable fact that she has been dead for half a century I regarded as an increasingly urgent task—and invited urgently to visit the crow's nest of the new Ministry of Health. This involved me in a twenty minutes' circular tour round the catacombs of the Elephant and Castle before I surfaced. I am bound to admit that I was not nearly so lost this morning as I am at this moment, having had the advantage of the continuous advice of hon. Gentlemen opposite.
We expect some confusion from the right hon. Gentleman when confusion is necessary. I am not suggesting that he could not be more clear about the implications of the Clause if he were more certain of its utility and its effective- 1122 ness, and, indeed, if he had more confidence in the Bill after the buffeting that it has had.
We have had several explanations of the Clause, but no explanation of the important and detailed expressions in it. One almost joyful explanation that came from hon. Gentlemen opposite was that almost every High Court judge would know what a clearance sale was. I have the greatest respect for our judiciary, but I would have thought that they know less about clearance sales than does Mrs. Jones, of Oldham. I think that the House ought to know what a clearance sale is when it is being used as a term of art in the Amendment.
The right hon. Gentleman was asked what was the meaning of profit He did not know. Not in the abstract, but in the terms of this Measure under which people are liable to be ruined. He said that one cannot lay down a definition. How will the retailer, or the small wholesaler, know when he is going to break the law and when he is not if the right hon. Gentleman cannot tell us what it means? How will they ever know?
My hon. and learned Friend the Member for Northampton (Mr. Paget), who raised the question in a very able speech, did not fully develop the important point that he made so effectively with brevity. In many oh these articles one is dealing with a reduced stock of a fairly large purchase. A shopkeeper buys 1,000 articles and disposes of 600, and then he wants to get rid of what is left, either by an annual clearance sale, or by a seasonal sale.
1123 The right hon. Gentleman did not say what seasonal meant, but it is important. In his more forthcoming moments he gave a suggested definition. He said that the sale of diaries and Christmas cards at Christmas time was seasonal. That is a fair point. I had thought that seasonal was different. I had thought that it may be something like summer, autumn, winter, and regular disposal.
§ Mr. R. H. Turton (Thirsk and Malton)On a point of order. Sir Samuel, can you explain which Amendment you have called? Is it the first, second, or third Amendment to the Government Amendment?
§ The Temporary ChairmanI have called the first Amendment to the Government Amendment, and the following one is being discussed with it.
§ Mr. HaleI am glad that the light is spreading. The hon. Member now knows a little more than he did a few seconds ago. If I go on long enough I may be able to spread the light a little more.
The right hon. Gentleman's definition of "seasonal" is in the terms of Halley's Comet, which comes round every 74 years, at regular intervals. I have a different idea. I do not want to be facetious, although it is tempting to be so. But some explanations have been so surprising that we are in difficulties. Every time I thought that I was getting out of my difficulties, the hon. Member for Tiverton (Mr. Maxwell-Hyslop) intervened. He is about as full of accurate information as a coconut is of pasteurised milk. Out of the earnestness of his desire to contribute to the debate, and his undiverse and not very accurate knowledge, he managed to make the limited confusion worse confounded.
We are dealing with the question of the definition of "seasonal". [HON. MEMBERS: "We are not."] Yes. I am putting the case to the Committee under the direction of the Chair, which I always treat with the great courtesy that it deserves. I am putting to the Committee the reason why we should exclude a wide variety of goods from this extremely wide definition.
The hon. Member for Gillingham (Mr. Burden) popped up, anxious to oblige every time. The hon. Member for 1124 Twickenham (Mr. Gresham Cooke) and the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) also intervened, and demonstrated the fact that too many cooks spoil the political broth. I have listened to all the things that they have said. There is no more innocent man in the House than I. I looked upon winter overcoats as being seasonal. I thought that there was a time of year when winter overcoats became unseasonal, and that when that time came there was a case for disposing of them cheaply.
I thought that a loss leader was something rather special—something that might well be referred to in one of the famous speeches of the right hon. Member for Flint, West (Mr. Birch), or something of that kind, but if packets of sugar can be loss leaders, presumably winter overcoats can also, if they are sold in the early summer. I do not want to be indelicate, but I usually find, towards the end of May or the beginning of June, signs that corsets have become non-seasonal, and I presume that it would then be the desire of the retailers of corsets and brassieres to sell them at reasonable prices.
§ The Temporary ChairmanI must ask hon. Members not to pass between the hon. Member who has the Floor and the Chair. I hope that hon. Members will stop doing this.
§ Mr. HaleI am much obliged, Sir Samuel. I thought that it was a slight shadow.
I spoke of the very great difficulty of defining the word "retailing" in a previous intervention. My hon. Friend the Member for Dundee, West (Mr. Doig), in a very able and moving speech, which was very effective, referred to these problems.
I return to the question of brassieres. I recall an occasion, many years ago, when one of my friends invited me to lunch at a "brassiere", as he called it. I said, "We will have a poulet en camisole". But that is irrelevant to the point that I am putting.
We are entitled to know what "seasonal" means. Whether we seem facetious or not, we are also entitled to know what a clearance sale means. The hon. Member for Gillingham, in one of his more forthright and understand- 1125 able moments, said "You chaps do not know anything about retailing, or market research". I have been a director of a market research company for 12 years. It has been fairly prosperous, and has had an increasing turnover. I have not benefited, because I do not accept any director's fees. That is the only difference in respect of my knowledge and experience of the subject.
The hon. Member said, "You do not understand this. You must wait 12 months to find out what the costs are." If the retailer must wait 12 months to find what are the costs, a wholesaler must wait more than 12 months to find whether he has contravened what the costs are. He cannot take action under the Clause, because the information is not available.
§ Mr. BurdenI said that firms have to wait until their accounts are audited to find whether they have made a profit on their business during the year.
§ Mr. HaleWe were not talking about a profit on their gross turnover. This was the point of the question to the Secretary of State which he rather dodged. We asked what he was referring to in terms of profit.
I understood the right hon. Gentleman to go as far as this. He said that we were talking about the profit on the article in question and not, as the hon. Member suggested, the profit on the articles which were not in question. We got as far as that. When we asked the right hon. Gentleman whether he meant net or gross profit and we got as far as asking whether he meant the net or gross profit on the number of articles which a retailer was disposing of as loss leaders, or alleged loss leaders out of a much larger number which he may have bought and passed through his accounts and on which he had already made a profit, we got no information.
The first Amendment in the names of myself and of my hon. Friends—[HON. MEMBERS: "Hear, hear."] There is a great deal to be said for festina lente in legislation. Think of the tragic mistakes which have been made in the last 12 years in legislation which the Government had to pass amending Acts to put right. Let us on this occasion consider the matter just a little bit before we go further.
1126 We have suggested leaving out "or a similar". The Secretary of State is not at his best today. He could be more specific and forthcoming if he wished. No one has more respect for his ability than I haw, in the appropriate place, but it is not quite as evident today. The right hon. Gentleman said that one whisky was the same as another. That is a point of view which would not be accepted by a number of persons with whom I have been associated. Suppose, however, that that is the test. Is one alcoholic drink the same as another? If "the same or a similar applies to whisky, does it apply to wine?
No one should say that there is not resale price maintenance of wine. There is strong r.p m. of wine. It certainly has been broker by some intelligent competition. Gilbey's sales of wines, I understand, are price-maintained and strictly so. Whether or not it is enforced, that is the position of retail sales.
Is a Mouton Rothschild 1947 the same as Minister of Defence 1963, or is it not? We are entitled to know. I beg the Committee to believe that I am fighting against the Temptation to indulge in any argument which might be too far-fetched or facetious.
Let us take the simple subject about which we are speaking. We are talking largely about soap. Indeed, a good deal of the discussion has been saponaceous. When a Lord Chancellor, from the Woolsack, used that term in relation to a bishop known to the House of Lords as "Soapy Sam", he was called to order—although one cannot call a Lord Chancellor to order; there is no one to do it. He was rebuked by some of his distinguished confreres. So I will not pursue that.
Soap is an area of competition in which a great deal of r.p.m. can turn. Is one soap similar to another? This is a difficult. painful and almost tactless question. The average hon. Member may think that one simply has soap that washes, soap that washes white, soap that washes whiter and soap that washes so white that Mrs. Jones, in Coronation Street, can identify it from a distance of 100 yards, and identify its category.
9.15 p.m.
There are many sorts of soap. There are many types of soap, and very often 1127 they serve considerably different purposes. I have not gone into this matter in great detail, but I have glanced at the Encyclopaedia Britannica and find zinc soap, real soap and framed soap, floais soap, and milled soap, usually from the grocers which permits the infitration of perfume, granulated soap and textile soap. Textile soaps are used in large quantities in the woollen industry. That is an industry which would buy soap from a large retailer, perhaps at cut prices in large quantities. Anyone who knows the West Riding knows that that is not an unusual proposition.
There are shaving creams which are very different and are mostly made of tallow and coconut oil. There are metallic soaps of alkaline earth and heavy metal and there is soft soap. The list is extended to all sorts of derivatives such as hair-cream, and of course there are detergents. I do not want to take unnecessary time, but the detergents are divided into anionic, cationic, and nonionic. This is the long molecule chain. When dissolved in water it becomes negative ion or anion. The best known types are R.O.S.O3N.A. and sodium alkyl-sulphate, R.C6 H4S.O4N.A., or sodium alkyl benzene sulphonates. It is not enough to say that R. means hydrocarbon chain with not less than 8 and not more than 18 molecules alone.
Cationic is a common example of where the chain part of the molecule is the positive ion, C18H37NH3CL. It would be physically impossible to say that there is a similarity except in the sense of use. The non-ionic is for a different purpose, washing machines. That reminds me of Mr. Bloom. We must not forget Mr. Bloom.
Who is to decide? If we are to say that a High Court judge will know what "seasonal" means and what a "clearance sale" is and whether one soap is like another "or similar" it is all very well. The trouble about Mr. Bloom is that the Act is not effective. One never knows whether the Tory Government blunder into these things by mistake or from an excess of cunning, and whether this was put forward as a blanket. All the very good practices in relation to cut price selling can be borne by the manufacturers or large wholesalers without let or hindrance from the Clause as 1128 originally drafted or as it is now drafted. It does not affect them at all.
The right hon. Gentleman has gone further. He says, "We are going to say, 'If you don't know what you can do and don't know what you can't do you write and ask the manufacturer. If he says you can do it, you are all right' ". That is exactly what the Clause says, and I am not misrepresenting it by one iota. If one gets the manufacturer's permission, one can do what one likes—sell at what price one likes, at a net loss or a gross loss. The manufacturer, who usually has retail interests, can give his own shops permission to run loss leaders every week of their lives. The manufacturer is too big to interfere with. If he has a nephew in retail, or more appropriately a niece, he can say, "It is reasonable for you to sell at any price and to wipe out your competitors, who are not related to me". That is the precise meaning of the Clause.
But the right hon. Gentleman adds some qualifications—and here I anticipate the Chair, because I am coming to the second Amendment in my name. The right hon. Gentleman says, "You need not establish that the contract with you has been broken. You need not establish that he is conducting sales of loss leaders and that these sales are on goods supplied by Mr. Jones. Mr. Brown can pop in and say, 'You are a loss leader seller and I shall stop you and your suppliers' ". The right hon. Gentleman has not thought of the very serious problem which has not yet been postulated. If Mr. Jones and his manufacturer arranged permission to sell but Mr. Brown said, "In my view this is a loss leader, whether you wangle the permission or not," can Mr. Brown refuse to supply?
The right hon. Gentleman constantly suggested that the cumulative effect of the Clause, with the Amendment accepted by the Committee, subject to the present discussions, is that one can stop only within 12 months. Suppose that a retailer changes his wholesaler. This is a complication of the question which I ought to put clearly first: what happens when something becomes out of date? Suppose that a retailer has been provided with a product, backed by an immense amount of advertising material and guaranteed, but that it proves wholly unsuccessful. The retailer says, "I shall 1129 deal no longer with this man. This was poor stuff and I have to dispose of it". But how can he dispose of it? The retailer can do it only on a number of grounds. The first is seasonal grounds, and these do not apply in this case, unless the right hon. Gentleman intends to say that "seasonal" means "getting a bit old". The second ground is that it is a clearance sale—and he cannot have a successful clearance sale of one unsuccessful item. In order to sell the one item in a clearance sale he would presumably have to dispose of a mass of other goods in stock. Alternatively, he can get written permission from the manufacturer who supplied the goods, with whom he has quarrelled, having taken his order somewhere else. This is all nonsense.
§ Mr. HeathI do not think the hon. Gentleman heard the explanation I gave at the end of the last debate, which was that he can dispose of those goods because he is selling them because he has them on hand or has bought them by mistake or misjudgment and he is not using them
for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods or otherwise for the purpose of advertising the business of the dealer".
§ Mr. HeathThe hon. Gentleman might have acknowledged it. The dealer is disposing of one line of stock which he does not want to hold. Therefore, he can do it.
§ Mr. HaleI heard that one. If a dealer has got landed with 1,000 rusty razors, he can sell them to an art dealer and he can lump them in with a couple of Renoirs, a Monet, a Manet and a Picasso. He can dispose of them in that way and he has not broken the law. Or he could send them to a local autioneer and tell him to chuck them in with the next small mansion he disposes of. That is all right. However, it must not be done between one dealer and another dealer, according to one of the Amendments we have passed today.
My hon. and learned Friend the Member for Northampton (Mr. Paget) mentioned, among the many other points he made, a question which I do not think he followed up. Perhaps he was satisfied by some of the interventions. 1130 He asked this: if Clauses 1 and 2 abolish the price, how can one cut the price which does not exist? This is fair enough. Under Clauses 1 and 2—this is the whole purpose of the Bill—the small trader will be protected by being told, "You cannot have a notice from Jones, Brown and Robinson, Limited, saying that the minimum price of an article is 18s. 6d. Jones, Brown and Robinson, Limited, will have to issue a little printed notice saying, 'Under the provisions of the Resale Prices Bill we are not entitled to fix any price for sale, but we advise our customers to sell at not less than 18s. 6d., which, according to the advice of our independent cost accountants and our advisers is the appropriate price to yield an appropriate measure of profit and which mill help to preserve good feeling in the industry'." That is all right. The test is if the dealer sells for less. The right hon. Gentleman has said, "How can one say what is a net price, unless one has laid down a fascinatingly difficult"—I agree with him—" mathematical computation to say what is the wholesale price?".
I said that it would not affect the big man at all. It is not intended to. Whom does it affect? Yesterday morning someone knocked on my door and offered me what looked like a can of liquid soap, nice and white, with a green label, and so on. It was too difficult a matter for me to decide whether to accept it, so I sent for the master of the house—and she declined it. Had we accepted it, would that have been all right? Was this a loss leader? Can one give things away?
Let us be serious about this. I can tell the Government what will happen. There are a lot of little pleasant practices which are seasonal practices in retail trading. There is Santa Claus. In the big shops Santa Claus hands out little prizes. There are also little tickets for the bran tub. If one pays 3d., one has the chance of getting 2½d. worth of prize, or 3½d. worth, if one is lucky. Would that be a loss leader? When the House of Commons passes legislation, the first thing that happens is that some silly ass tries to enforce it in the courts. This always happens. Always some busybody of an official with not much to do wants to bring action, or take steps, or test it, or run it out, or 1131 trade organisations which want to advertise themselves take action. The little man is the victim.
I have tried as briefly as I can, and with strict relevance, to move the Amendment, which I consider to be important. I do not believe that Acts should be full of words such as "or a similar". I do not believe that any hon. Member opposite will say that he knows what "the same or a similar" means in relation to goods, except the hon. Member for Tiverton. Subject to that, I do not believe that anybody in the House of Commons can support a system under which supplies can be stopped because someone has reasonable cause to believe. That is the test. It is not because a dealer did it, but because somebody thinks he did it. Not only can Jones Limited, the wholesaler, stop a dealer's supplies, but Brown can stop his supplies, even though he has nothing to do with it and did not supply the goods. This is under the Clause as amended.
I beg the Committee to ponder. When the right hon. Gentleman, with all his skill, talks about these things, one gets a picture of someone in Birmingham selling something to somebody in Wolverhampton. This is not what happens. It is a case of some one in Plymouth selling something to somebody in Newcastle-upon-Tyne. They do not know that a dealer has done anything. They have "reasonable" cause to believe because they read words in a paper which says so.
§ Mr. WinterbottomBrown may stop supplies when Jones himself has specially asked the retailer to take goods, perhaps at a lower price, to rid him of surplus stock he wants to get rid of.
§ Mr. HaleOf course. It is so obvious that it is hardly worth saying that Brown may have reasonable cause to believe that a dealer has done this because he does not know that Jones gave permission. If Brown is in Newcastle-upon-Tyne and Jones is in Plymouth and I, the little retailer, have my shop in Ashby-de-la-Zouch in the middle of them, what chance have they? This is what happens. This is how life works.
Finally, the right hon. Gentleman failed to deal with the other question 1132 I put to him. Once a wholesaler says, "I will not have anything mare to do with this retailer. I will not supply him with goods. I have reasonable cause to suppose that he has done something wrong because I have received information by post or through the Press that he has done something wrong", that wholesaler is under no obligation to supply when the period of 12 months is over. For him the customer has ceased to exist and the customer has no rights at all.
9.30 p.m.
I wish to choose my words with moderation, but I cannot help saying that it is humbug to talk about this in wide terms, because everyone knows that this provision will be brought into operation on different grounds. We all know that if the wholesaler does not want to deal with a retailer he need only say that the retailer was not prompt enough in paying his accounts. If the retailer replies, "I have been prompt", the wholesaler need only say, "In which case the Post Office must have caused the delay or something else, but in any case I will not supply you on these grounds".
Whatever the merits of the intentions underlying the Clause, I suggest that the terminology of the Measure and the provisions set out in that terminology are impossible to understand, impossible to interpret, impossible to enforce and are largely without meaning.
§ Mr. M. Foot (Ebbw Vale)I am surprised that no hon. Member opposite has risen to support the two Amendments which my hon. Friend the Member for Oldham, West (Mr. Hale) has moved so effectively. I should have thought that from the debate that has gone on for the past three-and-a-half hours there would be enough doubt in the minds of hon. Members opposite about the wording of the Government Amendment to make them agree to try to define the Government Amendment more sharply. That is all that my hon. Friend's Amendments seek to do.
During the three-and-a-half hours we have been discussing this matter a variety of opinions have been expressed. Questions have been asked about what should be done to deal with the problems arising under the Clause and 1133 I am surprised—in view of the variety of opinions expressed even on the benches opposite—that some hon. Members opposite have not supported my hon. Friend's Amendments. I hope that they will reconsider their position and do so when I have resumed my seat.
I find it difficult to understand how anyone could fail to realise that my hon. Friend's Amendments improve the Government Amendment. I do not wish to exaggerate the position or to say that they change the whole Bill. They do make some minor and beneficial adjustments which should be supported by hon. Members opposite. My hon. Friend moved them with such pedantic reference to the precise language in which they are presented that if I do not follow my hon. Friend's remarks exactly I may be excused on the grounds of not wishing to introduce battlements foreign to the discussion.
The real question which has been facing the Committee for the last three-and-a-half hours is this. Has the Secretary of State, by his Amendment, introduced words which wreck the purpose of the Bill? The fact that the hon. Member for Shipley (Mr. Hirst) and those who have been most critical of the Government from the point of view of wishing to see r.p.m. retained were so ready to approve the Government Amendment indicated that the Secretary of State had gone a long way to wreck the Measure. The hon. Member for Shipley appears to be shaking his head. We agree that he is not a person likely to be soothed too easily or shifted from his opinion. He indicated that he thought that the Government had made a considerable concession to him and his hon. Friends by introducing the Amendment. I am not suggesting that he said that the whole Bill had been improved—just that the Government Amendment had made an appreciable improvement in the Measure.
§ Mr. FootIt is interesting to discover that there has been an appreciable improvement in the Bill from the hon. Gentleman's point of view.
§ Mr. FootI am coming to that. The hon. Member must not distract me. If he does he must pay the penalty.
It is the fact that what my right hon. Friend the Member for Battersea, North (Mr. Jay) did in his speech was something quite different. He stated at the beginning of the discussion what he thought was the meaning of the Amendment, and he asked the Government whether they agreed with his interpretation. At that point in our proceedings, about 4 o'clock or half past four, everything appeared comparatively clear to the whole Committee, but by 9 o'clock we were back in abysmal darkness, because the Minister's concluding speech denied the implications which my right hon. Friend made at the beginning. That was the whole reason why we voted against that Amendment. The hon. Member for Shipley has not been following the proceedings with his usual acumen. If he had been, he would have understood the meaning of the exchange between his right hon. Friend and my right hon. Friend at the end.
We get back to the question. Has the Secretary of State introduced an Amendment which goes a considerable way towards wrecking his own Bill? That is what the hon. Member for Shipley wants. If what some hon. Members on the back benches opposite have said was the meaning of the Amendment was true, the right hon. Gentleman would have gone far towards wrecking his Bill, particularly on the question of whether a collective boycott can be applied. My right hon. Friend the Member for Battersea, North was very strong on this, and we never had a clear answer from the Secretary of State.
If it is true that something approaching a collective boycott can be applied, not only by the first manufacturer who wants to prevent loss leadering by the retailer but by other manufacturers as well, then the right hon. Gentleman has gone very far towards wrecking his own Bill. The question is: does the collective boycott really apply or can it be applied or not? Our Amendment is directed precisely to this question. If the right hon. Gentleman wants to make absolutely sure that 1135 a collective boycott cannot be applied in any circumstances he can accept our Amendment. It will go very far towards dealing with the problem. If he says that it does not precisely deal with it, or does not deal with it adequately, he can propose his own words for dealing with it. Let the right hon. Gentleman tell the Committee.
The right hon. Gentleman has had a different defence for his decision all afternoon. He gave the game away right at the beginning. He thinks that what the Committee has been discussing for the past five hours is complete rubbish. He does not believe that there is any problem of loss leadering. He said on Second Reading that it was not a significant problem at all in his opinion. He reiterated that today at the beginning, but in order to satisfy his hon. Friends he has had to pretend that it is a big problem and that he is dealing with it with an adequate remedy. He is in the position of the doctor described in Gulliver's Travels who invented a large number of imaginary diseases for which he also invented imaginary cures.
The right hon. Gentleman has said in the House of Commons, "I do not believe that there is any problem about loss leadering. I know that some of my hon. Friends think that there is, but I can produce an Amendment which I do not think alters the position at all but which may satisfy my hon. Friends." This, therefore, is what we have been discussing. The right hon. Gentleman does not think that he has been giving anything away, but we have to examine the exact words. When we examine the exact words of his Amendment we discover that they go very much further than the right hon. Gentleman intended. We are therefore trying to save him from himself. We are trying to assist him.
If the right hon. Gentleman had wanted to, he could have accepted our Amendment. If he is not going to accept it he must explain to the Committee exactly whether he thinks that the dangers of a collective boycott being applied to the retailer are greater with or without our Amendment. Obviously, if our Amendment is carried and we exclude this vague description of "similar goods" and the vague reference to "other suppliers" then whatever else is done nobody can possibly deny that 1136 the right hon. Gentleman's Amendment is much more clearly defined. This also has been one of the major points of controversy throughout the debate.
It was quite evident that at the end of the debate on the previous Amendment the Committee was much less aware of what it was voting or arguing about than it was at the beginning of the proceedings. Therefore, what we are also doing in the Amendment is to make much clearer what the Bill intends to do. I should have thought that whatever view hon. Members may take about the Amendment and about the Bill as a whole, those who are in favour of resale price maintenance and those who are in favour of abolishing it could all unite to support our Amendment. [Laughter.] Hon. Members may laugh, but it is certainly clearer than the Government's proposals. Those who are laughing have probably not even read our Amendments. Our proposal is certainly clearer in this sense, that we exclude the reference to similar goods, and it is bound to be clearer also inasmuch as we exclude other suppliers. No one can argue about that. The question the Committee has to make up its mind about is this. Do hon. Members want it to be clearer or not?
9.45 p.m.
There may be an entirely different explanation of why the Secretary of State, while proposing an Amendment which does not really alter the situation at all, has secured the support of hon. Members opposite who want drastic changes in the Bill. Perhaps they have made a bargain about some other parts of the Bill. If they have, the Committee should be given an explanation about it. Hon. Members opposite have been telling the country that they wanted to clarify the Bill. They have been saying that they wanted a better Bill and have put down Amendments of their own for this purpose. I appeal to them to come and vote with us on these Amendments and not to be afraid.
I call in aid the speech which the Secretary of State himself made a week or so ago. Hon. Members must not think that they will be reproved by their Whips if they come and vote with us. They need not think that they will get into trouble. The right hon. Gentleman himself has said that in these matters one is enough. 1137 A majority of one will satisfy the right hon. Gentleman, whose greatest ambition it is to carry the Bill through by narrow majorities of that kind. I was amazed when I heard that utterance, but I dare say that, following the declaration which the Secretary of State made that a majority of one would satisfy him in these matters, the Chief Whip has received letters from hon. Members opposite in some such terms as these: "Dear Chief, So sorry about Tuesday night. As a matter of fact, if you must know, I was at the club, but I was basing myself also on the theory enunciated by Winston, now backed up by others, that a majority of one is enough. Would you please sort this out with Ted before troubling me further". I am wire that the Chief Whip has received numerous letters of that kind. In one sense, therefore, the Government are encouraging hon. Members opposite to vote according to their consciences in these matters.
One hon. Member opposite said that we had seen democracy at work that Tuesday night when the Government had a majority of only one. We want to see democracy at work now, and we want to see whether the right hon. Gentleman likes it.
§ Mr. HeathPerhaps it would be for the convenience of the Committee if I dealt now with the points which have been briefly raised by the hon. Members for Oldham, West (Mr. Hale) and for Ebbw Vale (Mr. M. Foot). The position on loss leadering as I have put it to the Committee is quite straightforward. We do not believe that experience in other countries shows that there have been many examples of loss leadering which have done damage to manufacturers or to other businesses. From both sides of the Committee in this long debate very few examples have been given.
On the other hand, I have stated that it is not a desirable practice and, therefore, we should take as effective action as possible to prevent it happening and to ensure that, should it occur, those concerned are able to take effective action against it. In the Bill, therefore, we should as far as possible provide 1138 effective measures. That was the purpose of the Clause as originally drafted.
I draw to the attention of the hon. Member for Ebbw Vale the fact that in subsection (1) there are the words
whether obtained from that supplier or not".This is not, therefore, something introduced by he Amendment. It was in the Bill as presented to the House of Commons, because we believed that there should be an effective deterrent to loss leadering should it be attempted. What the hon. Member and his hon. Friends have to decide is whether they wish to try to produce an effective deterrent against loss leadering. This is the question to which they have given no answer. What both of their Amendments do is to weaken the deterrent.The hon. Member for Ebbw Vale must make up us his mind whether he thinks that in the Amendments which I am putting forward I am wrecking the Bill, or putting forward Amendments of no consequence, because every intervention which he has made has used both arguments simultaneously. Therefore, he must address himself to the question of an effective deterrent to loss leadering.
The long speech of the hon. Member for Oldharr, West was the strongest argument against his own Amendment. He gave innumerable examples of similar goods. If we have "the same" goods, it means that if there is loss leadering in one article—say, a particular brand of soap—and if we keep only the word "same" in, suppliers of only that one particular item can be withheld. By including the word "similar", it means that goods of that type, obviously, cannot be defined in a Bill or in a speech, but can be defined by manufacturers. If challenged by the retailer, the matter will have to be dealt with in the Court.
This would be a much more effective deterrent to loss leadering, to which I understand the greater part of the Committee is opposed, than by simply having the words "the same description" in the Bill. That is why I reject the Amendment.
Secondly, the hon. Member must make up his mind whether he wants an effective deterrent against loss leadering. The words to which he objects are
whether obtained from that supplier or not".1139 If there is an organised boycott, it comes under the 1956 Act. Suppliers can withhold their goods of the same or similar description if they find that loss leadering is going on. I understand that the view of the Committee generally is that if loss leadering is intended it is an objectionable practice from the point of view of the manufacturer because of the possible damage which it can do and from the point of view of retailers and small shopkeepers because if persisted in there is danger that it will put them out of business.I understood that these were the considerations in the minds of the hon. Member for Oldham, West and Ebbw Vale. If that is the case, the fact that other suppliers can withhold goods in these circumstances is a much stronger deterrent to loss leadering than if we accept the Amendment. That is why the hon. Member for Ebbw Vale must leave the heights of trying to decide whether the Bill is being wrecked and address his mind to the substance of the case and ask whether he wanted an effective deterrent to loss leadering or not.
§ Mr. M. FootI am in favour of having an effective deterrent against loss leadering if it can be devised, but that is an extremely difficult thing to do, as this discussion has proved, because it cannot be defined. The right hon. Gentleman, in refusing to answer questions, has shown that it cannot be defined. But I go further—and this is the point that I was arguing and to which the right hon. Gentleman has not attempted to reply. Even though we may try to obtain an effective deterrent to loss leadering, what we are not entitled to do is to create a deterrent to loss leadering which inflicts, or may inflict, a gross injustice on some retailers. If the right hon. Gentleman's deterrent reintroduces the possibility of a collective boycott, he is doing precisely that.
§ Mr. HeathThe hon. Member has shown no way in which this would be unjust to a retailer who was loss-leadering. He is playing with words like "boycott" or "possible boycott". If this is organised by suppliers, it can be dealt with by the 1956 Act. If the individual supplier sees that a retailer is loss leadering, and another supplier is 1140 withholding supplies justifiably, and that that action has not been challenged in the Court, then he himself will also be entitled, both under the Bill and the Amenrdment, to withhold supplies. That is a very effective deterrent to the retailer who may be attempting loss leadering. It is not an injustice.
The hon. Member for Oldham, West asked about the position of a man loss leadering with the permission of the manufacturer. He asked whether other suppliers can withhold supplies. The answer is that they cannot. Under the Bill, the retailer will not be loss leadering because he has the permission of the supplier concerned and, therefore, other suppliers will not be able to withhold supplies. There is no question of injustice in that case.
§ Mr. HaleI said that the test is whether there is reasonable cause to believe and the supplier has reasonable cause to believe because all he knows is that the man is cutting prices and selling what appear to be loss leaders. Surely the supplier has no method of knowing that the retailer has permission from the other manufacturers concerned unless he starts a wholesale investigation, employing detectives and accountants. He will surely have reasonable cause to believe, even if he is wrong in fact.
§ Mr. HeathBut he has not reasonable cause to believe, and the hon. Member knows quite well that the supplier can be taken to the Court either by the retailer or the Board of Trade if he withholds supplies unjustifiably. As a supplier he will take great care to ascertain from the retailer what the circumstances are. If he finds that the retailer is selling these goods with the permission of the supplier concerned then he cannot withhold his own supplies because he will be at risk if he does.
This matter must be taken with a certain degree of seriousness, however entertaining the address of the hon. Member. We must be realistic and realise that there is no injustice involved here but that there is an effective deterrent to the retailer who may be tempted to loss leader. For these very powerful reasons, I suggest that we reject the Amendment.
§ Mr. A. J. IrvineFor the second time today I find myself privileged to support my hon. Friend the Member for Oldham, West (Mr. Hale). His Amendment raises interesting and important points and I am not satisfied that the right hon. Gentleman has dealt with them. My hon. Friend wishes to delete from the Clause the words
…whether obtained from that supplier or not".If these words were omitted I believe that the Clause would still mean exactly the same as it means now. I think that my hon. Friend is seized of that fact himself. There certainly is a drafting difficulty. If the words are omitted, then it is simply for the purpose of producing what is hoped will be greater clarity. I do not think that the general effect of the Clause would be altered.My hon. Friend was on a much more important question, however, which cannot be shrugged aside by a drafting point. I agree that there is a need for some change in the wording such as was attempted by him in his Amendment designed to deal with the danger of collective boycotting. I listened with great care to what the right hon. Gentleman said, but his argument is that we do not need to feel any anxiety about the possibility of a collective boycott because that would be sufficiently dealt with by the 1956 Act.
But then there is also the question of simultaneous action by suppliers. There could be simultaneous action, which is something quite different from collective boycott, but in respect of which, none the less, it is very desirable that some provision should be made.
§ It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
§ Committee report Progress.