§ Order for Second Reading read.
§ 11. 5 a. m.
§ Mr. John Stonehouse (Wednesbury)
I beg to move, That the Bill be now read a Second time.
When I spoke in the debate on the Address in reply to the Gracious Speech, on 13th November, I referred in column 245 of the OFFICIAL REPORT to some omissions from that Speech, particularly regretting the absence of any mention of the need for consumer protection, the fact that no mention was made of the need to strengthen the Monopolies Commission, and no comment made on the need to control the activities of stamp trading companies, and the absence of any comment on the practice of resale price maintenance.
I am glad that some of these omissions are now being corrected. The hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) has introduced a Trading Stamps Bill, of which I am pleased to be a sponsor, which I hope will control the activities of stamp trading firms. We have now had a statement from the President of the Board of Trade about his anxiety to control monopolies more effectively and also eventually to abolish resale price maintenance. A Bill to deal with hire purchase has also been introduced, but I regret that these decisions by the Ministers concerned have been so long delayed.
Why were these matters not in the Gracious Speech only a few weeks ago? If the statement made by the President of the Board of Trade last Wednesday is correct today, surely it was correct twelve years ago. If it was correct on Wednesday it was correct twelve months ago or twelve weeks ago. Why have we had all this delay? In passing, I must say that if we had had a Minister for consumers' welfare there would not have been such neglect of the consumer's interests. The consumer has been left on the side in all these considerations. Even if we had had a Minister of State in the Board of Trade responsible for consumer questions, I do not think that these important questions would have been delayed so long.
581 Even now that we have had a statement from the President of the Board of Trade, what does it amount to? To judge from his replies to supplementary questions, and particularly to a supplementary question by my hon. Friend the Member for East Ham, South (Mr. Oram), it seems that the matter of resale prices being maintained on orders from the manufacturers will be referred to yet another tribunal. Therefore, we shall have more delay and during the period when these questions are under consideration the practice of maintaining prices will be continued.
I deplore this indecision after all these discussions on the subject for many years and after the Board of Trade departmental inquiry on which the Minister concerned has sat for the last eighteen months. After all the statements made by various public institutions, the Monopolies Commission and official committees, we still have no clear decision by the Minister and his colleagues about ending this practice.
The Government show all the signs of a weak and tired administration. They have vacillated on this question, and we are now going to have a great deal of delay in implementing the recommendations which have been made by numerous commissions of inquiry. I wonder why the Secretary of State did not use the opportunity I gave him two weeks ago to do something effective now in connection with my Bill to abolish this vicious practice of maintaining manufacturers' prices in retail shops. He had an opportunity to do something well before the General Election. As it is, the matter being subject to delays and splits in the right hon. Gentleman's party, it is unlikely that a Bill can be got through before the General Election, and even if it is, the various cases will then be referred to tribunals and there will be further delay.
I am sorry that I could not be in the House on Wednesday to hear the Secretary of State's statement. I had to be in Strasbourg for the Assembly of the Council of Europe. But while I was there I took the opportunity to discuss with some of our Continental and Scandinavian friends the practice of price fixing and trade restrictions in their countries. They were amazed and shocked that we continue to practise 582 price fixing in Great Britain. They regard us, rather disparagingly, as a nation of inefficient and backward shopkeepers, I do not agree with this description. I do not think it is entirely true or fair. But I think it is true that we have more restrictive practices in our retailing system than any other nation.
I invite the House to consider experience elsewhere. Sweden abolished resale price maintenance, but the Freedom of Commerce Board may grant exceptions provided that they result in cost savings benefiting the consumers or in a rational system of distribution in keeping with the public interest. The only exceptions which have been granted are books, printed music and—my hon. Friend the Member for Grimsby (Mr. Crosland) will be interested to know this—herrings. There have been appeals, but the Board has rejected them. The radio trade is an example. It asked for an exemption on the ground that price competition among retailers would result in reduced profit margins and the risk of poorer service to customers. The opinion of the Board was that no such risk existed.
In Denmark resale price maintenance has been abolished following a Trust Committee Report of 1953 which found that fixed prices discouraged competition and encouraged retailers to be wasteful in their promotion. It also found that price fixing was undesirable as it forced retailers enjoying low cost to charge the same prices as high cost retailers. In Denmark there is a general prohibition; special exceptions are allowed by the monopolies control authority, but these are few.
In Ireland, following public inquiries by the Fair Trade Commission, orders have been made by the Minister for Commerce and Industry in respect of radios, building materials, motor cars, groceries and carpets banning individual as well as collective resale price maintenance, although in Ireland there are safeguards against unfair trading practices.
In Germany, the Federal Cartel Department has banned retail price maintenance agreements because there was a disparity between the fixed prices and the lower prices which would have resulted without 583 resale price maintenance. Any price recommendations in Germany must be expressly designated as non-binding. In April, 1960, there was a test case in the Hamburg courts. The defendant had recommended prices to be charged by retailers, adding "the prices indicated are guiding prices recommended by us and not binding." The plaintiff in the case, a wholesaler, supplied goods to a retailer who did not adhere to the recommended prices. The wholesaler was warned to stop deliveries or supplies would be cut off. He did not stop deliveries. Supplies were curtailed. The wholesaler brought a case in the civil courts and won damages and an injunction against the supplier.
In Germany an agreement between a wholesaler and a retailer to which the retailer agrees to adhere violates the freedom to establish one's own selling price, and such agreements are null and void and completely prohibited. It is also illegal in Germany, according to Section 25 of the Restraint of Competition Act, to promise any advantages in any other way to retailers to persuade them to adhere to resale price maintenance.
In Norway a royal decree of 18th October, 1957, banned resale price maintenance by either individuals or collective groups.
In France a price ordinance of June, 1945, has given the basic law for free competition. It reads:Every concerted action, convention, combine, expressed or implied, or trade coalition in any form and upon any grounds whatsoever which may have the effect of interfering with full competition by hindering the reduction of production costs or selling prices or by encouraging the artificial increase of prices shall be prohibited. Any engagement or agreement relating to such prohibited practice shall be absolutely void.In France it is a criminal offence to break that law, with a penalty of up to five years' imprisonment.
This ordnance was amended and strengthened in August, 1953, specifically to prohibit refusal to sell, discriminatory price increases or the imposition of minimum prices. It was further strengthened in December, 1957, when it was made a rule that it would be unlawful to fix, maintain or impose minimum prices. This applies to any individual and body corporate whether 584 engaged in business or not, with a very few exceptions exempted by Ministerial order. Manufacturers in France have tried to evade the regulations, either by substituting the notion of "recommended prices" for that of fixed prices or by inserting in contracts clauses to the effect that branded goods must be sold on "the commercial terms usual in the firm". Such practices in France are regarded as illicit when they have the effect of circumventing the prohibition of minimum prices.
It is now impossible in France for manufacturers to refuse supplies to any persons who usually sell that sort of product. Under court ruling, the law makes no distinction between a trader's occasional customers and his regular customers. Every purchaser has the right to obtain the goods he needs from any supplier he chooses. It is a breach of the law to reserve merchandise or goods for specially selected clients. The only exceptions are when retailers have not got the installations to sell a particular product.
Specifically in French law it is not allowed to withhold supplies because of price cutting. There was a case in the civil courts which showed that. There was also a case in the Seine criminal court in July, 1960, when the exclusive distributor of cine cameras who had refused to supply a trader who consistently cut prices was fined for refusing to sell.
When we turn to the experience in Canada, there is the ironic twist that the MacQuarrie Committee which recommended the ending of resale price maintenance used as the basis of its report the British White Paper of June, 1951, which recommended that resale price maintenance should be abolished in this country. Following the MacQuarrie Committee report, a law was passed in Canada abolishing resale price maintenance. It was subsequently amended in 1960 to provide certain safeguards.
In this Bill I have taken advantage of the Canadian experience, including the safeguards passed there four years ago. It is interesting to note that almost the identical words are used in the Irish law. We have in the Bill the experience of Canada to go by, and that is an advantage in considering this complicated subject.
585 Why should resale price maintenance be abolished? Because it encourages barnacles to grow on the economic ship. We want to clean those barnacles off so that we can have a smooth running economic system. There are, I think, four main arguments against R. P. M. First, it imposes a rigid price system; secondly, it encourages inefficiency in retailing; thirdly, it is injurious to the customers; fourthly, it also encourages inefficiency in manufacturing.
There is, first, price rigidity, because prices are determined by arbitrary means, by the manufacturer who has no direct knowledge of the costs involved in selling the commodities concerned. These arbitrary prices apply to every type of shop and establishment notwithstanding the way in which the goods are sold, the services provided and the location of the shop, and whether the goods are delivered or collated by the consumer. This arbitrary imposition of price is not related to costs of services involved at the retail end but is arbitrarily decided. This leads to rigidity.
Secondly, it leads to inefficiency in retailing. Retailers who want to improve their efficiency have no incentive to do so because, even if they are able to cut their overhead costs by developing self-service techniques and the like, they cannot pass the advantages on to the customers and therefore attract the increased turnover which would justify the lowering of their costs. Therefore, there is a disincentive against improving efficiency in retailing.
Thirdly, it is injurious to the consumer. The consumer has to pay the fixed price whether he likes it or not, whether he wants to go to a discount house and choose a commodity for himself without having a salesman around him, and to collect the goods and take them home himself, or whether he goes to a plush departmental store in the centre of the town. Whatever he does he must pay the same price. Why should the customer be discriminated against in this way if he chooses to get a commodity with a lower range of services involved? Why should prices of so many commodities be maintained at a high arbitrary rate? It is fairly apparent that many retailers and co-operative societies who are efficient are anxious to cut prices.
586 Fourthly, this system encourages inefficiency in industry. Industrial manufacturers of consumer goods, by maintaining arbitrary prices, are protected against the pressure of the efficient retailers demanding a reduction in prices which they have to pay for the goods supplied. If retailers were able to cut prices at the retail end they would be more likely to go to the suppliers and demand reductions in the prices at which commodities were supplied. The system, therefore, has led to a certain flabbiness in the production of consumer goods, and this is bound to have had effect on our export trade and to have led to inefficiencies creeping into production which have embarrassed the endeavours of exporters.
For these four main reasons, the practice of manufacturers fixing the prices of goods in the shops should be abolished. Now I want to look at the facts of the position as they now apply in this country. Resale price maintenance is not as firmly established as it was. It has gone very largely from food but still applies to great sections of our economy.
Total consumer expenditure in 1962 was £18, 452 million, of which £5, 000 million was in food. Alcoholic drink and tobacco, amounting to £2, 300 million, are still very largely subject to R. P. M. So are radio and electrical goods and cars amounting to a total of £950 million. Resale price maintenance also partially applies to footwear and clothing and furniture and carpets—a total in clothing and footwear of £1, 700 million and in furniture and carpets of about £430 million.
It is, therefore, possible to calculate that about 20 to 25 per cent, of total expenditure on consumer goods is subject, in varying degrees, to resale price maintenance. Professor Yamey in 1960 estimated the figure to be about 30 per cent. I believe that it is something less than that, but there is no doubt that resale price maintenance has a considerable effect on our economy and that if it were abolished, there would be savings which we can estimate would be between £200 million and £300 million a year, depending on how much advantage the retailers and manufacturers took of the ending of this restrictive practice.
§ Sir Richard Glyn (Dorset, North)
I am following the hon. Gentleman closely. He has repeatedly referred to the advantages to the consumer, on the assumption that if fixed prices were abolished prices would come down. How does he tally this with Clause 4 of his Bill, which expressly permits manufacturers to retain a maximum price? He has so far made no reference to the fact that many of these maintained prices are maximum prices and are preventing retailers from putting prices up. He must know this, however, or he would not have drafted this Bill in this way.
§ Mr. Stonehouse
I shall be coming to the details of the Bill, but the hon. Gentleman is absolutely right. The sponsors of the Bill are not opposed to a manufacturer establishing maximum prices. We want the retailers to know what the maximum prices are, and we certainly do not want there to be profiteering at the retail end.
What we are objecting to is the practice of fixing minimum prices, which prevents the efficient retailer from passing the advantages of efficiency on to the consumer. The hon. Gentleman asks how we know that the consumers will get any advantage. We have some practical cases to quote to him. I have here a writ issued in the High Court of Justice, Queen's Bench Division, before Mr. Justice Megaw, by Bex-Bissell against Tesco Stores. Tesco was served with an injunction in a successful case by Bex-Bissell to prevent Tesco from selling the Shampoo-Master at 47s. 6d. Bex-Bissell wanted Tesco to sell the commodity at 67s. 6d. There is an example where the consumer could have got a commodity for 20s. less if resale price maintenance had not been applied. However, Tesco was taken to court and prevented from passing on the advantage of the lower price to the customer.
I hope that it will not be assumed that Tesco was doing this as part of some publicity campaign and was taking a very low gross margin on this commodity, say 5 or 10 per cent., merely to get the impact of being thought to be a competitive firm while selling many other commodities on which it took a far higher gross. The gross which Tesco intended to take on this Bex Bissell shampoo master was 588 33 per cent., but the gross margin which the manufacturer successfully insisted that it should charge was 87½ per cent. The manufacturer's price to the retailer was 36s.; the maintained price was 67s. 6d., showing a gross margin of 31s. 6d. I shall be very glad if any hon. Member who supports the retention of R. P. M. will defend that case.
There are many other examples, but I will quote only a few: Skyline kitchen sets, manufacturer's price to the retailer, 16s., maintained price, 29s. 11d., margin of 13s. l1d.; Ballito cardigan, manufacturer's price, 22s. 6d., maintained price, 49s. 11d., margin of 27s. 5d. on an article which costs the retailer 22s. 6d.; Hoover steam iron, manufacturer's price, 60s., selling price, 92s., margin, 32s., or more than 50 per cent.; a brush, manufacturer's 2s. 7d. —
§ Mr. Wilfred Proudfoot (Cleveland)
When the hon. Member talks of a margin being more than 50 per cent., he ought to make it clear that what he is talking about is a profit on cost, which is absolutely useless to the retailer. He should give the profit on return, which is a much better method of judging these margins. I am as much against high margins as he is, but the profit on return is a better figure to calculate.
§ Mr. Stonehouse
This can be calculated in various ways, but this is a fair way of making a comparison. The retailer in an efficient shop can make a very fair net profit through charging a lower gross than in the example I have quoted.
We have the example of branded shirts. No doubt the hon. Member for Cleveland (Mr. Proudfoot) is wearing a well-known make of shirt. The retail price is 39s. 6d., but the price to the retailer from the manufacturer is 20s. Is the hon. Member suggesting that the gross profit which the retailer needs should be 19s. 6d. per shirt? This might be required in an expensively developed department store, but certainly not in any off-beat location or discount house where this sort of margin is ridiculous.
Another example is an Austin bedroom suite. The manufacturer's price is 32 guineas, but the maintained price is 50 guineas, a mark up of 18 guineas. Again, while that might not be too 589 high for an expensive establishment, it is far too high for a shop which does not provide the services of an expensive departmental store. The brush I was referring to before I was interrupted had a manufacturer's price of 2s. 7d. and a maintained price of 4s. 11d., a margin of 2s. 5d. or almost 100 per cent. mark up. There are many other examples, but I have quoted only a few to show that if resale price maintenance goes, the customer will benefit immediately and directly on a great range of commodities.
Many co-operative societies are forbidden to give a deferred discount to their members because the manufacturers insist on these conditions. This is an intolerable imposition on co-operative societies who should be free to decide how they run their businesses in the interests of their members. There is the example of the very successful co-operative society in Portsmouth which went into the garage business but which could not pass on the benefit of its trading to its members because of manufacturer's conditions with many commodities which it sold. This is intolerable.
The practice of R. P. M. has been condemned over and over again, not only by those in the academic world, like Professor Yamey, who conducted an objective investigation of this position, but by scores of committees and inquiries established by Governments, many by Ministers now in office. The Cohen Committee, the Molony Committee both condemned it in passing. The report of the Monopolies Commission on pneumatic tyres condemned individual as well as collective R. P. M.
More recently, the Monopolies Commission's report on electrical equipment for mechanically propelled land vehicles took the same view. I invite hon. Members who have any doubts about this question to read this report, which condemned individual as well as collective R. P. M., and which ended with the positiverecommendation that this practice should be terminated by all suppliers of such goods.
There is no prevarication about that, no reference to more tribunals. The Monopolies Commission conducted an inquiry which took six years and made this firm recommendation. Are we to 590 understand from the statement of the Secretary of State for Industry and Trade and from his replies to supplementary questions on Wednesday that this matter of R. P. M. in batteries for cars and in sparking plugs is to be referred to yet another tribunal which will take another six years to report? Why not take the advice of the Monopolies Commission and abolish it now?
Not only the Monopolies Commission, but the Restrictive Practices Court has declared that restrictions on competition and restrictions by price agreements are contrary to the public interest—in January, 1959, in the case of yarn spinners; in March, 1959, in the case of blankets; in July, 1959, in the case of Scottish bread; in July, 1959, when it found against the appeal of the wholesale bakers' federation; in November, 1958—and this is interesting to observe in view of the agitation by the chemists in the last few weeks—the Restrictive Practices Court made this comment on the case put up by the Federation of Chemists:
The Federation had not established that small chemists in country districts would fail to survive the competition that might follow the ending of restrictions or that the National Health Service would suffer if some of them did.I am sorry that the hon. Member for Kidderminster (Sir G. Nabarro) is unwell and thus unable to be with us today. The court found that prices fixed by the Federation of Carpet Manufacturers were fixed but not on a costing system and could not be described as other than arbitrary. It said that these arrangements were detrimental to the public interest and the court regarded this detriment as considerable.
In December, 1960, the court found that price fixing and restriction agreements by the Wholesale Confectioners' Alliance were contrary to the public interest. The Alliance had argued that price fixing was required to ensure service to customers in sparsely populated areas. The court found that the Alliance had failed to satisfy the court and found that without restrictions competition would tend to reduce prices charged to retailers by wholesalers in many areas. The court held that there was sufficient elasticity in the profits of the trade to ensure a supply of confectionery at ticket prices to the more sparsely populated 591 areas. It is generally agreed that there are too many wholesalers in the industry and it is to be expected that without restrictions the less efficient wholesalers would go out of business. The court declared that the restrictions were contrary to the public interest.
In the motor vehicle case, decided in December, 1960, 65 signatories comprising all United Kingdom manufacturers of cars and motor vehicles, and substantially all the retailers, asked for a collective price agreement to be approved. The court found that no case had been made out and that the whole practice of fixed prices was contrary to the public interest. In the case of cement makers, there was some finding to the benefit of the trade. Apart from the cement and the net book agreement which I exempt in my Bill, there was no exceptions found by the Restrictive Practices Court.
Why is it that after all these findings, after the decision of the Consumer Council which demanded the banning of resale price maintenance, after the decision of the Monopolies Commission, and the other declarations that have been made, the Secretary of State for Industry and Trade said on Wednesday that this matter would be referred to still more tribunals of inquiry? In the meantime, resale price maintenance can continue in those trades where presumably either the retailers or the manufacturers want to maintain them. The full force of the law will back them up in imposing this vicious system. I hope that the Minister will throw more light on this. We are not willing to withdraw the Bill unless we have some satisfactory assurances on that point.
Sir Harry Legge Bourke (Isle of Ely)
In his interpretation of Clause 5(2), to which I think the hon. Gentleman is referring—to exempt those agreements which have been approved by the Restrictive Practices Court—will he say whether he is visualising only agreements which have been approved, or whether he is leaving the door open for approval of other agreements which may be submitted to the court?
§ Mr. Stonehouse
The Bill as drafted refers only to agreements which have been approved, but if the Bill goes to 592 Committee we can have a further look at this question. We can widen it if it is the will of the House so to do. We can have a system of appeal, but in my opinion it is not necessary. If the Restrictive Practices Court has condemned price agreements for collective groups, prima facie there is no case for individual resale price maintenance to be applied. We want to save time in going through all this procedure, but if it is the will of the House that question could be dealt with during the Committee stage.
§ Mr. Leslie Hale (Oldham, West)
Is it not a little ungenerous to the Government to complain that they propose to refer this matter to somebody else for consideration? After all, the Cabinet considered it for only a few minutes last Tuesday, and had a row about it. They were being torn by attacks in the Spectator. In a matter of this importance, surely someone should consider the matter before we pass the Bill?
§ Mr. Stonehouse
I agree with my hon. Friend that precious little serious consideration has been given to this matter by the Ministers concerned. They had a departmental report about 18 months ago, and we should have had the result of that long before now. The Government have rushed in to make a statement. They were forced into it by the fact that this Bill would be considered today. It is most unfortunate this subject is not being considered by the Government with the seriousness it warrants. The Government are window-dressing, and when customers go into the shop they will find that this is a loss leader and it has been withdrawn from sale.
Individual as well as collective resale price maintenance has been condemned by the Consumer Council, a body set up by the Government. It has been condemned by the Monopolies Commission, and by the Restrictive Practices Court. It has been abolished in practically every other country with experience of price fixing. Surely we can decide to have a general prohibition of resale price maintenance and then consider exemptions, rather than have the method proposed by the Secretary of State, that exemptions should be allowed until the appeals are heard. It will take 10 years for all the appeals to be heard, and in the meantime the practice will continue.
§ Sir Richard Glyn
This is most important. I cannot think that the hon. Gentleman wishes the House to understand that justice should be ignored merely because it takes a little time to achieve it. I have a list of firms and industries which have had the good fortune to be considered by the Monopolies Commission or by the Restrictive Practices Court and have had their present arrangements approved. Under the Bill as it stands these firms will have an enormous advantage over their trade rivals in other industries who have not had the good fortune to be considered and approved. The hon. Gentleman says that other people have not seriously considered this matter. Has he seriously considered this part of his Bill?
§ Mr. Stonehouse
I have considered it, but I think that the. hon. Gentleman has misunderstood the decisions that have been made by these various commissions. In fact the Restrictive Practices Court has allowed only two agreements, the cement and net book agreements, and those are the two exemptions in Clause 5(2). I do not want the discussion to be bogged down on this point. If there is a desire to have further appeal procedure, we can insert another subsection to Clause 5 to include an appeals procedure for individual as well as collective resale price maintenance, which the Restrictive Practices Court had to deal with specifically.
I turn now to the details of the Bill. Clause 1, which proposes to repeal Section 25 of the Restrictive Trade Practices Act, 1956, is necessary because that Section gave power to manufacturers to impose their fixed prices not only on wholesalers or retailers who had direct contracts with them, but on any third party. I have searched the law of other countries, and I have found no such provision in their statutes. It is an incredible law which gives this power to a manufacturer to impose his fixed prices on anybody trading in his goods, and the Bill seeks to repeal that provision.
Clauses 2 and 3 are taken from the Canadian law, which under a Liberal administration in 1951–52 was designed to ban resale price maintenance. The Conservative Party in opposition in those days opposed the Measure. When it gained power, it introduced a number of safeguards to satisfy its supporters. Those safeguards are embodied in 594 Clause 3(2). The difference between what I propose in the Bill and the Canadian law is that in Canada these are criminal offences, subject to the criminal code. I am proposing that this matter should be dealt with by way of a civil action. If a manufacturer transgresses the law, it will be possible for a retailer to take him to court and obtain an injunction. I believe that the provisions of Clause 3(2) are a sufficient safeguard against unfair trading practices.
Clause 4 specifies that there shall be nothing in this Bill—or Act if it is passed—which will restrict the right of a manufacturer to impose maximum prices. Its purpose is to ensure that retailers do not profiteer because of a customer's ignorance. Subsections (a), (b) and (c) provide that the manufacturer can still recommend prices on the market. The price cannot be imposed, but it can be put on the packet, or advertised. This will also provide protection for the consumer. He will know the manufacturer's price, and if a retailer wants to sell below that price the customer will have a means of comparison.
Clause 5 excludes any trade done as a result of in enactment. It excludes the operations of the Milk Marketing Board and any other similar State-trading organisation, where the practice of profiteering or excessive margins is ultimately controlled by Ministerial action. That gives protection to the consumer. Subsection (2), to which I have already referred, excludes any price agreements which have already been approved by the Restrictive Practices Court.
§ Mr. R. Gresham Cooke (Twickenham)
If the hon. Member is being logical in saying that he wants to get rid of retail price maintenance, how can he defend its retention in the book trade? Surely what he has said applies as much to the products of the Stationery Office. If the price of one of its reports is marked at £1 2s. 6d. net, the hon. Member logically should agree that a member of the public should be entitled to obtain it at a discount.
§ Mr. Stonehouse
The net book agreement is exempted by the Restrictive Practices Court. [Hon. Members: "Why?"] Hon. Members can examine the case in detail if they wish. It is a 595 special case. About 200, 000 titles are sold by booksellers. It would be a great disservice to the bookselling industry and also to consumers if booksellers were not able to maintain that range of books. I know that there are differences of opinion. Professor Yamey thinks that there should be as completely free competition in bookselling as in every other commodity, but the Restrictive Practices Court exempted this, and I am prepared—as I hope the House will be—to accept the judgment of the court on this question. Her Majesty's Stationery Office is a Government institution, as is the Milk Marketing Board. In the case of a State monopoly there is no such thing as free competition. The protection of the consumers' interests should be effected by the responsible Ministers.
§ Sir John Vaughan-Morgan (Reigate)
Every argument that the hon. Member has made surely applies just as much to the products of the Stationery Office. If his argument has any logic in it, why should not a bookseller be allowed to sell a Government publication a little cheaper than does H. M. S. O. in Kingsway?
§ Mr. Stonehouse
This is not the time to examine the net book agreement in detail. If we consider Clause 5 in Committee it may be that the arguments of the right hon. Member will convince the Committee that he is right. This Clause could be deleted. I have included it because I was convinced by the arguments of the Restrictive Practices Court.
I believe that the Bill will give us an opportunity to act quickly against this vicious and pernicious practice, which acts as a brake upon efficient retailing, is disadvantageous to the customer, and also introduces a great deal of flabbiness at the producing end of the economy. It will not only be of great advantage to customers—who will be able to save a great deal of money—but will provide flexibility in retailing. It will enable the development of new systems of trading and the introduction of self-service on a wider scale in commodities other than foods. It will also help the development of discount houses.
596 It will be of great advantage to the national economy if retail price maintenance is abolished, and I hope that we can take fairly quick action to deal with it, rather than follow what appears to be the dilatory methods proposed by the Secretary of State in his statement on Wednesday. I look forward to hearing the Minister today, and I am sure that the whole House wants to hear details of what the Government have in mind. It will be on what they say that we shall base our action in respect of the Bill.
§ 11. 55 a. m.
§ Sir Hugh Linstead (Putney)
I want to make three comments which are directly related to the speech of the hon. Member for Wednesbury (Mr. Stonehouse). First, he painted a false picture of the state of affairs in this country when he suggested that both industry and trade were riddled with resale price maintenance practices which were open to objection. As a general statement, that might have been true ten years ago. Today, with the Restrictive Practices Court, the Monopolies Commission and the restriction of resale price maintenance solely to the right of a manufacturer to maintain the prices of his own goods, it is not true. In this respect the hon. Member painted a grossly exaggerated picture.
Secondly, when he quoted certain retail prices and margins he presented a picture of shopkeepers who were fattening on grossly unjustified profits. That is a quite unreal representation of the state of affairs in retail business today.
Thirdly, he quoted some of his Continental friends who had criticised us as being a country of inefficient shopkeepers. I would remind him that Napoleon made the same mistake. It was a nation of shopkeepers who broke Napoleon, and some of us want to see the same spirit retained in retail distribution as much as in the other activities of the country.
I oppose the Bill, and I regret the statement made by my right hon. Friend on Wednesday in relation to resale price maintenance, so far as I understood it, although I realise that there is a considerable difference between what my right hon. Friend had to say and the proposals in the Bill. To use a simple phrase, the Government offer an escape 597 hatch, whereas the Bill offers no means of escape and brings down the guillotine immediately.
It is worth realising that in this country retail distribution is an immense and very delicate organisation. It may be inefficient here and there in the job it does, but it satisfies the public and provides a livelihood for hundreds of thousands of people. I suggest that Parliament and the Government have no right to throw into the middle of that machine—without any warning and without providing any cushioning—the sort of spanner represented by the Bill. At the very least, it is bound to some extent to affect the standard of living of proprietors and employees in the retail and distributive trades.
As the hon. Member pointed out, resale price maintenance has been a subject on which experts have differed in their opinions of its effect. He quoted one expert favourable to the hon. Member's point of view, but it is well known that there are other experts who take a different view. One is inclined to ask, in relation to all these experts, how many of them have been engaged in retail business themselves, and how many understand the real meaning of the services which are rendered to local communities by small grocers, confectioners, newsagents and chemists? How do they rate the service rendered to the community by independent shopkeepers as citizens, ratepayers and leaders in local activities? These people make a considerable contribution to community life.
The abolition of resale price maintenance is primarily favoured because it will reduce prices. The arguments which are based on the reduction of prices are attractive and appeal to us all, as they are bound to appeal to any Government. The maintenance of a level retail price index is an extremely important matter in relation to the control of inflation, and consumers generally want lower prices. But it is worth questioning whether the arguments about the reduction of prices, however valid in the short-term, are equally valid in the long-term. Indeed, American and Canadian experience has shown that whereas cut prices may result in certain reductions, in self-defence retailers put up the prices of the other products which they sell and the average 598 of retail prices is almost certainly not reduced and may, indeed, be increased.
§ Sir H. Linstead
We find the evidence in the pamphlet contradicting Professor Yamey's pamphlet, which was published by Andrews, and another as a result of a study of American and Canadian experience.
It is true of course, that the abolition of resale price maintenance, short term, can help to brake inflation, but only to a limited extent and only, I think, against cost inflation and not against wage or demand inflation. If, in fact, as that experience shows, average retail prices remain stable, the only deflation as a result of resale price maintenance will be in the wages of the proprietor of the individually owned business. What I think is clear is that if we abolish resale price maintenance three consequences happen. A manufacturer or a retailer or a wholesaler will lose some of his profit or he will cut his services, or he will cut quality. I believe that competition in retail prices ultimately results in competition in quality.
§ Mr. Richard Marsh (Greenwich)
The hon. Gentleman has said a great deal about protecting the position of the retailer. What about the position of the consumers, people who like myself desire to opt for less service and for a cheaper product? I recently bought my wife a washing machine and got 12½ per cent. off its price in a discount house. The hon. Gentleman might not wish to do that, but why should I be prevented from doing it?
§ Sir H. Linstead
The answer to that is in an old quotation, which I cannot remember exactly, to the effect that there is always a man who will make something a little cheaper and a little nastier than the next man. Ultimately the result of competition by price is that one is offered something cheaper and less efficient even if one may imagine that what one is buying is of equivalent value.
§ Mr. Douglas Jay (Battersea, North)
Is the hon Gentleman saying that in no case should the consumer be given a choice between a more expensive type of goods of one kind and a less expensive type of another?
§ Sir H. Linstead
I am saying nothing of the kind. In fact, it is a matter of policy for a manufacturer to decide whether or not in his particular set of circumstances he prefers to carry through a resale price maintenance policy or whether he does not wish to do so. I would have thought that one of the basic rights of any person manufacturing a material was, if he desired to do so, to maintain quality by maintaining prices, if that is to be his trading policy.
§ Mr. R. T. Paget (Northampton)
I am sorry to interrupt the hon. Gentleman, but I am wondering whether in this particular industry—because I am very undecided in my mind about this—of which he knows a very great deal, the profit margins of the retailers were larger on the price maintained goods or the non-price maintained goods.
§ Sir H. Linstead
If the hon. and learned Gentleman will allow me, I will come to that in a moment.
I want to refer to another effect this Bill will have. I am sure the abolition of resale price maintenance is going to favour the big man, the co-operative society and the formation of vertical combines and chain stores. I do not know whether that is the type of trading which hon. Members who support the Bill wish to see, but I would have said that that is the type of trading which has in it substantial monopolistic tendencies and, long term, might well produce precisely those evils which, I presume, it is the intention of the Bill to prevent. In fact, the Bill could, I suppose, to some extent be regarded as a charter for the co-operative societies.
The hon. and learned Member for Northampton (Mr. Paget) asked me about the effects of this on the pharmaceutical industry and pharmaceutical retail practice, about which I know a considerable amount, having been in one way or another associated with it for a good many years. I became an apprentice in pharmacy at a time when it was just recovering from the price-cutting days of the late 1800s and the early 1900s, and I knew it just as it was emerging from a time when there had been cut-throat competition, when no pharmacist was in a position to carry out his professional duties properly because he could not be assured of his livelihood from his other activities.
600 I do not believe that retail pharmacy in this country could have shouldered its responsibilities under the National Health Service had it not been revived, supported and sustained by resale price maintenance.
If I can, without boring the House, very quickly—
§ Mr. Hale
I apologise for interrupting the hon. Gentleman. I started to listen with sympathy. I am not passionately in favour of the Bill by any means, but I would have thought that the classical example he has given of the history about penicillin and about the discovery of a distinguished scientist in this country who did not wish to place any restriction upon it and about restrictions being enforced from America and price resale provisions being enforced by people who took up the invention and developed it in America and insisted on profits of 150 per cent., and so on, was not a very happy support of his case.
§ Sir H. Linstead
I was not aware that I had adduced that example in support of my case, and I suspect that the actual example which the hon. Gentleman has produced is very much open to criticism. It certainly is at the present time when manufacturing prices are free, when manufacturers are in strong competition one with another and when there is certainly no question of price maintenance of unpatented substances like penicillin.
I must not detain the House or bore it, but I want to take the six points which Professor Yamey has made in suggesting that resale price maintenance in pharmacy cannot be justified, and to examine them as briefly as possible. Professor Yamey says, first of all, that the subsidy provided by resale price maintenance in the pharmaceutical business is neither general nor large. He produces no figures in support of that, but those who knew the pre-resale price maintenance days in pharmacy would certainly have every justification to refute that. His second point is that the subsidy would not affect all chemists equally. Of course it does not. Those who will be worst hurt are the small men, and that is one of the cases that I want to make very strongly.
Further, Professor Yamey says that the present costs of running a chemist's 601 business are not necessary costs; dispensing services do not need expensive sites, and so on. In other words, let the small man be pushed out of the worth-while site to make room for the bigger people. He then says that the statutory monopoly of dispensing still gives the chemist a competitive edge over other retailers, to which the reply is that it only does so if it is itself able to remain remunerative without resale price maintenance. Otherwise, it is a millstone.
His fifth argument is one which I cannot understand, even when it comes from a distinguished economist. He says:many chemists are good business men and do not need price protection".If that means anything, it means that if a man does not need price protection he does not need price protection.
Finally, the professor states that even if the numbers of pharmacies were to decline, the public would not suffer necessarily;the number in busy centres might decline, but not those in isolated centres. That is not true. What almost inevitably would happen is that the small man in the isolated community would suffer because he has the competition of the travelling van and the competition of the local grocer, whereas the man in the large shopping centre is far more viable than the man in the isolated place.
It is interesting to look at this matter in relation to the National Health Service. In an average pharmacy, I am told that 50 per cent. of the proprietor's time is spent on National Health Service work, 25 to 30 per cent. of property charges can be allocated to the National Health Service and 35 per cent. of other charges. It is on figures of this kind that the National Health Service remuneration is determined. Therefore, it must be realised by my right hon. Friend the Minister of Health that if the figures are altered on one side of the equation, they must be altered on the other side of the equation. If we want the National Health Service to be available in pharmacies well spread throughout the country, this sort of thing will require some subsidising of the other side of the cost of the National Health Service that pharmacies give.
§ Mr. Stonehouse
The Restrictive Practices Court examined the very point 602 which the hon. Member now makes and after long examination and careful inquiry did not agree with it.
§ Sir H. Linstead
Yes. I shall answer that presently. I have come practically to the end of what I want to say, but I wish to extend this point about the National Health Service one stage further.
Many other pharmaceutical services are rendered outside the National Health Service. Very large numbers of medicines and drugs are sold, because the public need them, over the counter of the shop and the remuneration of the National Health Service bears no relationship to that part of the proprietor's work. Those services are possible, however, only because of a wide range of traditional supporting activities. It is a fact that chemists' shops cannot flourish, because of the accident of the way in which they came into being, unless they are supported by cosmetic and photographic sales and the sale of invalid foods, children's foods, and so on.
What the hon. Member for Wednesbury's Bill does is to remove part of that structure which supports pharmaceutical services quite outside the National Health Service. Men who are carrying on pharmaceutical businesses may not necessarily be put out of business, but they will find that their ability to maintain a good staff is weakened, that their ability to maintain long hours of service is weakened and that their own individual anxieties about the viability of their businesses will interfere with the fullness of the service that they can give to the public over a whole range of essential items.
Under today's Bill, the whole of the support of those services will go and once again the pharmacist will be unable to get on with his main job, just as 60 years ago he could not do it. He will be worried and concerned about his financial position and uncertain of his rôle in society and the service which he is expected to give to the public. I have taken as an example the special position of pharmacy. There are many other examples which, no doubt, will be raised in the debate.
We cannot treat the whole of the nation's distributive industry by one 603 crude method. Each trade and industry requires constructive examination, not on the basis that my right hon. Friend seems to prefer—that they are all to be regarded as battening upon the community and, therefore, required to prove themselves innocent—but on the basis that they are what they appear to be, which is decent citizens doing a decent job of work, trying to serve the community as best they can. At the very least, they should be proved guilty and not be required to prove themselves innocent.
I summarise my opposition in this way. The Bill must be opposed because it is a crude and brutal way of achieving its effects. Its benefit to the public would be short-lived. It plays into the hands of the big man, the chain store and the co-operative society. I believe that it would encourage the production of cheap goods, and it deals another blow at independent proprietors and their staffs.
If the effect of the Government Bill is the same, I may find myself in the position of having to oppose it just as strongly. I beg my right hon. Friend the Minister to examine the effectiveness of his escape hatch and, in particular, to consider most carefully how the onus of proof is to be dealt with in his legislation. As to the present Bill, my strong hope is that the House will reject it this afternoon.
§ Mr. Laurence Pavitt (Willesden, West)
In the question of pharmaceuticals, has the hon. Member considered the fact that because of high prices, his own Government have had to take action in buying large quantities abroad? Is he satisfied that the large number of dispensing chemists is the most efficient method in the light of his right hon. Friend's plans for the district hospital dispensary system and the ten-year plan of local authority services?
§ Sir H. Linstead
In reply to the first point, it was not resale price maintenance which was the barrier to the Government buying those drugs cheaply in this country. It is the operation of the patent law, which is a quite different state of affairs. As to the hon. Member's second point, my view is that the way in which the distribution of pharmacies has 604 grown up in this country is far too haphazard and that there is a strong case to be made for replanning the distribution of our pharmaceutical units. I do not, however, see any type of replanning of that kind coming from the operation of a crude machine such as the Bill.
§ 12. 18 p. m.
§ Mr. Anthony Crosland (Grimsby)
The hon. Member for Putney (Sir H. Linstead) has made an extremely moving speech. It was almost identical with his speech in June, 1950, which was the last time I took part in a debate on this subject. We were then discussing not merely individual resale price maintenance, but collective resale price maintenance. On that occasion, the hon. Member made almost precisely the same speech in the same words.
I was not expecting to be called at this stage of the debate, but while I am finding the right place in my notes I should like to make one or two comments on what the hon. Member for Putney has said. There was a lot in his speech about criminals and decent citizens. I suggest seriously to the House that we shall not advance the cause of truth or objectivity in this debate by using absurd, ridiculous language like that. Nobody suggests that British shopkeepers are a lot of criminals because we happen to disapprove of resale price maintenance. The injection of that degree of emotion into the debate is deplorable and will not lead us to the right conclusion on this matter. As to Napoleon and the army of shopkeepers, one can be accused of a total lack of patriotism, but this kind of argument simply does not advance the matter.
§ Sir H. Linstead
I might be able to help the hon. Member to find his place in his notes while I interrupt him. I was merely picking up a point made by his hon. Friend about the Continental opinion. It was not something which I introduced into the debate. Perhaps now the hon. Member for Grimsby (Mr. Crosland) is ready to continue.
§ Mr. Crosland
I am extremely grateful to the hon. Member for Putney. Nevertheless, I should like to make one or two more comments on his speech. If it is a fact that this Bill is designed merely to aid the Co-operative movement that pays the biggest tribute to the Co-operative movement which anyone could possibly 605 pay—I am afraid a rather larger one than I could pay. The theory would be that the Co-operative movement had by far the lowest costs of distribution and that it would cut out every other type of retailer.
Before coming to my own notes, I want to make reference to a point which has come up in the debate, the net book agreement and H. M. S. O. publications. I do not know if H. M. S. O. publications come under the net book agreement. If they do not I should be very happy for a retailer to sell them at any price he chose. The point about the net book agreement is quite different. Although many of us on both sides of the House in general disapprove of R. P. M., as we do of other restrictive practices, nevertheless we think there will be exceptional cases where harm will be done by its abolition.
In saying this we are not advancing a new proposition. This is part of our anti-monopoly and anti-restriction practices. We make a general rule and then allow for exceptions, as my hon. Friend the Member for Wednesbury (Mr. Stonehouse) has allowed for particular exceptions in his Bill. There is nothing in the slightest degree illogical about that.
In the light of what the hon. Member for Putney said, the arguments for abolition of resale price maintenance need briefly restating. The speech of the hon. Member was not simply an argument against this Bill but, if it were taken seriously, it was an argument for extending retail price maintenance across the whole of retail trade. He was making an argument in general in support of the virtue of resale price maintenance being raised from 20 per cent. to 25 per cent. to the whole of trade. The arguments against this have already been made by my hon. Friend, so I can make them extremely briefly.
First, what is the logic of having a uniform fixed retail price when the cost of distribution differs enormously between one shop and another? There is no logic in it if when I go to a shop it does not matter whether the shop is efficient or inefficient, has high costs or low costs, or provides many services or no services and whatever the costs of that shop I must buy at one single fixed uniform price. That makes no 606 sense at all. It should make less sense to hon. Members opposite, many of whom have a certain mystic about market forces, the price mechanism, and so on, than it does to hon. Members on this side of the House.
In general we surely all believe that prices ought to reflect the costs of production. We all believe that this should apply in manufacturing. The efficient producer should have lower prices than the ineffcient producer. If a manufacturer lowers his costs he should not be restricted in lowering prices. Everyone believes that this should be so in manufacturing—why not in distribution?
The hon. Member for Twickenham (Mr. Gresham Cooke) is very interested in the motor industry. He presumably believes that if one manufacturer in the motor industry is more efficient than another it is highly desirable that his prices should be lower than those of the inefficient manufacturer. If he believes that about motor production why does he not believe it about distribution?
§ Mr. R. J. Maxwell-Hyslop (Tiverton)
Does the hon. Member for Grimsby (Mr. Crosland) believe that a privately-owned airline can provide services at a cost lower than a nationalised airline can provide them? If so, should the private air line be at liberty to do so? On the same argument, does he believe the cost of a railway ticket should cover the cost of providing the service?
§ Mr. Gresham Cooke
What my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) is trying to say is that the cost of the railway ticket covers only about half the cost of carrying the passenger or goods. Does the hon. Member for Grimsby (Mr. Crosland) believe that the price of the railway ticket should include the whole cost of the transport of the passenger?
§ Mr. Crosland
Ibelieve that the price of the rail ticket should cover the entire cost of the railway journey for which the ticket is bought. [Hon. Members: "Oh. "] Certainly it should.
This brings me to the next point. It is quite illogical to have uniform prices 607 when we do not have uniform costs. Why should I have no choice at all between going to a shop where I get no services at all and no credit terms, and on the other hand to a West End department store where I get the lot? Why should I pay the same for those two different things? Why should I not be able to go to a discount house providing none of these services and pay less for goods than if I go to Harrods or somewhere where I can get an enormous number of services which I may not want?
There is simply no answer to this question. Why should I be deprived of this choice? I do not mind if people go to Harrods and have to pay more because of the good carpets in the shop and the pretty girls behind the counter. They are welcome to do that as far as I am concerned, but why should I be given no choice between paying the same price there and buying goods where the services are completely different? In answer to the hon. Member for Twickenham and the point about motor distributors, I should have a choice between buying a car from a dealer linked with Ford or Rootes offering me a guarantee and certain services, or going to someone who gives none of those services.
If I want the extra services I should have the right to pay more for the car than if I happen to be a mechanic and do not need those services. I cannot tell the difference between a sparking plug and a carburettor, if there is a difference, but if I were someone who spends the whole of Sunday underneath his car and knows how to service his car, why should I not be able to buy the car without all this elaborate provision for after-sales service?
§ Mr. Hale
What my hon. Friend is putting forward is a plea for equalisation or abolition of Income Tax and financial discrimination of all kinds. While people in the higher ranges of salary may be able to go to discount houses, others are not so mobile. Old-age pensioners have not the mobility to take advantage of them.
§ Mr. Crosland
It is not true that a discount house can apply only to the richer section of the community. Moreover, many things are sold in local shops 608 and the old-age pensioners would gain relatively as much as anyone else.
I am not against people charging relatively high prices if they are offering more services whether in connection with cars or not. All I am saying is that I should have the right to pay the lower price if I do not want any of the services which are offered.
If we believe that competition is, in general, a good thing for the bulk of manufacturing industry, which both sides of the House do, it is hard to say that it is not a good thing for retailing. It is hard to justify this differentiation between manufacturing, where we believe that competition is good, and retailing where we fear that it will have bad effects. Moreover I feel, and I have done since 1956, that the present half-way house in which we find ourselves is illogical. That is the half-way house in which collective price maintenance is illegal but individual price maintenance is not. I think that there is more logic in the position that many hon. Members opposite took before 1956 when they were in favour of resale price maintenance however enforced. That seems to me to be a tough tenable position, though I disagree with it. But it is difficult to maintain this half and half position where we say that the collective enforcement of R. P. M. is wrong but individual enforcement is O. K. R. P. M. is either a good thing or a bad thing, and if it is a bad thing, we should have neither individual nor collective enforcement.
I should like to take up one or two of the arguments frequently used on the other side against abolition. One is the loss leader argument. That is not strictly relevant to this Bill, and I shall spend only a minute or two on it, simply because it comes up in every general discussion that we have on this subject. It is not strictly relevant to the Bill because, as my hon. Friend has explained, it has taken over the provisions now in the Canadian legislation designed to stop the use of loss leaders.
I would make this general point. In a lot of discussion on this, I think that there has been an enormous amount of exaggeration and alarmist fear about the danger and the extent of the use of loss leaders. I take a more sceptical view about the fear of how much this is likely to happen and its damaging effects.
609 The fact is that we have the opportunity in this country to see how serious this loss leader problem is in the last few years when R. P. M. has been breaking down in the grocery trade. We have had the case of Nescafé and other commodities used as loss leaders, and we have been able to see what are the dimensions of the loss leader problem in the last few years and the fact is that in the main these are not very considerable. I cannot believe that the producers of Nescafé have suffered disruption of their production lines by the fact that Nescafé has occasionally been used as the loss leader. Moreover, when we consider the goods on which R. P. M. still exists and whether we would like it be removed, we realise that many of these goods could not be used as loss leaders anyway and a large proportion of the goods which could be used as loss leaders are not subject to R. P. M. today.
§ Sir Richard Glyn
The hon. Gentleman has referred to the use of loss leaders, which he hopes will not be permitted under this Bill, and to the fact that the Bill follows the new Canadian legislation. I saw in this morning's Financial Times how this change came into being in a short account of the history of the abolition of R. P. M. It said that in Canada it was found necessary to consider restoring R. P. M. since price competition by discount stores had hurt so many small traders. As a result it stated thata campaign has been mounted to restore price maintenance in Canada.
§ Mr. Crosland
It has not been restored. The legislation under the 1960 Act in Canada has a provision which is included in my hon. Friend's Bill against the use of loss leaders, that is to say, that the manufacturer can withhold supplies if his goods are being consistently used in a loss leader rôle. That is the only thing that has happened so far as legislation is concerned in Canada.
§ Mrs. Harriet Slater (Stoke-on-Trent, North)
Ask the hon. Member for Dorset, North (Sir Richard Glyn) to quote the next paragraph.
§ Mr. Crosland
Perhaps I should quote the last sentence in the next paragraph:But there is little expectation among manufacturers that Ottawa will find it 610 politically expedient to restore price maintenance".So that, perhaps, had better be a warning to the hon. Member. There is a certain agitation going on, which, as the Financial Times makes clear, is not likely to affect the Government
§ Sir Richard Glyn
The increase in discount houses, which I prefer to call multiple stores, or what one will—[Hon. Members: "No. "] Yes, they are in many cases. The increases in discount houses in Canada have been at the expense of the small trader. That is perfectly clear.
§ Mr. Frederick Gough (Horsham)
On a point of order, Mr. Speaker. May I ask whether we are on Second Reading or on Committee stage?
§ Mr. Crosland
If I have been guilty of going into too great a detail, it is because of the interruptions to which I have been subjected.
The argument about the small shopkeeper which was used by the hon. Member for Putney is the one which represents the strongest element of feeling on the other side of the House. Certainly I have no prejudice against the small shopkeeper. Unlike my hon. Friend, I have no link with the Co-operative movement. The only link that I have had with it is that I spent two years producing a highly critical report on it. If I have any other link with the Co-operative movement, it is only a sentimental and emotional one.
I therefore have no prejudice whatever against the small shopkeeper, but we must get the business of the small shopkeeper in perspective. The small shopkeeper will not disappear if R. P. M. is abolished provided, but only provided that he gives the consumer services for which the consumer is willing to pay. If the small shopkeeper is efficient and gives the consumer what he wants, he will remain in being, and should remain in being—and we all want him to remain in being. If any small shopkeeper is pushed out of business in consequence of the abolition of R. P. M., it will only be the one who is not providing the public with something for which the public is prepared to pay. I do not regard the 611 abolition of R. P. M. as any threat to the efficient independent retailer. This point must be made clear.
While we are on this subject of the independent retailer, I think we must observe the fact that in Britain, and in many other countries as well, the resilience of the small shopkeeper, I am glad to say, is immense. Many times over the last 100 years prophecies have been made of the total disappearance of the small shopkeeper—for example, when the department stores arose, when the multiples became powerful, and when self-service got under way after the war. There have been innumerable instances, decade after decade, of prophecy after prophecy of the disappearance of the small shopkeeper. Yet when one looks at the figures of the proportion of the total trade still in the hands of the small shopkeepers, one sees that it is enormous. I have more confidence in the resilience of the independent retailer than have some hon. Members opposite.
The next point which is frequently made—and again I will spend hardly any time on it—concerns the alleged threat to after-sales service if R. P. M. is abolished. This used to be used frequently as an argument, but I think that the Monopolies Commission's Report on electrical equipment for mechanically propelled land vehicles gives a final answer to the allegation.
The hon. Member for Putney said that it might be that prices would not fall at all if R. P. M. were abolished.
§ Mr. Crosland
Yes. He said that some might fall but that others might rise in compensation. I entirely concede that one cannot possibly make any definite prophecy about prices. My hon. Friend quoted estimates which had been made by writers on this subject, and it is reasonable for them to try to make such an estimate, but anyone would be very foolish who imagined that he could give a definite figure. As an abolitionist, I would not dream of claiming that the cost-of-living index will fall by a certain percentage if we abolish R. P. M. Indeed, I feel that the Government are trying to show much too much in terms of price falls, for political reasons; they are exaggerating the extent to which retail prices will fall to the consumer.
612 Nevertheless, it is reasonable to say that although we cannot tell precisely by how much prices will fall, the direction will be towards lower prices. It is impossible to take the view that if we allow price competition over a whole sector where it did not exist before, prices on average will not fall at all. I do not see how one can possibly take that view. Some retailers will cut some prices, and unless we return to conditions of wild inflation, I do not believe that these will be altogether offset by increases in other prices. To suggest the contrary does not make sense and is not consistent with any knowledge which any of us have about what goes on in the world. The fact is that on balance there will be a reduction in prices, but I have no idea exactly what it will be.
§ Mr. Walter Monslow (Barrow-in-Furness)
Does my hon. Friend agree that the last 12 months have proved the contrary to what he has said? There has been an increase in price levels by about 2½ per cent.
§ Mr. Crosland
There will always be many other reasons why prices rise from year to year. The fact that prices have not fallen in one year is not an argument for maintaining R. P. M. Letus put it modestly: any Government would be very lucky if we had complete stability of prices from one year to another. There are all kinds of reasons, such as general cost increases, wage increases, raw material price increases, for which prices seem likely, to put it mildly, to go up by some amount year after year. If the abolition of R. P. M. has the effect for which I hope, it might not lead to an absolute fall in prices but it might lead to a smaller increase than otherwise would have occurred and a smaller increase than has occurred in other countries.
The last point which I wish to make on the issue of prices is that if we have reason to think that at any rate the direction in prices would be downwards, then we cannot neglect this Measure at this moment in the country's history. Whichever Government are in power, economic growth will be threatened by one thing alone—the possibility of a balance-of-payments crisis. The one thing which matters from the point of 613 view of the national economy is competitive prices, if this measure of abolition will have any effect, however minor, in bringing down our prices relative to prices abroad, then it could not possibly be neglected at the moment by any Government.
To make our position on this side of the House quite clear, I think that most of us, possibly with one or two exceptions, in general want the abolition of R. P. M. We concede, as has been conceded by the Government in other anti-monopoly legislation, that there may be particular cases in which an argument can be made the other way. Most of us believe that the net book agreement falls into the category of the exceptional case. It may be that the pharmaceutical case made by the hon. Member for Putney also falls into that category. Personally, I find it hard to make up my mind on the arguments. But I am prepared to concede that pharmaceutical goods may be an exceptional case in which it would do more harm than good if R. P. M. were abolished. In any event, the machinery has been provided in the Bill for the exceptional case.
But it is very important that we should realise that these are the exceptions and that over by far the greater part of the goods now subject to R. P. M. its abolition would do very little harm to any genuine interest in retailing and would do some good at least to the consumer.
§ 12. 42 p. m.
§ Mr. Gordon Matthews (Meriden)
I am very unhappy about the Bill because I consider that the hon. Member for Wednesbury (Mr. Stonehouse) is in too much of a hurry to destroy an old-established practice which covers a very wide and varied field. The hon. Member for Grimsby (Mr. Crosland) agreed that it cannot be abolished in a wholesale fashion such as the Bill envisages.
It is almost exactly 32 years ago since I first entered the retail trade. At that time, in 1932, we had just passed through an acute economic depression, and the company which I joined had made a net trading loss for the first time in its history. I shall never forget the effect that that had on my mind as I entered my first job in the trade. We were in the midst of a hectic era of cutthroat competition. Wages were very 614 low in the trade, and the position was very hard on the small shopkeeper. Our organisation was correspondingly inefficient as a result of all the economies which had had to be entered into.
Trading conditions have changed a lot since then, and one of the facts for which we must be grateful today is the fact that our economy is far more stable than it was between the wars. The Government are developing a much better control of the economy, and acute slumps and booms, which were almost expected between the wars, are no longer the order of the day. We have moved a long way forward, and we are still going forward to develop better means of controlling production and distribution. I suggest that the time has not yet come to abolish resale price maintenance, although in time it might disappear.
Some of us feel that methods of distribution are perhaps changing almost too rapidly in some ways and that there is a danger inside the trade, among the personnel who serve behind the counter, of the trade losing its soul and of people losing their willingness to give personal service and a wide choice. I suggest that this has already happened to a very great extent in the United States. In this country the self-service stores and supermarkets are depriving their customers of many of their varieties of choice, and certainly depriving them of quite a lot of personal service which has been given in so many small and larger shops in this country and also of the friendly advice which is so much appreciated by so many customers.
§ Mr. Matthews
I accept that point of view in respect of possibly the majority of customers, but there are a large number of customers who have special needs and who need the advice of some of these small shopkeepers.
We have also to consider the more remote areas of Wales and the North of 615 Scotland, for example, where retail distribution is a problem because there is not the same expectation of turnover. Most hon. Members opposite appreciate the need to keep uniformity of prices throughout the country. It is desirable, is it not, that prices should be the same in a shop in the North of Scotland as they are in Oxford Street?
§ Mr. Matthews
This is the principle which many hon. Members opposite advocate in respect of postal charges, electricity charges, railway fares and many other things. This is the principle constantly advocated by hon. Members opposite—that we should keep prices as uniform as possible.
§ Mr. Proudfoot
My hon. Friend has made a point about supermarkets in America as if they were all owned by chains. That is not true. The independent trader in America has a greater share of the market than he has here; he has 61 per cent. in America and only 50 per cent. here.
§ Mr. Matthews
But there are far fewer small independent shopkeepers in the United States than in this country—and it is the small shopkeeper I am most keen to defend this afternoon.
These questions of the need for advice and assistance in this way are, I suggest, very important questions, because shopping can be made a great pleasure to many a housewife. It is certainly a very big feature of her daily life, and, incidentally, it can be quite educational. For example, there is the question of the choice of a good book. I understand that in the United States good book shops do not exist, largely because of the abandonment of resale price maintenance. In this country we have been wiser in agreeing to the net books agreement, and this was upheld by the Restrictive Practices Court in 1962.
Similarly with musical instruments, gramophone records, and such things. We need shops which will display a wide range of gramophone records. Fortunately, these still exist in Britain, thanks to resale price maintenance. In the United States this trade has gone to pieces. There are few dealers left who can offer a proper selection of 616 gramophone records, despite the fact that they have there what they call their "fair" trade in identified products, which is still recognised by the Federal Government.
We can also learn from Canada's experience. Canada abolished resale price maintenance in 1951. Since then prices have risen. This point was questioned earlier. I want to quote from the book "Fair Trade" by P. W. S. Andrews and Frank A. Friday. They quote statistics which have been produced by the Dominion Bureau of Statistics. These were collected from general stores one year and from independent shops the next year. This statement appears at the bottom of page 38:…there is no evidence at all of a general downward pressure on gross margins after resale price maintenance was prohibited in Canada. In fact, margins have risen…the gross margin in Canada increased on the average by about 1.9 per cent. of the retail price compared with about 1.7 per cent. in the United Kingdom.The detailed list provided shows some astonishing increases, notably in women's clothing. The retail gross margin on women's clothing supplied by general stores rose on an average from 28.3 per cent. to 34.4 per cent, between 1950–51 and 1956–57. The retail gross margin on furniture supplied by general stores rose from 30.7 per cent. to 36.7 per cent. The list shows that the prices of only two items were reduced.
Resale price maintenance is still a very important factor in our attempts to achieve and maintain a stable economy. The impression I gained in the United States, where I mixed with quite a few people, was that they envy us the stability we have. Other countries still appreciate the general quality of British products. This is due very largely to the control of excessive price cutting and the strength that it gives manufacturers to maintain the quality of their goods and services.
Most American citizens appreciate British chocolates and confectionery, for instance; but do they realise, or do we realise, that the profit margin on chocolates and confectionery in this country is the lowest in the world? There are 2, 000 lines. It would be utterly impossible from the shopkeeper's 617 point of view if there were not a standard price for those 2, 000 lines. Many Americans are astonished at the comprehensiveness of the British National Health Service; but do they realise that resale price maintenance on pharmaceutical products is vital for the economic working of the Service? My hon. Friend the Member for Putney (Sir H. Linstead) dealt with this aspect adequately, and there is nothing more I need say.
I could go on to talk about cigarettes, tobacco, tea, hard fibre cordage, rubber footwear, and metal windows and doors. All these items have been examined by the Monopolies Commission during the last eight years. None of the arrangements has been found to be against the public interest. The central issue is whether prices are higher than they need be and whether they will fall if resale price maintenance is abolished. In my opinion, after the present stunting has died down, prices will settle down, possibly in many cases to a higher margin than is in operation at present.
§ Mr. A. E. Oram (East Ham, South)
If this is so, why all the worry about the small trader disappearing?
§ Mr. Matthews
Because I believe that most of the stunting is coming from the bigger organisations. Having eliminated some of their competition, they will take the opportunity to return to a higher margin.
§ Mr. Matthews
We all want shop workers to have a better wage. They are not overpaid by comparison with other occupations.
I believe in competition. Probably we all do. It is the best check that we have against waste and extravagance. It is the best spur to greater efficiency. In my opinion, competition will not be intensified by the abolition of resale price maintenance. The table of retail profit margins printed on the front page of yesterday's Financial Times showed that the highest stated profit rates were for a woman's suit, which was 45 per cent. to 55 per cent. on cost, and for a man's suit, which was 40 per cent. 618 to 50 per cent. on cost. Both these items are subject to fashion and the consequent losses which occur from time to time when there is a change of fashion.
These are maximum rates and are more or less in line with the average realised by most department stores. The fact that these are maximum and that the majority of the prices quoted in the Financial Times were below these leads me to suppose that the majority of price maintained profit rates are below the average. They are certainly below the average realised in a supermarket, which works on an even higher gross margin of profit than department stores, because of the need to break even and clear higher overhead expenses. I suggest that the fact that supermarkets are able to charge lower prices is due more to their great buying power than to the effects of lower gross profit margins.
In case the House thinks that 50 per cent. on cost is a very excessive profit rate, I point out that 50 per cent. on cost is the same as 33⅓ per cent. on the selling price.
§ Mr. Hale
Do I understand that the hon. Gentleman is not in favour of wholesale price maintenance as against the supermarkets? He advances the argument that supermarkets are able, because they can buy in bulk, to get things cheaper, and it is to the advantage of the public that they should buy cheaper. What happens to the rest of the argument?
§ Mr. Matthews
The reason they sell cheaper is because of their greater bargaining power. It is not because they work on a lower profit margin. In fact, if my information is correct, they work on a slightly higher rate of profit.
Finally, I want to make a few remarks about the percentage question. Fifty per cent. on cost, as referred to in the Financial Times statement, is the equivalent of 33⅓ per cent. on selling price. When overhead expenses are deducted, 619 this is equivalent to a net profit on sales of about 6½ per cent. I suggest that 6½ per cent. net profit provides little room for extra discounts. I also suggest that a case has not been made out for the wholesale abolition of resale price maintenance.
§ 1.0 p.m.
§ Mr. Leslie Hale (Oldham, West)
I want to say at once, lest I regret it later, that I intend to vote for the Second Reading of this Bill—that is, unless I succeed in talking myself out of doing so in the next few minutes. My hon. Friend the Member for Wednesbury (Mr. Stonehouse) moved the Measure most effectively and any criticism to the effect that my hon. Friend has rushed into this is unjust, for he has been talking about it since he came to the House; while the Government started to think about it only last Tuesday and then made an announcement within 24 hours. My hon. Friend made a fair and able case for saying that this is an effort to reduce the cost of living.
I believe that our cost of living would have been reduced of its own accord automatically over the years but for the legislation passed by this House and the financial policy of the Government. It has been relatively reduced in most other comparable countries. Only in Britain has it remained high. That is about the only exception I would make to some of the tentative disagreements I have with some of the remarks of my hon. Friend the Member for Wednesbury, who returned from Strasbourg where he was most impressed by the prevailing efficiency.
I have a discursive mind and I must watch myself carefully on a Friday because of the rules of order. However, the Council of Europe has just agreed to pay £10,000 a year, tax free, to an Englishman to run its affairs—and I never regarded this gentleman as an efficiency expert during my limited acquaintance with him in this House.
When we talk about the French effort to control retail trading I usually think—particularly since I go to Paris at least once a year; more often if the missus lets me—that I have never recalled being in Paris in the last 10 years when there has not been an argument 620 going on between the French Government and the butchers. These arguments are usually resolved, the butchers putting up the price of their meat by a franc the week before promising to decrease it by only half a franc—and the best cuts go under the counter—while the French President and Government look as if they had won a major battle, and one anticipates the appearance of Colombey-des-Trois-Églises.
I concede, as my hon. Friend the Member for Wednesbury commented, that the Continentals generally regard us as being inefficient. I am in favour of a modest amount of inefficiency. I do not want to equip Brendan Behan or the late Dylan Thomas with computers but to preserve the virtues of individuality. I confess to being sufficiently conservative not to want any Measure ever to pass through Parliament without there being a good deal of examination of it. My experience of having been in the House for 18 years leads me to believe that we would be better off if 95 per cent. of the Acts we have passed were never passed.
I do not want to create a new offence or to put anyone in prison if I can help it. The trouble with putting a fellow in prison is that for every bad man—that is, if he is bad; and he is frequently not bad—in prison one must put a good man in with him to look after him. This must be followed later by the bad man being let out, at which point nobody has yet found out what to do with him. This is an important matter which needs a great deal of consideration. In many respects it is rather more important than the one we are discussing.
I have this further reservation. It would be unfortunate if great expectations were aroused in the minds of the public as to the consequences of this Bill because it still does not apply to many vital things which cannot be made subject to price maintenance. As my hon. Friend the Member for Grimsby (Mr. Crosland) said so ably in his interesting speech—and he always speaks ably, particularly on this sort of subject because he speaks as an economist and economists are supposed to believe in efficiency—he can get discounts. Another of my hon. Friends asked why he could not buy a washing machine at 621 12½ per cent. off, and went on to say that he had.
The point is that price maintenance has never really applied to the richer section of the community. I am told—and I apologise if this is not true—that the London County Council's staff have their own buying organisation through which they are able to acquire goods at 20 per cent. to 30 per cent. off. There are Civil Service, military and other similar buying organisations. Discount houses have been established, particularly in the south of England, and I believe that one is in association with the co-operative society, which gives substantial discounts, this rather destroying some of the observations of the hon. Member for Meriden (Mr. Matthews) about the high cost of running supermarkets. These organisations, however, are available to people with motor cars in the main since they invariably have parking facilities and are located outside towns and thus people with their own transport find them more readily accessible.
Let me say at once that I do not think that the Bill will in any way benefit the co-operative society. Hon. Members opposite used to make the case that the co-operative society—when they regarded it as a dirty word—cut prices as a result of the "divi" and that people shopped there because they received the "divi". This was substantially true. Good luck to the society for doing that. The trouble was that hon. Members who made that criticism never had regard to the sort of social services which the co-operative society performs. In Oldham, for example, practically all the meeting places—dance halls, cheaper cafés and so on—are provided by the co-operative society out of its trading activities.
I thought that one hon. Member was rather unfair earlier when he referred to an alleged observation of Napoleon Bonaparte. I do not think that Napoleon Bonaparte was intending to refer to the Home and Colonial Stores. I concede, too, with my hon. Friend the Member for Wednesbury that we do not have the great efficiency of the Germans. They are able to plan an operation in such massive detail and with such minute figures that everything is foreseen—except its complete failure 622 in the first five minutes due to the unpredictability of human nature or the inevitability of the unexpected. We have organisations, like the Treasury, which go into almost everything about an article which will take five years and cost hundreds of millions of pounds to make—except that they forget to ask the price. I suppose that these are symptoms of the present society.
I am rather worried about the mechanisation of life, and I do not like it. I am worried when I drive into London and see the enormous buildings which house the teeming millions of shorthand-typists who are tapping out millions of the same words, with each series of words sounding very much the same—"Dear Sir, I am instructed to reply to yours of the 29th ultimo, contents of which have been noted. "This is going on on a massive scale. In my constituency we can make computers which can solve a chess problem in twice the time it takes me to solve it. We are mechanising everything. We are seeing international companies becoming international societies. We are seeing firms like Shell Mex, the Steel Corporation of America and even the United Food Company and other such apparently humble organisations as Pepsi Cola and Coca Cola able almost to rival small governments, exercise a certain degree of political pressure and, as a result, it seems that the human being has little service to effect. I want to plead for some inefficiency.
§ Mr. Matthews rose—
§ Mr. Matthews
Would not the hon. Member agree, as a result of what he has been saying, that we should stand up for the small man who gives personal service?
§ Mr. Hale
That is what I am saying. If I lapse into fact I shall be relying on the recently-published book by Mr. Leonard Harris, of Browns of Chester, one of the most reputable retail organisations, compiled in conjunction with Mass Observation Limited, of which I have been a director for the last 14 years without receiving a bob for my services or even any trading stamps. The book presents a series of interesting 623 surveys which were conducted by Mass Observation of various units and areas. One of the troubles about doing this is that it is almost impossible to ask the right questions simply because if one asks the right questions people will not answer them. In these surveys, however, a number of important questions were asked and we get a useful and informative classification of the answers.
We find that one of the overwhelming reasons for using a shop in this country is proximity. I read a remarkable article in The Times yesterday. I admire The Times. It is a wonderful example of efficiency, apart from the fact that it pays too little attention to my own books and much more attention to my rival author, Miss Marilyn Rice-Davies, but it is now, at the age of 170, showing signs of humour and culture.
The Times said we must have efficiency—my hon. Friend the Member for Grimsby said we must have efficiency—but who on earth wants an efficient village shop? We do not go to the village shop to spend a lot of money. We go because we have very little to spend. We go to ask the village shopkeeper what will win the 3.30, what he thinks of the Government—although we know that already—and how things are going. People go to that shop because they are lonely. It is a friendly place. They do not want someone to say to them, "Can I serve you, sir? Can I show you this? This is the latest thing." They are frightened of that. That is what the survey shows. I do not know—I am just a simple soul. If I go to a second-hand book shop and someone asks, "Can I show you a book?" I say "No," and walk out. Of course I do. I do not go to that second-hand bookshop to buy books—I go to browse on books.
What is to happen to the village shop under this scheme? That little village shop is about all that is left—the wholesalers have grabbed everything else. I do not want to introduce polemics—although it is General Election year—but hon. Members opposite should remember that when I stood for Parliament in 1945 and 1950 we were all being attacked by the Tories as the men who would wipe out the village shop- 624 keeper. It was said that my friends and I were to nationalise it all and have peers galore controlling every back-Street off-licence. Then the Tories handed them over one by one to the wolves. I do not precisely agree with the hon. Member for Tynemouth (Dame Irene Ward) about her recipe for celestial pie, but I am certainly in favour of what is behind her observations. The Tory wolves introduced restriction of credit which was an attack on every small business. Some of us saw it working—saw the banks coming in. If anyone wants to find the real wolf, let him look for the bank manager who is afraid of losing his own job. There cannot be any pity there—he has to carry out instructions. I found myself working for security of tenure for the village shopkeepers, and trying to get a few benefits conferred on them.
The Tories should be ashamed of their actions. They have talked about being the apostles of private enterprise, yet they have shoved the smaller people into the hands of the great wholesalers and the great combines. When I go shopping at one of my local shops and ask for a tin of "Skippers" in tomato sauce, I am told that I cannot have "Skippers"in tomato sauce but only in olive oil. Why is that? The reason is that what I want is not in the wholesaler's printed list. The wholesaler has a list of about 2, 000 printed items, and the shopkeeper shops by ticking off the items he wants. If something is not on that list, the shopkeeper cannot get it. The wholesaler will not muck about just to get "Skippers" in tomato sauce, although the multiple storekeeper in the same area stocks them. It is said that cigarettes will be cheaper—more lung cancer, and everyone better off, but is it true?
God bless the small shopkeepers. In the days between the wars, people went to the small shop to try to get things a little cheaper, if possible—and could get what they wanted from the small shop, in any case. They often went there to get a bit of "tick" as well. I am not strongly in favour of extended credit, but there were times between the wars when the kindness and generosity of the small shopkeeper meant a great deal to the community. But we are shoving him out of business. The Government have jumped in to 625 adopt my hon. Friend's proposals without even considering them. My hon. Friend at least made out a strong, reasoned and factual case for a generality of public benefit as a result of the passing of his Measure—
§ Mr. Arthur Holt (Bolton, West)
Will the hon. Gentleman say why, if the small shopkeepers provide all these very desirable services—and I go with him on that—he should think that they will be driven out of business merely because they are given an extra freedom in future to decide for themselves at what price they sell their goods?
§ Mr. Hale
The whole of this debate has proceeded on the assumption that the big shop is more expensive to run. That is not true. The fact is that in the large stores 6.2 per cent. of turnover goes in wage costs, and one of their major objects is to reduce the wage costs. A small shopkeeper has to make a profit adequate to keep one individual going—he has no staff—and the small shopkeeper is being stopped from putting up prices. The permission to sell at lower prices, will result in brutal competition. I am always astonished at the Liberal intervention, because it is invariably illiberal.
We have lived through days when the big combines and chains—the Home and Colonial, Melias, and so on—came into towns they had previously never heard of, pushed themselves into the main street of a village, and embarked on a course of temporary competition designed to put the others out of business. We have seen it happen. They cut their prices until their competitors close down, then up go their prices again until someone else comes in. That is the sort of competition that is brutal and unnecessary, and against which the House should be prepared to protect people.
There are many reasons for using various shops and one is variety. My hon. Friend does not do much shopping. I think that ground coffee is essential to me, and if I go to a special shop to get it I might as well get other things at the same time. That is why the village shop is up against competition it cannot face—it cannot maintain the complete variety of goods a supermarket can. That is what it is up against already. It has to win on in- 626 dividuality and proximity, the courtesy and consideration of the staff, being a little easy-going and not frightening customers off, and not looking snooty when asked for a cheaper article, and they are entitled to all the encouragement they can get—
§ Mr. Proudfoot
The hon. Gentleman says that the small shopkeepers need protection. Does he realise that the small shopkeeper he talks about has evolved his own defence, and is now doing better than he has done for many years by the method of voluntary chains?
§ Mr. Hale
I do not accept what the hon. Gentleman says. I do not know his constituency, and I may very well be wrong, but what he says smacks of the Metropolitan mind. —[Hon. Members: "Cleveland. "] There it is—we have both sides. There they have the hills and the towns and the North-East countryside—he also has problems to face at the election. Nevertheless, we are rather apt to think in terms of north London and south London, and not in terms of Cumberland or Caithness or Sutherland—lonely areas. It is true that there the village shop is not exposed to competition—the supermarket cannot make a go of it.
What are the methods being used today? They take the form of stamp trading on terms that mean that the grocer who is virtually forced by this sort of competition to go in for it has to guarantee a payment of 2 per cent. or 3 per cent. of his gross turnover for the stamps and, according to the computations of statisticians, in order to make the stamps worthwhile he must increase his turnover by 15 per cent. He has to do that, but people are not buying more tins of bully-beef or tins of salmon; the turnover has to come from someone else, and the someone else is the small shopkeeper, who does not have a turnover big enough to make stamps worth while.
This is why I have intervened in the debate only to say that whilst I will vote for the Second Reading of a Measure designed to reduce the cost of living, I hope that if the Bill goes to Committee we shall consider its implications in further detail and try to provide some protection for the individual trader who belongs to the town, who is of the 627 roots or the town, just as is a co-operative society. The great co-operative society in Oldham, for example, draws its members from the town. It has the support and close association of the workers. The social welfare and individuality of the town are involved. This does not apply to the multiple stores, however eminent and decent their people may be. No one can say that when A. B. C. comes to Oldham, however, efficient it may be, it comes there with the interests of Oldham at heart.
§ 1. 22 p. m.
§ Mr. Philip Goodhart (Beckenham)
The hon. Member for Oldham, West (Mr. Hale) said that a number of fine electronic computers are made in his constituency. I notice that Senator Barry Goldwater in the United States has recently hired a computer to test the relevance of his political judgments and to try and make sure that he does not contradict himself in the course of seeking the Republican Presidential nomination. If the speech of the hon. Member for Oldham, West were fed into an electronic computer I think that the computer would say that he should vote against this Bill rather than in favour of it.
Three years ago a Conservative Party policy committee on consumer protection, of which I have the honour to be chairman, produced a Conservative Party Political Centre pamphlet which said:A practice which limits price competition needs constant justification not only in general but in each particular case.This continues to be my view and I am delighted to see that the Government now also accept it.
What we recognise and what the Government recognise, and what it seems to me the authors of this Bill do not take into account, is that various industries and branches of the retail trade have vastly different problems and cannot sensibly be lumped together in one great heap. It is true that one small section of the Bill refers to exceptions, indeed the weakness of that section supports the suspicion that the authors of the Bill believe that almost all fields should be treated alike. I do not think that it is sensible to prescribe the same treatment to tailor shops, to chemists, to garages and to bookshops.
628 As anyone who has looked at the last Report of the Monopolies Commission would know, a strong case can be made out that resale price maintenance for electrical equipment for cars is not in the public interest. In the same way, I believe that a strong case has been made out that the abolition of resale price maintenance in book shops and chemists' shops would be contrary to the public interest. There are a large number of other cases where I believe the argument is extremely finely drawn. Like the hon. Member for Oldham, West, I do not look forward to the day when all the retail trade of the country is in the hands of a few great multiple stores. This would be disastrous.
I notice that the hon. Member for Wednesbury (Mr. Stonehouse) did not cite the example of retail trade in the United States when he moved the Second Reading. Recently a friend of mine standing by the counter of one of these multiple stores met a woman coming out to pay for her purchases which consisted of a tube of vitamin pills, six English muffins and a paper-back copy of Kafka's plays. This is an extraordinarily diverse range of goods to find in one room of one shop, but this convenience has its other side. As has been said today, because of the pressure of this sort of trading specialist bookshops in the United States have largely disappeared. It would be disastrous if this were allowed to happen in this country.
The Bill recognises this fact in that it makes the almost sole exception of the book agreement. But this applies to other fields. Photographic equipment comes to my mind because one of the most prominent photographic retailers in the country lives in my constituency. It is perfectly arguable that the abolition of resale price maintenance would lead to a substantial reduction in the number of photographic specialists, which could easily result in a much worse service for the public.
I am glad that the Government's proposals are far more selective than those put forward in the Bill. On Wednesday my right hon. Friend the President of the Board of Trade told the House on behalf of the Government, thatThey have reached the conclusion that resale price maintenance should be presumed to be against the public interest unless in any 629 particular case it is proved to the contrary to the satisfaction of a judicial tribunal"—[OFFICIAL REPORT, 15th January, 1964; Vol. 687, c. 225.]I agree with the Government that in many forms resale price maintenance can be presumed to be against the public interest, but I am not happy about the question of proof. I admit that I do not attach the importance to it that some of my hon. Friends do.
In this country before a criminal court a man is presumed to be innocent of murdering his wife, for example, unless it is proved to the contrary, whereas in France in front of a criminal court a man can be presumed to be guilty of murdering his wife unless he can prove himself innocent. This may sound a tremendously important distinction, but I believe that the number of instances in which this affects the outcome is very small indeed. I do not believe that the change of emphasis on the necessity to prove a case would be of such importance as some people are inclined to argue, but I believe that we should change that emphasis.
The Times said in a leading article on Thursday:many of those opposing abolition have been very vocal. Now they will have to be convincing also.I agree wholeheartedly. But I also believe that those who propose abolition have been very vocal and that they should be just as convincing in front of a tribunal as those who oppose it. If resale price maintenance is as much against the public interest as some of those who have spoken have made out, surely it could be easy enough to carry this case and to say that the opposite line would lead to unnecessary delay.
But I do not believe that the position of the retail trade is so critical that one has to rush forward into what will, after all, be a drastic change without careful consideration before the judicial tribunal proposed by the Government but regrettably not mentioned in this Bill. Because of what I believe to be the gross weakness of this Measure with regard to exemptions, I shall certainly not vote in favour of it.
§ 1. 32 p. m.
§ Mr. A. E. Oram (East Ham, South)
The hon. Member for Beckenham (Mr. Goodhart)—I missed the opening of his 630 speech—seemed to be arguing in favour of the approach which the Secretary of State for Industry made on Wednesday but against this Bill. I would not make a great deal about the choice between the two. Indeed, my hon. Friend the Member for Wednesbury (Mr. Stonehouse) indicated that if his Bill were given a Second Reading he would be open to persuasion in Committee to include some machinery for review of particular cases more like that envisaged by the Secretary of State. Therefore, I do not think there is a very great deal in this, and I think that the hon. Member for Beckenham might well reconsider his decision not to vote for the Bill.
I congratulate my hon. Friend the Member for Wednesbury, first, on his good fortune in the Ballot, which we all envy; secondly, on his choice of subject; and thirdly, and perhaps more especially, on the effect that his good luck and choice of subject have had on the Government in making them move where they would have wished not to move. This is the second response of this kind that the Government have made to Private Members' Bills this Session. In the Gracious Speech there was no mention of a hire purchase Bill, but Lord Peddie in another place brought forward a Private Member's Bill on this subject and almost at once got a response from the Government, and there is now a Bill dealing with hire purchase proceeding through the other place. Also, a private Member has brought forward this Bill, and now, in great haste, and in the midst of great controversy among his supporters, the Minister has promised that a Bill will be forthcoming.
Obviously, the Opposition welcome these responses to the initiatives of private Members, but it would be far better in these important matters of consumer protection and public interest if the Government had had the strength of mind to take their own initiative. Although the Government can be accused of having rushed on this subject this week, they have certainly not lacked advice over very many years. Indeed, the Board of Trade has in its pigeonholes what I would expect to be an extremely valuable Report for hon. Members to have been able to consult before the debate, and I think we ought to have an opportunity to consult it 631 before the debate that we shall have on the White Paper or the Bill that we are promised.
Turning to my hon. Friend's Bill, the people who in the main will have their legal powers affected are the manufacturers, because it is they who at the moment receive powers under Section 25 of the 1956 Act which the Bill proposes to repeal. In any arguments about resale price maintenance, it is usually the case of the manufacturers which is put forward with most enthusiasm and with most—I will not say "with most conviction"—hope of conviction by those who advocate resale price maintenance—the arguments about loss leaders, consequent loss of good will, lessening of quality, and so on.
But it seems to me evident both from the debate as it has proceeded so far and certainly from the correspondence which most hon. Members will have received from traders' organisations, local chambers of trade and national associations of traders that the chief beneficiaries of resale price maintenance and the people most disturbed in the present situation are retailers, but not retailers as a whole by any means, only certain sections of them, some of whose cases have already been deployed in the debate.
Be it a manufacturers' case or a retailers' case so far as the benefits from resale price maintenance are concerned, I think there is no doubt whatever that the victims of resale price maintenance are the consumers. It is they who are forced to pay prices higher than would otherwise prevail in all probability. These are not things which can be asserted with absolute certainty, but I would maintain that in logic and so far as the evidence goes, resale price maintenance means the maintenance of higher prices to the consumer than would prevail if resale price maintenance were made illegal. It is either that, or the consumer is forced to accept and pay for services, after-sales services or services during the course of purchasing, which he may not want. The point has been made in relation to discount houses and the like. Because of the uniform prices maintained by manufacturers, this is the only way in which retailers can compete with one another, competing with more and more gim- 632 micks and services which a discriminating consumer might well wish to avoid.
Consumers are of many kinds—they are, after all, the whole population—with many tastes and many different preferences. Some prefer the luxury of a West End departmental store. Some—and this is increasingly the case-prefer the brisk efficiency of the supermarket. In these busier days people have less time in which to do shopping and like to be able to go into self-service stores, comprehensive in scope, and get what they want quickly.
Some—and thirteen million have indicated their preference in this respect—prefer the comprehensive services, the generally high and reliable quality and the dividend which they get at co-operative stores. Many others prefer the personal service of the shop around the corner or of the specialist shop or the village store, whose proprietor knows personally most of his customers, has served them for a long time and knows the details of their requirements.
Most of us prefer one kind of shop at one time for one purpose and another kind of shop at another time for another purpose. Most consumers have mixed preferences in this respect. Some of us on this side of the House, and many hundreds of thousands of people outside, are co-operators by conviction. We make it a matter of principle as well as of habit to do almost all our shopping at co-operative stores. But we do not expect the thirteen million general membership of the Movement to behave in this way. Nor do we expect shoppers of other kinds to shop always in the village store or in the supermarket or in any particular form of shop.
What is needed in distribution is adequate and efficient provision of all kinds of distributive outlets. There is a case for the small trader. He does a very valuable service to a particular section of the community and it would be unwelcome if any legislation led to the elimination of efficient small retailers. I do not believe that this Bill would have such an effect and that is why I am perfectly prepared to support it.
But while it is necessary to have this range of different kinds of shops and services there is one thing which should be common to all. They should be 633 reasonably efficient in their use of manpower and capital resources. If they are inefficient in any of these or in any other capacity, they should not expect to survive in an efficient, modern, competitive society.
I am not one of those who tend, as some hon. Members do in taxation debates, to dismiss the whole of distribution as in some sense rather an unnecessary operation or at least an unproductive one. Some argue that there is virtue in production but less in distribution. I have often pointed out that the selling and distribution of goods is as important a part of the process as manufacture. That proposition is not always accepted in taxation matters, however.
But, having said that, I would add that there is a case for asking whether distribution is as efficient as it should be. I believe that there are probably far too many shops for the purpose of getting goods efficiently into the homes. I believe that there is evidence that too much manpower is used in the distributive process. I was looking at the recently published Census of Distribution, which rather tends to point to this being so. I am speaking from memory, but if it is correct, over the last ten years the number of people employed in distribution has risen by about 200, 000. I am not convinced that this has been necessary.
There are still many thousands of one-man units in distribution with a gross turnover of less than £1, 000 a year. If each has a gross turnover of only £20 a week I cannot believe that that is evidence that such units are run in anything like an efficient manner.
§ Mr. John H. Osborn (Sheffield, Hallam)
Would not the hon. Gentleman agree that a large number of such shops are run as a sideline, practically in people's homes, as additional outlets and forming additional wages?
§ Mr. Oram
That may be so, but there is a case for a much closer examination of these figures to see whether these units are the best and most efficient use of manpower in the country. But, of course, it is not just among small traders that we should look for inefficiency.
I have indicated my close interest in the Co-operative movement. A few years ago, Mr. Hugh Gaitskell, my hon. Friend the Member for Grimsby (Mr. Crosland), and other distinguished colleagues produced an admirably clear document analysing the problems of the movement, and we were rightly told that we had too many too—small societies for a fully efficient organisation or co-operative trade. Though the supermarket these days tends to be looked upon as the efficient unit, I am not sure that this will necessarily in the long run stand up to examination.
It may well be that, as the years go by, it will found that too much capital has been plunged too suddenly into many of these supermarkets and that, from the point of view of the use of capital, they are just as inefficient as the small traders I lave been criticising from another point of view. All I am saying is that, throughout the whole range of distribution, there is an important case for at least asking whether efficiency is there and certainly for judging the sort of issues we are attempting to judge today by that standard of efficiency.
If these signs of inefficiency are found, wherever they are, one thing is certain: this country, in its position in the world, cannot afford inefficiency anywhere. Whether it be in the one man shop, the co-operative store, the supermarket or in manufacturing industry, we have to base our decisions on the achievement of efficiency.
It is because I believe that the abolition of resale price maintenance, either by this Bill or—although less satisfactorily—by the method outlined by the Secretary of State last Wednesday, would be in the interests of the efficiency of this country that I support it.
All forms of distribution have to stand the test of whether they are providing a real service for which their customers are prepared to pay and not relying on their inefficiencies to be concealed or bolstered up by any restrictive practices, 635 such as resale price maintenance. People should have the full opportunity to choose services, discount houses, superlative West End stores, or the one-man shop, and the consumer should not be deprived of any efficiencies or valuable methods of distribution which might be available.
There is an aspect of resale price maintenance which particularly affects the Co-operative movement. Our dividend is rightly regarded as a discount. It is a perfectly legitimate trading method that consumers should get together to trade in shops owned not by an individual proprietor, but by the consumer members engaged in mutual trade and selling goods at competitive market prices and making a surplus which at the end of the trading period is divided according to the purchases which the members have made. This is a deferred rebate, a deferred discount, and no manufacturer should have the right to debar co-operative societies from giving any such discount on any commodity. At the moment, a manufacturer can do so. He can take the society to court and prevent it from paying a dividend on his product. It is because the Bill will prevent that pernicious practice that I give it my wholehearted support.
I believe that resale price maintenance can be made illegal without any of the terrible consequences of which we have been told through the post and by speeches from hon. Members opposite. If small traders are efficient and give a proper service which their customers want, they are a welcome element in the community and they will survive. But if they or any other part of our economy are inefficient, they will not survive and they ought not to survive. The people who will benefit from the Bill are the consumers and the efficient retailers, and it is on their behalf that the House should legislate.
§ 1. 53 p. m.
§ Sir Richard Glyn (Dorset, North)
I will not take up the time of the House by repeating arguments already adduced, but I should like shortly to refer to the suggestion that if resale price maintenance is abolished efficient small traders will remain because they pro- 636 vide a service. The position in heavily populated areas and towns is entirely different from that in scattered country areas, such as that which I represent. The amount of business which a small shopkeeper can do in North Dorset, or any other country district, depends less on his efficiency than on his geographical position. Isolated shops—sometimes we have only one shop covering a certain range of goods in each village—have the volume of their business limited by the number of customers within reach. In many cases their margin of profit is decided by resale price maintenance.
If resale price maintenance is abolished and there is a general price cut throughout the country, these traders will be in difficulty. Anyone who does not agree should refer to the London evening newspapers of yesterday. It is not often that both the Evening News and the Evening Standard devote the whole of their editorials to the same subject. Yesterday they did. The subject was the effect of the abolition of resale price maintenance, particularly on the small traders.
I would not dream of reading out the whole of both editorials. The Evening Standard spoke of "virtually squeezing small shopkeepers out of business" and the headline in the Evening News was, "Little man in peril". This editorial said—and this was interesting in view of the number of times that hon. Members opposite have quoted Tesco—that it did not agree with Mr. Jack Cohen, chairman of Tesco, that the small shopkeeper need not suffer badly if he was efficient. It pointed out that he would suffer badly, however efficient, for the sort of reasons which I have put forward.
There is a strong political background to the suggestion that resale price maintenance should be absolutely and suddenly abolished. I am glad to see that we now have a member of the Liberal Party with us again. He will tell me whether the Press was correct in reporting that last year's Liberal Party Assembly refused an amendment to a motion to abolish resale price maintenance. The amendment would have permitted it in cases where it could have been proved to be in the national interest. The decision was that it should be abolished even in those cases.
637 I want to refer to one aspect of this highly controversial subject which seems to have been somewhat overlooked. Hon. Members opposite have talked about a few inefficient traders and shops going out of business, but no one has referred to the fact that, according to the Board of Trade list, there were 1, 120, 000 retail shops in 1961, between them employing more than 5 million people, about three-quarters of them full time. It follows from that that the average number of employees is between three and four per shop.
The average retail shop is not a large organisation. The Board of Trade throws further light on this by showing the number of people engaged in the retail business and showing the number of people engaged in shops where a total of less than three people were engaged, not employed—which means the proprietor and one or two assistants. There were more than 1,100,000 of these people, which means that there must be more than 500,000 such shops.
These are very small shops worked by the proprietor perhaps assisted by a relative or by one employee who may or may not be full time. It is shops of this kind of which I speak. Throughout the country they give most useful service to the community and if they are forced out of business, as yesterday's evening newspapers made clear may happen, it is the community who will suffer. There would then be no local supplier in many villages and people would be forced, as in some parts of America, to travel a long way to get what they want.
Something has been said about resale price maintenance in America. The position mere is complicated because some states permit R. P. M. which they call fair trading while others do not. I was recently speaking to a friend who has just returned from America and who told me of the plight of the American customer in some of the states which did not permit fair trading. I very much hope that nothing will ever be done which will allow a similar situation to arise here.
It happened there because the huge stores and the vast supermarkets broke price agreements as soon as they were legally allowed to. They cut prices. They deliberately sold at a loss and 638 thereby attracted customers, but there was nothing of the Father Christmas spirit attached to it. They were not doing it out of a sense of charity. What they did was to lose money on purpose to attract custom, and thereby bankrupt their rivals. Many of their rivals were small traders, and when the big stores had established a local monopoly, prices went up again, and we have been given figures of the effect on Canadian prices, which I have no doubt came about very much in that way.
§ Mr. Roy Jenkins (Birmingham, Stechford)
As 75 per cent. of the retail trade in this country is not subject to resale price maintenance, if there is a desire on the part of large retail groups to behave in that way, to sell at a loss to bankrupt their competitors and then put prices up to a much higher level, why does it not go on in this country at the present time?
§ Sir Richard Glyn
Because we do not have big enough organisations and big enough chain stores to enable that to happen in present circumstances. If one studies some of our biggest chain stores, one finds that they are not much concerned with resale price maintenance— I am quoting Professor Yamey who has set himself up as an expert—because they manufacture many of the goods they supply. I am thinking of Marks and Spencers, and Woolworths. In these cases the question of resale price maintenance does not come into the picture at all. It is in the articles to which resale price maintenance applies that people would be particularly exposed to that sort of pressure.
I am thinking of the small shopkeeper and the capital cost of the stock which he finds it necessary to keep, for one reason or another. I put it that way, because chemists have been referred to. They must, by law, carry a wide range of drugs which may or may not be needed. Inspectors visit chemists' shops to make sure that they carry all the drugs. The capital cost of such drugs is considerable, and this greatly increases the capital tied up on a chemist's shelves. He has to pay interest 639 on the money invested in that capital. Reference has been made to high profits, but it must be realised that those are gross profits. Overheads have not been considered in the profit figures that we have been given today.
I propose to refer again to the two leading articles in these well informed evening London newspapers. They both devoted a lot of their space to this subject. They both said that the little man would be in difficulty, and I say again that in those states of America where fair trade has been abolished the small shopkeepers are in difficulties, and the customers, too, find difficulty in making some of their purchases. I have been assured that in some states in America it is almost impossible to buy a decent book because one has to go to a discount house, as it has been called. They stock only popular books. They do not sell any book which cannot be sold in enormous numbers. They keep only the most popular ones.
The same comment applies to gramophone records. Only the most popular records are kept, and there are no facilities for people to enjoy the cosy habit of listening to a good record before deciding whether to buy it. These things do not go on in States which operate resale price maintenance, for the simple reason that they cannot. It is in the states in which resale price maintenance has been abolished that these difficulties arise.
A friend of mine tells me that in America he has to drive over the border to his neighbouring state to get the facilities which one gets in any reasonable sized town here.
§ Mr. Roy Jenkins
I was careful to point out that there are several gramophone record shops in which there is no resale price maintenance but which provide booths for people to listen to records.
§ Sir Richard Glyn
The hon. Gentleman has not quite grasped my argument. These facilities may be provided if one wants to buy "pop" records, but if one wants to buy a record which one has heard played on the Third Programme, one finds that the shops do not stock it, for the simple reason that there is not a big enough demand.
640 These shops carry only the quickest selling and most profitable lines.
§ Mr. Roy Jenkins
The hon. Gentleman has shifted his ground. The point to which I replied specifically was the hon. Gentleman's clear statement that no facilities were provided for listening to gramophone records. I contradicted the hon. Gentleman on that point, and he then shifted his ground and tried to pretend that he was making another point. He was almost as wrong on the second point as I think he admitted he was on the first one.
§ Sir Richard Glyn
If the hon. Gentleman charges people with pretending, they will give way to him less readily. I said it was clear that in the state in which my informant lives one cannot enjoy this cosy amenity of listening to good gramophone records because they do not carry records for which they consider there is not a sufficient demand. One has to order the popular record one has heard on the radio. It is a question of "Take it or leave it". There are no facilities for selecting which recording one wants, because, generally, only the most popular recordings are kept in stock.
That is what happened in Canada, and it resulted in squeezing out the small shopkeeper, as was indicated in the Financial Times this morning. It is the difficulty caused to small retailers which has caused the matter to be re-examined, and I am genuinely afraid that the editors of the Evening Standard and the Evening News are right and justified in the fears they expressed yesterday. If this indiscriminate abolition of resale price maintenance, with the few inadequate safeguards in this Bill, ever became law, the small country shopkeeper would go to the wall. He would suffer, and his customers would suffer too because they would have to travel long distances to get the goods which he now supplies them.
For those reasons, I think that the whole Bill has been insufficiently considered. We have heard about the difficulties which may arise because of the inequality between the position in those firms and industries which have been approved by the Monopolies Commission, and those which have not been considered by it. This is a very serious 641 factor, and in the circumstances I could not possibly support the Bill.
§ 2. 8 p. m.
§ Mr. Arthur Holt (Bolton, West)
I am in favour of abolition of resale price maintenance. I agree with what the hon. Member for Grimsby (Mr. Crosland) said about the benefits which will accrue from such a policy. It is very difficult to keep this kind of debate on an even keel. There are people who tend to exaggerate the benefits that would come from the abolition of resale price maintenance, and there are others who exaggerate the disruption that will be caused. I think that the advantage is marginally in favour of both the customer and the economy as a whole, but it is, nevertheless, a desirable margin and one which we should endeavour to achieve.
I become more reinforced in my view about this when I listen to the arguments of those who are in favour of the retention of resale price maintenance than I am necessarily more confirmed in my view when I hear the arguments of some of those who are in favour of its abolition. The arguments that we have heard from some hon. Gentlemen opposite are not worth anything.
For instance, the hon. Member for Putney (Sir H. Linstead) said that the pharmaceutical industry could not survive without selling products which had nothing to do with the supply of prescriptions and products immediately related to health matters. So what? The hon. Member for Dorset, North (Sir Richard Glyn) referred to the problems of the chemists, but he did not say anything about their advantages. He talked about the disadvantage of their having to stock certain drugs which they might not turn over very often, but I would have thought that chemists have a very great advantage in that hundreds of thousands of people, day in and day out throughout every year, have to go into their shops to have their prescriptions dispensed. Surely that is a great opportunity for the chemists to interest their customers in other things that they might like to buy.
If it is said that chemists cannot carry on their businesses on the prescription side alone because that side does not pay for itself, the obvious answer is that it is quite absurd that the other side of 642 their business should subsidise it. They should get cracking with the Minister of Health and have their pay and allowances increased to whatever extent is necessary.
The hon. Member for Meriden (Mr. Matthews) seemed to be most concerned in supporting the small shopkeeper against the possibility that prices and, accordingly, profits would rise, and that the small shopkeeper would make a great deal more money than he does at present under R. P. M. The second part of his speech was directed to showing that in Canada prices had risen after the removal of R. P. M. and that that would be the tendency here. It is true that in the case of some products, such as chocolates and sweets—although I do not think that this applies all through the confectionery industry—retailers' margins are very small. Hon. Members may remember that about five or six summers ago there was a tremendous row between Cadbury's and the retailers, who had asked for an increase in the margin that they were allowed. Cadbury's refused to let them have it.
Margins in these cases are very small. That is why, although I am a sponsor of the Bill—which I saw for the first time only the other day—I am not very keen on Clause 4. I know that many hon. Members have the idea that when we abolish resale price maintenance it may be possible to bring in a whole lot of hedging legislation to protect the small shopkeeper from loss leaders and the large rebates given by multiple stores. I am willing to go along with an endeavour to do this, because in their extreme form some of these things are undesirable, although in a modest form they are pretty harmless. But I very much doubt whether such legislation is both practical and possible to operate.
The hon. Member for Oldham, West (Mr. Hale) painted such a glowing and delightful picture that I felt that the small shopkeeper was in such a strong citadel and so buried in the good sentiments of all the people who went in to his shop for the latest racing tips that nothing—not even the abolition of resale price maintenance—would shift his custom. That is the point: even in the revolution that has now been taking place for a generation or more
643 in our methods of distribution there has remained, and will remain for so long as we can see, a most important job for the small shopkeeper to do.
I am entirely with the hon. Member for Grimsby when he says that the customer should be allowed to make his own decision—which in many cases he cannot now do—whether he wants to choose an article from a counter, with no service at all, or to go into the village shop and ask the village retailer for his opinion as to the relative merits of certain articles, and have the benefit of delivery as well. I see nothing which will be detrimental to the customer in making such a change. I would certainly think that there would be nothing detrimental to the efficient village shopkeeper.
§ Sir Richard Glyn
May I explain how it may be detrimental to the customer, and is detrimental to the customer in certain cities of America? The point is that the big discount houses put the small shops out of business—certainly in the hardware trade—and then fail to give the customer any after-sales service. If a person buys a refrigerator from a discount house and, in the process of taking it home in his motor car, breaks a part of it, the discount house cannot be less interested. It provides no after-sales service.
§ Mr. Holt
I do not deny that this kind of thing goes on in the retail trade. It certainly goes on in manufacturing industry. I have experienced it especially in the textile industry, where there is probably no finer example than Courtaulds. Before the war it kept its prices deliberately low so that practically no other rayon manufacturer could make a profit. If we are in favour of competition over a wide field of the economy, and if we think that competition is a good thing for the economy in that it allows change to take place and brings benefit to the consumer, we must put up with the fact that this is a rather rough world and that some people will always try to follow price policies which not merely compete with those of their rivals but put them out of business.
What the hon. Member and other hon. Members who raised the point 644 earlier seem to ignore is that if the discount houses do not provide the kind of service which the local people want an opportunity is provided for other people to come into the business. It is a changing world
There are many things that I wanted to say, but as they have already been said by many other hon. Members I shall not repeat them. I say that resale price maintenance must be considered in the context of other measures which ought to be taken to invigorate the economy and to see that competition is as fair as it can be made—to see that it is genuine and allows the maximum choice to consumers.
That is why I welcome the measures, although they are still vague, which were announced by the Government the other day, when they said that they will put more teeth into the fight against monopolies. In addition, mergers which may have a purely monopolistic tendency about them and have nothing to do with technical improvement should be examined and, most important of all—something that I have plugged in the House for years—along with this we must look at our tariff structure and bring a little competition, or threat of competition, into it. Certainly the monopoly elements in our economy should be much less protected from competition from abroad.
If R. P. M. is put to the country in this kind of framework, and not as something that has suddenly been thought up by somebody, merely to strike at a certain group of shopkeepers, I think that it will receive wide support. That is why I am so anxious that the Government, whatever the reasons for the muddled way in which this matter has been presented this last week, will give us a clear indication that, having put their hand to this plough, they are really serious about it. I think, and I am giving my view and the Parliamentary Liberal Party's view about a matter which the hon. Member for Dorset, North raised earlier, that we must have some machinery for the examination of whether there are some special cases for the abolition of resale price maintenance. I do not think that we could just blank it out. We have also to make our terms of reference about this pretty narrow. We have to make up 645 our minds over the field as a whole, and I think that if I were in the position of the Board of Trade I should be a little reluctant to bring in such a Measure without any escape clause at all.
§ Sir Richard Glyn
When the hon. Gentleman says that he would agree to an escape clause, is he giving his own personal view or is it Liberal Party policy? If so, how has it changed since the last century?
§ Mr. Holt
It is Liberal Party policy.
I have given a rounded view about the problem as a whole, and I hope that when the Parliamentary Secretary replies to the debate, whether he agrees with the Bill or not, we shall hear something a little more definite than we have yet had about the Government's plans in the matter.
§ 2. 22 p. m.
§ The Parliamentary Secretary to the Board of Trade (Mr. David Price)
It might be convenient to the House if I intervene at this moment. In considering the Bill, and, indeed, the statement made last Wednesday by my right hon. Friend the Secretary of State, I think that we should keep clear in our minds precisely what is the practice of resale price maintenance. Reading some of the articles in the Press, both for and against, it is difficult to believe that they are talking about resale price maintenance, certainly in some of their prognostications. We ought to be clear—and it has not been clear—that collective enforcement of resale price maintenance has been prohibited since the passing of the Restrictive Trade Practices Act, 1956. The courts have no power to give exemption from the provisions of Section 25 of that Act, and, therefore, what we are discussing today is the practice of individual resale price maintenance.
I should like to detain the House for a moment on exactly how this works. Resale price maintenance is typically the practice by which a manufacturer ensures that even when his goods have passed from his possession, and regardless of the channels of distribution through which they may pass, they are ultimately sold by the retailer at the price that the manufacturer himself has fixed. The manufacturer can ensure that this happens in a variety of ways and need 646 not necessarily resort to any legal sanction. I think that this is important.
The manufacturer may insert in his contract of sale a condition as to the prices at which the goods shall be resold, or he may simply say what the maintained price is and make it known that he intends to enforce this. If there is a condition of sale in a contract and that is broken, the supplier has an action for breach of contract. But normally there is no need to resort to this. There are a number of trades where all concerned are well content that uniform prices should be charged.
§ Mr. Price
I am coming to that later.
Even when a distributor steps out of line, there are simpler ways than legal action of producing the desired effect. The supplier can simply refuse to sell to him in future or agree to sell only on disadvantageous terms. These methods of enforcement are open to the supplier at common law. In this context, I should say that there is a lot of misconception about the Restrictive Trade Practices Act, 1956, and about how it fits into the system which I have just described.
Of course, resale price maintenance was practised long before 1956. None of the arrangements I have described depends primarily upon any provision in that Act. The new provision introduced by that Act can be described technically as giving suppliers a specific right to enforce conditions as to the resale price against people who were not parties; to the contract in which the condition was incorporated.
What this means in practice is that a manufacturer who does business through a wholesaler has the right to enforce his price conditions directly against the shopkeeper to whom the goods have finally passed, provided, of course, that the shopkeeper knew about the conditions when he bought the goods. Resale price maintenance does not stand or fall with this particular right. Section 25 is, therefore, not an essential part of the practice of resale price maintenance. It simply facilitates the practice.
Such is the practice of resale price maintenance. In considering whether 647 this practice is in the public interest or not, the House will want to know its extent, and there has been some attempt to do this in the speeches made so far in the debate. I do not suppose that the House will wish me to recite an exhaustive list of the goods for which the consumer is expected to pay a price fixed by the manufacturer. I will mention one or two of the more important ones. These are cars, electrical appliances, books, records, cameras, tobacco, spirits and most of the products on the shelves of the chemist's shop.
There are other trades where resale price maintenance is firmly established, for some manufacturers' goods alongside free-pricing by others. These conditions apply to hardware, stationery, furniture, branded textiles, shoes, scientific instruments, watches, toys and sports goods and soft drinks. Of course, one has to recognise that it is sometimes possible to get price-maintained goods at a cut price. Or the distributor may attach an artificial value to an old product "traded in". Many hon. Members may have had experience of this when trading in a motor car. But, taken all together, the goods covered currently by resale price maintenance represent a sizeable proportion of the consumer's everyday expenditure.
Economists have made varying estimates of its extent and the effect which this practice has on prices. It is, I think, accepted by almost all disinterested authorities that the general effect is to keep prices up, if only marginally. This is indeed borne out by the arguments of those who defend resale price maintenance on the ground that without it retailers would not have a large enough margin to carry desirable services.
§ Mr. Maxwell-Hyslop
I think that my hon. Friend has mistaken the argument. It is not that prices will not be reduced in a short period of time during which retailers may be driven out of business, but that in the long run many retailers having been driven out, the margin of the remaining retailers then inflates beyond what it was before.
§ Mr. Price
Professor Yamey, in his study "Resale Price Maintenance and Shoppers Choice," estimated that about 25 per cent. of all personal expenditure was spent on price maintained goods. The late Mr. Friday, in his study "Fair Trade: Resale Price Maintenance Re-examined," put it rather lower at about 20 per cent. I think my hon. Friend will realise that I have been reading both sides of the case. But I think that both these distinguished economists based their calculations on a total which included expenditure on services. A service cannot be resold. If we consider expenditure on price-maintained goods simply as a proportion of all expenditure on goods, then the figure is clearly much higher.
§ Mr. Maxwell-Hyslop
One of the services which is most frequently used is servicing of motor cars, and many of the large manufacturers have a form of resale price maintenance, namely, a fixed service charge for standard servicing. Certainly, the Ford Motor Company does.
§ Mr. Price
My hon. Friend should not try to draw me into a discussion upon the standard of service given even by the dealers of our great motor car companies, because I am sure that the experience of all hon. Members will show a large variation;and having in my Department a certain responsibility for exports I do not wish to be unfair in naming some of the personal experiences that we may have endured.
I turn, therefore, to the broad arguments for and against the practice of resale price maintenance. Its advocates, with the possible exception of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), do not overlook its effect on prices. They claim that the practice is necessary to assure the retailer of a reasonable profit margin and to cover proper standards of quality and service. They say that it covers necessary after-sales service. They also argue that resale price maintenance is essential to enable the small shopkeeper to hold his own against his powerful competitors—my hon. Friend the Member for Dorset, North (Sir Richard Glyn) used that argument considerably in support of his thesis—and that the public 649 benefit from having a large number of retail outlets.
Sometimes it is accepted that price competition would follow the abolition of resale price maintenance, but it is claimed that service and standards would then fall. Alternatively, it is argued that there would be no genuine long-term price reductions but that sharp practices, temporary price-cuts and unfair trading methods—"unfair" is a wonderfully emotive word in this context—would threaten the interests of consumers.
On the general proposition, I do not rate those arguments high, although I recognise that in some cases they may have greater weight. For instance, there is no guarantee that any service would be provided merely because the price is fixed by the manufacturer. The customer—and this argument has been used by many hon. Members—is paying for service whether he wants it or not; and whether or not it is provided. Consumers like an indication of what price to expect. But nobody who has seen and been part of the crowds at the pay desks of the supermarkets could claim that what they want is uniformity of price.
We have now for the first time an authoritative indication of the consumer's wants. The Government have set up an independent body to advise on just such points—the Consumer Council. I remember how some right hon. and hon. Members opposite rather scorned the way in which my right hon. Friend set up the Council and said that it was merely a creature of the Government. As the House will know, the Consumer Council has come down firmly against resale price maintenance. The Council recognises that the shopper stands to gain from an opportunity to make his own choice of the combination of price and service which he wants. Service, like the product, is one of the ingredients that come into the price in a fair market. These are not mere debating points. They seriously weaken the case advocated for resale price maintenance.
The real weight of the case for getting rid of the practice rests, however, upon considerations which go deeper. I am referring to the drag which resale price maintenance imposes upon com- 650 petition and the consequences for the economy generally. When resale price maintenance flourishes, direct price competition between retailers is virtually ruled out. There is the effect on prices which I have mentioned, but even more important there is the effect on efficiency and service to the community.
Resale price maintenance prevents the more efficient distributor from increasing his share of the market. There is less incentive to cut costs and to try new methods. The distributive trades are of growing importance in a modern economy. It is not enough to concentrate on efficiency and competition in the industrial sector while sanctioning a system in distribution which has the opposite effect.
As my right hon. Friend the Secretary of State made clear to the House on Wednesday, the Government believe that the practice of resale price maintenance
is, in general, incompatible with their objective of encouraging effective competition and keeping down costs and prices. They have reached the conclusion that resale price maintenance should be presumed to be against the public interest unless in any particular case it is proved to the contrary to the satisfaction of a judicial tribunal. They therefore propose to introduce legislation this Session designed to bring the practice to an end subject to the right to apply for exemption to the judicial tribunal to which I have referred. "—[OFFICIAL REPORT, 15th January, 1964; Vol. 687, c. 225.]In taking this decision, the Government have given the most careful consideration to the information which they have obtained from many quarters. The Government weighed with particular care the fears expressed about the consequences for small shopkeepers. They believe that the prophets of disaster will be proved wrong.
There is one broad sector of retailing in which resale price maintenance formerly was used and supported with fervour but where it has now almost entirely disappeared, namely, the grocery trade. There are other trades where it has never been practised. There are trades in which free pricing exists side by side with retail price maintenance. The Government believe that price competition in these trades is welcomed by the general public and has not operated to the disadvantage of one or other class of the traders 651 concerned. Price competition must, of course, make a difference, but it should operate to the advantage of the enterprising trader who is prepared to move with the times.
As many hon. Members have pointed out, the small shopkeeper has a unique service to offer in atmosphere and personal service. My hon. Friend the Member for Dorset, North, talked about the isolated shopkeeper. Surely, however, the isolated shopkeeper will not be affected by the abolition of resale price maintenance, because he has, in effect, due to his isolation, a local monopoly. I cannot see, therefore, how he would be seriously affected. In the neighbouring county to that of my hon. Friend, we get a variation in prices between the shops in the centre of the town, and as one moves out and gets into the villages, the price of many products which are not resale price maintained are a little higher because, as my hon. Friend rightly pointed out, the shopkeepers have a smaller catchment area and less opportunity for turnover. To provide their service, they charge a slightly higher price and the local public are prepared to pay it.
Therefore, although I fully recognise my hon. Friend's fears, I believe that he is being unduly alarmed, because in the very case that he has quoted the local monopoly or near-monopoly situation gives the small shopkeeper the protection which my hon. Friend and many of us in the House wish him to have.
We believe that there will always be a demand for the small shopkeeper, the shop around the corner. Experience shows that price competition does not endanger shops and services which the public want. If, however, the public do not want them, I suggest that they are a luxury which, perhaps, we cannot afford. We can learn something from the example of other countries which have already abandoned the practice. In Canada—and I challenge some of the statements that hon. Members have made about Canada—France, Sweden and those states in the United States where resale price maintenance is banned, as far as we can discover the ending of resale price maintenance has not led to an increase in business failures among small traders. Price competition 652 has not deprived branded goods of their reputation and the fears about loss-leader selling have not materialised.
With this in mind, the Government have concluded that the small shopkeeper should not have undue fears about the effect of the ending of resale price maintenance.
§ Mr. Price
The hon. Member should not try to dissect how I have composed my speech. As departmental papers are confidential, I am in the difficult position of not being able to have the pleasure of proving the hon. Member wrong.
Let us be clear about the context in which this new development is being made. The Government's policy is based on the principle that competition is essential for the economy and the consumer. Consumer expenditure is rising substantially year by year. The luxuries of yesterday are the necessities of today. We are fast approaching the age of the refrigerator in every kitchen and the car in every garage. The volume and complexity of the goods handled by the retailer are steadily expanding.
As my right hon. Friend has told the House, the Government will be bringing a Bill before the House this Session. At this stage, I cannot anticipate its detailed contents. But there is one point arising on the statement which my right hon. Friend made which I should mention.
The Government do not say that there are no conceivable circumstances in which it may be possible to show that R. P. M. is conferring benefit on the public. That is why they are making provision for exemption. In spite of the intention of the promoters of this Bill to get rid of the practice of resale price maintenance, we believe that the approach embodied in the Bill differs radically from the approach indicated by my right hon. Friend in his statement to the House last Wednesday. The Bill condemns the practice of resale price maintenance—
§ Sir H. Legge-Bourke
In reciting what the Government have already announced through the Secretary of State the other day, my hon. Friend today has not mentioned something which my right hon. Friend mentioned. It is that it was the intention of the Government to publish a White Paper in advance of the Bill. May we have an assurance that the White Paper will be published and we shall have a full debate on it, that the Bill will not be introduced on the next day but full consideration will be given to what is stated in the White Paper?
§ Mr. Price
My hon. Friend misunderstood, or misread, the statement. If he looks at it he will see that the Government said that they propose to introduce legislation this Session designed to bring the practice to an end subject to the exemptions to which I have referred. The White Paper will cover other matters dealt with in my right hon. Friend's statement, namely monopolies, mergers, and the filling of certain loopholes in the 1956 Act. There was no intention to introduce the White Paper prior to the Bill on resale price maintenance. It is the intention of my right hon. Friend to introduce the Bill as quickly as possible.
I was making the point that the approach embodied in the hon. Member's Bill differs radically from the approach in my right hon. Friend's statement. The Bill condemns the practice of resale price maintenance in all cases subject to the provisions of Clause 5(2). I imagine that the draftsmen of the Bill had in mind the decision of the Restrictive Practices Court in the net book case. I am advised that as drafted the Bill would not achieve this object, but that could be a Committee point.
My objection is not based on the drafting but on the Government view that it is quite indefensible to single out for exemption in this context any trade simply because it has been passed by the Restrictive Practices Court—in a different context—and limit the exemption to such a case. The right course, we believe, is to lay down the general presumption that resale price maintenance is against the public interest, but to set up a procedure under which there can be an appeal to a judicial tribunal for a declaration that 654 the practice does not operate against the public interest in respect of defined classes of goods.
§ Dr. Alan Glyn (Clapham)
Could my hon. Friend clear up a question on Clause 3 of the Bill? Would he not agree that this would be placing a very unreasonable burden on manufacturers because the exemptions mentioned are not sufficient? There are many reasons why a manufacturer might not wish to supply, such as bad debts and things like that. Will my hon. Friend make clear that when the Government consider this whole subject, not only the interests of the public but also the interests of small shopkeepers will be observed?
§ Mr. Price
My hon. Friend was perfectly right to draw attention to Clause 3. This is an extremely badly drafted Clause, but there is implicit in it an instruction that the matters specified are the only legitimate factors on which a manufacturer could refuse to supply. As my hon. Friend has so clearly taken the point, there are many other perfectly legitimate reasons—such as having a strike on ones hands or a retailer being a bad debtor—why a manufacturer might refuse or withhold supplies.
§ Mr. Stonehouse
May I remind the Parliamentary Secretary that this Clause was taken from the Canadian law and is included in the Combines Investigation Act of 1960? It was to introduce the safeguards which were demanded by those who opposed the banning of R. P. M. I hope the hon. Gentleman will not be so damning about these safeguards in view of experience abroad, particularly as in his speech he referred to foreign experience.
§ Mr. Price
I did not mean personally to attack the hon. Member because I know how difficult it is for a private Member to draft a complicated Bill like this. Quite a lot of his Bill has been taken front Canadian legislation and it is always dangerous to pick one or two Sections out of some other Act and not to realise that each Section depends on previous or subsequent ones. This particular provision was not in the original Canadian statute but was added to it. All the evidence we have is that it has not been called in aid and is completely ineffective.
655 It is not unknown even, I regret to say, in British Statutes for a Section to be added and then for it to be found by the lawyers, and especially when judges get to work on it, not to be particularly effective. I suggest with all humility that on the evidence available this is a singularly ineffective Section of an otherwise very effective Canadian statute. We believe that the type of exemption proposed by the Government is infinitely superior to the exemption in the hon. Member's Bill, even leaving out the point that as drafted technically it does not do what he wants it to do. That may be a Committee point, but what we are proposing is fairer to suppliers, to retailers and the public. It is quite indefensible to single out for exemption any trade simply because it has been passed by the Restrictive Practices Court.
It is the conclusion of the Government that even if the general approach of this Bill were right—and we do not think that it is—almost every provision would have to be recast if the Bill were to achieve the Government's purpose as explained by my right hon. Friend. If we were to attempt to build on this Bill there would be little left of the Bill as it now stands, except the Long and Short Titles, and they would both need amendment. In these circumstances I cannot advise the House to give the Bill a Second Reading.
§ Mr. Charles Curran (Uxbridge)
Before my hon. Friend sits down, may I put a question to him? He has been telling us what the Government's intentions are about R. P. M., but there is one point with which I should like him to deal. If we abolished R. P. M. it would be necessary to give the small shopkeeper a further differential advantage. Would it be practicable and do the Government contemplate any change in the reduction of shop hours to permit small shopkeepers after R. P. M. has been removed to keep their premises open for a longer time?
§ 2. 49 p. m.
§ Mr. Douglas Jay (Battersea, North)
It is a little surprising that the Secretary 656 of State did not come here today to speak on this subject. This controversy has caused a great deal of public interest. People are bound to ask whether the Secretary of State is perhaps afraid to face his own back benchers, or is it possible that he has changed his mind again? There has, I understand, been another Cabinet meeting today. I hope that the Parliamentary Secretary is quite sure that he knows what the Government's policy is today, Friday, this week.
We should all congratulate my hon. Friend the Member for Wednesbury (Mr. Stonehouse) on introducing this extremely important Bill today and on making a most powerful and persuasive speech. Whether or not my hon. Friend gets this Bill passed into law, he will certainly have the satisfaction of knowing that he has sweepingly—indeed, almost diametrically—altered the Government's policy. He has demonstrated how wrong those people are who say that private Members have no influence in this House nowadays. Private Members who have sufficient resolution and ability, as has my hon. Friend, do not find it at all difficult just now to overturn the Government completely. Indeed, Ministers seem to be tumbling over one another to turn somersaults quicker than others. I have never seen a Government so agitatedly on the run as this Government at the moment.
Only two months ago, Lord Tedder, in the House of Lords, announced that he intended to introduce a Bill to reform hire-purchase law. Within a few days, the Government, who had said nothing about this in the Queen's Speech, announced that they would introduce a Bill. My hon. Friend was due to move the Second Reading of this Bill today. So on Wednesday of this week, the Secretary of State came scurrying down to the House, actually one day late because the Cabinet was in a sort of double panic, and said, "Me too", to my hon. Friend. The Government have now been, ostensibly at any rate, converted overnight to outlawing retail price maintenance.
It was this Government which in 1956 introduced Section 25 of the 1956 Act, which, for the first time, gave manufacturers the legal power which they had not got, to enforce dictated prices 657 through the courts on reluctant retailers. Before 1956 manufacturers had no such legal power. They were gratuitously given it by the present Minister of Defence who remains, I presume, a member of this Government, who are now going to take it away.
We voted against this Clause—it was Clause 20 at the time and afterwards became Clause 25—in 1956. We objected to a provision which gave somebody power to enforce a contract on some other person who had neverentered into the contract. The present Minister of Defence, however, defended this. On the Second Reading of the Bill, he said, very frankly:What we propose to do is to…permit the individual manufacturer who wishes to price maintain his goods to do so openly and publicly through the ordinary courts.He went on to say—which is even more interesting—that the one thing he thought wholly objectionable would be the course which the present President of the Board of Trade now proposes to pursue. This is what the Minister of Defence said:There is one course which I hope will not be urged, and that is that somebody should be established to examine each price maintenance agreementelit…This he said would beopen to solid objection.It would be unworkable and wouldlast for an eternity. "—[OFFICIAL REPORT, 6th March, 1956; Vol. 549, c. 1939–40.]Now the President of the Board of Trade is adopting just that course. No wonder that the present Cabinet is split right, left and centre. We certainly do not need the Spectator, returning from the grave, to tell us that today.
In addition, incidentally, to the new broom at the Spectator, we are supposed to have a new broom at the Board of Trade. The right hon. Gentleman tells us that he is modernising everything, which is not very complimentary to his predecessor. But will the present Parliamentary Secretary tell us a little more clearly than he has yet what the Government mean to do in contradiction to the Bill of my hon. Friend? I do not think that we can judge this Bill unless we know what will be put in its place. The hon. Gentleman today repeated word for word the statement of the Secretary of 658 State on Wednesday. He says that he proposes to introduce legislation this Session on resale price maintenance, but as I understand it—and I think that the hon. Member for the Isle of Ely (Sir H. Legge-Bourke) did not understand it—there is to be no legislation this Session on mergers or restrictive practices or other points.
I think that the House should be clear about that, because our brave, new modernising, Minister, despite all his bold words, and although he has now been converted to arguments from this side of the House which the Government were turning down only a few weeks ago, is not even proposing to introduce before the next Parliament any legislation at all on mergers or restrictive practices. I think that the Parliamentary Secretary agrees. If so, he might have made it more clear.
Will he tell us when the Government's proposed legislation on resale price maintenance is to be introduced? Will it be this month, next month—can the hon. Gentleman tell us? It seems to be receding a little into the distant future. What exactly will it do? I feel that we should know more about this today What will it do differently from the Bill of my hon. Friend? The Secretary of State said, and it has been repeated today, that this Bill will be designed to bring the practice of individual price maintenance to an end…subject to the right to apply for exemption to the judicial tribunal to which I have referred. "—[OFFICIAL REPORT, 15th January, 1964; Vol. 687, c. 225.]That is to say, I take it, that he will repeal outright the Minister of Defence's Section 25 and do what the Minister of Defence then declared to be impracticable. So far, I think that we are clear.
But there are two questions which the Parliamentary Secretary ought to answer and about which both the House and traders are entitled to know. First, do the Government intend simply to repeal Section 25 and, apart from exceptions, leave manufacturers to do what they please, or will they take away, as my hon. Friend quite explicitly proposes, the manufacturer's right to withdraw the goods from a retailer to whom he does not choose to sell? We have not been told, but obviously this is fundamental.
659 Secondly—I think that we had a partial answer to this today and I should like to know whether I am right—will this change, whatever it is, be made legally effective from the day the Bill becomes law so that these practices have to be abrogated forthwith, as again my hon. Friend proposes, with power for aggrieved parties to make a case before some tribunal and, if they succeed, to return to their R. P. M. practices; or, alternatively, am I right in thinking, as we were told today, that all the practices in question will be permitted to go on as before, on the analogy of the restrictive practices procedure, until a tribunal has declared the arrangements illegal? Am I right in thinking that it is the second course which the Parliamentary Secretary proposes to follow? I do not know whether he would like to tell us.
§ Mr. Jay
I am further fortified in my slight doubt whether we have a serious proposal before us from the Government, because this makes an enormous difference to the time scale of the operation, and traders who—I do not say that they are threatened—have this legislation dangled before them are entitled to know what will happen.
If the Government mean, as the hon. Member appears to say—although he does not know, apparently, what is the Government policy—to let all these practices go on unless and until they are declared illegal, this means that nothing substantial will happen in the real business world before the General Election. Some things may happen, but not very much. I am not taking the extreme view of the Minister of Defence, who said that it will go on until eternity. I am much more moderate than that. But I believe that while creating this further uncertainty the Parliamentary Secretary will be misleading the public if he gives the impression that dramatic and early falls in prices, materially affecting the cost of living and wage negotiations, will result from the new policy. I believe that would be a great exaggeration.
I am wholly in favour of removing from the Statute Book the Minister of Defence's provision which gives the manufacturer the power to enforce at law a contract on somebody else who 660 was never a party to it. We voted against it in 1956. I have always felt, as I said then, that, quite apart from the economics, this is objectionable from the point of view of ordinary personal freedom. Why should a manufacturer be given power by the House to use all the forces of the courts to dictate to the retailer what the retailer's gross margin should be—because that is what resale price maintenance means.
Hon. Members will notice that this not merely makes it inevitable that retailers' gross margins everywhere are uniform; it also means that the manufacturer, and not the retailer, dictates what they should be. That is the issue before us. It seems to me that this has the prime objection that we are limiting the freedom of choice of both the consumer and the retailer. I have never felt that any good case has been made out for doing that. I hope that so far I carry a great many hon. Members with me on both sides of the House.
On the other hand, if the Government intend—and they have not told us—to go beyond a mere repeal of Section 25, which would leave a free-for-all, and in addition to take away from the manufacturer by legislation the natural power which he would otherwise have to refrain from selling to the retailer to whom he does not choose to sell—as my hon. Friend proposes—then some form of public tribunal is essential where legitimate arguments can be heard. As my hon. Friend the Member for Grimsby (Mr. Crosland) said, we on this side of the House certainly do not believe that every restrictive practice of any kind, by manufacturer, retailer or worker, is always wrong as such. We certainly believe that both manufacturers and retailers have legitimate interests which ought to be protected. This seems to be everywhere admitted in the case of the book trade.
On the other hand, I feel that the Government would be misleading the public if they suggested that as a result of their proposal, which is so vague, dramatic cuts in the cost of living will be achieved by these methods, which so far we have not had explained. It looks unlikely to me that the Government's Bill will bite seriously—that is, if the procedure is allowed to continue until it goes before the tribunal—before 661 the General Election. If right hon. Gentlemen opposite are to go round the country, as they did in 1951, claiming that their policy will produce substantial cuts in the cost of living, this will be deceiving the public just as grievously as they did in 1951.
To show the rate at which the Government work, we have not yet had a statement from Ministers on what they intend to do about motor vehicle electrical equipment, which the Monopolies Commission has been investigating for six years and the report on which has been in the hands of the Board of Trade for nearly 12 months. In this case there was a clear conclusion, and still we have no action. I wonder whether the Parliamentary Secretary will tell us today what the Government propose to do about this, because surely it is a test case before them. I fear that even here we still have no decision.
We therefore welcome the action of my hon. Friend today in introducing a Bill which has at least stirred the Goverment at last to some form of activity. We shall believe in the Government's Bill when we see it—we still have no date—and we shall judge it when we see it. Meanwhile, I think that the House should notice, to judge this matter aright, that on all the other points where the Minister claims to be modernising—that is to say, the strengthening of the Monopolies Commission; some examination of mergers, and so on—so far all we have is the promise of a White Paper.
§ Sir H. Legge-Bourke
I do not know if the right hon. Gentleman has Wednesday's Hansard with him. My right hon. Friend was asked a question by the hon. Member for Bolton, West (Mr. Holt), which in part read as follows:When can we expect to see the White Paper to which he has referred? If the right hon. Gentleman proposes to repeal Section 25 of the Restrictive Practices Act, will he also be making it illegal to enforce resale price maintenance at common law…".The reply was as follows:The White Paper will be published in good time for a discussion in the House, if the hon. Gentleman so desires and can arrange it through the usual channels. Amendments to the 1956 and other Acts will be covered in the Bill…". —[OFFICIAL REPORT, 15th January, 1964; Vol 687, c. 228.]I took that to mean that the White Paper would deal with Section 25 as well. I 662 believe that a great many other hon. Members did. Why did not the right hon. Gentleman?
§ Mr. Jay
I quite agree that in this matter the Minister is in something of a muddle. I do not blame the hon. Gentleman for having got mixed up. Having carefully read all the statements, I have come to the conclusion that the authorised version was the one which we have been given today. Since we have been told that it is, for the purpose of this debate, anyhow, we must assume that it is.
§ Sir H. Legge-Bourke
Would the Opposition officially object were the White Paper to be broadened to include the matter of resale price maintenance, because I am sure that it would be welcomed on this side?
§ Mr. Jay
I should not object to it in the least, provided that it did not delay the Bill. I am pointing out that, so far at any rate, we have not even had a White Paper. We have not even been told when the White Paper is to be published. We have not heard even that from the Minister today.
The weakening of the Monopolies Commission in 1956 was another deliberate act of the Government. Before 1956 the Commission operated in several panels and thereby worked much quicker. This Government then cut it down to a shadow. Now, after eight years, we are to go back to where we were before 1956. So it is on mergers, of which there is now apparently to be some examination, though we do not know quite what. Two years ago in the debate on I. C. I. the then President of the Board of Trade flatly turned down my proposal, which I could read to the House, very much on these lines, that mergers threatening monopoly should be subject to some sort of public examination. The present Minister adopts it in a very similar form to what we then suggested.
Altogether I find the Government's record in this so extraordinary, so vacillating and so confused, that we have very little confidence in their intention even now to tackle any of these evils, and we shall believe in the sincerity of their intentions only when or if we see them actually doing something practical and concrete.
§ 3. 8 p. m.
§ Sir John Vaughan-Morgan (Reigate)
I will be very brief, because other hon. Members wish to speak and most of the arguments have been deployed. Whatever criticism the right hon. Member for Battersea, North (Mr. Jay) may have of the record of my right hon. Friend's predecessor, I hope that he will give me a testimonial and agree that I was with him wholeheartedly in asking for action on mergers and monopolies earlier. Today's debate is a slightly narrower one on a Bill. I welcome the package deal on Wednesday as a package deal. I will be disappointed if the White Paper does not deal swiftly with the wider problems of resale price maintenance as well as being a prelude to the Bill which my hon. Friend mentioned and which I accept. I also expect that in this Session there will be at least minimal action on monopolies as well.
I accept that legislation on mergers is complex and difficult to draft, but there is no reason why we should not swiftly pass a Measure to increase the personnel and strength of the Monopolies Commission. I hope that my hon. Friend will put it forward as being the considered opinion of, I think, the majority of hon. Members that a package deal means a rather larger package than just the Bill which my hon. Friend discussed. In short, we expect some advance on all fronts.
I do not want to redeploy all the arguments that have been adduced about resale price maintenance, but the truth is that R. P. M. has been dwindling over the years and its scope is now less than it was. It has started to disappear, as I discovered to my surprise about two years ago, even in the motor car industry. It is staggering to discover, if one is trying to trade in a car, the wide disparity of margins one can get; and this tends to make nonsense of some of the protestations of the motor traders. I am not necessarily saying that there might not be an argument for R. P. M. for motor cars or goods in which there is a considerable element of service, but let the customer have some option in the matter.
Some of the arguments of the protagonists of R. P. M. are rather bogus. It is interesting to note that although some newspapers are fierce for the abo- 664 lition, they all have their prices printed on their front pages. They are all distributed through a narrowly limited network of newsagents and I, for one, will be delighted when I can get my copy of the Economist a little cheaper than the price on its front cover. So do not let us have too much of this holier than thou talk of which some people are so fond. Half the trouble is that everything is always made out to be black or white; that all R. P. M. is either good or bad, which is nonsense.
I hope that the Consumer Council, an admirable body, will be more careful about not rushing into print on every possible occasion when any issue is raised in the newspapers without more carefully considering the pros and cons of each argument. I hope that that remark will be received in the right quarters.
The hon. Member for Wednesbury (Mr. Stonehouse) gave us a tremendous tirade against R. P. M., with two exceptions—strangely enough, books and cement. The moment one begins to make exceptions one starts to find oneself in difficulties. I see no reason why, because these two products have been lucky enough to come before the Restrictive Trade Practices Court, they alone should be proved whiter than whiter, given haloes and allowed to continue.
Thus there is a strong argument for saying that the rather slower approach of the Government in this matter is right. It may delay the abolition of R. P. M. in certain spheres, but in my view this is a small price to pay for an orderly change in retailing. I learn from today's newspapers, contrary to the information of the right hon. Member for Battersea, North that he can, if he shops carefully, now obtain a bottle of whisky two bob cheaper than he could yesterday—[HON. Members: "Six bob. "]—I hear that it is now six bob cheaper. The offer is going up. That proves that, knowing that Government action is to follow, some of the regions in which R. P. M. is not justified are already taking the hint.
I am convinced that there are exceptions where, as I have said, the continuance of R. P. M. is justified, and I want to refer to the position of the pharmacists. Here, there is a very strong 665 case, but it has sometimes been put in the wrong way. I do not see why the cost of the prescription I may want from the chemist should be subsidised by my purchases of shaving soap—more particularly as I buy my shaving soap somewhere else. That does not seem to me to be quite just. My hon. Friend the Member for Putney (Sir H. Linstead) is quite right in saying that the service of prescribing must stand on its own, and must be paid for by the Ministry of Health at such a price that it earns a fair reward. As a result of my hon. Friend's suggestion, I hope that we shall be able to get a better pharmacy service in some areas where no such service exists now, such as in the rural and semi-rural areas, where great difficulty is experienced. It is no consolation to find that there are five chemists in the middle of the market town, none of whom will deliver to the network of villages around.
This is a service that should be paid for by the Ministry of Health directly to the pharmacist who will supply the service—
§ Mr. A. R. Wise (Rugby)
This is an interesting proposition, but it has so far always been considered that the cost falling on the National Health Service would be so staggering that it could not be borne. Has my hon. Friend gone into the details at all?
§ Sir J. Vaughan-Morgan
Of course I have not—the pharmacists and the Ministry of Health must discuss it. The fact remains that this service is at present being paid for by the other customers. If it is a direct charge incurred by the State, it should be paid for by the State. We do not expect anything else in the retail shops to be subsidised in this way. It boils down to the fact that, as my hon. Friend says, medicine seems to be a loss leader, which is hardly an acceptable proposition in that quarter—
§ Mr. Stanley R. McMaster (Belfast, East)
Is my right hon. Friend suggesting that in the Government Bill the chemist should be specially exempted because of his peculiar position?
§ Sir J. Vaughan-Morgan
No, I have not suggested that—but I do not wish 666 to labour the point, because I think that I have made myself fairly clear.
Most people accept that retail price maintenance is going. I prefer the Government's approach, but I am not impressed by some of the lobbying that is going on. I suppose we have to accept it as part of our profession, but I do not think that a printed circular telegram is a very forceful argument. And when I open three letters in my morning mail which all say in their final paragraph, by a strange coincidence, "This will have political repercussions at the next election", my reaction is positively hostile. I do wish that public relations officers and some of the secretaries of trade associations would be a little more circumspect and intelligent in their lobbying of Members of Parliament. They sometimes forget that the reaction is quite the contrary to what they seek. I hope that the House will defeat this Bill, but we await with eager anticipation the White Paper and the Government's Bill
§ 3. 20 p. m.
§ Mr. Peter Doig (Dundee, West)
I welcome the Bill as being in the best interest of consumers. We are all sympathetic towards the small shopkeepers, but there can be no doubt that a vast majority of the people whom we represent are consumers. They greatly exceed in number the minority groups of shopkeepers.
Resale price maintenance can sometimes do some good. During the war, for example, cigarettes which were in short supply were sometimes sold above the regulation price. By means of resale price maintenance the tobacco suppliers were able to force those sellers, under threat of stopping their supplies, to bring the price back to normal. These, however, are exceptional cases, and if we weigh the pros and cons there can be no doubt that the evidence is far heavier on the other side of the scale. Exceptional cases can be taken care of by Clause 5(2).
There has been clear evidence that excessive prices have been charged for television tubes, sparking plugs, car batteries and a whole series of articles, but many other articles have never been investigated and are unlikely to be. When ballpoint pens first came on the market they could not be bought at less than 667 15s. each. A refill cost 2s. 6d. at least, but now a whole variety of these pens can be bought for 1s. each and perhaps less, and my information is that even at 1s. the profit is probably still excessive. In this age of take-over bids, mergers, and all sorts of evils of that kind and of the common directorships of competing companies, the price of ballpoint pens could easily have been fixed at 2s. These pens are sold by the million. One can imagine the excess of profits which can be made and is made on this item alone.
A certain brand of coffee has been mentioned in the debate. I can remember when it was sold in a certain size of tin for 3s. 6d. This was the standard price for years. Before I became a Member of this House my job involved visiting small shops regularly, and I saw at first hand exactly what happened in this case. It is typical of what can happen in all these cases. One multiple store reduced the price overnight to 2s. 6d. and later to 2s. 3d. At one stage it was as low as 2s. 1d.
This might have been a gimmick to draw people into the large stores but the ultimate result was that the small shops came to sell the same article at 2s. 9d. There can be no doubt therefore that whether we break resale price maintenance by law, or whether it is broken by large private companies which can obtain bulk supplies, the ultimate result is lower cost to the consumer, which I am sure we all desire.
We have been told that the only argument against ending resale price maintenance is that the small shops will go out of business. I used to represent a firm which supplied small shops, some of them newsagents. They were like the poor farmers; whenever one went along to the wholesaler, one found outside a string of large cars owned by them. One could not get near the door for these cars. Yet these small shopkeepers are the people for whom we are asked to feel sorry.
There are also the chemists. Listening to the arguments here, one would think that chemists, out of public-spiritedness, were already supplying every area which had any need for a chemist's shop. This is far from the case. In my constituency there are many very large housing schemes where no chemist will take a 668 shop, where the local authority has gone out of its way to get a chemist to take a shop but all have refused because more profits can be made in another part of the city. Therefore, it should not be imagined that everything is open, above board and perfect in the present situation. It is nothing of the kind.
We have the small shopkeepers themselves who are against these price cuts, and they co-operate in buying groups, and we find that these groups are proving to be very successful. We have some in my area—Vivo, Spar, and Cash and Carry. These firms are combining to combat the higher purchasing power of the big multiples. The small shopkeepers are more than holding their own. Any idea that the small shopkeeper will go out of business is nonsense. In my previous job calling on small shopkeepers, I found that what caused them to go out of business came very largely under two headings. There were the inefficient ones who drank themselves out of business or put themselves out of business in some other way. The others—they constituted by far the majority—were those whose area had been depopulated because houses had been knocked down. Never in my experience extending over many years of calling on shops have I found one that went out of business because it was pressed out by multiples.
What concerns me about the Bill is that it does not go far enough in protecting consumers. It should not stop at resale price maintenance. It should start at the beginning, with the manufacturers. Is it not a blot on our national economy that we seek at various times to control wages and salaries, and even profits and dividends, but only during wartime do we ever seek to control prices? Surely this is farcical? There are people whose sole motive is to make profit for themselves, and yet they are allowed to charge any price they care, any price they can get. The more take-over bids and mergers that we have, the more instances we have of manufacturers taking over retail outlets, the more serious the situation becomes. It behoves us to take action to control prices charged by manufacturers.
After all, why should trade unions negotiate at great length for higher wages for their members, why should the 669 Government after lengthy negotiations occasionally, though all too infrequently, give increases to old-aged pensioners, why should even Members of Parliament, more occasionally still, get increases in salary, if at the end of the day, within a short time of that happening, a handful of people can put up prices to such an extent that the effect is eliminated? This is a very serious matter, and this represents a very serious omission from the Bill. The Government ask people to save and to put money in the bank, and they get interest on that money, but while prices remain uncontrolled, the money depreciates in value out of proportion to the interest which they get so that they are, in effect, throwing away their money.
This is serious in another way. As a member of a local corporation, I used to preside over a committee which gave out contracts. We had contracts for millions of gallons of fuel and all the offers we got from various companies for its supply for a very long time were exactly die same right down to one-sixteenth of a penny.
The same thing occurred with milk for schools. Seven different contracts were offered and we had seven different offers, one for each contract, from seven different suppliers. When we reported this to the Secretary of State for Scotland he said that the price was excessive. But there was nothing we could do about it because the Government have no power to interfere with prices. This is a shocking state of affairs and must be put right.
The hon. Member for Putney (Sir H. Linstead) pointed out that doing away with resale price maintenance might produce lower prices initially but that ultimately it could produce higher prices. What will the Government do if that occurs? At the moment they have no power to do anything. Is it not time they took power?
It has also been pointed out that the abolition of resale price maintenance could react in favour of rich people. In part, resale price maintenance reacts against poor people now. A wealthy person sitting in a big house can pick up the telephone and order a delivery. He does not pay for the message or for the delivery. They are paid for by the old-age pensioner and the poor worker 670 who has to go to the shop. It is claimed that this Bill is a charter for the co-operatives, but it is really a charter for the consumers. I do not think that it goes far enough, but it is at least a small step in the right direction.
§ 3. 32 p. m.
§ Mr. Wilfred Proudfoot (Cleveland)
I woke up at six o'clock this morning and decided to make a long speech, but I find myself with only five minutes, so my notes do not amount to much. I speak from experience of a trade in which resale price maintenance has disappeared, thank goodness. I do not like resale price maintenance, never have and never will.
As I have indicated, it has gone from the grocery business, and what has been the result? The independent man, the small shopkeeper, of whom we have a completely out-of-date picture from Dicken's time, has built his own defences. He has done so by forming voluntary groups.
Once, the small shopkeeper paid, on average, to the wholesaler some 10 per cent. profit. Today the members of my own voluntary group—an association of all grocers in my home town—get, through the correct logistics of their business, the goods for a charge of 3 per cent. What have they done with the other 7 per cent.? They have made a little better living, which is a good thing, they have improved their shops and facilities for their customers, and they have lowered prices.
If that is the result of getting rid of resale price maintenance, then I am all for getting rid of it. After the war I bought a village shop. I know all the names of the people in the village. If one tries to sell a product they do not want they think that one is trying to make a bigger profit on the goods one is trying to push. In some villages, even if one cut prices, they thought that there must be something wrong with the goods. Now, of course, they recognise that this is not the case.
We have been warned in this debate about supermarkets and have been told that they earn as much gross profit as departmental stores. I am shattered. The difference in profit margin between a departmental store and a supermarket is about 20 per cent. But if the small grocer joins a group, he can now buy at the same prices as Garfield Weston.
671 What is more, he gets many more services from being a member of a voluntary chain. He can get technical help and trade education and all the facilities which have never been available to him before. The voluntary chain will even rent him a supermarket, if he wants a supermarket, bought with voluntary chain capital, as has happened in Canada.
Resale price maintenance has stopped the development of discount houses. When I was on a Parliamentary delegation to America, I had the delightful experience of taking eight of my fellow Members into a discount house. I then had the terribly hard task of getting them out again, so intrigued were they with the discount house and the facilities which it provided.
Much has been said about after-sales service with television sets and washing machines and so on. Let us consider what has happened in America and in this country. The small man in television is the man who repairs sets, the repair and maintenance man who sells a few television sets on the side. That is probably a fairer picture of what is happening. The discount centre is somewhere where the consumer can have the choice of buying at lower prices and getting no after-sales service and carrying away with him the object of his desire. This is true consumer choice. If he wants to buy at the recommended price and hopes to get some after-sales service, that is also his choice. However, in my experience after-sales service means that a gadget for one's car which breaks is worth 6d. and can be obtained free, but that one has to pay £3 to have it fitted—and this is always in small print on the back of the contract.
I believe that resale price maintenance is not in the best interests of the people of this country and not in the best interests of the shopkeeper. I believe that very shortly the retail chemists will get themselves together to form their own buying association, when they will do better business than they have done before.
§ 3. 36 p. m.
§ Mr. Roy Jenkins (Stechford)
I should like to congratulate the hon. Member for Cleveland (Mr. Proudfoot) on having made not only the shortest but by 672 far the best back-bench speech from his side of the House today. Like him, I have a little retail trade connection which I should begin by declaring, although, inasmuch as I advise a group which contains departmental stores, supermarkets and self-service shops, I hope that I shall be acquitted by the hon. Member for Putney (Sir H. Linstead) of the charge which is sometimes levelled against me and which he said he was inclined to level against those who spoke against resale price maintenance, that of having a purely academic approach to this matter.
There are two issues which I expected to underly the debate today. The first was the obvious one—whether we wanted effective price competition in retail sales. The second was the extent to which the Government's new and belated policy was adequate for dealing with this matter. I rather expected the debate, although it was about my hon. Friend's Bill, to turn to a somewhat greater extent on the second issue than has been the case. I think that that was because I underestimated the extent of the opposition in principle to any interference with resale price maintenance which lies on the benches opposite and which we have heard come out in speech after speech. The hon. Member for Putney, the hon. Member for Dorset, North (Sir Richard Glyn), the hon. Member for Meriden (Mr. Matthews), the hon. Member for Twickenham (Mr. Gresham Cooke) and the hon. Member for Tiverton (Mr. Maxwell-Hyslop), who did not get called in the debate—
§ Mr. Jenkins
—but who has none the less managed to influence its course by a number of pungent interventions, have indicated that they are firm opponents of any interference with resale price maintenance.
There may be a certain agreement of principle—I was about to say between the Government and most of this side of the House, but perhaps I should say between the Board of Trade and most of this side of the House, for it is a little difficult to know where the rest of the Government stands. It is obvious that there is a great deal of disagreement on the benches opposite.
673 Today is private Members' day. We are dealing with a Private Member's Bill. I think it is lucky for the President of the Board of Trade that when he comes to introduce his Bill he will not have to introduce it under private Members' conditions, with a free vote of the House, because it is obvious from what we have heard that if that happened his chances of getting the Bill through would be only with the support of the Labour Party and not with the support of the Members on the benches opposite. When the right hon. Gentleman talks about his task being that of modernising British industry, and Britain, my impression is that he has to face the task of modernising some of his hon. Friends in the course of doing that.
We heard a lot about the plight and difficulty of small shopkeepers. The hon. Member for Putney, who was the first speaker from the benches opposite, went furthest in this direction, because, apart from his side references to Napoleon, he said—in what I understood to be a premeditated way—that small shopkeepers should be given a special position;a special income independent of what they were able to earn by their economic services to the community because of their value as figures in the community. I hope that he meant the community, and not the Conservative Party. Whichever he had in mind, I do not wish to go too far on that because it is a most extraordinary proposition.
In the first place, I am sure that it is wrong and unfair to small shopkeepers, because it underestimates their economic value, to postulate that they can be kept going as pillars of the local community only by being given a special position and special sort of subsidy. Secondly, if one takes up that sort of attitude to the introduction of any fresh wind of competition, one thing is certain. It is that one will never turn this country into an effective growth economy.
I am sorry that the hon. Member for Dorset, North is not in the Chamber at the moment. He spoke a great deal about the small man—whether he was thinking of himself as a representative figure I was not altogether clear—and the immense difficulties in which he would find himself 674 if resale price maintenance were to go. The hon. Gentleman then advanced what seemed a most surprising proposition, and I am sorry that he is not here to deal with it. He said that he was worried about the small man in an isolated village shop. He implied that someone keeping a small shop in town next door to a supermarket would not be too badly off, but that the village shopkeeper would be in a difficult position. That seems to be the reverse of the truth of this matter.
The village shopkeeper has the advantage, very naturally and rightly so, of lower rents and therefore of lower overheads. But, secondly, and more important, as the Parliamentary Secretary mentioned, he has a monopoly position, or at any rate a semi-monopoly position. It is reasonable for the consumer to decide whether he is willing to pay a few pence extra for the convenience of shopping on his doorstep, or whether he wants to make the journey to a larger town, do his shopping on a bigger scale, and get the advantages of greater economy.
It is a great mistake from the point of view of any hon. Member to argue this question too much in terms of the small shopkeeper being someone who needs propping up. In many cases he renders valuable service to his customers, for which they are prepared to pay.
There is another point which is not fully realised. It is that while under resale price maintenance manufacturers make both large and small shopkeepers sell at the same price to the customer, they do not necessarily themselves deliver at the same price to the large shopkeeper and to the small one. Even under resale price maintenance the larger shopkeeper gets a much bigger discount from the manufacturer than does the small shopkeeper. It is a classic example of the small shopkeeper's getting the worst of both worlds. The large shopkeeper gets the advantage of the bigger discount from the manufacturer, but the one thing that he is not allowed to do under the present system is to pass on that advantage to the consumer. We therefore have the position not in which the small shopkeeper's greater profit is made equivalent to that of the larger shopkeeper, but in which the larger shopkeeper makes a higher 675 rate of profit but is not allowed to pass on that advantage to the customer, as he should be.
We have also heard a certain amount about after-sales service, and the suggested appalling effect upon it which the abolition of resale price maintenance would have. I would point out, first, that an after-sales service does not begin to enter into a great range of price-maintained goods. Within that field it is a minority question. Secondly, we have to ask how efficient is the after-sales service which is provided. The hon. Member for Twickenham has not made a speech, but he has had a hard day, because many speeches have been made at him. It was suggested to him—and I would underline the suggestion—that if a person had anything to do with the garage industry he would keep away from this House when the question of resale price maintenance was debated, because if there is an industry which is a bad advertisement for R. P. M. it is our garage industry.
§ Mr. Gresham Cooke
The hon. Member must admit that there are about 20, 000 garages throughout the country. Some are better than others. Some of them are in very remote areas. I am sure that he would not like to envisage the position which, R. P. M. having been abandoned, everybody flocked to the big towns to buy their motor cars, leaving the little men in the country—who perform a very good service—being no longer able to sell their motor cars and thereby being forced out of business to the great detriment of the people in their areas.
§ Mr. Jenkins
I can assure the hon. Member that I should be happy to find a garage which gave good service anywhere in the country.
If R. P. M. is abolished in the case of trades where after-sales service is necessary, at any rate for some customers, the thing will shake down eventually, and we shall have a situation in which some retailers will sell at a lower margin of profit and make it clear that they will not give an after-sales service, while others, selling at a higher margin of profit, will make it clear that they are giving such a service. The customer will 676 be able to choose between the two. That is quite a reasonable position.
In this connection we have also heard a great deal about discount houses in the United States. But no one in his right mind goes to a discount house expecting an after-sales service. He knows that he will not get it, but he goes expecting to get his goods at 30 per cent. off cost, in the case of large durable consumer goods, and he thinks it is worth while to achieve this saving without having the benefit of an after-sales service. That is a quite legitimate and reasonable exercise of choice. In passing, I must point out that it is quite untrue that the discount houses in the United States have mainly challenged the small, independent, one-man retailers there. Above all, their challenge has been to the department stores which were previously selling at a very much higher rate of profit than is the case here.
By maintaining R. P. M. we are not entirely doing away with all competition in the retail trade—not even within the range of goods where R. P. M. applies. What we do away with is the price competition, and we therefore encourage retailers to go in for all sorts of other forms of attractive services. This is all right in its way, except that there is the danger that this is a very wasteful process from the point of view of the economy. It is offering the customer almost everything he wants except the one thing which, perhaps not in the majority of cases, but in a large number of cases, he prefers to have, that is, lower prices.
When my hon. Friend the Member for Grimsby (Mr. Crosland) spoke earlier he was interrupted by an hon. Member sitting below the Gangway opposite and asked what he would do about it. It seems to me to be the present position with regard to airline tickets under the I. A. R. T. A. Agreement.
§ Mr. Jenkins
I will say something about railways later.
The present position about airline tickets is that, there being no price competition, we get the ludicrous situation where air operators concentrate on providing the traveller wishing 677 to cross the North Atlantic, and who will go first-class, with a ticket for one way in which is included the cost of a champagne luncheon on the way. But the traveller may prefer not to have a champagne luncheon and to pay less for his fare.
This is exactly the position into which we get. What the hon. Member for Tiverton (Mr. Maxwell-Hyslop) seems to be advocating is not the existing position in relation to railways but the position in which when one buys a railway ticket one pays for a meal as well, whether one wants it or not. That is the sort of situation we want to avoid.
§ Mr. Maxwell-Hyslop
First, the analogy is not a good one, because the traveller can fly across the Atlantic by another brand, by the Loftleider line, which offers a cheap fare with sandwiches instead of champagne. Secondly, the question which I asked his hon. Friend was not the one he mentioned. I asked whether he believed that the price should be related to the cost. He replied that he did. Naturally, therefore, if the party opposite returns to office we can assume that fares will be doubled. May I ask the hon. Gentleman whether he intends to talk the Bill out or whether we are to have a vote on it?
§ Mr. Jenkins
I do not intend to talk it out, but I hope that the hon. Member will not get into the practice of getting to his feet in the guise of asking one question and then asking another. I can assure him that I will sit down by 4 o'clock.
I think that the case for the abolition of resale price maintenance, the case for exposing retail trade to the same competitive conditions as are generally accepted by people in manufacturing industry, is overwhelming. It would be very foolish, of course, to close one's mind to the fact that a case can be made out in certain circumstances for an exception.
The right hon. Member for Reigate (Sir J. Vaughan-Morgan) said that once one gets on to exceptions the logical position always becomes a little difficult. There is something in that. But this applies to the whole of our monopoly and restrictive practices legislation. The view I take is that the general case is overwhelming and that the onus of 678 proof is very heavy indeed on those who wish to promote the exception. The analogy which the hon. Member for Putney made this morning about not calling a man guilty before he is proved guilty is a totally false one. It is totally unreasonable to import comparisons with the criminal law into this scheme. It is not a question of calling a man a criminal but merely of preventing a manufacturer from imposing a discipline upon a retailer which he does not want. It is a question, on the other hand, of not allowing the retailer to make his own decision as to what is best from the point of his business and from the point of view of the consumer. I see no reason, therefore, why the onus of proof should not rest heavily upon those who want to promote the exception. It is also important that the promotion of these exceptions should not be allowed to hold up the effective coming into force of the change.
The question which we have to ask ourselves is; to what extent the Government's proposal is likely to provide an effective answer. The Parliamentary Secretary this afternoon made an effective speech on the general proposition. I rather wish that he had been allowed to make such a speech with equal effect in this House two or three years ago, or, if not allowed to make it in the House, that he had at least made it to his colleagues. There is no argument for making the change now which did not apply at least in 1961. I leave aside the question of the policy of the present Minister of Defence deliberately going in the other direction in 1956.
By 1961, there was a strong departmental report in favour of the abolition of individually maintained resale prices. We had a President of the Board of Trade who tried it with his colleagues in the Cabinet but failed. Now there is, perhaps, a more persuasive President of the Board of Trade. That is the only difference, however, and one is left in great doubt whether the Measures which the Government propose will carry out this policy effectively.
For example, we do not know—I am surprised that the Parliamentary Secretary would not even answer this question from my right hon. Friend the Member for Battersea, North (Mr. Jay)—whether the Government Measure will 679 definitely go beyond the repeal of Section 25 and whether it will make it illegal for manufacturers to withhold supplies. Still less do we know how quickly the process will operate. It seems to me extremely likely—and this is the view taken by the Financial Times this morning—that if Ministers who are opposed to the policy of doing away with resale price maintenance are able, supported by the sort of back-bench speeches which we have heard today, to chisel away at the Secretary of State's announcement, we might well go on for several years without any effective change.
The Bill of my hon. Friend the Member for Wednesbdury (Mr. Stonhouse) would deal with the matter much more quickly and effectively. I can believe what the Parliamentary Secretary says about there being considerable drafting difficulties and that the Government might want to make substantial changes. I once introduced a Private Member's Bill, in which the Government completely changed the drafting, but then, in Committee upstairs, we were able to put back a good deal of the substance of the proposals against the wishes of the Government. That might not be a bad approach to this Bill. I am sure, however, that in principle the Bill would give a more effective, tougher and firmer approach than anything we are likely to get from the Government at the present time in view of the conflicts in the Cabinet and the opposition on the benches opposite.
Nevertheless, the Bill has served the purpose of bringing about—
§ Sir J. Vaughan-Morgan rose in his place and claimed to move, That the Question be now put.
§ Question, That the Question be now put, put and agreed to.
§ Mr. Roy Jenkins
On a point of order. It is still one minute before four o'clock, Mr. Speaker and I had every intention of resuming my seat—
§ Mr. Speaker
This is one of the few matters which are left to the discretion of the Chair. I accepted the Motion. and what has happened is that the House has decided that the Question be now put.
§ Question, That the Bill be now read a Second time, put accordingly and negatived.