HC Deb 12 May 1964 vol 695 cc377-83
Mr. Heath

I beg to move Amendment No. 23, in page 5, line 26, at the end, to insert: (c) the prices at which the goods are sold by retail would in general and in the long run be increased to the detriment of the public as such consumers or users; or. This Amendment will provide a new gateway to Clause 5 and, again, it is put down as the result of an undertaking which I gave in Committee. It will allow it to be argued that the ending of resale price maintenence would lead to higher prices. In Committee, a number of hon. Members were anxious about the absence of such a gateway.

11.0 p.m.

In particular, it was argued by the hon. Member for Ebbw Vale (Mr. M. Foot) and my hon. Friend the Member for Hertford (Lord Balniel) that this was one of the heads under which the Restrictive Practices Court had found in favour of the Net Book Agreement but that it was not in the Bill as originally drafted, and I undertook to table an Amendment. The Amendment will permit the respondents to argue that without resale price maintenance prices would in general and in the long run be increased to the detriment of the public.

There was an Amendment with a similar object before the Committee. That referred to prices being on the average higher. This gateway has been phrased on the basis of the judgment in the net book agreement case, and it takes the two specific points made by the Court on that occasion. What the Restrictive Practices Court said in its judgment was: To speak of the average price of books does not help. That was the phrase used in the earlier Amendment. We had not followed that. The conclusion of the Court was that "prices generally would rise". This is the phrase that we have embodied in the gateway.

The other point that the Court made was: It is the results which would ensue in the long run with which we are principally concerned, not those which might for a short time only follow the determination of the agreement. So by using the phrases "in general" and "in the long run" the Amendment is, I think the House will agree, in accordance with the finding of the Court.

When we discussed this previously the question of the short-term and the long-term effect of prices was raised by my hon. Friends the Members for Gillingham (Mr. Burden) and Bournemouth, West (Sir J. Eden). My hon. Friend the Member for Bournemouth, West suggested that there could be a case in which prices began by going up and were subsequently reduced. My hon. Friend the Member for Gillingham suggested exactly the reverse, that they might first go down and then go up. I think that the phrasing of the Amendment deals with both cases in concentrating on the long-term effect which the Court will have to look at when it is considering whether a case comes within this gateway.

I expressed my view previously that I would have thought that there would only rarely be cases in which the ending of resale price maintenance could lead to increased prices, but I also readily acknowledged that this was one of the three grounds on which the Court based its judgment in the net book agreement case. So I have tabled this Amendment to provide for what I think will be the exceptional case. It allows for this argument to be put before the Court, about the progress of prices in general and in the long run.

I hope that the House will feel that I have fully met the undertaking which I gave in Committee and that this is appropriate phrasing for such a gateway, and I commend the Amendment to the House.

Mr. R. Gresham Cooke (Twickenham)

I express gratitude to my right hon. Friend for tabling this Amendment in response to the request of a number of my hon. Friends. It should be put on record that too often it has been said in the Press that the Government have not made any concessions to back benchers. The Government have made three or four Amendments in Clauses 2, 5 and 7 in which I was very much interested.

As my right hon. Friend said, there seem to be two ways of looking at what might happen if resale price maintenance were abolished. I have discussed this with persons in the motor industry and persons in the radio and electrical trades, and there seem to be two opposing views. One view is that the small man with his smaller overheads will cut prices to a great extent and thereby things will be very much cheaper. But there is also the view that in certain areas the large distributive firms will gobble up all the smaller firms in the neighbourhood, will hold practically a monopoly and will put prices up, and we ought to recognise that.

I wish to draw to my right hon. Friend's attention a point which was drawn to my attention only last night—that in certain complicated trades, such as radio, electrical products and motor cars, the price of after-sales service will be completely free if r.p.m. is abolished, and there may be a tendency by some dealers to cut their margins to sell goods at a very low price and to upgrade the price of their after-sales service. That has happened abroad. I am told that if one is motoring through the deserts of America and one's fan belt breaks 100 miles from a town, and if one goes to a dealer to have it mended, he may say that the price is 100 dollars. If one turns to the service handbook and points out that the price for General Motors is only 2 dollars 50 cents, he may reply, "If you want it for 2 dollars 50 cents. you must drive 100 miles to the next town."

There is a possibility, particularly at week-ends in this country, that service charges may be put up, just as greengrocers put up the price of vegetables on a Saturday. My right hon. Friend might consider whether in another place he could include after-sales services in the Amendment as well as goods in case the price of these services rose to the detriment of the public, which nobody wants. Having said that, I commend the Amendment and thank my right hon. Friend for putting it in the Bill.

Mr. A. E. P. Duffy (Colne Valley)

Hon. Members opposite should hesitate before they continue to congratulate the Secretary of State on what they regard as a concession. It is true that in Committee he gave an undertaking that he would introduce such an Amendment, and I welcome it on that account. I recognise that the crux of the Bill lies in this Clause and in the number of exemptions from abolition which it provides. I want those exemptions to be reduced to a minimum to obviate the continued weakening of the Bill.

But I need not have worried, because I do not regard this Amendment as a concession and certainly not as a gateway, as the Secretary of State described it. I supported my hon. Friend the Member for Ebbw Vale (Mr. M. Foot) in Committee when I said that I was prepared to make an exception in respect of the net book agreement, but I do not think that I could say with certainty that the net book agreement will get through this gateway. The right hon. Gentleman admits that theoretically there is a case, and so do I. It would not be difficult for many of us to see the theoretical possibility of prices rising in general and in the long run. Can you imagine the play, Mr. Speaker, that the economists will make with the Court when they are trying to prove that prices will in general and in the long run rise to the detriment of the public? Does any hon. Member believe that if prices are no longer fixed, they will tend to rise? Is there any hon. Member who is prepared to say that with conviction and defend it? Is there any hon. Member who is prepared to say that it is inevitable that prices will rise in the long run if prices are no longer fixed?

Mr. Maxwell-Hyslop

If the hon. Gentleman had been present when this matter was debated in Committee, he would have heard arguments deployed to that effect.

Mr. Duffy

I will concede some of the arguments. I will concede that it is possible that increased competition will so reduce the number of retailers or suppliers that monopolies will be created. I will concede that fluctuations in retailers' demands, created by their greater reluctance to hold stocks, will push up manufacturers' costs and so increase prices. I will not weary the House with a list of theoretical possibilities, but they are only theoretical. When we return to firm ground, we must recognise that in the long run when prices are no longer fixed they will not tend to rise and that, moreover, this will be very difficult to prove.

The significance of the Amendment lies, unhappily, in a weakening of the Bill. Arguments of this kind before the Court will delay the application of the Bill and will encourage applications to the Court simply in order to protract proceedings. The Amendment will be more important in its indirect than in its direct effects. I do not regard it as a concession, but I regret it, for I regard it as a weakening of the application of the Bill.

Mr. Maxwell-Hyslop

I should like briefly to welcome the Amendment, which removes one of the major defects in the Bill as it was introduced. I am glad that my right hon. Friend has introduced it in this form—a form which already has a definitive existence in the record of the Restrictive Practices Court. My right hon. Friend does not believe that it will often be used. I believe that it will be used more often than he does. It does not matter in the least which of us is right when the Amendment is made. There is no need whatever to rehearse the reasons for believing it to be necessary, for that was done fully in Committee. I regard the Amendment as having removed one of the great dangers inherent in the Bill, and I therefore welcome it thoroughly.

Mr. Cole

This gateway may well prove to be the most important of all, and I am grateful to my right hon. Friend for including it. I support what my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) said about services in this regard. He mentioned a number of trades in which after-sales services are sometimes all important and in which one might sacrifice a little on the capital cost in order not to lose for many months afterwards, for instance, with a year's guarantee. This is important to at least one trade where there is resale price maintenance and where after-sales services are of a very high character. I hope that my right hon. Friend will consider introducing in another place an Amendment to provide a gateway not only when prices go up with the abolition of resale price maintenance, but, equally, when the cost of servicing may rise. That should be an additional part of the gateway.

Mr. Jay

I am a little surprised that hon. Members opposite should think that they have won such a great victory. The Secretary of State told us earlier that he did not believe that this would ever happen except in very rare cases and that nobody would be able to prove that the abolition of resale price maintenance would raise prices. If that is his view, he has inserted into the Bill something which does no harm, on that assumption, but which he expects to have very little effect and very little substance.

I find it difficult to see how the abolition of resale price maintenance, except by the operation of one of the processes already covered in the existing gateways, such as a reduction in the number of retail outlets, could lead to a rise in prices in the long run. If that is so, and that is the right hon. Gentleman's view, although he has done no harm, he has not really made a concession of any material substance and this is a rather Pyrrhic victory for hon. Members opposite.

Amendment agreed to.

11.15 p.m.

Mr. Heath

I beg to move, That further consideration of the Bill, as amended, be now adjourned. We have made considerable progress today, and I think we have reached that position where it is not unreasonable to assume that we shall be able to complete the Report stage and Third Reading tomorrow.

Question put and agreed to.

Bill, as amended, to be further considered Tomorrow.