§ Question again proposed, That the Bill be now read a Second time.
§ 6.15 p.m.
§ Sir J. Rodgers
I want to refer to the setting up of a Registrar of Restrictive Practices, but before doing so, I should like to refer to the new powers for dealing with newspaper mergers. Like the hon. Member for Acton, I am a little worried about whether the provision goes far enough. For instance, I do not know why it excludes magazines and other publications. Why should it be confined merely to the daily and weekly Press and not bring in the local Press and the wider media of communications? This is a 1256 consideration which will have to be looked at carefully.
However, my main reason for intervening is to suggest that we should take monopolies and mergers out of politics, not only out of party politics, but politics as a whole, as much as possible. It would have been advisable to have set up an independent office of the Crown, as described by the committee which I mentioned and of which I was deputy chairman. This new office of Registrar of Monopolies would be analogous in some ways with the Registrar of Restrictive Practices. He would be an official adequately supported by a staff and responsible for referring cases to the Monopolies Commission. This would do a great deal to allay the undoubted suspicion of many businessmen who feel that to be referred to the Monopolies Commission is in some way to be found half guilty, the view being that the Monopolies Commission is judge, jury and prosecutor, which is not consonant with normal British procedures.
Obviously, in the ultimate analysis it must be for the Government of the day to decide what action to take on the recommendations of the Commission, or what further powers or legislation may be required, but if there were a Registrar of Monopolies, he would be responsible for collecting and presenting evidence to the Commission, which would add to the speed at which the Commission could work. If he had an adequate staff, he could, in consultation with industry, prepare briefs very much more quickly, which would relieve the Commission of a great deal of its preliminary work.
I very much welcome the idea of having separate groups of the Commission in order to speed up the work but, as has been pointed out, the powers under the Bill are now extended to include not only services, professional and commercial, but special cases such as newspaper mergers. While the President of the Board of Trade may poke fun at us for having at one stage reduced the numbers of the Commission, enlarging its numbers to 25 is utterly inadequate now. Why should the powers not be extended, as with newspapers, so that there can be people with special knowledge of particular subjects, temporary commissioners, so to speak, who 1257 could be brought into supplement the Commission?
It would be for the Registrar to determine which mergers were calculated to result in market dominance, for instance. He would determine which should be referred to the Commission and in what order of priority. Under the present procedure, irrespective of which party is in power, one is always under pressure to refer this and not that and one is asked why is this or that industry but not the other referred. One is asked whether there is not some party political consideration behind doing or not doing something. My proposal would take the matter out of party politics to a considerable extent.
It would be for the Registrar to prepare the case to be presented to the Commission, and that would relieve the Board of Trade of many of its headaches. Such a registrar could have power to hold up a merger until the Commission had recommended on whether it would operate in the public interest. In my view, it should be illegal to proceed with a merger until the Commission had made its recommendation. I do not believe that this would cause a great deal of delay. Obviously, there would be chaos if it took years to make a decision, but many mergers now require much preliminary negotiation and a good deal of information has to be given to other bodies, such as the Stock Exchange, and I see no reason why a confidential and private intention of merger should not be given to the registrar, who could then pronounce upon it. The present rate of progress has been lamentably slow. The combination of the appointment of a Registrar of Monopolies with an adequate staff and the enlargement of the Commission by bringing in people with specialised knowledge on specific inquiries would do much to speed up the work.
In addition, it would be only right and proper that firms contemplating mergers should have the right to go privately to the Registrar and tell him of their intentions and seek his advice as to whether, in his preliminary view, they should be proceeded with or not. There would be the reserve power of remitting the matter to the Monopolies Commission if he proved wrong. It would be of great assis- 1258 tance to business houses if there were someone, not a party politician, who was intimately associated with the subject to whom industrialists and others could go to talk over proposed mergers. I do not believe that the point of confidentiality would be breached in that way.
It is essential that before a Monopolies Commission hearing such a person as a registrar of monopolies should be empowered to send the companies concerned a statement of the case which would include an indication of the recommendations which he was seeking from the Commission. In this way they would be saved a good deal of wasted time because they would know the case which would be made against them and for which they had to prepare a defence; whereas at present they go before the Monopolies Commission with stacks of figures and papers not knowing which particular aspect of their business will come under scrutiny. Such a power as this would be of great benefit in speeding up the work.
The Commission should have power to hold up mergers and should take powers, whether there is a Registrar or not, to compel firms to divest themselves of certain assets if this has been recommended. I very much welcome the extension of these powers in the Bill.
As I say, the one thing which alarms me is the whole question of fixing prices. We will have to consider this matter most carefully in Committee to find out exactly what is the machinery and how long it operates because, to my mind. this could be a most dangerous power to give to any Government, of whatever persuasion, unless it is circumscribed.
I support the suggestion of my right hon. Friend the Member for Reigate that the name "Monopolies Commission", which has always offended me, because it is a nonsense—30 percent. of a market does not make it a monopoly in the strict sense of the word, and is not understood by the public—should be changed. I hope that a better name can be found for it.
I am sure that the Bill will receive an easy passage today, but I am equally sure that the Committee stage will, perhaps, be very long and protracted.
§ 6.23 p.m.
§ Mr. J. T. Price (Westhoughton)
The hon. Member for Sevenoaks (Sir J. Rodgers) has addressed the House so agreeably and in such a good-natured and well-intentioned manner that I hesitate to say anything critical of his remarks. But I think it should be said in this House that there is an increasing tendency in our debates to say that we should take this or that question out of politics and that we should resolve ourselves into a Council of State, as we are all reasonable men. The hon. Gentleman, who spoke in such a pleasant manner, has added another matter to the list of things which should be taken out of politics—monopolies and mergers.
The list of things which we are told should be taken out of politics is already lengthy. We have been advised in recent months to take education, National Insurance, defence and foreign affairs out of politics. My colleagues who know me well know that I am anything but a bigoted politician, but I am becoming restive about all these proposals to take every controversial issue out of politics. This would be a very bad thing, for the simple reason that it would reduce us to a set of dishonest people who could not face up to the real issues and argue the merits of them.
§ Sir J. Vaughan-Morgan
I agree with a great deal of what the hon. Gentleman says, but surely he will understand that what has happened in this case, and what happened in the case of immigration which we discussed last week, is that these issues have been taken out of party politics because the Labour Party has, in the main, taken over our policies.
§ Mr. Price
That is as may be. I should be out of order if I started to debate that matter. Perhaps I have left myself open to a jibe of that kind. I know that the right hon. Gentleman tries to be fair, but sometimes he falls short of his own high standards.
I am prompted to intervene very briefly in the debate for two main reasons. First, after some months" absence from our counsels, we have had the return of the right hon. Member for Altrincham and Sale (Mr. Barber). I am glad to see him in his place, because I happen to live in that part of the world and he is my Member of Parliament. Therefore, I have a 1260 special and more personal interest in what he said than would normally be the case. I always treated with respect what he said in his previous incarnations as Financial and Economic Secretary to the Treasury, Minister of Health and almost Pooh-Bah. He had a very good record in this House, and I always listen to what he has to say with respect, apart from liking his personal qualities, as he is well aware.
People talk about polemics in this House, but the right hon. Member for Altrincham and Sale will forgive me if I say that there is no more polemical politician in the House than the right hon. Gentleman. He never seems to miss an opportunity of scoring a party point. When I heard him say today that during the last fifteen years the only thing which has made this country tick over has been the capitalist system, I wondered whether I was dreaming or whether he was talking a lot of bosh. He forgets that the industries which are not nationalised in a mixed economy, to which my right hon. Friend the President of the Board of Trade referred very fairly, ticked over only by a combination of forces. If there had not been a tremendous increase in and expansion of the power industries, particularly electricity and gas, British industry could not have made the very substantial progress which it has made.
Some of the private sectors of industry have been able to tick over only because they have been able to attract public money into their coffers. They could not raise sufficient money on the market to finance them. This applies, for example, to the steel industry. Special facilities had to be provided. The right hon. Gentleman will know from his previous incarnation at the Treasury of the great transactions with Colvilles Ltd in Scotland. That concern had a great capital development programme which it was unable to finance from the market. I should be the last person to raise these polemical issues if they had not been raised from the benches opposite. I want to be fair about them and to face up to them. When we speak polemically or in a doctrinaire fashion—I am the least doctrinaire Member of this House, or one of them—[Interruption.] I am not doctrinaire in the sense that hon. Members opposite would have the public believe 1261 we are all doctrinaire in this House. I am a Socialist. I am not afraid to say it in the House, and I will continue to say it, but I am a Socialist concerned with practical politics. I am not fobbed off by the idea that right hon. and hon. Members opposite who detest the idea and principles of Socialism are still able to take advantage of a great deal of public money for their friends in private industry.
Let me refer—and I believe that this is strictly germane to the Bill—to the aircraft industry. If ever there was a vast monopoly in this country, it is the aircraft industry. We have had a lot of trouble and many debates in the House about it. We shall never agree about it. I suppose that we will go on disagreeing about it.
The fact is that the Conservative Government set up a two-headed monopoly in the aircraft industry. They set up the British Aircraft Corporation and the Hawker—Siddeley Group on the other side. I could give chapter and verse to anyone who is interested that because of the merging of many subsidiary firms into those two great groups, with a great injection of Government capital to make it possible, we have outside those groups the independent pillars of capitalist society whose principles are so strong that they have resisted becoming part of this monolithic organisation. Many of these small service companies which are still operating as independent capitalist undertakings are unable to obtain orders from the great corporations because those giants are concerned only with servicing their own subsidiaries who came over into the grouping with them. This is something that should be mentioned in this House, and there may be occasions when we can go more fully into it.
The right hon. Member for Altrincham and Sale made another rather interesting, to me even fascinating, proposition when he spoke about capitalist ethics. One cannot speak about capitalism purely as an economic phenomenon. One has to speak of it in ethical as well as economic terms. The right hon. Member complained that if the Government were given these powers under this modest Bill to hold up for six or nine months or longer of inquiry a major change which was referred to the Commission, this would in 1262 some way detrimentally affect the prices of the equities in the undertakings concerned. Of course it might. But one cannot make omelettes without cracking eggs. Who should suppose that no inconvenience would be caused? Who should suppose that anti-monopoly legislation could affect its purpose without hurting anybody or causing inconvenience to somebody?
Let us take the converse side of the picture. If two companies or a group are to he merged by, for want of a better term, some monopolistic tycoon who is the majordomo in the operation, it is not only the shareholders whose interests might be affected by the outcome of his proposals; it may be thousands, and scores of thousands, of workers and technicians, officials and people whose lives are involved in the industry and who may become redundant. Surely, when one looks at the modest scope of the Bill, one would not expect that kind of point to hold much weight in serious discussion.
My right hon. Friend the President of the Board of Trade, in what, I think, anyone would agree was a modest and restrained approach to the question, dealt with the basic consideration of an asset value of more than £5 million as a criterion under which a proposed merger should be referred to the Commission. That was one of the criteria. I can think of many other undesirable monopolistic practices which would not be caught by that kind of criterion. It might be one which is useful, but there are many highly specialised products which are more or less monopolistic—
§ Sir J. Rodgers
As I understand the Bill, there are two criteria. One is the size of the firm and its share capital of £5 million. If it is not caught under that criterion, it can be caught, even if its capital is much smaller, by being simply in the monopoly position.
§ Mr. Price
That, I think, is the intention, but I am referring to the dichtomy between the two considerations, the purely financial holding aspect and the function of the company in society.
Imperial Chemical Industries is a wonderful, vast capitalist undertaking. I am not sure that all the directors of I.C.I. are capitalists. Most of them are functionaries. They are not people who hold 1263 much capital in industry. They are functionaries in the capital held amorphously by millions of people outside who take no part in the management of I.C.I. It is about time that in this House, in debates of this kind, we stopped kidding ourselves that these great amorphous undertakings, whose stocks and shares are held in thousands of portfolios throughout the world, are in some way private enterprise. They are nothing of the kind, because the people who are functionally managing them, often men of brilliant capacity and interested only in the efficiency of their industry, are not particularly concerned with the financial return for the company. That is a secondary matter. The right hon. Member for Altrincham and Sale was less than correct in referring to that.
Let me take one particular monopoly situation which does not seem to be dealt with in the Bill. We can forget about the test of capital, but let us take the test of commodity. Let us take an item like soda ash, for example, a chemical which is universally used in a thousand and one other processes, which is a complete monopoly of I.C.I., and which is known to be sold at a completely ridiculous, unrealistic price in relation to its cost of production but the price of which is always sought to be justified on the ground that it is a return for a good deal of the research and development which has been put into other products. If we in this House are seriously concerned to bring down the cost of living, we must look closely at many basic commodities the cost of which enters into the cost of so many other commodities.
I do not wish to pursue that point further but will conclude what I have been saying with two short references, one of them to an intervention which I made during the speech of another hon. Member and one to some remarks which I made after listening to some of the speeches from the benches opposite. My right hon. Friend the President of the Board of Trade said that the Bill would apply to services as well as to commodities. I ventured to intervene shortly whilst my right hon. Friend was addressing the House about a service which I regard as being unfair exploitation, and that is the function of costs and works accountancy. I know that my hon. Friend the Member for Heywood and Royton 1264 (Mr. Barnett) has a professional interest in this matter and if I say anything with which he disagrees, I will be quite willing to give way to him.
The whole of the inflationary spiral is correctly diagnosed as stemming largely from the colossal inflation in land and property. One of the contributing factors is the automatic 8 percent. which is added for the surveyors and valuers who do the costing and the like. That is a fantastic increase.
§ Mr Price
Just a moment. I will give way presently. There are several other things on which I could address the House at length and uninhibited. I am concerned with doing something in this House to put a brake upon the monopoly abuses which have artificially increased the cost of commodities to the ordinary people.
§ Mr. Barnett
In his original intervention, my hon. Friend did not, perhaps, intend to do so, but he gave the impression that cost accountants, to whom he referred, were causing increases in price. I am sure that he did not intend to give that impression, because the reverse is the case. Perhaps I should declare a general interest as an accountant. Surely, my hon. Friend would agree that the reverse is the case since accountants in industry are helpful to the economic structure of the country in reducing prices generally.
§ Mr. Price
I would not wish to be unfair to any professional body and I accept the implied rebuke. Perhaps I ought to have said quantity surveyors, which is what I intended to say. If I got it wrong, I humbly apologise, because the last time I attacked any professional body in this House, and I have attacked the legal profession vigorously on a number of occasions, I received a spate of letters from irate and indignant members of the profession saving that I did not know what I was talking about. That did not, however, deter me in the slightest.
§ Mr. Shepherd
The hon. Gentleman complained about the costs of professional services relating to building, though he did not say so in such specific terms. Would it interest him to know that his wonderful Ministry of Public Building and Works charges Government Departments over 20 percent. for services which are obtained outside at less than half that amount?
§ Mr. Price
Well, I am grateful to the hon. Gentleman for drawing the attention of the House to that, and putting it on the record. If a Ministry were doing that it would not find me in very warm support of it, whether a Labour-controlled Ministry or another, for such a practice would be quite indefensible, unless, of course, some special reasons were produced for that sort of charge adding one-fifth to the costs of production.
I apologise for having made a longer intervention than I intended, but there have been a lot of interruptions and I have tried to give way to everyone who wanted me to give way. Of course, for what is the purpose in this House except to debate? What is the purpose of burning the midnight oil in reading briefs? Our purpose is to stand up and say what it is we believe, and some of us try to do that, rather clumsily sometimes perhaps, but nevertheless we do.
I am a little disappointed with this Bill. It is only a modest attack on a major problem which I should like to see dealt with in a rather more forthright manner. I do not think I shall be alone in saying that no tycoon concerned with mergers and monopolies will lose any sleep over this sort of Bill. For the last 17 or 18 years we have been tinkering with this sort of legislation. One of my hon. Friends behind me, who has now left the Chamber, spoke of the small number of things which have been referred to the Commission and the Court. Even in those cases in which the Commission has reported adversely upon monopoly practices no action has been taken. It has just been ignored. There have been no sanctions taken by anybody. In spite of having the Commission and the Court, plus ce change plus c"est la même chose—if that is what the lawyers call it.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
Without wishing to prolong the hon. Member"s intervention, may I 1266 ask him whether he would not agree that, following the report on the supply of industrial gases, the action taken by the British Oxygen Company was fully in accordance with the recommendations of the report?
§ Mr. Price
That is an exception which proves the rule. There were some exceptions. I am obliged to the hon. Gentleman for mentioning that. He is quite right, but there are many others which took a quite different line. I happen to be a Lancashire Member of this House, having had something to do with a famous Lancashire industry which is not so large as it used to be, and on which there was a very adverse report, and as the right hon. Gentleman the Member for Altrincham and Sale will remember, because he was at the Treasury at the time, nothing was done about it. That is the sort of thing we get. It is no use bellyaching about it in this House.
I want to sit down, but somebody keeps getting up to question me. However, one further shot from the locker, if hon. Gentlemen will allow me. The greatest monopoly in this country is not a commercial or manufacturing monopoly. It is a financial monopoly. I say honestly as a Socialist, that anything we do to restrict the unnatural, anti-social practices of monopoly will always be defeated so long as we are faced with a financial monopoly which can erect all kinds of holding companies to do what they want to do and which are not covered by some other branch of the law. I know that that matter is incapable of being debated in this short debate, but I think it appropriate to mention it.
Although if there is a Division on the Bill I shall support it, I do not think it goes anywhere near as far as I would wish in dealing with monopoly practices which, in many directions, go diametrically against public interest by artificially increasing the prices of the goods which everyone needs in his everyday life.
§ 6.44 p.m.
§ Mr. Charles Fletcher-Cooke (Darwen)
Like the hon. Member for Westhoughton (Mr. J. T. Price), I am a Lancashire Member. I totally disagree with him about the lack of effect which orders and recommendations and court judgments have played in the history of this branch of our industrial and commercial activity 1267 since the 1948 Act. The vast majority of the recommendations of the Monopolies Commission have been voluntarily adopted and faithfully observed. As for the orders of the Restrictive Practices Court, if the hon. Member was thinking, as I think he was, of the order of the Court relating to the cotton spinners" agreement, all I can say is that, although much disliked by the industry at the time, it was faithfully observed, to the great benefit both of the country and, eventually, of the cotton spinners themselves.
I think this is a good Bill. It has some ommissions, which I deplore. It has omissions about information agreements, the reasons for which I simply do not comprehend. It has omissions about our proposals for a Registrar for the Monopolies Commission by which a great deal of the sting of unfairness to which the President of the Board of Trade himself drew attention in another connection would have been removed.
But it has some novelties, most of which I welcome. I think it is quite right to bring services in, and professional services particularly. The hon. Member for Westhoughton will find that a great many of his suspicions about wicked and secret practices of professional men, when so exposed, as I welcome they should be, to the scrutiny of the light of day, will fall to the ground like scales. I know the hon. Member will accept that as far as accountants are concerned. I welcome that this scrutiny may be turned upon lawyers, because we have nothing to fear.
I gathered from what the President of the Board of Trade said when he mentioned this aspect of the Bill that he contemplated a general report after a general reference of services—whether of professional services as a whole or whether simply of some, I do not know—followed by legislation which might produce some judicial process. I think that was his word, or else it was judicial-procedure. In other words, somewhat of a repetition of events from 1952 to 1956 as they were for combinations for the purpose of trading restrictions. I think that is a very good precedent.
We had some very good action as a result of judicial process set up by the 1268 1956 Act—which, at the time, was much criticised by the party opposite because, it was said, this was not a justiciable process; but in fact the reports of the court have been of the utmost utility, have been very firm, have not caused the outrage among lawyers or laymen which was anticipated and prophesied by many of the party opposite, but which, in fact, as I say, have been of benefit to all. I hope there will be some repetition of this with proper judicial decision at the end, with proper criteria laid down in advance, as was done in the 1956 Act. I would ask the hon. Gentleman who is to reply to the debate whether that is the intention of the Government.
Divesting degrees in the case of monopolies we are to have for the first time. The Americans have had it for years. I think that is a perfectly proper weapon in the armoury of the Government. I am not sure why we have not had it before or why we did not have it in the first instance.
Price control as envisaged in Clause 3(3) seems to me far too severe if it is to be in this unlimited form. It seems to me that the way in which it should be limited is this, because of the dangerous political potentialities about a Government order. This is very hot party politics. It would make the Clause far more acceptable both to industry and to hon. Members on this side of the House if such price regulation could only follow a recommendation of the Commission itself. As I understand it at the moment, although a report of the Commission may not recommend this, either as an immediate remedy for a monopolistic situation, or as a long-stop in a case where industry refused to accept some sort of voluntary arrangement, then if, and only if, the Commission recommended price regulation I think it might become slightly more palatable to hon. Members on this side of the House. But if it is to be produced out of a hat without any such prior recommendation by what is a non-party and independent body, then I think we view it with immense suspicion, and I hope that we shall fight it strongly.
The biggest novelty of the Bill is the question relating to mergers, and here I do not think that the House has realised what a large step forward it is being 1269 asked to take. For the first time the Government are taking powers not merely to stop a merger before it takes place. That is the novelty which has hitherto been concentrated in the Bill. Much more than that, they are asking for powers to forbid or divest a merger in which conditions of monopoly do not apply, or may not apply, but merely because more than £5 million is involved, even if a very small proportion of the market may be involved.
That raises all sorts of new concepts, new philosophies, and new thoughts, and I do not think it enough for the President of the Board of Trade to leave us simply with that on the plate without saying what sort of criteria he and his successors at the Board of Trade are going to apply in such cases. In the case of the monopoly test, we know pretty well what the criteria are in a broad sense. We know, for example, that if competition is likely materially to be reduced, that is a good reason for intervening, and either stopping the merger before it takes place, or breaking up the monopoly, in the technical sense of the word, subsequently. We understand that, but what are the criteria where no conditions of monopoly apply, and where only 2 or 3 percent. of the market is involved?
I had somewhat suspected that it was a question of where foreign interests were bidding. My right hon. Friend the Member for Bexley (Mr. Heath) intervened during the President"s speech, but I do not think that his question was directly answered. I am not saying that it is necessarily wrong to step in in the case of a foreign bidder where one might not intervene in the case of a domestic bidder, other things being equal, but we would like to know whether that sort of consideration is in the Government"s mind, and if that is the reason for this great departure into uncharted seas by the erection of this second criterion which we have never had in this legislation before. Is that one of the reasons?
Is another reason, and this may be a good one, that if the organisation that is threatened is fighting against a takeover bid, it should have greater protection, it itself should be protected, whereas it would not be protected in similar circumstances, merely from the point of view of the public interest, if it was a willing victim, or a partner in the enter- 1270 prise? Is that suggested as a possible cause of distinction, and is that one of the reasons why this £5 million criterion is added?
The second reason that I suggested may be a good one, because in this connection the right hon. Gentleman mentioned the sort of take-over bid the motive behind which is not monopoly at all, but diversification. He mentioned that specifically, and this struck me as immensely interesting, because it is just such a take-over bid which my constituents, the Wall Paper Manufacturers, are being threatened with at the moment. They are not, I think, threatened with the sort of body which would increase in any material sense the monopolistic structure of the industry. After all, it has already been through the mill of the Monopolies Commission and with one or two adjustments has come out pretty unscathed. The bidder in this case, the Reed Paper Group, is not at the moment in any material sense engaged in the manufacture of wallpaper or in any of the similar activities of W.P.M. It is obviously a bid for diversification by the Reed Group, and not a merger which will produce a bigger monopoly situation than already exists.
It has provoked the most enormous resistance, not only from those at present managing W.P.M., but from all the staff —and I ask the Government to believe this, as I think they know—who have spontaneously put out statements objecting to this take-over bid. Ninety-eight percent, of the staff, down to foreman level, which is something quite new in British industrial life, have said that they do not want this take-over to happen. They think the present organisation is perfectly equipped to do its task and they do not wish for any change.
That may or may not be a reason why there should not be a change, but I am instancing this case to ask the hon. Gentleman whether it is this sort of situation which the Government have in mind in introducing this new test. It is not only a new test, but a totally vague one. The only thing that we have to cling to is the arbitrary figure of £5 million, and I hope that when the hon. Gentleman replies he will tell us the sort of conditions in which the Board of Trade will refuse protection for a take-over or a merger which comes under 1271 Clause 6(1,b), but does not come under paragraph (a), the anti-monopoly test. The right hon. Gentleman refused to specify this, and we must be told what the Government have in mind.
It is only the Board of Trade—and this is one of the important features of this —which under the legislation as drafted can refer the case to the Monopolies Commission as a matter of urgency when there is a take-over bid. The victim cannot do so, and in the Wall Paper case, as the hon. Gentleman knows, the President of the Board of Trade has written to me and to others refusing to intervene, not merely on legal grounds, because he is not sure, owing to the time-table, whether he has power to do so—I believe that he has, but I do not want to argue that—but also because he does not think that it would be a suitable case, or rather that he would not wish to commit himself on whether this would be a suitable case, or not. Let us put it in that neutral way. I should like the hon. Gentleman to tell us why it would, or would not, be a suitable case if there were not this legal objection in addition, because I think it would be a good illustration, it would give the House some idea of the sort of way in which this revolutionary proposal is likely to be administered, and I appeal to the hon. Gentleman to address himself to the matter.
The prevention of mergers is likely to be a blunt and rather damaging instrument, and some of my hon. Friends object to this power. I do not object to it with the same force as they do. I think that unless it is very carefully handled, it may cause difficulty until we have learnt to live with this new machine, but I think that we have to learn to live with it. and I am sure that the necessary consequential adjustments in our industrial, financial, and commercial life will be made.
There is no doubt, as the hon. Member for Colne Valley (Mr. Duffy) said, that a great many take-overs and mergers are good, are inspired by motives of economic efficiency, and will do the country a great deal of good. I do not think that many of them are inspired by bad motives in the classical sense, in the sense that there is some wicked monopolist wishing to get a corner in the market and then raise prices because he has a monopoly. I do not think that there are many of them 1272 about in the world today, if only because of the substitutes which there are nowadays for so many commodities, and if only because of foreign competition, which is going to get greater and greater.
But there is a third motive, which may be just as bad, and that is the motive of fear, the motive which says, "If we do not gobble up somebody we ourselves will be gobbled up". This is, on the whole, a bad motive, which is why I support the extension of these powers in the way the Bill proposes, because fear produces fear. The fear of my constituents, from the executives and administrators down to the foremen and the men actually printing the wallpaper and making the paint is—unconsciously perhaps but nevertheless really—a by-product of the sort of fear which the take-over bidders, the so-called "grabbers", have, that if they do not get in first they will themselves be swallowed up.
That is why we have to have powers to break this vicious circle; I hope they will be kept in reserve and used sparingly, but their existence is important. If they are used delicately and with confidence, we shall find that the fears of some of my friends will not be justified, nor will those of may hon. Members on both sides of the House which were expressed when we passed the 1956 Act, and I dare say, though I was not in the House at the time, when the 1948 Act was passed. We have moved a long way, and it has been a bipartisan effort. It is quite absurd for either side to try to score small points off the other. This is a great, successful attempt to produce in this country a competitive industry and a competitive commerce, and, now, a competitive professional atmosphere. I wish the Government well. This is not the modest Bill which the President said it was; it is a comparatively long Bill, containing many novelties. We shall have to deal with them at great length, I am afraid, in Committee, but its lines and its aims are right, and I hope that we get it on the Statute Book.
§ 7.2 p.m.
§ Mr. Edmund Dell (Birkenhead)
I have listened to the speech of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) with great interest, particularly his remarks on the subject of mergers. My own view is that it is right that these powers should exist, but I 1273 think that they will have to be used very sparingly. This is one of the subjects of debate which appears to engender a great deal of agreement, certainly between the Front Benches.
This is one of those Measures which was half-cooked in the previous Government"s kitchen and is now served on this Government"s table. I welcome it, but I cannot say that I welcome it with any enthusiasm. I wait for the next Bill which the President of the Board of Trade has promised us. I do not believe that this one, as it stands, is likely to add greatly to the efficiency of British industry.
All legislation on this subject since the war—the Bill is no exception—has been based on the general attitude that we should take a neutral and uncommitted view of monopolies, contrary to the view taken, for example, in the United States of America, where a monopoly is judged to be bad in itself, and monopolising has often been severely punished. One reason, no doubt, for the attitude taken in this country, as compared to that taken in the United States, is that the United States can—perhaps far more easily than we can—afford to take that attitude. It has a very large market, within which it can have a series of very large units in competition with one another. We, on the other hand, have a small market, within which it may appear that to achieve the economies of scale, to have the finance with which to do the necessary research, we have to have monopolies or very large industries.
But, in fact, monopoly is not the necessary consequence of the small U.K. market. There are, after all, at least two ways of expanding. The first is by monopolising the home market; the second is by advancing in exports pari passu with advances at home. It is a pity that this second way is so little regarded. Exports are of the very essence of any economic problem which this country faces.
I have read two pamphlets, one by the Bow Group and the other by the Poole Commission, both published by the Conservative Political Centre. Without reservation, I say that they are two very good pamphlets. They have one curious characteristic, which is that, in them, the problem of exports is barely mentioned. It seems to me that this problem is the essence of the question of monopolies, as 1274 embodied in the Bill and other legislation. There is, in fact, no limit to the markets open to British firms, if they have the energy to export.
We want to fix our minds on the idea of the export-oriented company. The export-oriented company—if one may use that phrase—is one which achieves its economies of scale and pays for its research by exporting 40 or 50 percent. or more of its total turnover. I suppose that the type of the export-oriented company is the great Swiss chemical companies, Ciba, Sandoz and Geigy. They are firms with a negligible home market, but, on the basis of technical and commercial effort of the highest quality, they have succeeded in becoming dominating forces in the world chemical market.
In this country too, we have such export-oriented companies which achieve their economies of scale and finance their research not just as a result of expanding in the home market nor by monopolising more and more of the home market, but as a result of exports. The car firms mentioned earlier are an example of this. B.M.C. exports one-third of its total turnover, Ford exports nearly a half, Vauxhall exports over 40 percent. There are other examples and I could mention B.I.C.C. and others.
On the other hand, there are firms which have achieved these alleged economies of scale and have expanded by monopolising the home market, but whose export record is pathetic. If anyone in this country wants to buy oxygen he probably has to go to the British Oxygen Company, which exports 8 percent. of its turnover. If he wants to buy tubes of a certain size, he may well have to go to Tube Investments, which exports 9 percent. of its turnover. These are figures which were recently published in the Financial Times.
It may not be possible for every large firm to be export-oriented, but the onus should, in my view, be on them to prove that they cannot achieve the economies of scale or finance research, without increasingly monopolising the home market. We should start with the idea that private monopoly is bad, not only if it acts directly opposed to the public interest but if it fails to take full advantage of its size and efficiency to 1275 promote its own efficiency, its research and its exports. We should require from any monopoly the most rigorous and continuous justification for its existence.
I will refer to the pamphlet, "Monopoly and the Public Interest", because I think that it agrees with something which I will say. I believe that the Board of Trade should be able to demand from monopolies, or from many large firms which are nearing monopoly position, regular indices of their efficiency. I think that this pamphlet says more or less the same thing, when it says that the powers… should certainly include the power to require from a monopoly regular returns of information of a type for which there is no other statutory authority…I agree with that.
The sort of information which I think that the Board of Trade should be in a position to demand from any monopolistic firm is information which will enable it to decide whether that firm exports enough. I would say that high exports which involve meeting competition in the world market are, in themselves, normally a justification which could be produced against a charge of monopoly. A large firm should know what proportion of the world market in a particular product it commands, and I believe that that information should be available to the Board of Trade on request. Every large firm should be required by the Board of Trade to provide details of its target exports, and if those target exports are too low, it should be asked to explain why. If they are not achieved, again it should be asked to explain why. I do not in any way regret the powers in the Bill on the subject of prices. I think that information about prices should be available from monopolies at the request of the Board of Trade. There is also the need to be able to refer single firms to the Monopolies Commission and not just industries.
The Government, in my view, should be prepared to act very strongly against monopolies. There are far too many sleeping monopolistic firms—for example, Courtaulds, until it was awakened by the I.C.I. bid. There are various ways in which it is open to a Government to awaken sleeping monopolistic firms. They can perhaps lower tariffs and thus 1276 encourage the firm in the home market by the threat of imports. The difficulty about that method in the present economic situation in this country is that the balance of payments may not always allow it, and in any case there are certain products—plastics, in particular—where the marginal cost of the foreign exports may be so low as to permit dumping and the type of competition which would destroy the home industry rather than wake it up.
Another method which is open to the Government to encourage such sleeping monopolistic firms is the refusal to grant Government contracts to them. This action might cause certain difficulties. I feel that one of the best methods, if not the best method, open to the Governmen in taking action against sleeping monopolistic firms is rapid investigation by an independent commission followed by strong Government action.
This brings me to a point in the Bill about which, I must confess, I am not satisfied. I refer to the proposal which has been made, and which, as far as the arguments which have been deployed so far are concerned, I continue to accept—and that is the argument in favour of having a registrar of monopolies. It seems to me that the principle of divided responsibility which has been used to justify this idea—that the Registrar will assemble the facts and refer cases, whereas the Monopolies Commission, with the assistance of the Registrar, will assess these facts and judge them—is a very good principle. It is particularly important that there should be an independent person who, without Board of Trade permission, could refer monopolistic companies and monopolistic situations to the Monopolies Commission.
I say this with a great deal of respect, and of course it applies to Governments of whatever party, but in these days the links between Government and industry are becoming closer and closer. The Government deals with bodies like big Neddies, little Neddies, the British National Export Councils and the like. The links between Government and industry are getting closer and closer. I should like to see an independent person who will have the responsibility of referring monopolies and monopolistic situations to the Monopolies Commission 1277 without the specific permission of the Board of Trade. Of course, it would have to remain with the Board of Trade what action might be taken subsequently. At any rate, reference should be made independently.
One of the troubles in dealing with this whole monopoly situation over the years h is been the lack of action by the Board of Trade. This, of course, occurred in the time of the previous Government. I do not want to be accused of making a party political point here, any more than I should, but it unfortunately remains true that the Board of Trade has not been remarkable for its enthusiasm in following up monopolies. Under the 1953 Act it became possible to appoint a Monopolies Commission of 25 members. I think I am right in saying that the number of persons actually appointed never reached even 20. In other words, a great deal less work was being done, and there had to he a great many fewer references, than the legal limit of 25 might have permitted.
There is also the question of speed. The fact that we are now to have 25 members and that they are to be able to work in groups may enable a larger number of industries to be investigated simultaneously. It does not mean that any particular investigation will take a shorter time. If there is a single individual who is responsible for ensuring that these inquiries are speedily conducted, then they are more likely to be speedily conducted than if they are dealt with within a somewhat amorphous and unidentifiable staff on a Monopolies Commission.
I also do not understand why the Bill places a limit on the size of the Monopolies Commission. Compared with the 1953 Act, we are adding mergers and services, and restrictive practices have been taken away. In addition, we shall have to deal with newspapers, but it will be possible to co-opt a few people, up to five I think, to assist inquiries into newspapers.
I consider that this limit of 25 may well prevent enough inquiries from going on simultaneously, and I should certainly question that any limit was necessary. I know that it is said that it is very difficult to find the right sort of people 1278 —and maybe it is. Maybe, on the other hand, the difficulty in finding the right sort of people has been due to lack of enthusiasm on the part of those who, in the past, have been searching for them. I believe that if we really want to tackle this problem of monopolies as it should be tackled, then we shall have no difficulty in exceeding the number of 25, and if we can do so, I cannot see why we should not do so.
I should like to ask the Minister of State, who will be replying to the debate, one or two questions about the Bill. I have read—I was not here at the time—that in the debate on 6th July on the White Paper of last year he referred to the necessity to control the operation of international companies. He referred, particularly, to the oil companies, which have found it convenient to make their profits elsewhere than in this country; and, of course, this is something which international companies find it only too easy to do. It is something which occasionally benefits this country as well as sometimes harming it—although possibly not to the same extent as in the case of the oil companies.
It is also in the power of international companies to decide how they will supply their exports—from which of their manufacturing plants distributed throughout the world they will supply them. If we are to have foreign investment in this country—and I have no objection in principal—then we should know the answer to the question: from where will such companies supply their exports? I think that there is a need for the registration of any provision that a British subsidiary of a foreign concern is prevented by internal agreement from competing with its parent concern or its other foreign subsidiaries in particular markets.
§ Mr. J. T. Price
I am interested in what my hon. Friend is saying in this part of his speech. He may or may not be aware that the matter which he criticises goes much further than he has explained. For example, the House, about seven or eight years ago, in the Finance Bill of 1957, passed a special Section dealing with the Overseas Trading Corporations, which granted taxation relief to foreign-based subsidiaries of British registered companies, which were able to retain the profits made overseas 1279 and thus in no way make a contribution to the British Treasury from those profits. I have often protested in the House about it. This is something which I should like to see a Socialist Administration put right. It is quite wrong.
§ Mr. Dell
I thank my hon. Friend for that intervention. I have some knowledge of the workings of international trade and investment, and I know of some of the things which go on. It is because of this that I refer to this point about the control by international companies of exports supplied from their different manufacturing plants.
I should like to raise, in the mildest possible way, especially in the light of the remarks of the Prime Minister over the weekend, one controversial constitutional point. I would like to know why the other place—I think that it is right to call it such—is given certain powers under the Bill which could, in certain cases, be extremely controversial politically.
One of the powers granted under the Bill is to require a company to divest itself of certain holdings. I understand, from my reading of Clause 3(10), that an order of such a kind would require the agreement not simply of the House of Commons, but of the House of Lords as well. Such an order might be extremely controversial politically and I would like to know how this proposal is justified by my hon. Friend.
I would be interested to know whether a constituency case of mine would be covered by the Bill. I feel that, unfortunately, it would not, but I hope that the Minister of State will comment on this, for it is another criticism I have of the Bill. My criticism is that it has not dealt with certain gaps which have appeared in the Restrictive Practices Act. A shop keeper in my constituency is being denied supplies of newspapers by wholesalers, who have said that the areas which he wishes to supply are already sufficiently supplied with newspapers.
While I appreciate that this would need to be the subject of an independent inquiry, I consider that what they are doing is creating one monopoly retail supplier in what is quite a large area. This problem was examined by the Registrar and the previous Government, 1280 but it was found that nothing could be done about it under existing legislation. Would it be possible, under the Bill, to tackle a situation of that sort?
Clause 8(1) refers to newspaper mergers and the problem of newspapers perhaps not being economic. What is meant by the phrase "not economic"? How could that phrase be interpreted in an argument? Does it mean, for example, that a newspaper must be running at a loss or that the proprietors would be able to argue that they could achieve a greater return on their capital if they invested it in a different way? The phrase "not economic" would appear to be susceptible of different interpretations and I would like to know what interpretation the Government place on it.
The object of this type of legislation is to increase the efficiency and competitiveness of British industry. Yet despite all our monopoly and restrictive practices legislation since the war, our proportion of manufactured exports continues to fall and our balance of payments position continues uncertain. No doubt we should not expect too much from this type of legislation and must not exaggerate what a Bill of this sort can do to increase the efficiency of industry. Nevertheless, my suspicion is that more than has been done could have been done within the ambit of the Bill.
§ 7.23 p.m.
§ Mr. William Shepherd (Cheadle)
The House will agree that the hon. Member for Birkenhead (Mr. Dell) made a reasonable and balanced speech. He did not take us in to the somewhat controversial sphere which his hon. Friend the Member for Westhoughton (Mr. J. T. Price) entered.
I would, if time permitted, have liked to have made some observations on the ethics of a capitalist society and a Socialist society, which is a matter of wide and considerable interest, but I will merely say that if faced with the alternative of private and public monopoly I would, in economic terms, be more anxious to embrace private monopoly, though perhaps in ethical terms I would be more inclined to public monopoly. However, I would prefer to see neither public nor private monopoly because, in my view, all monopoly is bad.
It will be seen, therefore, that I do not follow the view of some of my hon. 1281 Friends, perhaps because I am more actively concerned in business and can see some of the effects, as one of the smaller fry, of monopoly in the United Kingdom. There is no doubt that there is a correlation between exports performance on the one hand and monopoly on the other, as was indicated by the hon. Member for Birkenhead. It is a correlation which depends upon attitudes of mind; upon aggressiveness of spirit and intention.
The real evil of monopoly is not that people do bad things—if that were the case it would be nothing like as serious as it is—but that restrictive practices and monopolies are the opiate of trade and industry. People get themselves, as a consequence of monopolies and restrictive practices, into the state of mind where they really think that they are doing their best when, in fact, they are not.
British industry is a curiously disparate example of intensive competition on the one hard and of extraordinary monopoly, fortifies by very high tariffs in many respects, on the other. If one looks at the monopoly situation one finds that, broadly speaking, in the relatively large scale manufacturer of primary produce and raw materials there is a high degree of very damaging monopolies in the United Kingdom. When one looks at applied manufacturers, however, one finds that there is intense competition, probably as great as anywhere in the world. I want to see the breaking down of this monopoly situation and I am satisfied that what we have done up to now has not been sufficient to break it down.
I am sorry to have to tell the President of the Board of Trade that I do not believe that the Bill will do it, either. What we must destroy is an attitude of mind, an attitude built on 30 or 40 years of restriction and monopoly practices. It is not easy to destroy an attitude of mind of this sort. Indeed, monopoly and restrictive practices can coast on on their own momentum long after legislation which has the presumed effect of putting an end to them has been introduced.
To give an example of this, I refer to what was said by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke); that those who have been the subject of inquiry, have faithfully observed the conditions which have been laid down by the Government—as 1282 a result of the Monopolies Commission"s report.
§ Mr. Shepherd
I assure the hon. Gentleman that this is not necessarily nonsense. Almost all have readily agreed to make changes, but almost all, in one form or another, are continuing to do what they did before. I believe that I see the President of the Board of Trade shaking his head in disagreement, but I assure him that this is largely what happens.
§ Mr. Price
Perhaps I should make my position clear since I did rather rudely shout something across the Floor of the House while the hon. Gentleman was speaking. I entirely agree with him that many of these people who have been condemned for these activities by the Monopolies Commission have gone on as before. For that reason I am disappointed with this legislation, and would be whichever party was in power.
§ Mr. Shepherd
I was about to give an example. On the day the Monopolies Commission produced its Report on electrical goods in the motor car industry I telephoned a friend in the business and said, "What do you think about the Report of the Monopolies Commission?" He replied: "It does not tell us anything we do not already know." I then asked, "What effect do you think it will have on the trade?" He replied, "You don"t want to bother about this. We don"t want to go about taking a hatchet to each other. We will carry on just the same after this Report as we did before". This is, by one means or another, what is happening. It is bolstered by the fact that we have a very high level of demand for goods and services, and that very high tariffs exist in respect of many commodities.
I urge the President of the Board of Trade and the House to accept the fact that we must have a much more positive attitude towards monopolies and restrictive practices if we are to get the sense of urgency, drive and competitiveness that is necessary for our economic survival. Therefore, I believe that this Bill, although I welcome it in a way, is inadequate, and I want to give one or two reasons for my opinion.
1283 I accept—and I have been pressing this perhaps as much as any hon. Member, and probably more, the need to include services. When I say "include services" I hope that the right hon. Gentleman will not be afraid of the big boys—the banks, the insurance companies, the shipping companies—because their practices want looking at. The White Paper had to my mind a most unhelpful qualification of "services", appearing to limit the definition to services in connection with the supply of goods. I hope that the present Government will see that inquiries into services are determined by the size of the operations and their importance to the community and not by whether they are related to the supply of goods; and that banking, shipping, insurance and other aspects will come within their purview. I am convinced that those sort of activities should be looked at in the same way as those of manufacturers, and others.
Much has been made about the size of this Commission, and I regard that as a piece of nonsense. It is quite true that the Commission ought to be made rather larger, but this will not get us very far. The best thing we ever did in dealing with monopolies was when we said that exclusive boycott would be brought to an end. The Measure that said that did more in terms of combating monopolies than almost anything we had done before or have done since. The size of the Commission is not critical. The important thing is to try to define specific practices that are harmful to British industry and its competitiveness and get them outlawed as quickly as possible.
I will give an example of what is perfectly possible under the terms of the Bill. I have to declare a personal interest here —I make car batteries. I am prevented from selling my car batteries to probably seven-tenths of the main sellers of batteries because those seven-tenths are agents for another maker of batteries which is a member of the erstwhile ring. The ring says, "You can only sell my battery provided you enter into an undertaking not to sell anyone else"s battery". I therefore cannot sell my battery to that man because of an exclusive arrangement that prevents me from doing so. That is grossly wrong. We ought not to allow 1284 people to enter into agreements excluding other people"s products—
§ Mr. Shepherd
The right hon. Gentleman is quite right—if more than one person did it. But if we had an industry in which there are three or four concerned or, in this case, two large-scale operators, they themselves can bring about the same state of affairs without entering into any collusion the one with the other. They can merely decide, as is so easily decided, "We shall continue to follow a common policy in respect of these operations." Under this Bill this limitation of competition will still be permitted; it should go.
Another thing that I regard with the utmost seriousness is failure to deal with information agreements. I am rather ashamed of those information agreements. They are a great reproof to British industry that those concerned have refused to accept the decisions of the Restrictive Practices Court and continue with information agreements that are really only another form of the old agreements. Why do we not make these things illegal? Why do we not send someone to prison for doing something that is contrary to what a court of this country has decided?
Why should those who frustrate the decisions of the Restrictive Practices Court not be sent to gaol? I tell the President of the Board of Trade that until we start sending someone to gaol for doing things that are contrary to the decisions of the Restrictive Practices Court we shall not get adherence to antimonopoly legislation. We have had 30 or 40 years" of restrictive practices, and it is not easy for people to give up their bad old easy ways and accept the rougher, tougher and more difficult course.
I hope in Committee to be able to put down a number of Amendments which will make this a tougher Bill than it is now, and which will compel the Board of Trade to take a tougher line. I know all the arguments in favour of voluntary persuasion: "It is very nice. We get the gentlemen responsible for running the monopoly to see us at the Board of 1285 Trade. We tell them "You are very naughty boys. You should not do this." They reply, "Perhaps we have been naughty boys, but we shall conform"." That is not good enough, because it never produces a sufficiently decisive and clear-cut line.
The Board of Trade must be much tougher with restrictionists. We can then afford to be a little tougher with those on the workers" side if they are restrictive. We can afford to be tougher with them if we are tougher with the employers. I say at once that if we are tough now with the employers we shall not have so much restrictive practice at the worker level, because the restrictive practices of the workers are, on the whole, made possible by the restrictive practices of employers. One has only to look at the newspaper industry to see precisely what I mean. The Board of Trade must be much tougher than it has been before, because it is no good trying to pretend that the change of attitude can be brought about in a gentlemanly manner.
I had hoped that this Bill would have included some procedure for investigation. The method we are now adopting of waiting for a complaint and then making an inquiry will never root out restrictive practices. Some organisation—the Board of Trade, the Registrar, whatever the mechanism may be—should have an investigating staff going round getting information about the methods by which the decisions of the Court are being frustrated. There is quite a lot of information to be obtained by competent and intelligent agents. The Registrar of the Restrictive Practices Court should have such an inquiry staff, so that there is a constant war upon those who try to defeat the purposes of this Bill.
Let no one say that if we force upon industry a more vigorous competition it will be disastrous. When, as we now do maintain by Government action a high and stable level of demand it is incumbent upon those in private industry to be fully competitive. There is no justification for private enterprise unless it is engaged in a free competition to serve. We on this side have to take this stand in favour of private enterprise based upon its being freely competitive. 1286 I was told in 1956, when I was pushing the Bill then, that disaster would overtake industries if we had intensive competition—but just look at the motor car industry. That is one of the most competitive industries in the world, in which a manufacturer starts arguing about putting ½d. or 1d. on a product. Yet this has been one of our most successful industries, because it has been intensely competitive. Intensive competition within a society where the level of demand is high and stable will not be followed by harsh consequences. It will be followed by substantial benefits and economic efficiency.
Therefore, the right hon. Gentleman should not be afraid of being tough and rough with monopolies. The monopolist is not a bad man. He bemuses himself into believing that he is doing what is socially right and economically justified. He lives in a false world and one day he awakens, as did our great electrical industries to find that they were 20 years behind the times because they had been engaging in restrictive practices. The only basis on which we can survive as an industrial nation is by being much more rigorously competitive and efficient. I refuse to believe that the average Britisher is not as good in terms of business as the average German or Frenchman, but we have been losing the game in the last ten years. One of the prime reasons why we have lost our position is that we have not been sufficiently competitive. Therefore, whilst I will vote for the Bill, if there is a vote, I feel that it should be much more far-reaching, because I believe that the House and the country as a whole have not fully appreciated the truly damaging nature of restrictive practices and monopolies.
§ 7.41 p.m.
§ Mr. Joel Barnett (Heywood and Royton)
I agree with much that has been said in this debate, particularly some of the comments made by the hon. Member for Cheadle (Mr. Shepherd), although I believe that he contradicted himself in a sense to which I shall refer later. I also agree with the right hon. Member for Altrincham and Sale (Mr. Barber) that not all mergers are bad. It is clearly true that not all mergers are bad, because there are many thoroughly incompetent boards which need very much to be taken 1287 over. In many instances it would be helpful to both shareholders and to the nation if there were mergers so that such companies could be absorbed.
When considering the Bill, it would be foolish to ignore the approach of businessmen generally. They love monopolies. As the hon. Member for Cheadle said, they do it in the nicest possible way; they believe that they are doing it in a benevolent way and that what they are doing is in everybody"s interests, including their own. This is so except when they complain of monopolies working against themselves. When it hurts, they complain about the particular monopoly. I do not blame businessmen for believing that they are doing the right thing in being satisfied that their particular monopoly is right. But we should strive all the harder to ensure that we put the national interest first. If they do not put the public interest first, we must.
We must also understand the nature of the opposition we face. It is not just the large businessman. Monopoly tendencies are there throughout industry, from the very smallest upwards. The little local shopkeeper would do everything in his power to see the local shopkeeper round the corner closed. One can understand that the same goal is in the minds of the directors of I.C.I. when they want to take over Courtaulds.
There are some interesting comments in the 1955 Report on Collective Discrimination by the Monopolies and Restrictive Practices Commission, to which my hon. Friend the Member for Acton (Mr. Floud) referred. The Commission makes the point that complaints against various practices in various trades are mostly made by those who are complaining about the fact they are excluded from those practices. If they were included, they would not be complaining. In the main, businessmen are happy with the monopolies they have and genuinely believe that they are working their own monoply in everyone"s interests. Recognising this attitude, we must see whether the Bill has been framed in a way satisfactory to all of us. I propose not to deal with the parts of the Bill with which I agree. I shall take those parts in which I am dissatisfied.
My right hon. Friend the President of the Board of Trade today and in the 1288 debate on the White Paper last July made two main points. He said, first, that the whole process was far too long from the time when a reference was made to the Commission to the receipt of the Report. Many examples of this have been given. My right hon. Friend said, secondly, that there was far too little action when reports were eventually received. There is adequate evidence of this.
Will the Bill deal with these criticisms? First, as to the length of time from a reference to the Commission to the receipt of the Report, the Bill will provide that we revert to the 1953 position and have a board of 25 members. This will be split up with vice-chairmen so that the Commission can deal with several references separately. This will help, but it will not prevent the situation which arose on the Report relating to electrical components in the motor industry. Almost six years elapsed from the initial reference to the receipt of the Report. Under the Bill this could still happen, but we should at least have the additional benefit that other matters were being examined at the same time. However, we could still wait six years for a report.
I believe that something must be done about this. It is said on page 6 of the 1964 Report that in one year alone the Board of Trade received 30 suggestions for reference to the Commission. These suggestions included such goods as bread, burglar alarms, infant milk foods, imported comics, supply of drinks to tied houses, and automatic vending machines, amongst many others. The Board of Trade eliminated subjects already under investigation and matters which it considered frivolous. After eliminating these, there were still 30 matters which could have been referred to the Commission in one year. At this rate, it will take a long time to deal with the problem, even under the terms of the Bill.
There are other possibilities. There are not just the 30 referred to in that Report. On page 97 of the 1955 Report on Collective Discrimination a further 75 items are referred to. They are not all necessarily relevant to the Commission, but clearly many of these items could be referred to the Commission. There were such things as flushing 1289 cisterns and copper balls, groceries, pins and hair grips.
§ Mr. Shepherd
Is the hon. Gentleman really saying that the Board of Trade regarded all these submissions as being of any consequence? This was put in only as a sop to Labour Members in 1948. It was a very unwise provision to allow these things to be put in and recorded in this fashion. Some of them are without any bearing.
§ Mr. Barnett
I was not saying that they were all necessarily relevant. I was saying that nevertheless there are many cases which could and should be submitted to the Commission. The hon. Gentleman himself was very disturbed about the way the present arrangement was working and said that the Board of Trade should be tougher. He went on to say, and contradicted himself by so saying, that he did not think that the size of the Commission was relevant. He said that he did not think it needed to be increased
§ Mr. Shepherd
I do not want to detain the hon. Gentleman or the House, but I said that the size of the Commission had been made a political play point by the present Government and that I did not think it had any importance. The hon. Gentleman is fortifying my view that the time scale will be the same, although one may deal with more items than at present. The point that I was making was the necessity to outlaw specific practices, which is much more important than increasing the size of the Commission.
§ Mr. Barnett
I think the hon. Gentleman is contradicting himself. I am not trying to make any party political point. What I am saying is that under the new arrangements suggested by this Bill, although I am still not satisfied with them, it will be possible to deal with rather more cases, and presumably the hon. Member for Cheadle would be pleased if that were to happen. Even so, in view of the way in which things worked out in the past, whereby one report could take six years to emerge, we could reach the year 2000 before we dealt with all the possible monopolies which would need to he referred to the Monopolies Commission.
I think it was the right hon. Member for Reigate (Sir J. Vaughan-Morgan) who 1290 referred to this matter. I do not see why we need to be so rigid and inflexible over the size of the Commission. Why must we say that the number has to be 25, 10 or 35? I do not see why this is necessary. I do not see why the President of the Board of Trade, subject always to the approval of the House, should not have power to increase the size of the Commission even to as many as 125 in one year, whereas in other years it should be possible to manage with only 10. In other years it may be necessary to supplement the number with a few extra members.
I am a little sick of the Parliamentary tactical manoeuvre which makes it necessary for months to go by before a Measure can get on to the Statute Book, whereas the matter could be dealt with by a simple Resolution and the Minister coming to the House and saying, "We need to deal with a tremendous backlog of business and we require 20 extra members and additional staff".
A second criticism to which my right hon. Friend the President of the Board of Trade referred is that action has taken far too long. Of course, it is not difficult to prove that this is the case, but it is difficult and, indeed, impossible to point a gun at the Minister"s back and say, "You must take action." This is why, over the past 13 years, we have not had the sort of action that we would have expected, because a Minister goes as fast or as slow as he wishes and the Parliamentary procedures of this House help him to do so.
What are we to do? My hon. Friend the Member for Birkenhead (Mr. Dell) referred to the question of the Registrar or some other means by which we could give more power to the Commission, subject always to the approval of this House, if a Minister, of whichever political party, was not acting speedily enough. He might be busy with other matters but, whatever the reason, if we could get the Commission to work at a greater speed and with a greater sense of urgency, this would press the Minister to deal with these problems much more urgently.
I now wish to turn to Clause 8 dealing with national newspapers. I am sorry that local newspapers are not dealt with, for very often they are subject to the use 1291 of monopoly powers. I feel I am fortunate, because in my constituency there are three local newspapers which are very fair, but I know of many hon. Members who complain at the way in which they are treated by their local newspapers which have a virtual monopoly. In Manchester, for instance, there is one newspaper which covers a lot of Lancashire and Manchester, having gobbled up the Evening Chronicle which used to circulate in that area. Now the whole of the area is covered by one evening newspaper. Very often it is far from fair and reasonable in its approach. I hope, therefore, that the Minister will look into the question of local newspapers in the near future.
Dealing with the Bill itself on the question of national newspapers, I can appreciate the difficulty that the Minister had in drafting this Clause, but I am afraid it will do very little. Indeed, it will do almost nothing. I am sure we would all deplore the concentration of power into yet a smaller and more irresponsible number of proprietors" hands. This Clause states what shall happen if a newspaper is losing money —my hon. Friend used the term "uneconomic"—and if a national newspaper loses money it does so at a fantastic rate. Surely if a newspaper is losing money and the proprietor wishes to close it down, we could not prevent that happening; otherwise it would be unfair to the shareholders, creditors and workers.
The Clause goes on to say that if a newspaper is losing money and if it is a matter of urgency, consent shall be given to the merger. I do not know what is intended by the word "urgency". Perhaps my right hon. Friend can deal with this when he replies. But clearly it would be a matter of considerable urgency if a newspaper were losing millions of pounds. Therefore, under the terms of this Clause the Minister would have to give his consent to the merger, unless there is some other meaning to the word "urgency".
One should consider some of the possibilities that could arise. Suppose the owners of the Sun, the Daily Sketch, the Sunday Citizen or even the Daily Mail decided that they had lost enough money and decided to stem the tide, close down and stop the losses, and that 1292 as a matter of urgency it was decided that they should be taken over. Under this Clause I do not see how that could be prevented. Take an even more extreme case. Suppose the Daily Express were losing money and were taken over by the Daily Mirror. I am sure hon. Members would not like to see that happen, but under this Bill I do not see how this could be prevented.
What are the alternatives open to us? There are only two—three, of course, if we include this Clause, but I submit that it does nothing. The first alternative is that we should say "No, you may not merge. You must close down." Clearly, if we did that, we must compensate the newspaper and pay the equivalent of what it would have had under the merger so that the shareholders, creditors and workers would not suffer. There is the other alternative, and it is the only alternative open to us if hon. Members do not want to see national newspapers in this country eventually being reduced in number to one or two covering the whole country. I know that it will be a great temptation to dismiss this alternative out of hand, but the Government might consider setting up an independent trust consisting of three non-political judges, by agreement with all the parties, the Government to have no further say in the matter but leaving it entirely to the trust who would, no doubt, from time to time appoint editors with whom we would all heartily disagree, and which editors would then, no doubt, select writers whom we would all detest. Perhaps, in deference to some Members, we could exclude, say, Bernard Levin and Cross Bencher.
I do not need reminding that there are many difficulties in such a suggestion. But the next time that a national newspaper is being closed down and there is no alternative to letting it close down or merge, as would be more likely the case, and we come to a situation where we have one, two or three national newspapers only covering the whole country. I ask hon. Members to bear in mind that under the Bill nothing can he done about it.
§ 8.0 p.m.
§ Mr. Peter Bessell (Bodmin)
It would be surprising if anyone rose from the Liberal bench to do anything other than 1293 welcome with open arms any legislation which tends to curb and control monopolistic practices, and I have no hesitation in welcoming the Bill as a forward piece of legislation which we know is well received in all parts of the House. It would be impossible for other than this to happen, particularly in the present economic situation. There is a wide measure of agreement that we shall not in the long term overcome the economic problems which are still confronting the nation unless we have a competitive system which will compel the majority of manufacturers to seek much wider and larger markets overseas.
It is perhaps even more important to take anti-monopoly action in this country than in many others because we are a nation which for many years has been heavily protected by an almost impenetrable tariff system. I should not like to argue, in the present economic situation, for any drastic or large-scale reduction in tariffs, but, as long as we are protected by a strong tariff wall, clearly the only way in which we can make the soft home market less attractive to the home producer is by the cold wind of competition within the nation itself. This makes antimonopoly legislation of the kind which we have before us today of far greater importance and significance to the economic situation of the nation.
We have had references in the past and again today to the position in the United States. Over the past 10 years, for business reasons, I have become very familiar with the position in the United States and the effectiveness of many of the antitrust laws that exist there. I do not hesitate to say to the President of the Board of Trade that I hope he will not be led into the false path of belief that if this country adopted identical anti-trust laws we would necessarily benefit from them.
I do not think that the right hon. Gentleman will do that, but it should be remembered that while the legislation which has been provided to prevent monopolistic practices in the United States from operating to the detriment of the public have in many cases gone too far the result has been the very opposite of what was intended. This is seen particularly in certain aspects of the retail trade, where shoddy goods are the result of enforced competition. Nevertheless, 1294 there is in the United Kingdom a situation which clearly indicates the urgent need of action.
I have been looking through the reports of the Monopolies Commission during the first 11 years of its existence. It is startling to see the numbers of goods and wide variety of products which in the Commission"s view are operating under monopoly to the detriment of the nation as a whole. They include such things as rainwater goods, electric cables, insulin, matches, building in London, linoleum, rubber footwear, oxygen, metal doors and windows, fertilisers, and tobacco. One cannot look at this situation with complacency. I am glad that Her Majesty"s Government and the Opposition, who did so much of the preparatory work for the Bill, are not complacent about it and are taking at least some action towards curbing this continuing growth of monopolistic practice. I believe that this action has been too long delayed. The Liberal Party, like Humpty Dumpty, has shouted loud and clear on the subject of monopolies and restrictive practices for many years.
§ Mr. Bessell
We did not fall at Roxburgh and I do not think that we shall fall in one or two other places, but if I say any more I am certain that I shall be ruled out of order. Nevertheless, we have sounded a clarion call and if, like little lost sheep, the Government and the Opposition have gradually come home, dragging their tails behind them, I do not welcome them any the less for that reason.
In the view of both parties in opposition, the Clauses of the Bill will require amendment, but in the main these are matters which will be dealt with in Committee and, therefore, there is no need for me to refer to them in detail tonight. Clause 3 is, to my mind, the most welcome part of the whole of this legislation, because it apparently takes the more drastic step of giving the Board of Trade the power to declare certain monopolistic practices positively unlawful. Unless these practices are declared to be unlawful there is not very much hope of our getting any positive action of the kind which is so badly needed.
1295 I am also glad that there is provision in the Bill for dealing with existing monopolies and not merely those which might accumulate or come into force as a result of further mergers. One of the worst examples of monopolistic practice is the one which occurs in the industry which produces sugar, a vital commodity upon which everyone depends, except of course, the diabetics. The example of sugar has come to my notice in recent years because about two years ago, when I was a director of a company in the south-west of England, we had occasion to require sugar in small packets. We applied to one very well-known firm for a price and also to a number of other refineries in the country. To our astonishment we discovered that the price was absolutely identical in each case. I was curious about this and I investigated the register of companies when it was located in Bush House. It appeared that one sugar company, Tate and Lyle, either controlled completely, or had very large holdings in, the competitive companies concerned.
The company with which I was associated tried to purchase sugar abroad. We were quoted very much more favourable prices from France, but when we came to investigate the regulations dealing with the importation of sugar in packets of the kind produced by the monopoly company to which I have referred we discovered that the import duty was such as to bring the price to almost exactly the same as that which we were offered by Tate and Lyle and many of it subsidiary companies that trade under such a variety of names.
Therefore, one of the urgent tasks before the enlarged Monopolies Commission—I share the view expressed on both sides of the House that it is vital that the Commission should be larger, it this means that it can work faster—is to look at those industries, in particular, which produce commodities upon which every section of the public depends.
As regards the Press, I think it doubtful that any responsible director or shareholder of a large newspaper company will be offended or displeased by the Clause which deals specifically with Press mergers. Whether this is a good thing or not is arguable, and I share the view expressed by the hon. Member for Heywood and Royton (Mr. Barnett) that it is important that local and provincial 1296 newspapers should be included within the scope of the Bill.
§ Mr. Bessell
I am very grateful to the right hon. Gentleman for that clarification, but there is a danger, in certain cases where local newspapers are concerned, of mergers taking place which are not in the interest of the public as a whole. Like the hon. Member for Heywood and Royton, I am fortunate in having a very fair Press in my part of the country. In this Chamber, of course, I should not dare to say otherwise, but it is, in fact, absolutely true and I have no hesitation in paying that tribute. I see the hon. Member for Torrington (Mr. Peter Mills) in his place, and I believe that he would probably share that view.
There are several other points which will have to be looked at rather closely. The suggestion that there ought to be a Registrar, with power to investigate the affairs of any company which is referred to him, is good as far as it goes, but we in the Liberal Party have always felt that something more drastic was needed. It is our view that all companies should be compelled to register with the Board of Trade and make a complete annual disclosure of all their activities, all their subsidiary companies and all the holdings which they have in any other company or interest.
§ Mr. Bessell
Yes, I should prefer to see it done in that way. But I recognise the administrative difficulties where small private companies are concerned, and I should be quite happy to accept a limit in the case of private companies up to an issued capital of £10,000, or something like that. It would require closer definition than I have given it. Certainly, it should apply to all public companies and private companies of any substantial size. If this were done, it would be possible to discover many of the restrictive practices which are "continuing, often under cover and quite unknown.
1297 Secondly, we should like to see registration and disclosure of the activities of all trade associations and very strong penalties for any association which assisted its members in price-ringing arrangements or in any way helping to produce price agreement among members. I agree with the hon. Member for Cheadle (Mr. Shepherd) that, if the Bill is to be effective, it will depend entirely on how fast and how vigorously the Board of Trade is prepared to act. In the last analysis, any legislation which passes through the House can only be as effective as the Ministry concerned determines to make it, and there is in this case a very bad record of lack of determination.
During the first 11 years of the existence of the Monopolies Commission, 18 of the 23 Reports made were said by the Commission to involve monopolies which were carrying on practices contrary to the public interest, yet in only two cases were orders actually made. This is a very serious situation. There is the blatant example of the Imperial Tobacco Company, which was found by the Monopolies Commission to be acting contrary to the public interest by maintaining its holding in Gallahers. So far as I am aware—I shall be corrected if I am wrong—the Imperial Tobacco has done nothing about this holding and there has been no attempt by the Government to insist that it does.
§ Mr. Bessell
I am grateful to the right hon. Gentleman for that piece of information. I wonder, of course, what the composition of the investment trust is, who the main shareholders are, and what sort of interest the Imperial Tobacco Company may have in the trust.
§ Mr. John Hall (Wycombe)
This question has been raised more than once in the debate. Two points should be made clear. The first the President of the Board of Trade has just dealt with. The second is that the only other thing the company was asked to do was to terminate its bonus agreement, and this it did.
§ Mr. Bessell
I appreciate that, and I am grateful to the hon. Gentleman for making the point. Nevertheless, the company did not take the action which was required according to the main recommendation of the Monopolies Commission until the present Government took office. Whether that is coincidental or not I do not know, but its happening now does not alter the point that it should have happened when the recommendation was made.
The many recommendations made by the Monopolies Commission which have not been acted upon are, plainly, overdue for action, and I hope that the President of the Board of Trade will not hesitate to insist that action be taken, where necessary forcing it upon the companies concerned. Otherwise, there is no point in having a Monopolies Commission of 10, 25 or 500 members. The only use the Commission has in this context comes when the recommendations it makes are acted upon promptly and efficiently and where necessary, I believe, quite ruthlessly.
I take, next, the question of newspapers and the position of many of the middlemen who operate most successfully their own monopolies in particular areas of the country. The hon. Member for Birkenhead (Mr. Dell), who referred to a case in his own constituency, may be interested to know that I have an identical situation in my own constituency. A bona fide trader has applied to a newspaper wholesaler for supplies and has been refused. The wholesaler takes no notice of any letters either from solicitors or from anyone else who tries to assist the trader.
Other examples can be found in the activities of wholesalers supplying shops in the food trade. I have had a recent example of this. The only practical wholesaler in the district in terms of delivery, and so on, has refused to supply what I regard as a perfectly legitimate partnership set up by two young people simply because he fears that to do so would damage his position with other retailers in the area. I believe that there is a need for a very strong line in such cases. It is wrong that there should not be free competition and that wholesalers should be in a position to dominate the retail market, frequently to the detriment of the general public.
1299 I was glad that an hon. Gentleman raised the question of consideration of staff attitudes to mergers. The case of the Wall Paper Manufacturers Limited and the proposed take-over by Reeds has been referred to during the debate. There is no doubt that the memorandum circulated by the staff in their interests and the interests of the shareholders is an impressive document.
I believe that it is right that representations should be received by the Board of Trade from staff associations concerned with any proposed merger or take-over bid and should be considered very carefully, and that the arguments advanced should be examined, because in many cases senior staff, in particular, are in a better position to judge the effect of a merger or take-over on the future health of a company and its productivity. To that extent, this is a matter which should be looked at with great care. It may be that in Committee the President of the Board of Trade will be able to consider Amendments to that affect.
In 1959, a Liberal Party committee recommended an increase in the size of the Monopolies Commission. That is included in the Bill. Mr. Donald Wade, the former Member for Huddersfield, West, in the debate on 6th July last, recommended legislation to enable an investigation of mergers to take place before they actually happened. That is also incorporated in the Bill. As I said earlier, for a very long time indeed, throughout the last 30 years, the Liberal Party has continuously, and without abatement, called for stronger and more effective action, both legislative and by the Board of Trade when it has the powers, against any monopoly practice to the detriment of the consumer. We believe in a society of free enterprise. We want to see free enterprise grow. We welcome the steps which the Government have taken by means of the Bill, and we congratulate them on their prompt action and also upon following the many admirable recommendations contained in the White Paper published by the previous Government, to which many useful additions have been made.
§ 8.23 p.m.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
The hon. Member for Bodmin 1300 (Mr. Bessell) appears somewhat as a purist in referring to matters of monopoly or instances where monopolies themselves might be created. I was more pleased to note that many hon. Members have been anxious to protect desirable mergers and consider the division somewhat more sharply. The President of the Board of Trade has given as a criterion that his Department should step in where mergers might drastically reduce competition.
It is very important that we should know what we mean by "competition". Very many of our views have been formed by the great mythology which can be traced back to the Industrial Revolution, that of competition at once both absolute and pure. When industries were new and rising and expanding rapidly, their costs naturally fell dramatically. The growth of those industries was at that time part of the mythology—that growth and expansion and reduction in costs could be attributed to competition. This was partly so, but a very much larger part was due to the tendency of the interests concerned to use their profits for reinvesting in the fairly easy improvements that are possible when an industry is very young.
Competition played an important part in so far as it helped to stabilise prices. But let us not overdo the part that competition played and that it plays now in our economy. The position of competition in stabilising prices, not in causing vigorous and sustained growth but just in stabilising prices, is probably still a tenable function, but the distinction must be made that industry has always idealised competition and at the same time has always tried to reduce its effects.
The ideal of industry, in pursuing its own ways, assisting in competition, as we imagine was once pursued, was that in the pursuit of profit industry would be able to offer better services and lower prices. But if this may have been true in the past, it is manifestly only very limitedly true today. It may have been true at other times, and it may have been true in certain other countries, but it is true here today only to a very limited extent. The ideal of industry, in pursuing its own ways, assisting in the competitiveness and progressiveness of industry, is not very meaningful today.
1301 Yet, although actual competition in the way that we know it and understand it, in the way in which it is practised today, might stop prices rising to exorbitant levels, in the large majority of our important industries it does very little more than this. In established industries today the competition is not so much in prices or in fundamental development. Far more of the competition is in side developments, not of new products but of variations of products in style and design and similar matters which go with it.
The units which are concerned in the Bill before us are large—large manufacturing, distributing and servicing units. When units are large and few, price competition is not often very real, because each unit, if pressed, can often reduce its prices to cost or below cost, and can maintain this position indefinitely. This is the prerogative of the large and powerful organisation. It can maintain the position indefinitely especially if it is making and distributing other products, for some of the costs can he transferred to some of its more profitable functions, for a certain time at least.
In a situation where no one concern can hope to subdue its competitors, price fixing becomes inevitable. If we pass laws making price fixing illegal, we shall get price stability, because these people understand what is likely to happen and will take steps to safeguard their interests out of fear of the consequences.
Clearly, in the case of steel and tyres, to mention only two examples, aggressive competition at this time is an ideal which is impossible. There is, however, in large organisations one possible type of competition which is still tenable. That is where units are large and the sizes of the orders are also very large. I think particularly of the shipbuilding industry and very large manufacturing organisations. But for most firms a monopoly status does not necessarily result in a true decline of competition because competition was previously almost nonexistent in so many of the organisations.
I think that it is an over-simplification to say that competition determines prices. One only has to consider the price differences between countries making the same goods. Whether one works it out 1302 in terms of man hours or rates of exchange or whatever it may be, one can see that, however vigorous the competition may or may not be, the relationships between prices here and certain overseas markets have very little in common.
The effect of competition, I believe, is quite subordinate to very much more important effects—the driving force, the technology and the size of the markets—in determining the aggressiveness of a particular industry. In a large competitive industry, there are one or two sources of disguised waste. An obvious source of such waste is advertising. Advertising is now taking about 2 percent. of our gross national product. All competitive industries have to practise it, the object being, so we are told, to achieve the economies of scale.
If we are prepared to spend 2 percent. of our gross national product on achieving the economies of scale, then we are spending 2 percent. to achieve a monopoly position which then has to be threatened by anti-monopoly legislation. This, of course, is our contradiction. We understand, or are beginning to understand, the advantages of certain economies of scale, but it is no use providing the economic climate in which the large organisations can flourish and are encouraged to grow and then stopping them from achieving their objective.
I believe that the sponsors of this Bill had this in mind, because they have avoided very firm rules. When legislation avoids such firm rules, we should think about it very carefully because it may be that it is not founded on very firm principles. I understand the difficulties of avoiding firm principles in this case, but the truth is that the virtues of competition are less than is generally realised and the disadvantages more than generally accepted.
I believe there are such things as certain limits beyond which competition ceases to be useful. I think that competition ceases to be useful when the advantages of the economies of scale equal the usefulness of competition. It comes at a point where one achieves certain economies of scale which are more important than the usefulness of competition which one then tries to avoid in large, expanding efficient industries. This limit is getting very large and is 1303 coming to the point when we approach almost complete monopolies.
Mention has been made of car and chemical firms. The most important and aggressive of these produce, as my hon. Friend the Member for Birkenhead (Mr. Dell) said, largely for export, and the concentration of all these industries and their growth increase the arguments to be advanced for the economies of scale. This is a growing trend and something that is not a subject of extrapolation: it is inevitable. As the advantages from economies of scale increase, then the advantages of a monopoly or a near monopoly position will also increase.
§ Mr. Terence L. Higgins (Worthing)
Would not the hon. Gentleman agree that, if this is so, his argument only holds if the industry concerned is not protected by tariffs and that it is, therefore, essential that such an industry should be investigated by the Monopolies Commission to see whether there are economies of scale of the size he suggests? If that were so, the Commission could recommend the complete abolition of all protective tariffs on the industry concerned.
§ Mr. Sheldon
The hon. Gentleman has anticipated my remarks rather well. It used to be felt that the optimum size for any industry was about 5,000. A group of economists felt that, as an industry approached a certain size so inefficiencies built in, due to bureaucracy and other causes, caused a certain optimum size beyond which it would then fall. People believe that maximum efficiency would come at a certain stage and beyond that one got bureaucracy.
But certain things the managers of these organisations did not really understand. These were the development of management techniques, of aids of one kind or another. All these things are changing the whole balance of argument in favour of growing centralisation.
The new management tools we are seeing are today only in their infancy. Information processing can show that there need be no such thing as optimum size and, as far as one can see in these matters, it can be argued that efficiency will increase quite rapidly, with increase in size. In many cases, faced with large capital investments, smaller organizations 1304 will no longer be able to survive as they used to. The new technology, the new methods of management and the new ideas of information processing are making monopolies more common and more viable.
But if the factors of information processing, management techniques and the new technology favour monopolies, what are we to do about the great concentrations of industrial power which will be built up? Even in the United States, where there is an enormous market favouring the growth of these large organisations, the large organisations will shortly find themselves in the position of being unable to expand because of the anti-trust Acts, and all the time industry is likely to be bumping up against the anti-trust Acts. If that should happen in a country the size of the United States, with the organisation of the United States, how much more likely is the same kind of thing likely to apply to us?
§ Mr. Bessell
The hon. Gentleman has referred to the effect of the anti-trust Acts and, to some extent, I believe that he is correct. But would he not agree that the technical advances made by General Motors, the Chrysler Corporation, American Motors and other companies of that sort have been largely because of the intensive competition among these companies, which has resulted in lower prices?
§ Mr. Sheldon
Of course, there are many advantages in competition. I do not deny that, but the competition must be genuine. When in this country we have companies which cannot grow to such a size, the incentives of competition must be replaced by some other means which will provide the same sort of beneficial effects. While one can go to the toffee shop round the corner, if one wants the best toffee and the best service it is best to have two such toffee shops; but if one can have only one there must be some alternative to competition when competition is no longer tenable.
When we find these large concentrations of industrial organisation building up, we will find that they will reach such a stage that we will need Government regulation, or even Government ownership. Of course, imports complicate the situation, because it is possible to get 1305 competition from imports, but that is not really the remedy for the situation, because we are concerned with the big, important industries of this country, and if the competition of imports were so serious, it would be likely to promote even further Government intervention.
So we find the situation where the growth of monopolies and the large-scale industries which are necessary today is leading to a greater control and participation by the Government. The President of the Board of Trade said that competition was the justification of private enterprise. In the large industries, the economics of scale can be greater than the advantages of competition. This trend is not likely to diminish and it may be argued that, in the interests of industrial efficiency, so far from declining to accept mergers, part of the function of the Board of Trade should be to promote them, but we all know that it is easier to draft legislation to prevent action than to promote it.
The President of the Board of Trade said that by making certain mergers more difficult he hoped that there would be certain beneficial results. This can be a very dangerous road. Part of the rôle of the Board of Trade must be to understand industry and to understand some of the important forces which are emerging from it. It is important to understand the nature of these mergers. Any Bill affecting this part of our industrial sector should be not so much anti-monopoly as against the quiet life which is enjoyed rather too easily in many board rooms. The fault, possibly, is not that there is too much monopoly, but that there is too much sloth, and part of the function of any Bill dealing with this subject must be to discourage it.
I believe that there is little value in the over-encouragement of competition. The real dangers of monopoly and over-monopoly are what many people have been mentioning—restrictive practices. But restrictive practices are not necessarily the result of monopoly. Acts dealing with resale price maintenance and restrictive practices have done a great deal of good in this part of our industrial and economic sector, but we must not confuse those with the monopoly which can often be so helpful to industry.
There are useful anti-monopoly powers in the Bill. If there is a danger of price 1306 abuse this can be curbed. But I do not think that this is a terribly important point. Far more dangerous is the fact that there are many firms opting for this fairly easy life. We must understand why these firms act in this way. Playing for safety is quite an understandable form of management. In many management games there are young men who beat the chairman of the big boards very easily and with very little effort. This is easily understood because the responsibilities of power can be very large indeed. Although the young man, playing his management games, may stake the fortune of his company on a switch in the computer, no head of an industrial organisation can ever venture in quite the same way.
The lesson which I have learned from the battle between I.C.I. and Courtaulds is not the same as that which other people have learned. I think that had a merger gone thtrough it would have been better than the position which existed before the bid was made. This is because I read certain aspects of this industry rather differently. But much more important is that this bid, which was made and was foiled, woke up the entire industry, and in fighting the merger Courtaulds got a taste for business.
This taste for business should be permeating our industrial and economic life. Anybody who can find some way of initiating it and introducing this stimulus will have the thanks of the whole House.
There may well be certain means of achieving resale price maintenance through a monopoly structure. Firms can get round the provisions of the Bill concerning resale price maintenance by achieving a monopoly structure. This does not look very likely at the moment, but there is a point in this.
What concerns me particularly are the various Reports from the Monopolies Commission. Going through all these reports, we see the small results that they have had. I do not think that this is the fault of the Monopolies Commission. It is because industry, so far from being wrong and wicked, tends rather more to be slothful. The idea that industries of various kinds have great schemes for enriching themselves has proved to be unfounded. What has been shown up much more is their activity in very many branches of their own sphere of interest.
1307 As I have said, the Bill does nothing to stimulate industry. It can stop abuses, but the reports of the Monopolies Commission have shown that abuses are few. The great danger in the Bill, however, is that it can discourage mergers of the useful type which I have been discussing, even by public examination, proving something which the firms in a proposed merger might prefer not to go through with.
The trial by public examination is very real. If companies have to go through that trial before taking part in a useful merger, it may well be that many large and valuable mergers will be stifled at birth. I ask the Minister of State to reply particularly on this point. We must have a firm understanding that no restriction shall be placed on mergers. The Bill leans against mergers. Of this there is no doubt. Throughout the Bill the accent is against mergers. I think that, in the main, mergers are probably a useful feature of our industrial life. The Minister must try to correct and restore the balance. It could well be tragic if in anti-monopoly legislation by eliminating such a potential abuse from industrial life we were to initiate an even greater one.
§ 8.45 p.m.
§ Mr. Terence L. Higgins (Worthing)
I am somewhat less enthusiastic about the Bill than a number of hon. Members who have spoken, on both sides. It seems to me that in some respects it goes too far and in other respects not far enough, and in one respect it introduces a particular point of principle which I regard as being entirely undesirable.
To deal, first, with the point of principle in the Clause concerning mergers, the Bill suggests that in addition to the usual definition of monopoly in terms of share of the market we should introduce an additional criterion concerned with absolute bigness. This is a radical departure which is to be deplored, because, clearly, from an economic point of view it is only through control of the market that a firm can exert monopoly power and raise prices and profits. To introduce a definition in terms of an absolute figure is entirely wrong.
The figure of asset value which is given in the Bill is £5 million. It is pertinent 1308 to ask the Minister exactly how he intends to define this figure. He must surely be aware that the Monopolies Commission has had great trouble in determining how to value the capital assets of a certain firm. It has tended normally to value assets in terms of the historic cost of the assets less depreciation at Inland Revenue rates. This is a quite nonsensical concept from an economic point of view. It is a concept based upon accounting conventions and it means, generally speaking, that the value of a firm"s assets is assessed at a lower figure than that at which they would normally be valued.
What I am saying—and the Government may well wish to introduce an Amendment in Committee—is that the definition of £5 million in terms of the Clause does not give a precise definition and that the Commission has had great difficulty in evaluating assets in this way. I regard this as a major point and I hope that the Government will consider it.
Some potentially wrong principles have been bandied about during the debate concerning the little "Neddies". Little "Neddies" may provide a useful source of data, but it would be quite wrong for them to become part of the anti-monopoly apparatus, because this would certainly deter industry as such as from participating in little "Neddies" in the way in which one hopes that it will co-operate. Therefore, it would be dangerous to do as the Prime Minister suggested in a recent speech and incorporate the little "Neddies" into the anti-monopoly structure.
I said in my opening remarks that in particular respects the Bill appeared to go too far. One respect which I have in mind is the Clause dealing with regulation of prices. If the Commission and the Board of Trade have any real criteria on which to set prices they will find that it is better to go into the question of enabling competition to be increased to reduce prices rather than to regulate the prices of a given monopoly. To regulate those prices would deter new competitors from coming into the industry concerned and would deter research into products which might well compete with the monopolistic industry.
The answer, therefore, is not the regulation of prices by the Board of Trade, but rather the encouragement of competition by enabling new entrants to come into 1309 the industry and, as I suggested in an intervention during the speech of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), the reduction of tariffs to ensure that our competition is at the highest possible level in industries which the Monopolies Commission has found to be wanting.
I said, thirdly, that the Bill would not go far enough. In one respect, I agree wholeheartedly with what has been said on this side of the House to the effect that we need a Registrar of Monopolies who will determine what the particular market being monopolised is and which firms should be referred to the Monopolies Commission.
The White Paper introduced by the Conservative Government was right in this respect, because it removed references to the Monopolies Commission from political pressures which might otherwise be brought against it, and this is what an hon. Friend of mine was suggesting earlier when he said that monopolies should be taken out of politics. He did not mean they should riot be subject to controversy in this House. What he did mean was that references to the Monopolies Commission should not be subject to political pressures, but that there should be an impartial body able to act in an impartial way.
As to the size of the Commission, hon. Members on both sides of the House have stressed that there has been too much delay in investigating firms referred to the Commission. I would ask the Minister, when he winds up the debate, to say exactly how many members of the Commission are full-time members, because I think that the important point here is not only that we need more members, so that investigations can be speeded up, but that we should have more people, in addition to the chairman and deputy-chairman, devoting their whole energies to the difficult problem of appraising monopolistic firms to see whether or not they are against the public interest.
I should also like the hon. Gentleman to answer this point. I should like to know how many economists there are on the Commission. Would I be right in thinking there is only one economist, part-time, on the Commission? Would the hon. Gentleman also care to tell us how many people there are on the staff of the 1310 Commission and covered by the sum of £190,000 as mentioned in the Explanatory and Financial Memorandum? How many economists will there be full time on the permanent staff of the Commission, helping it with its investigations?
I ask because one of the important points which has emerged from the work of the Commission is that the criteria which the Commission has used to determine whether a monopoly position is being abused have been extremely out of date. As I was saying earlier, it has been inclined to evaluate the capital of firms on the basis of historic cost less Inland Revenue rates. This, clearly, is not an effective or meaningful economic criterion.
The hon. Gentleman should be thinking more in terms of replacement costs of assets, taking account of the effect of inflation over the years. It is quite absurd that the Commission should evaluate assets in terms of what they cost in the 1890s, making no allowance at all for the change in the value of money, and then knock off depreciation at Inland Revenue rates, which is a purely tax concept, and then, having arrived at this nonsensical estimate of what the assets of the company are, to relate them to current profits in terms of pounds of today"s value.
This is the kind of concept to which the Commission has been working, and I think that it must reflect the fact that the Commission has been working in difficult circumstances, that it has been under great pressure, and has not had either enough full-time members or the number of staff to enable it to work in a manner economically meaningful to produce results which can be a basis for decision.
The Commission has been inclined to rely on figures of profits, or rate of return on capital, which are too high, though it may be that an inefficient monopolist is making a return on capital, or a profit margin, which is extremely low, the reason being that his costs are high because he is inefficient. So it is quite nonsensical, I would suggest, for people to say that these profits are too high or too low, because there is really no basis for taking decisions.
Again, as I suggest, it stems from the fact that the Commission and its staff 1311 are heavily overworked, and the provisions in the Bill for increasing them and for increasing the facilities available to them are totally inadequate. If, as they profess, the Government believe that we should have a more stringent monopoly control in this country, they should introduce a much more drastic Measure than they have, and a Measure which, at this stage, could be much more important than this one.
The hon. Member for Ashton-under-Lyne, referred to economies of scale. The fact is that because of the small staff, and so on, the Commission has had little opportunity to look into what economies of scale really are in particular industries. The points made by the hon. Gentleman were largely theoretical. He postulated that economies of scale were getting bigger and bigger, but the Commission itself has made little attempt to evaluate exactly what economies of scale are in particular industries.
This means that it has not been able to evaluate whether a particular monopoly is, or is not, against the public interest, because, as the hon. Gentleman rightly stressed, it may he that an industry which is able to obtain economies of scale may be in the public interest, and this is the kind of industry which we should encourage, but it means that we have to ascertain technically and economically what those economies of scale really are.
I suggest that that is something which we ought to do, but I add the caveat which I mentioned just now, that if the economies of scale are large there may be a case for encouraging competition by the removal of tariffs. This, again, is something which, if it went into the question of costs in detail, the Commission could look into and help in encouraging the competition and efficiency of industry.
I do not think that the Bill goes anywhere near far enough. I do not think that the proposals for expanding the Commission are sufficiently vigorous or ambitious. We must encourage competition in this country. We must be sure that we are not discouraging mergers where economies of scale are great, and to do this we must have a much better Bill than this one as it stands at the moment.
§ 8.57 p.m.
§ Mr. Raphael Tuck (Watford)
I support the Bill, and I have only one suggestion to make to my right hon. Friend the President of the Board of Trade. It is with reference to the monopoly and enormous power wielded by the Press. We on this side of the House have felt this power, to our detriment. The scales have been inordinately weighted against us.
Everybody knows that the vast majority of the newspapers in this country are anti-Labour, and that the dice are strongly loaded against our party. My suggestion might meet with derisive laughter from both sides of the House, but it is one which I think merits consideration by my right hon. Friend. because it would set at nought the great power of the Press on one side or the other.
I should like to see it made compulsory for every newspaper to devote an equal number of pages to Conservative news and views, to Liberal news and views, and to Labour news and views. In this way the man who read the Daily Worker would be conversant with Conservative views, and the man who read the Daily Telegraph would be conversant with Labour views. It would set at nought the tilting of the scales against any one party. It would enable people to be better informed, and in that way would reduce the monopolistic tendencies of the Press today.
§ 8.59 p.m.
§ Mr. John Hall (Wycombe)
We have had a very interesting, if short, intervention from the hon. Member for Watford (Mr. Raphael Tuck), who said that the Press tended to be heavily weighted against the Labour Party. My hon. Friends and I have always been under the impression that the scales were weighted very heavily against us. Under those circumstances, it is probably correct that the Press have the scales about right.
I think that hon. Members on both sides of the House will agree that this debate has been notable for the very high standard of the contributions which have been made to it. We have had a number of extremely thoughtful speeches which have not only suggested ways by which the Bill could be improved, but have brought to the notice 1313 of the Government various considerations which they ought to have in mind when they are considering how to administer the Monopolies Commission"s system. I think that there has been a very considerable measure of agreement on both sides of the House, a measure which it a very important one and which could have a considerable effect for good or ill on the economy of the country.
We had an intervention from one member of the Liberal Party who, I am sorry to see, is not in his place. It was an interesting speech, during the course of which he likened the Liberal Party to Humpty Dumpty. I would remind him, if he were here, thatAll the King"s horses and all the King"s menCouldn"t put Humpty Dumpty together again.The President of the Board of Trade put over a good brief in the way which we have come to expect of him. In view of the form of his introduction, I hope that he will forgive me—I am sure that the Minister of State will forgive me—if my own introduction is not entirely dissimilar from that of the President of the Board of Trade.
On 4th June, 1841, Edward Stanley, later Lord Derby, made a speech in the House in which he quoted Mr. Tierney, the authority of the day, as saying that the duty of an Opposition was very simple: it was to oppose everything and to propose nothing. I think that it "is probably true that when the present Government were in opposition, they followed this admirable advice to the letter. As the spokesman of a responsible Opposition, I find it a little more difficult to follow that advice, particularly as the Bill which we are discussing emerges from the proposals of Command Paper 2299, which was laid before the House in March, 1964, by the previous Government.
While this Bill differs in some respects —respects to which I will refer a little later—it follows the Conservative line of thinking fairly closely on this subject. Even the Monopolies and Restrictive Practices Act, 1948, as my right hon. Friend tie Member for Altrincham and Sale (Mr. Barber) pointed out, follows quite closely proposals which were made by this party in our Industrial Charter. This is, of course, not unusual. The best 1314 legislation which has been introduced by Labour Governments over the history of government of this country has often been based either on the groundwork laid by previous Conservative Administrations or on Conservative principles.
If I may slightly misquote that famous extract from Disraeli"s "Coningsby", which hon. Members may remember:A sound Labour Government," said Taper musingly. "I understand: Labour men and Tory Measures"While this Tory Measure is based on a neutral and uncommitted approach to monopoly, it has emerged from this Government"s hands a little later than we would have introduced it ourselves and not perhaps quite in the form which we would have liked. This does not mean that we do not recognise this as a very valuable step along the road towards making our industry more competitive.
I think that its main defects have been mentioned time and time again in speeches from both sides of the House. I would mention some of them. The first is the failure to appoint a Registrar of Monopolies under the Bill, which I think, is regrettable. The second defect is the very wide and, I believe, inadequately detailed powers given to the Board of Trade and particularly as has been stressed from this side of the House—the power given to fix prices, apparently indefinitely.
The third deficiency is in respect of the powers relating to mergers or proposed mergers given by Clause 6, and particularly the power to apply a temporary stop to a merger while it is being considered by the Commission—in other words, to bring the merger to an end even before the Commission has considered it. The Bill has other defects of commission and omission which are perhaps best considered in Committee, although I will return to one or two of them later.
May I refer to the question of the appointment of a Registrar of Monopolies? This was referred to by my right hon. Friends the Members for Altrincham and Sale (Mr. Barber) and Reigate (Sir J. Vaughan-Morgan) and other hon. Members on both sides of the House who suggested that it might be of value if we introduced a Registrar of Monopolies. It will be remembered 1315 that this was covered at some length in paragraphs 9to15 of the White Paper, and I should like to quote some of the relevant extracts from those paragraphs.
Paragraph 9 includes:…but experience has shown that certain aspects of the law are open to criticism: the impression that the same body is being asked to carry out the function of "both judge and prosecutor"".In paragraph 10 we read:The first point has been made particularly by industry. It rests to some extent on a misconception." In paragraph 11 we read:Nevertheless, the Government believe that it would be desirable to draw a clearer distinction between the two stages of an inquiry into a monopoly—the investigation into the facts, i.e. into what is done by the monopoly, and the assessment of their consequences in relation to the public interest.In the White Paper we stated our intention to appoint a Registrar of Monopolies who would be responsible for making the investigation into the facts and for setting out for the consideration of the Monopolies Commission the questions and issues involved. I believe that the arguments used in those paragraphs in the White Paper were right, and this has been emphasised by speeches by my right hon. and hon. Friends, and, indeed, by hon. Members opposite. It is not too late to reconsider this question, and I hope that it will be reconsidered.
Not only is it desirable from the point of view expressed in the paragraph which I have quoted, but it might also make it possible for those companies which are desirous of achieving a merger to go to the Registrar to seek guidance in a way which perhaps they could not do if they had to go to the Board of Trade.
This point was raised at the beginning of the debate by my right hon. Friend, and in his reply the President of the Board of Trade suggested that it was perhaps difficult for companies to approach the Board of Trade to ask for advice because, for some reason or another, it might not be possible to disclose the various facts on which the Board of Trade could make up its mind whether it was likely to refer the merger or not. It is true that it may not be possible to ascertain all the facts. Nevertheless, the Registrar could in confidence 1316 have representations made to him by firms which are likely to come together and merge; it would have to be an approach by both sides.
They could give him enough information for him to say, "On the facts given to me I do not think that you are likely to be referred", or, alternatively, "You are likely to be referred". This would not bind the Board of Trade or the Registrar in any way at all, but it might be easier to do it with a Registrar than if the matter were left to the Board of Trade alone. I hope that the Minister of State will give attention to this point and, in his reply, will say that it will be reconsidered in Committee.
I turn to the powers given to the Board of Trade. These are very extensive. I recognise that to some extent they have to be extensive, and I agree with my right hon. and hon. Friends who have said that the existing powers are inadequate. Indeed, this was recognised by the White Paper. The White Paper stated clearly that we thought at that time that the powers under existing legislation were quite inadequate.
On the other hand, it is going too far to take the power to control prices for an indefinite period. I think that I am right in saying that almost every hon. and right hon. Member on this side of the House who spoke on this subject was against giving these powers. I do not think that they are necessary to deal with the monopolies and mergers which the Bill covers. The powers may be very useful if they are designed to implement a Government policy to control prices, but that is not supposed to be the basic purpose of the Bill. If, however, the Bill is designed as a method of controlling prices, the Government should say so.
It will be generally agreed that any lengthy control of prices of this kind makes trading extremely difficult, distorts the economy and means that firms must make constant application for increases in prices in the face of rising costs. Although I appreciate that France has a system which is not dissimilar—it controls prices in such a way that firms must make application if they want to increase prices—that system has not resulted in bringing down the cost of living in France. If we are to follow the French example in this connection 1317 it should be remembered, on a slightly different subject, that France is about to depart from the very fiscal measures which we are about to introduce. Further, France has announced its intention of encouraging company mergers by easing the tax which at present applies to them. I am sure that this would meet with the approval of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), who suggested that we should have more mergers rather than fewer of them.
My hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) suggested that if we are to have a restriction of this kind then price control should only follow a recommendation by the Monopolies Commission. There might be something to be said for that idea. As it stands, however, I think that it is a dangerous and unnecessary power and one to which we will have to return in Committee.
On the question of mergers generally, the President of the Board of Trade said of our proposals that they were rather like shutting the stable door after the horse had bolted. To continue that equine example, I suggest that the Government"s proposals are rather like interrupting a stallion put to stud. One will not get a Jay Trump that way.
Under the provisions of the Bill if the Board decides to refer a merger that is almost tantamount to deciding that it should not take place, particularly if a temporary stop is put on it and, according to Clause 6, that could be done even before the Monopolies Commission has completed its inquiries. Very few mergers would be likely to survive an inquiry lasting six or nine months, especially if, under the Bill, the Monopolies Commission must then lay a report before Parliament. That could not be done, under the Bill as I understand it, until three months after the report has been made, so it could be nine or 12 months before any action could be taken, and a decision arrived at, about a merger. As I say, I doubt whether any proposed merger could survive that sort of delay.
As has been mentioned during the debate, the conditions on which the original proposals were made in connection with a merger—the attitude towards the merger, and so on—tend to change, the whole basis of calculations 1318 change and often one needs to start all over again. Furthermore, other people may seize the opportunity to come in or to disrupt the merger. As has been pointed out, many desirable mergers could be frustrated because of this.
The example of I.C.I.-Courtaulds has already been given, including reference to its eventual breakdown. One hon. Member opposite mentioned that one of the effects was to stimulate Courtaulds into taking what he described as a businesslike interest or developing a greater business spirit in consequence of that attempted merger. I do not think that the kind of examination to which they would be subjected under this legislation would have that result.
Not that I think that the failure of the I.C.I.-Courtaulds merger was necessarily a good thing for the country in the long run. I agree that there is a lot to be said for encouraging more mergers, especially when we must compete with increasingly large industrial combines in other parts of the world. This particularly applies now to Europe, where mergers are taking place the whole time.
I should not have thought it necessary to hold up the merger while it was being considered. We must bear in mind that if companies are thinking of a merger but know that, on grounds of the operation being against the public interest, the Bill as it stands gives power to the Government to insist on the companies concerned breaking up their assets or splitting apart again, that is sufficient to deter them from merging. If companies had a merger in mind that was likely to be referred to the Commission, knowing full well that in those circumstances they could later be asked either to divest themselves of the assets acquired or split, I do not think that they would go ahead—it would be a very expensive operation to undertake.
The figure of £5 million has been attacked by various hon. Members on both sides, and I cannot quite understand what relationship it has to the question of monopoly. Whether or not one has assets of that value has nothing to do with whether or not one holds, or is likely to hold, a monopoly position. A company with a comparatively small capital, or total assets considerably below that figure, could well be in a monopoly position, 1319 or be able to attain a monopoly position in a limited field—
§ Mr. Hall
I am not sure that that is a good example, but it may be, and there are examples of that kind. I do not think that it has anything to do with the question at all.
The Government, or the Minister, have probably been misled by reading that excellent pamphlet by the C.P.C. "Monopoly and the Public Interest", because there the suggestion is made that an asset figure should be taken into consideration. Here, the figure mentioned is even less. That was one of the few proposals that I did not agree with then, and I do not agree with this one now. I am not sure how it will work.
My hon. and learned Fried the Member for Darwen gave the example of the attempted take over of the W.P.M. Here is a case of an attempted takeover on grounds of diversification. It does not create any greater monopoly position than existed before. Is this the kind of thing that would be referred for consideration? My hon. Friend the Member for Worthing (Mr. Higgins) asked how the Commission would assess the value of the assets. How will it decide whether or not a particular concern has assets worth £5 million? How does it value them? These facts have not yet been established, and we do not know how it will be done. Perhaps the hon. Gentleman the Minister of State will address himself to that matter in his reply.
Hon. Members on both sides have suggested that the Monopolies Commission should have its name changed, and I agree with the suggestion. The name "Monopolies Commission" gives a wrong impression. My right hon. Friend the Member for Reigate suggested that the name might be the "National Trade Commission". I do not know whether that commends itself to the House in general, but I consider it to be preferable to "Monopolies Commission".
It has been suggested that the number of members of the Commission should be increased. The figure of 25 is one that we introduced ourselves in the 1953 Act. I thought that it was inadequate then, and I think that it will be even more inadequate in the future. The Minister 1320 of State might consider amending the Bill in Committee to give power to add to the numbers by Statutory Instrument. It has not been possible to establish a number, and say that 25, 35, or 45 is the right figure. Power to add to the numbers, to cope with the work placed on the Commission, would deal with that point. It is necessary, and I hope that the Government will accept the suggestion.
The notable thing about the debate is that everybody has welcomed the Bill in principle, although some doubts have been expressed about its possible effect on industry, as to whether it is likely to be as beneficial as some Members think. We accept it as a logical development of our own previous legislation and preparation. I do not think that by itself it will make industry any more efficient. What it will do, however, is to take another step towards making the country increasingly competitive and perhaps arrest a tendency for industry to relax and become, to use a word which has been used this evening, slothful. There is a tendency for industry to become a little slothful. The Bill, if it does anything at all, will tend to increase the competitive spirit, which, I believe, is one of the essential factors we must have if industry is to be competitive and able to compete successfully abroad.
The Bill follows the Resale Prices Act, introduced by the Conservatives in the last Parliament. That was the first step in a series of steps designed to improve the efficiency, effectiveness and competitiveness of industry as a whole. The benefits of that Act are now beginning to be felt. Perhaps rather naturally, the present Government tend to take credit for the benefits coming as a result of that Act. I have no doubt that they will take the credit for any benefits which might flow from the Bill in future. I do not object to that. After all, we on this side of the House are concerned only that the legislation approved by the House should be for the benefit of the nation as a whole. It does not matter really which side takes credit for it. I can leave it at that.
§ Mr. Hall
I can assure the hon. Gentleman that it is not a big improvement to any of my right hon. and hon. 1321 Friends. This has always been our attitude. If the hon. Gentleman looked back at past speeches made by my right hon. Friend the Member for Altrincham and Sale, and my hon. Friend the Member for Reacting (Mr. Peter Emery), he would find many examples showing that this was our main objective. I sometimes wish that the enthusiasm which is now being shown for maintaining and, indeed, increasing the competitive spirit in our economy would also influence the Government"s attitude towards other major industries, to which they seem to have a rather different attitude.
I can promise the Government that we will co-operate to the full during the Committee stage and do our best to make the Bill more effective and move Amendments which will take into account the many useful points which have been made on both sides of the House. I am certain that the Government will have taken note of these suggestions and will be tabling Amendments to give them effect. If, perchance, they omit to do so, we will help them by tabling Amendments. We welcome this recognition of the need for a competitive economy.
We wish the Bill well. There is no intention on our part to oppose it in any way. In fact, this is a case where we would have proposed a very similar Bill ourselves. We congratulate the Government on having taken off the shelf a Bill which was ready to come forward. We regret that they have not perhaps included it in some of the things we would have liked to have seen. We regret that they have put into it provisions which we think might not be helpful, but which there is still time to amend in Committee.
We rest assured that the Government will co-operate with us, as we will cooperate with them, in improving the Bill for the benefit of industry and for the economy of the country as a whole.
§ 9.24 p.m.
§ The Minister of State, Board of Trade (Mr. George Darling)
I thank the hon. Member for Wycombe (Mr. John Hall) for his offer to co-operate with us in making this a satisfactory Bill. In view of the remarks which have been made about the paternity of the Bill, this is what we would expect. I am sure that all those hon. Members who referred to the Corn mince stage are now volunteering 1322 to serve on the Standing Committee. I am sure that in Committee we can deal with many of the questions which have been raised in this most interesting and valuable debate.
The Bill has received a general, though somewhat qualified, welcome even from the right hon. Member for Altrincham and Sale (Mr. Barber). I suppose I ought to comment on his reappearance at the Dispatch Box—appropriately the one on the other side of the House. Of course, it is difficult when a right hon. Gentleman disappears from the House in the way that he did. We are in a position of either offering him a welcome or ignoring the fact that he has reappeared. The best thing I can do is to say that if Altrincham and Sale has got to be represented by a Tory, then we accept his return here personally with very good grace indeed.
The right hon. Gentleman chided us for not putting into this Bill the whole of the White Paper introduced by his right hon. Friend the Member for Bexley (Mr. Heath). After all, he said, we had since last October to prepare this big comprehensive Measure. I should like to quote what his right hon. Friend the Member for Bexley said when I accused him of precisely the same thing, of not introducing a comprehensive Measure, last year. I said that the right hon. Gentleman had had plenty of time to introduce it, and the right hon. Member for Bexley—then the Secretary for Industry, Trade and Regional Development, and I think he was also called the President of the Board of Trade—said that I would recall that he went to the Board of Trade on 20th October. There was not a great deal of difference. We got there on the 21st. He went on to say:Anyone who knows the problems of Departmental life and drafting Bills knows that one could not have drafted a Bill of the size, scope and complexity of that which would be required for monopolies, mergers and restrictive practices in time to have carried it through in this Session."—[OFFICIAL REPORT, 6th July, 1964: Vol. 698, c. 146.]What we have done has been to start off from scratch. There was no Bill in the pigeon-hole.
§ Mr. John Hall
I thank the hon. Gentleman for giving way. He will recollect that the President of the Board of Trade, in introducing this Bill, described it as a modest Measure, and it is only one 1323 part of the legislation which was envisaged by my right hon. Friend.
§ Mr. Darling
I was going on to deal with that. There was nothing in the pigeon-holes and we had to start from scratch. We could not introduce a complete comprehensive Measure in this Session, and what we have decided to do is to make this modest first advance towards the comprehensive Measure. We will deal with restrictive practices and other issues which arise out of the White Paper as soon as we possibly can, but this is the first instalment, and I think that my right hon. Friend, instead of being attacked and criticised for making this first instalment in these circumstances, ought to be congratulated.
There was one contribution from the right hon. Member for Bexley, in a wider sense. I am referring to the Resale Prices Act of last year. We learned from him a year or so ago that even in debates on great issues in this House a majority of one is enough. The right hon. Gentleman nearly got into hot water and into a very difficult situation when he was talking about steel. He may recollect that when we were discussing his Government"s White Paper in July, this question of steel, and how to deal with the monopoly situation in steel, arose and I put two questions. I was winding up for the Opposition. I put two questions to the then Minister of State, Board of Trade, which have not yet been answered by anybody in the party opposite.
I asked him what, if hon. Members opposite believed in private competition in the steel industry, they would do to get the directors of the steel companies out of each other"s boardrooms so that They could really compete with each other instead of cooking up things between themselves. I am still waiting for an answer to that question. I went on to ask what, if the party opposite believed that competition was impossible among the big firms in the steel industry, because of the need for size and specialisation and so on, they would do to deal with the monopoly situation which arose out of that need. I am still waiting for a reply.
The right hon. Member for Altrincham and Sale said that he raised this issue of steel at the General Election. So did I, 1324 at every meeting, and I made sure that there was a steel worker in the audience to ask questions. [An HON. MEMBER: "A stooge."] No, he was there to ask what the Labour Government were doing about the steel industry, The result is well-known. The right hon. Gentleman was defeated and I trebled my majority.
§ Mr. Barber
I was not this afternoon the first to raise the question of steel. It was raised in an intervention from the benches opposite. Secondly, in my election address I dealt with the question of steel. It is true I lost. I think that the hon. Gentleman did not put in his election address any reference to the nationalisation of steel.
§ Mr. Darling
That is quite untrue. I mentioned it in my election address and, as I have said, at every meeting during the election, and on television. There is no question about it. I raised it not only at the last election but at every election from 1951 onwards.
The right hon. Gentleman said that it was quite true that the size of the Monopolies Commission was cut down in 1956. I do not know whether he agrees with the remarks of his right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan) that this is now considered to be a mistake. I think that it was the right hon. Member for Reigate who said that now, with hindsight, we were increasing the number. That is altogether wrong. My right hon. Friend the President of the Board of Trade and I were both involved in the debates on the 1956 Measure and both of us protested against cutting down the size of the Commission and we forecast what would happen if it were cut down.
§ Sir J. Vaughan-Morgan
The hindsight I mentioned was my own. I admitted that it was a mistake to have cut down the number and that there could and should be more.
§ Mr. Darling
I am sorry. I thought that we were being accused of hindsight.
The question has been raised in the debate of why we have not accepted the suggestion in the White Paper that there should be a Registrar of Monopolies. One point struck me as rather peculiar, when some hon. Members opposite were raising this issue. They said that a 1325 Registrar would be more impartial than if references were made to the Commission by the Board of Trade. I had the impression from the hon. Member for Sevenoaks (Sir J. Rodgers) that he was thinking of the Monopolies Commission as a sort of trial, and that the Registrar would he involved in making submissions to the Commission on the basis of a trial. We are not concerned about the trial at all. The Commission is not concerned with a trial in that sense. We are merely asking the Commission to investigate the facts.
§ Sir J. Rodgers
What I was suggesting was that a Registrar should put the case for the monopoly being investigated by the Commission. The firm would answer that and it was then up to the Commission to adjudicate whether or not the monopoly was in the public interest.
§ Mr. Darling
No, we do not want to do it in that way. First of all, we want to get at the facts. It is essential, all through our discussions on the Bill and on the whole question of monopolies, to think of the Commission as a fact-finding body, which, of course, can make recommendations to the Board of Trade though the primary need is to establish the facts.
This is not the only consideration we have had in mind, of course. As I explained, we had to produce a Bill rather quickly in the terms which were laid down by the right hon. Member for Bexley, and, because of the circumstances, it had to he restricted in scope. We should have much preferred to introduce the comprehensive Measure which, I am sure, all hon. Members want, but we had to keep the Bill short and we did not wish to do anything in the Bill which would completely close the door to the eventual introduction of the Registrar if this was shown to be desirable. However, we thought that a further major unheaval in the system of dealing with monopolies would not be desirable at this stage. We have taken into consideration the other advantages which have been claimed for the appointment of a Registrar, but we have come to the conclusion that we ought not to provide for it in this Bill.
We have been told that the appointment of a Registrar would separate the factual stage of an investigation from that of adjudication in the public interest, 1326 and would also help to speed up the Commission"s work. My right hon. Friend gave careful consideration to the proposal, for which all these advantages can be claimed, but, as I said, it would have meant a much longer Bill and we were not altogether satisfied that the resulting benefits would justify the degree of complication that the appointment of a Registrar would raise at this stage.
We believe that not only the enlarging and strengthening of the Commission but —here I reply to the point raised by the hon. Member for Worthing (Mr. Higgins) and other hon. Members—the strengthening of its staff, which is equally important, will achieve the major part of the advantages which would have resulted from the appointment of a Registrar; but I assure hon. Members who raised this point that our minds are not closed to the idea and, when we come to deal with the restrictive practices part of the operation, it may well be that we can go back to it and make whatever alteration may arise out of the results of working the Bill.
§ Sir J. Rodgers
Are we to take it from the hon. Gentleman"s last remark that there is no chance of the Government putting down an Amendment to the Bill on the question whether a Registrar should be appointed and we shall have to wait?
§ Mr. Darling
Not on this Bill, no. We think, for the reasons I have given, that it would make the whole thing too complicated, and, in any case, we have got to come back to the question of restrictive practices and, therefore, we shall have to look at the work of the Commission again as a whole. We think it more desirable to look at the problem again in those circumstances rather than tackle it in this Bill, which must necessarily be limited, for the reasons I have given.
§ Mr. John Hall
I apologise for interrupting again, but this is a rather important point. I am not sure, from the answers which the hon. Gentleman has given, exactly why he thinks it not possible to introduce under the Bill a power to add by Statutory Instrument to the members of the Commission. It seems a very simple thing to do, and far more satisfactory than saying that one can come back to it at a later stage 1327 after the Bill becomes law, because one never really does that.
§ Mr. Darling
The hon. Gentleman seems to be confusing the two points. Up to now, I have been talking about a Registrar. I have said that we consider that increasing the size of the Commission to 25 and, equally important, making sure that it has the right size of staff is the best course for the moment. I do not want to go into detail in reply to the hon. Member for Worthing"s question about the composition of the staff—how many economists and so on—because I should require notice before I could do so, but, clearly, the Commission must have the right kind of staff to do the job. I think that we are in agreement about that. The hon. Member for Wycombe has spoken about the membership of the Commission itself, and this is a question I should be prepared to look at, although at present, until we have discussed the matter a little more fully, I cannot give an undertaking that we should propose an alteration during the Committee stage.
One of the difficulties—
§ Mr. Higgins
I appreciate the hon. Gentleman"s reluctance to go into detail, but can he give an assurance that if the Commission is to work in groups there will be on each group one full-time member and one economist?
§ Mr. Darling
I appreciate the hon. Gentleman"s vested interest in economists, if I may put it so, which is in a friendly way. I cannot give that assurance now, but I appreciate the argument. There is a great deal to be said for it. The point is how to find the right people to do this kind of work, particularly the members of the Commission. I think it would be relatively easy with the right salaries to get, as my right hon. Friend said, a professional, full-time body of commissioners, but is that what we want? The Commissioners would, I think, be criticised for being divorced from industry, even from the academic life which some economists ought to have, and trade union leaders would be criticised for being divorced from their trade union practices and activities.
The proposition of making the Commission more professional must, I think, be taken into consideration, but if we 1328 are to carry on with the present voluntary arrangements of having people engaged in industry coming to work for the Commission more or less in their spare time —although a great deal of spare time may be taken up with it—we may have difficulty in finding more than 25 persons at this stage. I do not know. However, this is one of the things that we can discuss later.
The right hon. Gentleman and other hon. Members raised the question of mergers. They think it is wrong for us to take in the Bill power to hold up mergers during an investigation. On this point the hon. Member for Wycombe was very severe on us. He thinks that the provision may frustrate desirable mergers. He asked me a number of questions. I want to make clear—I repeat what my right hon. Friend and hon. Friends of mine have said—that we are not opposed to mergers and amalgamations in British industry. Of course not. I do not want to reproduce all the arguments which have been put forward for getting a better concentration of British industry, by stopping the dispersal of many industries into small units, none of which is capable of doing the job that industry in our modern economy requires. The bringing together of firms is very desirable. We must have our economy put into a modern shape, and this is one of the ways of doing it.
Therefore, we are not opposed to mergers and amalgamations in all cases. Indeed, we expect that very few mergers and take-overs will be referred to the Commission. But where there is a prima facie case that a projected merger may be contrary to the public and national interest, it is at least arguable that it should be held up and inquired into so that the facts may be established, rather than that it should be allowed to go ahead and then, if it is shown to be contrary to the public interest, we should have the appallingly difficult job of unscrambling it. We prefer the method we have laid down in the Bill, so that the projected merger can be held up while it is inquired into. Obviously the only mergers which will be inquired into will be those where there is a prima facie case that to let them go on will be contrary to the public interest.
§ Mr. Barber
Does the hon. Gentleman agree with his right hon. Friend the 1329 Minister of Technology—I quoted him earlier—who obviously thinks that there is a case for inquiry into the motor industry?
§ Mr. Darling
One thing that we are not going to do during the debate is to give any indication at all of the references that will be made to the Commission. We do not want any bargaining in this Chamber about references to the Commission. That would destroy everything that hon. Members opposite have been asking for when they have suggested that there should be a Registrar to do it instead of this House. It is a good debating point but has nothing to do with this debate.
§ Mr. Barber
It has a great deal to do with it, for the simple reason, as I said earlier, that one of the things of genuine concern to us is not the terms of the Bill but the way in which they are likely to be implemented. We recognise the point of view of the hon. Gentleman and of the President of the Board of Trade. We do not quarrel with their outlook, but I am bound to say that we are concerned about the way in which the Bill might be implemented by some other members of the Cabinet.
§ Mr. Darling
If the right hon. Gentleman will allow me to make my speech I will come to such points as he has raised. He has referred to another very important point about Clause 4—which. perhaps, has some slight relation to his previous question, although we are referring to Clause 4 of the Bill and not to Clause 4 of the Labour Party constitution.
I think that I can best answer the right hon. Gentleman by taking what must be considered a hypothetical case. I must stress that it is hypothetical because he also asked whether any complaints had been made to the Board of Trade about offences—if one can put it that way—against the Stockholm Convention of E.F.T.A. We have received complaints and, therefore, the example I am giving must be a hypothetical case, although it explains what we have in mind.
Let us assume a complaint from an E.F.T.A. Government that a British company, as a member of an international cartel, is changing discriminatory prices in the complaining country. This would 1330 be a breach of the Stockholm Convention and the Board of Trade, therefore, should ask the Monopolies Commission to investigate if the case cannot be settled by discussion among the parties concerned. The word "must" would entail all cases and I would rather temper the expression by using "should". The Board of Trade should ask the Commission to conduct an investigation to establish the facts.
If, in the light of the facts found by the Commission and reported, we were satisfied that there was a breach of the E.F.T.A. Convention, we could use the powers of the Bill to make an order requiring the firm to end the discriminatory practices complained of. That is what Clause 4 means, but I stress again that, before making an order, we should try to get voluntary arrangement which would put an end to the practices complained of. I think that will work out that way but obviously, having signed the Treaty and accepted the Convention, we must take power, as I am sure the right hon. Gentleman would agree, to deal with the situation that might arise in the way I have described.
The right hon. Gentleman raised one or two other questions. For instance, he referred to the defensive or restrictive practices of trade unions which, of course, can sometimes be harmful to the development of British industry. I am sure that he has noted with interest the announcement of the appointment of a Royal Commission to consider all aspects of relations between employees and management. I, in turn, also noticed with interest that the right hon. Gentleman had nothing to say about the social consequences of mergers and, therefore, I think that between us, by this reference to the Royal Commission, we can perhaps get things straight.
§ Mr. Darling
I am sorry. I must get on now. The right hon. Gentleman also referred to Post Office bulk supply agreements. I think that I can say, on behalf of my right hon. Friend the Postmaster-General, that the Post Office is doing its best to foster competition in the industries in question, that the future is constantly under review and that there is no need for the right hon. Gentleman 1331 to assume that the present system will be permanent.
The right hon. Member for Reigate made a very interesting speech. He said that the Bill had a respectable pedigree —that it was blue with pink spots. That is as may be. The right hon. Member also referred to resale prices and asked whether we would review the Resale Prices Act, a subject also raised by other hon. Members. The right hon. Gentleman will know that, although that Act was passed some months ago, under its terms the Registrar has only just made his first reference to the Restrictive Practices Court. Everybody will agree, whatever statements might have been made in the past, that we must give this new procedure time to work so that we can examine how it works before making suggestions for alterations.
I have far more sympathy with the right hon. Gentleman"s suggestion that we should change the name of the Monopolies Commission. I have been looking into this, and I have found that the same proposition was put forward in 1948, on the Second Reading of the original Measure. My right hon. Friend the Prime Minister, who was in charge of that Bill, promised to think up a better and more appropriate name if he could, but on Report stage he had to say that, after full consideration and consulting everybody he could think of, he had not been able to find a better name.
The right hon. Gentleman"s suggestion that it should be called the National Trade Commission was made at that time, but it was turned down for reasons which I will not go into now. I can assure hon. Members that not only in connection with this but also with other legislation in which we deal with trade matters, for instance, the Merchandise Marks Acts, the name of which must be changed when we introduce the new legislation, I shall be very glad to consider suggestions from any quarter for a new name.
The right hon. Gentleman went on to ask how we proposed to apply price control and for how long. So did the hon. Member for Wycombe. In the past, the Monopolies Commission has made recommendations either straightforwardly for price control, as in the 1332 case of matches, or for some kind of supervision of prices and profits. In its Report on the supply of dental goods it recommended that prices should be reduced in the national interest.
It went into a great deal of detail about matches and recommended that the Government should fix maximum prices for both home-produced and imported matches. On the supply of certain industrial and medical gases, when the Commission was dealing with the British Oxygen Company, again it said that steps should be taken to prevent the British Oxygen Company from charging prices which would produce a higher return of profit on capital employed than was reasonable.
On the supply of chemical fertilisers it suggested that the pricing policy of Fisons should be put under supervision, although recording its belief that the company itself could be relied on to carry out the recommendation that prices should be kept down. There is a great weakness in accepting that kind of recommendation of course.
On the supply of electrical equipment for motor cars and so on, it suggested that the prices of sparking plugs were too high and that something should be done to keep them under supervision.
Our view is that if we receive an adverse report on profits and prices in any particular case and fail to get a voluntary undertaking on prices as recommended by the Monopolies Commission, or as a result of an adverse report—and I must stress that—an Order would be laid to give the Board of Trade power to exercise control of prices. The Order would lay down clearly how the powers would operate, but I must stress that the Board of Trade would never contemplate acting without an adverse report from the Monopolies Commission.
I should like to take up the point made by my hon. Friend the Member for Acton (Mr. Floud). I have answered the point which he made about staff. The Monopolies Commission"s staff will be improved and made adequate for its job. He raised a point about general references and wanted to know whether there would be any more such references and whether they could be speeded up. The answer is "Yes". Within the scope of the Bill we have 1333 power to make an increasing number of general references. If he looks carefully at the Bill he will see that the provision makes it much more flexible for us to deal with general references.
On Press mergers, it is true that the Bill refers only to amalgamations of newspapers. It does not take in mergers of newspapers and magazines, or newspapers in relation to television companies. The reason its that we are following closely the recommendations of the Royal Commission on the Press. The only difference is that, as my right hon. Friend said, we have discarded the idea that this matter should be dealt with by a judicial tribunal. We have decided that if there are any newspaper mergers which have to be considered they should be dealt with by a special panel of the Monopolies Commission. This proposal has, I think, received general support.
The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) raised a question about the £5 million criterion for mergers and the reference to the Monopolies Commission of mergers above that figure. The figure of £5 million is arbitrary; we accept that. We went through the list of mergers over the last five years and did a little separating of the sheep from the goats. It seemed that £5 million was a very satisfactory figure where the merger did not lead to a monopoly situation. If the hon. and learned Gentleman looks at the Bill, he will see that the provision is rather flexible. We take the book value for assets as shown in the last accounts. But we want this provision for the very reason which the hon. and learned Gentleman gave. Where there is the prospect of public detriment arising from too big an empire, where a succession of mergers leads to diversification but the sheer power of the giant, as my right hon. Friend said, even though it is a diversified empire, is so great that it may stifle competition, we think that this kind of merger should be inquired into, and because it does not lead to a monopoly we have to find a new criterion for dealing with it. Therefore, we took this figure for size and said that any mergers above £5 million worth of assets can be looked into if there appears to be a prima facie case that the merger is contrary to the public interest.
1334 We have been very pleased that there has been such a general welcome for the Bill. We have been warned that there may be plenty of discussion in Committee on certain points. However, I think that the whole House will agree that this is a very welcome step in the right direction for dealing with monopolies and mergers, and that the powers to be taken by the Board of Trade will, in general, receive the support of the whole country.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).