IRON AND STEEL (RESTRICTIVE TRADING AGREEMENTS) (Hansard, 21 June 1968)

§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)
I beg to move, That the Iron and Steel (Restrictive Trading Agreements) Order, 1968, a draft of which was laid before this House on 20th May, be approved. This Order is made under Section 33 of the Iron and Steel Act, 1967, which provides for my right hon. Friend to repeal Section 7(1) of the Restrictive Trade Practices Act, 1956, when central arrangements have been made to import raw materials or other iron and steel products for use by the British Steel Corporation. Section 7(1) of the Restrictive Trade Practices Act exempts from registration agreements between iron and steel producers for central importing and distribution of raw materials and other iron and steel products. Subsequent amendments to the subsection have made exemption dependent on the Minister of Power's approval.
Two agreements have been approved under Section 7(1). Under the first, all steel companies using imported iron and manganese agreed to get their supplies from B.I.S.C. (Ore) Ltd., a subsidiary of the British Iron and Steel Federation. Under the second, steel companies using imported magnesite and magnesite bricks agreed to get their supplies from the British Magnesite Corporation Ltd., another subsidiary of the Federation. The Federation has now however been wound up and B.I.S.C. (Ore) and British Magnesite have become subsidiaries of the Corporation. The conditions set out in Section 33 of the Iron and Steel Act 1468 have therefore been satisfied and the Order can now be made.

§ Mr. John H. Osborn (Sheffield, Hallam)
As the Parliamentary Secretary knows, I am interested in the private sector of the steel industry, but I wish to comment on this Order as a Parliamentarian. In Committee on the Bill we did not debate the Clause. I do not know whether the Parliamentary Secretary recollects that it was 11.27 p.m. when we withdrew and the Clause went through on the nod.

§ Mr. Speaker
We cannot debate the Section from which this Order springs. We can only debate the Order.

§ Mr. Osborn
Thank you, Mr. Speaker, I was moving straight on to say that we are now dealing with an Order which results from the Clause which was not debated. As the Parliamentary Secretary has outlined, the old arrangement was that the British Iron and Steel Federation, the B.I.S.C. (Ore) Ltd., and the British Magnesite Corporation Ltd., were affected by the 1956 Restrictive Trade Practices Act.
This Order has been put to the industry, which has welcomed it. It is a natural development from the original Bill, but there are a number of questions which should be asked. I understand that the private sector will still have the option of purchasing its iron ore and will have rights to purchase by agreement from other suppliers if at any time it is dissatisfied with the arrangements made with B.I.S.C. (Ore) Ltd., which becomes the purchasing department of the British Iron and Steel Corporation. What guarantee have we that the B.I.S.C. as a purchaser will not have preferential terms over those of the private sector?
This was an excellent arrangement which is about to be continued. Will there be fair treatment, as between the public and private sectors? It would be encouraging if the Parliamentary Secretary could confirm this. I recognise that today a good understanding has been built up in this field between the public and private sectors. The bulk of iron ore will be used by the public sector. Therefore, in the normal course of making commercial arrangements, it could be claimed that the public sector will be 1469 purchasing in large scale or bulk quantities, and therefore will be eligible for special discounts. If this claim were pursued it would put the private importer in a difficult position.
Under the old arrangement both public and private companies purchased their ferro alloys through the normal traders and metal merchants. I presume that this Order is strictly confined to terms of reference which in no way influence the purchase of ferro alloys, or could it be extended to them? Has the Parliamentary Secretary any knowledge of the extent to which scrap will be affected by this Order? Very little scrap has been imported of late, but presumably if the private sector wanted to purchase imported scrap, this arrangement could be extended.
The Parliamentary Secretary may not be able to give me these assurances now, although they will be welcome if he can give them, and a letter subsequently explaining the position will be satisfactory.

§ Mr. Michael Shaw (Scarborough and Whitby)
The origins of the Order lie in the Iron and Steel Act, 1967. The Minister joined us halfway through the proceedings on that Bill, in the less hectic stages. No doubt he has mixed feelings about that.
During the debate, we were naturally concerned, and properly gave voice to our concern, that Clause 29, now Section 13 of the Act, should not be used to put the private sector of the industry in any way at a disadvantage. My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkins) described the Clause as an "I'm all right, Jack, Clause". That was couched in the rather provocative terms of those Committee proceedings and the Parliamentary Secretary's predecessor said that perhaps my hon. Friend had exaggerated the problem. All that my hon. Friend was trying to do was to highlight the fact that a problem exists.
The British Steel Corporation, having ensured that supplies of imported steel and manganese ore are readily available, through the acquisition of B.I.S.C. (Ore) Limited and that the supplies of imported magnesite are equally secure through the acquisition of the British Magnesite Corporation, the Minister, as he has 1470 every right to do, is abolishing the privilege which previously existed under the 1956 Act whereby the industry was allowed, without registering them, exclusive agreements for the purchase of certain raw materials.
My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) has a great knowledge of the iron and steel industry which is always respected in the House. He asked whether possible purchase arrangements for future imported materials, other than these materials, are affected. The answer is "No", because only two agreements have been concluded in this respect. The Parliamentary Secretary said that any such agreement in future will have to be registered.
Our concern, as in the debates on the Bill, is to make sure that the Order in no way places independent steel producers in a difficulty. I have made such inquiries as I can and I believe that the Order does not place the independent steel producers in any difficulty—or, at any rate, that it is not expected to do so. It seems to me that, following the arguments which we put forward in Committee, the British Steel Corporation are prepared to offer, and have already offered, a continuing service by offering to enter into individual arrangements with any independent producer who may want to use B.S.C. services. The advantage to the independent producer, if he accepts the new arrangement, will be that he is not bound to go to the B.S.C. or one of their subsidiaries as a source of supply. If he sees a better opportunity, either of service or of price, it will be possible for him to make his own independent arrangements.
I have a question to ask the Parliamentary Secretary, although I think that the answer is "No". Does he agree that it is not likely that any independent producer would wish to continue the existing agreements? If they were continued, would it have to be by the agreement of all the independent producers or could one independent producer alone continue an exclusive agreement? If that were possible, it would have to be registered in accordance with the 1956 Act.
In considering the question of fairness, I remind hon. Members of the words of the Parliamentary Secretary's predecessor in Committee. As reported in column 1471 2293 of the OFFICIAL REPORT, in anticipating the sort of agreement likely to arise between the B.S.C. and independent producers, he said, These arrangements will not be registrable "— That is because they are not exclusive— and no agreement will be necessary between private firms and the Corporation, remembering that the Corporation, as an agency, will take the overwhelming bulk of imports anyway. It is in that respect that there will be benefits arising from economies of scale."— [OFFICIAL REPORT, Standing Committee D, 13th December, c. 2293.] I can see that there will be these economies, but I believe that my hon. Friend the Member for Hallam is right to pinpoint one of the dangers. The B.S.C. already have a very commanding position, because they will take by far the greatest quantity of the raw materials being imported. A conflict of interests may well arise in future about supplies, price or quality. It is right that we should bring that out to make sure that if any such conflict arises, the B.S.C. will never use their overwhelmingly strong position unfairly against independent producers. As far as I have been able to discover, B.S.C. are anxious that they should not use these powers unfairly. I understand that B.S.C. are fully aware of their position and are anxious to provide a fair service to those independent producers who want to avail themselves of the service. It is on that understanding that we accept the Order.

§ Mr. Freeson
May I have the leave of the House to reply both to the general points which have been made and, as far as I can, to some of the specific points made?
I was asked about the relationship of the small private sector to the B.S.C. and to fair trading practices. As the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) rightly said, there is an anxiety to bring about fair practices on both sides—an anxiety felt by both the B.S.C. and the private sector. Adequate machinery is written into the Act which the private sector can use 1472 should they feel justified in complaining of unfair trading practices in pricing. The Order was, however, discussed both with the B.S.C. and with the British Independent Producers Association, and both were quite happy about it. Generally speaking, the hon. Member has the position correct.
I was asked whether the private sector would have to register an agreement if they wanted to buy from a supplier other than the B.S.C. I understand that they would not, unless the private producers had an agreement to buy only from that supplier. A straight commercial transaction would not be registrable under this procedure.
As for the private sector, under the Restrictive Trade Practices Act agreements solely between inter-related bodies —that is, between corporate bodies and their subsidiaries—are not registrable. Arrangements confined to the Corporation and the publicly-owned companies are not therefore registrable and would not be affected by the Order.
The private sector interest is very small. Less than one per cent, of the ore and only between 15 per cent, and 18 per cent, of the magnesite and bricks containing magnesite, imported last year by B.I.S.C. and British Magnesite, went to private companies, but the B.I.S.C. has offered all these companies the use of its central purchasing facilities at terms comparable with those for public sector companies, so the relationship is quite happy and there are no grounds for uneasiness on that score.
The only other question asked by the hon. Member was whether this division could apply to ferro-alloys and scrap. These are not affected by the order in any way.
If there are any other outstanding points which hon. Members wish to raise when they read the OFFICIAL REPORT we shall be glad to answer them.