§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ernest G. Perry.]
§ 4.17 p.m.
§ Mr. Leo Abse (Pontypool)
The passing of the family planning Act last year enabling local authorities to give advice on contraception and to supply contraceptive substances and appliances to any person who needs them on social grounds, but not only in medical cases, was doubtless the final proof of the social acceptance of birth control in this country. How great is its acceptance today, and how it has accelerated is revealed in the comment made in July of last year by Mr. Angus Reid, sometimes known as "Mr. Durex", the chairman of the London Rubber Company, the company that has an almost total stranglehold over the rubber contraceptive industry in this country, when he indicated that in the five years to 1966 the business went ahead too fast for the management.
My purpose in this debate is not merely to draw attention to the fact that during the years spoken of by this director the profits of his company almost trebled; 1193 or, indeed, that during these wage-restrained years the six directors so unrestrainedly increased their fees, or even to comment on the prolific scrip issues made by the company. I do not believe that profits in themselves are necessarily sinful—indeed, they are a yardstick of efficiency and of service to the public. But the large profits of this company are not the consequence of efficient production. They arise because it has ruthlessly, and often deploying sinister methods, succeeded in making captive a large proportion of consumers—of the families in Great Britain which practise birth control.
Despite the increase to 800,000 of women using the pill, the current figure of the use of protectives has soared far above the figure estimated by the Economist Intelligence Unit in 1964. Today, no fewer than 100 million male contraceptives are being sold each year in Britain. The millions of men who, in chemists or in barber shops buy the well-known rubber brands of Durex, Prentifs, Prefax or Ona protectives are given the illusion of choice, but the truth is that these brands, and many others, like Arloid and Lloyds Grade are, although it is shyly omitted from all the packets, manufactured by this one firm, the London Rubber Company. This company manufactures 95 Per cent. of the male contraceptive devices sold, and similarly dominates the female rubber contraceptive industry.
Loving is certainly no less a part of family life than eating. No community would tolerate a monopoly making intolerable profits out of absurdly high-priced bread. Why should we tolerate such profit being made out of family life? A country which appears to want abortion free and easy and its contraceptives expensive certainly has its priorities curiously awry. That contraceptives are unnecessarily expensive as a consequence of lack of competition in the industry I have no doubt.
The net raw material content of male contraceptives is about 200 grammes weight per gross. With rubber latex at present prices and making a very generous allowance for mixing losses and reject production, the material content of a single contraceptive costs less than one-tenth of a penny. Other materials, dusting chalk and silicone lubricant, are used 1194 in only infinitesimal quantities per contraceptive. Packaging materials, heat-sealed foil, envelopes and boxing are a slightly larger item than raw material and the combined rubber and packaging content of a contraceptive is about a farthing. Manufacturing, testing and foil packaging machinery are largely automatic, but the machines require minding and there are direct labour operations at the latex mixing and final packaging stages. A halfpenny each would fully cover the wage costs, making a total of three farthings each.
Then we have to consider heat, power, plant depreciation and general factory overheads which are legitimately chargeable. They no doubt would cost as much as the wage bill on operations of this sort. Nevertheless, that means that the direct production costs could be no more than l¼d. each. If we take into account administration costs, selling, distribution and advertising and the giving of uplift of 50 Per cent. on direct production costs to cover such expenses, an uplift which many might think excessive, it would still leave the unit cost at less than 2d.
Therefore, every amount by which the London Rubber Company sells to the retail trade over and above that 2d. is demonstrably profit. Since it is selling at a retail trade rate of 4½d. to more than 7d. each, it is clear that over a wide range of the products the company is making a profit of over 200 per cent.
I believe it is not unfair to describe this monopoly company as war profiteers. It is probably the more offensive because of that. The history here was that before September, 1939, the United Kingdom market was supplied by several producers and many importers, but as a result of the war, when of course imports ceased, it was supported by Government contracts. "Durex ", the name now belonging to the London Rubber Company, progressively became the only one known.
Given this situation, at the end of the war the company was able to develop a powerful system of distribution to retail chemists. Only one brand was known since a huge quantity was supplied to the Services in envelopes bearing the name "Durex ". This acted as a code word for the product thus avoiding embarrassment to the customer during the post-war 1195 years. It was therefore possible to fix a price out of which generous margins could be taken by the distributors while still leaving the manufacturing company with handsome profits.
High profits traditionally attract new entrants in to a market, and of course competitors normally appear. The fact is that these conditions do not exist. If anybody else entered the field, his brand would be unknown and he would start with almost all the media for advertising and publicity closed to him, in view of the practice of newspapers not to carry advertising of such products and in view of the rules governing television.
In the meantime, the sales representatives of this company clearly from time to time have been instructed to collect any competitors' free samples and display material and to give equivalent products—their company's products—in exchange. This has meant that the distributor was happy about this, because he was in effect obtaining free supplies of the brand that he would almost invariably be asked for. So it has come about that it has not been possible since the war for any competitor whatsoever to solve these problems. So it has come about, too, that this company can make these profits.
I am aware that the Family Planning Association is disquieted by the present situation and would welcome a situation in which it could have genuine choice to buy, perhaps centrally, for its 770 clinics —a choice which would free the Association from the possibility of ever submitting to dictated terms. The local authorities, too, now that they are being encouraged to open clinics and supply contraceptives at reasonable cost, should be able to buy other than under the domination of a monopoly. Why should the general taxpayer be exploited, too, because the Army Medical Equipment Depot, which purchases 1.7 million contraceptives each year, is clearly unable to shop around in its purchasing?
What is most disquieting is that reputable companies with the capacity and will to compete are frightened from so doing, because they know how in the past this monopolist company has taken over or crushed all its competitors. The tactics which the monopoly is prepared to resort 1196 to are notorious. Its utterly irresponsible behaviour was revealed as a consequence of investigation in 1965 by some highly intelligent journalists, when it was discovered that this company clandestinely created and endowed a unit known as the Genetic Study Group with the object of disseminating to medical officers of health, the Women's Institutes, and Member of Parliament, misleading and alarming propaganda concerning contraceptive pills.
With the aid of doubtful public relations practitioners, attempts were made fraudulently to induce medical officers of health to act as patrons to this unit. The unit was created, promoted and activated by this company to mislead and alarm women and so dissuade from using contraceptive pills and use, instead, the rubber products the company produces. It was a disgraceful episode which was ended by newspaper reports and by Questions I put in the House at that time. Then, when the unit was wound up, the company's only comment was, "It was only a very small affair anyway". That sort of conduct and comment can in no way allay the alarm at the contemptuous way with which the company treated the public.
I am not surprised that a company which can act in that way can cause fear to potential competitors and dissuade them from entering the field. I am aware that legislation precludes any undertaking from being given in advance that a takeover bid by one company of another would be vetoed by the Board of Trade, but I hope that my hon. Friend the Minister of State will make it clear to any competitors wishing to enter the field that the Board of Trade will exert the utmost vigilance, and give serious consideration to the possible detriment to the public interest which might arise from any takeover or merger bids being made yet again by this monopoly.
I am aware, too, that now that the Ministry of Health, under the Family Planning Act which we have passed, will become involved in the purchasing of contraceptives, in addition to the Ministry of Defence being involved, devices could, if necessary, be deployed, and undoubtedly will be deployed, by hon. Members to interest the Comptroller-General and the Public Accounts Committee in prices being paid to this monopoly. 1197 Indeed, when the new powers assumed by the Prices and Incomes Bill become law, a reference aimed at reducing prices would not be amiss. In the long run, I have no doubt that that reference to the Monopolies Commission is required in the public interest. The statutory conditions for a reference could clearly be satisfied.
I realise that the Commission has a heavy load on hand, but I hope that the Minister will confirm today that, when future references are being considered, this industry will have a high priority. Apart from any other factor, a reference might well be a means of pushing this monopoly, far more than it has been until recently, into the export market instead of lolling about in the present captive home market. But, more important, a reference would reveal a situation showing that the family life of this country has an unnecessary incubus upon it because of the activities of a monopolistic concern of this kind.
§ 4.30 p.m.
§ The Minister of State, Board of Trade (Mr. J. P. W. Mallalieu)
My hon. Friend the Member for Pontypool (Mr. Abse) has argued with feeling and with cogency about certain possible monopoly aspects of the contraceptive industry. He did not attempt to establish a case regarding chemical contraceptives or oral contraceptives. There are several firms—11, I believe—producing the oral contraceptive, and the Family Planning Association would, I think, agree that there is intense competition in chemical contraceptives. I am unable to say whether there is anything like a monopoly situation in female rubber contraceptives because the facts of that branch of the industry are still not established, but it is clear from what my hon. Friend has said, and from our own investigations, that, as regards male rubber contraceptives, the minimum statutory requirements for reference to the Monopolies Commission do apply.
The London Rubber Company, to which my hon. Friend has been alluding, has not one-third of the sales; it has, so far as we can establish, about 95 per cent. However, the fact that the level 1198 of control of sales comes within the minimum statutory requirements for a reference to the Monopolies Commission does not necessarily mean that an industry would be automatically referred to the Commission. In the Board of Trade we have to consider, for example, the degree of competition from alternative products. We have to examine the economic and social importance of the industry. Certainly, on the social aspect of the matter, there is no question of the importance of this industry. Also, as in so many things, we have to consider priorities. We do not wish, and we do not propose, to overload the Monopolies Commission.
None the less, my hon. Friend has put on record a considerable case and has established the need for a most careful watch on this sector of the industry. He made some powerful points about price, which might well become of interest to the Prices and Incomes Board. Also, he wished me to sound a warning note about the effects on this industry of takeover bids or mergers with competitors. He knows that I am not able at this moment to assert that, if a particular merger were to take place, it would be referred. I do not propose to make any such assertion, nor at the moment to give my hon. Friend an assurance that a reference will be made in present circumstances to the Monopolies Commission of the position in the industry. But I assure him, as did my predecessor and my right hon. Friend the previous President of the Board of Trade, that we shall take the most serious note of the points he has raised.
If by any chance it seemed as though there was an attempt to establish a total monopoly position in the industry by take-overs or mergers, we should go into it very thoroughly to see whether there was a need for a reference. I give my hon. Friend that assurance and hope that it will, for the time being, satisfy him. I congratulate him on raising this matter in the House.
§ Question put and agreed to.
§ Adjoined accordingly at twenty-four minutes to Five o'clock.