WHOLESALE CO-OPERATIVE SOCIETIES (Hansard, 18 October 1968)

§ Mr. Dell
I beg to move, That this House cloth agree with the Lords in the said Amendment.

Mr. Deputy Speaker
Order. Mr. Speaker has not selected the Amendment in the names of the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) and the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis), in line 10 to leave out 'in the opinion of the Board'.

§ Mr. Dell
This rather lengthy and complicated Clause is intended to deal with a relatively small point.
After the Bill had left the Commons the attention of the Board of Trade was drawn to the fact that the definition of a trade association in Section 6(8) of the 1956 Act includes co-operative societies, such as the Co-operative Wholesale Society and the Scottish Co-operative Wholesale Society, which are registered as industrial and provident societies. We have given careful consideration to representations about the difficulties alleged to stem from this situation.
We think it anomalous that the ordinary, everyday trading transactions of a body such as the C.W.S. should be required to be registered. This situation arises as a result of the wording employed in Sections 6(6), 8(3) and 8(5) of the 1956 Act. Section 6(6) says in effect that if a trade association enters into an agreement under which it accepts a restriction, all the members of the trade association are to be regarded as accepting that restriction. This is what I might term a statutory fiction, and its effects in relation to a body such as the C.W.S. are rather surprising. For example, if the C.W.S. enters into any exclusive buying agreement under which it agrees to buy all its corn flakes, detergent or jam from a particular supplier, the agreement is registrable, because the statutory fiction of Section 6(6) requires one to regard all the retail co-operative societies in England and Wales that are members of the C.W.S. as parties to the agreement, and as accepting the exclusive buying commitment. As a result the agreement becomes registrable, because two or more persons are to be regarded as accepting restrictions under it.
The effect of the Amendment is to permit a body like the C.W.S. to be approved, and where it is approved to relieve it from the effects of Section 6(6). The Clause also makes similar provision 843 in relation to Sections 8(3) and 8(5) of the 1956 Act. Section 8(3) provides an exemption for ordinary commercial exclusive selling contracts. The exemption is not available where either of the parties is a trade association. The short effect of the new Clause is to make the exemption provided by section 8(3) available in cases where one or both of the parties is a society approved under the new Clause, notwithstanding that the party is a trade association.
The new Clause operates similarly in relation to Section 8(5) of the 1956 Act, which exempts knowhow agreements and contains a similar qualification. It does not affect the position of trade association recommendations to which Section 6(7) of the Act applies.
Two features of the new Clause call for some further explanation. First, the exemption is only available to societies approved by the Board of Trade. The reason for this is that the Board wants to guard against the possibility that ordinary commercial trade associations might get themselves registered as industrial and provident societies so as to circumvent the provisions of the 1956 Act. I hope that that explanation may help to deal with the point of doubt that appears to have existed in the minds of the hon. Members for Wanstead and Woodford (Mr. Patrick Jenkin) and Morecambe and Lonsdale (Mr. Hall-Davis) and led them to put down the Amendment which was not selected.
Second, subsection (4) of the new Clause exempts agreements made before the commencement of this Act. We understand that a number of ordinary commercial arrangements have been made in good faith without the parties realising that they were technically registrable because of the provisions of the 1956 Act relating to trade associations. We think the parties might reasonably he excused from registering these agreements. To sum up, what we are attempting to do is to put the C.W.S., in its capacity as manufacturer and wholesaler, in the same position as any other ordinary manufacturer or wholesaler.

§ Mr. Hall-Davis
I was going to say that the Bill has proved to be something of a Pandora's box as it has received its 844 detailed scrutiny. But perhaps "Pandora's box" is not the right simile, because the things that flew out of it were all unwelcome, whereas some of the unexpected things that have arisen from our discussion of the Bill have been welcome, and have been matters that should have been dealt with.
As the Minister said, the Clause is somewhat complicated to understand and to deal with briefly. Whilst he says that it deals with a simple point—and I am prepared to accept that after listening to him, I am glad that the discussion is limited this afternoon to those of us who have toiled through the full provisions of the Bill.
It is worth making clear that the object of the Clause is not to relieve the wholesale co-operative societies of an obligation which would be newly imposed on them under the Bill. The obligation is not new, but arises from the terms of the Restrictive Trade Practices Act, 1956. The wholesale co-operative societies have never discharged that legal obligation under the Act, because apparently they did not realise that it imposed any such obligation. It is not surprising that they did not realise the position, because apparently no one else appreciated it over a period of about 11 years, nor was it appreciated what the Bill would do until it was reaching a very late stage of its consideration. If the new Clause were not incorporated the wholesale cooperative societies would be exposed to consequences which could not have arisen under the 1956 Act, namely, to action by a person who might be affected, as set out in Clause 7.
The need for the new Clause shows what can now result from the sharpening in the Bill of the provisions about registrable agreements which have not been registered hitherto. It shows that we were correct on our side of the Committee when we said that the administrative provisions should be carefully examined and viewed against a likely substantial number of new registrations. It was perhaps this type of situation that we had in mind when making those comments.
One can readily appreciate the wholesale co-operative societies feeling that without the Amendment they would be subject to a scrutiny of their conduct of their trading activities to which no other similar trading arrangements would be 845 exposed. That is the gist of the Minister's reasons for bringing forward the new Clause. He said that the societies would have needed to register the agreements, and as they would be trading agreements this would mean not only the fact that they had entered into exclusive trading agreements of this sort but the disclosure of the full details to their commercial competitors of matters such as prices and quantities. This reinforces the point about the invidious position in which they would have found themselves.
The Minister has not suggested that there are any other bodies that would find themselves in the same position as the wholesale co-operative societies.
2.30 p.m.
This should not be taken necessarily to mean that there are none. During our discussion of this Bill various surprising matters have come to light, and it is possible that we might find that there were other bodies in an exactly parallel situation as to the effects of the Bill upon them. I appreciate the Minister's reason for making exemption available only to societies approved by the Board of Trade, because we on this side would not wish the provisions of the Bill to be weakened in directions which have not been foreseen. I hope that if the Board of Trade finds that there are, in future, other bodies suffering some disability such as the wholesale co-operative societies were, outside the underlying intention of the legislation, action will be taken at the first opportunity to relieve them too.
Subsection (2,b) of the new Clause is intentionaly very limiting in its effects. I would hope that the Minister can assure us that the Board of Trade, equally, will not hesitate to take action if it is found that the unforeseen arises in another direction, and as a result of any approval given by the Board of Trade under this Clause, any agreements which it was the intention of this Bill should be registrable, are escaping attention. I hope that if consequences are frustrating the Bill's intentions, the Minister will at a suitable opportunity undertake corrective action.
The Minister has referred to the retrospective element, and although one tends to be hesitant about such provisions, it seems that if the Clause is correctly drafted, it achieves the specific purpose and the retrospective provisions are rational, and not open to objections. The 846 Minister referred to the words in the new Clause which were the subject of a somewhat belated Amendment. These words wind up the Bill on a note about which we do not feel happy. That is the tendency for the Board of Trade to rely on administrative discretion to what is perhaps too great a degree.
The Minister has made clear there is the reservation that the Board of Trade may, if it thinks fit, approve under this Clause any industrial provident society. We do not quarrel with that. As I understand him, this is in order to see that the Bill so fulfils its purpose and that the escape Clause shall not permit more escapes than anyone would wish to see. The words "in the opinion of the Board" come before what appear to be two very tightly drafted subsections—(a) and (b). It seems that this is carrying caution to excess and stems from the Board of Trade's wish to see that on all occasions its own administrative Ministerial decision runs, and there is no risk, or only a very minimal risk, under the law, of it being challenged in the courts.
Perhaps the Minister can put our minds at rest on this and say that it carries some other impllication and it is essentially a phrase to make the powers covered by the phrase, "if they think fit" fully operative. We have had, in this Clause, and elsewhere a great reliance on Ministerial discretion. I would be happier if, in considering this Clause, there had been no examples of it. I accept the reasons for the general approach on these lines in the Clause, and we do not wish to challenge the reasonableness of it.
At the end of a succession of changes proposed in the spirit of the examination of this Bill, and in accordance with all the events as they have developed in a Bill of this kind which has been on the stocks for two or three years, under to some extent, the guidance of both parties, and has been scrutinised by the Department, it is fitting that there should still be an unforeseen situation at this late stage in its examination.

§ Mr. Dell
With the leave of the House, the hon. Gentleman has raised a point regarding the definition of the discretion in the Lords Amendment and it is right that I should reply to it. As he says, the provisions of the new Clause as to approval by the Board of Trade confer 847 two distinct powers upon the Board. In the first place, the Board "may if they think fit" approve a society for the purposes of the new Clause. Secondly, it is for the Board to decide whether a society satisfies the requirements set out in subsection (2)(a) and (b). As I understand it, the hon. Gentleman is not questioning the first element of discretion, but it is the second about which he is asking.
It may be argued that it is wrong to make the Board the judge of whether a society is eligible for approval under (2)(a) and (b). In fact, if the conditions as to eligibility were stated objectively, it would probably make little practical difference. The Board intends to exercise this power very sparingly and for a very limited purpose. The possibility that its decision that a body was eligible for approval could be successfully challenged is, in the circumstances, remote. On balance, therefore, it seems better to leave this discretion to the Board of Trade. This will make for speed and certainty which are among the reasons for introducing the approval procedure. It should be remembered that this provision does not confer arbitrary powers upon the Board which has to take its decision whether a society is eligible or not honestly and reasonably. If it fails to do this it would be open to challenge.