HC Deb 17 December 1969 vol 793 cc1483-98

10.15 p.m.

The Minister of State, Department of Employment and Productivity (Mr. Edmund Dell)

I beg to move, That the Restrictive Trade Practices (Information Agreements) Order, 1969, a draft of which was laid before this House on 26th November, be approved. This is the first order which it is proposed to make calling up certain classes of information agreements under the provisions of the Restrictive Trade Practices Act, 1968. After the introduction of the 1956 Act, which had the object of preventing harmful restrictive trading agreements, it was found in practice that even though the undesirable types of restrictive agreement, such as those under which competing firms agreed on the prices which they would charge, were satisfactorily dealt with and, for the most part, abandoned, in some cases they were being replaced by a new type of agreement, the price information agreement. Under this, companies might agree to keep each other informed about the prices they were charging or the price increases they proposed to make without any actual obligation on the firms to charge the same prices or make the same price increases.

Very often, however, price information agreements of that kind could have much the same effect in reality as a straightforward price cartel. Because there was the possibility that the whole object of the 1956 Act could be circumvented by agreements to exchange information about prices or other aspects of companies' business, the Government took powers in the 1968 Act to call up, by order, a wide range of agreements of that kind.

With that background, I should like to explain the content and effect of the draft order which is before the House. The 1968 Act gave the Board of Trade—and now, since the transfer from that Department of its functions in relation to monopolies, mergers and restrictive practices, the Department of Employment and Productivity—the power to make an order calling up information agreements relating to many different matters—prices, terms and conditions of sale, costs, quantities and descriptions of goods produced, processes of manufacture, persons supplying or acquiring goods and areas or places in which goods are supplied.

It has been decided, however, to confine the first order to a much narrower field of agreements than that. It will only call up for registration agreements relating to prices and terms and conditions of sale. These are the types of information agreement which can be used most directly as a substitute for price-fixing agreements.

Although the order is narrow, that does not mean that the order-making power under the 1968 Act is exhausted. It may be that in the light of experience we shall find it necessary to make further orders later—for example, dealing with the exchange of information about costs, which can also be used as a near substitute in some cases of price-fixing agreements.

I have referred particularly to the decision not to call up cost information agreements at this time because this explains a point of drafting to which I should like to draw attention. The order is so framed as not to make registrable at present information agreements for the exchange of information between buyers about the prices which they have paid or are being called upon to pay. This is clearly in character much closer to cost information and to be considered in the context of any order relating to costs rather than in this order.

The most important feature of the order is the Schedule which sets out the agreements to be excluded from the general call up of information agreements relating to prices and terms and conditions of sale. This may appear complicated but it is intended to achieve common sense and desirable results.

We have always recognised that even in the class of price information agreements there are certain categories of agreement which are desirable and even clearly beneficial in the national interest. The objective in drafting the order has been as far as possible to exclude beneficial categories of agreement from call up. In drafting these exclusions we have benefited from the very extensive consultations which we have had with industry, the C.B.I. and trade associations. As the Act required we published, in February last, a notice of the matters which we intended to cover in this first order, and have studied very carefully the representations which we received in response to this. I should like to try to say briefly what the effect of the more significant exclusions contained in the Schedule is intended to be.

Mr. John Page (Harrow, West)

Before the hon. Gentleman leaves that point, can he tell us a little more about what the attitude of the trade associations and those with whom he had discussions disclosed—whether it was favourable or unfavourable to this new order?

Mr. Dell

The hon. Gentleman will, no doubt, remember that the notice as first given had included the proposal to include costs in the call up of information agreements. As a result of the representations which were made on that specific point we have now omitted costs. I therefore have the impression, though, of course, I cannot speak for any trade association or the C.B.I. with whom we also consulted on this matter, that their attitude to this order is far more favourable, at any rate, than it would have been had we decided to include costs in the form in which we originally intended so to do

I should like to say briefly what the effect of the more significant exclusions contained in the Schedule is intended to be, but I should emphasise that industry will have to look at the actual wording of the order, and my explanations will necessarily at some points have to oversimplify the effect of the exclusions.

First of all, the draft order excludes information agreements relating to exports. Without this exclusion industry would find itself obliged to deposit with the Department of Employment and Productivity all export information agreements under the special provisions relating to exports in the 1956 Act.

Secondly, we are excluding information agreements which are needed in connection with the supply of statistical or other information to Government Departments and other public authorities. This is, of course, because we do not want to upset arrangements for the collection of valuable statistical information or for consultation between industry and Government.

Thirdly, where information is already public or is being collected with a view to publication and not for the private purposes of the firms concerned we consider that it would not be sensible to require the agreements involved to be registered.

Fourthly, there are same unavoidably complicated provisions to ensure that information agreements which are incidental to types of restrictive agreement which are themselves exempt from registration under the 1956 Act do not become subject to registration as a result of this order.

Fifthly, there are provisions relating to the rather special positions of the agricultural marketing boards and the nationalised gas and electricity industries.

Finally, it may be useful to say what the obligations will be of parties to the information agreements covered by this order when it is made. The intention is that the order should, subject to the approval of Parliament, come into operation on 1st February, 1970. This date rather far ahead has been chosen so that there can be, it is hoped, time between the making of the order and its operation for industry to become fully aware of the provisions of the order and to consider its effects on existing agreements. When the order comes into operation the agreements existing at that time will have to be registered with the office of the Registrar of Restrictive Trading Agreements within three months from that date. The Registrar, when the agreements are registered, will consider, for each agreement, whether the provisions of it are or are not of such significance as to call for investigation by the Restrictive Practices Court. If the provisions are not significant the Secretary of State will be able on a representation from the Registrar to give a direction that the agreement should not be referred to the Restrictive Practices Court. Otherwise the agreements will be examined by the court in due course, and they are deemed to be contrary to the public interest unless the court is satisfied that there is justification for the agreement in terms of the public interest in the circumstances of the particular case under one of the heads set out in the legislation.

I have mentioned this to show that registration does not mean that the agreements are automatically condemned. Indeed, I know that the Registrar considers it important that public money and the time of the court should not be wasted on unnecessary references where an agreement is not likely to cause detriment to the public or any section of it.

The order represents a further important step in the effort under the restrictive practices legislation to bring to an end types of agreements in industry which are harmful to the public interest because they distort or prevent competition. With the explanation I have given of the content and effect of the order. I invite the House to give approval to the draft order laid before it.

Mr. John Page

Before the Minister sits down may I ask for clarification? I quite understand that competing firms are not to tell each other what their price structure is to be, but does paragraph 3(2) mean that a firm, when it sells or offers goods for sale, is not allowed to issue a suggested price structure for the wholesale and retail sales of its goods by firms to which it has sold them?

Mr. Dell

No.

10.27 p.m.

Mr. Dudley Smith (Warwick and Leamington)

In essence this order stems from the Restrictive Trade Practices Act of 1956, which was passed when most of us who are taking part in the debate tonight were not Members of the House. As we have been reminded, it is the first order which relates to Section 5 of the 1968 Act, which itself stemmed from the Act of 1956.

May I thank the Minister of State for his explanation of a somewhat technical document? I think we on this side are prepared to give the order a guarded welcome, though I understand that some of my hon. Friends who have specific points to put may be a little less enthusiastic, particularly because they fear that the order may have an adverse impact on small businesses.

I suppose I should declare a technical interest on this of all days when hon. Members interests have featured in a report. I am employed in industry in my activities outside the House, although I have no involvement whatever in information agreements. My activities in industry have, however, brought me into professional contact with a number of well-known and highly reputable trade associations, and I shall in a moment mention their relation to this order.

On restrictive practices of the type attacked by the order we on this side of the House have always seen the main problem as one of reconciling the beneficial results which can flow from the exchange of legitimate information between companies, and the undoubted fact that the intention of the 1956 Act was in many cases being undermined by the arrangements which some industries made for the exchange of information, particularly where prices are concerned.

It is worth recalling two paragraphs of the White Paper which was published by the last Conservative Government in 1964. On information agreements, paragraph 31 of the White Paper on Monopolies, Mergers and Restrictive Practices (Cmnd. 2299) reads as follows: Many exchanges of information between firms can be beneficial. Comparisons of costs can, for example, be used as a means for enabling levels of productivity to be raised. Agreements for the exchange of technical information may lead to the development of new methods and processes. The Government welcome such arrangements, and intend to see that nothing is done to impede their operation and extension. 32. But the Government are not prepared to see the intention of the 1956 Act undermined by agreements or arrangements for the exchange of information the purpose and effect of which is to limit competition. They therefore propose to bring information agreements within the scope of the 1956 Act, and thus to make them registrable and subject ultimately to consideration by the Court. It is interesting to note that that was back in 1964, and it has taken nearly six years for this first order to be brought before the House.

It is the wish of all of us that this measure should go a long way towards catching arrangements which are designed to restrict genuine competition. At the same time, I hope that the Department of Employment and Productivity and the Registrar will exercise their powers under Section 9(2) of the 1968 Act as carefully as possible, so as not to inhibit the exchange of useful information which is in no way harmful to the public.

In reading the reports of the debates which took place on the Second Reading of the 1968 Act, I was particularly attracted to one quotation from my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) when he said: Surely what is important here is that the mere provision of information is a perfectly harmless activity. What is damaging to the economy is the misuse of that information."— [OFFICIAL REPORT, 30th April, 1968; Vol. 763, c. 1027.] This order primarily affects trade associations, and I am sure that the Department was right to allow a period longer than the statutory period for representations to be made by interested parties. It is also encouraging to know that they paid heed in a number of respects to those representations. I am sure that the Minister of State will be the first to recognise that the trade associations will need guidance in what could be a difficult situation for them, and I hope that the Department of Employment and Productivity will be prepared to give it.

Trade associations are nearly always a power for good in industry and commerce. They help to raise and maintain standards in their industries. They encourage the weaker brethren in their ranks; they also keep them up to the mark, which is an important point, and they help to promote a responsible and statesmanlike approach.

I am sure that nobody here tonight wishes to construe this order as an attack on trade associations. I do not believe that is the intention. They have a difficult role as a collective agent for their particular membership. These associations have, as a general rule, become constructive and forward-looking in their attitude, particularly over the last decade or so, and have often provided a useful bridge between Government and industry—one which is appreciated on both sides, and which is vitally important.

I know that these associations, from talks that I have had with some of them, are very glad that the Department has decided to exclude information agreements about costs, at least at this stage. Mostly, I submit, these particular agreements are unobjectionable and they can be a valuable aid to efficiency and more competitive prices. The Minister has given more than a hint tonight that they may form the basis for another order in due course. I hope he will look at this carefully before he brings one forward, because many of us on these benches will be far less happy about that sort of order than we are about the one which is before us tonight.

Trade associations will also be pleased that the order is obviously designed to allow them to continue to some extent to collect information for statistical purposes, which can also be beneficial to the public interest.

I wish to ask the Minister to clarify paragraph 2(c) of the Schedule. Does this mean that it will be possible for trade journals to publish information on prices and costs subject to the provisions of the Act without recourse to the Registrar? I am wondering what the situation is where trade journals are concerned. As we know, they are often freely available to the Press. They might in certain circumstances be available to members of the public, and I am wondering how far prohibition of publication goes where these trade journals are concerned.

One leading trade organisation has also expressed to me considerable uncertainty about the scope of paragraph 2(b)(i) of the Schedule. That trade organisation thinks it would be helpful to industry if the Minister could explain the intended scope of that paragraph. In my view, it is far from clear and it would be useful to mention it.

There is also the question of what happens where an order is called up by the Registrar. While it is under consideration and before the hon. Gentleman's Department declares that it is unobjectionable, or if the Restrictive Trade Practices Court pronounces a decision to the contrary, is the information agreement allowed to be continued? I am sure that it must be allowed to go on until a definite decision has been made, but it would be valuable if we could have the Minister's confirmation.

I think it is fair to say that we on these benches give the order a qualified welcome. If it is applied liberally and sensibly it can be a useful spur to competition. But if it is interpreted oppressively it will earn the resentment of industry. I urge the Department to see how it works out before rushing forward with further orders under the same heading. We need a period of trial to see how it plans out.

I am sure that there is no intention to be illiberal about the interpretation of the order, but we must give notice to the Government that we shall watch closely to see how it operates in practice, and, if we think it necessary, we reserve the right to make alterations when we are sitting on the benches opposite.

10.35 p.m.

Mr. Charles Fletcher-Cooke (Darwen)

The Minister trails a few clouds of glory, having come from the Board of Trade, and he will, therefore, understand the importance of competition and unrestrictive practices as opposed to the Department in which he is now a captive where he is absolutely in laocoon toils of restrictive practices and unable to move in any direction.

I give a rather warmer welcome to the order than my hon. Friend the Member for Warwick and Leamington (Mr. Dudley Smith). If we will the means, we must will the end. There is no doubt that the order follows through the great corpus of anti-restrictive trade practices that both parties have adopted—in my view, quite rightly—for more than 25 years.

The order is a somewhat blunt instrument. It condemns information agreements, but in enormous schedules in enormously small print it makes exceptions. I suppose that this is one way of legislating. I do not know why, as my hon. Friend said, gas, electricity and agriculture should be excepted. What is there about those occupations or the nationalised industries that makes them not susceptible to the same kind of rigorous treatment that we mete out to other industries? Why should they be excepted?

Information agreements are "arrangements" in the sacred word of the principal Act of 1956. Arrangements are condemned by the 1956 Act, and quite rightly so. Information agreements too often, whether in the form of recommendations by trade associations or over lunch in the golf club on Sundays, or whatever it may be, have been the nonbinding legal equivalents of a legal restrictive practice. I have always condemned them.

I believe that they have been responsible for the enormous surgence—not resurgence, but surgence — of the capitalism of the United States of America. They have adopted an even stronger view than the order purports to propose. The United States have adopted criminal sanctions—and so has Canada —for this kind of activity. I am an unredeemed apostle of that doctrine. I believe that it is important to make capitalists compete. It is not an easy task to make capitalists compete, because they do not wish to compete when it comes to the crunch. The purpose of this House and of the community is to force them to do so. Therefore, I welcome the order.

In England, there is a psychological desire not to compete because it is thought to be ungentlemanly, against the code, or somehow beastly and anti-public school tradition. Nevertheless, I believe strongly in competition and, therefore, I welcome the order.

But what I do not understand is why there should be this enormous number of exceptions—three pages of close print—relating to agreements to which the order does not apply. This requires enormous justification by the Minister. He has mentioned gas, electricity and agriculture. I find no reason in principle why they should be excluded. There are many other exceptions in the order. Why should not they compete?

I believe that in philosophy this is a good order, but I do not like it in the sense that so much is taken out of it on political grounds of a very meagre and minor kind. Apart from that, I hope that we shall adopt it tonight.

10.41 p.m.

Mr. Tom Boardman (Leicester, South-West)

I, also, support the objective of attempting to create a more competitive society—something which hon. Members on this side of the House welcome. To that extent I go along with my hon. Friends in the blessing they have given to the order. But I have some doubts about its effectiveness, because the control of prices alone is only one part of the equation. The Minister will remember that when the Bill was in Committee we had long debates on this aspect of the problem. Too much concentration on price alone tends to conceal the other elements that go to make up a competitive society—the quality of goods, specifications, deliveries, service, and so on. These are also important.

I realise that the order is intended to avoid too many complexities in applying solely to prices, but I hope that it will not lead people to believe that prices are the only things that matter.

I share the fears of my hon. Friend the Member for Warwick and Leamington (Mr. Dudley Smith) about some of the obscurities in the Bill, and particularly the reference to paragraph 2(b) of the Schedule. I had a letter from a distinguished firm of solicitors who specialise in these matters who, referring to this Schedule, said: This exception is of fuliginous obscurity and must be clarified because it is at present unintelligible. Although we cannot amend the order I hope that we can have some explanation of what it is intended to convey.

There are also some irrelevancies in the order—the reference to restrictions on registered agreements relating to past prices. I wonder whether this is an entirely necessary exercise, particularly when there is such a wide range of exceptions. There is also the peculiar point that the terms of the order can be largely avoided by the publication of a catalogue. Perhaps the Minister will confirm that the mere publication of a catalogue of prices, which is available to those who ask for avoids the necessity for any agreement to exchange prices having to be registered. I understand that that is a correct interpretation of the position.

I have some doubt about the exclusion of prices relating to exports. I do not accept that the export trade is a completely different animal from any other type of commercial business. We should not kid ourselves that because somebody seeks to export he need not be as competitive as those dealing in the home market. He must be more competitive. I wonder whether any damage would be done to our export industry by applying the same spotlight of registration, if needed, to competition in that field, just as it is applied elsewhere.

With those reservations, I share my hon. Friend's support for the order.

10.45 p.m.

Mr. John Page (Harrow, West)

As the only amateur here tonight, I wish to ask one rather simple question, the answer to which I expect all other hon. Members know. It is in connection with Section 9(2), which provides that the Board of Trade, upon the representation of the Registrar, that the relevant restrictions…are not of such significance as to call for investigation by the Restrictive Practices Court,…may give directions discharging the Registrar from taking proceedings… I believe that a number of trade associations are worried about the costs which they may have to bear if their case is taken to the Court.

Mr. Deputy Speaker (Mr. Harry Gourlay)

Order. I am not sure that the hon. Gentleman's point is related to the order. He cannot ask questions on the principal Act unless it refers to the order.

Mr. Page

I believe that it refers to the order. If I am out of order, I will finish by saying only a few more words.

Under the provisions of the order, would it be possible for a test case to be put to the Registrar to ascertain whether it would be "of such significance" before an official application for registration is made?

10.46 p.m.

Mr. Dell

I am a little sorry that the order was given such a qualified welcome by the hon. Member for Warwick and Leamington (Mr. Dudley Smith). I much preferred the full-blooded approach of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), which appeared to be very much in line with that portion of the 1964 White Paper on monopolies and mergers policy which the hon. Member for Warwick and Learning-ton read out. This is an advance in producing a more competitive economy and should be welcomed as such—welcomed more warmly than it was by the official spokesman for the Opposition.

The hon. Member for Harrow, West (Mr. John Page) said that he was the only amateur present. I must at once profess not to be a lawyer. Therefore, I must be careful in any words I use in interpretation of what is, I confess, a very complicated document, which includes paragraphs which it takes some knowledge of the subject to interpret.

The hon. Members for Harrow, West and for Warwick and Leamington raised questions about Section 9 of the 1968 Act. The hon. Member for Warwick and Leamington wished me to give an assurance that the powers under Section 9 would be used sensibly. The hon. Member for Harrow, West indicated the worry of certain trade associations regarding the costs which can result from defending restrictive trade agreements before the Restrictive Practices Court.

I understand that worry. He must recgonise that that type of worry which was implicit in the decision taken in 1956 to proceed against restrictive agreements by a judicial method. If an agreement is to be defended, if an attempt is to be made to argue that any restrictive agreement should be permitted under one of the gateways in the 1956 Act or the additional gateway relating to restrictions that have no material effect in the 1968 Act, it costs money, as do processes of law in Britain. However, as I said earlier, the Registrar is fully apprised of this point. He is ready to take full advantage of the powers of representation given to him by Section 9 of the 1968 Act, and I am sure that he will make representations in respect of information agreements which he does not think to be of great significance.

May I again, not just in relation to Section 9, but in relation to the point made by the hon. Member for Warwick and Leamington that trade associations would need guidance, make a point which I made repeatedly during the passage of the 1968 Bill. The Registrar is available to discuss these matters with people who wish to consult him, and I recommend those who find difficulty in interpreting the law, or in understanding exactly what the situation in relation to their agreements, actual or proposed, may be under the law, to consult him. Obviously, even he is not an absolute interpreter of the law, but he can give them guidance.

The hon. Member for Warwick and Leamington warned me about going further from this order and returning to the subject of costs. The hon. Gentleman thinks that many such agreements can be beneficial. We have accepted that many price agreements can be beneficial, and this is the reason for the long list of exclusions referred to by the hon. and learned Member for Darwen (Mr. Fletcher-Cooke). I gave certain assurances in Committee that we would do our best—we could not do it absolutely—to draft an order which would avoid, in so far as it was humanly possible, beneficial agreements having to be registered, and this is the complicated result of the pledge, which I hope I have fulfilled. I am sorry that it has been necessary to make all these exemptions, but this was the only way in which I could fulfil that pledge.

On the question of costs, all that I say to the hon. Member for Warwick and Leamington is that we shall watch the operation of this Order very carefully. We are in no way abandoning the powers that we have under the 1968 Act, and if necessary we shall return to that matter. If and when we return to it, we shall have to go through the processes of notification and consultation that we have gone through in respect of this order.

The hon. Gentleman also asked me about publication in trade journals. Paragraph 2(c) of the Schedule exempts information agreements relating to information which has already been published in such manner that it is readily available to persons who are or may be purchasing goods…of descriptions to which the information relates…". If an information agreement is to be justified by publication, then the publication must be generally available.

The hon. Gentleman also asked about the scope of paragraph 2(b)(i) of the Schedule. Indeed, reference was made to the complexity of the wording of the paragraph as a whole. Perhaps I can give the House some guidance on this. This exclusion is intended principally to allow trade associations to carry on their representational functions. It allows them to collect information from their members, to process it, and present it to Government Departments and public authorities. They may wish to do this because, for example, they are making a case for a change in the tariff, for on anti-dumping duty, or for a change in taxation. There obviously must be some safeguard to prevent associations nominally collecting information for some public purpose but in reality for circulation of price information among their members.

Accordingly, the exclusion prevents a trade association from circulating information about particular firms' prices, and as a further safeguard prevents any information collected for submission to a public authority being circulated unless the Government Department has asked in writing for the information to be provided to it. In the bona fide case, for example, of an anti-dumping application, there should be no difficulty about the Government Department formally indicating that it requires information essential to consideration of the application. The hon. Gentleman also asked whether people could continue to act on agreements which once registered had not been brought before the court. They can continue to operate them until they are brought before the court.

The hon. and learned Member for Darwen put certain questions. I am delighted that he finds in me some grace in that I came to the D.E.P. from the Board of Trade. I hope that some of this grace might in his eyes be cast upon the D.E.P., but evidently not yet. He asked why gas and electricity are exempted. These organisations are exempted because they are part of one organisation and, therefore, it would be absurd not to permit information agreements between them.

The hon. and learned Gentleman also asked about the agricultural provisions in paragraph 4 of the Schedule. This provision is needed because at the time the provisions of the Agricultural Marketing Acts bearing on restrictive agreements of the Board were drafted, the 1968 Act had not been passed. The effect of this paragraph, therefore, is to exclude from the call up any information agreements made by a Marketing Board before 1st February, 1970—when the order comes into force—unless the Minister of Agriculture gives the necessary certificate. The hon. and learned Gentleman may say that, nevertheless, this does not deal with the principle that agriculture should be absolutely covered by the order. All I can say is that that is not the view we have taken.

Mr. Fletcher-Cooke

Is the hon. Gentleman really proud of the result of the exemption for agriculture in view of the condition of agriculture which was exemplified by the demonstrations yesterday?

Mr. Dell

I will content myself by replying that I am proud of the order. The hon. and learned Gentleman asked why there are so many exemptions. If he studies the rather longer than usual explanatory memorandum, he will see that these exemptions are necessary to exempt the useful information agreements to which I referred earlier.

The hon. Member for Leicester, South-West (Mr. Tom Boardman) holds the view that export prices should not be excluded. Their exclusion is in the tradition of the Restrictive Trade Practices Act, 1956, as well as of the present Act. I know his view, but I think that, in the light of the representations we have received and of our own judgment, it is sensible to continue this type of exemption. I think that, in any event, these agreements would probably be found to be beneficial to the economy rather than otherwise. The hon. Gentleman asked whether publication of catalogues of prices is adequate. It is. I think that is the answer which he got from reading the order.

I hope that, with this further explanation of the order, the House will be prepared to support it.

Mr. Fletcher-Cooke

By leave of the House, I would like to say how glad we are to have for once a Minister who has really answered all our queries. It is a nice change and I congratulate the hon. Gentleman.

Question put and agreed to.

Resolved, That the Restrictive Trade Practices (Information Agreements) Order 1969, a draft of which was laid before this House on 26th November, be approved.