HC Deb 17 December 1970 vol 808 cc1577-86

4.0 p.m.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)

With permission, I will make a statement about the measures which the Government are taking to strengthen the machinery for promoting competition in industry and for providing safeguards against the abuse of market power.

We shall in due course introduce legislation to reshape the Monopolies Commission, to widen its scope and powers and to make it more effective. Meanwhile, within the scope of the existing legislation, we shall make important changes of practice which will foreshadow the legislative proposals we shall eventually bring forward, and set the Monopolies Commission on a course enabling a smooth transition to be made to the new Commission which will replace it. In the transitional period we shall increase and strengthen the staff of the Commission and appoint additional full-time members as necessary.

The Commission will be encouraged to become the expert and authoritative source of information to the Government on situations of imperfect competition, and I shall be ready to consider proposals from it of possible subjects for formal inquiry. The power to make references will remain with me, but I shall have no objection to the Commission making its proposals public if it so wishes.

To enable shorter inquiries to be undertaken in appropriate cases, the Commission will be asked, so far as is possible within the existing legislation, to direct its attention to specific issues as an alterna- tive to the traditional wide-ranging monopoly inquiry. For example, the Commission may be asked to investigate a particular practice by a company or industry, or to report on prices in a monopolistic situation. I hope, too, that these limited inquiries will permit simpler procedures to be adopted.

I shall make further references as necessary. I shall continue to use the power to refer proposed mergers to the Commission if I consider that competition in the relevant market would be restricted to a damaging degree as a result of the merger. I shall also hope from time-to-time to issue guidance on the principles being followed in making references to the Commission.

The Commission has in the past been used to inquire only into the activities of private industry. In future, I shall be ready to make use of the power in Section 2(2) of the Monopolies and Restrictive Practices Act, 1948, to ask the Monopolies Commission to give the Government information and assistance on questions arising out of the operations of publicly-owned enterprises which are in a monopoly position. But I shall bear in mind the need to avoid burdening those industries with a wholly unreasonable succession of investigations, as has happened in the past.

These measures will start to strengthen the authority of the Commission at once, and to make it a more effective body for promoting competition throughout the economy. But the Commission cannot be fully effective in the new directions I have outlined without legislative changes. In preparing such legislation, we, shall aim in particular to provide for a reconstituted Commission; for appropriate new powers to collect information and to propose inquiries; and for its powers of formal inquiry to be extended to cover public monopolies such as nationalised industries and other statutory trading bodies which are in a monopoly position.

The Government are also reviewing the restrictive trade practices legislation with a view to extending its scope and making it more effective. In particular, we shall be considering the case for bringing services within the legislation, for making registrable certain anti-competitive practices by single firms, and for making certain types of restrictive agreement illegal.

I should like to emphasise that in the preparation of legislation I shall want to consult fully with representative bodies in the light of experience of the steps I have outlined.

Mr. Benn

Is the right hon. Gentleman aware that his statement, though long, contains very little information and is, in a sense, disappointing because, by contrast with the positive policy of trying to protect the consumer and encouraging industrial efficiency through the Consumer Council, the Prices and Incomes Board and the I.R.C., the right hon. Gentleman appears to have fallen back on a negative practice? Is he aware—indeed, he must be—that the extension to the public sector was provided by the Commission on Industry and Manpower, which the previous Government brought forward?

Will public interest findings on the nationalised industries be allowed, and exactly what will they mean? When will he be publishing the guidance to which he referred? Will there be a Green Paper on the new powers which he contemplates and will a Bill be introduced in the present Session?

Mr. Davies

The purpose of the Monopolies Commission, and its future development, is to deal with the long-term imperfections of competition. The Consumer Council and the Prices and Incomes Board were in a different time-scale. They were concerned rather more with medium than long-term considerations. Thus, the contrast which the right hon. Gentleman has made is a correct one, but it is not fair, that being so, to comment critically on the content of my statement.

As for the public sector, the intention is to utilise the Section of the 1948 Act which allows the Monopolies Commission to be used in a more general sense than on a straightforward reference and, in doing so, to gain experience over the course of the ensuing period.

The answer to the right hon. Gentleman's question about the possibility of publishing a Green Paper is that my hope was that this statement would serve as a vehicle for a considerable degree of public discussion and for the period until legislation is introduced to be in a sense one of experiment. I hope that this experimental phase—which will, if all goes well, give rise to legislation, not in this Session but in the next Session of Parliament—will enable it to be perfected during the intervening period.

Mr. Benn

Having said that he now contemplates this as a long-term operation, may I ask the right hon. Gentleman why there are to be short-term studies on specific areas—of a kind which were dealt with by the Prices and Incomes Board, which had 140 reports? Will the right hon. Gentleman answer my other question, about whether there will be public interest findings which have a specific statutory significance in relation to the nationalised industries?

Mr. Davies

Am I right in supposing, on the latter point, that the right hon. Gentleman is referring to the broad field of efficiency studies and so on? I am not clear what he means by referring to public interest matters. The public interest is the responsibility of my Department in relation to the nationalised industries with which I am concerned. I therefore do not fully follow his question. The intention here is that the Monopolies Commission should, in the period until further legislation occurs, be on a more or less voluntary basis to examine the position in the nationalised industries, and to advise the Government accordingly.

Mr. Tom Boardman

While welcoming the statement and in particular the proposals for reforming the procedure, may I ask my right hon. Friend if during the transitional period he will see that account is taken of the time, expense and dislocation that is involved in a full reference and ensure that there is established a prima facie case before he makes a reference?

Mr. Davies

This purpose will, of course, be served considerably by using the Monopolies Commission more than it has hitherto been used as the receptive body for knowledge and experience in the whole sphere of competition, and it should be able with greater ability to advise the Government on issues which can be succinctly and effectively dealt with. The purpose of the Government in trying to narrow the field of the terms of reference will also prove to be advantageous in speeding up the completion of inquiries.

Mr. John Mendelson

Has the Secretary of State noted the deep concern that has existed among work people in all parts of the country in recent years when mergers have been proposed, particularly when they have been discussed in complete and utter secrecy? Will he make sure that in future the trade unions, representatives of the people and all other associations are fully consulted in private at the earliest possible moment so that they do not learn as a fait accompli at the last moment of how large redundancies may result from mergers? Will he ensure that from the very beginning everybody concerned in the Administration takes note of this point?

Mr. Davies

The hon. Gentleman will realise that mergers are, by their very nature, of an extremely sensitive character, not only in relation to the shareholders, managers and boards of companies, but, of course, to the work forces in the companies concerned. These matters are very much in my mind, but I direct the hon. Gentleman's attention nevertheless to what I said in my statement: that I would make a reference of a merger only if I considered that competition in the relevant market would be restricted to a damaging degree as a result of that merger. My purpose here is to strengthen the forces leading to improved competition in the economy.

Mr. Lane

Is my right hon. Friend aware that these proposals will be widely welcomed? Can he say a little more about any consideration that he has given to the desirability, possibly through the appointment of a single registrar or some such official, of unifying the system more so as to cover both the monopolies and the restrictive practices parts?

Mr. Davies

Consideration has been given to that type of suggestion. It is considered that it would be wise to maintain a distinction between the strictly judicial character of the Restrictive Trade Practices Court and the somewhat different statutory character of the Monopolies Commission, or its successor, and I think that that distinction is worthy of preserving. I have given consideration also to the possible nomination of a Registrar within the field of monopoly, but that consideration has brought us to the conclusion that that would not be a wise course because the Registrar in question, who would not be within the framework of a judicial position, as he is in the Restrictive Trade Practices Court, would have responsibility to nobody. We thought it was preferable that the Monopolies Commission, which has a direct responsibility to me, should be its own vehicle for examination in this field.

Mr. Palmer

Will the right hon. Gentleman explain how these new powers of the Monopolies Commission in relation to the nationalised industries are to be reconciled with normal ministerial responsibility for nationalised industries and with investigations from time to time by Select Committees of this House into nationalised industries?

Mr. Davies

First of all, let me point out that the moment I am taking no new powers. We are entering into a period of the maximum use of the present powers. The proposals that I have made will in no way limit the scrutiny and rights of the various people who take responsibility for nationalised industries in the face of the public, whether it be Parliament or the Select Committees, or the Minister, each one of whom has a particular part to play. My great concern, however, is that in seeing these matters as a whole we should, as far as possible, seek to avoid imposing what has become something of an intolerable burden of inquiry on the lives of the managements of the nationalised industries.

Mr. Tapsell

While fully sharing my right hon. Friend's enthusiasm for competition, may I ask him whether he will bear in mind that competition within what may be broadly called the professions may well be best achieved by standards of skill and professional integrity rather than by competition purely through price, which often leads to a lowering of standards?

Mr. Davies

My hon. Friend will know that in the light of a recent report of the Monopolies Commission, I have written to the senior officers of most of the representative bodies of those professions, quoting to them the opinions expressed by the Monopolies Commission—

Mr. Speaker

Order. It will help the HANSARD reporters if the Minister will address the Chair.

Mr. Davies

I apologise, Mr. Speaker.

I have asked the senior officers of these institutions if they will give consideration to the recommendations of the Monopolies Commission and whether they would, after a period of six months, let me know what they then consider is the appropriate course of action to take.

Mr. Dell

Does the right hon. Gentleman realise that his statement represents a complete abandonment of major elements in the competition policy put forward by the Government before the General Election? Not merely has he abandoned the Registrar of monopolies and mergers, but equally he has completely abandoned self-referencing by the Commission or the Registrar of Monopolies and Mergers. Can he say whether his remarks about policy for referring mergers means that he is abandoning the £5 million asset criterion in respect of the reference of mergers, and whether he intends to do anything about additional financial disclosure as part of competition policy, or whether he is leaving this to the Ides of March when he may be able to bring in a Companies Bill?

Mr. Davies

As to the Registrar and self-referencing, I have dealt with the subject already. The Registrar was found to be less perfect, to our minds, than the system which we have adopted.

The self-referencing is covered by giving the Monopolies Commission, in the interim, a very free hand to make recommendations in the light of its own general scrutiny of the efficacy of competition impulses in the economy. These matters are covered just as well—in fact, better—in the proposals which I have made than those to which the right hon. Gentleman has referred.

The right hon. Gentleman asked me about financial disclosure, and he has referred to the Ides of March. I see nothing particularly magical in that date, which has a more tragic connotation. I hope, indeed, to be looking into this question in relation to any changes which may be foreseen in company law.

Sir D. Walker-Smith

Does my right hon. Friend appreciate that the answer that he gave a moment or two ago to my hon. Friend the Member for Cambridge (Mr. Lane) will be well received by those who have given some study to these matters, in that he proposes to preserve the dichotomy established by the 1956 legislation whereby monopolies of scale go to the Commission and restrictive practices to the Court? Does he further agree that the main scope for advance and improvement is in the context of the Monopolies Commission and that the judicial processes instituted by the Restrictive Trade Practices Act, 1956 have been very successful?

Mr. Davies

As to the Restrictive Trade Practices Court, I am not sure exactly what "success" means in this particular connection. On the whole, I should have thought that the findings of the Court over the years have proved not how great are the restrictive areas in British industry but, on the contrary, how little they are. I have mentioned that we are contemplating something of an extension of the activities of the Restrictive Trade Practices Court into fields which it does not at present cover.

Mr. Sheldon

While welcoming the increase in staff which will presumably enable the Commission to report in a rather shorter time than it has done in the past, when so many of its reports were wildly out of date by the time they were received, will the right hon. Gentleman not accept that this is rather a mouse of a measure by comparison with the great schemes that we were led to believe would result from their interest in increasing competition? Since this is an interim measure, would the right hon. Gentleman say when we can expect the Bill which will produce the far-reaching plans which we were assured would come before the House?

Mr. Davies

I do not consider that the proposals I have made are at all small. On the contrary, I think they are very profound. I think I have already mentioned the timing of the legislation in question. I repeat that we hope it will be introduced in the next Session of Parliament.

Mr. Sheldon

And the staff?

Mr. Davies

The Commission numbers 17, and the staff just over 40. It is not a big organisation. My proposals might have the effect of doubling it.

Mr. Crouch

May I draw attention to the advantage afforded to my right hon. Friend and to the House by the work of the Select Committee on Nationalised Industries? I hope that my right hon. Friend did not imply any downgrading of the sort of work done by the Select Committees referred to by the hon. Member for Bristol, Central (Mr. Palmer). May I ask whether my right hon. Friend is aware that sometimes these Select Committee Reports are not debated in this House? May I further point out that the Select Committee on Nationalised Industries has decided in its future session to look into the relationship between certain of the major nationalised industries and their impingement on the public interest?

Mr. Davies

I certainly have no intention whatever of downgrading in any sense the work of the Select Committees—quite the opposite. Questions about the work of the Select Committees and debates in the House which might ensue are really matters for my right hon. Friend the Leader of the House.

Mr. Marsh

Would the right hon. Gentleman not agree that a lot of the talk about monopoly in the public sector is based on pure prejudice? Will he interpret the words "competition in the relevant market" very widely in the public sector and recognise that, for example, the market for steel is international where there is plenty of competition, and the market in the fuel industry is a market between different fuels, some in the private sector and some in the public sector?

Mr. Davies

I fully recognise that many of the nationalised industries face stiff competition from outside and within. Some of the actions of the former Government did nothing to improve that competition.

Mr. Gorst

Can my right hon. Friend say whether he expects his proposal will make it possible for these areas of the nationalised industries which are not developing or taking an active part in marketing some of the technological products which they have at their disposal, to be investigated by the Monopolies Commission to enable private firms to develop what the monopoly prevents?

Mr. Davies

If any issues arise within the field of imperfect competition, which is the definition of the word which I have perceived for this Commission, they can be looked at.

Mr. Russell Johnston

In welcoming any intention of the Minister to widen the scope and powers of the Monopolies Commission, may I assume that he would look back critically on the fact that, during the fabled 13 years, out of some 23 references to the Monopolies Commission, the previous Conservative Government acted on only three? May I hope that he will be firmer? Specifically, on the restrictive trade practices legislation which he intends to review, does he have it in mind to take trade unions within its operation and to make across-the-board wage increases subject to the Restrictive Trade Practices Court to see whether or not they are in the public interest?

Mr. Davies

Among that variety of subjects, I am of course open, in this experience-gaining period, to very much discussion and consultation. The actual enlargement of the work of the Commission to which I have referred will not embrace, in the interim period at least, these latter issues to which the hon. Gentleman has referred.

Mr. Benn

In view of the very large number of points which have been put, would the right hon. Gentleman look again at the question of producing a White Paper or a Green Paper to allow the House to debate these issues, because, as he said, these are fundamental changes which he has introduced? I think that he would agree that there should be an opportunity for the House to consider the policy before the Bill is produced. May we also have a figure on whether the £5 million asset limit for merger references still applies?

Mr. Davies

On the last point, the £5 million assset limit will apply for the present, but I am further considering this matter. As for a Green Paper, it is difficult for me, in all fairness, to undertake to do this. I wish to use the ensuing months as a period of experience and experiment in this widening field. It is in the light of this experience and experiment that consultations and discussions emerge, not in the light of an arrested position on what is at the moment a conjectural basis.