HC Deb 22 January 1980 vol 977 cc307-18


''(1) If it appears to the Secretary of State that

  1. (a) two or more reports of the Commission on competition references (being reports which conclude that a person has engaged in an anti-competitive practice which operated or might be expected to operate against the public interest) deal with substantially the same anti-competitive practice; and
  2. (b) that it would be appropriate to make an order under this section; or
  3. (c) that it would be appropriate to make an order under this section following the publication of a report on a general reference under section 78 of the Fair Trading Act 1973 (being a report which recommends the desirability of action of a specified description for the purposes set out in subsection (2) of that section)
the Secretary of State may make an order prohibiting persons generally, or a class of persons, from engaging in the anti-competitive practice or other course of conduct described in the respective reports or a practice or conduct which, in the opinion of the Secretary of State, is substantially the same. (2) The power to make an order under this section shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (3) In the Fair Trading Act 1973
  1. (a) section 90 (general provisions as to orders under section 56 etc.) except subsection
  2. 308
  3. (b) section 91 (2) (publication of proposals to make an order),
  4. (c) section 93 (enforcement of certain orders), and
  5. (d) Part I of Schedule 8 (powers exercisable by orders under section 56 etc.),
shall have effect as if any reference in those provisions to an order under section 56 of that Act included a reference to an order under this section.'.—[Mr. John Fraser.]>

Brought up, and read the First time.

Mr. John Fraser

I beg to move, That the clause be read a Second time.

The purpose of the clause is to enable the Secretary of State to make an order which would ban an anti-competitive practice across the board if it were found to be a practice indulged in by more than a mere handful of firms.

In Committee, we discovered a weakness in the Bill. As the law will stand when the Bill becomes an Act, one can have a conventional monopoly reference where any number of people can be investigated, but it must be a monopoly test—whether a complex or a single monopoly test—before any of the powers in the Fair Trading Act can be applied. That is one way of approaching the matter.

Secondly, there can be a competition reference under the terms of the Bill where there does not have to be a monopoly test but where the competition reference will be against, if that is the right word, only a limited number of firms. The right hon. Lady made it clear, when resisting amendments that would enable a particular class of persons to be investigated—for example, estate agents, members of a profession or a large group of companies—that a competition reference would be limited to a handful of firms, and perhaps more usually to one firm.

Thirdly, under the Fair Trading Act, as it stands and as it will continue to stand, the right hon. Lady can make a general reference to the Monopolies Commission, as the Labour Administration did on discounting; but, at the end of a general reference, there is no power to do anything about the Monopoly Commission's conclusions, apart from passing a new Act of Parliament. That is what happens in relation to resale price maintenance and price-fixing agreements. The power to deal generally with an anticompetitive practice that operates against the public interest, but where there is no monopoly, is absent from the Bill.

8.30 pm

Let us imagine what will happen if the Monopolies Commission reports on discounting and finds that discounting practices that are not justified on economic grounds are against the public interest. The right hon. Lady will know that there is a good deal of concern, by small retailers in particular, about discounting practices. The Monopolies Commission may find in favour of those practices. If there is to be any speedy justice and remedying of the anti-competitive practice, the Government will require a power, which they do not now possess, to act across the board.

Secondly, what does the right hon. Lady propose to do about car spares? The Price Commission report on prices, costs and margins in the manufacture and distribution of car parts made clear that In practice, the exclusivity of supply of car parts resulting from the vehicle franchise system is an unreasonable restraint on competition and is a matter which ought to be rectified. It has been made clear that the Secretary of State wants a competition reference, after an investigation by the Director General of Fair Trading, but that there will be an investigation into the franchise system, which operates against the public interest and which appeared to the Price Commission to be an anticompetitive practice.

Appendix 2 of the report on car spares indicates that about 10 firms indulge in that practice. That figure is too large to be the subject of the Director General's investigation or a competition reference, as the right hon. Lady indicated. If the right hon. Lady contradicts me, I shall be happy. It became clear from her remarks in Committee that an investigation by the Director General of Fair Trading, or a competition reference, would not cover such a large number of firms, yet there is overwhelming evidence of the need to do something about franchising, not simply of car spare parts but of other spare parts.

I give a third example. The Liesner committee reported that the practices of rental-only contracts and full-line forcing should be outlawed across the board. What will happen if there is a series of investigations by the Director General of Fair Trading, or a series of competition references, and it becomes apparent that rental-only contracts and full-line forcing are evils that should be dealt with more widely than by a mere investigation or reference? Why should not the Government have the power to say that that practice, which has been repeatedly shown to be against the public interest, should be outlawed generally?

I give another example, to which my attention was drawn this morning. I understand that a multiple High Street firm, whose name is a household word, is being refused a supply of British-produced television sets because it would sell them too cheaply. It is having to go to Spain and to Portugal to buy sports equipment and bicycles. British manufacturers are not prepared to sell them to this High Street retailer, because he would sell them too cheaply.

I have given three examples of refusal of supply in respect of one High Street retailer. I did not make a presumption about such matters. Perhaps my remarks can be rebutted by the manufacturers. I am not trying to decide the issue at this stage, but, as a hypothesis, what happens if wefind—there is a good deal of suspicion for it—that refusal to supply, particularly to price-cutters, is a practice that is indulged in widely, against the public interest, and is inflationary? There is no power in the Bill to act except by way of investigation by the Director General.

A reference to the Monopolies Commission or to the Director General of Fair Trading would be possible, but that has already happened in the case of refusal of supply. Nothing is followed up by way of Government orders. The right hon. Lady should not ignore the weaknesses of the Bill. The Government have not been backward in acting drastically or courageously, or whichever adjective one cares to use. They have not been backward or indecisive in cutting back on public expenditure or taking draconian measures against consumers, housewives, tenants or ratepayers. The Government now have an opportunity to be decisive, courageous and forthcoming about the malpractices of big business, in order to increase competition. It is in that spirit that I commend the new clause.

Mrs. Sally Oppenheim

I am sure that the hon. Member for Norwood (Mr. Fraser) will be aware that his new clause is extremely tempting for the Government. At the outset, on Second Reading, my right hon. Friend the Secretary of State said that our approach was not to make general prohibitions by order. We prefer the case-by-case approach, because we do not want to follow a course of action which might by its very nature be exclusive. If we had simply provided a list of practices that were listed as anti-competitive practices, we might have included some things that we did not want to include and excluded other things that we wanted to include.

The hon. Gentleman is taking it a step further. In effect, he is saying "When we know, arising out of the investigations, that there is a practice operating generally across a whole industry or in a very widespread way, why not take powers under the Bill to prohibit that practice, once it is established that it is operating in this way?" I fully understand his point. It is in no way negated by the fact that we have chosen a particular course of action in not naming practices at the outset. That is why his new clause is very tempting. I have considered it very carefully, because there are many aspects of it that I find particularly attractive. I have looked at the kinds of things that would be likely to come under this power.

The hon. Gentleman has talked about cases of minimum pricing and of refusing to supply. He knows perfectly well that those can be pursued in the case of individual companies, or even in the case of more than one company, under the powers that we have already in the Bill. By his new clause, he wishes to outlaw the practice altogether. The kind of practice that he wants to outlaw altogether in his new clause is not appropriate to be dealt with in this way. Resale price maintenance is a very good example. It was something that needed to be outlawed, but it was appropriate that it should be done by primary legislation, so that consultation about drafting, about definitions and about all the things that go into this kind of legislation could take place.

We are not saying that it will never be desirable to ban these practices across the board. What we are saying is that it is not appropriate and that we believe it is not desirable to do it by means of delegated legislation.

Mr. John Fraser

Nothing in the drafting of the new clause prevents a very long period of consultation with the interests concerned there is no time limit on it. It is an order that would substitute secondary legislation for primary legislation, but if that brings prices down and that satisfies a public demand to end a racket, I do not see why it should not be done.

Mrs. Oppenheim

The hon. Gentleman used the word "racket". I prefer to use the word "practice". He may have in mind such things as resale price maintenance. He may have in mind discriminatory price discounting against which the Monopolies and Mergers Commission may find. Minimum pricing or refusal to supply, as the hon. Gentleman suggests, may also be referred, and the Commission may find against those practices. We believe that the right course of action is to introduce primary legislation to deal with these matters.

I know what the hon. Gentleman will say next, and I have sympathy with it. He will say that Governments never find time for primary legislation. It is perfectly true that, although the resale price maintenance legislation found its way on to the statute book, it is sometimes difficult for Governments to find time to legislate across the board against such practices in the form of primary legislation.

I wish that we could find a middle way. I have spoken before about a middle way—the hon. Gentleman has picked it up in Committee—between primary and secondary legislation, which could deal more flexibly and more quickly with this type of thing. But in the absence of that middle way—the hon. Gentleman must take it from me that I am still searching for it—I fear that I have to reject his amendment, not because I am not generally in sympathy with the objectives but because I do not think that this is the means with which to deal with the problem.

It will be very interesting to see how many of the kinds of cases that he has described are investigated by the Office of Fair Trading—and subsequently by the Monopolies and Mergers Commission—and stop, and how many companies, as a result of those precedents, desist from these practices. It is not as simple as that. In the failure-to-supply case, if a complaint is made to the Office of Fair Trading the company concerned may bring another and different sanction against the company that wanted the goods supplied—

Mr. Campbell-Savours

Is the Minister saying that fear of an investigation that may take three years is sufficient to make people desist from that practice?

Mrs. Oppenheim

Such investigations cannot take three years. It would be very difficult for them to do so. If a precedent is established against one company, and if there is an adverse effects finding by the Monopolies and Mergers Commission following an investigation concerning failure to supply, other companies will be more careful before engaging in such practices. The precedent will have been created. I accept that that does not entirely meet the hon. Gentleman's point.

Perhaps there are cases where there should be a general prohibition. Where that occurs is should be done by primary legislation unless we find a middle way between the two, and we have not yet done so. When we go further with our competition policy, particularly when we implement the recommendations in the Liesner report, I shall see whether that can be incorporated in future legislation as primary legislation.

Mr. Robert Hughes

I hope that my hon. Friend the Member for Norwood (Mr. Fraser) and the Minister will forgive me when I say that she made a better speech in favour of the new clause than he. The essence of her speech was that she had great sympathy with the objectives of the new clause and that she was tempted to accent it. She said that it was not appropriate. However, she justified its appropriateness by saying that the case-by-case approach could be best dealt with by primary legislation. She clearly said that Governments always find it difficult to find time for such legislation. We are all familiar with that problem.

Mrs. Sally Oppenheim

I hope that I have not misled the hon. Gentleman, because these problems can be dealt with on a case-by-case basis under the Bill. The hon. Member for Norwood (Mr. Fraser) wants a general prohibition.

Mr. Hughes

I accept the Minister's correction, but she also said that one problem was that if an investigation took place into a company's anti-competitive pricing arrangements, the company might substitute some other form of anti-competitive practice. As each company finds a way of escaping the Government's case by-case approach and as fresh investigations are needed, there will be no end to the process. The Minister always says that we need primary legislation to deal with this. I cannot remember how long it was before a Government were persuaded to bring forward the ending of resale price maintenance. It took a long time and a great deal of argument before the Conservative Government brought forward a Bill to end that practice. I think that the Minister concedes that in a number of important areas restrictive practices are being extensively used. Once that is admitted—and as we both wish to make sure that prices are kept down as much as possible—it is nonsensical to hold that point of view yet deny oneself the opportunity to have those powers should they prove necessary.

Mrs. Sally Oppenheim

Again, I hope that I have not misled the hon. Gentleman. I said that a general prohibition would not catch the type of case that I described where a company started to use an entirely different sanction from that described. In a general prohibition, those companies would not be caught. Under the Bill, that could be the subject of further investigation.

Mr. Hughes

My point is that a further investigation has no power. If we accept, under the new clause, the power to deal with it by delegated legislation rather than primary legislation, we shall be able to act more speedily. At the same time, there could still be proper consultation.

I am sorry that on this occasion the right hon. Lady has not succumbed to temptation. I hope that before completion of all stages of the Bill she will allow hereself one small indulgence.

8.45 pm
Mr. John Fraser

I am sorry that the right hon. Lady is not able to accept the new clause. I do not know whether I speak out of place, but I believe that we waste far too much time in this House on primary legislation on administrative law. Anyone who has been a Minister will know that there is a long queue of useful Bills in every Department because we have a fixation and fascination for primary legislation when a great number of matters could be dealt with perfectly adequately by secondary legislation. This is one instance.

I have drafted the clause in such a way that I am not introducing an across-the-board prohibition. The drafting of the order could leave exceptions and reservations. I know that there are great difficulties about a refusal to supply and discounting, but it is perfectly possible to construct an order that contains a prohibition and also creates an appeal or arbitration system in respect of, for example, refusal to supply or unfair discounting. It would ensure that we did not create the rigidities of the Patman-Robinson system or the flexibility of American anti-trust legislation but would ban a practice in the sensible, pragmatic way which is the tradition of British competition legislation.

It is a pity and a waste of future parliamentary time that the right hon. Lady should reject the suggestion which I put forward to help her and for her to use in the interests of competition. If she cannot accept it, I shall want to divide the House.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 138, Noes 182.

Division No. 142] AYES [8.45 pm
Allaun, Frank Dubs, Alfred Leighton, Ronald
Anderson, Donald Dunn, James A. (Liverpool, Kirkdale) Lestor, Miss Joan (Eton & Slough)
Archer, Rt Hon Peter Dunwoody, Mrs Gwyneth Lewis, Arthur (Newham North West)
Armstrong, Rt Hon Ernest Eadie, Alex Lewis, Ron (Carlisle)
Ashton, Joe Eastham, Ken Litherland, Robert
Atkinson, Norman (H'gey, Tott'ham) Edwards, Robert (Wolv SE) McCartney, Hugh
Bagier, Gordon A. T. Ellis, Raymond (NE Derbyshire) McDonald, Dr Oonagh
Bennett, Andrew (Stockport N) Evans, loan (Aberdare) McElhone, Frank
Booth, Rt Hon Albert Evans, John (Newton) McGuire, Michael (Ince)
Boothroyd, Miss Betty Field, Frank McKay, Allen (Penistone)
Bray, Dr Jeremy Fitch, Alan MacKenzie, Rt Hon Gregor
Brown, Robert C. (Newcastle W) Flannery, Martin McWilliam, John
Brown, Ronald W. (Hackney S) Fletcher, Ted (Darlington) Marshall, David (Gl'sgow, Shettles'n)
Brown, Ron (Edinburgh, Leith) Foot, Rt Hon Michael Marshall, Dr Edmund (Goole)
Buchan, Norman Ford, Ben Marshall, Jim (Leicester South)
Callaghan, Jim (Middleton & P) Foster, Derek Mason, Rt Hon Roy
Campbell-Savours, Dale Fraser, John (Lambeth, Norwood) Maynard, Miss Joan
Canavan, Dennis Gilbert, Rt Hon Dr John Mikardo, Ian
Carmichael, Neil Gourlay, Harry Millan, Rt Hon Bruce
Carter-Jones, Lewis Grant, George (Morpeth) Mitchell, R. C. (Soton, Itchen)
Cocks, Rt Hon Michael (Bristol S) Hamilton, James (Bothwell) Morris, Rt Hon Charles (Openshaw)
Cohen, Stanley Hamilton, W. W. (Central Fife) Morton, George
Concannon, Rt Hon J. D. Hardy, Peter Mulley, Rt Hon Frederick
Conlan, Bernard Harrison, Rt Hon Walter Newens, Stanley
Cook, Robin F. Haynes, Frank Oakes, Rt Hon Gordon
Craigen, J. M. (Glasgow, Maryhill) Heffer, Eric S. Orme, Rt Hon Stanley
Cryer, Bob Home Robertson, John Palmer, Arthur
Cunliffe, Lawrence Hooley, Frank Park, George
Dalyell, Tam Hudson Davies, Gwilym Ednyfed Parry, Robert
Davis, Clinton (Hackney Central) Hughes, Mark (Durham) Powell, Raymond (Ogmore)
Davis, Terry (B'rm'ham, Stechford) Hughes, Robert (Aberdeen North) Prescott, John
Dean, Joseph (Leeds West) Hughes, Roy (Newport) Race, Reg
Dempsey, James Johnson, Walter (Derby South) Rees, Rt Hon Merlyn (Leeds South)
Dewar, Donald Jones, Rt Hon Alec (Rhondda) Richardson, Jo
Dixon, Donald Jones. Dan (Burnley) Roberts, Albert (Normanton)
Dobson, Frank Kilroy-Silk, Robert Roberts, Ernest (Hackney North)
Dormand, Jack Lamond, James Rooker, J.W.
Douglas, Dick Leadbitter, Ted Ross, Ernest (Dundee West)
Shore, Rt Hon Peter (Step and Pop) Strang, Gavin Wilson, William (Coventry SE)
Silkin, Rt Hon John (Deptford) Taylor, Mrs Ann (Bolton West) Winnick, David
Smith, Rt Hon J. (North Lanarkshire) Torney, Tom Woolmer, Kenneth
Snape, Peter Wainwright, Edwin (Dearne Valley) Wright, Sheila
Soley, Clive Weetch, Ken Young, David (Bolton East)
Spearing, Nigel Welsh, Michael
Spriggs, Leslie White, Frank R. (Bury & Radcliffe) TELLERS FOR THE AYES:
Stewart, Rt Hon Donald (W Isles) Wigley, Dafydd Mr. James Tinn and
Stoddart, David Wilson, Gordon (Dundee East) Mr. Donald Coleman.
Stott, Roger
Alexander, Richard Griffiths, Eldon (Bury St Edmunds) Penhaligon, David
Alton, David Griffiths, Peter (Portsmouth N) Pink, R. Bonner
Aspinwall, Jack Grist, Ian Pollock, Alexander
Atkins, Robert (Preston North) Hamilton, Michael (Salisbury) Porter, George
Atkinson, David (B'mouth, East) Hannam, John Powell, Rt Hon J. Enoch (S Down)
Banks, Robert Haselhurst, Alan Prentice, Rt Hon Reg
Beaumont-Dark, Anthony Havers, Rt Hon Sir Michael Price, David (Eastleigh)
Beith, A. J. Hawkins, Paul Proctor, K. Harvey
Bendall, Vivian Hawksley, Warren Raison, Timothy
Benyon, Thomas (Abingdon) Hayhoe, Barney Rathbone, Tim
Benyon, W. (Buckingham) Heddle, John Rhodes James, Robert
Best, Keith Henderson, Barry Rifkind, Malcolm
Bevan, David Gilroy Hicks, Robert Ross, Wm. (Londonderry)
Biggs-Davison, John Hill, James Rost, Peter
Blackburn, John Hogg, Hon Douglas (Grantham) Sainsbury, Hon Timothy
Bonsor, Sir Nicholas Hordern, Peter St. John-Stevas, Rt Hon Norman
Boscawen, Hon Robert Howells, Geraint Shelton, William (Streatham)
Boyson, Dr Rhodes Hunt, David (Wirral) Shepherd, Colin (Hereford)
Bright, Graham Hunt, John (Ravensbourne) Shepherd, Richard (Aldridge-Br' hills)
Brinton, Tim Johnson Smith, Geoffrey Silvester, Fred
Brittan, Leon Jopling, Rt Kon Michael Sims, Roger
Brooke, Hon Peter Kellett-Bowman, Mrs Elaine Skeet, T. H. H.
Brown, Michael (Brigg & Sc'thorpe) Langford-Holt, Sir John Smith, Cyril (Rochdale)
Browne, John (Winchester) Latham, Michael Smith, Dudley (War. and Leam'ton)
Bruce-Gardyne, John Lawrence, Ivan Speed, Keith
Buck, Antony Le Marchant, Spencer Speller, Tony
Budgen, Nick Lennox-Boyd, Hon Mark Spence, John
Burden, F. A. Lester, Jim (Beeston) Spicer, Michael (S Worcestershire)
Butcher, John Loveridge, John Sproat, Iain
Butler, Hon Adam Lyell, Nicholas Stanbrook, Ivor
Cadbury, Jocelyn Macfarlane, Neil Stanley, John
Carlisle, John (Luton West) MacGregor, John Steen, Anthony
Carlisle, Kenneth (Lincoln) MacKay, John (Argyll) Stradling Thomas, J.
Carlisle, Rt Hon Mark (Runcorn) McQuarrie, Albert Tebbit, Norman
Chapman, Sydney Major, John Temple-Morris, Peter
Churchill, W. S. Mather, Carol Thatcher, Rt Hon Mrs Margaret
Clarke, Kenneth (Rushcliffe) Mawby, Ray Thompson, Donald
Cockeram, Eric Mawhinney, Dr Brian Thorne, Neil (Ilford South)
Colvin, Michael Maxwell-Hyslop, Robin Thornton, Malcolm
Crouch, David Mellor, David Townend, John (Bridlington)
Dean, Paul (North Somerset) Meyer, Sir Anthony Trippier, David
Dorrell, Stephen Miller, Hal (Bromsgrove & Redditch) Vaughan, Dr Gerard
Douglas-Hamilton, Lord James Mills, Iain (Meriden) Viggers, Peter
Dover, Denshore Mills, Peter (West Devon) Waddington, David
Dunn, Robert (Dartford) Moate, Roger Wainwright, Richard (Colne Valley)
Dykes, Hugh Molyneaux, James Wakeham, John
Fairgrieve, Russell Moore, John Walker, Bill (Perth & E Perthshire)
Faith, Mrs Sheila Morrison, Hon Charles (Devizes) Waller, Gary
Farr, John Morrison, Hon Peter (City of Chester) Ward, John
Fenner, Mrs Peggy Murphy, Christopher Warren, Kenneth
Finsberg, Geoftrey Myles, David Watson, John
Fletcher, Alexander (Edinburgh N) Neale, Gerrard Wells, Bowen (Hert'rd & Stev'nage)
Fookes, Miss Janet Needham, Richard Wickenden, Keith
Fraser, Peter (South Angus) Nelson, Anthony Wilkinson, John
Fry, Peter Newton, Tony Winterton, Nicholas
Garel-Jones, Tristan Onslow, Cranley Wolfson, Mark
Glyn, Dr Alan Oppenheim, Rt Hon Mrs Sally Young, Sir George (Acton)
Goodhew, Victor Osborn, John Younger, Rt Hon George
Gorst, John Page, John (Harrow West)
Gow, Ian Page, Richard (SW Hertfordshire) TELLERS FOR THE NOES:
Gower, Sir Raymond Patten, Christopher (Bath) Mr. Anthony Berry and
Greenway, Harry Patten, John (Oxford) Mr John Cope.

Question accordingly negatived.

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