Specialised Advertising Services (Hansard, 2 March 1988)

§ Mr. Michael Stern (Bristol, North-West)

The Monopolies and Mergers Commission recently reported on an apparent monopoly in the United Kingdom over the acceptance of advertisements by specialist magazines for campers, climbers and ramblers. The effect of that monopoly in magazines such as The Great Outdoors, Climber, High Magazine, Mountain, Footloose and Country Walking is that they will not normally accept advertisements that contain any mention of the approximate price of the goods advertised, except where the products concerned are own-brand products or are exclusively imported and available only from the advertisers.

That policy appears to apply to most, if not all, of the magazines listed, although with some variations. For example, it is reported that High Magazine will accept advertisements containing prices from national manufacturers for their own brands, but will refuse advertisements from mailing houses at prices that are significantly below the going market norms. We know what that means.

Clearly, such a policy must act to the detriment of the customer. Although the quality of the advertised goods is important—for example, very few climbers would use 5 mm rope where 11 mm rope is needed, and for those who do the laws of natural selection soon prevail—there is considerable price competition for national branded goods and for goods of similar quality. The policy of the magazines concerned clearly denies much-needed information to the consumer.

The damage to the buyer is not limited to the denial of information, which could, after all, be obtained with some additional effort. Although the bulk of the sales of the magazines occur through newsagents, a significant proportion of the magazines are sold by the same retail shops that sell the goods advertised in the magazines. Of the magazines that I have already mentioned, the proportion sold through equipment retailers in 1986 — the latest year for which figures are available—varied between 8 per cent. for The Great Outdoors and Footloose and 28 per cent. for Mountain and High Magazine.

When it is considered that over two thirds—69 per cent. —of all advertisements are placed by manufacturers whose goods are being sold in the retail outlets concerned, it is hardly surprising that a cosy little cartel has grown up between manufacturers, publishers and retailers, which has the effect of putting the interests of the consumer last. Also, it cuts out a substantial market share from mail order houses, which can afford to sell goods more cheaply but are being denied the opportunity to advertise such a service where it would be most effective. We should not be surprised that in 1986 only 3 per cent. of advertisements by manufacturers contained prices.

It is worth rehearsing, if only to nail them down, the arguments put forward in defence of the policy that I have outlined. It is suggested that potential customers would use a combination of retail shops and the magazines to identify the goods they required and then order them direct from mail order houses. To the extent that such concern is justified—it is clearly not justified when the 1135 goods need to be fitted or where specialist advice is needed from the shop on the type of equipment and its use—it should be pointed out that other businesses use the existence of mail order as a spur to efficiency. I can see no reason why retailers concerned with the sports and recreations I have mentioned should not do so.

It is suggested that those specialist retailers who stock the magazines concerned would cease to do so if they contained advertisements for goods at below the price that the retailers were offering. Again, in so far as this fear is justifiable, it should be pointed out that an average of 79 per cent. of the circulation of the magazines concerned is through newsagents. Clearly, if a retailer decides not to stock the magazines there will not be great difficulty for the potential customer in obtaining them.

What is surprising, and a little worrying, in respect of climbing in particular, is the argument raised by the British Mountaineering Council, which is supposed to look after the interests of climbers, that, because mail order firms cannot offer advice on equipment and its uses, and because, in the BMC's opinion, bad equipment is the most serious safety problem in mountaineering and fell walking, customers should be forced—despite their best interests — to take the opportunity of the advice offered by retailers, whether or not that advice is correct, rather than go to mail order firms. Yet figures produced by the BMC itself show that, in 1984, out of 358 mountaineering accidents, at least 245 had nothing to do with equipment, and many of the remainder were far more likely to have arisen from the absence of equipment than from its poor quality or poor choice.

Although the surveys and discussions on which the recent report is based took place in 1987, there is every sign that the practice criticised has continued. A study of the April 1988 editions of High, Footloose, Country Walking and The Great Outdoors and the March edition of Climber shows that they contain advertisements for popular branded goods such as Silva compasses, Blue Water ropes, Helly Hansen outdoor clothing, Karrimor and Berghaus rucksacks, Brasher boots, Mammout ropes, Salewa crampons and North Face outdoor clothing, without any mention of price, although occasionally, it must be admitted, price guides are given in the small print in equipment reviews in the body of the magazines. At the same time, mail order companies, which are capable of making up a substantial order for part of the market, to the consumer's benefit, are restricted to advertising their existence together with such meaningless phrases as "10 per cent. off" and a request that the reader write in for his own catalogue.

It is made clear in the report, and is consistent with the observations that I have made, that the publishers of the magazines have no intention of changing their anticompetitive policy unless they are forced to do so, not least because they are backed in that policy by the manufacturers of most of the equipment concerned, and this is borne out in the report. The publishers of The Great Outdoors and Climber would be prepared to accept advertisements containing prices, including advertisements from mail order houses, if the rest of the industry did so.

The publishers of Mountain would prefer, and the publishers of High Magazine would demand, to be forced to change the policy rather than to do it voluntarily. The contempt of the publishers of High Magazine for the people who buy the goods which they advertise is shown 1136 in the comment quoted in the report when, referring to the need to support the retailers, as opposed to the mass market aimed at by the mail order houses, they say: the mass market was less knowledgeable and experienced consumers could, to an extent, safely be left to shop around, but there were dangers to the inexperienced. The report reached certain conclusions, and it will be apparent from what I have said that I am in agreement with them. First, the policy of refusing advertisements, containing prices imposes an extra task on the consumer which amounts to a distortion of competition. Secondly, in the absence of the policy and its effect on the ability of mail order houses to advertise, goods would be cheaper to the consumer. Thirdly, it is necessary that all magazines with any significant market share should end the policy; otherwise the manufacturers and retailers will continue to be able and willing to distort the market.

There is further evidence of this ability to ignore the consumer in the fact that, although the Monopolies and Mergers Commission report was published in January, I have not been able to trace a single mention of it to date —I accept that I may have missed it by accident—in any of the magazines concerned.

Restriction of competition leads inevitably to censorship. It is for that reason that I support the final recommendation of the report, which is that the Secretary of State should make an order under section 56 and schedule 8 to the Fair Trading Act 1973, declaring it unlawful for publishers of specialist magazines intended for campers, climbers and walkers to operate the policy that I have described.

I know from my own experience many years ago as a climber, and now as a walker, that followers of outdoor pursuits are, at this time of the year, planning their summer activities and beginning to look at the often heavy investment in equipment that will be needed for those activities. We are not talking about expenditure of a few shillings. To equip a climber for a season in the Alps or a family of walkers with the boots and outdoor clothing that they all need involves considerable expenditure.

The draft order that is recommended by the report has already been advertised and the period designed for consultation, which has resulted in no more than a deafening silence, is all but over. My hon. Friend the Minister has it within his power, if he acts quickly along the lines suggested in the report, to make a significant difference to the budgets of large numbers of people in their chosen pursuits, both in terms of the quality of information available to them and of the cost of equipment that they will need. I hope that he will take that opportunity at an early date.

§ The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude)

I congratulate my hon. Friend the Member for Bristol, North-West (Mr. Stern) on his success in raising this subject, although not on the hour at which the debate is taking place. I also congratulate him warmly on the robustness with which he has defended the interests of consumers.

No one pretends that this issue affects a wide range of consumers, but, none the less, for the consumers who are affected, what has been identified here is a thoroughly anti-competitive practice which militates against their interests. I hope that no one needs persuading of the 1137 importance that we as a Government, and particularly as a Department, attach to competition and its effect on the interests of consumers.

Our recent White Paper enlarged on the importance that we attach to ensuring that the market works properly to allow the free play of competititive forces in markets for goods and services, unhampered by cosy cartels and monopolies which contain the potential for inefficiency and exploitation of the consumer. We must be alert to spot such anti-competitive practices and monopolies to safeguard consumers' interests.

The Monopolies and Mergers Commission makes an important contribution towards our aim of ensuring that markets work properly. The commission investigates monopoly situations that are thought to confer significant market power and reach a view on whether they operate against the public interest.

In the case of complex monopolies—as in the report which is the subject of the debate—the commission is also bound to consider whether those companies which jointly constitute the monopoly so conduct their actions in such a way as to prevent, restrict or distort competition. I welcome the commission's analysis and conclusions in its report, published in January, in respect of this issue. The commission did not consider only the effects on competition of the magazines' policy of refusing to accept advertisements containing price information, except in limited circumstances. In reaching its adverse public interest finding, the commission had a duty to take into account all matters which appeared to it to be relevant.

It considered, for example, the arguments put to it that to compel the magazines to put an end to the practice in question would have detrimental effects on the markets for goods. Those arguments fell into three broad categories. First, it was claimed that consumers would suffer from a reduction in the number of specialist retailers in competition with mail order firms. Secondly, it was said that the range and quality of the goods available would deteriorate. Finally, the loss of specialist outlets, which was seen as an inevitable consequence of the reference policy, was thought likely to undermine the protection of campers, climbers and walkers by removing an important source of professional advice.

The latter view was presented forcefully to the commission by the British Mountaineering Council. Like my hon. Friend, I take issue with the British Mountaineering Council's claim that the ending of the reference practice will inevitably lead to a decline in specialist retailing.

The consumer makes his or her choice on the basis of a number of factors, which may or may not outweigh considerations or price. The service and expertise that a particular retailer offers may well be factors which would cause a consumer to pay a higher price than he or she would when that service was not provided. What is important is that the consumer should have a choice, the 1138 ability to choose the goods and services he wants at a price that he is prepared to pay. If the specialist retailers fulfil the important function that the British Mountaineering Council claims for them, they will not be seriously weakened in a more competitive environment.

It is worth noting that other bodies that made representations to the Office of Fair Trading during its investigations have supported that view. The Long Distance Walkers Association told the OFT that the policy restricted the freedom of choice of its members when buying equipment and that consumers required as much information as possible, including prices, before deciding from which kind of outlet to buy. If price information were available, the consumer would not invariably opt for the lowest prices.

The National Consumer Council also maintaind that competition was likely to be distorted and consumers' interests prejudiced if price information about some types of goods was withheld from consumers.

After considering all the representations made to it, the commission reached the overall conclusion that the reference policy operated against the public interest in three respects. First, it prevented consumers from making an informed choice of product. Secondly, it restricted price competition between specialist retailers and mail order companies that sell at lower prices. Finally, it narrowed the range of prices at which goods are offered for sale and increased the average price level.

I announced to the House on publication of the report on 13 January that I accepted the commission's recommendation that an order should be made to remedy the adverse effects on the public interest which the commission identified. I considered it important that the prohibition on the refusal of advertisements containing price information should not apply just to one or a few magazines, as that could distort their market position by encouraging advertisers to turn elsewhere.

The advantage of an order is that it will apply to all those currently in the market, and, indeed, to any new entrants. A notice was published on 29 January setting out the proposed terms of the draft order. The closing date for representations is 7 March and I invite my hon. Friend and any other hon. Members wishing to make representations on the terms of the order to do so as quickly as they can.

I am confident that the action we are taking will be reflected shortly in changed practices by the magazines in question. I assure my hon. Friend that I shall be moving as swiftly as I reasonably can to bring that order into effect.

I am grateful to my hon. Friend for giving me the opportunity to discuss this matter and to explain the action that we have decided to take. It is important that such inquiries, although they are not wide in range, should be brought to public attention and the consequences understood.