HL Deb 02 July 1964 vol 259 cc722-52

3.46 p.m.

Report of Amendments received (according to Order).

Clause 1 [Avoidance of conditions for maintaining resale prices]:

LORD SHACKLETON moved, after subsection (2), to insert: ()If a supplier whose normal practice has been to supply goods to any dealer for sale seeks by entering into an agency agreement with that dealer to sell on consignment and thus to retain ownership of the goods until the customer has taken delivery, and if it appears to the Registrar that the object of the agreement is to circumvent the provisions of this Section, then the Registrar may refer the agreement to the Restrictive Practices Court; and the Court may, if it thinks fit and after hearing such evidence and argument as appear to it appropriate, declare that agreement void, and thereupon this section shall apply accordingly.

The noble Lord said: My Lords, in moving Amendment No. 1, I must apologise to your Lordships for bringing up a subject which we debated very fully on the Committee stage. The purpose of this Amendment is to stop a possible loophole by which someone wishing to maintain resale price maintenance would be enabled to do so by supplying goods on consignment and retaining ownership until the customer had taken delivery. We had a very interesting debate on the Committee stage; the noble and learned Lord the Lord Chancellor was extremely forthcoming and he gave us very clear and interesting answers.

I would not have brought this up were it not that I think I am able to make rather a stronger case than I was on the last occasion. We argued on the last occasion that an attempt to get round resale price maintenance could be made by some device as a result of which the manufacturer retained ownership of the goods until after the sale or until the point of delivery; although, I admit, there was a flaw in our previous Amendment. We argued that this would be likely to apply especially in the motor trade; it might apply in the case of motor cars or tyres—indeed, the noble Lord, Lord Latham, gave an example of tyre companies who appoint certain persons as stockists. We are not seeking in this Amendment to upset established practice in regard to stockists and others who act as agents; but there is a possibility that a particular group of manufacturers, and certainly a single manufacturer, might wish to retain control over prices, and that under the Bill as it stands it would be perfectly legitimate for this to be done.

The noble Lord, Lord Drumalbyn, like the noble and learned Lord the Lord Chancellor, produced a number of arguments designed to suggest that such an event was unlikely. He suggested, for instance, that it was unlikely that a supplier or a manufacturer would wish to take the responsibility involved in being a principal in a transaction of this kind. He rather suggested that this would be so onerous that in such circumstances the supplier would not contemplate—or would, at least, be averse to contemplating—such an arrangement. I would reject that argument because there are very many agents who operate quite happily, and clearly a manufacturer in such circumstances takes very good care to ensure that whoever has his agency behaves reputably; although I must admit that there are certain additional responsibilities. It was further suggested that this was a very unlikely event. I think the noble and learned Lord Chancellor suggested that he had had actual assurances from manufacturers that they were unlikely to take advantage of this method of avoidance. I would stress, as did my noble friend Lord Latham, that avoidance would be perfectly legal. We wish to stop up the loophole and not put manufacturers in the position of having the Government subsequently (in the words of the noble and learned Lord the Lord Chancellor) "crack down" on them. This would be most undesirable. It would entail some retrospective action, because manufacturers would at least have to undo the arrangements into which they had entered.

There was the further objection that it would not be possible under this Amendment, as then drafted, for the court to take action effectively, because the matter would merely be referred to the court and nothing would then happen. We have redrafted the Amendment to enable the court to intervene. If the principles contained in this Amendment are acceptable, and the redrafting is not satisfactory, I do not doubt that the Government will be able to put it into satisfactory form. All I have said so far is theoretical. The noble and learned Lord the Lord Chancellor said that it would be impossible to predict the effect of this provision in view of the various devices that may be adopted by various individuals and concerns, but he went on to say that the risk would be slight. It so happened that, on the very day of the debate, I was speaking to an American lawyer and found that, only within the last few weeks, such a case had arisen in the United States, Richard Simpson versus Union Oil Company, in precisely the same circumstances which we in our prophecy, and the noble Lord, Lord Lucas of Chilworth, had foreseen might take place.

I would draw your Lordships' attention to this case. It was with some difficulty that I managed to get a photocopy of the report of the proceedings, and the noble and learned Lord the Lord Chancellor will have received a copy only recently. An American dealer found that the oil company, which supplied him with gasolene, wished him to sell it at a fixed price and they proposed an agreement, a lease, under which they would be able to insist on his selling at the price they set for a certain period. The dealer brought suit and, after various processes, the case went to the Supreme Court where, in a ruling (if that is the right word), this arrangement was declared illegal under the anti-trust laws of the United States. I should like to quote from this ruling. Dealers, like Simpson, are independent businessmen; and they have all or most of the indivia"— indications; perhaps my noble and learned friend Lord Conesford can help us on this— of enterpreneurs, except for price fixing. The risk of loss of the gasoline is on them, apart from acts of God. Their return is affected by the rise and fall in the market price, their commissions declining as retail prices drop. Practically the only power they have to be wholly independent businessmen, whose service depends on their own initiative and enterprise, is taken from them by the proviso that they must sell their gasolene at prices fixed by Union Oil. By reason of the lease and consignment' agreement dealers are coercively laced into an arrangement under which their supplier is able to impose non-competitive prices on thousands of persons who otherwise might be competitive.

The oil company in question used the argument that all those who seek to maintain prices use—namely, that they provide a good service in the interests of the community and of the dealers generally. But Parliament is in process of deciding that, except within very limited terms, resale price maintenance should be illegal. I suggest that the case we put forward is a relevant one. It is likely to happen, and it is the duty of Parliament to stop up in advance loopholes of a kind of which it would be perfectly proper for people to take advantage. I hope that the Government, if they are not able to accept the Amendment as it stands, will at least accept the principle and agree that an additional Amendment will be introduced at a later stage. I beg to move.

Amendment moved— Page 2, line 19, at end insert the said subsection.—(Lord Shackleton.)


My Lords, I wish to support my noble friend in this Amendment. For some time I have felt that in a trade like the selling of petrol there could be a circumvention of the principles of the Bill. I am sure that the Minister will be aware that in recent years there has been a considerable increase in the number of petrol stations that are owned directly by the oil companies. Whereas four or five years ago the number was approximately 300, to-day, it is well over 3,000, and this increase has taken place largely during the last two years. Undoubtedly, there is a definite policy behind the petrol companies' decision to increase the number of stations they own.

What will be the consequence of this Bill to them, with their continuing capital investment? The Government say—and here we agree with them—that the privately owned petrol station should be allowed to sell petrol at whatever price they consider right. What will be the policy of the petrol companies, when they see the activities of private stations selling in direct competition with them and gravely affecting the returns on their own stations? I submit that the natural result, which will be perfectly legal, unless the Bill is altered, will be that the boards of the petrol companies will do something to ensure that the returns on their stations will be continued at the same level; and if they cannot impose a retail price upon petrol, they will get round it by bringing the private stations into agency agreements, similar to those instanced by my noble friend when he gave his illustration of what had happened in America.

It was interesting that the noble and learned Lord the Lord Chancellor said that he had obtained assurances from the industry. He did not say which industry. It may well have been the petrol people. If that is the case—and from the nod the Minister gives I surmise that it was—


With respect, I myself said that it was from the motor industry, not the petrol industry.


Therefore, we have not an undertaking from the petrol people. It is within the distribution of petrol and oil that we get some of the most vicious restrictive practices. Is it not a fact that the oil companies impose regulations upon their distributors as to the types and brands of oil that they may sell? A company that sells one particular brand of petrol, and is at the same time selling oil under the same market, prohibits by agreement the sale of other brands of oil. I should have thought that this was one of the most vicious forms of restrictive retail practice. It is well known in this trade. Therefore, we have a case where the oil companies are operating restrictive practices, and they may now find—as I think they will—that the present method of distributing petrol at a fixed price will be undermined. I imagine (they certainly have the resources to do it) that they will circumvent the intentions of this Bill by adopting agency agreements. I do not think the Government intend that this should be so. The noble and learned Lord the Lord Chancellor suggested that it was not likely and that the possibility was remote. We have tried to put some of the possibilities.

I should have thought that the Government would welcome the opportunity of closing a gap. The Amendment does not affect any of the present or the future agreements. If it were approved it would give power to the Registrar, if he felt that the agreement had been entered into to circumvent the intentions of Parliament in passing this Bill, to refer it to the Restrictive Practices Court. I should not have thought that there was any clash of principle or opinion between noble Lords on this side and the Government. We want to see this Bill strengthened and to have a proper balance. I should have thought that, if the Government accepted the Amendment, we should have gone a considerable way to achieve it.


My Lords, I am grateful to noble Lords for the way in which they have spoken to this Amendment, which is undoubtedly an interesting one. The noble Lord, Lord Shackleton, said in the course of his speech, that if the Amendment was not satisfactory, no doubt it would be possible to put it in a satisfactory form. I do not think he will be surprised to hear that, as a matter of drafting, the Amendment is not satisfactory. Moreover, as a matter of administrative machinery it would not effect what he seeks to achieve.

However, let us consider rather the substance of the matter, because I think this is what noble Lords opposite want us to do. I have only in the last half hour had some indication of this case brought to my attention. I think it would be wrong to go into the merits of the case in a different country with a federal system and all the various implications that are involved there. I do not even know whether I have the latest "state of play" on this particular lawsuit, or series of lawsuits—I do not know which it is. So I would rather not discuss that. Nor should I wish to discuss whether that case is on an exact parallel with the kind of arrangement which, at any rate according to the drafting of the Amendment, the noble Lord has in mind.

What I think is important is that the noble Lord has indicated one field in which it is conceivable that this kind of arrangement might be introduced. Financially, this is a field which we considered earlier: we did not entirely neglect it in considering the various developments that might take place and the loopholes that might arise. But we still think that this is a loophole that is unlikely to arise. The noble Lord, Lord Shepherd, pursued this in various ways. He talked about petrol stations that were owned by oil companies. But it by no means follows that a petrol station owned by an oil company might not already have a consignment agency system.


It would.


That would not be stopped in any way. There is no intention of interfering with normal methods of trading. What the noble Lord plainly has in mind is that he does not want a change to an agency arrangement to be introduced as a means and for the purpose of avoiding the effects of this Bill. We quite accept that. But we still do not think this is likely to arise in this case. For one thing, in this particular field, the Monopolies Commission are inquiring into the solus site system. I think it would be as well, from that point of view, to await their Report before we, as I think my noble and learned friend put it, "slammed down" in any particular direction.

I think it would be quite impossible to anticipate where loopholes might arise. We have examined this, but I still think that loopholes are unlikely to arise in this way. I still take the view expressed by my noble and learned friend the Lord Chancellor that it would be wrong to try to close loopholes in general. The right course in dealing with a new field of this kind is to wait and see where the loopholes are likely to arise, and then close them, and make certain of closing them. I say, again, that this particular Amendment would not close this particular loophole, and for that reason I would ask your Lordships to reject the Amendment.


My Lords, with permission, I should like to make one point in regard to loopholes. We were told on previous legislation this afternoon that we have had 27 Bills on housing, and two Acts of Parliament, each dealing with loopholes. Some of them may have been anticipated by the Government, and many of them have been anticipated by the Opposition. It occupies a great deal of Parliamentary time and creates considerable inconvenience and uncertainty within the trade. If there is this loophole, and it is recognised as a loophole, surely it would be sensible to close it up.

4.8 p.m.


My Lords, I should be grateful if the noble Lord, Lord Drumalbyn, could reaffirm a point which the noble and learned Lord the Lord Chancellor made when a similar Amendment was discussed in Committee. The noble Lord will recall that I instanced the practice of sending goods on consignment where the ownership did not pass from the manufacturer and the dealer never really owned the goods at all, because at the moment that he sold them to the customer that was the only moment when he became responsible for paying for the goods to the manufacturer. I pointed out that that was a well-recognised and fairly widespread practice in a number of industries; and I have been thinking of others since.

For example, even in the food trade, in wholesale markets, where there is a good deal of selling on consignment ment—which is another word for selling on commission—the wholesalers or dealers never own the goods. But in cases where prices are fixed by the haggling of the market, there is no possibility of maintaining the price. In many cases goods are sent on consignment without ownership passing. But where the supplier of the goods in wholesale markets—and I am still talking about food markets—does retain ownership, and does fix the price, he gives instructions that the goods shall be sold at that price, and the dealer merely gets a commission when he actually sells the goods.

As I understand the position from the discussion in Committee, that is not an offence; it is not a matter which would have to be referred to the Restrictive Practices Court. There would not be any need for registration of such practices. If that be so—and that was certainly my understanding when the matter was discussed in Committee—then my noble friends Lord Shackleton and Lord Shepherd are perfectly right in their representations of this Amendment: namely, that there are exceptions to the Bill that if there is this loophole, as he described it, then it is an open invitation for that form of trading to be used in extenso by suppliers who are so disposed in order to evade the consequences of this Bill, without any liability whatsoever to go to the Court; and, therefore, the Bill could be set aside with immunity. I think, therefore, that before we leave this Amendment, it is important for the noble Lord—who I am quite sure would have the leave of the House to do so—to deal with that point with which he did not, in my submission, deal in his first speech.

4.12 p.m.


My Lords, by leave of the House again, may I reply to the noble Lord? It is quite true, of course, that the consignment agency system at present exists—and this is not a legal term, but a loose trading term. In the normal way, where that takes place the manufacturer or supplier retains control of the goods. He sells the goods through the dealer by the agency of the dealer to the customer. The goods are his throughout. That is a system which already exists, which this Bill does not touch, which we use all over the world, and which we do not think it reasonable to touch in this Bill.


My Lords, what does the noble Lord mean by "we use all over the world"? We are talking about resale price maintenance.


My Lords, what I meant was that this system of consignment agencies is used in appropriate circumstances, not only in this country, but in our export sales as well. I quite agree that it is not relevent, but, at any rate, it is an indication that perhaps it would not be a very good idea to try to interfere. The point the noble Lord, Lord Shackleton, is getting at—and I think the only point with which we are concerned—is the adoption of such a system purely in order to evade the effects of this Bill in cases where, at the present time, the supplier sells to the dealer and the dealer sells to the customer. This is the point at issue at the present time.

I would suggest to the House that there may be particular cases, and there may be very different reasons indeed for changing over to a consignment agency system. There may be good commercial reasons for doing it. What the noble Lord has in mind is that this should not be done purely in order to evade the effects of this Bill. I think the House should appreciate that in most cases changing from one system to another would involve great difficulties for the supplier. It would mean, in many cases, that he would have hundreds of agencies all over the country, and he would retain control of the goods throughout the shops or depots, whatever it may be, of the various dealers who were the agents for the goods. We do not think it is likely that, merely in order to avoid the effects of the Resale Prices Bill, such extreme steps would be taken on any large scale by suppliers. This is the point I was putting to the House, and this is the reason why we do not think it necessary to accept this Amendment in principle.


My Lords, having listened to the arguments, I must say that I think the Government have been almost as obstinate on this as they were over my Amendment concerning putting in exports as an additional gateway. All they say is that this is not likely to happen very often and, therefore, it is not worth putting in. I cannot say I am convinced by that. I cannot see the harm in putting in the words … if it appears … that the object of the agreement is to circumvent the provisions of this section, then the Registrar may refer the agreement to the Restrictive Practices Court … What is wrong in that? I am afraid I am not convinced at all.


My Lords, I really do not think the Government have addressed their minds to this at all. I am sorry that the noble Lord, Lord Drumalbyn, did not have this paper more than half an hour ago. I gave notice through the Library to the Lord Chancellor's Office that I was going to quote an American case, and perhaps I should congratulate the Library in getting the details so quickly.

The noble Lord has repeatedly said that this is not likely to happen. He has argued without any grounds and, if I may say so, without very much experience—I do not mean this offensively—that suppliers will not go to the bother and expense of setting up hundreds of agencies. He said, "We use it all over the world." Of course we do. This is the normal process of trading in certain fields, and certainly in a large field of industrial goods people operate through agents and retain possession. Certainly this is so very often in export. But we are dealing here with resale price maintenance. The Government have introduced a Bill the purpose of which they hope is to introduce more competition, ultimately with a view to bringing down the prices. Admittedly, the legislation is very difficult to draft—we have seen that in discussing some of the other clauses.

But the Government in this House have been completely obstinate. As the noble Lord, Lord Jessel, pointed out, they refused to consider arguments on the subject of bringing in an additional gateway which I, personally, found convincing, and I hope other noble Lords will see that this is a genuine attempt to stop up an obvious gap. This is one which is likely to occur, and which is open for anybody to take advantage of. In an extreme case a tobacco wholesaler—this is very unlikely—could retain the ownership of the cigarettes. It is very unlikely, but in certain fields it is likely and, indeed, has happened. It has happened in the United States, and action has had to be taken. There are other difficulties to cope with. I really find it very difficult to believe that the Government have considered this matter at all seriously, and unless we can get some undertaking—and obviously one is not forthcoming—we shall have to divide to test the serious intention of the Government in this matter.

4.20 p.m.

On Question: Whether the said Amendment (No. 1) shall be agreed to?

Clause 3:

Exception for measures against loss leaders


(2) The reference in this section to the use of goods as loss leaders is a reference to a resale of the goods effected by the dealer, not for the purpose of making a profit on the sale of those goods, but for the purpose of attracting to the establishment at which the, goods are sold customers likely to purchase other goods or otherwise for the purpose of advertising the business of the dealer:

Provided that a sale of goods shall not be treated for the purposes of this section as the use of those goods as loss leaders—

  1. (a) where the goods are sold by the dealer at a genuine seasonal or clearance sale, not having been acquired by the dealer for the purpose of being resold as mentioned in this section;
  2. (b) where the goods are resold as mentioned in this section with the consent of the manufacturer of the goods or, in the case of goods made to the design of a supplier or to the order and bearing the trade mark of a supplier, of that supplier.

Their Lordships divided: Contents, 30; Not-Contents, 56.

Airedale, L. Listowel, E. Saye and Sele, L.
Amwell, L. Mackintosh of Halifax, V. Shackleton, L.
Burden, L. [Teller.] Meston, L. Shepherd, L.
Champion, L. [Teller.] Monson, L. Silkin, L.
Colwyn, L. Morrison, L. Stonham, L.
Douglas of Barloch, L. Morrison of Lambeth, L. Strang, L.
Hobson, L. Peddie, L. Summerskill, B.
Iddesleigh, E. Rea, L. Williams, L.
Jessel, L. St. Davids, V. Williams of Barnburgh, L.
Latham, L. Samuel, V. Wise, L.
Alexander of Tunis, E. Ebbisham, L. MacAndrew, L.
Allerton, L. Elliot of Harwood, B. Malmesbury, E.
Alport, L. Falkland, V. Margesson, V.
Amory, V. Ferrers, E. Massereene and Ferrard, V.
Arbuthnott, V. Forster of Harraby, L. Merrivale, L.
Bessborough, E. Fortescue, E. Milverton, L.
Blakenham, V. Fraser of North Cape, L. Monsell, V.
Carrington, L. Goschen, V. [Teller.] Newall, L.
Chesham, L. Greenway, L. St. Aldwyn, E. [Teller.]
Cholmondeley, M. Grenfell, L. St. Oswald, L.
Clitheroe, L. Hamilton of Dalzell, L. Sandford, L.
Colville of Culross, V. Hastings, L. Spens, L.
Conesford, L. Hawke, L. Suffield, L.
Coutanche, L. Horsbrugh, B. Swinton, E.
Denham, L. Ilford, L. Thurlow, L.
Derwent, L. Jellicoe, E. Twining, L.
Drumalbyn, L. Lambert, V. Wakefield of Kendal, L.
Dudley, L. Lansdowne, M. Waleran, L.
Dundonald, E. Long, V.

Resolved in the negative, and Amendment disagreed to accordingly.

4.28 p.m.


My Lords, the purpose of this Amendment is to establish whether Clause 3, which is concerned with loss leaders, is intended primarily to benefit the customer or to protect the supplier. I personally believe that the purpose of this clause is to protect the supplier. I am not, I may say, in favour of the clause anyway, but we may as well get it clear. Therefore my Amendment is to clarify the purpose of the clause. Subsection (2) says: The reference … to the use of goods as loss leaders is a reference to a resale of the goods effected by the dealer … My Amendment is to insert, after the word "dealer" in such a manner or subject to such description as to give a supplier reasonable cause to believe that the use of the goods in such a way was prejudicial to his goodwill. It is only a very minor Amendment and I move it more in the hope of getting clarification rather than with any idea of insisting on its acceptance. But I think it would help to clarify the purpose of the clause. I think the noble Lord, Lord Drumalbyn, would agree that there is perhaps some doubt as to whom the clause is really intended to benefit. I beg to move.

Amendment moved— Page 4, line 7 after ("dealer") insert the said words.—(Lord Shackleton.)


My Lords, the Amendment which the noble Lord has moved would not, I am afraid, be acceptable to the Government because it does not seem to take account of the fact that a supplier may withhold supplies from a dealer even if he has been using somebody else's goods as loss leaders, as the noble Lord will see from the last words of page 3: … whether obtained from that supplier or not". The result is that it would, I think, throw an impossible burden on the supplier who wishes to withhold supplies on the grounds that the goods of another supplier have been used as loss leaders. I think the noble Lord will agree that it would be impossible for one supplier to say that the use of another supplier's goods as loss leaders has prejudiced the first supplier's goodwill, and for that reason the Amendment would not fit in with the structure of the clause and we would have to reject it.

The noble Lord raises a wider question as to whom the clause is intended to benefit. I suppose the right answer is both the supplier and the customer, because to the extent that the supplier is injured, and his marketing and sale of his product disrupted, so it might be said to be to the disadvantage of the customer who wants those goods. So think one would have to answer that the clause is primarily intended to benefit the supplier but, secondarily, also the consumer. I think one has to say quite plainly that the loss leader exception has been introduced out of a sincerely held conviction of many suppliers that the practice is intrinsically harmful to their interests. And I think it would be extremely difficult to require the supplier to prove a reasonable cause for fearing such harm in a particular case. I think it is better to rely on the clause as it stands now. If I am right in inter- preting the previous debate in the House, the House felt it is going to be difficult enough in any event to ask the supplier to prove that his goods were sold for the purpose of attracting to the shop at which the goods are sold customers likely to purchase other goods, or otherwise for advertising the business of the dealer. That is what he is going to have to prove, and I do not think it would be right to add this additional requirement and put that on him.


My Lords, I do not want to press this, but there is one point on which I should like clarification. The noble Lord said the benefit is mainly for the supplier, and if the customer benefits from this at all he benefits indirectly. I accept that that might be so. It is therefore clear that even if a dealer goes in for loss leading with goods supplied and agreed to by one manufacturer, the other manufacturer can regard this as damaging for him. This seems to be clear on the last line of page 3. I should have thought, therefore, there was something to be said for restricting it in the way I have done in relation to the particular supplier whose goodwill is damaged by the goods being used as loss leaders. We are clear on this point. If I as a dealer sell with the agreement of the manufacturer, who says "By all means go ahead and go in for loss leaders as much as you like; it does not hurt me", other suppliers can say this is damaging to them. It is for that reason that I should have liked to clarify and restrict it.


My Lords, this was certainly not the intention of the clause. I cannot exactly see how to answer that from the point of view of the drafting at the present time, except to put it in this way. Subsection (2) gives the definition of what "loss leader" is, whereas subsection (1) merely says it shall not be unlawful to withhold supplies in these circumstances. I will certainly look into this point.


My Lords, I hope the noble Lord will look into this because, quite clearly, my noble friend has made a very pertinent point. I must admit I did not spot it when I went through this clause, but certainly it is a case where difficulty might arise.


I should have thought the answer was quite clear in that the definition makes it clear that it is not to be considered as loss leading if a manufacturer gives his consent to goods being sold at prices which would otherwise have been considered loss leading. That being so, as it is not to be considered loss leading, I do not see how another manufacturer could claim to withhold goods as if those goods had been treated as loss leaders. I think the situation is quite clear, but I will look into it. But I have no doubt that is the answer.


My Lords, I do not want to get more tangled in this. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD SHACKLETON moved, in the proviso to subsection (2), after "leaders" to insert: (a) where, at the time of sale by the dealer, the goods so sold were no longer in current production; or".

The noble Lord said: My Lords, the purpose of this Amendment is to clear up a difficulty in Clause 3 and to clarify that in certain circumstances the sale of goods would not be treated for the purposes of this clause as the use of those goods as loss leaders. If your Lordships will look at subsection (2)(a) and (b) you will see that there are certain circumstances in which it is possible for a dealer to dispose of goods—for instance, during a seasonal or clearance sale or with the consent of the manufacturer. I am not sure whether the word "or" is right; that is another point that we shall come on to. I was concerned about the position where a firm buys a special line for a sale.

It is a well-established practice in the retail trade for shops to buy up lines at all sales and clearance periods; they are usually discontinued lines, bought from manufacturers, and this is an important part of the stock clearing process at the manufacturer's end. This is how the manufacturer whose stocks have not been moved or whose lines are being discontinued gets rid of them. Clearly this is a thoroughly desirable and proper action. It is possible (and that is why I have moved my Amendment) for a manufacturer to insist that certain of his goods bought in as a jobbing line should not be sold in a way that might lead to a possible charge of loss leading. I should mention this is a matter which has caused some concern in the retail trade. I have put down an Amendment to provide an additional ground on which goods would not be treated as loss leaders—namely, where, at the time of sale by the dealer, the goods so sold were no longer in current production. This seems to me to be desirable and a perfectly reasonable proposition. It is not going to open the door widely, but it will provide protection for the retailer. I beg to move.

Amendment moved— Page 4, line 10, after "leaders" insert the said paragraph.—(Lord Shackleton.)


My Lords, I am not going to argue what "in current production" means because the noble Lord has made quite clear what he does mean: that this relates to discontinued lines but not to lines not for the moment being produced. I think the point surely is this. In the circumstances that this Bill will introduce, where a manufacturer believes that the sale of his goods as loss leaders could do damage to his interests he is given the right to withhold the goods. Surely, there is no difficulty about this in any way, because where there is any doubt about it the dealer can obtain the consent of the manufacturer. But what does seem to be quite wrong is to introduce a kind of artificial conception of implied consent when it is perfectly easy for real and actual consent to be obtained in these circumstances.

I should have thought that in the particular case where the whole of an end of line production was purchased by a particular dealer, there would be no objection from the manufacturer's point of view at all; he would not mind at what price the goods were sold in the ordinary way, although there might always be certain circumstances in which he would have reservations about their being sold at too low a price, because it might affect the prices of those lines, and possibly similar lines which are still in production. I should have thought that this is not really a necessary or desirable suggestion, bearing in mind how easy it is to obtain the consent of the manufacturer in the circumstances.


My only point is that it is these goods which are no longer in current production that retailers are most frequently anxious to move, and which lead to most allegations of price-cutting. I quite agree that this is a fairly unlikely event, although there is some concern and there have been accusations of this type. But I do not think it is a major point and, unless others of your Lordships would wish to pursue the matter further, I would beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.


My Lords, this is a small drafting Amendment, and f am sure the noble Lord, Lord Drumalbyn will help me. Do we need the word "or" in line 14, and, if not, why not? Are not both paragraphs (a) and (b) alternates, or do they hang together? I quite agree that that "or" was, to a large extent, consequential on the previous Amendment, but it has occurred to me that it might also be necessary in the Bill as it stands; or does the semicolon in those circumstances equal "or" rather than "and"? I beg to move.

Amendment moved— Page 4, line 14, at end insert ("or").—(Lord Shackleton.)


My Lords, the noble Lord is quite right in thinking that they are alternates. I am told that, strictly speaking, the "or" is not necessary; but if I may put it in this way, for the removal of the noble Lord's doubts I am happy to accept the Amendment.

On Question, Amendment agreed to.

4.43 p.m.

LORD SHACKLETON moved, in subsection (2), to add to proviso (b): or with the implied consent of the supplier by virtue of the goods having been acquired by the dealer on terms indicative of a clearance of stocks by the vendor. The noble Lord said: My Lords, this is only the second occasion upon which, when I nearly did not move an Amendment, I found that the Government were going to accept it. I express my appreciation of this improving degree of flexibility on the part of the Government, and I hope that they will be sympathetic to the last of the Amendments I have to move, which again closely ties up, or at least is parallel, with Amendment No. 5. Indeed, in moving Amendment No. 5, I am afraid I may have confused the issue by using some of the arguments that apply strictly to this Amendment, but the two hang together.

I shall not take long over this Amendment. Again, it is concerned merely with the question of clearance of stocks. Here I am suggesting that there should be no danger in regard to action for loss leading if the stocks have been acquired by the dealer on terms indicative of a clearance of stocks by the vendor. But I suspect that the noble Lord will again say that this is not necessary, and that obviously this will be done by agreement with the blessing of the manufacturer. However, we are not all quite so confident of this and perhaps we could hear from the noble Lord on it. I beg to move.

Amendment moved— Page 4, line 19, at end insert the said words.—(Lord Shackleton.)


My Lords, as the noble Lord referred to this idea in his previous remarks, I, too, referred to it, and I thought that I answered him then. I think that this also would not be a wise change to make, simply because of the ease with which the dealer can get the consent of the supplier to sell at any price he likes. I see no great difficulty about this. I do not think that the noble Lord really expects this Amendment to be accepted. It would mean that, by implying consent, one was introducing an artificial conception here, and, as I have said before, one would be doing it where it would be perfectly easy to obtain the consent of the supplier. I should have thought that in cases of this kind there would, in general, be no difficulty in getting that consent, especially where the dealer took the whole of the end of the line. In that case, all the supplier is normally concerned with is getting as good a price as he can. He will not mind so much what price the dealer gets. There may be cases where the supplier has a particular interest in seeing that the dealer sells as usual, in order to get a profit, and not merely to attract customers or for advertising purposes. Therefore, I think we should stick to the provision that the consent of the supplier should be obtained.


My Lords, I must press this a little further, really going back to the earlier part, to subsection (1), where it is open to another supplier in such circumstances to withhold goods. Supposing, in fact, a dealer buys some goods on terms indicative of a clearance of stocks by the vendor, and another supplier then sees them being sold, and in circumstances in which he accuses the dealer of loss leading. The dealer then says, "I was only clearing somebody's stocks for them" and the other supplier, who is after him because he does not like these stocks being sold at this low price, says, "You have to prove it. Where is your consent?" It is just conceivable that that consent may not be forthcoming. This sounds a little hypothetical. But what happens, for example, if the original supplier has gone out of business? I should have thought that this was a simple and reasonable Amendment to accept. I wonder whether the noble Lord would think a little further about it? I admit that I think that there is a stronger case for this Amendment now than when I first moved it.


My Lords, is the noble Lord arguing that the supplier of another type of article than that which is alleged to be used for loss leading can take action?




Surely that is entirely wrong. The only supplier who can take action against a dealer who is loss leading is the supplier of the goods which are affected by that action. There is nothing in this Bill to say that all and sundry suppliers can take action against a supplier or a dealer in regard to an article which is not of their manufacture.


Will the Minister explain to the noble Lord, or shall I?


I think it is the usual rule that one speaks only once in the course of debate on Report, so to help the noble Lord, Lord Shackleton, I will perhaps answer the noble Lord, Lord Lucas of Chilworth. If the noble Lord looks at the Bill more closely, he will see that the supplier can withhold supplies of his goods if goods of that kind or of a similar character are being used as loss leaders. Therefore, to take the analogy of electric irons, a supplier of electric irons who finds that somebody is loss leading with an electric iron which is in fact produced by another supplier will be entitled under this Bill to say, "I will not supply electric irons either".


May I, with permission of the House, ask leave to withdraw the Amendment, feeling very dissatisfied?

Amendment, by leave, withdrawn.

Clause 5:

Power of Court to exempt classes of goods

(3) On a reference under this section in respect of goods of any class which have been the subject of proceedings in the Court under Part I of the Restrictive Trade Practices Act 1956 the Court may treat as conclusive any finding of fact made in those proceedings, and shall do so unless prima facie evidence is given of a material change in the relevant circumstances since those proceedings.

LORD STONHAM moved, after subsection (3), to insert: ()—

  1. (a) on a reference under this section in respect of any goods the supply of which has been investigated by the Monopolies Commission the Court shall take into account any relevant facts established by the Monopolies Commission;
  2. (b) in this subsection 'Monopolies Commission' means the Monopolies and Restrictive Practices Commission constituted by the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, or the said Commission as reconstituted under the name of the Monopolies Commission by the said Act as amended by the Restrictive Trade Practices Act, 1956, as the case may be."

The noble Lord said: My Lords, this Amendment has the purpose of ensuring that the Restrictive Practices Court should take into account any relevant facts which have already been ascertained by the Monopolies Commission. I was pleased to note the more favourable attitude met a few moments ago by my noble friend Lord Shackleton, and, as this is the last non-Government Amendment to be moved on Report, I hope I shall enjoy similar success. During the various stages of the Bill there have been some sharp disagreements on a number of aspects, but I do not think there is any doubt at all that all Parties have fought for the general purpose of the Bill, which is to ensure greater flexibility of retail prices by means of a discontinuance of resale price maintenance, except for those particular goods or classes of goods which may be found by the Restrictive Practices Court to qualify for exemption under Clause 5. I believe that in general the Bill is likely to have some effect, at least, in promoting freer competition and in protecting the public interest, but there is no doubt at all that the so-called gateways in Clause 5 will not be at all easy to get through. In fact I think "needle's eye" is a more apt description than "gateway" because, in order to get through it, you must have not only a very good case but a considerable amount of money.

The onus of proof places heavy burdens on the supplier. This creates a real difficulty because an industry may believe, and may prove to the complete satisfaction of the Court, that the practice as they operate it is not, and is not likely to be, against the public interest, and yet be unable to prove that the discontinuance would be positively to the detriment of the public as measured by the test laid down in Clause 5. I would ask whether it is possible to argue that it is in the public interest to discontinue a practice which has already been shown, after complete investigation, to be not against the public interest. I do not claim that, either in principle or in general, resale price maintenance is in the public interest. Certainly throughout my own business life in my own business I have persistently refused to fix retail prices, but there are undoubtedly cases where it is in the public interest.

Everybody operating such a system who feels that he has real grounds for believing that the public interest is not harmed by his practice and that it has positive advantages to his trade, will when this Bill becomes an Act, give notice of application for exemption. There may also be cases, less fortunate cases, where an industry feels that it is clearly desirable from the point of view of its own interests, yet it has little chance of passing through the gateways in Clause 5. Those industries who wish to be able to continue with the practice will continue as they are for as long as possible. If they consider they have any kind of case, enough money, and can stand the expense and trouble, they will submit a case to the Court so as to defer the evil day for as long as possible. The Court is already overburdened and provision is made for the appointment of three more puisne Judges. These hearings take a lot of time, and are costly not only to the industry concerned but also to the public purse.

It is because of this and what I regard as the extreme fineness of the distinction, on the one hand, of something which is not, nor is likely to be, against the public interest, and, on the other hand, of something whose discontinuance would be to the public detriment, that an Amendment was moved in Committee by the noble Lord, Lord Sinclair of Cleeve, to give the Court power to exempt a practice as applied to a particular class of goods where the practice had been held by the Monopolies Commission to be not against, or not likely to be against, the public interest. Although that Amendment appeared to be reasonable enough, the Government could not accept it. I hope I can fairly summarise the Lord Chancellor's quite powerful objections as being two. First of all, he said that if the Amendment were accepted it meant that for certain trades the Restrictive Practices Court would be obliged to make an exemption order regardless of the application of the gateways. Secondly, he said that it would be contrary to the intention of the Bill, which is that resale price maintenance in all trades, if it is to continue, must be examined by the Court in the light of the criteria in Clause 5—which means that no goods should be automatically exempted from any liability to be judged by the Court.

I submit to the noble and learned Lord, the Lord Chancellor, that the present Amendment I am moving completely meets those two fundamental objections. It surely is not too much to hope that, bearing in mind what the Lord Chancellor said about what is already the practice of the Courts, the Government will accept the present modest Amendment. It would merely, I submit, write into the Bill recognition of the point that where the Court is satisfied that there is no material change in relevant circumstances, facts established on an investigation by the Monopolies Commission may be taken into account without requiring them to be proved or established all over again. I realise that, even without this Amendment, the Court can have regard—and, indeed, as the Lord Chancellor pointed out during the Committee stage, they have already had regard in other cases—to the contents of Monopolies Commission Reports; but this Amendment does no more than seek to consolidate that position by specifically providing that the Court shall take into account any relevant facts established by the Monopolies Commission. It would obviously be for the Court to determine what are, or are not, facts relevant to the particular application before them and to make their own judgment on the basis of those facts.

I submit that in no circumstances would this Amendment offend against the principle of the Bill or even knock down a single gatepost, but it could save a great deal of unnecessary time, trouble, expense and anxiety without, by any stretch of the imagination, putting an applicant whose goods had been the subject of investigation by the Monopolies Commission in a privileged position in the sense of making it more likely than it is now that the application would be successful. The judgment of the Court will still be based on the facts in relation to the gateways in Clause 5, but this Amendment could ease the time, trouble and expense of proving the facts.

In my view the only possible argument against the Amendment is that it is unnecessary, but even if the Government arc not convinced of its absolute necessity I hope they will see fit to accept it. If they do so they will be giving some recognition to the feelings that exist among many industries, and I believe among your Lordships, that this would be a wholly reasonable provision to make. In some industries it will also relieve the anxieties of tens of thousands of small retailers who have every reason to fear that they will be at the mercy of supermarket chains who will have no hesitation in using these particular products as loss leaders thinly disguised as bargains. I beg to move.

Amendment moved— Page 6, line 23, at end insert the said paragraphs.—(Lord Stonham.)

5.2 p.m.


My Lords, the Three Musketeers who have banded themselves together to promote and defend this par- ticular Amendment are, as your Lordships will know, recruited from entirely different parts of your Lordships' Chamber; indeed, I think it true to say that they reached their opinions on the subject quite independently. As the noble Lord, Lord Stonham, has said, we proposed in the Committee stage that if a firm had already satisfied the Monopolies Commission that its arrangements for maintaining the retail prices of its goods were not objectionable in the public interest, it should be saved having to go through practically the same distasteful, time-consuming and costly process all over again before the Restrictive Practices Court. But the Government rejected our Amendment very firmly; therefore we are not putting it forward again.

We are putting forward a very modest Amendment. We are asking merely that something should be done which would make this tiresome, time-consuming and costly process just a little less irksome, a little less time-consuming and a little less costly for the firms concerned. The Amendment is completely innocuous, and though the Government may not think it is very necessary we hope they will agree to it, if only to show some measure of sympathy for firms who have to go through this horrible process twice, and show to them and to others that the Government are not wishing to go out of their way to persecute them. I support this Amendment.


My Lords, the two noble Lords who have spoken on this Amendment have covered the points so fully that the third Musketeer will occupy your Lordships' time for only a few minutes. However, I should just like to make the point that although one recognises what the noble and learned Lord the Lord Chancellor said in the Committee stage, that the inquiry of the Monopolies Commission is conducted in an administrative field and on different criteria from those which the Restrictive Practices Court will operate, what we are concerned with here is facts. I think it is immaterial whether the inquiry eliciting the facts was conducted in an administrative field and on other criteria. If the facts still remain—and this is the basis of the Amendment—and are held to be unchanged, then we suggest that it would be a great economy of time and money if the Restrictive Practices Court could take account of this.

5.6 p.m.


My Lords, I do not know whether it would be proper for me to refer to the mover of this Amendment and the supporters as the Three Musketeers. They have tried to represent to your Lordships that this Amendment should be more attractive to the Government because it really is a very small infant compared with the Amendment which was moved during the Committee stage. Despite the attractive way in which the Amendment has been supported, I am afraid that the Amendment itself is no more attractive to Her Majesty's Government. I hope that the noble Lord, Lord Stonham, will forgive me for not following him over the wide range of his speech in relation to this Amendment, but the Amendment itself falls within a pretty narrow compass. It is quite true that a very much more far-reaching Amendment was moved in Committee, which would require the Court to make an exemption order where the Commission had concluded that resale price maintenance did not operate against the public interest. This Amendment does not require the Court to do that, but only to take account of any relevant facts established by the Monopolies Commission. Listening to the noble Lord, Lord Stonham, I gathered that he meant that, if they did receive in evidence the conclusion of the Monopolies Commission, the Restrictive Practices Court would be required to accept it as proof.

There is no question here, if I may say so to the noble Lord, Lord Robertson of Oakridge, of any endeavour to persecute or be oppressive. But what we think is wrong, when we have created by this Bill the matters which have to be considered by the Restrictive Practices Court, is that certain trades or industries which have come before the Monopolies Commission should be put in a different position from anyone else so far as the determination of the case is concerned. This Amendment proposes that it shall apply to all facts found by the Monopolies Commission, and to that extent I suppose it is put forward as advantageous to the trades whose resale price maintenance had, if one could use the expression, been "cleared" by the Monopolies Commission—for instance, the tobacco trade. But, my Lords, if it was favourable to them it would be prejudicial to the trades whose resale price maintenance had been condemned—wallpaper and electrical components for motor cars, to give two examples.

So the Government think it would be wrong to require a court of law, like the Restrictive Practices Court, to "take into account", whatever that expression may mean, the findings of an administrative body which was not having regard to the criteria contained in this Bill. There really is no parallel between this Amendment and the provisions of Clause 5(3), which relate to the findings of fact by the Restrictive Practices Court. But I can offer to the noble Lords some small crumb of comfort, and I will follow their example of trying to dress it up as attractively as possible. I draw their attention to Rule 55 of the current Rules of the Restrictive Practices Court, which of course it falls to my lot to consider and to make. The terms of that Rule are as follows—and I will leave out the irrelevant words: Where it appears to the Court … —that is, the Restrictive Practices Court— … that the Court would be assisted in determining any issue in the proceedings by the admission of evidence (whether oral or documentary) which would not otherwise be admissible under the law relating to evidence, the Court may make an order allowing the admission of such evidence. My Lords, that is a very wide provision, and all that will be required is for the counsel appearing for one industry—say, tobacco—which comes before the Court, to satisfy the Court that it will assist them if they look at these documents in determining a question in the proceedings. If it is going to lead to the saving of considerable time and to the avoidance of considerable expense, I have no doubt at all that the Court, in its discretion, will say, "Yes, we will look at them." So while I am not prepared to advise your Lordships to accept this Amendment, because I do not think it is right to do so, at the same time I point out that there is already machinery before the Restrictive Practices Court whereby the ordinary rules of evidence can be relaxed if the Court thinks fit, and if the Court thinks it is proper to do so for the purpose of assisting the Court in the discharge of its duties. Speaking from recollection, I think I am right in saying that even in cases that have come before the Restrictive Practices Court already there have been occasions when the Court, under this Rule, has in fact looked at the Reports of the Monopolies Commission.

My Lords, that is the short explanation. I hope I have made it clear, and I hope it will satisfy your Lordships that, despite the persuasive eloquence of the noble Lord, Lord Stonham, and his noble friends, this is not as good an Amendment as all that and should not be inserted in the Bill.

5.11 p.m.


My Lords, I can assure the noble and learned Lord the Lord Chancellor that the gleanings on this particular Bill have been so small that we will certainly not overlook the benefit of any crumb that he is able to offer. In fact, when he read out the extract from the existing enactment he made it sound like not a crumb but an éclair. I can only hope that it will not turn out to be the carraway seed that is so often revealed when we have this kind of assurance. But I find it extremely difficult to understand how the noble and learned Lord can say that the Government found this Amendment no more attractive than the earlier one, because in this Amendment—there is no question about it—we met the two fundamental objections which he had to the previous one.

The only other points I would make are these. It is not clear to me how the Restrictive Practices Court would, through this Amendment, be required to accept it all as proof when they would merely be instructed to have regard to it. The other point is that on the Committee stage the noble and learned Lord the Lord Chancellor pointed out—and I quote his words [OFFICIAL REPORT, Vol. 259 (No. 87), col. 160]: It is already the practice of the Court to have regard to the contents of the reports of the Monopolies Commission where these would be relevant … And I can see no reason why a similar procedure should not be followed in exemption proceedings under the Bill. If that is the case—and it is—then all objections about having to accept something as proof would apply, as the noble and learned Lord said they would apply if this Amendment were accepted. I cannot see any real difference in practice between the statement made by the noble and learned Lord which I have just read out and what we are asking for in this Amendment, except that if the Amendment were accepted then everyone would know, whereas if it is not accepted they will always be in doubt. I should have thought it would be to the benefit of the industries concerned, of the Court, of traders and of the public if these doubts were removed, and that is why we moved this Amendment.

On Question, Amendment negatived.

Clause 7 [Late application to, and review of decisions by, the Court]:

5.13 p.m.


My Lords, I hope it will be to the convenience of your Lordships if I talk both to this Amendment and to Amendment No. 10, which is in identical terms. These are purely drafting Amendments involving no change of substance. Their purpose is simply to distinguish between the procedures under the two subsections. Clause 7 makes provision for two distinct types of application: late applications for exemption, under subsection (1) of Clause 7, and applications for the review of previous decisions of the Court, under subsection (2) of that clause. The Amendments are designed to ensure that proper distinction is drawn between them. I beg to move.

Amendment moved— Page 7, line 34, leave out ("in accordance with this section") and insert ("under this subsection").—(Lord Drumalbyn.)

On Question, Amendment agreed to.


My Lords, I beg to move.

Amendment moved— Page 7, line 42, leave out ("in accordance with this section") and insert ("under this subsection").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Clause 11 [Interpretation]:

LORD DRUMALBYN moved to leave out subsection (2) and to insert: (2) Where the dealer referred to in section 2(1)(a) or section 3(1) of this Act, or the supplier referred to in the said section 2(1)(a), is one of a group of inter-connected bodies corporate within the meaning of the Restrictive Trade Practices Act 1956, the reference shall include a reference to any other dealer or, as the case may be, any other supplier, who is also a member of that group.

The noble Lord said: My Lords, I beg to move Amendment No. 11, standing in the name of my noble and learned friend the Lord Chancellor. On Committee, my noble friend Lord Hanworth moved an Amendment in the name of my noble friend Lord Jessel adding a proviso to subsection (2) of Clause 11, which excluded its operation in relation to Clause 4. My noble and learned friend the Lord Chancellor then indicated that the Government were giving further consideration to this provision, and on that understanding the Amendment was withdrawn. We are grateful to the noble Lords for drawing attention to the fact that, as it now stands, subsection (2) of Clause 11 is too wide. The Bill as now drafted, for example, requires a supplier company and its supplier subsidiary to be treated as one person for all the purposes of the Bill. This would produce undesirable anomalies. For example, unlawful conduct by one person is treated as unlawful conduct by another person, and renders that other person liable to legal proceedings.

My Lords, the Amendment substitutes a new and narrower subsection (2) of Clause 11, which requires suppliers and dealers who are inter-connected bodies corporate—that is to say, members of a group (in the company law sense of the word)—to be treated as a single dealer or supplier in relation only to the withholding of supplies, including withholding on account of loss leading. It might be convenient if I were just to indicate how this will work out in practice. The new subsection works in conjunction with subsection (1) of Clause 2 and subsection (1) of Clause 3 in the following way. If you have three inter-connected companies, A, B and C, and three inter-connected dealers who are inter-connected companies X, Y and Z, then, first, A may not lawfully withhold supplies from X on the ground that X has been cutting the price of B's or C's goods; secondly, A may not lawfully withhold supplies from Z on the ground that Y has been cutting the price of A's or B's goods; and, thirdly, A may lawfully withhold supplies from X on the ground that Z has been using similar goods as loss leaders. This is the effect of the change proposed. I beg to move.

Amendment moved— Page 10, line 39, leave out subsection (2) and insert the said new subsection.—,(Lord Drumalbyn.)


My Lords, I should like the Minister to clarify for me one point about which I think I have been misinformed. Does this Amendment have the result that a parent company will not be allowed to regulate prices of a subsidiary? That is not so, is it?


My Lords, that will be the effect of the Bill, and was always intended to be the effect of the Bill. The relationship between two companies within the same group would be that resale prices could not be maintained there, any more than anywhere else. But, of course, one will no doubt be able to recommend prices to the other.


My Lords, I am sorry to be stupid on this point (I am afraid that I must be), but in the. case of a subsidiary which is the manufacturer and the supplier, in the circumstances set out in the explanation, as I understood it, they would not be re-selling. They would be the original sellers, would they not? If I correctly understood the question of my noble friend Lord Jessel, I thought it related to that. We are talking of resale, are we not, essentially?


My Lords, I think the question of my noble friend Lord Jessel was related to what was meant by "inter-connected bodies corporate" for the purposes of this subsection, and whether it would mean that there could be resale price maintenance as between a parent company and a subsidiary. The answer to that is that there cannot be resale price maintenance between those two, any more than in any other section of industry, without the sanction of the Restrictive Practices Court; but there can, of course, be recommended prices.

On Question, Amendment agreed to.


My Lords, this is a purely drafting Amendment. I beg to move.

Amendment moved— Page 11, line 23, leave out from ("date") to end of line and insert ("of the passing of this Act").—(Lord Drumalbyn.)

On Question, Amendment agreed to.