§ 4.4 p.m.
§ Debate on Second Reading resumed.
§ LORD GRANTCHESTER
My Lords, I should like to follow the noble Lord, Lord Shepherd, and pay tribute to the clarity with which the noble and learned Lord the Lord Chancellor explained this Bill and the reasons for it. I do not wish to follow him in the wider field of general restrictive practices, but, if I may presume to say so, I think he made some very cogent points in his speech, particularly in dealing with the subject of profit margins. I think this shows the difficulty of this kind of legislation, which may have the effect of making customers less careful in making their choices, and could do as much harm as good.
I cannot say, therefore, that I welcome this Bill with any great enthusiasm. On these Benches we all accept the general principles of competition of which the Secretary of State for Industry, Trade and Regional Development spoke, when introducing this Bill in another place. But he made no reference to any intention of lowering tariffs or of easing what I might call frontier restrictions, which is one of the classical ways of promoting competition. We are also in sympathy with any attempt to halt the rise in the level of prices. The level of consumer prices has been steadily rising since 1948. It rose by 50 per cent. in ten years from 1950, and it has risen by no less than 30 per cent. since 1953. The rise in consumer prices has been worse in this country than in any other of the great European countries, with the possible exception of France. But I suggest that if the Government are serious, as I think they should be, about this rise in the level of consumer prices. we must go to the root of the problem which, in my opinion, lies in the manner in which the value of the currency has been allowed to drift. It cannot be dealt with in a measure of such minor importance as this Bill, on the level of consumer prices.
My Lords, this Bill adds just one more prohibition to what a citizen can do in the ordinary course of business in a simple contract between supplier and retailer. It is surely undesirable to interfere with such contracts when they 805 are freely entered into; that is, where there is no element of coercion. This was recognised in the Restrictive Trade Practices Act, 1956. Coercion in any form is one of the most unpleasant features of the relationships between individuals, but this Bill does not pinpoint this evil. We all hear of instances which point to the existence of coercion, but the fact that a certain percentage, or even a high percentage, of goods are sold subject to price agreements is not evidence of coercion in the making of those agreements.
The noble and learned Lord the Lord Chancellor stated to-day that the position is virtually unchanged in spite of the Act of 1956, because, in fact, tacit agreement has replaced formal agreement between groups of suppliers. If this is so, could this practice not be stopped, for example by publicity, or by some less cumbersome and less expensive procedure than is suggested in this Bill? For instance, I think we should like to know the extent of the complaints of coercion received at the Board of Trade which have convinced the Government that this Bill is so urgently necessary. By what are called "the safeguards" it is anticipated that many exceptions or exemptions will be made to the provisions of the Bill; but firms who claim exemption will be put to a lot of trouble, and I assume from what the noble and learned Lord the Lord Chancellor said that these tacit agreements, if they are accepted by the Commission, again will become legal, so we shall really again be making such agreements respectable.
I suggest that this type of interference can be justified only when it has been clearly shown that malpractices exist which amount almost to a conspiracy to defraud the public, and nothing like this is even suggested. It seems to me that what this Bill does is to provide a rather tiresome and ineffective substitute for what should be a general attack on the coercion of the individual or the small trader, which persists in many ways, exercised by quite a number of big bullies. It is a proper function of Government to prevent this, but it is too often dodged. Admittedly it is not easy sometimes to detect coercion, or to get at it, but I should like to see much more thought given to this evil, and I should like to see Government. Departments and officials particularly careful to set a good example.
806 The other point I should like to make is that this Bill tips the balance still further in favour of the big retailer against the smaller shopkeeper. I consider, therefore, that this Bill should have been presented as part of a more balanced legislative effort giving more freedom, not in hours of employment but, for example, in hours of opening and closing, to meet the convenience of the working public. To-day more and more the customer is expected to absorb production without complaining about deficiencies in finish or careless workmanship; in many large establishments he is treated with less than courtesy. Customers wait and fetch and have to come to buy when it suits the convenience of the big store. The small shopkeeper could, if he had more freedom, improve on the service he could offer, and could study the convenience of his customers. This is his best chance to survive. At least something might have been done at the same time as the proposed legislation before this House to give to the small shopkeeper greater flexibility in selling. If long delayed, it may come too late to be of any use to him.
§ 4.15 p.m.
§ LORD REDESDALE
My Lords, resale price maintenance is such a complicated subject that it is probably about the worst subject to choose for a maiden speech. However, I hope your Lordships will bear with me while I touch on certain aspects of the subject, at the same time endeavouring to implement all the good advice that has been given me on maiden speeches, for which I am very grateful. At any rate, I will try to observe the cardinal rule of not taking up too much of your Lordships' time.
An indirect interest in the appliance business has given me the experience which has led me to the position of being what could be described as a "conditional abolitionist". The abolition of resale price maintenance will naturally have greatly differing effects on various trades. Thus it is extremely dangerous to generalise. Clause 5, of course, sets out to give each trade a fair hearing if they claim that the abolition of resale price maintenance is in the end against the interest of the consumer. This is fair enough. But Clause 3, while purporting to give some protection to the small retailer, in fact allows such 807 trading flexibility that it defeats its own objective. As I have said, I am in favour of price flexibility, but I am a little concerned at the possible consequences of the degree of this price flexibility. The wide differences in prices are, of course, caused by volume and preferential discounts. In the grocery business the maximum additional volume discount varies with the stock turn of the item. Slower-moving lines have higher volume discounts, but grocery volume discounts are low in comparison with those for capital goods.
In absolute costs the difference on a week's grocery purchases between a multiple and an aggressive independent is not that significant. The Financial Times showed as an example that groceries costing 39s. 8d. at an independent could be bought for 5s. 2½d. less at the multiple shops of the noble Lord, Lord Sainsbury, although the average between these two costs is probably in the region of about 3s., as not all the independents are so expensive nor all the multiples so aggressive. Against this must be taken the fact that in all probability the housewife is just going down the street to her local independent grocer, where she is known and given personal service. One survey showed that 80 per cent. of housewives shopping at independent grocers live within a half-mile radius of their shop, and that 67 per cent. live within a quarter-mile radius of the shop. If the housewive has to take a bus to the shopping centre and make her purchases at a supermarket, the difference could be accounted for by fares. Therefore, an independent grocer, provided that he is a member of a voluntary group, is able to be reasonably competitive, and has the major advantage of convenience on his side.
It has been implied that, as a large proportion of the grocer's business is, anyway, not price-controlled and the independents are still in business, this is an open and shut argument that the abolition of resale price maintenance will not harm the smaller retailers. However, this generalisation is misleading. For instance, a very different situation will face the electrical retailer. The margins are larger and the purchases are usually one-off and not frequency pur- 808 chases as with a grocer. Thus, convenience at the purchase stage has not so much significance as it has at the service stage.
The differences between the independent and the multiple in this trade are very marked. For example, on a washing machine all dealers can get an average of 22½ per cent. discount, but the largest chain operators and the Electricity Boards get a 39.5 per cent. discount. This means that a machine retailing at £100 is bought by a small retailer for £77 10s., whereas the big chain buys it at £60 10s. Purchase tax is not included, for it would be the same wherever the machine is bought as it is calculated on a notional rate. It is not hard to see that, on this basis, the chain operator can sell the machine at £75 and make a profit of £14 10s., which is still £2 10s. below the actual cost price to the small independent. It takes some service to account for this difference in price.
It is impossible to take an average figure for volume discounts in the grocery trade, but overall they are significantly lower than the appliance volume discounts; and, bearing in mind that the absolute costs are very much higher, the small electrical retailer will have a much more difficult time than the small grocer has had. The rapid growth of the establishment of domestic appliances has resulted in a corresponding increase in the number of electrical outlets. In the period 1950 to 1961, these increased from 11,929 to 18,878. These figures are for electrical outlets only and not for stores selling appliances as a sideline. Because of volume discounts the multiples have taken a disproportionate share of the increases, in terms of both numbers and turnovers. Over the period in question their share of the number of outlets has gone up from 5 per cent, to 21 per cent., and their share of the turnover from 13 per cent. to 36 per cent. which has meant in an expanding market a turnover increase of 1,000 per cent.
Obviously, the multiples are in a far stronger profit position and the abolition of resale price maintenance will leave them plenty of margin as compared with the independent. Independents still account for 62 per cent of the total number of shops, and if large numbers 809 of them close the total number of electrical outlets will drop very much below the present satisfactory level of 2.8 outlets per 1,000 population. The growth of the multiples will, in all probability, result in mergers which, in turn, will result in rationalisation of their numbers. This is already taking place in the grocery business, and the end result of all this will be a reduction in the total number of outlets. Those chains that are left in business will in the long term become extremely powerful and the consequent oligopoly might not be entirely in the consumers' interests.
It can be argued that there are both advantages and disadvantages of an oligopoly. Prices could certainly be very much lower because of the higher efficiency of these outlets; but, against this, it would not be very difficult for some of the controlling interests to come to working agreements which might not benefit the consumer. As well as this, their bargaining power can be such that the manufacturers could be dominated by them. This could result in inferior goods with poor service; but with the competitive situation this is probably unlikely. As I have said, an oligopoly would result in extremely effective distribution, but this normally reduces the range of choice. In this situation specialist requirements are not catered for. The present degree of competition has already made the smaller retailer more efficient. For instance, there is a trend towards their providing servicing, which previously has been the responsibility of the manufacturer.
The abolition of resale price maintenance will inevitably lead to the closure of some of the smaller, less efficient, outlets; but those that do offer a genuine service should be preserved, and this will require their being given some degree of protection if they are to survive. The efficiency of industry and the retail trade, which in turn affects the service to the consumer, is best maintained by free competition. The task of the Government is to keep this competition working freely and effectively. We are fortunate in being able to see a case history of the maintenance of competition in the American anti-trust laws. Of these, the 1936 Robinson Pat-man Act is particularly interesting. Its aim was to make illegal the practice of price discrimination by manufacturers 810 between retailers. I must emphasise that this Act recognised the real differences of price made by genuine savings in manufacturing or transport costs as being in the consumers' interests, but it set out to prevent undesirable preferential discounts made for reasons other than those of real savings. If it costs a manufacturer the same amount to deliver an item to a large multiple store as to a small retailer, and if the small dealer's costs of operating are as low as those of the multiple, surely discriminatory pricing should not prevent the small shopkeeper from offering goods to the consumer at as low a price as the multiple.
My Lords, I believe that, with the present population deployment, the consumer can best be served by a reasonably large number of efficient but competitive retail outlets. They can have a fairly wide degree of price flexibility, but a situation should not arise whereby the smaller man is literally forced out of business. He may be rather more expensive than a multiple, but he can offset this by a greater degree of service to the consumer. The consumer can choose to shop from outlets such as discount houses, where he will receive little or no service, or from full service outlets. The choice is his. There will always be some people who require service and other amenities. The change in American discount houses from stark warehouses to the very plush shops that they are at the present moment bears out this view. Immediately resale price maintenance is abolished in any trade there will be a switch in promotional emphasis from product advantage towards price. Although price will have greater significance than it has had up to now, the situation should stabilise in around eighteen months to two years, depending upon when the Bill becomes effective, and will then return to the existing pattern in which the product is sold on its advantages over (competition. But, my Lords, unless some measure is enacted to limit volume and, more particularly, preferential discounts the smaller retailers will go out in the initial price rough and tumble.
The case for giving a greater degree of protection to the smaller retailer is based on the current situation. The long-term implications of the Bill before the House are rather different. We have 811 neither the space nor the potential road capacity to diffuse ourselves as much as has been done in America, where large shopping centres have grown up. The replanning of our towns is gradually taking place and allows for shopping centres which are more efficient than the present haphazard High Streets, and these new developments can serve larger numbers of people. Therefore, the number of shops per 1,000 population can be reduced. Until this takes place, which will not be for some time to come, a very real need exists for the smaller retailer—especially in fields such as appliances where service is required. While supporting this Bill, I would ask your Lordships to give consideration to the need for some further legislation which will limit preferential and volume discounts and thus give the smaller retailer some much-needed protection.
§ 4.27 p.m.
§ LORD MORRISON OF LAMBETH
My Lords, the House has listened to a very interesting, able and thoughtful maiden speech on which we should all wish to congratulate the noble Lord who has just sat down. He has raised some important points which so far as I—and, I think, he—could see, are not covered by the Bill; and he hopes there may be some further legislation to cover it. It shows how difficult it is, with ability and with constructive purpose, to cover all the ground in matters of this sort. But the noble Lord has given us a useful, thoughtful and valuable speech on the subject, and I am sure it is the wish of all noble Lords that we shall hear from him again from time to time.
This Bill is going to be a difficult Bill for the courts, for the administrators, for the manufacturers and for the wholesale and retail trade. It is not an easy Bill to read and to understand fully. A good many Amendments were made at the Committee stage in another place in order to propitiate the Government's Back-Bench members who were, not unexpectedly, troublesome about the Bill, and the measure would have been more satisfactory if the whole field of monopolies and restrictive practices had been covered so that the White Paper as a whole would have been covered by the legislation now before your Lordships' House. What the Government did was 812 to pick out the rather more troublesome aspects of the problem and to leave those others with which I should have thought it would have been easier, on the whole, to deal.
The noble and learned Lord who sits on the Woolsack, who also made an able speech this afternoon, simplified the provisions of the Bill as best he could; but the Bill is still not simple, so far as I am concerned. But he gave us a valuable exposition. The noble Lord, Lord Shepherd, also made an excellent speech in leading for the Opposition. The noble and learned Lord who sits on the Woolsack said there were restrictive price maintenance arrangements covering about 40 per cent. of consumer goods. I see that the noble Lord, Lord Mabane, shakes his head in negation, by which I gather he disagrees with the Lord Chancellor, but does not say that I have inaccurately quoted what the Lord Chancellor said. He knows a good deal about trade, especially the retail trade, and does not agree with the noble and learned Lord's estimate. But that is what he said.
The whole history of capitalist society began with cut-throat competition, with very doubtful results. It meant, to some extent, shocking conditions for working people, including children, even children of five in the factories. It meant a rough time for working people, with bad standards of living—indeed, a rough time for everybody except the well-to-do. The more price agreements and monopolistic and restrictive trade practices have developed, the more the little man has been squeezed in the process. I suppose it is in the nature of the economic system that this development of restriction, monopolies and controlled prices should have survived the competitive era.
But this will not last for all time. The noble Lord who has just resumed his seat has pointed out that manufacturers themselves have arrangements whereby the big retailer can get their goods at a lower price than the small one. This is understandable up to a point, but, as the noble Lord has indicated, possibly it is overdone. Within the field of manufactured goods there is a lot to be said for private enterprise, and I have always judged the question of nationalisation, or, as I prefer to call it, socialisation, as a matter of 813 its being up to the nationalisers or socialisers to prove that it would be better under their conditions than under private enterprise. It is equally up to the believers in private ownership to prove that it is better to leave things as they are. Over a considerable field there is a lot to be said, as things are, for private enterprise, although there is nothing to be said for private unenterprise and there is some of it that could do with a little more competition in order to shake it up and improve its functioning.
There is another practice among some contractors for municipalities. Municipalities sometimes Lind that tenders come in all for the same amount. That does not happen without arrangements behind the scenes within a trade association or between likely tenderers. In other cases, it is arranged that tenders, though of different money values, are so fixed in price that a particular tenderer will get the contract. This happens partly among public works contractors and certain other related trades and industries. This Bill has nothing to say about this practice; the Bill remains within the limited sphere of resale price maintenance. It leaves out monopolies and restrictive practices and does nothing about this kind of agreement about tendering, which is contrary to the public interest.
The only remedy for this, in the case of local authorities, is direct labour, but it is not always the case that direct labour will solve the problem or necessarily do a more economical job than private enterprise. So there is a big field to cover before these problems are dealt with in the way they ought to be dealt with. The way in which this Bill will operate is uncertain. There are so many reservations, so many saving provisions, so much for the Restrictive Practices Court to settle, that until the Bill has been in operation as an Act for quite a time, we shall not know what the outcome is going to be. Therefore, nobody need look for particularly quick results.
For myself, I find it difficult to make up my mind in any dogmatic or wholesale fashion for or against this Bill. And I imagine that this is the position of a good many of your Lordships. I am for the Bill in principle, but there are so many reservations that whether the principle is going to be sufficiently 814 observed is becoming increasingly doubtful. I am for the Bill, because it is contrary to the wellbeing of the community that manufacturers should be able to determine the profit margin between themselves and the wholesalers, between the wholesalers and the retailers, and the price that the retailers are to sell at to the public, without the public or the retailers being heard about it at all. As the noble and learned Lord the Lord Chancellor said or implied, it is building up a private court and a private state within the public organisation of the State itself, especially when it comes to the point when a retailer selling under the stipulated price is hauled up before one of these private courts and the manufacturers consider the case and come to a decision that might have the result of putting him wholly or partly out of business. That is the case, very shortly stated, for the Bill and its proposals.
On the other hand, there is a case against the Bill. I have enough human feeling in me to be sorry for the small shopkeeper. When I was a schoolboy, I distributed newspapers and I knew the struggle that the newsagent had even though he also sold toffees. My first job after leaving school at 14 was as errand boy to my brother, who had opened a grocer's shop in a London suburb, hoping to do well. But he found it a hard struggle. The hours were long and the profits were very limited. And thereafter I worked in the retail trade as a shop assistant.
Do not let anybody underestimate the struggle that the little shopkeeper has to exist. His takings are limited. He works long hours—at any rate, he used to. The Shops Act may have made a difference, but even now he works fairly long hours. He has to do everything for himself, with the possible assistance of his wife and a boy. Resale price maintenance means this to the small shopkeeper: that he is not undercut by the big stores. It ensures that he has a margin of profit. But now he is in danger of being up against cut-throat competition from the big stores. This competition in cut prices may not last, but it may go on long enough to embarrass the small trader; then prices may be put up again and an attack made on other classes of goods, which are price cut. This is the problem of the small 815 shopkeeper and I do not sneeze at it. I have a lot of sympathy with and understanding of the problem of the small retail tradesmen.
There is another aspect of the question. There are a good number of old ladies and gentlemen who find it physically difficult to go to the big shops in the centre of the town, but they can get to the little shop round the corner or a few yards down the road. And the little shop is often obliging at delivering, or getting things, or coming to collect orders. I do not say that all these little shops will be closed down, but there is a risk that a good many will be. Then these old folk will find themselves in considerable difficulty, if they have to find their way to the big stores in the middle of the town. That, put quite shortly, is the case against the Bill.
I find it difficult to make up my mind dogmatically about the merits of the Bill. However, the Labour Party, the Conservative Party and the Liberal Party—despite the speech of the noble Lord who spoke for the Liberals this afternoon, which I thought was dead straight against the Bill—have all decided, in principle, to accept the Bill. Therefore we have to handle it in that way. Of course, there is the interest of the shop worker which has to be taken into account. I think the Shop Assistants' Union rather favoured resale price maintenance in their interests as a means of protecting their standard of life. But the Co-operative Movement has gone against resale price maintenance, and the Labour Party, the Conservative Party and the Liberal Party, as I understand it, are all against it, too.
Another way in which the Government might have dealt with the problem was by enabling the Restrictive Practices Court, or whatever is an appropriate tribunal, to interfere with the profit margin stipulated by the manufacturer as between him and the wholesaler, the wholesaler and the retailer and so on, because if the profit margins are excessive, that clearly is against the public interest. If they were too small, particularly between the wholesaler and retailer, that might have been rough on the retailer.
Well, there it is. The Bill is before us. We certainly do not propose to divide against the Second Reading any more 816 than our friends did in another place. But there may be Amendments when we come to the Committee Stage, as my noble friend Lord Shepherd in his excellent speech indicated.
But there is another aspect about the handling of this Bill on which I think the Government are open to sharp criticism, particularly from their own Back Benchers in another place, and, indeed, in this House. Of all the shocking examples of Parliamentary mismanagement I have come across, the handling of this Bill is about the worst case within my recollection. The Government should have known (and if they did not know, it shows how little they know about the people outside: and often they do not know much about the people inside) that this was bound to cause trouble. There were bound to be protests from the small traders and their chambers of commerce and trade organisations. That was bound to have an effect on most Conservative Back Benchers in Parliament, and particularly those with marginal majorities, who, poor souls, must be worried to death about what will happen to them at the next General Election—except those who, I think wisely, have decided not to run.
Consequently, the Government were faced with a menacing and dangerous revolt of their Back Benchers in the House of Commons. The result was that the Government had to alter the Bill in material respects in order to get it through at all without breaking up the Government and risking serious Parliamentary defeat. The last Session of a Parliament, within a few months of a Parliamentary General Election, is the last time that a Government should conduct themselves in this foolish way. That is the time when the Government need a cheerful, roaring programme, if they can think one up. But they did not. They thought this up; they have given themselves the maximum of trouble; and serve them right! They ought to have known that, if they wanted to do this the time to do it was in the first Session of a Parliament, and not the last. For heaven's sake, try to keep your troops together in the last Session of a Parliament! But this Government precipitated a first-class row, which they ought to have known they would precipitate, in the last Session of a Parliament and 817 within a few months of a Parliamentary General Election. Utter incompetence! People who cannot manage their Parliamentary business are really not fit to manage the wider affairs of the nation.
§ THE EARL OF SANDWICH
Has the noble Lord, by any chance, noticed that the Gallup Poll figures have steadily improved in a Conservative sense during the passage of the Resale Prices Bill in the House of Commons? Does not that dispose of his argument?
§ LORD MORRISON OF LAMBETH
I have not noticed any material improvement in the Gallup Polls. It depends which poll you take, because they have rather contradicted each other in recent months. But I am happy about the by-election results; and even if the polls have improved—which I do not think they have, noticeably—I should think it is very doubtful whether this Bill has had anything to do with it. I know the noble Earl, and I am sure he wants to do all he can to be as helpful to the Government as he can these days. From his point of view, he is quite right to do it. But I do not think he is on a good wicket in arguing that case.
Of course, the Government argued—and this was another case of Parliamentary mismanagement—that this Bill would bring down prices. If there was certainty of that, and a certainty of its coming off at a material time before the Parliamentary General Election, that would have been a piece of smart electioneering. But I cannot see that this Bill will affect prices before the Election; in fact, it is arguable bow much it will affect prices after the Election. So you see—and I say this more in sorrow than in anger, but I say it to noble Lords opposite in order that they may do a little lecturing of Her Majesty's Ministers and tell them—it was idiotic. Who is responsible? First of all, Mr. Heath, Because he is the Minister who brought it in. I like Mr. Heath. I think he is a pleasant-looking man, and he was a very good Chief Whip. But he should not have brought 818 this in. Having been a Chief Whip, he ought to know better. And now here comes the noble Viscount, Lord Stuart of Findhorn.
§ VISCOUNT STUART OF FINDHORN
My Lords, I have been listening with the greatest of interest to the noble Lord's argument. Would he not agree that the logical conclusion is that he, in his very high position in the Labour Party in 1950 and 1951, should have been a little more intelligent and able in managing their affairs and presenting a popular policy to the country?
§ LORD MORRISON OF LAMBETH
I managed their affairs very well indeed, even though I say it myself. We did very well. The unfortunate thing was that the country got weary of well-doing, as sometimes the country does. The hope for the next Election is that the country will be weary of ill-doing. At that time it was weary of well-doing. But we were a jolly good Government, and we handled the post-war situation with great ability—infinitely more ability than that with which the period after the First World War was handled. And the Tories should be grateful to us. It is no good talking about 1951, because in 1951 we got a clear majority of six (I think it was) and that was a hard life.
However, as I was saying, the President of the Board of Trade (to omit the rest of his long, long title), as an ex-Chief Whip, ought not to have brought the Bill in. When I was interrupted by the noble Viscount on the lower Front Bench opposite I was about to pay him a compliment, and then he stopped me.
§ LORD MORRISON OF LAMBETH
Not at all. I guarantee that if the noble Viscount, Lord Stuart of Findhorn, had been Chief Whip at the time he would never have let this Bill see the light of day. He would have had more political wisdom, and would not have let it happen. But they have the wrong Chief Whip. Then the Bill has to pass the Legislation Committee, over which (I presume this is still the case) the new Leader of the House of Commons presides. I do not think he is a very bright specimen for 819 leading the House of Commons, or in the matter of this Bill either. He should not have let the Bill through, but should have said: "Take it away, and come back in the first Session of the new Parliament—if we are still there—when we will see what can be done."
Then the Prime Minister let it go. The Prime Minister is to be excused more than any of them, because he does not understand the House of Commons and does not understand politics. He understands your Lordships' House. He did very well here. It shows how unwise he was to go and de-noble himself and go somewhere else. Nevertheless, he has his responsibility as Prime Minister. Therefore, from the Government's point of view this is a classic case of Parliamentary mismanagement from beginning to end. It landed them in no end of a Parliamentary crisis in another place, in which they need not have landed if only they had been sensible.
However, they produced the Bill, such as it is, and they have amended it. So we have now the Bill, such as it is, which is not as it was. I think we can safely give it a Second Reading, not in anticipation that it is going to do much good, but hoping at the same time that it will not do much harm. In that spirit of Christian toleration, I say that we will assent to the Second Reading of a Bill which has not a great deal to be said for it and which ought never to have been brought forward at this time in the life of a Parliament.
§ 4.51 p.m.
§ THE EARL OF SHANNON
My Lords, as your Lordships are well aware, this is the first time that I have had both the pleasure and the privilege of addressing you. Having attended your Lordships' House for a matter of the last two or three months, I could not fail to be extremely impressed with the very high standard of debate to be found here, and I cannot but wonder at my own presumption in thinking that I should have anything of value to offer to your Lordships' deliberations. However, relying entirely, I am afraid, on the indulgence which your Lordships are kindly accustomed to granting to beginners like myself, I am tempted to try. T am also very well aware that when making a maiden speech it is customary not to choose a matter that is controversial 820 or liable to dispute. Believing (and the noble Lord, Lord Redesdale, who has just addressed your Lordships also held this belief) that all the fur and feathers that were going to fly on this subject had already flown in another place, I was rather surprised to find that the matter is still causing a certain amount of trouble.
I was most interested in the speech of the noble Lord, Lord Shepherd. Surely as I should love to come in in full sail on certain subjects, such as credit and loss leaders, and matters like that, I must be careful and steer clear of those subjects. Before I go any further, I must, in accordance with the tradition and custom of the House, declare an interest. I am a manufacturer. When this Bill was introduced in another place, and at many other times subsequently, it was hailed as a measure to tackle the manufacturer. I am not sure that I agree entirely with that view, and it is for this reason that I wish to address your Lordships on this subject. Because as one ostensibly being, or about to be, tackled, I must, if possible, on behalf of quite a large number of smaller manufacturers (I cannot claim to speak for all) most respectfully decline the tackle.
To illustrate this point, if I might trespass on your Lordships' time slightly, may I give a résumé of how the conditions and origins surrounding this maintenance of resale prices occur? The manufacturer, having costed his materials, labour, overheads and other costs, and also having applied his own margin of profit, is quite happy to sell at that price. However, he makes use of the services of distributors, who give him wider coverage for his goods than he could probably make himself; bulk orders, not a lot of penny packets, but real, big, "meaty" orders; local stocks held around the countryside; local advertisement, with goods on display in local shops. The distributors also shoulder some of the burden of the credit to the customers, and very often they deal with local complaints. All this had to be paid for, and the manufacturer was forced to raise his price to enable him to give the trade discount which returned his price back to the figure that he himself really wanted. The retailers served the manufacturer well, and in return for this they vastly increased his business. But to a certain 821 extent they also required that the manufacturer, having established that price, should see to it—in the interests, I would submit, of the other retailers—that nobody who received this trade discount should be allowed to pass part of it on to their customer.
I know that this is all very simple, and that we have heard it before, but I am suggesting that a large amount of this pressure to maintain these prices did not, in fact, come from the manufacturers. Remember that the manufacturer is happy to sell at trade price. This meant that the manufacturer had to grant this discount to everybody who claimed to be in the trade. I know that there are certain agency agreements, quantity discounts and that sort of thing but, on the whole, anybody claiming to be in the trade succeeded in getting this trade discount. Exactly how that affects the manufacturer I should like to illustrate with a small personal incident that occurred recently. I attempted to place a product on the retail market. I was quite surprised to find how much I had to mark up my price to enable any retailer to be even in the slightest bit interested in my product. Furthermore, I was told the percentage that they would require. This was over quite a wide range of retail shops, not necessarily all of one type: they ranged from (if I may use the phrase) the rather lush store down to the quite small shop. They all wanted very much the same trade discount.
To move to the present situation, there is no doubt that the maintenance of resale prices is already crumbling badly. It is, I know, used as a reason, or an argument, by some that this Bill is entirely unnecessary, because it is crumbling so badly that it will all be gone, anyway, fairly soon. I must say that I strongly disagree. Such parts of it as do exist seem to be most strongly entrenched. I do not know whether anybody has tried in some of these spheres where it is most strongly enforced ever to get anything at a discount, but it is most extraordinarily difficult. However, it can happen. The major cracks that are already appearing in the edifice of maintained resale prices are, first, the phoney trade-in where you are given a grossly excessive price on trading in 822 something against the purchase of a new article. This means that the retailer is using this as a dodge to give away a portion of his trade discount but without actually showing it as such. There are the clubs which exist purely for the benefit of their members to purchase through them goods at wholesale prices, which they hand on either at the wholesale price with full trade discount or minus a very small handling charge.
There are those warehouses which claim that they deal entirely with the trade. If you visit them it is quite surprising the number of buyers' trade cards which seem to have found their way into the hands of private individuals making private purchases. There are some even more enterprising individuals of my acquaintance who have printed their own private order forms describing themselves as general dealers in this and that and, as a result, whenever they wish to make a private purchase they write to the manufacturer on one of these forms and obtain full trade discount. Finally, there is the group of companies which trade direct with the public and eschew all the services of the distributing trade. That is the present situation. Part of it is still very strongly entrenched but with a lot of loopholes.
I should like to consider the effects of the Bill as I personally see them as a small manufacturer. It will finally remove the underpinning of a very large portion of this crumbling structure, allowing most of it to collapse. Nobody likes a change, especially those of more mature age who have built up a nice, tidy, comfortable business, with guaranteed margins. One is very sorry for them, but are they really terribly necessary? Some of them no doubt will be in difficulties. I do not think I would agree with some of those noble Lords who have spoken before me that retailers and small shopholders are in any great danger. I personally am a great customer, if I can put it that way, of the small shop. I think they are most amusing to go into and great fun, and I think that their service is appreciated. They are widely scattered and bring a service to many areas: and as I think someone remarked previously to me, by the time you have paid your bus fare and all the rest of it to get to the cheap price shops you may as well go 823 and have a comfortable chat in the local village shop and pay a penny or two more for the goods.
It has also been argued that a branded article of which a manufacturer is proud, probably justly so, would be degraded if it were used as a loss leader or for other sales gimmicks to encourage custom. I do not think that is a very strong argument, any more than that the name of a reputable motor manufacturer would be degraded, or his product degraded, if one of his cars happened to be offered as a prize in a raffle. I do not think that is anything detrimental to do at all. The people will buy that product because they know of its quality and its established reputation, and if they happen to buy it very cheaply I do not think that that can really be argued as degrading the product.
Another effect of the Bill, as has already been pointed out, might be a lack of service and of outlets. Here again I believe that there are already quite enough provisions in the Bill to cover this contingency. If some outlets disappear I think we shall have to assume that they are the excess outlets which perhaps ought to disappear. But I strongly suspect that the number which disappear will be very small. Also, for special goods which require special provision, I think that here again ample allowance has been made in Clause 5.
On the positive side—I am afraid that all the previous points I have mentioned are negative—the public has quite definitely shown its wish to choose. The consumer public has perhaps grown up since the days—I am not quite sure when they were—when this maintenance of resale prices started, and does not now want a series of national nannies saying, "That is what you should have; don't complain about it; you have got to pay for that service whether or not you want it wherever you buy it". It has now shown its wish to choose and shop for itself. A result of this also will, I think, be a larger direct trading from manufacturers. I think that manufacturers now will be quite happy to deal more in penny packets. Remember, my Lords, that communications and transport have improved vastly over the years and it is now possible for a manufacturer to deal 824 direct with his customers and give them good delivery all over the country.
I should like to touch on a subject which might be slightly contentious. Is the Bill, or is it not, going to lead to cheaper prices? I cannot speak for some of the very specialist goods; no doubt other noble Lords who are more concerned with these will be able to speak on their behalf. But I think there is no doubt that a very wide range of consumer goods will now become very much cheaper. As a small example, again I should like to say what I was told when I first tried to place my product on the retail market. Most retailers advised me that I must include at least 33⅓ per cent. on sales for them. This was about the lowest figure they would consider, and I was expected to back this with national advertising by newspapers, cinemas and television. If I was not prepared to do this, I was expected to give them an even larger percentage. To illustrate this in terms of actual figures, something that I was quite happy to sell out of my works at £50 would automatically have cost the consumer £75. Because I was going for this lowest margin, and therefore was expected to indulge in national advertising at (shall we say, for the sake of argument?) £10 per unit, I must now charge £60, and the poor consumer is going to have to pay £90—nearly twice the sum for which I should have been quite happy to sell the product to him straight from the works. This is going to result, I suggest, in a very large increase in turnover, a large increase in trade. Many people who would have jibbed at having whatever this particular thing was at £90 are now quite happy to purchase it direct for, say, £55—£5 extra for running the department that deals in penny packets. I think there is no doubt that, given time, it will result in a considerable reduction in prices, and not just marginal ones as has been suggested.
I would suggest, too, my Lords, that those retailers who are really giving a service will be able to recoup what that service costs them; but, remember, it will now be the public who will be the judge, and they will pay the extra only for what they get in extra service. I have made one or two personal inquiries among people who come from countries where there is no such thing as maintained resale prices, and it has been quite astounding—I agree it has been a small cross-section—to hear their enthusiasm for free shopping. One 825 of them, I think, put the matter in a nutshell. I will not attempt in your Lordships' House to imitate a Transatlantic accent, but his real comment was, "It's fine for us, but gee! is it hard on those retailers!; It keeps them on their toes, but it's good for them". That, in my view, is what we shall find here; but I believe that the retailers will measure up to that, and will be "on their toes". I do not think the casualties will be anything like the numbers the prophets of doom are complaining about at present. Any measure of real progress, as I consider this is, whether or not it is as big a measure of progress as some noble Lords would like to have (I rather understand it is not; but at any rate it is a step in the right direction), is bound to result in a certain amount of anguish. But I am sure that when your Lordships consider this Bill in Committee, ample consideration will be given to reducing to the minimum possible amount what anguish is caused by this progress.
There is one little point that I should like to raise. I have heard it argued that of course there is a way round this Bill—though I hope that the noble and learned Lord who introduced the Bill will be able to reassure us that there is no substance in this fear. It is said that, in future, trade discount will become agents' discounts, with agents on annual agreements with the manufacturer. I do not know whether or not a manufacturer, without assigning any reason, as is usual in agency agreements, wishing to terminate his agreement with the distributor, can then put that distributor back on to ordinary trade terms because he has ceased to be an agent. Whether that is going to be permissible under the Bill I should not like to say; but there are many learned Lords who will probably be able to clear that matter up.
To conclude, as a manufacturer, a small manufacturer, I commend this Bill very strongly to your Lordships. This may surprise you, because I am one of those who, in theory, are being tackled. But I have tried to show that to my certain knowledge a lot of the pressure for maintained resale prices does not come from the manufacturers, although I agree that it is done through them. Thank you, my Lords, for giving me of your time to make this my maiden speech.
§ 5.15 p.m.
§ BARONESS ELLIOT OF HARWOOD
My Lords, I am sure that I am speaking for everybody in this House when I congratulate the noble Earl, Lord Shannon, on his most expert and excellent maiden speech. We are used in your Lordships' House to having many experts on all kinds of subjects, some of them occasionally very erudite indeed; in fact I have often marvelled at the variety of subjects which we tackle in this House and the number of people who are experts on those subjects. But we have listened to-day to a truly expert speaker, on a subject which he knows really well. We are most indebted to him, and I hope that we shall have the pleasure of hearing the noble Earl on future occasions.
We have also listened to one of Lord Morrison—of Lambeth's inimitable "knockabout" type of speeches, which we all enjoy very much, lecturing us on how we ought to run the Government and the Conservative Party, and what not to do in the last year before an Election. While listening to him I could not help wondering whether he ever thought that we have broken all records. He used the word "classic", I think, in his speech—he referred to a "classic mistake". We have broken all records in our tenure of office since we have won three classic Elections running; and who knows that when, in October, another Election comes along, we may not again win what I would call a classic Election—because we still have to discover on which side of the House Santa Claus is running, and it may well be on our side.
I apologise for addressing your Lordships for a second day running; indeed I think it is very brave of me. But I am doing so simply because this Bill, like the one yesterday, closely affects the consumer, the ordinary citizen, the shopper in this country, whose interests at the present time I have very much at heart. In December, 1963, my council, the Consumer Council, passed a resolution recommending that in the interests of the consumer resale price maintenance should be made illegal. I do not know whether the fact that we passed that resolution had any influence on the President of the Board of Trade, but certainly I think that one of those supporting resolutions helped him to make his very brave decision. We 827 recommended that resale price maintenance should be abolished, and, of course, that safeguards should be written into the Bill.
The reasons my Council believe that resale price maintenance is of importance to the consumer are, first, that it limits competition among retailers; and, secondly, that it restricts the choice of the shopper. With the passage of this Bill, which I welcome very strongly, both those disadvantages will be overcome. Its passage will mean that retailers of many branded goods will be able to compete for custom by offering lower prices, better services or better facilities. I have put those three alternatives deliberately because it is, in fact, in enabling shoppers to be offered a choice between them, that the Bill will be of such assistance to shoppers. Where prices are maintained the shopper has no choice between paying a low price without, say, credit terms or delivery service, and paying a higher price and obtaining these services. This uniformity does not encourage retailers to be enterprising and is not solicitous of the needs and wishes of their customers.
What will be the effect of the Bill upon prices? The noble Lord who has just sat down thought that it would have a considerable effect. I hope he is right. I do not know whether there will be a spectacular reduction, but I am sure there will be a much bigger variety of prices. This, of course, will make calls upon the shrewdness and the common sense of the housewife, which many people think that she lacks. I agree with the noble Earl who said that the housewife no longer wants national nannies: I think he is absolutely right. And I think that too often she has not the opportunity of exercising her wisdom and her powers of choosing because she has not had a full range of goods presented to her in the shops.
The Consumer Council recognised that a ban on resale price maintenance should not be complete and final. It recognised that there might be a case for preserving it for certain goods. The Bill, of course, reflects this, and I think amply so. The noble and learned Lord the Lord Chancellor has clearly stated the five gateways provided in the Bill for appeals against the abolition of resale price maintenance. 828 I think that is sufficient opportunity for anyone who wants to appeal against it.
I should like to congratulate the Government on maintaining in the Bill that the onus of proof in demonstrating that the retail price maintenance agreement is not against the public interest must rest with the manufacturer. I do not for a moment accept the argument that this is tantamount to saying that he is guilty before he is proved innocent. These are not criminal cases. What the Restrictive Practices Court is being asked to do is to test the justification of resale price maintenance in a particular case, against the background that a competitive economy is a healthy and a prosperous one, and in the interests of the consumer.
One of the fears which have been expressed about the abolition of resale price maintenance is that it will lead to a considerable extension of the pernicious practice of phoney double pricing. We are all familiar with cases where one price is struck out and another one is inserted below it, indicating an attractive reduction. But too often the former price may be a fictitious one. If this cannot be tested against a maintained price by the manufacturer, the consumer may be absolutely at sea. But, as I understand it, there is nothing in the Bill which will prevent manufacturers from advertising recommended prices, and these could form a guide. But the practice of double pricing should, I think, be brought within the scope of the Merchandise Marks legislation, and this, indeed, we in the Consumer Council are studying most carefully at the moment, and making recommendations to the Board of Trade in view of their proposed legislation in these matters.
The noble Earl, Lord Shannon, has also referred to the small shopkeeper. I, like him, am a shopper in small shops, and I hope that the small shopkeeper will not be affected nearly so much after the passage of this Bill as at the present moment he thinks he is going to be. I think he is too apprehensive. Nobody—least of all those of us who support the Bill—wants to do anything which will harm the efficient, the useful, the practical and the good small shopkeeper. I think that his interests are, and will be, safeguarded by his own efficiency and his own practical methods and ways of 829 serving the public. Statistics do not indicate that the small shopkeeper has suffered as the result of the virtual disappearance of resale price maintenance in other countries; and in this country; where in the food trade there is virtually no resale price maintenance and the small shopkeeper in this trade has not been grievously injured, there is one curious fact—namely, that the number of independent booksellers, in spite of the fact that there is the Nett Book Agreement to maintain the price of books, has declined noticeably in recent years. I think that the efficient small shopkeeper will always have many supporters and customers among those who value personal service of a willing, informed and friendly kind. Without resale price maintenance he will not have to compete with rival shopkeepers who earn their margins without offering good service.
In conclusion, I therefore welcome the intention of this Bill. I am sure it will help consumers—provided that the procedure for bringing matters before the Courts does not prove too cumbersome and long drawn out. Uncertainty as to whether resale price maintenance will disappear in a particular trade will not help shoppers; provided also that the gateways allow to pass through only those who, in return for their assured margins, offer in quality and service genuine value to the consumer. The Consumer Council congratulate the Government, and is glad indeed that this Bill is, as I hope, going to become law quite soon.
§ 5.27 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, I had some hesitation as to whether to join in this debate to-day, because my views upon the subject of resale price maintenance must be well known to your Lordships, and I may be tempted to repeat some of the things I have said so many times over so many years. As the noble Lord, Lord Shepherd, said, in 1956, from the Opposition Dispatch Box, I fought a strenuous fight to get the principles of this Bill incorporated in the Restrictive Trade Practices Bill, and I failed. The reasons for that your Lordships will find if you read the debate and listen to the speeches of Government spokesmen this afternoon.
I thought that I would trespass upon your Lordships' time to tell you that I 830 wholeheartedly support this Bill. I have lived in the manufacturing and the selling sides of industry all my life. I hope I shall not be thought egotistical if I say that I think I have little to learn about resale selling, its virtues and its vices, and about retail price maintenance. I know of no single factor in the whole of the distributive system of this country that has brought more inefficiency into retail trading than resale price maintenance.
There was a time when I was much in favour of it. This was in the 'twenties, when sellers did not care a "hoot" what they cut their prices to, or what wages they paid to their employees, so long as they could sell below their competitors' prices. But those were the days before the unions effected wages and conditions-of-employment agreements throughout the whole length and breadth of the distributive trades. Where would the prosperity and high standard of living of the ordinary consumer in this country be if it had not been for mass production? When I was first in the motor industry, more years ago than I care to remember, there were hundreds of manufacturers. Now there are six. The result has been the price at which you buy motor cars to-day. As this is true in production, it is true in distribution. One can obtain the benefits of efficient selling and efficient distribution and retailing only by mass selling.
More nonsense has been talked by the pressure groups opposed to this Bill than I ever thought I should hear. It may sound impudent to say so, but I have heard some of it this afternoon. Why all this talk about the harm it will do to the small man? Do you keep a man in existence in retail trade because he is small, or because he is efficient? If he is efficient it does not matter that he is small: he will be there. If he is inefficient he does not deserve to be there, and the sooner he is exterminated the better. We had a debate in this House not long ago on the economic position of the country, and I tried to point out then that our great problem in this country is that we have too few producers and too many sellers. The overheads which productive industry has to carry to-day are enormous. The official figures produced by the Ministry of Labour show that the numbers of those engaged in retail distribution are going up hand over fist, higher 831 than the numbers of productive workers. Why do some of your Lordships bend over backwards and say, "Of course, we cannot see the demise of the small man"? We have got to see a diminution of those engaged in retail distribution by the thousand before we shall ever get down to a really economic system of distribution. As the noble Earl, Lord Shannon, said, we cannot achieve that by manufacturing State nannies. There is one thing that will achieve it, and that is proper, healthy competition. We must bring competition back.
It has been said—and in fact has been said this afternoon—that if one does away with resale price maintenance there may be a diminution in the quality of the goods. What nonsense that is! The only type of goods which resale price maintenance can touch is the branded article. The quality of the branded article is the only way by which the manufacturer can get his image over to the buyer. Do your Lordships think that, because in some shops one will buy a tin of Cadbury's cocoa 2d., 3d. or 6d. cheaper, the quality of Cadbury's cocoa will go down? What nonsense! Or do you think that you will not get the service? The service one gets on any article one buys, whether it is a branded article or not, is not determined by the price; it is determined by the producer's or the retailer's assessment of the value of the goodwill of the buyer. How can one expect to get proper service from small people whose turnover is so tiny that the goods are on their shelves with the dust of months lying upon them? If they are efficient they will exist, and if they are not efficient they will not exist.
Another argument that has been put forward is that the abolition of resale price maintenance may tend to make prices rise. I have never heard anybody argue how that is going to happen, and I should like to hear a logical argument put forward on it. That statement is on all fours with the argument put forward by the pharmaceutical industry, who say that if one takes away price maintenance from drugs and similar items it will have a detrimental effect on the health of the country. What utter nonsense that is! Do they mean to say that the health of the country 832 is determined by how high a price is charged for drugs, and that if one reduces the price of drugs by competition the sick and the ailing will take so much of them that they will die or their health will deteriorate? This is some of the propaganda that has been put about.
I agree with the noble Baroness, Lady Elliot of Harwood, who is the Chairman of the Consumer Council, that there will be a diminution in prices, for the reason that it will take the fetters off those who have wanted to pass on the benefits of their efficiency to the public. I will cite a case. Why should a man with a petrol filling station on a main road, who sells millions of gallons a year, be restricted to selling his customers that petrol at the same price at which it could be bought in a little village at the foot of Snowdon, when he can afford to pass on the benefit of his efficiency owing to the equipment and services he has?
§ LORD LUCAS OF CHILWORTH
The little man does not go out of business. If the little man puts up his filling station at a place where you can conveniently call, you will call; but do you want filling stations outside your front doors because you might have to go a mile or two to get the stuff more cheaply?
The point one has got to look at is the price to the consumer. I heard this afternoon, as I read in the debate of the other place, that the manufacturer's interest was provided for, as well as that of the small wholesaler, the large wholesaler, the large retailer, the small retailer and the multiple trader. But not one word was said about the one who really matters, the consumer. If you want to open in retail trade—and I had a chain of retail businesses myself—nobody owes you a living. You insert yourself as an intermediary between the producer and the consumer, and you are deserving of a reward only if you give a real economic service to the community. That is your only reason for existence—not charity.
One other point I should like to make is in relation to all the nonsense that has been talked about the loss leader. The loss leader is supposed to be the branded 833 article that is put in the shop window at a reduced price to induce the customer to go in and buy something he does not want. I have never known anybody—there may be the odd occasion—who has ever had a loss leader of that description for very many days, because he could not afford to have it. The best loss leader I ever came across was one which this Bill cannot touch. That was the case of a multiple provision store, who advertised for three days before Good Friday that anybody who spent £1 in that store would be given free of charge two dozen hot cross buns. Admittedly, they had the brand of "X" on them, but this Bill cannot touch that. So if one wants to have loss leaders in the future, have them without a branded article. I think somebody said that branded goods are only 30 per cent. to 40 per cent. of the total.
I hope I am in order, but I should like to refer to the maiden speech of the noble Lord who gave a very interesting discourse on the various conditions upon which goods are sold, and on the varied types of discount. You will never change that, my Lords. If I am in the retail trade and I go to the producer of an article, whether it is an electrical appliance, a motor car or anything else, and say to him, "I will purchase 10,000 of your motor cars and I will pay you the money now", do your Lordships really think that I shall be expected to pay the same price as my next door neighbour, who goes and buys one or half a dozen?
Take another aspect of this question. The reason why price maintenance is falling into disrepute is that in recent years it has been used by the producer as a kind of sword of Damocles for the economic discipline of some of his sellers. I can cite many cases where retailers of articles have had a price maintenance agreement which included sanctions, and the producer of the article, the other party to the agreement, has gone behind the retailer's back and cut the price considerably to get the customer away and sell direct. This Bill will do the retail trade, and those who are efficient in the retail trade, a tremendous amount of good. Do not forget, my Lords, that the only people who will stick to a resale price agreement in the majority of trades in this country are those whose consciences will not allow them to break an agreement. But those people are 834 very few, because even in the field of branded articles the most prosperous retail distributors in the country are among the biggest price-cutters.
I apologise to the noble Lord the Minister of State for the fact that, owing to an engagement outside London, I cannot be here when he winds up. But, finally, I should like to congratulate the noble Lord, Lord Shepherd, on what I thought was an excellent speech. I think I know the answer to his problem, but I would rather the noble Lord tells him. There is an answer, and I have no doubt the Minister knows it. I hope the Opposition will support this Bill. I know the co-operative societies do so, and do not forget, my Lords, that the co-operative societies have built up their business on cutting prices by 10 per cent. ever since they started in Rochdale. Why was that? It was because they offered good value for money, and they could afford to be 10 per cent. cheaper than anybody else. That is how they built up their business.
So, I wish this Bill a fair passage through this House. I am grateful to the Government for bringing it in. I do not throw stones at them. I rather adopt their attitude that there is more joy in Heaven over the sinners who have repented. They have lost eight years. They might have done this eight years ago, to their credit and to the benefit of the consumer. For in the last analysis the consumer is going to benefit, and in the last analysis he is the only person who really matters in this question.
§ 5.45 p.m.
§ LORD GARDINER
My Lords, there are so many Members of your Lordships' House, like the noble Lord, Lord Redesdale, and the noble Earl, Lord Shannon, whose speeches we so much enjoyed, who have great experience of trade and commerce, that it would be an impertinence on my part to address your Lordships on that aspect of the Bill. The only justification, I suppose, for having lawyer members of Legislatures, is that they may be able to tell perhaps better than laymen how a particular measure will work out, in practice, on the legal side. It is only from that point of view that I venture to make a few observations, particularly because that aspect of the Bill has not, I think, yet received any consideration.
835 Clause 1 is simple enough. As your Lordships know, Section 25 of the Restrictive Trade Practices Act, 1956, gave manufacturers a power, which they had never had before, to enforce on retailers price maintenance agreements to which those retailers were not a party. There were, of course, those who opposed this at the time, but it was pushed through. The only effect of Clause 1 of this Bill is to repeal Section 25 of that Act, except in exempted cases; and repentance, however late, is naturally to be welcomed.
Clause 5 provides for applications for exemptions to be heard and determined by the Restrictive Practices Court. Clearly, if the Government cannot make up their mind whether there should be any exemptions, or, if so, which they should be, the only thing to do is to push it on to somebody; and if it is to be pushed on to somebody I have no doubt that the Restrictive Practices Court is as good a body on which to push it as any other. But, speaking only for myself, and seeing that the Bill provides for the appointment of three additional High Court Judges for this purpose, I am a little doubtful how far to welcome the increasing practice in the last ten years of employing Her Majesty's Judges to perform tasks other than their ordinary tasks. I have observed that this practice has increased very greatly in the last ten years.
It started, really, when a puisne Judge was sent to head a committee to hear evidence and find out what facts had happened, and what facts had not happened, in Rhodesia and Nyasaland. When he came back and reported what facts he had found, the then learned Attorney General—as my noble and learned friend on the Woolsack will remember—said that he had found the facts all wrong. I should have thought that if a Judge is to be employed for that sort of purpose it ought to be on the footing that all the political Parties agree beforehand that, he having seen and heard the witnesses, his findings of fact will be accepted; otherwise it inevitably means drawing Her Majesty's Judges into matters of Party politics. Since then we have had Judges to report on the morals of Ministers, and Judges taking charge of purely industrial inquiries. I do no more than say that I am myself somewhat doubtful 836 as to whether this increasing practice of employing Her Majesty's Judges, otherwise than on their ordinary work, is desirable. However, the Restrictive Practices Court has, I think, done extremely well. I believe that everybody acknowledges that. I am not quite clear whether Her Majesty's Judges have any special qualifications to determine what are really socio-economic questions, but they have done well and no doubt the new appointees will do the same.
My Lords, the whole of the rest of the Bill is devoted to an answer to the question: having provided that any restrictive trading agreements, so far as resale prices are concerned, are to be void, unless they are for exempted goods, how are we to stop the supplier from cutting off the price-cutting retailer's supplies? I suppose that my own sympathies are perhaps rather more with the small shopkeeper. But one wishes to be fair to everybody, and one has to bear in mind that there are large retailers and that there are, for that matter, comparatively small suppliers. If Parliament decides that something is contrary to the national interest and should be stopped, the ordinary way of doing so is, of course, to say, "You must not do this, and if you do you will be fined £100, or sent to prison"—or whatever is the penalty prescribed. But in this Bill that is not done. As your Lordships appreciate, all this Bill does is to say to the supplier: "If you refuse to supply goods to somebody because he is cutting prices, he can then bring an action against you for an injunction and damages. You have got not only to supply him, but to supply him on certain terms". Because under the Bill the supplier is deemed to be withholding suppliesif he refuses to supply those goods to the dealer except at prices, or on terms or conditions as to credit, discount or other matters,"—whatever they are—which are significantly less favourable"—whatever that means—than those at or on which he normally supplies those goods to other dealers carrying on business in similar circumstances;"—whatever that means. And, if he does supply him, he must not treat himin a manner significantly less favourable than that in which he normally treats other such dealers in respect of times or methods of delivery or other matters arising in the execution of the contract".837 If I have understood this Bill aright, what it says is this. Suppose a retailer goes to a supplier who has never seen him before and says to this supplier, "You will be surprised to hear this, but you are going to supply me with goods because I want the goods for the purposes of price-cutting. if you do not supply me, I am going to 'bring an action against you saying that the reason you would not supply me was because I was a price-cutter; and, even if you do supply me, if you do not supply me on certain terms or conditions as to credit, and so on, I am going to bring an action against you". As your Lordships will observe, the subsection I am speaking about—subsection (3) of Clause 2—assumes that all dealers have what may be called normal terms as to credit, discounts. delivery and so forth. I speak with great deference before those who know so much more of trade and industry than I do, but although, as we all know, some very large corporations have standard forms of contract, there must be many small dealers who ordinarily make contracts ad hoc; and what credit terms are given must, I imagine, depend entirely on the credit-worthiness of the customer.
Every supplier must realise that, if this Bill is passed in the very loose terminology of which it at present consists, he may have an action brought against him if it can be shown that in any respect the terms which he is offering are not what are called "his normal terms ", unless he can show that, in addition to the fact that he knew the retailer was a price-cutter, there wereother grounds which, standing alone, would have led him to withhold those supplies.I do not know what those words mean. One ground, apparently, is not good enough, because it says, "grounds"—and I suppose it means what it says. Suppose the dealer takes the view: "I remember what happened to the small chocolate retailers when they started cutting prices. Most of them ended up in the Bankruptcy Court. I think that if these small retailers are going to cut prices, that is probably what will happen to them. Therefore I do not propose to give them as good a credit as I should if they were not cutting prices". Is that another reason, or is it merely that he is refusing to supply because the retailer is a price-cutter? It is not simply because he is a price-cutter. 838 In one sense he has an additional reason: in another sense he has not.
Quite apart from these difficulties, we then come to Clause 3, which raises the further difficult question of loss leaders. Again, one might have thought that, if the Legislature thought that loss leaders were contrary to the national interest, they would have said, "You must not do this". One might have thought that they would have defined what they meant by a loss leader, and said, "You must not do this, and if you do you will have to pay £100 ", or whatever sum it is. But an extraordinary way, as it seems to me, of trying to stop loss leading is not to make any provision against it but simply to say, "This is to be an additional ground on which a supplier may refuse to supply goods to a price-cutter without finding himself liable to an action for damages." In fact, as drafted, it does not matter whether the retailer is using loss leaders or not. What it depends on is whether the supplier has reasonable cause to believe that he is. The supplier may be in the North of England, and he may be told by somebody in the South, "This retailer in the South of England has, in the last twelve months, been using loss leaders". The question will be: does the judge think he was acting reasonably in believing that?
The words of the subsection are:… has reasonable cause to believe that within the previous twelve months the dealer or any other dealer to whom the dealer supplies goods has been using as loss leaders any goods of the same or a similar description …My Lords, I observe that in the other place nobody was able to ascertain what were "goods of a similar description". The phrase, "goods of the same description" has already caused some trouble in legislation. I suppose whisky is of the same description, whoever makes it; but what are goods which are not of the same but of "a similar" description? Is brandy of a similar description to whisky? Is there a description of goods called stationery? Is ruled foolscap of a similar description to india-rubber? Goodness knows!
Then, this is not enough, because loss leading is defined asa resale of the goods effected by the dealer, not for the purpose of making a profit on the 839 sale of those goods, but for the purpose of attracting to the esstablishment …",and so on. Now anybody would say at once: "What does ' profit' mean?" After all, whether the supplier who is declining to supply goods will be liable to an action or not depends on these things; and the first thing he will say is: "What does ` profit' mean? Does it mean net profit or gross profit?" It must mean one or the other; and in another place, when the Secretary of State for Industry, Trade and Regional Development, and President of the Board of Trade (I am glad to get his title right) was repeatedly asked: "Does this mean net profit or gross profit?", he had to end up by saying that he did not know and that the judge would decide.
My Lords, I do respectfully object to legislation on this footing. There have been occasions when it may have looked as if some particular Judge was rather taking a delight in construing an Act of Parliament as meaning the exact opposite to what Parliament obviously intended, and then saying: "You see how stupidly they draft these things." If I may say so, I have no sympathy with that, because I have always thought the construction of Acts of Parliament ought really to be by partnership between Parliament and the Courts. We do not help the Judges much. In most civilised countries, as your Lordships know, whenever an Act of Parliament is passed there is issued by the Government a Policy Memorandum to explain what the Act is intended to do; and, naturally, the first thing any Judge called on to construe the Act does is to read that. Nobody would encourage Judges to read Hansard, but in this country they are forbidden to try to find out what, in fact, Parliament meant: they can only go by the words. So long as that system continues—and I hope it will not be for long —I suggest that there is some responsibility on the Legislature so to word its legislation that a Judge can tell from the wording, with a reasonable degree of precision, what was the intention of Parliament in passing the legislation.
As your Lordships know, prima facie mens rea is necessary to constitute crime. If a man has not a guilty mind he is not a criminal. But Parliament can say, and in some cases has said, that if you do this act, whether you had a guilty mind 840 or not, and even if it was done inadvertently, it constitutes a criminal offence. But it is extraordinary how many Statutes are passed, as one sees from reading the Debates, without either House considering from beginning to end what they are intending to do in relation to this criminal offence; whether or not they intend mens rea to constitute part of the offence. The point is not discussed at all. The courts must guess at it. Here, "profit" must mean either gross profit or net profit. If the case is one in which it can be shown that the retailer was apparently selling loss leaders at a price at which he would not make a gross profit but which was intended to make a net profit—either that falls within the subsection or it does not. Considering that the question of whether a supplier may have an action for damages brought against him or not may depend entirely on that, then I think he ought to be told.
But then the subsection goes on: "unless …"—because this Bill is full of provisos and "unlesses"; and all this is unless the dealer who is using loss-leaders is doing so at a seasonal or a clearance sale. So, again, whether an action for damages will lie may depend on whether the loss leaders were being used in the course of a seasonal or a clearance sale. I read all that was said at some length over a period of days in another place on this Bill in an attempt to try to find out what the Government, at least, thought a seasonal sale or a clearance sale was. If Christmas cards are sold at Christmas, is that a seasonal sale, or is it only a seasonal sale of Christmas cards if they are sold at Easter? If "seasonal sale" means simply during one of the four seasons of the year, then, of course, all goods are sold during that time. If one deals with summer clothing, is it a seasonal sale if it takes place in the summer, or only when, the summer season being over, the retailer wants to clear his stock?—perhaps that is a clearance sale. Again, there are shops which have clearance sales all the year round. The only concession made on this point was at a later stage when the word "genuine" was put in front of the word "seasonal"; but there is still no attempt to define what is meant by a "seasonal sale" and I still do not know. If on the 23rd December, when a shopkeeper's Christmas cards have gone badly, 841 he decides to reduce them to half-price, is that a seasonal sale or is it a clearance sale? If the right to an action for damages depends on this, it is not treating the smaller people fairly if Parliament does not make plain what it means.
To summarise, my Lords, I would put it in this way. If this Bill is passed in the terminology in which it now exists, while my noble friend Lord Shepherd said he thought the Bill was rather weighted against the wholesaler, my own feeling is that I do not think it would be possible for me to say whether I should be more sorry for the retailer or more sorry for the supplier. You see, a retailer comes to his lawyer and says, "I am, as you know, a small shopkeeper. My overheads are not like Harrods', and I have of ten wanted to sell my goods more cheaply than at these maintained prices; but I have these agreements under which I must maintain prices. But I understand that this new Act makes them void, does it not?" The lawyer says: "Yes, it does". The retailer then says: "Is it all right for me now to go ahead and sell at the prices that I think right? "And the lawyer replies: "That is quite all right, so long as your supplies are not cut off". When the retailer says: "I thought the new Act says that the suppliers are not to cut off the supplies because of price cutting," the lawyer tells him: "It is not as simple as that. The new Act does not say that the supplies have got to be be given you. It says that if the supplier cuts off the supplies, or if anybody whom you do not know but who supplies those goods will not supply you because you are a price-cutter, then you have an action for an injunction and damages." The retailer says, "That is all right." The lawyer however then says to him: "I don't know whether it is as good as it sounds, because there are two kinds of injunctions. Judges are used to granting negative injunctions to stop somebody from doing something; but they cannot grant an injunction to tell somebody that he is not to supply. It would therefore have to be a mandatory injunction ordering the supplier to supply you".
And the lawyer continues: "I do not see any Judge doing that, because, you see, the whole dispute might be as to whether he had offered you what were his usual terms as to credits and 842 discounts, and all that sort of thing. And if a Judge were to grant a mandatory injunction he would have to settle all the terms of the contract, because that is the whole point; and the Judge would have to say what credit is to be given to you and what discounts. I do not see any Judge in practice doing that. I think he will leave you to your action for damages. The difficulty about your action for damages, however, is twofold. First of all, if all the suppliers were to cut off your supplies, you would be bankrupt long before it came into court. And even when it does come the Act is not at all clear about how the damages are to be assessed. If you have been refused by ten different suppliers, and you bring an action against one of them, nobody at the moment knows whether your measure of damages is going to be one-tenth of the goods or all the damage that you say you suffered. I think the safest thing for you to do is to go on maintaining whatever the maintained prices are; except that I must tell you that this Act does one really good thing for retailers. It does give you a great nuisance value; and I think you will find that if you go to a number of suppliers and say to them that you are going to price-cut, and that if they do not supply you you intend to bring an action against them, then, although you are in difficulties under the Act, so are they. You may find that the thing will work out all right."
So much, my Lords, for the retailer. So far as the supplier is concerned, one must say to him: "If you don't like the look of someone who comes to you and says he is a retailer and wants supplies, you are going to be in great difficulty; because the Act is so worded that no barrister or solicitor can tell you whether, if you refuse to supply, or supply only on certain terms, you will or will not be liable to an action for damages. The terminology is so abstruse. You say you have been told that he is a retailer who is using loss leaders; but what does that mean so far as profit is concerned? How do you know he was not doing it during a clearance sale or a seasonal sale, considering that nobody knows what those words mean? I think, on the whole, that if you get a retailer coming to you 843 and saying 'I am going to price-cut and I want supplies,' the cheapest thing for you is to give him £1,000 and tell him to go away. This will save you a lot of trouble. You could then easily make an agreement with him that he will withdraw his request and make no similar request in the next three years in consideration of £1,000. Then he can go along to all the other suppliers and see what happens with them." The lawyer would probably add: "I am afraid, from the point of view of suppliers, that this is a very difficult matter. The only advice I can give is twofold. First of all, I should, if I were you, spend 3d. on a letter to the Registrar of the Restrictive Practices Court applying for exemption for your goods, because that cuts out the whole thing for the time being. You can go on price maintaining like mad' for two or three years before the matter is heard."
These five "gateways" are so wide that I should think anybody would stand a sporting chance of getting the goods through. If they did not get them through, then they would be no worse off at the end of two or three years, except that they would have a pretty stiff bill of costs to pay. Even if the decision is against them, then they are only back to "Square One". There is a very simple way of driving a coach-and-four through the whole of this Bill. If you are a motor manufacturer, all you have to do is to alter the form of agreement with your dealer, to provide that the property is not to pass until it passes to the consumer. You get paid all right by the motor agent, but you call it a deposit. The agreement should say that it is to be treated as a deposit until the property passes to the man who is buying the motor car. That cuts out the whole problem, because this Bill deals only with the old-fashioned form of price maintenance and does not touch the large combine which imposes direct price maintenance, and there is nothing at all in this Bill to touch or stop anybody, so long as he provides that the property does not pass until it reaches the consumer.
I have always been against resale price maintenance. I am not a vast enthusiast, because in relation to the cost of living, 844 I cannot believe that this will have any marked effect on the consumer—at any rate, not until a period of years has elapsed. What people really want is homes at reasonable prices and at reasonable rents, and when one sees what has happened to homes in the last ten years, it is obvious that a measure like this is going to have relatively little effect. I support it, but I suggest that Parliament has some responsibility for so wording legislation that at least lawyers can understand it, even if no one else can, so that they are in a position to give to laymen some rational advice about it. This is a Bill on which I do not think that any lawyer would be morally justified in taking money to advise anybody of what its effect might be. I hope very much, on these grounds, that in these respects we may improve it in Committee.
§ 6.13 p.m.
§ LORD MABANE
My Lords, after that brilliant speech, it seems to me that the real debate on this Bill will be in Committee. I understand that there is almost complete unanimity in the House that the Bill must be read a second time. My reason for intervening briefly in the debate is that, for fifty years, I have been intimately concerned with resale price maintenance, both as a business man and as Parliamentary Secretary to the Ministry of Food for three years during the war, when we could not have operated without price fixation. I should like to try to remove one or two factual errors that have crept in. In the first place, as the noble Lord, Lord Shepherd, said, this is an unnecessary Bill. Its only justification is the unfortunate inclusion in the 1956 Act of a provision enabling manufacturers and suppliers to use the courts to enforce the prices at which their individual products can be sold. And we ought to remember that that was an enactment of the present Government. It is a great misfortune that it was ever there. All this pother about resale price maintenance could have been avoided, if that provision had not been in the 1956 Act, and a simple way of dealing with the problem would be to repeal Section 25 of that Act.
But the point I am mainly concerned about is what really is the present extent of resale price maintenance. It has been 845 much exaggerated, so far as general merchandise is concerned. Let me exclude some special situations. They are motor cars, spirits and some wines, tobacco products, sugar confectionery, drugs and cosmetics and food. None of these is general merchandise. I calculate that over the whole field of general merchandise resale price maintenance affects, not 20 per cent., and certainly not 40 per cent., as the noble and learned Lord the Lord Chancellor said, but barely 5 per cent. of total sales. All the categories that I have excluded are special cases, in some of which resale price maintenance has been abandoned, and we are discussing something which is much less important than represented.
From my experience, I think that this Bill will not result in any real reduction in retail prices. have examined the situation carefully and I think that there may he a reduction of 2 or 3 per cent., not overall, but here and there in particular instances. The effect on the overall retail price index will be negligible and, as has been suggested, might even cause it to rise. There appears to be a popular idea that goods which are the subject of resale price maintenance carry a higher level of gross profit than other merchandise. That is not true. I have examined a wide range of departments in the store group with which I am connected and I find that in general overall retail price maintained merchandise carries a lower, rather than a higher, margin of gross profit than merchandise not subject to resale price maintenance.
The next thing that I would say is that there is not the slightest likelihood that this Bill will force the efficient small traders out of business. They were not forced out of business before the war. They were not forced out of business before 1956. And this Bill really reverts to the position that then existed.
Throughout this debate and the debate in another place, I am surprised that so little has been made of quality and so much has been made of price. If resale price maintenance has a merit, it is that the merchandise carries with it a guarantee of quality. In general, the public are very inexpert as judges of quality and of value, and the established brand name is the best protection for quality. Indeed, if I have any doubt about this Bill. and I have many, it is 846 that it might lead to deterioration in quality. Fifty years of experience has taught me that the usual reply to price cutting is not the lowering of prices, but the lowering of quality. And during those fifty years nothing has been more remarkable or praiseworthy than the general improvement in the quality of merchandise, and for that improvement the Retail Trading Standards Association, founded and supported by the most reputable traders, can take great credit. It would be deplorable if mere price competition were to return us to furniture made out of orange boxes, shoes made out of cardboard, or adulteration of food and drink. My own belief is that quality tells in the end and that the maintenance of quality is the best thing to prevent decrease of trade. This Bill, as I began by saying, will probably be debated in Committee and, I think, improved. It is, in my view, an unimportant Bill. It is likely to have very little effect, and there is no reason to get excited about it. It does not seem to me to merit much support or to deserve any opposition. At this stage, I, for my part at any rate, will give it my full support, in the hope that when it is read a third time it will be a better Bill than it is now.
In conclusion, I should like to make this point. From some things that have been said, it might be supposed that retail distribution in this country is neither competitive nor efficient. That is not true. We have in this House one or two noble Lords, whose names I will not mention, who I think are the most efficient retail distributors in the world; if there are any more efficient businesses, I do not know of them. I would say that retail distribution in this country is not merely efficient, but far the most efficient in the world. We are talking a lot about profit margins. Let us remember that, whereas the average gross margin in this country over the whole range of merchandise is about 27 per cent., in the United States of America, which is sometimes held up to be the very acme of distributive efficiency, it is just under 40 per cent. We have no need to fear the efficiency of retail distribution in this country.
§ 6.22 p.m.
§ LORD PLOWDEN
My Lords, first I must declare an interest. The industrial group of which I am chairman makes, among many other things, a fairly wide 847 range of durable consumer goods which are subject to resale price maintenance. After listening to the noble and learned Lord, Lord Gardiner, I am a somewhat bewildered manufacturer, but consoled by the thought that he says that no lawyer will charge us fees for interpreting the Bill.
I think we can all agree that one of the things we should like to see in this country is a faster rate of economic growth, combined with stable prices, or at least, more stable prices than we have had since 1945. Whether we think we need to improve our export performance, or to have a steady increase in the standard of living of the ordinary man, or to spend more on defence, education and other welfare services, the foundation of them all is the growth of the national income. This will not come about through any miracle or outside intervention; it will come from working harder or more efficiently. It is from this point of view that I want to consider resale price maintenance.
Greater efficiency means, of course, producing and selling goods more cheaply than before. This, in blunt terms, means that those who are not using the national resources as efficiently as they can be used should make way for those who can do better. The simplest way of bringing this about is through the system of competition. It is indeed, the justification of private enterprise that, as long as monopoly and restrictive practices are controlled, the competitive system will give efficiency. Those who have doubts about the virtues of free competition none the less say that they believe in growth and efficiency. Much of their criticism of private enterprise seems to me to amount to saying that it should be made to behave as if it lived in a more competitive system than it actually does.
Of course, the abolition of the power of the manufacturer to compel those who sell his products to adhere to a fixed price will not in itself transform the British economy. To do that would require a major change of attitude by both management and labour. But at the root of the arguments of those who wish to retain resale price maintenance is the attitude that anyone who has an established business has, in some 848 sense, a piece of property and has the right to be protected against those who think they can do the same job more cheaply or more efficiently. We find this attitude in many places: among industrialists who talk about fair competition; among farmers who want the Government to guarantee prices that will give them a living, whether they are efficient or not; and among trade unionists who like to make it difficult for others to enter their trade.
The retailer who supports resale price maintenance hopes by it to be protected from the competition of other retailers, who, because of their lower costs or the lower profit they are prepared to take per pound of sales, sell products at lower margins and at lower prices than those prescribed by the manufacturer. Retailing employs around 10 per cent. of the working population of this country. It is a large industry, and one which can make a considerable contribution to growth. As in other industries, there are economies to be made by having a larger turnover, which enables a more efficient use to be made of the selling staff and also gives opportunities for employing expert buyers, bulk transport and so on.
§ LORD MABANE
My Lords, did the noble Lord say that retailing employs 10 per cent. of the population?
§ LORD PLOWDEN
Ten per cent. of the working population. If, however, the efficient retailer is not allowed to pass on to the consumer the benefits of his efficiency, the competitive process is arrested. Do we really want this to happen? We are told that if resale price maintenance is abolished the small man will be driven out of business, and that this must not be allowed to happen. As the noble Lord, Lord Lucas of Chilworth, said, where should we be to-day if this had been the attitude towards production generally—for instance, the making of chemicals or motor cars? We should still be a backward country. If efficiency requires large units, then we must have them.
However, as many noble Lords have pointed out to-day, in practice the small man is not effectively protected by resale price maintenance. If the more efficient retailer is prevented from passing on his economies through price reductions, he 849 will spend more on other selling devices and thus try to increase his sales in ways where the customer has no choice between lower prices or so-called services; or else the high margins will bring in more retail units, so that, for example, one might have four petrol stations all struggling for a living in one place where one or two could handle the business if the margins had been allowed to be settled by competition. I am quite sure, as indeed many noble Lords have said, that we shall always have large numbers of small local shops, simply because the consumer who needs something in a hurry, or likes to retain a personal relationship with a shopkeeper, wants them.
In the food trades, where resale price maintenance has been practically a dead letter for some years, we have seen the rise of self-service stores and supermarkets, with lower costs and lower prices for the housewife. We have seen independent food shops driven by this competition to improving their own efficiency through the voluntary groups which have centralised buying and deliveries, and who have provided services and advice to the independent store members on the question of stock control, shop layout, and so on. This cannot he a bad thing, but it would hardly have happened if the atmosphere had been less competitive. I submit that the virtual abandonment of resale price maintenance in the food trades has been wholly beneficial. So why should we deny these benefits to those dependent on other types of retailing? The process of innovation, of increasing efficiency, depends in large part on the innovator being free to attract sufficient custom by the offer of lower prices to launch his new techniques.
In conclusion, I want to return to the theme with which I opened. In the last few years there has been a quite abnormal spate of recommendations from committees of inquiry suggesting ways in which we can improve our standard of living and our way of life. In the educational field, Crowther, Robbins and Newsome have become household words, all recommending huge increases in expenditure. In a year or so we shall have Bridget Plowden on primary education. We have had Buchanan in the field of transport. Even I have added my small 850 mite to the many millions recommended by others. Over and above these recommendations, the larger part of which have been accepted by the Government, all political Parties have made further promises. They have said that they will rebuild the slums, schools, hospitals, prisons and roads of this country. Industry, both public and private, is to he encouraged or even compelled to invest more in new plant and equipment, to increase the amount spent on research and development. In addition, they have undertaken to maintain our contribution to the defence of the world. These are only some of the things that we have been promised.
Apart from all this, the ordinary man and woman expect there to be a constantly increasing amount of money in their pocket to enable them to spend more on buying the goods of their choice, Whether it be housing, durable consumer goods, leisure, or what you will. If even a part of these things is to come about in the next five, ten or even twenty years, two things are essential. First, we must get our priorities right and, secondly and most important, there must be a great surge forward in the production of goods and services in this country. This can come about only if there is to be something like a revolution in the efficiency of British industry. One of the prerequisites is to increase competition. I submit that the abolition of resale price maintenance is one step, albeit a very small one, in this direction, and it is for this reason that I support the Bill.
§ 6.34 p.m.
My Lords, this is a very important Bill, and I think we should he very grateful to the noble and learned Lord the Lord Chancellor for his classic exposition of this new legislation. As to whether or not resale price maintenance is desirable or undesirable, I do not propose to express any opinion. I feel myself that this aspect of the matter is one for people in trade and industry who are better qualified to speak upon it than I am myself.
I should like, however, to ask a few elementary questions, and also to draw attention to certain matters in the Bill itself. The first question is an extremely elementary one. Am I right in saying that, after this Bill is passed as an Act of Parliament, the supplier will not be 851 able to institute a scheme of resale price maintenance in respect of goods for the first time? If, indeed, it is open to him to institute such a scheme of resale price maintenance for the first time, then I presume that he will have in the ordinary way to make an application to the Court, and to have his case decided upon by the Restrictive Practices Court. The second question refers to Clause 6 of the Bill, which comes into operation one month after the Act is passed. Within the following three months the supplier who is practising resale price maintenance in relation to any goods may give notice to the Registrar of Restrictive Trading Agreements claiming registration in respect of those goods. I understand that if such notice is not given within a specified time, then the resale price maintenance arrangement in relation to those goods ceases altogether and for all time. If such notice is given, then I presume that a particular resale price maintenance arrangement will come before the Restrictive Practices Court for determination in due course.
Now comes my difficulty. Clause 7 of the Bill makes provision for late applications for exemption. The supplier who has not claimed registration under Clause 6 within the initial period of three months can apply direct to the Restrictive Practices Court for exemption of those goods. But the supplier has not in the first instance claimed registration within the initial period of three months. Therefore, his resale price maintenance arrangement in respect of the goods is dead, and not merely put in cold storage. If that is a correct view of the matter, how can he come along later, under Clause 7, and make an application direct to the Court in respect of an arrangement which is virtually dead?
The last point refers to the exemption of goods, a subject upon which practically all your Lordships have already spoken or will speak in the future. I have in mind particularly Clause 5(3), which I need not read aloud. Where a trade or industry has succeeded in justifying resale price maintenance before the Court under the Restrictive Trade Practices Act, 1956, or has received a satisfactory report on the same subject from the Monopolies Commission, why should that trade or industry have to spend time and money in appearing before the Court 852 again to justify its position under the Resale Prices Bill?
I have in mind the cement industry. Let me say at once that I have no ulterior object in mentioning this industry. The cement industry made an application to the Restrictive Practices Court, who published a full, interesting and comprehensive judgment under the 1956 Act. In effect, they held that resale price maintenance was justifiable in the cement industry. Why should the cement industry—and I mention it as only one of many—have to go through the whole business of making an application to the Court again under the Resale Prices Bill? The trouble is that Her Majesty's Government have made up their minds on this point and, therefore, nothing that I say will have the slightest effect on them at all. Nevertheless, I am very grateful to them for listening to us so carefully, and I have no doubt that in the Committee stage a certain number of justifiable improvements will be made to this measure.
§ 6.40 p.m.
§ LORD HUGHES
My Lords, I have often heard it said that in debates in your Lordships' House we always have the opportunity of hearing experts. That has been amply borne out to-day. It has been anything but enlightening to me, coming to a consideration of this subject only in the simple faith that anything that kept prices up to the consumer higher than they otherwise need be was a bad thing, because we have had the expert talking from the point of view of the manufacturer, the expert talking from the point of view of the merchant, and the expert talking from the point of view of the multiple retailer. And, to say the least, their statistics did not always arrive at the same conclusion. It brought home to me very forcibly the merit of a quotation which I obtained from an American friend the other day on the subject of statistics; that a statistician is a man who can prove that a straight line is the shortest distance from an erroneous premise to a foregone conclusion.
And, my Lords, if I had had any reason for speaking merely to indicate that because I thought that the abolition of resale price maintenance was in itself a good thing, not just something I had acquired as a matter of electoral tactics in the year 1964 but something I have believed for a very long time, and if, in 853 my innocence, I thought that this Bill was to be the vehicle to help bring about the things in which I believe, then that faith was most rudely shattered by my noble and learned friend, Lord Gardiner. In the hope that the wonderful speech which he made in drawing attention to the defects of the Bill will be at the disposal of the House and will be accepted in the House at the next stage of the Bill, so that the object which he, the rest of my noble friends and I on these Benches have in mind—that of making goods as cheap as possible to the consumer, consistent with the giving of a fair living to those who are necessarily engaged in the production and distribution of these goods—can be accomplished; and in the hope that he will be encouraged to amend the Bill, and that his advice will be accepted by those who have the power to change the Bill, I give it on Second Reading my somewhat diminished support.
§ 6.42 p.m.
§ LORD SINCLAIR OF CLEEVE
My Lords, too, must declare an interest in that I have been throughout most of my life connected with an industry in which resale price maintenance has operated for many years. I do not, however, propose to talk particularly about the tobacco industry but rather on some of the more general aspects of this Bill. In doing so I think it is likely that I may strike a slightly discordant note in that I cannot wholeheartedly praise this Bill as so many people have done.
It is easy to appreciate, and to sympathise with, the Government's desire to prevent harmful restriction of trade and to promote full competition, but it is unfair, as I shall hope to show, to label resale price maintenance in general as contrary to the public interest. It is true that in certain circumstances it could operate to the public detriment; but it need not do so, and in certain cases I am quite confident that it does not. I agree with the noble Lord, Lord Shepherd, that in some respects the Bill as it stands is heavily weighted against the manufacturer. The respects that seem to me to stand out in this regard are its generalisation and the onus of proof in the sense of what, under the Bill, the manufacturer has to prove and how he has to prove it. 854 I could have wished that the noble and learned Lord, Lord Gardiner, in his brilliant exposition of the difficulties of terminology of the Bill could have gone on to give an analysis of this subject of onus of proof as it stands in the Bill, but I shall try to explain what this seems to me to mean in practice.
I think that under the Bill the manufacturer who believes that the system as he operates it does not prejudice the public interest has to prove that if it is discontinued certain specific things will happen that will be to the detriment of the public; in other words, he must prove that the public interest will be positively harmed by the cessation of this practice. This means that he must prove what will happen if resale price maintenance is discontinued under the conditions that are to prevail in the future. That seems to me to come very near to a requirement to prove what these conditions in the future are going to be. It is difficult to see how any manufacturer can do more than produce a long line of expert witnesses, men experienced in the trade, who can express opinions—for this can be only a matter of opinion, and not one of fact—of what results they think are likely to occur. But that is hardly proof, in the ordinary sense of the term.
Would it not be far better, my Lords, that the Bill should provide that, if the Government feel that in a particular trade the system operates against the public interest, then the reasons for that conclusion should be stated? The manufacturers concerned can then contest the claim, if they think fit, and submit their reasons for the consideration of the Court. I recognise, of course, that this point of view has already been argued in another place. It was reflected, at least in part, in an Amendment designed to impose on the Board of Trade the obligation to select the cases to be brought before the Court. That Amendment was not accepted. Nevertheless, I feel that there are grounds for believing that the terms in which, under the Bill as it stands, the onus of proof is placed on the manufacturer, present practical difficulties which are insufficiently appreciated and, indeed, unreasonable. 855 If I may, I should like to put this in another way. "Public interest" is difficult enough to define with precision on the basis of actual facts. To prove how it would be affected under hypothetical conditions in the future is virtually impossible. That is what the manufacturer is asked to do. It would surely be more reasonable and more sensible if the trader who has been operating a system of resale price maintenance under the law as it stands—that is, with the rights of individual enforcement, but without the right of participation in collective enforcement—were required to show that the practice as operated is not, and is not likely to be, against the public interest, rather than to require him to prove that its withdrawal would be against the public interest. I hope that the noble Baroness, Lady Elliot of Harwood, will realise that I am not asking that the manufacturer should not be required to do something to prove his case, but I think that under the Bill as it stands he is being asked to do something which is unreasonable and impossible.
Despite the Amendment to Clause 1 that was made in another place, the Bill as it stands still carries the implication that a supplier who attaches resale conditions to his own goods is guilty of doing something against the public interest, unless he can prove that it is positively in the public interest. That is without any regard to whether or not the price which is maintained is or is not reasonable in itself.
There is, of course, under Clause 5(3) a provision which would seem to frank agreements such as those in the book trade and the cement industry, to which the noble Lord, Lord Meston, referred a moment ago, that would seem to be a perfectly good "gateway" for the cement industry, inasmuch as it provides that the Restrictive Trade Practices Court may treat as conclusive any finding of fact made in respect of goods which have previously been the subject of proceedings before that Court, and enjoins them so to find unless prima facie evidence is given of a material change in their relevant circumstances since those proceedings took place. In such cases, of course, what I have been saying about onus of proof would not apply. 856 Incidentally, I might here remind your Lordships that action to justify a practice under this Act would be a lengthy, laborious and expensive proceeding, and it would seem (although this is a point which may well be considered on Committee stage) that there is a good case for including with the provisions to which I have just referred authority to the Court, where the circumstances justify it, to treat as conclusive a conclusion of the Monopolies Commission on the facts as examined by them in relation to a particular trade.
In relation to the general point of presumption of guilt unless innocence is proved, I think it is a mistake to generalise; and to illustrate that point I should like to bring to your Lordships' attention two examples, of different types of case. The first concerns an article in general demand, sold throughout the country in small units, where there are arrangements applicable to all such goods sold by manufacturers in a particular industry whereby the distributors' margins are effectively kept within reasonable bounds. The result of that is that the public can be sure of obtaining the same article at the same price wherever it is purchased; and they know that, by and large, the distributor is not making an unreasonable profit. The competition between the prices of brands of different manufacturers is, of course, entirely unrestricted. The manufacturer has a perfect right to fix whatever price he likes for his own goods. Tobacco, newspapers and some confectionery are examples of this type of case, and it so happens that sales of these articles together form the basic means of livelihood of a large number of small shopkeepers whose existence serves the convenience of the public. I fail to find any convincing evidence that concentration of the sales of these articles in the hands of fewer and larger companies would effect any substantial economies or produce advantages to the public which would outweigh the convenience of the existing system.
My second example is another type of case, of which the shoe trade, the clothing trade and the furniture trade are examples—I believe the only examples. In these trades the non-fixed-price goods predominate and, in every type and grade of the commodity in question, are in severe and unrestricted competition with 857 a relatively small sector of price- maintained goods. I think the noble Lord, Lord Mabane had in mind one of these cases. I have not figures for the clothing and furniture trades, but it is estimated by the British Shoe Manufacturers' Federation that the proportion of the shoe trade that is price-maintained does not exceed 25 per cent., and at the present time is nearer 20 per cent. This presents a very interesting example.
The case for the abolition of resale price maintenance seems to be based largely on the theory that under this system the margins to the distributor are artificially or unnecessarily high; that the efficient retailer is prevented from exploiting his efficiency; that the incompetent or high-cost distributor is "feather-bedded"; and that consequently the public is being prejudiced. If such a theory were generally valid, then in a situation such as exists in the shoe trade surely the fixed-price minority must, in the end, be defeated by the free-price majority and the price-maintained manufacturers will either go out of business or abandon their practice altogether. But the facts are quite different. The facts are that in shoes, first, the price-maintained sector is steadily gaining ground at the expense of the other; and, secondly, that the margins allowed by manufacturers of price-maintained footwear are appreciably lower (and in the case of the most widely selling make of men's shoes, I understand, very much lower) than the margins normally added by the retailer to shoes of which he is free to fix the price himself.
Here, then, is a case where price maintenance certainly tends to keep prices down in at least one section of the trade. Yet so long as the main provisions of this Bill as regards onus of proof stand as they are, it requires a very considerable stretching of the meaning of words before any of the "gateways" in Clause 5 could be held to provide the way out for the shoe manufacturer who fixed resale prices for his goods. The nearest approach to a relevant "gateway" is subsection (2)(c), but to get through that the manufacturer has to prove that if his practice were discontinued the retail prices of shoes "in general and in the long run"—that is to say, not only his shoes but all shoes— 858 would be increased to the detriment of the public.
I trust my Lords that these examples may be considered relevant. In the light of them, and of the more general argument that I have endeavoured to develop, I hope that when this Bill comes to Committee in your Lordships' House the possible ill-effects of the generalisation and presumption of guilt in conjunction with the practical difficulties inherent in the provisions relating to the onus of proof will be very carefully examined.
§ 6.57 p.m.
§ LORD SAINSBURY
My Lords, once more I must declare an interest as a retailer, though in point of fact this interest is a very minute one, as the proportion of price-maintained goods sold by my firm is negligible. I have been an opponent of resale price maintenance for many years, an opponent in principle. I gave evidence to this effect to the Lloyd Jacob Committee. Therefore I speak in support of the Bill, although I am critical of some of the clauses and regretful that this legislation is not part of a much wider attack on all forms of restrictive practices.
I am against resale price maintenance in principle because I believe that price competition in retailing is in the public interest. It has always struck me as socially unjustifiable and economically unsound that a customer who gets credit, home delivery, plus personal service should pay the same price as a customer who goes into a store, pays cash on the nail and takes the particular article away with her. It is obvious that Harrod's overheads are higher than those of a street trader in Petticoat Lane. It is right, in my view, that competition, which takes many forms, should result in a variety of prices for the same product, dependent upon where it is bought and how much service is attached to it. Resale price maintenance eliminates price competition at the retailing stage and introduces a uniform price for a particular product in all shops in the country.
In my experience, the manufacturer who enforces resale price maintenance is inclined to set the maintained price at a level to maximise the number of retail outlets for his products; in other words, he fixes a price that leaves a margin of profit even for the retailer with a very 859 small turnover. And may 1 here underline the fact that high costs are not always due to the amount of service given? They are sometimes due to the uneconomic turnover of the retail unit. These inefficient shops are, in fact, subsidised by resale price maintenance at the expense of the consumer. Low-cost retailers are unable to cut their prices on price-maintained products and so they are unable to pass on the benefit of their efficiency to the public. Why should a retailer make nearly 44 per cent. profit on kitchen utensils if he would be prepared to take 10 per cent less?
Another aspect of this question is that as efficient retailers, unable to use price appeal, cannot expand their business at the expense of their inefficient rivals, the structure of distribution becomes ossified. Retail innovations, like discount houses, are discouraged in favour of the orthodox old-fashioned store. In my opinion, the result of this situation is higher than necessary retail prices and an inefficient, costly retailing network.
Turning to the Bill itself, I should like to make a brief comment on the loss leader clause. Loss leading is defined as selling goods, not for the purpose of making profit but of attracting customers or to advertise the business of the dealer. I think that considerable problems will arise from this clause. The legal aspect has been dealt with in his usual brilliant manner by my noble and learned friend Lord Gardiner. Let me quote, on a different plane, the Financial Times on this clause:Such a definition is too broad for comfort and also displays a considerable lack of grasp of business practice—almost every seller aims to tempt buyers by offering some lines at little profit, whether it is batteries in new cars, cheap offers of sugar, or attractive supplements in newspapers.In conclusion, I should like to refer to the fate of the small retailer after the abolition of resale price maintenance. I have every reason to be sensitive about it because my grandparents were small shopkeepers. In my opinion, it is a gross exaggeration to say that the abolition of resale price maintenance will mean the doom of the small private business. In the grocery trade, as has been said by many speakers in this debate, resale price maintenance virtually disappeared 860 six or seven years ago. In spite of this, the small grocer has shown remarkable resilience in maintaining his position, and still does about half the total trade. In my opinion, however, the abolition of resale price maintenance will lead to the disappearance of some of the least efficient small shops in due course, but for others it will act as an incentive to improve their efficiency. The private retailer, with his customers "round the corner", compared with the multiple trader in the High Street, will always have a role to play. With his special services he will continue to be an essential part of our distributive system. It is because I am sure of that from my long experience of the retail trade that I support this Bill.
§ 7.5 p.m.
§ LORD SILKIN
My Lords, the Government can have little ground for satisfaction in the debate which is now coming to an end. It is true that they have not been faced with an open revolt to-day. It is true that a number of noble Lords have spoken strongly in favour of the Bill. It is equally true that a number of others have spoken against the Bill. The opposition to the Bill comes from all quarters. It is not merely from those who are wholesalers; it comes also from the people who are engaged in the retail trade. So, while there is nobody here to-day who is proposing to oppose the Second Reading—to that extent, the Government are to be congratulated on not being faced with an open revolt, as they were in another place—nevertheless, feel that they have little to congratulate themselves about on this debate.
Broadly speaking, we on this side of the House are in favour of the principle of the Bill. We believe it is right, and we are prepared to give credit to the Government for their intentions in introducing a Bill which puts an end to resale price maintenance. But intentions are one thing, and the carrying out of those intentions is another. If the instrument by which they propose to carry out those intentions is defective, then it may well be that the later position will be worse than the first.
I do not propose myself to cover the ground that my noble and learned friend Lord Gardiner covered—he did it much more ably and much more brilliantly than I possibly could—but one thing 861 strikes me immediately, namely, that it is open to every manufacturer or distributor, at the end of four months, to make a claim for exemption and then take his turn for a hearing, and possibly carry the thing beyond the Registrar's decision to the Court, thereby holding up the purpose of the Bill—my noble and learned friend Lord Gardiner said for two years, but it could be for much longer. In the meantime, price maintenance is continued. It may well be many years, and different periods in different trades, before we have a uniform system without price maintenance.
If that is not enough, my noble and learned friend drew attention to a number of other matters in the Bill which make it quite an unsuitable instrument for carrying out the Government's intentions, and feel we ought to hear quite definitely from the noble Lord who is going to reply whether these criticisms of the Bill are justified. There were seven days of debate in Committee in another place. Many of these points were put, arid a number of others which my noble and learned friend had not got time to put before the House—such as, what are "findings of fact" in another hearing which may have taken place some years ago? And, how far it is justifiable that these findings of fact, if they can be identified and isolated from a judgment given some years ago, can properly be made binding in the hearing of a flatter years later? These are all matters which no doubt will be heard of again.
I should like to ask whether the criticisms which have been made by my noble and learned friend Lord Gardiner are justified. Secondly, if they are justified, are they considered to be fundamental to the Bill? It looks very much as if they are, because nothing can he worse than introducing legislation which is uncertain in its effects and liable to cause a large amount of litigation. I have great sympathy with this point particularly because only yesterday I had to raise the same question on a Government Amendment to the Diplomatic Privileges Bill—an Amendment which, I might say, was quite unintelligible to anybody, including the mover of the Amendment who had to read from a long brief to explain it. I am bound to say I did not follow even 862 the explanation, but I am sure that I had the whole House with me on that occasion in saying that legislation is of no value unless it is clear and unambiguous.
It seems to me that the criticisms of my noble and learned friend this afternoon were even stronger; that many of the matters are not merely unintelligible, but quite ambiguous and almost impossible to interpret. If these criticisms really are fundamental, then is the Bill capable of being made workable? With regret, I must say that I doubt it, unless the Bill is completely transformed on the lines suggested—namely, that if you want to prohibit something, then prohibit it in straight-forward terms and make it an offence for anybody to attempt to override it.
The noble Lord, Lord Mabane, said, quite rightly, that the crux of this Bill will be dealt with in Committee. We all of us, to a greater or less degree, are prepared to give it a Second Reading, but if the Bill cannot be improved in Committee so as to be made workable, then I am bound to say that some of us may take a different view when we reach the last stage of the Bill. I, for my part, and I am sure many other noble Lords, will not be prepared to let go through this House a Bill which is unworkable or unintelligible or ambiguous, or one which is going to create, as somebody has said, a lawyer's paradise. We must therefore reserve ourselves for the later stages of the Bill.
I am not at this stage, your Lordships having heard so many of the views of trade and industry, going to attempt to add to what has been said, and it is only on this aspect of the Bill that I am choosing to say a few words. I want to warn the Minister most solemnly that, unless this Bill emerges in a completely different form in the later stages, unless it is made a businesslike, workable and efficient measure, then whatever the intentions of the Government may be at the present time, we on this side, and I am sure many noble Lords on all sides of the House, will not be prepared to treat it with the indulgence with which we are treating it this afternoon.
§ 7.15 p.m.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD DRUMALBYN)
My Lords, I am bound to say that in the 863 debate to-day, in the broad terms in which the measure has been discussed, I have not seen much evidence that the terms of this Bill are unintelligible in their broad intentions. One noble Lord (I believe it was the noble Lord, Lord Mabane) said that this was an unimportant Bill. At least it can be said that there have been a great many important speakers on it and the weight of debate has been very heavy indeed. Of course there have been experts on all sides, commercial, industrial and legal, and, as usual, the experts do not agree. I should like to say this about the intelligibility and workability of the Bill. In so far as the noble Lord, Lord Gardiner, dealt with the wording of the Bill from a legal point of view, this is a matter we shall want properly to examine and discuss in Committee. The House was extremely grateful to him for his speech to-day; he himself seemed to enjoy it and the House as a whole enjoyed it, too. But we recognise that he was making serious criticisms, and we are grateful that he has given us advance notice of the points which he obviously intends to raise in Committee.
I should like at an early stage to offer my congratulations to the two maiden speakers. The noble Lord, Lord Redesdale, made an exceptionally well-informed and well-argued speech. Personally, I feel that there is a good deal in his plea for the limitation of preferential discounts. This is a matter in which this Bill may easily help. It is a matter for the manufacturers themselves: it is for them to convince their customers that they are being fair to all. I hope that in the new climate which this Bill will produce there will be changes along the lines he would like to see. Then we had an interesting speech from the noble Earl, Lord Shannon, in which he spoke from direct experience and with great confidence, and, if I may so, spoke extremely good sense. What we on this side of the House welcomed was the "bullish" view he took of this Bill and its effect. Some have expressed the view that this Bill is not going to make much difference to consumer prices. He took a different view. We do not know where the final result will lie, but at any rate it is nice that when a noble Lord makes his first speech in this House he should put us in such good heart. I hope that we shall 864 listen often to both noble Lords whose maiden speeches we have heard to-day.
Most people agree that it is right to put one manufacturer in competition with another by refusing to allow them to agree together on consumer prices except where the Restrictive Practices Court says it is in the public interest. Yet if each manufacturer is permitted to fix a single retail price for his goods, the effect for the consumer, as my noble and learned friend the Lord Chancellor said, is the same as if retailers had agreed among themselves on a single retail price. As the noble Earl, Lord Shannon, said, this is to a large extent in effect what has happened, since it is often from the retailers that the pressure for resale price maintenance comes. If it is right to insist on price competition between producers, the broad and general principle which the Government adopt is that it surely must be right to insist on it between distributors also.
We have been asked, quite properly, why it was we did not take this step in 1956—as the noble Lord, Lord Lucas of Chilworth, put it, we have lost eight years. With respect, I do not think that is so. There has been a great change indeed in conditions since the immediate post-war decade. By that time ten years had gone past. Now, of course, another ten years have gone past. It took a long time to get away from the general circumstances of the allocation of supplies, the difficulty of allowing newcomers into an industry, fixed prices, and all the rest of it. But there has been a marked change in public opinion, a change which I think has been reflected in the sweeping away of resale price maintenance in the grocery trade, and shoppers seem to like it. As the noble Earl, Lord Shannon, said, the public has shown its wish to choose.
I took note of the sympathy with small shops which the noble Lord, Lord Morrison of Lambeth, expressed; but speaker after speaker in the debate has said that they do not think this Bill will adversely affect the small shops to any great extent, if at all. On the other hand, speakers have readily recognised that if small shops are inefficient, if they are not serving the needs of the public, then they have not a justification for existence. But, by and large, where there are human needs to be met they will be met; and the kind of human needs 865 that have been referred to are those of old age, the difficulty of getting to shops, the need to have shops close, and the fact that people like to have a shop close and like to patronise it in the country districts, and all the rest of it.
There is another factor here, and that is that while resale price maintenance has practically been swept away in the grocery trade, we may argue about the extent of consumer purchases as a whole that are covered by the practice at the present time. Whatever it may be, it seems to be fairly clear that resale price maintenance outside the grocery trade has been gaining in recent years. It certainly seems odd that a practice that was designed to meet conditions of the 1930s, with the slow emergence from the depression at the end of the 1920s, is actually increasing in so many fields today when circumstances are so entirely different. This is certainly not a healthy development. As has been said by the noble Lord, Lord Plowden, and other noble Lords, it represents a restriction of trade; it represents a serious impediment to consumer choice as to the services he wants and the prices he should pay, as my noble friend Lady Elliot of Harwood also said; and it restricts the freedom of distributors to compete on prices, and pass on to consumers any savings they can effect through greater efficiency, whether in purchasing, selling, stocking or the like.
There is another point that I would make to your Lordships. In my experience, towards the end of last year the controversy that had been running for some time seemed to he breeding uncertainty in industry, and many people said to me, "The Government must decide one way or the other on this matter". Whatever the noble Lord, Lord Morrison of Lambeth, may say, I believe that great credit is due to the Government for the fact that, although it was a difficult time to make the decision, they recognised this need and have now made the decision. There cannot surely be any doubt what the decision should be. The best use must be made of the nation's resources in manpower. In this connection, it is perhaps significant hat the numbers engaged in distribution have been increasing over the past four years up to June, 1963, and they increased more in distribution than in manufacturing. We 866 do not believe that it would be right to perpetuate a system which prevents those who can make better use than others of such resources from obtaining their just reward in a competitive economy.
There is, of course, nothing doctrinaire about the Government's approach to this matter. In this connection I was puzzled by what the noble Lord, Lord Silkin, said. He picked up one of the points which the noble Lord, Lord Gardiner, threw out, I thought perhaps a little light-heartedly. Is it seriously suggested that we should make resale price maintenance a criminal offence and have exemptions from the criminal offence? if not, are we not to have the exemptions? Certainly, for our part we believe that while, as a system, resale price maintenance must be presumed to be against the public interest, it must be recognised that there may be circumstances in which maintained prices produce, on balance, a beneficial result; and that is why we do not have any interdiction of resale price maintenance in all circumstances. Instead, as the House knows, the Bill provides in Clause 5 criteria to be used by the Restrictive Practices Court in considering whether such circumstances exist in any particular case.
The noble Lord, Lord Sinclair of Cleeve, argued cogently that there ought not to be specific criteria, but that it should be possible for manufacturers or suppliers who sought exemption for their goods to make a general case that the exemption was in the public interest. We do not believe that that is the right course. We think that once you have said—and this is rather different from the 1956 Act—that a system is presumed to be against the public interest, then specific criteria have to be laid down for the court to judge whether or not an exemption should be made.
The noble and learned Lord, Lord Gardiner, made it fairly clear that we are, perhaps, laying if not unusual, at least comparatively new, burdens on the Judiciary in this respect. But surely it is much easier for the Judiciary to judge of these matters if specific criteria are laid down. With respect, I think it would make it much more difficult for them if the matter were left entirely to them to judge of what is, as Lord Gardiner said, largely a socio-economic problem. Each 867 of the grounds of exemption, as my noble and learned friend the Lord Chancellor said, is related to one of the arguments commonly advanced to justify resale price maintenance. I need not go over them again, but where it is claimed that such adverse effects would result it seems eminently reasonable to allow evidence of them to be weighed in the Restrictive Practices Court; and that is what the grounds of exemption in Clause 5 are intended to permit. Equally, it is reasonable that before the Court can make an exemption order it will have to be satisfied that the resulting detriment to the public outweighs any detriment which the public might suffer from the continuance of resale price maintenance.
The noble Lord, Lord Meston, and one other noble Lord, raised the question of whether those goods should be excluded where the Restrictive Practices Court has already approved a collective agreement involving resale price maintenance. He quoted the particular case of the Cement Agreement and there is, also, of course, the publishers' Net Book Agreement. I want to ask whether that would really make sense. The Bill, after all, provides in the first place judicial machinery for deciding whether individual resale price maintenance should be permitted to continue in particular classes of goods. Secondly, it lays down the grounds of exemption for the Court to apply in those cases. But having laid down the principles, surely Parliament should leave it to the Court to say in any particular case whether the goods should be exempted or not.
Can it really be said that decisions of the Restrictive Practices Court, in cases referred under the 1956 Act, give ground for exemption to those goods entirely from the scope of the Bill? After all, those decisions were taken at a time when individual resale price maintenance was a legitimate commercial practice. They were taken with regard to collective agreements and in relation to criteria in the 1956 Act for considering collective agreements. Indeed, in the cement case resale price maintenance was only a comparatively minor element in the agreement. Only the Court can say whether individual resale price maintenance in these trades falls within the grounds of exemption. Certainly, some of the considerations which influenced 868 the Court's decision in the collective agreements—for example, lower prices—may be relevant under the grounds of exemption in Clause 5. Therefore, we are convinced that the exemption provisions of the Bill must apply uniformly to all goods; but we recognise that, in any case where the issues to be proved are in fact the same issues on which the parties have already satisfied the Court, provision should be made to save them unnecessary trouble and expense, and that is why we amended the Bill in another place to provide that any finding of fact in proceedings under the 1956 Act is to be treated as conclusive in exemption proceedings under the Bill, unless there is shown to have been a material change in the relevant circumstances since the previous decision. We have also provided for the award of costs where an issue is determined in favour of the party seeking exemption—that is, against the Registrar and where the issue substantially corresponds with an issue determined in their favour in proceedings under the 1956 Act.
The Bill recognises that it would not be reasonable to exempt or refuse to exempt particular goods for all time. Circumstances may change; and that is why the Bill provides that, subject to the leave of the Court, upon an application by the Registrar or by any supplier of the goods in question, or any trade association whose members consist of or include suppliers of such goods, the Court is to review the decision it has previously made if the relevant circumstances have materially changed. It would not have been reasonable to exclude particular goods from the possibility of such revision no matter what the previous circumstances were. I would say that, if this argument is valid where proceedings before the Restrictive Practices Court under the 1956 Act are concerned, surely it is at least as valid where the goods have already come under the scrutiny of the Monopolies Commission. It is indeed hard to see how we could treat manufacturers whose activities as regards individual price maintenance, among other matters, had been considered by the Monopolies Commission more favourably than manufacturers whose collective agreements, including individual price maintenance, had been referred to the Restrictive Practices Court. 869 We have to remember that the Monopolies Commission reached their conclusions at a time when resale price maintenance was not unlawful. I need not say more about that at present. The noble Lord, Lord Sinclair of Cleeve, has kindly indicated to me that he intends to table an Amendment on this subject, and I should like to thank him for the advance notice he has given me.
Having dealt with the reasons for the Bill and the grounds of exemption, I should just like to say something about what the Bill forbids and allows. This is a matter with which the noble Lord who opened the debate, Lord Shepherd, dealt. The Bill, as the House knows, makes it unlawful for a supplier to insert in a contract, or to bring pressure on a dealer to insert in a contract, a term or condition providing for minimum prices, and it makes any such term or condition void. It also makes it unlawful to require an undertaking to maintain minimum prices; and it makes it unlawful to notify to dealers or publish, whether on the goods themselves, in a price list or in an advertisement, a price stated or calculated to be understood as the minimum price to be charged.
Once the Bill comes into effect—and this is a point that has not, perhaps, been dealt with very much in the course of the passage of the Bill—this will not mean that a price cannot be printed on the goods or that a price list cannot be used. Obviously, in the absence of any action or intention to prevent the goods from being sold at less than the price marked or listed, that cannot be considered to have been "calculated to be understood" as the minimum price. It is not improbable, however, that that price will in fact be treated as the maximum price, since nobody is likely to pay more than the price marked on the goods, except possibly in the very remotest parts of the country.
In specifically allowing prices to be recommended by suppliers, the Government are taking a much more practical view than the Labour Party did in its White Paper of 1951. In that Paper they announced their intention of making any individual indication of a retail price illegal unless it were clearly stated to be a maximum price. I am sure the noble Lord, Lord Shepherd, will agree with me that salesmen know 870 very well that when they are trying to introduce a new line to an independent retailer they are commonly asked the price at which it should be sold, whether or not it is intended to be a fixed price. There is no way of stopping this, and there is no reason to try. The things to be stopped are the enforcement of a fixed price by withholding supplies, by discrimination or by legal action, and also the publishing of prices in such a way as to lead people to believe that they are minimum prices.
In order to stop resale price maintenance, obviously the first thing to do is to deprive a supplier of goods not exempted from the Bill of the right to enforce a condition for maintaining minimum prices either against a person with whom he is in direct contractual relationship or, under Section 25 of the 1956 Act, against a third party who acquires the goods with notice of the condition.
There is another and very common way of enforcing resale price maintenance, and that is to withhold or threaten to withhold supplies from a dealer who is himself not observing the condition or whose retail customers are not observing the condition. The next thing to do, therefore—and I think this is quite inevitable—is to stop supplies being withheld on the ground that the minimum price is not being observed or will not be observed. The noble Lord, Lord Shepherd, said that in his view the 1956 Act was weighted against the retailer—I do not really know why he should have thought that, because this seems to be what the retailers are at present trying to defend—whereas this Bill will be weighted against the supplier. He was afraid that we should be creating a willing buyer but an unwilling seller. I want to make it quite clear that the Government are anxious not to interfere with the normal working of commerce any more than is necessary to stop the practice of resale price maintenance. But if it is made unlawful to withhold supplies from anyone because he is selling below a recommended price, and if the supplier nevertheless wants to punish a person who is doing so, the supplier will obviously not admit that the reason for withholding supplies is that the dealer is selling below that price. I think that is quite clear; and the somewhat complicated provisions of Clause 2 and subsection (4) of Clause 4 871 are designed—ineffectively, the noble Lord, Lord Gardiner, thinks—to prevent suppliers from evading the main purpose of the Bill. When we come to the Committee stage we can certainly have a look at them.
My Lords, it has been said (or at any rate implied) that no suppliers will ever be able to refuse to supply. With respect, this is just not so. Manufacturers must obviously be allowed to devise their own marketing policies, and to change them as and when they think fit. In the light of the significant change made by this Bill, it is only right and proper that manufacturers should be able to review their marketing policies.
§ LORD DRUMALBYN
The noble Lord, Lord Gardiner, mentioned the risk of suppliers' changing over their marketing systems on a large scale to agency agreements. We believe that the risk of their doing so on any large scale is small, for there would be very serious problems for anyone who adopted agency arrangements—and they would have to be full agency arrangements; there would be no question of the goods reverting back to the dealer at the last moment, as in the ordinary consignment agreement, before they were disposed of—and we think the problems will be so serious that they are not likely to be adopted on any wide scale simply as a device. But I think we have to recognise that agency arrangements are a perfectly normal and recognised way of trading, and we do not want to interfere with it. If in the future, contrary to what we think, abuses in this respect should develop, then of course the Government would take steps to check it. But there is nothing in this Bill to prevent a manufacturer from revising his marketing policy in such a way as to cease supplying directly a whole class (and I am coming to the noble Lord's point) of dealers operating in similar circumstances whom he has hitherto been supplying, so long as the reason for his doing so is not that the dealers are all price-cutters.
§ LORD SHEPHERD
My Lords, I am glad that the noble Lord has said that. It answers a doubt in my mind. Would the noble Lord confirm that if, as I illustrated, a chain store has purchased from one manufacturer a large quantity of goods and another chain store comes along and wants to buy the same goods—and this is normal business practice, because in competition one firm tries to seek the merchandise that another firm is selling successfully—it is the view of the Government that the supplier could refuse to supply the second party because he has already had a quantity order? Or would the supplier, though the second party has said that he proposed to sell below the recommended price, be required to supply those goods?
§ LORD DRUMALBYN
My Lords, I have no doubt at all that so long as the motive for refusing to supply is not the motive of preventing price-cutting, so long as there are other good grounds for refusing, to supply, then there is no reason at all why he should not refuse to supply. What he cannot do is to discriminate against a customer because of price-cutting or because he thinks the customer will price-cut, either by refusing to supply or by offering terms significantly less favourable than those available to other dealers in similar circumstances, or by treating him worse than other dealers in similar circumstances as regards delivery. He cannot discriminate on those grounds. If a customer thinks he is going to do so because of that reason, he can take the matter to court. If a supplier can show that there were other valid grounds for withholding supplies which, taken alone, would have caused him to withhold them, whether or not the customer in question has been cutting prices, we have no intention that the supplier shall be forced by this Bill, against his will, to supply.
The noble Lord asked on what grounds a supplier could withhold supplies. Whether the ground for withholding supplies in a particular case was valid and genuine would be for the Court to decide. Let me give one or two possible examples. First of all, there is the possibility that, as a matter of policy, the supplier may not wish to supply to a shop because it is badly kept—for example, because it is dirty; perhaps a confectionery shop. If so, he 873 will probably have to show that it was his general policy not to supply dirty shops, and that measures were taken to check the cleanliness of shops in general. Secondly, he might say that he already had enough outlets in the particular town, and that it was not his policy to have any more. Thirdly, a manufacturer might be genuinely unable to take more business and might be genuinely turning down orders from those who had been selling at recommended prices. Fourthly, he might have given an undertaking (as I think was the case in one instance that the noble Lord mentioned) to confine the supply of a particular design to a particular dealer. There are all these possible cases, and many others that may arise. It is certainly not the intention of the Bill that a dealer who would not otherwise be able to buy should be enabled by the Bill to do so by price cutting or by indicating an intention to cut prices. I think this really is what the noble Lord, Lord Shepherd, was getting at. I will certainly look at the refusal to supply on grounds of lack of credit-worthiness, although attention has been drawn already to Clause 4(4).
§ LORD SHEPHERD
My Lords, can the noble Lord help me? I asked a specific question in respect to trade marks. When you supply the goods, whether willingly or unwillingly, do you have to supply the goods with your registered trade mark?
§ LORD DRUMALBYN
My Lords, I should like notice of that question. It seems to me that the goods are the goods, trade marks and all. That is an answer "off the cuff"; that is as it seems to me.
In conclusion, my Lords, may I say that, while the Government firmly intend to preserve the basic principles of the Bill, we shall certainly be willing to consider carefully any suggestions designed to improve it. In our view the Bill is both necessary and timely; and, in our view, it shows courage on the part of my right honourable friend to introduce it at this time. It is a logical sequel to the 1956 Act in the changed circumstances of today. We believe it will come more and more to be regarded as a moderate and sensible measure, which will stimulate competition and enhance efficiency in the distributive trades and ultimately 874 bring benefit both to the consumer and to the economy as a whole.
§ On Question, Bill read 2a, and committed to a Committee of the whole House.