RESALE PRICES BILL

HL Deb 22 June 1964 vol 259 cc33-82

4.1 p.m.

House again in Committee.

LORD AIREDALE moved, in subsection (4), after "him" to insert "reasonably". The noble Lord said: I should have thought that the necessity for this Amendment was well demonstrated by the exchange which took place between the noble Lord, Lord Shackleton, and the noble and learned Lord the Lord Chancellor in the discussion on the last Amendment. The example discussed there was where a supplier who was a teetotaller had seen a retailer going into a public-house and on that ground quite genuinely was proposing to withhold supplies. I suppose might be the other way round: there might be a whisky drinking supplier who wished to withhold supplies from all retailers who were, in his view, miserable teetotallers. Such feelings may be quite genuinely felt, but I should have thought that they would not constitute reasonable grounds upon which to withhold supplies, an action which might interfere with the livelihood of the person discriminated against. The insertion of the word "reasonably", as I propose, would secure that the withhold- ing of supplies could be done only on reasonable grounds, not on purely eccentric or "cranky" grounds, however genuinely those grounds might appeal to the person seeking to withdraw supplies. I beg to move.

Amendment moved— Page 3, line 33, after ("him") insert ("reasonably").—(Lord Airedale.)

LORD DRUMALBYN

What this Amendment would do would be to alter the character of the Bill altogether, because what the Bill is designed to do is to prevent resale price maintenance. As my noble and learned friend has just said, the test is whether the dealer would have got the goods if he had not been selling below recommended resale prices. If the supplier had been going to withhold supplies in other circumstances, the Bill would not alter this at all and it is not intended to alter this. This is not a Bill designed to force the supplier to supply in all circumstances. It is designed only to prevent his refraining from supplying with the object of maintaining resale prices. It is true that some grounds may be personal and not commercial at all, but if somebody else had to say whether a ground was or was not reasonable, then the point made by the noble Lord, Lord Shepherd, that this Bill was not intended to alter the relationship between a willing buyer and a willing seller, might no longer apply. For a man might be quite unreasonable in refusing to sell, but if the reason for his not being willing to sell is anything else than one directed towards maintaining resale prices, then his right to refuse to sell, or to refrain from having business transactions of any character with the intended buyer, remains and should remain intact. As my noble and learned friend says, it is for the courts to say whether they are satisfied that there is a genuine reason, but not necessarily a reasonable reason.

LORD SHACKLETON

I appreciate that this is the only way to look at this matter, but it seems to me that the courts are going to have a hard time, if the unreasonable reason is that a supplier does not like a particular retailer because he is a "stinker" and one of the reasons for this view is that the retailer is a price-cutter. Indeed, one of the unacceptable reasons may be that the hatred is so intense that the supplier may not be able to talk to him.

THE LORD CHANCELLOR

I think that the courts would find it much more difficult if the word "reasonably" were inserted. I was somewhat surprised to find this Amendment being moved from the Liberal Benches by the noble Lord, Lord Airedale, because this really puts the court in the position of saying whether it is wrong for a particular supplier to refuse to supply a retailer on grounds wholly unconnected with price-cutting. I think that that would be objectionable. Certainly it would be a very difficult task for the court to construe what was reasonable in all the circumstances of trade. It would be much better to leave it without that word. I believe that as the subsection is now, it is right. If a supplier honestly withholds supplies for other reasons—whether or not such reasons appeal to us—he should be allowed to do so, whether his action is reasonable or unreasonable. This reproduces the position which would prevail if there were no price-cutting, and we think that this is correct. Of course, it is true that if the ground put forward is one which to ordinary individuals appears utterly unreasonable, that might make it more difficult for the person putting forward that ground to satisfy the court that it was a genuine reason on which he had been acting.

LORD STONHAM

Would the noble and learned Lord not agree that his use of the word "genuine", which was also used by his noble friend, adds to the difficulty? It is possible to consider a genuine reason, which most of us would regard as wholly unreasonable. For example, a Mohammedan might genuinely object to doing business with a Jew—that is a kind of case which has arisen. But I should have thought that everyone would regard that as completely unreasonable. Therefore it would be possible to say that, while the reason might be genuine, at the same time the question of its reasonableness does not arise.

THE LORD CHANCELLOR

The two words are different words and mean something quite different. I do not think that my use of the word "genuine" adds any difficulty. If a ground was not a genuine ground under subsection (4), I am sure that the courts would not pay any attention to it. We are concerned here with genuineness. There remain a wide variety of circumstances, on which the court can say whether or not a particular decision made by a particular supplier was reasonable, and to have the word "reasonably" would certainly be very imprecise and would create very real difficulties.

LORD SILKIN

I think the position is as stated by the noble Lord, Lord Drumalbyn: that it is not intended to change the relationship between the supplier and the dealer. The supplier must be free to decide for himself whether or not he wants to supply any particular dealer. He is entitled to be prejudiced if he wants to. He is entitled to say that he is not going to supply a particular class of dealer, or a particular dealer, so long as the reason is not that he is a price-cutter. If that is the case, by putting in the word "reasonably" we are putting in a restriction on the activities of suppliers which this Bill is not intended to do. Therefore, I think it right that this word should not be included.

LORD AIREDALE

We have had an interesting discussion on this matter. I am bound to say that I think it very unreasonable that an unreasonable supplier should be allowed to cut off supplies to a retailer on unreasonable grounds. But I am persuaded by the arguments advanced from the Government Front Bench that there is another side to this argument and that I ought not to press the Amendment. Therefore, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

On Question, Whether Clause 2, as amended, shall stand part of the Bill?

LORD CONESFORD

I wish to ask my noble and learned friend the Lord Chancellor to consider one point of drafting on this clause before we reach another stage. I think the point that troubled the noble and learned Lord, Lord Chorley, is given some substance by the fact that in subsection (4) the word is "has", whereas I should have thought there was some argument for making it "had". I think it should be: … if, in addition to that ground, he had other grounds which, standing alone, would have led him to withhold those supplies. That would make it clear that the supplier had the other ground at the time when he in fact withheld supplies. There may not be much in that point, but it seems to me that the difficulty of the noble and learned Lord, Lord Chorley, arises from the apparent difference in time—the time when he has to have the ground and the time when he withheld the supplies.

THE LORD CHANCELLOR

I will look at this point. It is a question of tense, and having regard to the tense of the expression "a supplier shall not be treated", it may be that the word "has" is right. However, as I say, I will certainly look at it.

Clause 2, as amended, agreed to.

Clause 3:

Exception for measures against loss leaders 3.—(1) It shall not be unlawful by virtue of section 2 of this Act for a supplier to withhold supplies of any goods from a dealer, or to cause or procure another supplier to do so, if he 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, whether obtained from that supplier or not. (2) The reference in this section to the use of goods as loss leaders is a reference to a resale of the goods effected by the dealer, not for the purpose of making a profit on the sale of those goods, but for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods or otherwise for the purpose of advertising the business of the dealer: Provided that a sale of goods shall not be treated for the purposes of this section as the use of those goods as loss leaders—

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

4.14 p.m.

LORD CHAMPION moved, in subsection (1), to leave out all words after "the dealer" and insert: has been using as loss leaders any goods of any description ". The noble Lord said: As I understand this Bill, Clause 1 is designed to benefit the consumer by ensuring that there should be free competition between retailer and retailer, and to achieve this no supplier of goods is to be permitted to fix minimum resale prices. I have listened carefully to what the noble and learned Lord the Lord Chancellor has said about Clause 2, which seems to me to be designed to further this object by protecting the retailer against the supplier who would seek to withhold goods from the retailer on the grounds that the retailer was cutting prices. Now we come to Clause 3, which, as I understand it, is intended to protect the manufacturer or the wholesaler or other retailers against price-cutting of the type known as "loss leaders". In this clause the Government are attempting to define "loss leader" for the benefit of the retailer, the wholesaler or the manufacturer and, if necessary, the courts. I must admit that it appears to me to be an attempt to define the undefinable.

Part of the trouble lies in the difficulty of reading it. This is caused by the fact that in one context the supplier is the manufacturer, and between him and the retail dealer stands another supplier who in relationship to the supplying manufacturer is a dealer, but who in his relationship to the retail dealer is a supplier. In another context, the retail dealer finds sitting above him two suppliers, both of whom may be interested in withholding supplies from him on the grounds that he, the retail dealer, is engaging in the practice of loss leader selling. In yet another context, the manufacturer supplier may find sitting below him two dealers, one in his dealer capacity closing his eyes and supplying the manufacturer's goods to a retail dealer who is using them as loss leaders.

I cannot pretend to have worked out all the permutations made possible by the use of the words "supplier" and "dealer" in their varying relationships, but the number must be considerable. It is not as many, of course, as in an eight results treble chance football pool. I have never yet been able to find out how many permutations are possible there, and certainly I have never solved the problem of finding the right one. But the number of permutations is considerably increased if sitting between the manufacturer and the retailer there happens to be more than one agency; and this certainly is the case with the only commodity in which I am interested —namely, sugar.

Sugar is sold, to a large extent, by the corporation in which I happen to be interested, first of all to a dealer. He sells, in turn to a wholesaler, who sells to a retailer. So we have this difficulty of the supplier in relation to the retailer. Sugar is one of the commodities that are extensively used for loss leading—perhaps it is the greatest loss leader of the lot. The only thing I would say about it is that I cannot see that this has ever cramped the style of the corporation in which I am interested, or indeed has had any effect on the profits of Tate and Lyle. So I cannot pretend that I am here speaking on behalf of the corporation or that they have any particular interest in loss leaders. Therefore, I have no interest to declare.

What does subsection (1) of this clause do? In so far as I can understand it, it enables the manufacturer supplier to refuse to supply his goods to a dealer if he has reasonable cause to believe that somewhere down through the chain that links him to the consumer his goods are being used as loss leaders. It also enables the manufacturer supplier to persuade other manufacturer suppliers of goods of the same or similar nature to join him in refusing to supply such goods to dealers who are either indulging in loss leadership or are conniving at the practice. The wholesale dealer in his capacity as a supplier, may also refuse supplies to the retail dealer by whom he has reasonable cause to believe that the goods he has supplied have been, or are being, used as loss leaders. He, the wholesale dealer, may also cause or procure other wholesale dealers or manufacturers as suppliers to join with him to refuse supplies in those circumstances.

All this means that there could be a collective agreement by suppliers to refuse supplies—in other words, a ganging-up between suppliers at all levels against the retailer who has been using their goods as loss leaders. Once the dealer is off the books as a result of loss leadering, he may never get back—that is, if I have understood Clauses 2 and 4, and the explanations that were given to the Committee on Clause 2, aright. So the effect may well be, because of the possible ganging-up of suppliers, a life sentence against the dealer because he at some time engaged in loss leadering.

Another possible consequence of subsection (1) may be that the wholesale dealer may be supplying a certain manufacturer's goods to, say, thirty retail dealers one of whom may be using these goods as loss leaders. The manufacturer, hearing of this, could lawfully stop the supply of the goods to the wholesale dealer, which would have the effect of stopping supplies through their recognised wholesale dealer to the other 29 retail dealers. That is not likely, perhaps, but it would not be unlawful under this subsection. Another disadvantage that I see in all this business of exception against loss leaders is that it is left to the supplier to decide in what circumstances and against which dealers he uses the right this Bill gives him to withhold supplies.

There is, it seems to me, nothing in this subsection to prevent a supplier from shutting his eyes to one dealer using loss leaders and stopping supplies to another; in which case the stopping of supplies may well have the effect of driving one retailer out of business and assisting the other retailers in their businesses. The trouble about this subsection is that it not only leaves the retailer at the mercy of the wholesaler, and the wholesaler at the mercy of the manufacturer—which, to some extent, they always were—but leaves them at their mercy with legislative encouragement.

I have tried to explain this subsection as I see it and as we see it. We have put down an Amendment which we hope will have some mitigating effect. What does our Amendment seek to do to subsection (1)? In the first place, it cuts out, or seeks to cut out, one link in the chain of distributors which I have described, so that the supplier, whether a wholesaler or a manufacturer, who supplies goods direct to the retailer would be able to withhold the goods from the actual loss leaderer and from no one else. This would have the effect of preventing a number of retailers from being deprived of the goods they obtain from the wholesale dealer in the event of one of his retailers being engaged in loss leaders, so that punishment would fall on the guilty and not on the innocent. In that respect, it would have the effect of narrowing this, what I must admit I regard as a very stupid, clause.

The rest of our Amendment would have the effect of widening the clause by omitting the words "any goods of the same or a similar description". This would have the effect of punishing the loss leaderer, no matter what type of goods he actually used as loss leaders. Under the clause, if amended by our proposal, if a retailer indulges in loss leadering in, say, whisky, it would be possible for the supplier of, say, cigarettes, to say, "You are loss leadering in whisky. Parliament has decided that loss leadering is a harmful practice, and we will not supply you with cigarettes". If loss leadering is a bad practice, then it seems to us that this would be a better way of stamping it out, rather than to confine the refusal to supply the retailer with just those goods of the same or a similar description.

As I have already indicated, this is a clause which the Bill would be much better without. But if Parliament is bent on having it, it is up to us, I think, to make it a little more understandable and a little less unjust in some of its possible applications, and at least to make it a workmanlike way of stamping out loss leadering, as we think our Amendment would do. I beg to move.

Amendment moved— Page 3, I ine 42, leave out from first ("dealer") to end of line 45, and insert the said new words.—(Lord Champion.)

4.27 p.m.

LORD DRUMALBYN

I certainly cannot complain of the way in which the noble Lord, Lord Champion, has moved this Amendment. I think a great many of us feel that loss leadering can do harm. On the other hand, it is possible to exaggerate the amount of harm it may do, and I sympathise with the noble Lord in his personal attitude to the Amendment he was moving. He said that he wanted to mitigate to some extent the harm which might be done (a) to the retailer and (b) to the wholesaler, the intermediary who might be supplying the retailer. I wonder whether the noble Lord has thought out the way in which this Amendment, as drafted, would be likely to work. Surely, if we are to say that loss leadering is undesirable, then we have to devise some means of preventing it.

In the normal way, the first thing that will happen, if a loss leadering activity is being conducted by a retailer, will be, not that the supplies will be peremptorily zut off, but that, in the ordinary way that business is done, the wholesaler or manufacturer, as the case may be, will go and talk to the retailer, to see whether the matter cannot be smoothed out. If it cannot be smoothed out, then, as the clause stands, both the manufacturer, as supplier, and the wholesaler as the immediate supplier, are enabled to withhold supplies. If, as the noble Lord quite correctly said, the wholesaler were to refuse to withhold supplies, then the manufacturer would be powerless, unless he were able to have some sanction or other with the wholesaler. In the ordinary way, with this clause in existence and with the recognition that loss leadering is a bad thing, the supplier will be able to go to the wholesaler and say, "I am not going to withdraw all supplies of my goods from you, but I should like you to withhold goods from this retailer"—goods, that is, as is said here, "of the same or a similar description".

Where the noble Lord's Amendment goes so much further is that, so far from mitigating the impact upon the retailer, it does not limit the withholding of goods to "any goods of the same or a similar description" but says "any goods of any description". He is perfectly right in saying that, inasmuch as the clause says that a supplier may withhold supplies or cause or procure any supplier to do so, the purpose of this clause is to enable the manufacturer to withhold not only his own goods but goods of a similar character. But the words to cause or procure another supplier also, of course, help him to cause or procure the wholesaler, as the direct supplier of the retailer, to withhold his supplies. Should the supplier go to other manufacturers and seek to prevent them from supplying goods of a similar description, the noble Lord is perfectly right that this would have the effect of a virtual boycott in those goods. It would be tantamount, as he says, to a collective agreement. But, in so far as it is tantamount to a collective agreement, it would become registerable if the suppliers themselves agreed not to supply goods of the same or a similar description. It would become registerable under the 1956 Act. So I think he is perhaps going a little far in his criticism of the clause as it is drafted.

However, the justification, as I said, is the need to safeguard a supplier's right to prevent his goods from being used as loss leaders with the possibility that the demand for them may be adversely affected. But the Amendment would go beyond what is necessary for this purpose and would place the retailer who had engaged in loss-leader selling of one line in danger of having withheld supplies of all the products that he handled. It seems to me that this is much too severe a penalty. On the other hand, if we are to enable the supplier to protect himself against loss leadering, the provisions that are in the clause as drafted are necessary to enable him to do so, and it seems to me that they are likely to work much less harshly than the Amendment the noble Lord has proposed.

LORD CHAMPION

As I understand it, the noble Lord has dealt with the points that I made about extending the whole thing to goods other than goods of the same or a similar nature, but he has not dealt with my proposal to leave out "any other dealer", which appears to me to have some importance in this connection.

LORD DRUMALBYN

With respect to the noble Lord, I thought that I had dealt with that, because I pointed out that, unless the supplier had the power to withhold supplies from the wholesaler, it would not then be possible for him to assert his right to prevent loss leadering.

LORD LUCAS OF CHILWORTH

I listened to the noble Lord with great attention and I apologise for being called away and thereby not hearing the opening remarks of the mover of the Amendment. I was hoping that the noble Lord would tell us how subsection (1) of the clause was going to work, because it is just not going to work. I want to know, first of all, what is a "loss leader". Some people argue that a loss leader is a supplier's goods used for the purpose of inducing customers to buy other goods. But supposing a loss leader is a different article from those sold in the shop. Would the noble Lord say that, if a chemist —as in the example I gave on Second Reading—purchased a lot of hot cross buns or had them made, and said that anybody who bought any goods in his shop would be given some during the two or three days before Good Friday, when the attraction to buy hot cross buns is there, he would be guilty of using the buns as a loss leader? Who would take action against such a chemist, the supplier of the chemist's ordinary goods or some unknown confectioner? And supposing this practice spread to other chemists' shops.

It is all right if you get a branded article used as a loss leader, but this clause does not say it must be a branded article. I read it as referring to use as loss leaders any goods of the same or a similar description, whether obtained from the supplier or not—goods of a similar description beyond branded goods. So any person can go on with this practice of loss leading if he does not have branded goods. In other words, is it loss leading if he buys no named articles and gives them away? If it is, against whom is the sanction? As the noble Lord will know, if he goes into a reputable chemist's shop at various times he has only to buy a large tube of toothpaste to get a small tube of tooth-paste given him for nothing. That is advertising. Is it also loss leading? What happens when the manufacturer or the supplier of a branded article supplies the loss leading article?

Frankly I cannot see how this is going to work. I think the Government have been pushed into this. Really, loss leading is not the prevalent practice which it was made out to be by some of the advocates in another place. You will not stop loss leading, because every day a retailer can put up in his supermarket a notice saying, "To-day's free gift is 'X'", and to-morrow he can alter it to "Y". Not one of these articles given away need be a branded article. They can all be non-branded articles, which this Bill, first of all, does not bite upon.

The other thing that shocked me in this matter is the reintroduction, as the noble Lord, Lord Champion, said, of the collective agreement, which I thought, once and for all, had gone out with the 1956 Act. Now it is brought back again and you are going to have coercion against the very thing that this Bill is supposed to do as a first principle: to reduce the retail price of goods to the consumer. I may have misunder-stood this, and if I have I am sure the noble Lord will have every sympathy with me because, if I may say so with the greatest possible respect, when he was explaining this subsection to the Committee he did not do so. to my way of hearing him, with any degree of confidence. I do not know whether or not I agree with the Amendment. I do not think this clause is capable of being amended, because as you go into it you see more and more absolutely unworkable things.

LORD CONESFORD

The subject matter of this clause may or may not be as nasty as some people think, but the language used about it by the noble Lord, Lord Champion, and, I regret to say, by my noble friend the Minister, seems to me quite intolerable. A loss leader is defined, i think, to some extent in the next subsection. But it is not only a loss leader that may be sold. Sometimes you may sell a best seller or a prize winner, but so far as I know we do not talk about "best sellering" or "prize winnering"; and why on earth we should say "loss leadering" I cannot imagine. I thank the noble Lord, Lord Lucas of Chilworth, for refraining from that. It seems to me that "loss leadering" is intolerable, and on the grounds of cruelty to the English language I protest.

THE LORD CHANCELLOR

I hope that I shall not incur the wrath of my noble friend for using language which is quite intolerable. I must say that I entirely share his view about the word, if it is a word at all, loss "leadering". May I say this to the noble Lord, Lord Lucas of Chilworth—to whose remarks on this point I listened with the greatest interest. Of course, I think it is true that views differ as to the importance and effect of the practice which is commonly called "loss leadering." The Government have decided it is right that the withholding of supplies under subsection (2) will not be unlawful if they are withheld on account of what is commonly called "loss leadering" by the retailer. So far as subsection (1) is concerned, we are dealing with machinery, and we are not seeking to define what is meant by "loss leadering". That comes in under subsection (2), which we shall no doubt be discussing.

The noble Lord, Lord Lucas of Chilworth, referred to free gifts. Free gifts do not come within this clause, as the noble Lord will see, if he looks at subsection (2) which refers to "a resale of the goods". The resale may be for the purpose of advertisement. The noble Lord has been luckier than I have ever been. Apparently when he goes into a chemist's shop to buy one tube of toothpaste he comes out, quite lawfully, with two. That has not happened to me yet. This is not, I gather, what the complaint is with regard to loss leading. It is doing damage to a manufacturer, and indeed to other retailers, by selling goods, not for the purpose of trying to secure a profit but merely as an inducement to get custom to the shop and to advertise the shop. That is what we have sought to deal with in subsection (2).

There is, I think your Lordships will recognise, a strong view in some quarters against this practice as being something not consistent with what I would call fair trading. It would be a hard thing to say that suppliers would have to go on supplying someone engaging in a practice of this sort which they regarded, rightly or wrongly, as doing considerable damage to their business. Therefore subsection (1) deals with means of coping with it. The subsection does not make it a criminal offence to engage in loss leading, but provides that it shall not be unlawful for a supplier to withhold supplies, or cause any other supplier to do so, from a dealer who has been using the goods, or goods of a similar description, for the purpose of loss leading. The supplier must not cut off all his livelihood, but he may cut off his supply of those particular types of goods used for that purpose. As my noble friend said (and I think he satisfied the noble Lord, Lord Champion), if you are going to do that, you have to give this power to operate in this respect not only in relation to the retailer, to whom you may not be supplying direct, but also in relation to the wholesaler.

The noble Lord, Lord Champion, said something with which I was very much in agreement when he referred to the difficulty of defining the practice of loss leading. No doubt we shall come on to that in subsection (2). At the moment we are dealing purely with the machinery under subsection (1); and for the reasons advanced, I think very cogently, by my noble friend I would ask the noble Lord, Lord Champion, to withdraw the Amendment.

LORD SHEPHERD

What is the position of the wholesaler where a supplier has complained to him that one of his retailers is loss trading and the retailer refuses to change his policy? The supplier can then say, "Well, there is one way in which I can deal with the matter. I will prevent goods from going to the wholesaler". This may mean that the wholesaler's own business position is in jeopardy, because the supplier has taken the one course open to him by preventing the wholesaler from trading in those goods. I should not have thought that fair and right, but I should have thought it was a possibility as the subsection is now drafted. Therefore I hope that the Government will look at that point.

THE LORD CHANCELLOR

I think I can answer the noble Lord and put his fears at rest. If he looks at Clause 11 he will see that "supplier" is defined as a person carrying on a business of selling goods other than a business in which goods are sold only by retail". So that the supplier, for the purposes of subsection (3) will include not only the manufacturer but also the wholesaler. So the wholesaler need not go back to the manufacturer and say "I have a retailer who is loss leading in your goods". The supplier himself can operate under subsection (3).

LORD SHEPHERD

The noble and learned Lord did not get my point. Suppose there is a manufacturer who believes that a retailer is selling goods as loss leaders. He has sold those goods through a wholesaler, and he approaches the wholesaler and says "Are you aware of this? Will you take steps to prevent the retailer from continuing the practice?" The wholesaler does that, but the retailer refuses to make any alteration in his policy and continues to loss lead the particular item. The manufacturer then says, "All right, you cannot prevent it but I will refuse to supply you with any further goods, even if this means that you cannot supply to some of your other retailers. At least I will stop that man from spoiling my trade mark, spoiling the business I am conducting in that town through the medium of other wholesalers". I should have thought that that would be very unfair on the wholesaler, who has no control over the activities of the retailer.

THE LORD CHANCELLOR

I think I did answer that point. I am sorry if the noble Lord did not understand. He said again that the wholesaler cannot prevent the retailer from doing this. I thought I had answered that point. The wholesaler comes within the definition of "supplier". This clause refers to a supplier—the wholesaler and the manufacturer both have the powers conferred by this subsection. Therefore, with great respect, the noble Lord is wrong when he says the wholesaler cannot withhold supplies from the retailer who is loss leading. He can, and therefore the argument of the noble Lord, which he repeated twice, that the manufacturer would say to the wholesaler, "You cannot take any action about this retailer, but I can because I am going to stop the supplies to you", is not accurate, because the wholesaler himself can take that action. He can withhold supplies lawfully from the retailer whom he is supplying direct, if that retailer is loss leading in the line in which he is being supplied.

LORD LUCAS OF CHILWORTH

May I ask the noble and learned Lord a question? Do I understand him correctly to say that gifts do not come into this—that I cannot be accused of loss leading unless I sell the article; that if I give it away, then I am not guilty of loss leading? That is what I understood him to say.

THE LORD CHANCELLOR

If we could discuss what is meant by the expression "loss leading" on the next subsection, I think it would be easier, because that is where the definition comes.

LORD LUCAS OF CHILWORTH

Then the second question I should like to ask the noble and learned Lord is this. I have mentioned pharmaceutical goods, so I will stick to them. Suppose I am a retailer and I am selling 1,000 different brands of various pharmaceutical goods, but I choose as my loss leader something right out of that line; and suppose I say that to every married woman who comes in and buys face powder I will give a doll for her child. Who brings the sanction against me? Because I have not, as an inducement by loss leading, used one of the pharmaceutical goods.

THE LORD CHANCELLOR

The answer is, the person who has supplied you with the goods that you have used for loss leading, whether it be cakes or sugar, or whatever else it may be. It is the supplier of those goods who can lawfully withhold further supplies from you.

LORD LUCAS OF CHILWORTH

Then, if that is the case and I go and buy 100 gross of dolls from a doll manufacturer, telling him what I am going to do—that I am going to use them as free gifts in my chemist's shop—he is the only one who can withhold my supplies through my loss leading; there is no redress for the chemical manufacturer?

THE LORD CHANCELLOR

I am afraid the noble Lord has not got it quite right, because I told him a little earlier on that free gifts do not come within the scope of this section.

LORD LUCAS OF CHILWORTH

Then what if I sell them for 6d. each?

THE LORD CHANCELLOR

If the noble Lord sells them at 6d. each, the only person who has any power to withhold further supplies is the doll manufacturer.

LORD GARDINER

I do not know whether the noble and learned Lord the Lord Chancellor can help the Committee as to what is the difference between "goods of the same description" and "goods of a similar description". This point, I think, was raised in another place, and I believe the Minister got so far as saying that all shirts are shirts, and therefore, presumably, a sports shirt and a hard evening shirt are goods of the same description. Then, one wonders what are goods of a similar description in relation to a hard evening shirt, unless it is hard evening pyjamas. This is awkward phraseology. Whether this Amendment is the right one or not, it is an attempt to rationalise and simplify what is so complicated in this particular subsection.

THE LORD CHANCELLOR

This is a point that the noble and learned Lord had great fun with in his Second Reading speech. I will take another example, not of dolls but of electric irons, which is not a bad example. If you were to say "goods of the same description", that would mean that other types of electric iron could be used as alternative loss leaders. If you have "goods of the same or a similar description" that would cover all types of, for instance, electric irons.

The point may be raised—it is a perfectly fair point—whether the word "similar" is not too vague; but if we reject that view that the use of any goods as loss leaders justifies the withholding of supplies, as we do, we must define the goods concerned. As I say, simply to say "goods of the same description" would, if the words were strictly construed, unfairly limit the class of goods in regard to which the supplier could withhold supplies. Therefore, some word such as "similar" must be used, and the intention is to indicate that the loss leading must be such as to lead a reasonable supplier to fear that his goods might be used as loss leaders. The degree of similarity required would be that which, in all the circumstances, justifies such a fear. I do not think the noble and learned Lord, Lord Gardiner, is really seriously suggesting that the necessary degree of similarity can be defined in terms suitable for all cases.

LORD REDESDALE

I should like to point out one thing: that in the discussion so far everybody has rather left out the subject of discounts. With the abolition of resale price maintenance, discounts would be of such an order that loss leading does not really come into it. As I said on Second Reading, where the cost of an appliance is in the region of £100 at the moment, the big retailer would be buying it at about £60, whereas the small man can at best get it at £77. With the abolition of resale price maintenance, these differences will reach the stage where the small retailer cannot, at any rate, buy it at a price at which the big retailer can legally sell it. Consequently, while many people feel that this question of a loss leader is a serious matter, in fact it will not really arise, because the small retailer will not be in a position, in any case, to compete in terms of loss leading, and I do not think the manufacturers will be greatly affected.

LORD CHAMPION

The noble Lord who has just sat down seems to me to have raised a point which will have to be considered on the next Amendment in regard to the definition of "profit". Perhaps I am wrong about this, but it is a point which I think we might consider in relation to the next Amendment. I must say that, on the whole, I have been reasonably well satisfied with the explanations of the two noble Lords on the Government Front Bench.

I had some doubts about the point which the noble Lord, Lord Drumalbyn, made, that this clause would not work in such a peremptory fashion as I was suggesting. He said that surely there would first be another approach and an attempt to get the person concerned to desist, and so on. There is nothing at all in the Bill about that. It is just an expression of hope in regard to which, if the supplier really wanted to be tough and had a desire to get this man out of his particular branch of the trade, he would act without any of these preliminary moves.

I am not sure whether I have had a satisfactory reply about the position in which, as I suggested, it would be possible for a wholesale supplier to discriminate against one retail dealer and to favour another in this matter of loss leading. I must be careful about the use of the words "leading" and "leadering". I remember when I was in America some years ago a taxi driver said to me, "I hope you can understand me. I know I am moldering the English language." He was, but I could understand him. I might have "moidered" the word "leadering", but I am sure that the noble Lord, Lord Conesford, thoroughly understood what I was up to—and, after all, that is the purpose of language. But having had my little flutter on that, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.0 p.m.

LORD CHAMPION moved, in subsection (2), to leave out "not for the purpose of making a profit on the sale of those goods" and insert: ,if the dealer offers such goods for sale at such a price as to lead the supplier to believe that the sale was not for the purpose of making a reasonable profit".

The noble Lord said: As the noble and learned Lord Chancellor said a moment ago, at this point we shall have to attempt to define the loss leader and to find the right words for it. I pity any supplier or dealer who may have to put into practice subsection (1), as I pity the court which has to decide whether goods have been lawfully withheld by a supplier on the pretext of loss leading. It is not good enough our putting into an Act of Parliament words which we as Parliament cannot reasonably define, saying "We will leave it to the people who will have to work it to interpret what we intended." It seems to me that this is precisely what the Government are doing in regard to the word "profit", and certainly what the Minister said in another place in relation to profit. As I see it, the Government are saying that the words for the purpose of making a profit are really in two parts: one, as to the definition of a loss leader, and the other, as to the motive of the retailer in selling the goods—that is, as to whether the purpose of the sale of the goods is for advertisement. It must be remembered that in the whole of subsection (2) we are placing the whole of the burden of proof on the supplier as to profit and motive, and, in the event of a dispute between the supplier and the retailer, on the courts. If we cannot say what we mean, how can we expect others to say it for us?

In regard to the problem involved in using the word "profit", my dictionary tells me that the word means the excess in money value of receipts over outlay or goods in trade, business, occupation, et cetera". But, as though realising that definition is not enough, it immediately goes on to tell me what "gross profit" means and what "net profit" means. If gross profit is intended in the Bill, it would mean that the retailer might be selling at a loss because in between the actual purchase price and the sale receipt the retailer was not making a sufficient provision for handling, stocking and the other normal expenses of the trade; but, if it is gross profit that is meant here, it might be held that he was making a profit.

But does the subsection mean "net profit"? If so, how is it to be assessed? Clearly, a margin that would give a net profit to one retailer whose methods are efficient could mean a net loss to a less efficient retailer; and, in the event of a dispute on this matter, how is the supplier, or the court, to find out whether a net or gross profit is or is not made? As I understand it, this could only be done by a disclosure by a retailer of his books and accounts and examination by an accountant—in other words, by what lawyers call discovery of documents. The accountant would then have to venture an opinion on the matter at the instigation of the supplier, or of the court to which the matter is referred. The total effect of such examination might well be that one retailer might be said to be indulging in loss leading if he were selling an article at 6d., while another, because of his efficiency, although selling at the same price, might be making a profit. And, as the noble Lord, Lord Redesdale, pointed out a moment ago, discount may well enter into the net profit calculation. The one would be guilty of loss leading and the other would not, although the price of the article being sold in the two shops would be precisely the same.

What we are setting out to do, and what in fact we are proposing in the Amendments—and I am speaking to both Amendments 14 and 15, as clearly they go together—is to arrive at an improved definition of "profit". Although we do not seek to set out profit as a percentage of total selling price or use an arbitrary mark-up, what we propose would give a greater measure of guidance than is to be found in this subsection as it now stands. In the first place we import the word "reasonable" and, for further guidance, seek to add the words "taking into account the recognised trading costs of his class of business". Of course, I readily admit that the word "reasonable" itself is not capable of precise definition in relation to profit, but it is a word which is often used in Acts of Parliament. Time after time I have been assured from the Government Front Bench that it is a word which the courts do not find difficult of interpretation.

We do not leave it there, for our words which qualify "reasonable profit" would appear to us to assist the court and the supplier in interpreting those words. The words which we consider will assist in this connection are the words the recognised trading costs of his class of business". I understand, as a result of talking to people who are engaged in distribution, that there would he no great difficulty here, for the average sort of trading costs are pretty well known to the people engaged in the trade. I consider that the inclusion of these two Amendments in the Bill would be an improvement. I beg to move.

Amendment moved— Page 4, line 3, leave out from ("dealer") to ("but") in line 4 and insert the said words.—(Lord Champion.)

LORD SINCLAIR OF CLEEVE

May I say a word in support of this Amendment? It seems to me to come nearer to a practical definition of this difficult term "loss leader". It can be presumed that every supplier, whether he is a manufacturer or a wholesaler, is in business to sell his goods. It may also be presumed that the supplier in the ordinary way of business is pretty well conversant with the costs of the retailer who sells the goods which he supplies. And, as the noble Lord, Lord Lucas of Chilworth, said in reference to an earlier clause, loss leading in the main must surely apply to branded goods with a large sale of a known standard of quality. They are the goods which can be effective loss leaders, and not the unnamed goods. So here we might assume that these well-known branded goods in universal supply are potential candidates for use as loss leaders.

Yet in the ordinary way of business those goods, such as tobacco or confectionery, which are sold to a large number of outlets throughout the country will not be prevented from reaching someone who wants to use them as loss leaders merely by this clause in the Bill. They will still get there, but it is surely right that any supplier should be able to refuse to supply his goods direct to somebody who is using them in this way—because for branded goods to be used as a loss leader means that there is in that circumstance some kind of stigma attached to that brand, and it is right that the supplier should be entitled to withhold supply. We thus get back to the question of the definition of the loss leader, and merely to use the words as they appear in subsection (2) does not help, and places too great an onus of proof on the manufacturer or the supplier. Therefore, I welcome this Amendment in coming nearer to a practical approach to a satisfactory definition.

LORD DRUMALBYN

With your Lordships' permission, I do not propose to compare the wording of these two alternatives—what is in the Bill at the present time, and what is in the Amendment—because I should like to make the point that it appears to me that the Amendment is based on a misunderstanding of the test of loss leadering that is contained in this subsection. The test of a sale which counts as a loss leader under the Bill is, in effect, that it is made for the purpose of advertising rather than making a profit. As my noble and learned friend the Lord Chancellor said, you leave aside this purpose of making a profit on the sale of the goods. Subsection (2) says that the loss leader is not for the purpose of making a profit on the sale of those goods, but"— and then you get positively to what it is— for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods …". In other words, if a trader is not trying to make a profit it is not really material to ask whether it is a gross profit or a net profit that he is not trying to make.

The real question is quite a different one, namely, what facts a supplier has to prove—and the noble Lord is quite right in saying that the onus will lie on the supplier—in order to show that a particular sale was not effected for the purpose of making a profit on that sale. To this question the Bill gives no clear answer, because no general answer need or can be given. Clearly, it will be necessary to show that the goods were sold at a price well below the prevailing range of prices charged by dealers, if such an expression can be used in view of what my noble friend Lord Redesdale has said. But if it can be shown that the price was so low that it was below the cost to the retailer, then, of course, there will he no doubt at all and that will be quite conclusive evidence. But there may well be cases in which a sale somewhere between the cost to the dealer and the dealer's normal mark up of such goods, coupled with evidence to establish the affirmative proposition that the sale was effected for the purpose of attracting customers, would be sufficient. So the answer to the question whether "profit" means gross or net profit, is that, in the first place, that is the wrong question to ask, and, secondly, that, when the right question is asked, a sale above the actual cost to the retailer could be held to constitute the, use of the goods sold as loss leaders, though, of course, it would not necessarily be so held.

Your Lordships might wish to consider Section 34 of the Canadian Act to amend the Combines Act and Criminal Code, 1960, under which it is a defence to a charge of refusing to supply goods that the accused believed that the person from whom the goods were withheld, was making a practice of using articles supplied by the person charged as loss leaders, that is to say, not for the purpose of making a profit thereon but for the purpose of advertising. That Act does not define profit, either, and for the reasons which I have given it appears quite right not to attempt to do so. The question is the positive one: was this dealer selling goods, for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods or otherwise for the purpose of advertising the business of the dealer", and not for the purpose of making a profit on the sale of those goods? I think that defines the matter quite as amply as it is necessary to define it here.

LORD STONHAM

I found that that was an extraordinary answer to the case put by my noble friend Lord Champion. The noble Lord, Lord Drumalbyn, said that my noble friend's case was based on a misunderstanding of the loss leader, which he said was for advertising and not for making a profit. But, surely, the people whom we have to consider—

LORD DRUMALBYN

Will the noble Lord forgive me? I said that it was a misunderstanding of the test in the clause.

LORD STONHAM

That does not really alter my point. But, surely, the people whom we have to consider are the dealers and the suppliers who will have to interpret the Government's intentions, and will have to interpret what is in the Bill. The supplier must be able to know whether he is right in withholding supplies, because of his belief that the dealer has been using his goods as loss leaders. The noble Lord declared that it was not material whether it was a gross or a net profit, but let us consider a class of goods such as furniture, where the normal mark-up on the manufacturer's price is anything from 45 per cent. to 55 per cent.

LORD MABANE

It is more like 35 per cent.

LORD STONHAM

I have been a furniture manufacturer now for some 40 years. I do not have a fixed price for my goods—I have always resisted it—but whenever we are asked by some of the most important firms in the country to supply them with printed retail price-lists for our goods, the lowest mark-up I think I have ever seen has been 45 per cent. It is no use the noble Lord shaking his head. This is my experience and it is a universal experience. The request is that we put a 50 per cent. mark-up on the sum of our prices plus purchase tax. Therefore, I think I am in order in saying that the Amendment—

LORD MABANE

I did not hear the noble Lord say "purchase tax" the first time.

LORD STONHAM

I did not say "purchase tax" the first time. I was very careful in what I said. I said that the mark-up on the manufacturer's prices varied between a minimum of 45 per cent. and a maximum of 55 per cent., and therefore I take the mean as a 50 per cent. mark-up. In other words, the article for which you pay £3 in a shop has cost the retailer £2. That mark-up, that 33 per cent. of the dealer's selling price, is gross profit. Assuming the retailer sells for 41s., the article for which he has paid £2, he in fact can be said, if gross profit and net profit are not material to this clause, to be making a profit of 2½ per cent. But his overheads are almost certainly as much as 25 per cent. of the total, out of the 33 per cent. which he might be expected to get on his total sales. Therefore, he is making a loss, a net loss, of at least 22½ per cent.; he is doing that only for the purposes of advertising; and, by the definition of the noble Lord, Lord Drumalbyn, it is a loss leader.

Now let us take the position of the manufacturer who has to decide between Messrs. Brown, at one end of the street, and Messrs. Harris, at the other end. Messrs. Harris, in the terms of the Amendment moved by my noble friend Lord Champion, have been charging margins which are reasonable having regard to the nature of their business and the nature of their costs. The people at the other end of the street are charg- ing 25 per cent. lower prices for the same goods, but it can still be said. technically, that they are making a profit because they are charging slightly more than the actual cost to them of those goods and are disregarding their overheads.

The supplier, Smith, says to himself, "Well, my customer Harris is obviously doing his business in a proper and respectable manner. My would-be customer, Brown, is absolutely destroying my reputation, and is destroying other reasonable traders, for the sole purpose of attracting customers to his shop to buy my goods at prices impossible to those other traders, in order to advertise his store and enable him to make a profit on other goods". That, I would submit, is a loss leader;but the noble Lord, Lord Drumalbyn, leaves the supplier in a quandary, because he is not sure. Indeed, the noble Lord, in answer to this question, said that the Bill gives no clear answer. I would submit that one of the most important things that an Act of Parliament must do, where possible, is to give clear answers to vital questions which every trader has to ask himself to sec whether or not he is complying with the law.

The noble Lord went on further to say that it is not possible to give a clear answer.

LORD DRUMALBYN

If I said that the Bill gives no clear answer, it was a slip of the tongue. I meant to say that the Bill gives no general answer.

LORD STONHAM

I am quite sure that, if the noble Lord studies Hansard tomorrow, he will see that, at least in his first utterance, he used the word "clear", because I noted it down when he said it; and I am sure it is well within the recollection of those Members of the Committee here at the time. I do not want to make very much point about "clear" or "general", but I would say that if the Bill gives no general answer to the questions which traders are bound to ask themselves, then it is extremely defective. My noble friends in front have not a general or clear answer, either. They are trying to sort it out.

LORD DRUMALBYN

I think it would be fair to get this right. What I was talking about there was the facts that would have to be proved, and it was on that that I said the Bill gives no general answer.

LORD STONHAM

Precisely. It would have to be proved. In other words, the noble Lord is admitting my case—that the supplier would not be safe in acting on what he and 99 out of every 100 other decent manufacturers would think was right and proper. He just would not know. And if he then asked his lawyer to turn up this debate in order to get guidance, and he read the words of the noble Lord, Lord Drumalbyn, he would he even more mystified, because he would see that the noble Lord had said, "There is no general answer to this. You must just find out. You must such it and see'". It is going to be an extremely expensive business. It is going to be something which, I would submit, is quite insupportable.

The Amendment in my noble friend's name—indeed, I have just noticed that my name also appears against it—proposes to insert the words, if the dealer offers such goods for sale at such a price as to lead the supplier to believe that the sale was not for the purpose of making a reasonable profit". I know the objections to the word "reasonable"—the noble and learned Lord the Lord Chancellor made them quite clear in a discussion on another Amendment. But the word "reasonable "frequently appears in legislation; and I am quite sure that, if a case went to the court, it would be much easier to establish what was reasonable and what was not in this context, when we are considering the word "profit".

But surely, it is up to the Government to say now what is meant by "profit". Is any difference between the price paid for goods and the price at which they are sold a profit? If so, then I think traders everywhere would completely and flatly disagree; because every trader has expenses, has overheads to pay, before he can make a profit. The profit made varies according to the nature of the business. In tobacco, the profit margins for retailers are relatively small. In domestic capital goods, the profit, the difference between the buying price and the selling price, is relatively large, as it well must be because of the differences between the types of business.

Therefore, if the Government do not accept these Amendments (and I still hope they will), it is most important, indeed, imperative, that they should say what they mean by "profit", and so give guidance to traders. Certainly it is not the Government's intention to mystify, to leave traders in unreasonable doubt, and virtually to compel them either to go out of business or to risk litigation which is surely avoidable. This Bill, as I understand it, is to discourage unnecessary and improper restrictions in trade, to do away with improper barriers against fair competition. But if, in the process, we make it impossible for suppliers to conduct a proper business, then I think it is a failure—and I think this clause of the Bill has been demonstrated to be unworkable.

THE LORD CHANCELLOR

I have listened with the greatest attention to the noble Lord, Lord Stonham. But I must say, frankly, that the more I listened to him, the more convinced I was that the clause is right as it stands, and that it is the Amendment which deserves his adjective "unworkable". I know the noble Lord will disagree with that, but I will try to justify my observation. I know that it is always very difficult to draft an Amendment, and I am not taking any technical point.

The purpose of subsection (2) is to define what is meant by the practice of loss leading; and, if that practice is established, if the supplier has reasonable cause to believe that that is going on then, under subsection (1), he can take the action defined in subsection (1). If your Lordships were asked, irrespective of this Bill, to say what was meant by "loss leading", I think your Lordships would say that it is the practice of selling goods, be they branded or other goods, cheaply for the purpose of attracting customers to buy other goods or of advertising the particular business; it is the cheap sale of goods for those two purposes. If your Lordships will look at subsection (2) you will see that the definition is based upon the purpose of the resale. And there is an antithesis between the purpose of making a profit and the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods or otherwise for the purpose of the business of the dealer. That is the antithesis. To establish that the purpose is the positive purpose of attracting customers or advertising—and that is what has to be established—you do not have to show that there was any or a net profit or a small gross profit, in fact, received on those particular articles.

I could not help thinking, as the noble Lord addressed the Committee so eloquently on the nature of various profits which the business man makes, the difference between gross profit and net profit and the effect of overheads, that if he were starting a new business and were asked the question, "Are you expecting to make a profit? Are you starting that business to make a profit?" he would reply: "Yes, that is my purpose". Then in the light of the noble Lord's speech, he would have to be told that that is not nearly enough and that he must say exactly what kind of profit it is—what degree of profit. But we are not dealing here with accountancy. We are dealing with the purpose of loss leading, which is surely that of selling goods cheaply to attract customers or to advertise that particular business.

LORD STONHAM

If the noble and learned Lord Chancellor will allow me to intervene, may I say that if I were to set up a business and someone asked me for what purpose I had set up that business, I would reply: "For the purpose of making a profit"; and I would say and mean a net profit after paying all expenses. But the noble and learned Lord Chancellor says "Not for the purpose of making a profit", but does not say what he means by profit. That is our objection.

THE LORD CHANCELLOR

I know that that is the noble Lord's objection. I was seeking to persuade him, though it is difficult, that the objection is ill-founded. We are not concerned here with whether it is a gross profit or a net profit; we are concerned with whether there is any purpose of making a profit. If you accept that the purpose of loss leading is to sell goods cheaply to advertise or attract customers, then that is what the supplier will have to show if he wishes to invoke this clause; that that was the purpose. The other side of the coin, if you are selling cheaply for that purpose, is that you are not selling them for the purpose of making a profit. I cannot myself see the slightest reason to enter into these refinements as the noble Lord has suggested.

When it is suggested that we should put the word "reasonable" in this context before the word "price", then I think the noble Lords' observations about the imprecision of this Bill will recoil on their own heads. I cannot think that that will serve any useful purpose at all. As my noble friend Lord Drumalbyn said, it is asking the wrong question to ask what sort of profit it is. What we are here concerned with is the purpose of the sale. We are not requiring here that the supplier should have access to all the books of the retailer to see what are the recognised trading costs for that particular class of business, for calculating out exactly what the profit is and then having to convince a court that it was an unreasonable and not reasonable profit or whether it was too great or too small. All that the supplier is concerned with is establishing that the purpose of the sale was to attract customers or advertise the business to attract customers to purchase other goods.

LORD LATHAM

May I ask a question which peradventure may be the right question? If the dealer can show that he has made a profit, whether it be gross or net, is he thereby discharged from all the other obligations of the clause?

THE LORD CHANCELLOR

I suppose that by the use of the words "dealer" the noble Lord meant "retailer". If the retailer can rebut the evidence to show that his purpose was not the purpose of selling cheaply to attract customers to his shop, then, of course, the withholding of supplies to him would continue to be unlawful. If, on the other hand, the supplier can come to the court and say in answer to the proceedings brought by the retailer: "I can satisfy the court on this evidence that I had reasonable grounds for believing that these sales of my goods at cheap prices were for the purpose of advertising or attracting customers to purchase other goods", then that was the object of the sale and not the object of earning profit on the sale of those particular goods. I am sure that that is the right test on this issue.

LORD HUGHES

I wonder whether I could revert to an earlier discussion between the noble and learned Lord the Lord Chancellor and the noble Lord, Lord Lucas of Chilworth, on the subject of free gifts. The noble and learned Lord the Lord Chancellor said that free gifts were not affected by the clause because the clause referred to the resale of goods, and if the goods were given away they were not being resold. I cannot understand why it should be considered against the public interest, or an offence, however it is described, to dispose of something for a sum which loses part of the money expended on its acquirement in order to attract business to the shop or to advertise the business, and it should not be considered an offence to lose the whole of the purchase price by giving it away for nothing.

I will return to the argument used by the noble Lord, Lord Lucas of Chilworth, in his mythical chemist's shop. First of all, he gave away hot cross buns and then dolls. The noble and learned Lord informed him that that would not be affected by the clause because he was not reselling them. He then put the terms slightly more to the customer's disadvantage by proposing to charge him 6d. for the doll—the presumption being that each doll had cost more than 6d.— and that then brought it within the terms of the clause. If it is considered to be against the public interest to lose part of your expenditure in acquiring the articles which are to become loss leaders, why should it not be against the public interest to lose the whole of it by giving them away for nothing? Having asked that question, may I ask what was the purpose of the noble Lord, Lord Drumalbyn, in quoting the Canadian Act on this subject, where, if I remember rightly, they most carefully did not use the words "sale" or "resale" but used an expression something like "use the goods for the purpose", which I presume would cover either selling at a loss or giving away for nothing?

THE LORD CHANCELLOR

I hope the noble Lord will forgive me if I do not enter into a discussion as to the relative merits of loss leading and free gifts. But the practice of giving away free gifts does not come within what is generally understood as loss leadering. If the noble Lord will look at subsection (2) he will see it is confined to the resale of the goods affected. That is what we are concerned with, and that is the subject to which I am addressing my remarks. Whether or not the practice of giving free gifts is against the public interest is not for me to say. It is not comprehended here. The question, as I understand it, is of the damage thought to be done by the practice of loss-leading, because the goods are sold at give-away prices for the purpose of attracting other customers to purchase other goods, or of advertising.

LORD HUGHES

I quite understand that, but why should the Government seek to act against someone, for instance, who sells sugar at a 1d. a lb. less than it cost him to buy the sugar and not act against someone who offers ½1b. of sugar free with every 5s. worth of purchases? Why should the first be against the interests of the sugar manufacturer and the second not require any action? I know perfectly well that the clause does not say anything about free gifts. My question was why, if a partial giving away is considered an offence, the whole giving away is allowed to escape?

LORD WALSTON

I enter into this discussion with some diffidence, because I have not had a great deal of experience of the retail trade. But what I understand noble Lords are taking exception to here is not whether a net or gross profit has been made, but whether a sale has been made with the object of attracting people into a shop or attracting them to buy what they otherwise would not buy. At one stage, I was a producer-retailer of milk, and I found that one of the best ways of increasing my sale of milk was by selling butter, margarine and eggs at the same time. I was not selling these to make a profit, but solely to get people to buy my milk. That sort of thing is fairly prevalent among small shopkeepers. especially those who are themselves producers of vegetables, dairy produce or eggs. If my understanding of what the noble Lord, Lord Drumalbyn, and the noble and learned Lord said is right, the supplier of butter and margarine would be entirely within his rights in refusing to supply his goods to the retailer of milk, because the retailer's object in selling the margarine and butter is solely to attract more customers. If that is so, I think that this is a strong indictment of the clause as it stands, because it acts directly against the interests of small shopkeepers and retailers, who are doing their best to provide their customers with a general range of goods, instead of the small range which they are normally or primarily selling.

LORD CHAMPION

I do not want to prolong this debate. So far as I am concerned, all the replies relating to the whole clause have been completely unsatisfactory, but in the circumstances I am prepared to withdraw my Amendment. We hope to divide on the clause, which I regard as wholly unsatisfactory.

Amendment, by leave, withdrawn.

On Question, Whether Clause 3 shall be agreed to?

5.44 p.m.

LORD SHACK LETON

It must be apparent to your Lordships that this clause is really unworkable. We have seen the Government wrestling with the difficulty of "profit" by avoiding any definition. We have seen the total impossibility of using any phrase like gross profit, or net profit, or mark-up, because gross profit means different things in different businesses. In some cases, it is mark-up less wastage; in others, it is the whole difference between the prices at which the goods are bought and at which they are sold. The only definition the Government seem able to apply is that loss leaders are goods sold for the purpose of attracting customers to a shop.

I am sure that the noble Lord, Lord Drumalbyn, must appreciate that in the retail business, especially in group activities, there are certain departments in which a profit is made and others in which probably no profit will be made, and that it is impossible for a business to say honestly whether they are selling certain goods for the purpose of making a profit on that class of goods. As my noble friend Lord Stonham said, the object of any business is to make a profit, but that does not necessarily mean making a profit on a particular class of goods or service.

When we look at the latter part of this clause, we see the attempts to meet the circumstances in which goods are sold other than for a profit on that class of goods. if somebody is clearing stock other than at a seasonal or clearance sale, is he making a profit or a loss? It is very probable that he may be making a loss on that particular class of goods. It is simply not possible to put into a single clause of an Act of Parliament the whole of trading practice within the retail trade. As my noble friends have made clear earlier, I believe that the Government have been stampeded into attempting the impossible, because of the false anxiety which has been conjured up by certain people. I do not wish to become too Party-political, but we know that pressures have been brought to bear. The result is that we are having some very bad legislation. I doubt whether any trader in this country (and perhaps I should declare an interest in this Bill, since I have one) is concerned about loss leaders.

Furthermore, this clause introduces restrictions which have never hitherto existed. Instead of being a Bill to free trade, in certain respects this is a Bill to restrict it. We know that resale price maintenance has largely gone within the food trade; and it is particularly here, as one can see in any departmental store or supermarket, that special offers are on display. There may or may not be a profit on them. This is a continuous merchandising technique designed to attract customers. Are the Government really going to make this potentially illegal? Are they really going to expose traders to restriction through particular suppliers?

The Government reply may be that it is unlikely that the suppliers will take any action, in which case this clause is largely futile. I would tell the Government that the opinion of many responsible people in the retail trade is that this clause is almost impossible to understand, and it is either going to be a dead letter or, if it is enforced, will be a serious restriction on trade, a restriction of a kind which I honestly do not believe the Government intend to bring about. I believe that their intentions are honourable, within the limits of the panic that has been thrown into them by certain activities in the country and in another place.

I suggest that any attempt to legislate against loss leaders is either doomed to failure or unnecessarily restrictive. I should like to see this particular clause dropped entirely from the Bill. Certain of the other clauses are difficult enough, though the noble and learned Lord the Lord Chancellor has defended their provisions with great clarity and effectiveness. But I think he has been quite ineffective on this clause, and I hope that we shall get rid of a useless and potentially dangerous piece of legislation.

LORD FRASER of NORTH CAPE

I do not often intervene in a Bill of this sort, but I feel that there is a grave danger of turning this House into a lawyers' paradise. It is all lawyers arguing with one another. Speaking as a simple sailor, I cannot understand a word of it. That may not matter very much, but I think that the simple shopkeeper, and perhaps the simple soldier, will not understand it either. I noticed that the noble and gallant Field Marshal left the Chamber halfway through, and he came back when noble Lords were talking about "loss leadership". I should like to quote a case. I was in a shop this morning to buy a tin of Maxwell House coffee. The price normally was 4s. 11d., but this morning it had gone up to 5s. 7d. I asked why, and they said that they had had a message through that that was the new price. I said: "I will not buy it". There were five housewives in that shop, and they all said they would not buy it, and walked out. That is the simple answer to all these terrific lawyers' questions.

THE LORD CHANCELLOR

That intervention has certainly lightened the atmosphere, but I must say that I am always astonished at what the layman's idea of a lawyers' paradise is. I should hope that the lawyers' paradise would be very different from discussing a Bill dealing with resale prices and questions of loss leading.

LORD LATHAM

It would be very hot.

THE LORD CHANCELLOR

It would be very hot. I listened to the powerful speech of the noble Lord, Lord Shackleton, but I am afraid that I do not agree with him. I do not know whether the noble Lord is in favour of the practice of loss leading or not; but perhaps that does not arise on this Bill. I should like to make it clear that all we are seeking to do by this particular provision is to avoid a situation in which a supplier is compelled to continue supplying for resale some goods which the retailer is using for what is commonly called loss leading. If we do not have this provision in this clause, then the supplier will have no escape from being compelled to supply the goods, unless he can bring himself within some part of Clause 2.

We are not making this a criminal offence. It really has nothing to do with the issue of the public interest, as was raised by the noble Lord, Lord Hughes, a few moments ago. Nor has the question of free gifts. I would say, in answer to the noble Lord (I should perhaps have given him the answer then), that in the case of free gifts, if a supplier does not like the practice he can withhold supplies, because it does not come within Clause 2 either.

If one realises that all this clause does is to prevent the supplier from being compelled to supply his goods to a person engaged in loss leading, I suggest to your Lordships that it is not right to describe it as unworkable or as very bad legislation or, indeed, as a clause impossible to defend. I find no difficulty in defending it. A lot of heavy weather has been made about the word "profit", owing, in my belief, to a misunderstanding of how the clause works. A lot of heavy weather has also been made before now on the use of the wont; "genuine seasonal or clearance sale". It has been suggested that the lawyers should seek to define that simple question of fact, as to what is a genuine seasonal or clearance sale. Nothing is more dangerous than to try to attach legal definitions to determinations of questions of fact.

I do not see any reason to suppose that this clause will not operate perfectly satisfactorily. The noble Lord, Lord Shackleton, says that he would like to see it dropped from the Bill. The effect of dropping it from the Bill would be that the supplier would not be entitled to withhold some supplies of his goods to the man engaged in loss leading, even though the supplier thought that indulging in that practice was doing his business considerable harm. We do not think it is right to put that burden and obligation upon the supplier. We think that in those circumstances the supplier ought to be free to say: "I will not supply my goods to you if that is what you are going to do with them." That is what we are seeking to secure by this particular clause. As to its language, while I have listened carefully to all that has been said I must say that I think the language is sufficient to achieve that purpose. I therefore ask your Lordships to keep the clause within the Bill.

LORD SHEPHERD

I should like to say one last word in regard to this clause. I have listened with great attention to the noble and learned Lord the Lord Chancellor, and on previous matters in relation to this Bill I think he has spoken with great conviction and has satisfied most of us. But with regard to this clause—not on what is the Government's intention, but on what is

Resolved in the affirmative, and Clause 3 agreed to accordingly.

Clause 4:

Civil remedies for breach of restrictions

4.— (4) If in proceedings brought against a supplier of goods in respect of a contravention of section 2 of this Act it is proved that supplies of goods were withheld by the supplier from a dealer, and it is further proved— (a) that down to the time when supplies were so withheld the supplier was doing business with the dealer or was supplying goods of the same description to other dealers carrying on business in similar circumstances; and drafted in the Bill—I do not think that is the case. I agree with my noble friend Lord Shackleton, that, from a practical trading point of view, it will be unworkable. I do not think it will have any basic effect in dealing with loss leadership, but I think it may well create great difficulties in the retailing trade in regard to the disposal of lines. In those circumstances, merely on the drafting of the Bill, I would suggest that the Committee should vote against this clause.

6.0 p.m.

On Question, Whether Clause 3 shall stand part of the Bill?

Their Lordships divided: Contents, 52; Not-Contents, 30. (b) that the dealer, to the knowledge of the supplier had within the previous six months acted as described in paragraph (a) of subsection (1) of that section, or had indicated his intention to act as described in paragraph (b) of that subsection in relation to the goods in question, it shall be presumed, unless the contrary is proved, that the supplies were withheld on the ground that the dealer had so acted or was likely so to act: Provided that this subsection shall not apply where the proof that supplies were withheld consists only of evidence of requirements imposed by the supplier in respect of the time at which or the form in which payment was to be made for goods supplied.

CONTENTS
Ailwyn, L.	Gorell, L.	Massereene and Ferrard, V.
Ampthill, L.	Goschen, V. [Teller.]	Milverton, L.
Blakenham, V.	Grenfell, L.	Monk Bretton, L.
Boston, L.	Hanworth, V.	Monsell, V.
Carrington, L.	Hastings, L.	Montgomery of Alamein, V.
Chesham, L.	Hawke, L.	Napier and Ettrick, L.
Cholmonsdeley, M.	Horsbrugh, B.	Redesdale, L.
Coleraine, L.	Hurcomb, L.	St. Aldwyn, E. [Teller.]
Colville of Culross, V.	Iddesleigh, E.	Sandford, L.
Conesford, L.	Jellicoe, E.	Sinclair of Cleeve, L.
Denham, L.	Jessel, L.	Spens, L.
Derwent, L.	Lansdowne, M.	Strang, L.
Devonshire, D.	Long, V.	Strange of Knokin, B.
Digby, L.	Lothian, M.	Stratheden and Campbell, L.
Dilhorne, L. (L. Chancellor.)	Luke, L.	Stuart of Findhorn, V.
Drumalbyn, L.	Mabane, L.	Tangley, L.
Ferrers, E.	McCorquodale of Newton, L.	Wakefield of Kendal, L.
Fortescue, E.

NOT-CONTENTS
Addison, V.	Hobson, L.	Samuel, V.
Attlee, E.	Hughes, L.	Shackleton, L.
Burden, L. [Teller.]	Latham, L.	Shepherd, L.
Burton of Coventry, B.	Lindgren, L.	Silkin, L.
Champion, L.[Teller.]	Lindsay of Birker, L.	Sinha, L.
Fraser of North Cape, L.	Listowel, E.	Stonham, L.
Gaitskell, B.	Lucas of Chilworth, L.	Summerskill, B.
Gardiner, L.	Mottistone, L.	Walston, L.
Greenhill, L.	Peddie, L.	Williams, L.
Henderson, L.	St.Davids, V.	Willis, L.

6.7 p.m.

LORD GARDINER moved, in Subsection (4), to leave out "it shall be presumed, unless the contrary is proved", and insert: the Court may decide". The noble and learned Lord said: This is a clause which deals with the onus of proof, and the object of the Amendment is to give the court a greater discretion than it now has in relation to the onus of proof in the clause as at present drafted.

As the Committee will remember, Clause 4(4) provides that in proceedings which are brought by the retailer against his supplier for either some mandatory injunction or damages for breach of statutory duty, the retailer who brings the action has, of course, to prove, first of all, that he asked for supplies from the dealer, the supplier, who is the defendant to the action, and that they were withheld from him. Then he has to prove that, down to the time when supplies were so withheld, the defendant in the action was doing business with the dealer or was supplying goods of the same description to other dealers carrying on business in similar circumstances. Then he has to prove that the dealer, to the knowledge of the supplier, had within the previous six months acted as described in paragraph (a), that is to say, that he was price-cutting, or, as in paragraph (b), that he had indicated his intention of so doing. When he has proved all those things, then the subsection as at present drafted provides that it shall be presumed, unless the contrary is proved, that the supplies were withheld on the grounds that the dealer had so acted or was likely to so act.

It is, of course, very unusual in legislation to provide that an onus of proof is put upon the defendant against whom the action has been brought. We suggest that there is no reason why at that point, once the retailer has proved all those things, the rest should not be left to the court itself to decide, free from any presumption one way or the other. It contemplates the situation in which the retailer has already proved all those things which he is required to prove. There may then have been a variety of reasons operating in the mind of the supplier refusing supplies, and we cannot see why the court should be circumscribed to the extent to which it is circumscribed by the presumption which is provided for in the present clause as drafted. Accordingly, we suggest that there should be omitted the presumption, that is to say, the words, "it shall be presumed unless the contrary is proved", and that we should insert simply: "the court may decide", leaving it at that point for the court to decide on the evidence before it, free from any presumption. I beg to move.

Amendment moved— Page 5, line 5, leave out from beginning to ("that") and insert ("the Court may decide").—(Lord Gardiner.)

THE LORD CHANCELLOR

I must advise your Lordships not to accept this Amendment. In fact, the effect of accepting it would be to destroy the whole purpose of subsection (4), and, indeed, this is another way, really, of saying that subsection (4) need not be in the Bill at all. The noble and learned Lord, Lord Gardiner, has described to some extent the operation of subsection (4) and your Lordships will see, when one looks at that subsection, that the first thing which has to be proved before the presumption arises is that supplies of goods were withheld by the supplier; that is, withheld within the meaning given to the word "withheld" by Clause 2. Then it must also be proved that down to the time when supplies were so withheld, the supplier was doing business with him or was supplying goods of the same description to other dealers carrying on business in similar circumstances; and that the dealer, to the knowledge of the supplier, had within the previous six months acted as described in paragraph (a) or had indicated his intention to act as described in paragraph (b) of that subsection in relation to the goods in question.

Once those matters are proved, we think it is right to create the presumption that the supplies were withheld on the grounds that the dealer had so acted or was likely to act; that is to say, withheld on the grounds mentioned in Clause 2(1)(a) and Clause 2(1)(b), because the grounds on which the goods were withheld must be peculiarly within the defendant's knowledge in these proceedings. It is on that basis, and not on the mere fact of proof—because the grounds must be in the defendant's knowledge—that we think, on those facts being established, it is right to put the onus on the defence and to presume, unless the contrary is proved, that the goods have been withheld (to put it in ordinary language) because of price-cutting.

I must say that I am afraid—I naturally considered the point when I saw the noble and learned Lord's name on the Amendment—he desires to leave it entirely open to the court to decide that the goods were withheld on the grounds that the dealer had engaged in price-cutting. It is not necessary to say that in the Statute. In my belief it is right here, bearing in mind that we are dealing with the grounds on which the goods were withheld, and those facts are particularly within the defendant's knowledge, on the proof of the matters mentioned in this clause, to say that this presumption will arise unless the contrary is proved by the man who knows his actual grounds for withholding those supplies. For those reasons I must advise your Lordships to resist this Amendment.

LORD GARDENER

I would, of course, entirely agree that this is very much a matter of opinion. It had seemed to some of us, having put the onus quite rightly on the retailer who brings the action to satisfy the court of all these things which the subsection requires him to satisfy the court upon, that it was going rather far then to impose the presumption on the defendant against whom the action was brought, and that it could safely have been left to the court to make up its own mind, free from presumption either in favour of or against the subject matter there in question. I appreciate this is indeed a point on which more than one view can be held; and having heard what the noble and learned Lord has said, I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD JESSEL

This is a small drafting Amendment only. I beg to move.

Amendment moved— Page 5, line 11, at end insert ("supplied or to be").—(Lord Jessel.)

LORD DRUMALBYN

I think this is perhaps partly a question of judgment as to whether this is correct as it stands or whether the words should be added, but we are quite happy about the Amendment and shall be glad to accept it.

On Question, Amendment agreed to.

On Question, Whether Clause 4, as amended, shall stand part of the Bill?

LORD CONESFORD

I rise only to point out what is, I think, an obvious misprint. Perhaps in the next printing of the Bill it might be corrected. There is a quite mad comma in line 44 of page 4.

THE LORD CHANCELLOR

I will tell my noble friend that that had not entirely escaped our notice.

Clause 4, as amended, agreed to.

Clause 5:

Power of Court to exempt classes of goods 5.

(2) An order under this section directing that goods of any class shall be exempted goods may be made by the Restrictive Practices Court if it appears to the Court that in default of a system of maintained minimum resale prices applicable to those goods—

1. (a) the quality of the goods available for sale, or the varieties of the goods so available, would be substantially reduced to the detriment of the public as consumers or users of those goods; or
2. (d) the goods would be sold by retail under conditions likely to cause danger to health in consequence of their misuse by the public as such consumers or users; or
3. (e) any necessary services actually provided in connection with or after the sale of the goods by retail would cease to be so provided or would be substantially reduced to the detriment of the public as such consumers or users,

and in any such case that the resulting detriment to the public as consumers or users of the goods in question would outweigh any detriment to them as such consumers or users (whether by the restriction of competition or otherwise) resulting from the maintenance of minimum resale prices in respect of the goods.

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

6.19 p.m.

LORD GARDINER moved in subsection (2), to leave out paragraph (d) and insert: (d) that, arising from the consumption or use of the product in question, there would be a danger either to public health or to the health and safety of any person buying the product.

The noble Lord said: This clause, of course, deals with the well-known "gateways" and the object of this Amendment is to raise for the Committee's consideration a short point which arises under "gateway" (d), the case in which the goods would be sold by retail under conditions likely to cause danger to health in consequence of their misuse by the public, as such, the consumers or users. It seems to some of us that safety and danger to health are not the same things. We know difficulties which have arisen in relation to oil heaters and electric fires and matters of that kind, and that this particular "gateway" ought, therefore, to provide not only in relation to health but in relation to safety of the individual buying the product. I beg to move.

Amendment moved— Page 6, line 4, leave out paragraph (d) and insert new paragraph (d) as printed.—(Lord Gardiner.)

LORD DRUMALBYN

Perhaps I might be allowed to point out the differences this Amendment would make. First of all, it omits any reference to the conditions under which the goods are sold. Secondly, it omits any reference to the misuse of the goods in consequence of these conditions. Thirdly, it widens the incidence of danger, if I might put it that way, to the health of the public as users or customers, to danger either to public health or to the health and safety of any person buying the product. I think it would help the Committee if I were to indicate why we introduced this gateway, because it is germane to the consideration of this particular Amendment.

It was done to fill a gap in the fifth gateway which refers to services actually provided, and does not cover the eventuality that, in default of resale price maintenance, the product might be handled by shops which had not handled it before and which might not provide the necessary services provided under gateway (e), with the consequent danger to health through the misuse of the goods. It is limited to conditions under which the goods are sold, because any reduction of quality that might constitute a danger to health is covered by the first gateway. So, of course, would any reduction in quality due to an action by a dealer.

The gap to be filled, therefore, lies in the possibility of misuse b the public in consequence of failure to provide necessary services on the part of the dealer who has not hitherto handled the product and may not be qualified to provide them. Danger to health is defined as danger to the public in the same way as all the other gateways arc limited to detriment to the public at large. We believe that it should be for the Court to determine in each case what constitutes detriment or danger to the public, having regard to the circumstances of that case and the likelihood of misuse and the extent of such misuse. We believe that the gateway as it stands adequately fills the gap which existed in the gateways as they stood, in that it covers the possibility of danger to health arising from the handling of the product by dealers not at present handling the goods and not qualified to give the necessary services to forestall misuse. I think it is worth while making these points not only for this Amendment but looking forward to the other ones.

The Amendment is, if I may say so, in rather wide and imprecise terms and would give no guidance to the Court as to the circumstances in which the ending of resale price maintenance might result in danger to health. We have sought throughout to keep the danger specific and precise. The noble and learned Lord says that we should specify safety as well as health. We are informed that "health" would cover everything that has to be covered here, inasmuch as any injury to the person would be an injury to health, and it would cover this precise gap. But we are perfectly prepared to consider what the noble Lord has said on this particular item as to whether safety should also be added. In view of what I have said, I hope that the noble Lord will withdraw his Amendment.

LORD GARDINER

May I say that, speaking for myself, I do not dissent greatly from the observations which the noble Lord made about the terms of the Amendment. And the sole point is to include provisions so far as safety is concerned. One view may be that danger to health may include safety. But others take a different view, and no doubt when the noble Lord comes to reconsider it he will consider whether or not there is any real objection to putting in words in order to make it quite plain.

THE LORD CHANCELLOR

I am not at all sure that this safety consideration is not already comprehended within gateway (a),—"anything which is to the detriment of the public". Something which constituted danger to safety would certainly be "to the detriment of the public". I think it is covered, but I will consider it again.

LORD GARDINER

I think the difficulty there was whether the word "quality" in paragraph (a) would include considerations of safety. This matter was discussed in another place, and the general feeling was that the word "quality" would not cover safety and that we ought to cover safety. Subject to that, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.23 p.m.

VISCOUNT HANWORTH moved, in subsection (2)(d), to leave out "the public as such The noble Viscount said: With the permission of the Committee, I will speak to this Amendment and also to Nos. 22, 27 and 28. The later Amendments are consequential, and I think it is possible that the Amendment I am moving now is largely one of drafting. If we look at the gateways we shall find that in each of them we have a phrase used by the public as consumers or users ". It has been held in a recent case, Re Black Bolts and Nuts Association Agreement, that when you use that term, "the public as users or consumers", it means that a substantial proportion, or possibly even a majority, of the public must be affected. That is a perfectly reasonable interpretation for all the gateways except, I maintain, the fourth, that is paragraph (d), which says: the goods would be sold by retail under conditions likely to cause danger to health in consequence of their misuse by the public as such consumers or users … I think for that to be effective one has to envisage that there may be a misuse by quite a small section of the public, and it is to avoid the possible interpretation of which I have spoken that I move this Amendment.

It may be contended that this would to some extent widen the gateway, but I do not think this is so to any appreciable extent, because there is the proviso at the end of all the gateways which says: and in any such case that the resulting detriment to the public as consumers or users… would outweigh any detriment to them as such consumers or users (whether by the restriction of competition or otherwise) resulting from the maintenance of minimum resale prices in respect of the goods. I beg to move.

Amendment moved— Page 6, line 6, leave out from ("by") to ("consumers").—(Viscount Hanworth.)

THE LORD CHANCELLOR

My noble friend has put the case for these three Amendments, if I may say so, very clearly and, indeed, persuasively. I hope he will not be unduly disappointed when I say that we cannot accept his proposals. The words to which he refers and which he wants left out, both from paragraph (d) and also from the tailpiece (and I think the Amendments to the tailpiece are consequential) have some definite significance. The requirement that the court must be satisfied as to some detrimental effect on the public generally is common to all the gateways in Clause 5, and we believe that that is the right test to apply in relation to each gateway. It is also in line with the related provision in Section 21(1) of the Restrictive Trade Practices Act, 1956. But of course this does not mean that every single member of the public must be liable to suffer harm.

My noble friend referred to the Black Bolts and Nuts Association Agreement case. In that case the Court indicated that under the Act the test would be the effect on the consuming and using public as a collective whole. We think that that is right, and that it should be expressed in relation to (d) as, indeed, to the other parts. Our view is that the relevant consideration in all the gateways is possible detriment to the public generally. It would be for the Court in a particular case to determine what constitutes detriment to the public, having regard to the circumstances in the case. I do not think there is any justification for departing from this principle in the fourth gateway. The Court will no doubt take account of the fact that likely misuse by the public is an issue affecting health and safety. I hope I have said enough, if not to convince my noble friend of the rectitude of having these words in the Bill, at least to make it clear to him why we feel they must be retained.

VISCOUNT HANWORTH

I am not entirely satisfied that retaining these words as they are in the Bill will allow for the possibility of dealing with the case where only a small number of the public are having their health dangerously impaired. However, I put this Amendment forward largely on the basis that it was a matter of drafting, and I do not wish to press it. I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD JESSEL moved, in subsection (2)(e), after "reduced" to insert "or the price thereof would be increased". The noble Lord said: Many goods under the general class of consumer durables—for instance, washing machines and television sets—require at the time of their installation or by way of after-sales service what Clause 5 defines as "necessary services". These are usually given free by the dealer, or are subject to a small charge. I suggest that when the abolition of resale price maintenance really gets into its stride there will be fierce competition and price-cutting between dealers and suppliers, and they will naturally be tempted to make their sales by striking reductions in price and then recoup themselves by making additional charges for the services which they provide. In fact, in the end, the purchaser may well be worse off than he was before, because the total cost to him of the goods which he has bought and the services which he must have will be higher. Unless this suggested Amendment is made, this argument will not be valid before the Court but only that argument which is now in the Bill: that the services themselves would be substantially reduced. I think that a reduction in the services is much less likely than an increased charge for them. This Amendment would not affect the principles of the Bill in any way. The Court would still have to weigh any detriment which might result from an increase in the cost of the necessary services against the detriment which might result from the continuance of resale price maintenance in the goods in question. I think this is an important Amendment, and that the point I raise is something which the Government may well have overlooked. I beg to move.

Amendment moved— Page 6, line 10, after ("reduced") insert ("or the price thereof would be increased").—(Lord Jessel.)

LORD REDESDALE

There is little I can add to what the noble Lord has just said. There are certain domestic appliances which require these services —for example, they require adjustment. Certain automatic machines have pressure sensitive valves which have to be adjusted, and so on. Domestic appliances are items which can be dangerous to the public if they are incorrectly used or set up. Consequently, these services are most important. The noble Lord has already said that this Amendment does not affect the principle of the Bill, but I believe it sharpens up this particular clause. Consequently, I should like to support what he has said.

LORD DRUMALBYN

The noble Lord, Lord Jessel, has moved this Amendment most persuasively, but I am afraid that it is not one that we can accept—for this reason: that we have always said that it should be open to the consumer to choose whether or not to pay money which includes the price both of the goods and the services, or to pay for the goods and for the services separately, if he wants them. It does not, of course, follow, because services are necessary that in all cases the consumer will want them. He may very well be able to supply them himself. He may be qualified to do this.

The Government believe that in a free enterprise economy the economic price or charge is normally the right price. It may be true that at the present time the services branch of a firm is being subsidised from the sales branch. That is a matter for commercial judgment. It is not uncommon for a business to depend on one department for a disproportionate share of its profits. But it is surely another matter to argue that resale price maintenance on goods is necessary in order to subsidise the provision of services. This must mean that customers buying the goods are paying a higher price in order to subsidise customers buying the service. I suggest to your Lordships that it is far better that people should pay the economic price for both the goods and the services as and when they require them.

It is not easy to establish in all cases what are necessary services and what services the public want, but in a free enterprise society the way to establish what the public want surely is to remove artificial barriers to competition, like resale price maintenance, and then let demand create a supply. For these reasons, I do not think it would be right to include the additional words suggested by the noble Lord—namely, "or the price thereof would be increased." We think it would be right for both the price of the goods and the price of the services to find their correct level.

LORD JESSEL

May I ask the Minister one small question, for clarification? I think he said that if the consumer did not like the charges he could supply his own services. I do not quite follow that. In the case of a television set, you must have the technical ability and the knowledge. I, personally, could never service my own television set, and no doubt there are few Members here who can. Is the noble Lord really suggesting that that is an answer?

LORD DRUMALBYN

Certainly I share the noble Lord's inability to deal with these problems; but there are many people who would be able to cope with them or, for example, have neighbours who would be able to provide the necessary services. It is not at all essential that we should insist in the Bill on a single price being quoted which covers both the goods and the services; nor is it necessary that we should make it possible by including in the gateway a provision that the price of something which is separate from the goods, the services, would go up—that we should include that in the gateway as an argument for an exemption from the provisions for resale price maintenance. It would be most difficult to balance where the advantage of the consumer lay, whether in lower prices for the goods or in higher prices for the services, if indeed the services were to go up. It would be extremely difficult for the Court to say what would be likely to happen in those cases. I am afraid it is not really a practical consideration, and we prefer the philosophy of the Bill as a whole.

LORD JESSEL

I cannot pretend that I am pleased with the answer, but I am not going to the stake for it. In those circumstances, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

I do not know whether all your Lordships will agree, but I think we have made good progress to-day. We have had some most interesting discussions. I have been looking at the list of Amendments and I feel confident that, with co-operation, we shall be able to complete the Committee stage to-morrow without sitting to an unduly late hour. Therefore, to avoid sitting to-night to an unduly late hour, I would beg to move that the House do now resume.

Moved, That the House do now resume.—(The Lord Chancellor.)

LORD SHEPHERD

May I say to the noble and learned Lord the Lord Chancellor, that we on this side of the House are always co-operative in the Business of the House. I think his expectations will bear fruit.

On Question, Motion agreed to, and House resumed accordingly.