RESTRICTIVE TRADE PRACTICES (INFORMATION AGREEMENTS) ORDER 1969

HL Deb 15 December 1969 vol 306 cc858-69

4.56 p.m.

THE MINISTER OF STATE, MINISTRY OF TECHNOLOGY (LORD DELACOURT-SMITH)

My Lords, it may be for the convenience of your Lordships if I recall very briefly the background to this Order. The Restrictive Trade Practices Act 1956 was introduced to prevent harmful restrictive trading practices and has, since it became law, had a good deal of influence. But even though this legislation dealt satisfactorily with undesirable forms of restrictive agreements, such as those under which competing firms agreed on prices which they would charge, experience has shown that in some cases such agreements are being replaced by agreements of a new type: that of the price information agreement. Under such agreements companies keep each other informed about charges which they are imposing, or which they propose to impose, and it has been found that these can often have the same practical effect as straightforward price agreements.

Because there was a danger that the whole object of the 1956 Act might thus be circumvented, the Government took additional powers under the Restrictive Trade Practices Act 1968 to call up for registration and examination a wide range of agreements of this new kind. The 1968 Act gave power to the Board of Trade—and the power has passed, as noble Lords will know, to the Department of Employment and Productivity—to make orders calling up agreements relating to many different aspects of trading arrangements: prices, terms and conditions of sale, cost, qualities and descriptions of goods produced, persons supplied or acquiring goods, and areas or places in which goods are supplied.

The Order which I am moving is the first Order under this Act, and it has been decided to keep it to a relatively narrow field. It will call up for registration agreements relating to prices and terms and conditions of sale. The Order does not, of course, exhaust the order-making power under the Act, but it is likely to cover those types of information agreements which can be most readily used as a substitute for price-fixing agreements. In the light of experience there may, in due course, have to be further orders—for example, relating to information about costs, which can also be a mere substitute in some cases for price fixing. The present Order is, in fact, so framed as not to make registrable the exchange of information between buyers about prices which they have paid or are being called upon to pay. Clearly, such information is much nearer to cost information, and it would have to be considered in the context of any Order relating to costs.

The other major point which I must make is to draw attention to the Schedule to the Order, which sets out the information agreements to be excluded from the general call-up. We have always recognised that even in the class of price information agreements there are certain categories of such agreements which are desirable and beneficial in the national interest, and the objective in drafting the present Order has been so far as possible to exclude beneficial categories of agreement from call-up. I should say that in drafting these exclusions we have benefited a great deal from the extensive consultations we have had with industry, with the Confederation of British Industry and with trade associations during the last few months since the period in February when, as the Act required, we published a notice of the matters which we intended to cover in this first Order. Since then we have studied very carefully the representations received in response to that notice.

I think it would be convenient, my Lords, if I tried to indicate briefly the effect of the more significant exclusions which are contained in the Schedule, although I need hardly say in such a case as this that all I can do is to give a broad summary, and that it is necessary for anyone considering the effect in any particular case to study the Order itself. First of all, the Schedule excludes information agreements relating to exports. Without this exclusion, industry would find itself obliged to deposit with the Department of Employment and Productivity all export information agreements under the special provisions relating to exports in the 1956 Act. Second, we are excluding information agreements which are needed in connection with the supply of statistical or other information to Government Departments and other public authorities. I am sure that the reason for this exclusion will be self-evident. We do not want to upset the arrangements for the collection of valuable statistical information or the arrangements for consultation between industry and Government.

The third category of exclusions relates to those cases where the information is already public or is being collected with a view to publication, not for the private purposes of the firms concerned. We consider that in such cases it would not be sensible to require the agreements involved to be registered. The fourth category is that of information agreements which are incidental to types of restrictive agreements which are themselves exempt from registration under the 1956 Act. We must clearly ensure that these do not become subject to registration as a consequence of this Order. Lastly, there are provisions relating to the rather special positions of the Agricultural Marketing Boards and the nationalised gas and electricity industries.

My Lords, the intention is that, subject to the approval of Parliament, the Order should come into operation on February 1, 1970. This date, rather far ahead, has been chosen so that there can be, it is hoped, time between the making of the Order and its coming into operation for industry to become aware of its provisions and to consider its effect upon any agreement which may exist at the moment. When the Order comes into operation, agreements existing at that time will have to be registered with the Office of the Registrar of Restrictive Trading Agreements within three months. The Registrar, when the agreements have been registered, will consider in the case of each agreement whether its provisions are of such significance as to call for investigation by the Restrictive Practices Court. In the event that he does not regard the provisions as significant, he may make representation to the Secretary of State, who may in turn give a direction that the agreement should not be referred to the Restrictive Practices Court. In the event that this does not take place, the agreements will be examined in due course by the court, and they are of course deemed to be contrary to the public interest unless the court is satisfied that there is justification for the agreement in terms of the public interest in the circumstances of the particular case under one of the heads set out in the legislation.

My Lords, I have mentioned this procedure to bring out the fact that registration does not of itself mean that agreements are automatically condemned. Indeed, I would expect that any clearly beneficial agreements which happen to remain in the categories being called up will not, in the event, have to be examined by the court. This Order represents a further step in the effort under the restrictive practices legislation to bring to an end types of agreements in industry which are harmful to the public interest because they distort or prevent competition. With the explanation I have given of the contents of the Restrictive Trade Practices (Information Agreements) Order 1969, I invite the House to give approval to the draft Order laid before it. I beg to move.

Moved, That the Draft Restrictive Trade Practices (Information Agreements) Order 1969, laid before the House on 26th November last be approved.—(Lord Delacourt-Smith.)

5.5 p.m.

LORD DRUMALBYN

My Lords, first of all I should like to thank the noble Lord, Lord Delacourt-Smith, for the very clear way in which he has explained the purposes of this Order to your Lordships. He has made it clear that this is a subject which has been under consideration for some time; and, indeed, I do not think I can do better than quote the report of the Registrar for the period July 1, 1963, to June 30, 1966, when he says: It is I think unnecessary further to argue the proposition that registration and examination by the Restrictive Practices Court of information agreements are desirable, since I think it has been accepted by all Parties in Parliament". That, of course, is so, as was made clear when we had before us the 1968 Act, when my noble friend Lord Jellicoe gave his support particularly to the provisions regarding information agreements. Since then we have had, as the noble Lord said, the Transfer of Functions Order, and now we have this Order; and the noble Lord has explained to your Lordships the reason why the Order has been limited to the price at which and the terms and conditions on which goods are supplied—and, perhaps it is right to add, the processes of manufacture which are applied to goods.

My Lords, I gather from what the noble Lord has said that it is still the intention of the Government subsequently to introduce an Order or Orders to cover the other points referred to in Section 5 of the Restrictive Trade Practices Act 1968, and to which he referred; that it to say, such as … quantities or descriptions of goods … costs incurred or to be incurred … processes of manufacture … and the persons or classes of persons to or for whom goods have been or are to be supplied … I would ask the noble Lord to confirm that this is his intention, because if it is I think it would be well that industry should know that now and not think that, simply because the Government have thought fit to introduce this Order of a restricted character (of a modest character; shall I put it in that way?) to start with, it is not their intention subsequently to cover the other subjects.

I think I am right in saying that representations were made to the Board of Trade (as I suppose it was at that time) that the Order should be so restricted, and what I am really asking is whether the Government have accepted those representations in the sense that this Order should be restricted to these particular purposes of price and terms and conditions, or whether the Government have come to the conclusion that the other parts of Section 5 of the 1968 Act do not need to be implemented. Of course, my Lords, it may well be that the reason for proceeding in this way is not to give the Registrar indigestion, so to speak. He will have quite a formidable task, no doubt, after the day appointed for this to come into operation, February, 1, 1970, in coping with the registration within the three months thereafter of all these various information agreements, and I am sure the Government were right to restrict the Order, even if it is only for that reason, to price and terms and conditions.

My Lords, the noble Lord referred to the various degrees of processing that such information agreements have to go through, and I should like to ask him how long this process takes. First of all, the Registrar has to consider the agreement, and possibly investigate it. Then, if he so decides, he may either apply to the Secretary of State for a declaration that the effect of the Order on the public interest is insignificant or he may decide to take the case to court. The reason why I think it important to ask this question is (I think I am right in saying) that until a decision has been reached—that is, until either the Secretary of State has said that the effect of the agreement is insignificant or the court has decided it is not unlawful to operate the agreement—people will not know where they are. So the time taken is obviously a matter of considerable importance.

It is perhaps also worth mentioning that, while restrictive trade agreements have only rarely got past the Restrictive Practices Court, there is a fair likelihood that the proportion of information agreements getting through may be greater, because of the addition in Section 10 of the 1968 Act of the new paragraph saying restriction does not directly or indirectly restrict or discourage competition to any material degree in any relevant trade or industry and is not likely to do so. The addition of that to the "gateways" in the 1956 Act may mean that a higher proportion of information agreements may get through than has been the case with restrictive agreements in the past.

There is one aspect of this matter to which I think I ought to refer. Information—intelligence if you like—passes very freely in the market, and in many cases the operation of information agreements is designed simply to ensure that the information which passes is accurate: the agreement has no restrictive intent. The information in some form or another will pass round the market pretty quickly. The reason I say this is that we are dealing here with restrictions that do not give rise to any criminal prosecutions, and the effect of failing to register an agreement is simply, as I understand it, that any person who is adversely affected, or thinks he is adversely affected, by that agreement, if it exists, may apply to the courts and bring a civil action in order to obtain damages for such injury as he may have suffered. The danger of actions brought in this way is that in many cases there may be a false inference of the existence of such an agreement where in fact no agreement exists, the information having passed in the normal way—for example. a market leader's price has been followed as soon as it became known in the market.

My Lords, I have every confidence in the judgment and skill and fairness of the Registrar, and there is no doubt that things have worked extremely well so far. Indeed, the confidence of industry has probably been enhanced rather than the reverse through the operation of the Restrictive Trade Practices Act. Nevertheless, there is the danger that, with the calling up of these information agreements, a situation might arise in which pressure built up for investigations to be made by the Registrar, or indeed by the courts on discovery (my noble friend will put me right on this), to the point at which industry began to lose confidence in co-operation. I know that this is the last thing the Government want, always provided of course that the co-operation is in the public interest and not against it. I say this because I think that the working of these information agreements, or of this first instalment, as I think it is, needs to be watched pretty carefully in the first two or three years and I hope that we shall in due course have another report from the Registrar on the working of this particular Order, possibly before the Order is extended. This may be desirable.

I would express the hope—and so far as the Registrar is concerned I think I can express it with confidence—that the Order will be operated in such a way as not to destroy the confidence of industry or their co-operation for all good purposes, but I feel that there is the danger that confidence could be undermined if there were a large number of private civil actions. This is the only danger that I see in this Order. Apart from that, I give it the utmost support.

LORD BEAUMONT OF WHITLEY

My Lords, this is one further step in a process, which has been going on for some time, to restrict restrictive practices themselves. It is something which needs to happen throughout the whole economy, not merely in this particular field, and it is something which I think is happening. There are various areas which need more attention, and I hope to have time to mention one or two of them to your Lordships' House when, later this week, we come to consider prices and incomes. Meantime, I would merely say that we on these Benches warmly welcome this Order as a step forward towards greater competition. As the noble Lord, Lord Drumalbyn, said, there is always a balance to be maintained between competition and co-operation. While I would be the last to say that we should move away from co-operation in most parts of our society to-day, there can be little doubt that we have in the past suffered from too much co-operation between certain sections of the economy, possibly to the detriment of other sections of the economy. I think that we have to continue to fight this and we give this Order a wholehearted welcome.

LORD KIRKWOOD

My Lords, I am entering this discussion without any prepared notes but as one who has been before the Restrictive Practices Court on behalf of an association (I should declare my interest), the National Suphuric Acid Association. We went before the Restrictive Practices Court on two occasions, and in both instances the case against us was withdrawn: it was unfounded. But in the course of this investigation we were involved in legal expenses amounting to nearly a quarter of a million pounds. That cost had to be borne by industry, and I hope that, if there is going to be a further examination of the Restrictive Practices Court and the method by which associations are called before it, prior investigation will be made in such a manner as will not involve the calling of evidence which could not be substantiated in a proper court.

One of the points I was particularly concerned about, apart from the very expensive legal costs, was the involvement of senior executives in the chemical industry with whom I had to go into discussion for a period of nearly twelve months in answering the case which the Registrar had brought against us. I would suggest that the legal costs were infinitesimal compared with the costs that the chemical industry incurred because individuals in the industry had to concentrate on a restrictive practice case rather than on their own proper business. May I say that the National Sulphuric Acid Association is an association of those chemical producers in this country who purchase their sulphur in bulk form for the whole of the industry. The Association's object is to keep the price of sulphur on a very stable basis, and the chemical industry in this country is to-day enjoying a sulphur price unequalled in any other part of the world.

5.21 p.m.

LORD DELACOURT-SMITH

My Lords, I am very pleased at the welcome which, in general, this Order has received. As the noble Lord, Lord Drumalbyn, has said, the general approach of the legislation upon which it is based is one which is accepted by all Parties. He asked a number of questions to which I shall try to reply. He asked, in the first place, whether the relatively restricted character of the present Order was to be taken as indicating that the Government had decided not to make other Orders under the 1968 Act embracing other types of information agreements. The position is that no decision has been taken about the introduction of Orders relating either to costs or to any other aspect of information agreements covered in the original Act. But I am sure that the noble Lord will bear in mind that, in the event of the Government deciding to lay further Orders under this Act, there is a procedure (which, as I have said, we have observed in the present case) which requires a substantial period of notification to industry and the opportunity to make representations; and, of course, such representations are very carefully considered. The noble Lord was right in saying that there have been representations on the particular point to which he drew attention. He was also right in saying that a substantial influence in deciding the shape and scope of the present Order was the desire not to face the Registrar of Restrictive Practices with an indigestible task.

The question of the period of time that the process takes is one which is difficult to answer. The extent of investigation required in a particular example depends on the nature of the agreement, on its provisions, on how those provisions operate in practice and on many other factors. On the other hand, it may be possible to refer some agreements to the court with very little delay at all and the cases then do not take any substantial period of time. Therefore, I cannot really give a general answer to that particular question. I can confirm that, as the noble Lord said, until a particular agreement has been before the Restrictive Practices Court and has been declared by that court not to be consonant with public interest, there is nothing illegal about the agreement.

My Lords, the noble Lord, Lord Beaumont of Whitley, also joined in the welcome given to the Bill. I took note of the fact that he will be raising at a later stage this week some points which are germane to this afternoon's discussion. As the noble Lord, Lord Kirkwood, has indicated, very real problems arise for industry from the operations of this Act. I think that one can only say that while these procedures are time-consuming and may be expensive, nevertheless the general sense of public opinion, and certainly the view of Parliament, has been that this is a very important field of commercial and industrial activity and one that requires provisions of the kind that Parliament has approved.

LORD KIRKWOOD

My Lords, may I interrupt to make the point that it is a very serious matter when the Restrictive Practices Court call in an association twice and on the second occasion withdraw the case when it is halfway through? What I am objecting to is the procedure by which evidence is assembled before an industry is brought before the Restrictive Practices Court. I trust that great care will be taken before anyone is brought to the court once: but that there will be even greater care if they should be brought to the court twice.

LORD DELACOURT-SMITH

My Lords, I think that coincides with the point that I was just going to make and, more particularly, in relation to the concluding point made by the noble Lord, Lord Drumalbyn. He spoke about the repercussions which could arise in industry from this legislation and this Order and about the necessity for keeping under review the operation of the Act. I think that anybody who has read the Report of the Registrar and of the operations of the Restrictive Trade Practices Act—and the noble Lord, Lord Drumalbyn, quoted from it—will recognise the care which has been taken and the quality of that Report. I am sure that the necessity to keep the operation of the Act and, in the present context, the operation of this Order, under close review, is appreciated by all concerned.

LORD DRUMALBYN

My Lords, may I ask one further question relating to interpretation which has caused a certain amount of doubt in the industry? Paragraph 2(b)(i) of the Schedule relating to agreements to which the Order does not apply, says: …neither that information nor information based thereon is to be furnished directly or indirectly by that person to any party to the agreement except— (1) information which does not relate to any party other than the party to whom it is furnished; The interpretation of this has given a certain amount of trouble to the industry. I wonder whether the noble Lord could make it clear.

LORD DELACOURT-SMITH

My Lords, I will do my best to assist the noble Lord. Perhaps I can do so by indicating the general purpose of paragraph 2(b) of the Schedule. The prime purpose of this is to allow trade associations to carry on their representational functions, as I am sure the noble Lord will accept. It allows them to collect information from their members, to process it and to make representations of it to Government Departments and other public authorities. There may be a variety of reasons why a particular trade association wants to do this. Obviously, there must be some safeguard to prevent an association, collecting information nominally for some public purpose but, in reality, for circulation of price information among their members.

The exclusion as drafted is designed to prevent a trade association circulating information about particular firms' prices and, as a further safeguard, prevents any information collected for submission to a public authority being circulated unless a Government Department have asked in writing for the information to be provided to it. In a bona fide application I do not anticipate that there should be any difficulty about the Government Department formally indicating that it requires information essential to consideration of the application. To come more specifically to the noble Lord's exact point, the intention there is to examine computer accounting systems. Firms send their accounts and the computer bills the customers, informing the firms of the total. The intention here is to ensure that the position is adequately safeguarded. I trust that that explanation will satisfy the noble Lord.

On Question, Motion agreed to.