§ Sir T. Moore
asked the President of the Board of Trade when the Monopolies Commission's report on insulated electric 21W wires and cables will be published; and if he will make a statement about the report.
§ Mr. P. Thorneycroft
The Report was published today. The Commission have found that about three-quarters of the whole supply of these goods is accounted for by the members of two Associations —the Cable Makers' Association and the Covered Conductors' Association—who operate arrangements restricting competition in the industry.
In the case of certain types of cable there is virtually no independent production. The member firms agree together on the types and qualities of cable to be manufactured, and on common manufacturers' prices and conditions of sale. There are also "sales quota" arrangements; and there is some central "allocation" of orders.
As regards the distribution of certain types of cable, there are special terms for buyers who undertake to deal exclusively with Association firms; only exclusive buyers are given wholesale terms; and other special inducements to buyers include aggregated quantity rebates and rebates to certain dealers' associations.
The Commission consider that, although the production of first quality cable is by no means confined to Association companies, the Cable Makers' Association has played a predominant part in establishing the reputation and the export trade of the British industry. The high standard of quality control has been of great benefit; and the requirement (found to have been reasonably administered) whereby Association members must submit new designs and types for approval is recognised as a necessary concomitant.
Other features of the Commission's conclusions are:
- (a) the Commission find no recent evidence of any general policy of restricting productive capacity in the United Kingdom.
- (b) There are international agreements which impose certain restrictions on the import of cable from abroad. Since these form part of a complex whole which also affects the export trade (outside the Commission's terms of reference), the Commission make no recommendation; but they have taken
22 account of these restrictions in considering other aspects of their inquiry.
- (c) Patent policy has been liberal, and the Commission make no recommendation.
- (d) The Commission welcome the co-operation which the two Associations have recently extended to the British Standards Institution in establishing published standards of quality.
- (e) There is no evidence that Association members have abused their power to exercise control over supplies of copper to independent manufacturers.
The Commission's principal criticisms and recommendations for safeguards are as follow:
- (i) There is a wide spread of costs between the Association members, and the public interest requires some modification of the existing price-fixing arrangements.
- Some types of cable (mains, telephone and submarine cable) are purchased mainly by very large buyers, such as the British Electricity Authority and the G.P.O. These buyers already have arrangements whereby the prices of their supplies are based on cost investigations. These arrangements should be continued and supplemented by other safeguards. Prices to smaller consumers should bear a known (and reasonable) relationship to the prices charged to the large ones.
- The common price system for other cables (rubber cable and covered conductors) should be brought to an end; but, as standards of quality might be endangered by extreme price cutting, the Association should be allowed to fix minimum prices (to be periodically reviewed by the Government) giving no more than a reasonable profit to the lowest-cost producer.
- (ii) The G.P.O. buys land telephone cable from C.M.A. members under a long-term bulk supply agreement. The conclusion of any further agreements of this nature should be published; and, to prevent their becoming excessively rigid, provision should be made for the continuance and development of independent competition.
- (iii) The "sales quota" arrangements have been relaxed in recent
23 years; but the sharing out of business in advance, irrespective of changes in the relative efficiency of different producers, is against the public interest. All "quota" and "allocation" arrangements should therefore cease.
- (iv) The exclusive dealing arrangements, although administered with moderation, nevertheless obstruct independent competition. They should therefore be ended, as should the aggregated quantity rebates and association rebates.