§ Mr. Shepherd
asked the President of the Board of Trade when the Monopolies Commission's report on imported hardwood and softwood timber and plywood will be published; and if he will make a statement about the contents of the report.
§ Mr. P. Thorneycroft
The Report was published today. The Commission have found that conditions to which the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, apply prevail as respects the supply of the three classes of goods covered by their inquiry, since, in each case, more than one-third of the total is supplied by importers who so conduct their affairs as to restrict competition.
The Commission explain that, although the trade as a whole is competitive on price, the channels through which most timber is imported into the United Kingdom are regulated by the use of a system of "Approved Lists." There are three such lists, one for European softwood, one for hardwood, and one for plywood. The lists contain the names of United Kingdom agents employed by overseas shippers and of United Kingdom importers.
The agents on each list undertake to negotiate sales of the timber covered by the list only to importers on the list, and the importers on each list to buy such timber only through agents on the list. (In practice, "listed" agents act also only on behalf of shippers who confine all their sales in the United Kingdom to "listed" importers.) A trader who is refused admission to the lists thus has little opportunity to deal in the three main 338W classes of timber except as a non-importing merchant.
Admission to the lists is controlled by joint committees of agents and importers elected by members of affiliated or constituent bodies of the Timber Trade Federation (T.T.F.), but does not in every case depend on membership of these bodies. The joint committees have regard to certain general criteria when considering the addition or deletion of names, but have a wide discretion. Although the arrangements for administering the three lists are not identical in all respects, their common effect is to deny admission to users and to smaller merchants.
The Commission consider that in this trade the services of agents and importers are real and in the majority of cases indispensable. They think that, except in the case of hardwood, the great bulk of imports would probably have passed through the same channels even if the "Approved List" system had not existed; nor do they consider that the restriction of competition inherent in the system has raised prices to any substantial extent. The Commission note the existence of some criticism of the way in which the lists are administered, but find no evidence of deliberate partiality in this respect.
In the Commission's view, however, the tendency of the system has been in the direction of increasing rigidity; and as a result the structure of the trade in timber has been forced, and may be forced yet further, towards an inflexible, conventional pattern. This hampers the ability of traders to expand and change the character of their business; the introduction of fresh resources from outside the trade is hindered; and those users who wish to do so cannot adopt methods of purchase which in their view would be more economical.
Other relevant points are:
- (a) The Commission are satisfied that, contrary to the view expressed by the T.T.F., the price level of imported timber would not be enhanced by the competition of merchants and users for supplies from abroad. Freer competition would be a healthy stimulus to agents and importers and would in the long run make for lower prices to the ultimate consumer.
- (b) As to the T.T.F.'s claim that the "Approved List" system provides a necessary minimum of stability as a protection for importers against the risks inherent in the provision of stockholding and other services, the
339 Commission find no evidence to show that timber importers are in a different or more vulnerable position than importers and wholesalers of other commodities sold on world markets. They note that many non-importing timber merchants perform similar services and run similar risks without protection.
- (c) No evidence was adduced to show that the protection which the system affords to agents is necessary; and since unsuitable agents are likely to be kept out by the working of competition, it is not needed as a safeguard for purchasers.
In the light of these considerations, the Commission conclude that the agreements and undertakings by traders to deal only with each other on which the system rests are contrary to the public interest; they accordingly recommend that these should be abrogated and not replaced by any other arrangements or undertakings having similar effects.
Although the Commission find no evidence of any price-ring on a national scale, they note that local associations in four areas operate lists of "suggested" prices. Since the present tendency in the trade appears to be against using such lists, and since their significance is likely to be reduced if the "Approved List" system is abolished, the Commission do not find it necessary to record any finding on this subject. They add, however, that if such price-lists were introduced in other areas, or if the present lists came to be supported by binding agreements or sanctions, the whole matter should be re-examined.