§ Captain Waterhouseasked the President of the Board of Trade to make a statement about the contents of the Monopolies Commission's Report on exclusive dealing, collective boycotts, aggregated rebates, and other discriminatory trade practices.
§ Mr. P. ThorneycroftI am glad to have an opportunity of summarising the findings of this Report, which was published today.
This is the first general inquiry that the Commission has made under Section 15 of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948. The Report covers a wide range of collective practices, all of which involve discrimination in favour of, or against, certain customers or suppliers. The Commission was not asked to consider trading methods as such (except aggregated rebates); what it had to advise on was whether collective agreements to adopt or enforce them operate in the public interest.
The Commission found that agreements falling wholly or in part within their terms of reference exist in a wide range of industries and trades, and that their form may vary widely from one industry or trade to another. The Commission has 35W nevertheless found it possible for the purposes of its Report to identify six broad categories of agreement. These are:
- I. Collective discrimination by sellers, without any corresponding obligation on the buyers.
- II. Collective discrimination by sellers in return for exclusive buying ("exclusive dealing").
- III. Collective adoption of conditions of sale (notably the maintenance of resale prices).
- IV. Collective enforcement of such conditions of sale.
- V. Collective discrimination by buyers without any corresponding obligation on sellers.
- VI. Aggregated rebates.
The Commission discusses each of these categories in turn, illustrating them from the evidence which it has received from this inquiry, and from its earlier Reports. The Commission discusses the arguments for and against each category of agreements, and the effect on the public interest of action taken in the course of carrying them out. It then discusses the policies adopted in certain other countries—U.S.A., Canada and Sweden—in relation to such agreements. Finally, the Commission discusses the general effect of the practices on the public interest, and makes recommendations as to possible action by the Government.
The inquiry was made by a group of ten members of the Commission. They have concluded by a majority of seven to three (subject to a reservation by one of the seven about enforcement agreements) that all the types of agreements examined do in general affect the public interest adversely, some to a considerably greater degree than others.
The majority have been impressed particularly by the effect of a binding and collective obligation in preventing traders from experimenting and from trying out new or different ways of conducting their business. Such obligations, they say, create an undue rigidity which may affect the numbers and kinds of concerns engaged in a trade, the trading methods of those established in the trade and the level of prices both generally and to different classes of buyers. They think, however, that the use of the practices might, subject to suitable safeguards, be justified in exceptional circumstances:—
- (a) Where consumers are not able to judge the standard of service which it is in their interests to demand from distributors, and the matter cannot conveniently be dealt with by legislation.
36 - (b) Where an exclusive-buying or exclusive-dealing agreement protects an industry of strategic importance or one that is peculiarly susceptible to damage from imports, and protection by Government action is impracticable.
- (c) Where a common price agreement is found after inquiry to operate in the public interest and agreements within the scope of the present inquiry are necessary for its effective operation.
- (d) Where the practices are necessary to enable small firms to compete with a very large concern which is itself employing restrictive practices.
The Report discusses two possible alternative courses of action, either of which would require legislation:
- (i) Compulsory registration and publication of agreements (with subsequent prohibition of those found after investigation to be against the public interest).
- (ii) A general prohibition of the practices, with provision for exceptions, on the grounds stated above, in particular cases.
The majority prefer the second course. They suggest that exceptions might be made by Statutory Order, on the advice of an independent body, which would assess the merits of each application for exception.
The remaining three members are not prepared to say that the practices are in general injurious to the public interest. They recognise that some may be injurious in certain circumstances, but do not think that industries should be prevented from using them without having an opportunity of having their cases examined individually. A general statutory prohibition seems to them to create a degree of inflexibility in the law which might in the future prove undesirable. They would, however, be prepared to accept the idea of compulsory registration considered, but rejected, by the majority.
These three members think that agreements, and the enforcement of agreements, obliging all the parties to fix resale prices or handle only price-maintained goods are likely to be against the public interest. But they disagree, as does one of the other seven members, with the finding that collective arrangements for the enforcement of resale prices prescribed by individual manufacturers in general operate against the public interest. It seems to them illogical that, if it is lawful for individual manufacturers to prescribe resale prices, they should be debarred from enforcing maintenance of those prices in the most effective manner consistent with the general law.
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§ Captain Waterhouseasked the President of the Board of Trade whether he has yet received the Report of the Monopolies and Restrictive Practices Commission on the supply and export of pneumatic tyres.
§ Mr. P. ThorneycroftYes. I received this Report on 24th June. It will be laid before Parliament in due course in accordance with the provisions of Section 9 of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948.