§ Mr. Walker-Smith
In its Report, the Commission included a recommendation that the agreements and undertakings by traders on the approved lists to deal only with each other should be abrogated and should not be replaced by any other arrangements or undertakings having similar effects. My right hon. Friend is about to make a reference under Section 12 of the Monopolies and Restrictive 223W Practices (Inquiry and Control) Act, 1948, to ask the Monopolies Commission to investigate and report whether and to what extent the parties have complied with this recommendation.
§ Mr. Walker-Smith
The Report was published today. The supply of electronic valves and cathode ray tubes was referred to the Commission on 4th December, 1954, for investigation and report on the facts and their bearing on the public interest. Following the passing of the Restrictive Trade Practices Act, 1956, the reference was varied on 30th August, 1956, to require the Commission to submit a factual Report only. Accordingly, the Report contains a description of the industry's arrangements, but the Commission has expressed no opinion of its relation to the public interest. The arrangements described are those operated until 31st August, 1956, and have been superseded by new arrangements which came into effect on 1st September, 1956.
The Commission finds that the conditions to which the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, applies prevail, because members of the British Radio Valve Manufacturers' Association (B.V.A.) accounted in 1954 for 93.5 per cent. of the total United Kingdom supply of valves and 92 per cent. of the supply of tubes and have conducted their affairs so as to restrict competition. Furthermore, Mullard Ltd. was responsible for 67 per cent. of the supply of valves and 51 per cent. of the supply of tubes.
Broadly, the scope of the B.V.A. covers all valves and tubes except (i) Government orders and (ii) most special valves which have little or no sale in the domestic market or through wholesale and retail channels, such as high power transmitters, magnetrons, klystrons, photo-electric cells and cold cathode tubes.
At the time when the Commission's Report was drafted the members of the B.V.A. restricted competition in a number of ways including the following:
- (i) Common prices were fixed and maintained for valves and tubes sold by retail that were
224 considerably higher than the prices charged for valves and tubes sold for first equipment. These arrangements applied to about 15 per cent. of the total supplies of valves and cathode ray tubes and mainly to the valves and tubes distributed through wholesale and retail channels for repair and maintenance work. The Regulation providing for a stop-list and fines, which had not been invoked since 1948, was abrogated in 1952. There was provision for limited licences under patents to be used in support of resale price maintenance but this was of little practical assistance.
- (ii) Different prices and discounts were allowed to various classes of customers. A basic discount and monthly cash discount were allowed to bona fide traders. These comprised retailers within the B.V.A.'s definition, approved and listed service engineers and cine dealers, motor dealers and auto-electric engineers within the B.V.A.'s definition, and retailers' wholesale purchasing companies. Preferential discounts were given to equipment makers, other large users and dealers most of whom were on approved lists and had entered into agreements with the B.V.A. Admission to the approved lists depended on a number of factors such as minimum turn-over. There were separate lists for set makers, apparatus manufacturers, wholesalers, chain stores, rental and relay companies and car manufacturers and, for each class, there was a different form of agreement with the B.V.A. All agreements provided that the signatories should buy B.V.A. valves and tubes exclusively (except where the B.V.A. granted special permission) and for resale price maintenance and a uniform period of guarantee for valves and tubes. The agreements relating to set makers, apparatus manufacturers and car manufacturers provided that the valves should be used only for original equipment. Manufacturers on the main list, comprising most of the large manufacturers, were supplied at uncontrolled prices. (A few old-established set makers obtained these terms without undertaking to buy B.V.A. valves exclusively.) The proportion of uncontrolled valve and tube business covered at least 80 per cent of the sales to set makers. Wholesalers' agreements required the maintenance of minimum stocks, limited sales to defined classes of purchasers and stated that no agents should be appointed. Agreements with chain stores also required the maintenance of minimum stocks, specified the maximum number of points at which valves and tubes should be delivered and stipulated that no agents should be appointed. Rental and relay companies were restricted in the extent to which they could replace valves and tubes free of charge. Discounts on sales between members and sales to St. Dunstan's and certain other charitable organisations were unregulated.
- (iii) Restrictions were placed on the freedom of B.V.A members and others to import valves and tubes. Members had to notify the B.V.A. of proposed imports in excess of 10 per cent. of their home sales and of intended imports of valves and tubes which were liable to introduce new techniques into the home market.
- (iv) Members agreed on common forms and periods of guarantee. There were also regulations restricting advertising and participation
225 in exhibitions by members and preventing members from giving inducements to customers relieving them of expenses they would normally incur.
On 31st July, 1956, the B.V.A. informed the Commission of certain important amendments to its constitution which were to come into force on 1st September. Broadly, their effect was to abolish the provision for agreement on prices and resale prices, although each member would still publish a retail price list and members would continue to agree upon maximum discounts for the various classes of customers. The discrimination between the various classes of manufacturers of domestic receiving sets and other apparatus would cease and lists would no longer be kept of either tine dealers or service engineers. At the same time the basic trade discount for cathode ray tubes was increased from 20 to 25 per cent. The Report contains details of a number of restrictive agreements entered into by individual companies.