HC Deb 06 February 1962 vol 653 cc33-4W
48. Mr. Jay

asked the President of the Board of Trade what were his reasons for rejecting the recommendation of the Monopolies Commission that the Imperial Tobacco Company Limited should sell its shareholding in Gallahers.

Mr. N. Macpherson

The Monopolies Commission considered that Imperial's shareholding in Gallaher might lead to some weakening of the incentive on Imperial to be competitive. They referred in particular to the possibility that a conflict of interests might cause Imperial to depart from its undertaking not to intervene in the management of Gallaher. To meet their view that this possible danger should be guarded against, my right hon. Friend asked Imperial to confirm formally to H.M. Government the undertaking not to intervene which they had previously given to Gallaher alone. Imperial have given that undertaking. My right hon. Friend has made it clear to Imperial that the matter will be re-opened if at any time the Government decide that owing to changed circumstances the present arrangements are no longer adequate to safeguard the public interest.

In my right hon. Friend's opinion these arrangements will satisfactorily achieve the objective which the Comission had in mind, and in the circumstances as they now exist it did not seem necessary on this account to go so far as to require Imperial to divest themselves of their shareholding.

In general, my right hon. Friend does not believe that Imperial's shareholding in Gallaher will reduce their incentive to be competitive. Imperial could have no assurance that trade lost by them would be gained by Gallaher, and even if Gallaher gained as much as Imperial lost, there would be a severe loss of profit to Imperial that could not be offset by any increase in the amount received by Imperial as dividends on their Gallaher shareholding. The Commission themselves acknowledged that the competition experienced by Imperial was intense; it has grown even more intense since the report. There is no evidence that Imperial are not combating it as strongly as they can; indeed, all the evidence goes the other way.