Bricks (Hansard, 3 August 1978)

§ Mr. John Fraser

The House will recall that the aim of the Commission's recommendation in this report, published on 17th June 1976, was to remedy the Commission's single adverse finding: that the practice of the London Brick Company Limited (LBC), the monopolist, of over-charging for transport customers relatively close to its works and undercharging those relatively distant from its works, operated and might be expected to operate against the public interest. The Commission had recommended that LBC should, so far as was practicable and subject to certain qualifications, relate its552W transport charges to the customer to the cost of delivery to him.

In my statement announcing the publication of the report, I informed the House that my right hon. Friend had accepted the Commission's recommendation and was accordingly asking the Director General of Fair Trading to consult with LBC with a view to obtaining from the company undertakings that it would take action to change its system of transport charges to customers to reflect, so far as was practicable, the cost of delivery to them. I said further that my right hon. Friend was also asking the Director General to discuss with LBC certain suggestions which the Commission had made. These were:

(i) that LBC might consider implementing a recommendation made in 1970 by the National Board for Prices and Incomes that small loads should attract a delivery surcharge; and
(ii) that LBC might reconsider its practice of suspending at times of high demand the facility it provides at normal times of allowing customers to collect bricks ex-works.

As a result of the discussions with the Director General, LBC has now given a main undertaking designed to meet the Commission's recommendations on the system of transport charges and the essentially related matter of the small load surcharge, and a secondary undertaking dealing with the collection of bricks by customers.

The main undertaking will not become effective until 1st January 1979, in order to allow LBC to install the necessary revised accounting system, but as from that date LBC will undertake, in supplying fletton building bricks:

(a) maintain separate transport accounts and allocate to those accounts all income and all direct and indirect costs which are fairly and reasonably attributable to delivering bricks;
(b) publish both delivered prices for bricks for each delivery zone and ex-works prices, the latter not to include any charges in respect of costs allocated to the transport accounts;
(c) in cases where the company arranges delivery of bricks and subject to (e) below, charge all customers in each zone the same transport charge per 1,000 bricks and set such transport charges at levels estimated to be sufficient to recover those costs which are attributable to delivering bricks into the delivery zone in which the customer's delivery site is situated;
(d) subject to (e) below, when determining the costs which are attributable to delivering bricks into a delivery zone, use the average of all the costs the company incurs in making deliveries by all forms of transport into that 553 zone weighted according to the deliveries expected to be made by each method of delivery in each quarter expressed as a percentage of the total deliveries into that zone;
(e) where the circumstances of individual deliveries to sites in a particular delivery zone necessitate the use of vehicles with a capacity of less than 6,000 bricks, charge those customers who require the use of such vehicles an additional transport charge sufficient to recover all the costs incurred by the company in making deliveries on such lorries to sites in that delivery zone which are additional to the costs incurred in making deliveries to that zone by using other forms of transport.

This last provides for the small load surcharges.

For the purpose of this undertaking the delivery zones will constitute, first, in area of approximately 20 miles radius enclosing LBC's brickworks; secondly, five successive annular bands situated outside the first area with their outer boundaries approximately 20, 40, 60, 80 and 105 radial miles from the boundary of the first area; and, thirdly, further successive annular bands with boundaries at mately 25 radial mile intervals.

Under the secondary undertaking LBC has said that customers who make it their practice to collect bricks from LBC's works will be permitted to do so at all times and at published ex-works prices.

My right hon. Friend considers that the undertakings given by LBC, properly implemented, should be sufficient to remedy and prevent the adverse effects specified in the Commission's report on the one hand and to meet the two ancillary suggestions made by the Commission on the other. My right hon. Friend is, however, making arrangements for the carrying out of the undertakings, copies of which will be placed in the Library, to be kept under review and to this end LBC has undertaken to furnish to my right hon. Friend or such person as he may nominate the necessary accounting information.