§ Mr. Brandon-Bravo
asked the Secretary of State for Trade and Industry if he will make a statement on the report of the Director-General of Fair Trading on competition and retailing.
§ Mr. Fletcher
The Director-General's report was published today, 28 June 1985. The purpose of the study was to update certain statistical information in the 1981 Report of the Monopolies and Mergers Commission "Discounts to Retailers" as a basis for considering whether the MMC's findings were still valid in the present circumstances of the retail trade. The study was undertaken against the background of continuing concern among food manufacturers and small retailers about the effects of discounts on their businesses.
The MMC report examined the practice of charging some retailers lower prices than others, or providing special benefits to some retailers, where the difference could not be attributed to savings in the suppliers' costs. This practice is variously described as "discriminatory discounting" or "non cost related discounting". The MMC found that the practice had not, in general, operated againt the public interest; rather the practice had been part and parcel of development which had been beneficial to competition and to the consumer. The Director-General's Report concludes that on the basis of the information collected there does not appear to be any material change in the factors which led the MMC to reach that finding.
The Director-General's report analyses recent developments in grocery retailing; financial statistics related to food manufacturing and retailing, including data on profitability; and information on manufacturers' trading terms and retailers' gross margins. It also reviews overseas legislation on price discrimination. On the basis of this data, the report concludes that, while there has been some further increase in concentration in grocery retailing since the MMC's report, competition in this sector remains very strong; and in general lower buying prices are being passed on to the benefit of consumers. The study found no evidence to suggest that the degree of price discrimination had increased since the MMC reported.
I welcome the Director-General's report. It confirms that substantial changes in the pattern of retailing in this country have taken place and continue to occur. These changes, which result from a number of deep-seated economic and social forces, have had (and will continue to have) wide repercussions, for retailers, the supplying 509W industries and the consumer. Overseas experience suggests that Government intervention to prevent or mitigate these changes is unlikely to be effective, and would give rise to considerable problems of enforcement. Having regard to the present strength of competition in the sector and the benefits this is bringing to the consumer, I do not believe that such intervention would be justified. I will however be willing to review the position again if further developments give grounds for concern. In addition the Director-General has confirmed his continuing willingness to look into any allegations of anti-competitive behaviour or abuse of buying power under the competition legislation for which he is responsible.
Copies of the report have been placed in the Library.