Electric Lamps (Commission's Report) (Hansard, 13 November 1951)

§ Mr. P. Thorneycroft:

The Report was. published today. The Commission have 21W found that conditions to which the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, applies, prevail as respects the supply of electric lamps, since about 60 per cent. of both filament and discharge lamps are supplied by members of the Electric Lamp Manufacturers' Association who operate a number of arrangements which restrict competition in the industry.

The Report shows that the E.L.M.A. firms agree together on the types of lamps to be manufactured and on common manufacturers' prices for each type; they also lay down the prices to be charged at each stage of distribution and enforce these prices by collective sanctions. Besides the "stop-list" used for this purpose, there are also "exclusive dealing" arrangements requiring all wholesalers who sell E.L.M.A. lamps not to sell lamps made by other manufacturers; and retailers get better terms if they agree to confine themselves to E.L.M.A. lamps.

There are also "sales quota" arrangements by which a manufacturer in the E.L.M.A. group cannot increase his share of the total U.K. market (relative to other members of the group) without incurring penalties.

The Commission also describe in detail the patent policies followed by members of E.L.M.A., their attitude to standardisation and the position with regard to certain components which manufacturers outside the association obtain from E.L.M.A. members.

The report shows that outside the Electric Lamps Manufacturers Association there are a number of firms—known as the "controlled companies"—which are jointly owned by E.L.M.A. members and which market lamps through the chain stores, usually at lower prices than E.L.M.A. lamps.

The Commission note that the E.L.M.A. system is markedly less restrictive now than in 1939. The new patent policy proposed by the members of E.L.M.A. who own patents is more liberal and the "quota" arrangements and the arrangements about the sale of components to non-members have been made less rigorous. The Report also shows that prices and profits, which were unduly high before the war, are now—except in the case of motor lamps—on average, moderate.

22W

The Commission see in the exchange of technical knowledge within the industry a considerable advantage to offset the potential dangers of the manufacturers' price-ring and they do not recommend that the fixing of common manufacturers' prices should be prohibited, provided that two conditions are fulfilled. The first condition is that the exchange of technical knowledge should extend to all manufacturers within the system of common prices; the second is that the prices should be reasonable. The Commission suggest that the Government should review them from time to time.

Moreover, the Commission recommend certain other safeguards and changes in the system, failing which they think that it may be expected to operate against the public interest in the future; and anything which had the effect of reducing the degree of competition advocated in these recommendations would make it necessary, in the view of the Commission, to reexamine the whole question. The principal recommendations under this head are as follows:

(a) E.L.M.A. members who supply components (apart from patented components and ready-coiled filaments), should make them equally available to members and non-members at prices which are not higher to non-members than to members.
(b) If the new patent policy proposed by E.L.M.A. members results in reducing the degree of competition to which E.L.M.A. firms are subjected, the whole question should be reexamined.
(c) E.L.M.A. members should give an assurance that the "controlled companies" will continue to provide a measure of competition by supplying cheap lamps, but will not be used as "fighting companies" against independent manufacturers.
(d) The sales quota arrangements should be brought to an end.
(e) On the distribution side, the collective enforcement of resale price maintenance and all the "exclusive dealing" arrangements and ancillary arrangements regarding rebates and other payments should be brought to an end.

One member of the Commission—Mrs. Joan Robinson—in an addendum to the 23W Report considers that it is unrealistic to expect the "controlled companies" to compete freely and effectively with E.L.M.A. members while still being owned by them and recommends that the Government should acquire the share capital of these companies. This would, in her view, generally strengthen the effect of the other recommendations.