HC Deb 13 December 1968 vol 775 cc229-31W
Mr. Atkinson

asked the President of the Board of Trade whether he will make a statement on the Report of the Monopolies Commission on the supply of clutch mechanisms for road vehicles.

Mr. Crosland

The Report was published this morning. The Commission have found that monopoly conditions, as defined in the legislation, prevail in the supply of clutch mechanisms for road vehicles. One supplier, the Automotive Products group, has more than one-third of the market.

The Commission have found that the Automotive Products group is efficient and progressive, and that it owes its dominant position to the satisfactory service it gives to vehicle manufacturers. The Commission accept that the existence of a large specialist manufacturer of clutches has been beneficial to the vehicle industry because economies of scale have enabled it to supply clutches at prices which the vehicle manufacturers would not have been able to match by their own manufacture; because the concentration of skill and its financial strength have enabled it to develop and take the risk of introducing new designs; and because it has been possible to meet the demand for clutches without creating much surplus capacity. The Commission have not, therefore, found that the group's monopoly position as such has operated against the public interest.

The Commission have, however, found that certain of the things done by the group have operated against the public interest. These include its price policy and the level of profits to which it has given rise, which were considered excessive in the period 1962 to 1964; its requirement that its wholesalers should not handle competing clutches; and its interference with the supply of clutch linings to competitors.

The Commission have also found that the Automotive Products group's high level of profit is assisted by its practice of charging higher prices for replacement clutches than for initial equipment clutches. They note that the group has made some attempt to reduce the difference between these prices, and express the view that it would be desirable for the difference to be more significantly reduced in any further price changes. They do not consider, however, that it would be practicable to impose a change to a single-tier price system unless changes were also made in the vehicle manufacturers' price policies for vehicle spares. The Commission find, however, no justification for the practice by which the group pays different prices for clutch linings accordingly to whether they are used in initial equipment or in replacement clutches.

In addition, a majority of the group who conducted the inquiry consider that the Automotive Products group's practice of appointing and controlling regional wholesalers which it does not supply direct, and its recommendation of resale prices and discounts, operate against the public interest. The minority, in a note of dissent, take the view that the only undesirable aspect of the group's control over its wholesalers is the insistence on loyalty to the group's products; and that the majority's criticism of the practice of recommending resale prices is not justified by the evidence.

As remedies, the Commission recommend that the Board of Trade should exercise surveillance over the Automotive Products group's price policy and the profits to which it gives rise, in order to ensure that these do not rise significantly above the levels of 1965–67; that the group should withdraw the conditions imposed on distributors to prevent them from handling competing clutches; that the group should not interfere in any way with supplies of clutch linings to its competitors; and that the group should buy all its clutch linings at the same price, whether they are for use in initial equipment or in replacement clutches. The majority further recommend that the group should cease to appoint and control those wholesalers with whom it does not deal direct, and that it should cease to recommend resale prices. They see no objection, however, to the group's continuing to prescribe enforceable maximum retail prices.

The Commission has conducted a useful and thorough inquiry. I accept the report in principle and my Department will discuss with the company the implementation of recommendations unanimously made by the Commission. As regards the other recommendations, I propose to defer a decision until after the discussion with the company.