§ Miss Fookesasked the Secretary of State for Trade and Industry when he 112W expects to publish the Report of the Monopolies Commission on the supply of ready-cooked breakfast cereal foods.
§ Sir G. HoweThe report is being published today. The commission found that monopoly conditions prevailed because Kellogg supplied at least one-third of all the ready-cooked breakfast cereal foods supplied in the United Kingdom.
The commission was required by the terms of the reference, if it found that monopoly conditions prevailed, thereafter to consider whether the parties concerned determined the level of prices at which the goods were supplied. It examined the nature of competition in the industry and the profits and pricing policies of Kellogg's and its principal competitors, and concluded that Kellogg's determined the level of prices as a result of, and for the purpose of preserving, its monopoly position.
In assessing the effect of the determination of Kellogg's prices upon the public interest, the commission found that its profits had been excessive in the past but that the trend was downwards. On the evidence that was before it that this trend was continuing it did not consider that Kellogg's power to determine price levels operated against the public interest at present. It considered, however, that it might be expected to do so, given that the restricted nature of price competition in the industry and Kellogg's known profit target could result in price increases not justified by increased costs, which could again lead to excessive profits.
The commission therefore recommended that Kellogg's profit rates should be kept under review and that Kellogg should be required to seek Government approval before making any increases in the prices of its breakfast cereals.
The Government accept the commission's recommendations. In view, however, of the high profits which the report revealed, and the measures which have been taken to control inflation since the commission reported, the Government sought further information from Kellogg about its future levels of profit. Evidence now available shows that if its selling prices were held at present levels its returns in 1973 would be likely to be significantly reduced as a result of increases in raw material costs. The Government will exercise regular surveillance over Kel- 113W logg's costs, prices and profit rates, and Kellogg has been asked to make available to the Government periodically the information required for this purpose. It has also been asked not to raise the prices of any products which were the subject of the reference to the commission without the Government's approval. It has been made clear to the company that the Government are unlikely to approve any price increases on these products for some time to come. Kellogg has undertaken to comply.
These undertakings by the company are distinct from and in addition to the more general arrangements that are being made for price and profit surveillance as part of the Government's counter-inflationary measures.