Roofing Tiles (Hansard, 19 November 1981)

§ Mrs. Sally Oppenheim

My right hon. Friend received the report on 10 September. It was published yesterday.

The commission's findings are as follows:

"(a) A monopoly situation under sections 6(1)(a) and (b) of the Fair Trading Act 1973 exists in relation to the supply of concrete roofing tiles in favour of The Marley Tile Company Ltd. and Redland Ltd.
(b) As a consequence of the monopoly position in favour of Marley and Redland, the price of concrete roofing tiles has been higher than it would have been if there had been a greater degree of competition. In these circumstances we consider that in the past prices have been at levels that have operated against the public interest. We consider it is likely that when the construction industry recovers unless the structure of the concrete roofing tile market changes and the competitive environment is improved prices charged to consumers and consequently profits may be expected to rise again to levels that will operate against the public interest.
(c)The monopoly situation has operated and may be expected to operate against the public interest as:

(i) the operation of the scale monopolies has acted to restrict competition in some areas of Great Britain;
(ii) it has resulted in higher prices for concrete roofing tiles than would have been the case over the long term if more competitive conditions had prevailed."

The Government accept the commission's findings.

In the light of those conclusions, the commission made the following recommendations:

"(a) To avoid reduction of competition from the absorption of smaller manufacturers, Marley or Redland should be required to inform the Director General of Fair Trading of proposals to acquire any other concrete roofing tile producers. Such proposals should only in exceptional circumstances be allowed to proceed without reference to this Commission.
(b) The preferable solution to the adverse effects of this monopoly is to encourage increased competition from small manufacturers, new entry and the greater use of buying power by public authorities. We recommend that:

(i) Local authorities and other public bodies should, as an aid to greater competition and to minimise cost, include the widest possible specification for roofing tiles in their documentation.
(ii) Local authorities and other public bodies should also reconsider their buying procedures. If, perhaps by co-ordinating their individual concrete roofing tile requirements on a regional basis, they could, while still employing small roofing contractors, make better use of their buying power this would also reduce prices and benefit competition.
(iii) To avoid new entrants or existing companies suffering from excessive discounting by the monopolists, the Director General of Fair Trading should monitor details of projects for which the highest levels of discount have been granted or 210 offered in all regions of Great Britain together with results of the regional units of Marley Contract Services (MCS). If the monitoring of discounts and MCS, or complaints that may be received, suggests that excessive discounting or low pricing by MCS is being used as a barrier to entry or to prevent existing companies expanding the matter should be investigated under the 1980 Competition Act.
(iv) Redland should make its roof tile fittings freely available to builders' merchants.

(c) We accept that these measures cannot guarantee increased competition, and therefore also recommend that the Director General of Fair Trading should monitor the industry including its cost and profits. If there is no change in the structure of the market from new entry nor substantial and sustained competition from alternative products, and the pricing policies of Marley and Redland result in high profits, or the information on regional discounts gives rise to concern that competition between them is still limited, the use of other powers of the Secretary of State should be considered or another reference should be made to this Commission."

The commission also expressed the hope that such of its recommendations as might be adopted should be applied to Northern Ireland.

I accept this important report by the commission and its findings. Given the adverse effects of the scale monopolies specified in the reports, the order making powers provided in section 56 of the Fair Trading Act 1973 are available to remedy or prevent those effects.

Taking the commission's recommendations in turn, I shall certainly bear their report in mind in considering future mergers involving Marley or Redland and any other producer in the industry.

As for the specification and buying procedures of local authorities and other bodies, my right hon. Friend the Secretary of State for the Environment will be considering these recommendations, in consultation with my right hon. Friends the Secretaries of State for Scotland, Northern Ireland and Wales.

With regard to the commission's other recommendations, I shall be giving careful consideration to the appropriate action to be taken on the report. I am asking the Director General of Fair Trading to open discussions with the parties concerned in relation to the commission's findings and recommendations.