Postal Franking Machines (Hansard, 7 March 1986)

§ Mr. Howard

The report is published today.

The commission found that the market shares of Pitney Bowes and Roneo Alcatel constituted a monopoly situation in relation to the supply, maintenance and repair of postal franking machines. Despite entry into the market by other suppliers in recent years, the two companies still jointly retained 81 per cent. by volume of the market for new machines and 93 per cent. of the maintenance market.

The commission also found that Pitney Bowes, the dominant supplier of the two companies and the price leader, was enjoying comfortable profits, and that price competition from other companies in the market was affected by its market leadership. Prices of postal franking machines has stayed well ahead of those for office 293W machines generally and of the retail prices index and, in the commission's view, were higher than they needed to be or would be in conditions of more effective competition. The commission judged that the practice of Roneo Alcatel and Pitney Bowes of failing to provide customers with price lists also helped to restrain price competition and to focus it on selected discounts for the more insistent bargainers.

The commission noted that the Post Office imposes strict conditions on the design, use and maintenance of postal franking machines in order to protect its revenues from fraud or machine malfunction. However, the commission found that these conditions had the effect of preventing distribution through independent dealers as an alternative to direct selling by the machine suppliers, the development of any alternative maintenance services and a market for second-hand equipment.

The commission concluded that the pricing policies and certain other practices of Roneo Alcatel and Pitney Bowes taken together with certain Post Office regulations and practices have the effect of inhibiting competition.

The commission rejected as a remedy measures to regulate the companies' prices which, it concluded, might harm the smaller competitors and newer entrants to the market. Instead, it suggested that the Post Office be invited to change certain of its requirements; that assurances be sought from Roneo Alcatel and Pitney Bowes to remedy the uncompetitive practices identified in the report; and to open the market to approved dealers and maintenance organisations.

I accept the findings of this report. I am consequently asking the Director General of Fair Trading to hold discussions with the Post Office with a view to securing changes in its present regulations and practices to provide for some authorisation of independent maintenance sources and dealers in both new and second-hand machines and for relaxation of inspection specifications. I am also asking him to seek appropriate undertakings from Pitney Bowes plc and Roneo Alcatel to remedy the uncompetitive practice identified in the report and to open the market to authorised dealers and maintenance operators: notably on the provision of price lists; the supply of spare parts to third party suppliers and maintainers of machines; the maintenance requirements imposed on those buying and leasing machines; and on the ability of the leasing companies of machines to dispose of machines otherwise than by return to the original suppliers.

The commission drew attention to the need for the management of the two companies to maintain vigilance to prevent sales malpractices on the part of their salesmen. I attach great importance to such vigilance, and trust that if any such malpractices occur in the future the managements will take appropriate action against any of their staff who permit or use such tactics.