§ Mr. Gwilym JonesTo ask the Chancellor of the Duchy of Lancaster when the report of the Monopolies and Mergers Commission on the supply of pest control services is to be published; and if he will make a statement.
§ Mr. MaudeThe commission found that a monopoly situation existed in favour of the Rentokil Group plc and its subsidiary operating company, Rentokil Ltd., which supplied over 60 per cent. of the United Kingdom market for pest control services. They concluded that Rentokil had established a dominant position in the market which enabled it to fix its prices largely unconstrained by competition. Many customers were charged higher prices than they would be in conditions of normal competition. There was an unduly limited choice of suppliers., particularly for customers who required a nationwide service.
Where Rentokil does encounter competition, the commission noted that its high profitability — as illustrated by its 28 per cent. return on turnover and its 92 per cent. return on capital employed—had enabled it to cut its prices selectively, thus inhibiting the development of competition. The commission found that Rentokil's differential pricing practices operated against the public interest.
As a remedy against the charging of high prices, the commission has proposed that Rentokil should provide more information in written statements to its customers about the way its charges have been calculated.
The commission pointed out that some of Rentokil's past acquisitions of smaller pest control companies had been designed to reduce competition or frustrate the expansion of potentially larger companies. Rentokil's 627W stated policy was now to expand by organic growth of its existing business rather than through further acquisitions. Nevertheless, the commission referred to the Director General of Fair Trading's duty under the Fair Trading Act 1973 to keep himself informed about the creation of merger situations and suggested that this task would be facilitated if Rentokil gave an undertaking to notify him of any proposed acquisitions of other pest control companies.
Where an MMC report finds that aspects of a monopoly operate against the public interest, the Fair Trading Act gives me powers to take appropriate action to remedy the adverse effects. These powers include a requirement to divest assets and prohibition of price distrimination. Although this report did not specifically canvass these possibilities, I thought it right to consider these and other options. However, I accept the MMC's view that in the circumstances of this case, the most appropriate remedy is that Rentokil should provide the customer with more information.
I am consequently asking the Director General of Fair Trading to hold discussions with Rentokil with a view to obtaining appropriate undertakings; that Rentokil should provide more information about its charges to customers and that the company will notify him of any proposal to acquire further pest control companies.