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British Monopoly Legislation in Practice
Published online by Cambridge University Press: 07 November 2014
Extract
The purpose of this article is neither to consider the formal provisions of the Monopolies and Restrictive Practices Acts, 1948 and 1953, nor to outline the findings of the Commission set up under the 1948 Act. These have been dealt with elsewhere. Our more limited purpose is to examine the operation of the 1948 Act and the efficiency of the machinery set up in the light of a recent report of the Select Committee on the Estimates. The function of this Committee is to investigate items in the Government estimates for expenditure to see whether public funds are being properly and economically applied to the purposes for which they are voted. The Committee therefore does not question the policy laid down by Parliament. On the other hand, in questioning whether the Commission and the Government departments concerned are making the best use of the funds available in accordance with the provisions and intentions of the Act, the report and the minutes of evidence allow us to judge whether the Act, as it stands, provides an adequate basis for inquiry into and the control of monopolistic practices.
At the outset it should be borne in mind that there are important differences between the British legislation and that of the United States and Canada. Both North American countries have legislation which forbids specific practices and creates offences under the criminal law. The British legislation does neither. There is a commission which investigates industries referred to it by the President of the Board of Trade and makes its report upon these industries to him. Following a report by the Monopolies Commission that certain practices are contrary to the public interest the President of the Board of Trade or the minister in charge of certain other Government departments may make an order forbidding the practices in that industry only.
- Type
- Research Article
- Information
- Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 20 , Issue 2 , May 1954 , pp. 195 - 206
- Copyright
- Copyright © Canadian Political Science Association 1954
References
1 See, inter alia, Cohen, Ruth, “New British Law on Monopoly,” American Economic Review, 03, 1949 Google Scholar, and “Reports of the Commission on Monopolies,” Economic Journal, 03, 1953 Google Scholar; Meier, G. M., “Activities of the British Monopolies Commission,” American Economic Review, 09, 1952 Google Scholar; and Harbury, C. D. and Raskind, L. J., “The British Approach to Monopoly Control,” Quarterly Journal of Economics, 08, 1953.Google Scholar
2 Sixth Report from the Select Committee on Estimates, together with Minutes of Evidence taken before Sub-committee F on the 27th. January, 3rd. February, and 3rd. and 27th. March and Appendices, Session 1952–1953, The Monopolies and Restrictive Practices Commission (H.M.S.O.: London, 1953)Google Scholar, hereinafter cited as Select Committee Report.
3 The Select Committee reported before the amendment of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, by the Monopolies and Restrictive Practices Commission Act, 1953. The latter was a non-controversial measure designed to expedite the work of the Commission set up under the original Act.
4 If the Government disagrees with a finding of the Commission that a practice is not contrary to the public interest it may still make an order prohibiting the practice. In this case it must wait for six months after the publication of the Monopolies Commission's report, and obtain from the House of Commons a motion stating that the practice is contrary to the public interest.
5 Report to the Minister of Justice by the Committee to Study Combines Legislation (Ottawa, 1952), 20.Google Scholar
6 Kilroy, A., “The Task and Methods of the Monopolies Commission,” Transactions of the Manchester Statistical Society, 03, 1953, 5.Google Scholar Machlup, F., The Political Economy of Monopoly (Baltimore, Md., 1952), 51 Google Scholar, does not attach much weight to this argument about the “technological inevitability of monopoly.” This judgment would appear to be a narrow one based solely on United States experience, which is not necessarily applicable to a country with a smaller market.
7 For an outside view see Gide, Pierre, Le Projet français de loi anti-trust et les expériences étrangères (Paris, 1953), 31.Google Scholar “L'importance relativement faible des industries qui ont fait l'objet des enquêtes de la commission [the British Monopolies Commission] donne l'impression qu'avant de s'attaquer aux industries de base, la commission ait voulu procéder à un rodage, et déterminer quelles règles pratiques elle suivra.”
8 Select Committee Report, par. 16.
9 In one investigation the Commission employed an independent firm of accountants for the costing inquiry. The Select Committee recommended that this experiment, which aimed at speeding up the completion of these inquiries, should be continued. Select Committee Report, par. 12.
10 Briefly, the Act applies when one-third of the output of an industry is controlled by a single firm or by a cartel. It is the first duty of the Commission to discover whether “the conditions to which the Act applies prevail.”
11 Select Committee Report, par. 711.
12 Select Committee Report, Annex 2, Memorandum by the Monopolies and Restrictive Practices Commission on Procedure of the Commission and Organisation of their Staff, par. 4.
13 Ibid.
14 We discuss this point more fully in section IV.
15 In its memorandum to the Select Committee the Commission refers always to associations rather than individual firms. This is because its first five reports were concerned mostly with the role of certain trade associations which dominated their respective industries. The same procedure is followed in a case such as the match industry, the subject of the Commission's sixth report, where the activities of a single monopolistic firm are in question.
16 Although the associations are represented by counsel the proceedings before the Commission are not strictly a judicial inquiry. Evidently, the associations have felt that counsel would be better able to present their case than anyone else.
17 The Commission's own accountants usually compile the accounts of the independent firms in the industry. See Select Committee Report, Annex 3.
18 A reference has now been made to the Commission calling for a report on the general effect of the collective boycott and exclusive dealing. Such a general reference can only cover practices that have already been discovered in the investigation of particular industries. In dealing with a reference of this type the Commission has to study the effect of these practices over a wide range of industries. It is, therefore, possible to speed the inquiry by the employment of additional staff teams, each working on a single industry. It may be added that the Government has no power to act upon a report of this kind except by new legislation.
19 In his evidence, the Chairman of the Commission, Sir Archibald Carter, stated: “My own feeling has been anyhow that a large part of the Commission ought to consist of people of whom it is true that the Commission's work is not their main work… . It seems to me that we are rather like a jury and I would have thought that until Parliament, anyhow, frames the outline of a policy about these things, it ought to be kept that way.” Select Committee Report, par. 164.
20 During the debate on the second reading of the bill, however, the President of the Board of Trade made it clear that it was no easy task to find suitable commissioners and that the Commission could not be brought at once to full strength. See House of Commons Official Report, vol. 517, July 19, 1953, col. 1598. Even with the old maximum of ten commissioners it would, however, be possible to have two separate panels.
21 The Government would not be able to act upon a conclusion that had the support of a smaller proportion of the members of the group. Under the original Act, the Government had the power to take action in cases where the Commission found a practice to be harmless or reached no decision, provided it first obtained a motion from the House of Commons to the effect that the practice was contrary to the public interest. (See above.) Presumably the Government could still use this procedure in the case where a conclusion is supported by less than two-thirds of the members of the group. This refers solely to the conclusions of the group relating to the public interest. The Government has never been bound to follow the recommendations of the Commission for remedying a harmful situation.
22 The intention is that each investigation will take as long as formerly but that there will be more of them as there are more bodies to deal with the reports at the final stage where the bottle-neck has existed. It is possible that a new difficulty will be experienced at an earlier stage. The staff teams work under the supervision of members of the Commission and with ten members it has been possible to supervise six teams. Possibly a group of five members might not be able to cope with more than two or three teams. On the other hand there will now be at least three full-time members of the Commission, the chairman and two deputy chairmen, and this should increase the ability of the Commission to supervise staff teams.
23 Such a reference can only be made in cases where the industry has agreed to take certain action. Where the Government has issued an order the Commission cannot be asked to report upon whether or not the order has been obeyed.
24 The drafting of orders may be extremely difficult. It is only too easy to draft an order in such a way as to ban practices which are harmless or, on the other hand, to exclude practices which are harrnful. This was apparent in the case of the Dental Goods Order where the original draft was hurriedly withdrawn because of serious defects. (See House of Commons Official Report, vol. 488, June 20, 1951, cols. 650, 656–9 and 663–5.) Departments may, therefore, wish to avoid recourse to orders.
25 So far only one order has been made, namely that relating to dental goods.
26 It might also be feared that a slight variation of the prohibited practice would be sufficient to protect the offender in the eyes of the law.
27 Evidence of the Board of Trade representatives, Mr. A. C. Hill and Mr. D. N. Charlish, to the Select Committee; Select Committee Report, pars. 201–8 and Annex 1, F(l).
28 One of the Board of Trade representatives stated: “I would find it awfully difficult in regard to a particular reference to weigh the various factors which led to the choice of that reference, particularly if I may say so, always remembering it is finally a Minister's decision, not mine.” Select Committee Report, par. 241.
29 In a recent law suit which had revealed the existence of a ring of dealers in antiques in a provincial town the plaintiff was asked “if he had been aware that there was an Act of Parliament to deal with that kind of ring.” We cite this as offering a highly optimistic view of the Act. According to the press report the plaintiff replied, “Yes. That is why I have finished with sales.” It might be recalled that the Act was passed in 1948. See Manchester Guardian, July 25, 1953.
30 Monopolies and Restrictive Practices Commission, Report on the Supply and Export of Matches and the Supply of Match Making Machinery, Appendix 8. The British Match Corporation suggested, as an approximation, that written-down book values were about equal to half the original cost.
31 Silbertston, A. and Solomon, D., “Monopoly Investigation and the Rate of Return on Capital Employed,” Economic Journal, 12, 1952.Google Scholar
32 The problem of valuing capital for purposes which bear some resemblance to those of the Commission has been treated in great detail over a considerable period of time by American economists. As an example we may cite Glaeser's, M. G. pioneer work, Outlines of Public Utility Economics (New York)Google Scholar, published as far back as 1927. Thus the implied suggestion of Silberston and Solomon that economists have not been much concerned with matters of this kind, though true of British economists, is not true of their American counterparts. The reasons are natural enough, but now when the problems which are set us do bear some comparison, it is to be hoped that the American writings will be consulted.
33 The Commission must report whether or not a practice is contrary to the public interest, unless the reference calls for a report upon the facts only, but it is not required to make recommendations. The authority under the Act to make such recommendations is permissive. See Kilroy, “The Task and Methods of the Monopolies Commission,” 18–19.