§ 3.41 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (LORD MILLS)
With your Lordships' permission, I should like to read to you a statement which is being made in another place by my right honourable friend, the President of the Board of Trade. The statement is as follows:
§ "With permission, Mr. Speaker, I would like to make a statement about the merger which I.C.I. have proposed with Courtaulds.
§ "Each of the companies concerned, in respect of the production of man made fibres, already has a sufficient share of the market to bring it with in the terms of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948. Their merger, however achieved, would bring about a combination of exceptional size by the standards of this country. There have been no grounds hitherto for contemplating a reference to the Monopolies Commission of any sector of the production of man-made fibres, and the merits or demerits of a monopoly cannot in the view of Her Majesty's Government be fairly judged on grounds of size alone.
§ "It has been the policy of successive Governments in this country to judge monopolies, using 1017 the word in the sense of the 1948 Act, by their actual effects in practice, and not to attempt to reach conclusions on the possible effects of any particular monopoly before it has come into existence and there has been experience of its working. The 1948 Act is based on this policy.
§ "Her Majesty's Government have on consideration come to the conclusion that the circumstances of the offer which I.C.I. have announced their intention of making to the shareholders of Courtaulds, are not such as to justify them in departing from this well-established policy. They are satisfied that the advantages or disadvantages of a merger of the two companies, however it is achieved, can only be judged by results; and that there are no grounds for concluding in advance that the effects would be such as to require them to intervene on grounds of injury to the national interests. In reaching this conclusion they have had in mind the great and increasing competitive power of other countries in this field, and in addition the fact that there will be competition from units in this country which, though small in themselves, are subsidiaries of very large foreign countries.
§ "They have also had in mind the rights of users, either of primary materials or of finished products, to apply at any time for reductions in the level of the tariff.
§ "If the merger takes place, and if it operates in such a way that it appears to me to be acting against the public interest, then I would immediately make a reference to the Monopolies Commission.
§ If, after considering the report of the Monopolies Commission, the Government were to decide that it was necessary for them to intervene, they would ask Parliament for any additional powers that were required.
§ "The Government recognise the importance of the problems which surround the general subject of mergers, monopolies and restrictive practices. Certain aspects of this are already being considered by the Committee on Company Law which, I understand, will shortly be submitting its report. I am not going to anticipate 1018 the conclusions of Lord Jenkins and his colleagues.
§ "On the wider issues I had already put in hand a general review of policy in the light of experience gained in the five years since Parliament passed the Restrictive Trade Practices Act in 1956. This is a very large and complex subject and the review will clearly take some time. It will naturally have to cover the growth in recent years in the number of mergers and the implications of this development for the future health of the economy."
§ That, my Lords, is the statement.
VISCOUNT ALEXANDER OF HILLS BOROUGH
My Lords, I am sure the House is grateful to the noble Lord, Lord Mills, for that statement, though it hardly seems to rate to deal effectively with the public anxieties which have been expressed in many parts of the community by all classes and in all types of trades and business. The desire of the Opposition, in this House—and in the other place too, I am sure—is that an Inquiry should be held into this matter. I think most of the statements made to us in this House this afternoon are undoubtedly true, but there are aspects of it which surely give rise to very big national considerations.
As I understand it, for example, this particular integration is commented upon by Messrs. Courtaulds in these words:The I.C.I. have said that complete control of the United Kingdom man-made fibres is necessary to avoid over-capacity and duplication. But by the same argument the I.C.I. could attempt to gain complete control of all other United Kingdom industries in which it is a supplier of chemical raw materials, paint and fertilisers being two examples.This is the sort of thing that is being discussed by all classes of the population, as I have discovered on my journeys round the country. I do not want to take the line that we ought to do our best at once to defeat this proposal. What I do want is to have the facts thoroughly got at by an Inquiry. Whilst it is true that some steps are being taken to amend Company Law with regard to the general problem of take-over bids, I do not think that is going to meet this type of thing in relation to mergers.
I do not understand one part of the statement which refers to the size of 1019 the undertaking. One would think, from the way it was put, that the man made fibres industry is in itself a monopoly, or virtually a monopoly. But, in fact, Courtaulds are producing 83 per cent. of the man-made fibres of this country, and as to the remaining 17 per cent. only 13 per cent. is made by I.C.I., with 4 per cent. being made by other people. This shows a very different situation, and the kind of approach that is expected to be made in future by take over bidders who want to become the dominant factor in an industry in which their own interest is something like 13 per cent. of the total production in this country, seems to raise very great issues indeed. I feel that the Government ought to grapple with this problem before it begins to operate in a particular case, and should set up an Inquiry into the whole of the circumstances. I wish I had time to say more, but I think I have put enough of my view to the noble Lord, Lord Mills, for him to see what I want.
§ LORD MILLS
My Lords, I always listen with the greatest respect to what the noble Viscount the Leader of the Opposition has to say, and I have no doubt that he is convinced there should be an Inquiry into this matter. The Government carefully considered whether there would be any advantage in having an Inquiry. Their reason for rejecting the proposal was that they were satisfied that it would not serve a useful purpose, because, in their view, the matters which could, or might, cause disquiet lie in the future and not in the present. I think it would be an impossible task, whatever experts we gathered together, to expect them to reach firm and agreed conclusions on matters which have not yet taken place.
The noble Viscount referred to what is said in the statement about size. The statement said merely that size itself is no ground for submitting a case to the Monopolies Commission; what matters is how a monopoly acts. Of course, great changes are taking place in industry. Great movements have been taking place since the last century, and they have been very much accentuated since the war. I think many noble Lords would agree with me that, while there are cases of take-overs which we should 1020 be better without, others have undoubtedly strengthened the efficiency and the power of this country to compete.
§ THE EARL OF SWINTON
My Lords, I should like to ask the noble Lord, the Minister, one or two questions. They are directed not so much as to whether this ought to be referred to the Monopolies Commission—because I agree that probably the Monopolies Commission can decide or report only on whether something that is already in existence and operating is doing harm or good—but as to whether, as a most important piece of planning and industrial policy, it is in the national interest that this amalgamation should take place.
The noble Lord referred to users. May I ask him these specific questions? First of all, have the Government considered, and if so what is the answer, whether this amalgamation would be in the national interest, in the sense of making this industry more efficient and more able to compete in the markets of the world? Secondly, these two great companies, whether operating together or separately, produce fibres which are used by an enormous range of industry, doing some of the most important export trade which this country possesses. Have the Government had discussions with the textile industry which uses these fibres, to ascertain whether, in the opinion of those in the industry, such an amalgamation is in the interest of the textile industry and the export trade of this country? Those are the questions that I should like to put to my noble friend.
§ LORD MILLS
My Lords, in reply to the noble Earl, and answering his first question, I would say that the Government have listened to the reasons put forward by the chairmen of these companies as to whether the merger is or is not desirable. As the noble Earl will know, while there are some differences of opinion as to whether the merger should take place on the terms proposed, there has been general agreement that there are advantages, in the interests of the companies and in the national interest, in their coming together both in production and in research.
Then the noble Earl asked me whether there had been consultations with the textile industry in relation to this proposed merger. I would remind the noble 1021 Earl that these two companies themselves constitute the greater part of the man-made fibre industry. But apart from the fact that the Board of Trade are constantly in touch with the textile industry, there has been no direct discussion with them on this particular question.
§ THE EARL OF SWINTON
My Lords, could I put this point plainly to the noble Lord? I did not ask about the makers of the fibres; I asked about those branches of the textile industry which use the fibres which Courtaulds and the I.C.I. make.
§ LORD MILLS
My Lords, the reply to the noble Earl is that, apart, as I say, from the contacts which the Board of Trade regularly have with these industries, there has been no direct contact on this particular merger.
§ LORD SILKIN
My Lords, I hope that in view of the statements and replies which have been given, my noble friend will press for a day on which this whole matter can be debated. I think that it is of so great a national importance that the Government ought not to rush this through before we, have had a full opportunity of discussing it in this House, and possibly, of course, in another place.
I want to ask the noble Lord whether it is not a fact that, once the merger has taken place—that is, once the share holders of Courtaulds have disposed of their shares in some form or another to the I.C.1—it would be too late to "unscramble" the thing. The noble Lord says that he will see how it goes, and whether it is against the national interest. But even if it is, will it not then be too late to do anything? The noble Lord, Lord Mills, indicated that it may be necessary to pass legislation, which seems to show that at the present moment there is no power to do anything, even should it turn out, as a result of experience, that this merger was against the public interest. Is it not much wiser, therefore, to consider this merger before it is permitted, rather than to allow it to take place?
§ LORD MILLS
My Lords, my noble friend the Leader of the House will answer as to the question of a debate. In the statement which I repeated to your Lordships, my right honourable friend the President of the Board of 1022 Trade said that if it appeared to be in the public interest that something should be done about this, such as unscrambling" it, he would see that it was done; and, obviously, if it were necessary to take powers to carry that out, that would be done, too.
§ LORD LATHAM
My Lords, would the noble Lord say whether the users of the man-made fibres have been consulted as to the consequences of this proposed merger?
§ LORD MILLS
My Lords, I have already been asked that question and I have answered it. I am sorry that the noble Lord did not hear it, but I do not think he will expect me to reply again.
§ LORD SHEPHERD
My Lords, it is a fact that a monopoly position has arisen in the man-made fibre industry. is it not a fact that this has arisen through both of these companies in the course of years absorbing other companies in that industry? A monopoly position has been created. Both of these industries are groups. On one side there are the man-made fibres; on the other side there is paint, there is paper and there are plastics. A monopoly position exists in man-made fibre. After the statement which has been made by the Minister, would it not appear that I.C.I., when this merger has gone through, may go a head and absorb the paint industry, as it has done the man-made fibre industry? As we know, the Monopoly Commission are to-day unable to cope with this problem. Is it not obvious that an inquiry by the Government is urgently needed, not only into the position of I.C.I. but into the whole trend of developing monopoly, which is spreading right through production and the distributing trades of this country? The shoe industry and the bicycle industry are now becoming closed shops. Is it not time, in the interests not only of the consumer but of industry generally, that the Government had a full inquiry, so that a general policy, fair to consumer and fair to shareholder, can be adopted?
§ LORD MILLS
My Lords, I do not know whether the noble Lord, Lord Shepherd, disagrees with the noble Lord, Lord Silkin, and wants to debate this matter now. I think it would be better if it were debated at a later date. I 1023 have in front of me here a speech made by the noble Lord, Lord Shepherd, on December 20, when he really covered this ground. I think it better, if we are going to debate it, to wait until we debate it on a Motion.
§ LORD SHEPHERD
My only fear is that the statement which has been made may make it appear to the I.C.I. that they could go on and on, absorbing more and more of the different sides of their industry.
§ LORD MILLS
Perhaps I had better say that I think the statement and any remarks of mine have not been calculated to encourage amalgamations of this sort, or to dissuade people from going into them.
§ LORD SILKIN
Could we have a reply to the point that the Government should make representations to I.C.I. that this matter should not be proceeded with pending discussion in this House, and possibly in another place?
§ VISCOUNT HAILSHAM
That is for the noble Lord to decide. His noble Leader has asked for a debate, and, of course, if the request is pursued through the usual channels I shall be happy to meet him in that respect. But I should be the last to think that a Parliamentary debate is of no purpose. We have the power of legislation in this Parliament, and Parliamentary discussions can elucidate whether or not we should legislate. I can see no reason to suppose that Parliamentary debate in this country is useless.
§ LORD SILKIN
Would the noble Viscount at least ask the I.C.I. to postpone any further operation until after the debate?
§ LORD DOUGLAS OF BARLOCH
My Lords, may I ask the noble Lord who stated that the Government were going to embark upon a review of policy on this matter what form that 1024 review is going to take, whether it will be published and will set out all the considerations, on one side or the other, and also how soon the review will be carried out?
§ LORD MILLS
My Lords, the Government are always reviewing policy in this and other matters, but they have no intention at present of setting up a Committee of Inquiry into this or related subjects other than the review that is already in progress.