§ Mr. H. Clark
asked the President of the Board of Trade when the Report of the Monopolies Commission on the supply of chemical fertilisers will be published; and if he will make a statement about its contents.
§ Mr. Maudling
1. The Report was published today. It covers the supply of the following chemical fertilisers:—
- (i) Nitrogenous fertilisers: ammonium sulphate, Nitro-Chalk, sodium nitrate, ammonium nitrate.
- (ii) Potash fertilisers: potassium chloride, kainite, potassium sulphate.
- (iii) Phosphatic fertilisers: calcium superphosphate (single and triple), ground rock phosphate, basic slag.
- (iv) Compound fertilisers.
2. The reference made to the Monopolies Commission on 29th October, 1955, was varied on 30th August, 1956, to bring it into conformity with the Restrictive Trade Practices Act of that year. The practical effect of this was that the Commission did not take account in their conclusions of any agreements to which Part I of that Act applies and which are therefore liable to examination by the Restrictive Practices Court.
3. The Commission find that the conditions to which the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948 (as amended), apply do not prevail in the case of ground rock phosphate. Accordingly, no conclusions or recommendations on this material appear in the report.
4. The Commission find that materials within the scope of the inquiry account for the great bulk of chemical fertilisers now used in the United Kingdom for the provision of nitrogen, potassium and phosphorus. Some of the fertilisers listed at (i)-(iii) above, as well as being sold for straight use by farmers are also sold to mixers for the production of compound fertilisers. In the year 1957 to 1958 Imperial Chemical Industries Ltd. (with their subsidiary, Scottish Agricultural Industries Ltd.) supplied about 74 per cent. of the total quantity of nitrogenous fertilisers sold in the United Kingdom, Potash Ltd. about 76 per cent. of the potash and Fisons Ltd. about 43 per cent. of the superphosphates sold. Fisons Ltd. supplied 40 per cent. and British Basic Slag Ltd. 37 per cent. of the market for basic slag. Fisons Ltd. supplied 43 per cent. of the compound fertilisers covered by the inquiry and were the leading customer of Imperial Chemical Industries Ltd. for the ammonium sulphate, and of Potash Ltd. for the potash required in making these compounds. In 1957 to 1958 Fisons Ltd. purchased about 40 per cent. of all the potash sold.
5. The main conclusions and recommendations of the Commission are:—
- (i) Neither the position of Imperial Chemical Industries Ltd. as the preponderant supplier of nitrogenous fertilisers, nor any of the things done by the company in this capacity, operate or may be expected to operate against the public interest. (In reaching this conclusion the Commission did not
103 consider the effects of the agreements relating to the British Sulphate of Ammonia Federation, to which the company is a party; these are agreements to which Part I of the Restrictive Trade Practices Act, 1956, applies.)
- (ii) Nothing done by Potash Ltd. operates or may be expected to operate against the public interest; but the fact that the company is part of an international organisation designed to eliminate competition operates against the public interest. The Commission note that competition from East Germany has had beneficial effects in recent years and consider that everything possible should be done to develop still other overseas sources for some part of the country's requirements. They recommend that the Government should consult with Fisons Ltd., Imperial Chemical Industries Ltd. and other large buyers as to the further measures that might be taken to develop the strongest possible bargaining position with the overseas producers.
- (iii) Neither the position of Fisons Ltd, as preponderant buyer of potash nor anything done by the company in that capacity operates or may be expected to operate against the public interest.
- (iv) The position of Fisons Ltd. as predominant supplier of superphosphates and compounds does not in itself operate against the public interest nor may it be expected to do so. The Commission consider, however, that the company's practice of fixing prices at a level which produces profits at the high rate of recent years (when they have averaged over 20 per cent. on capital employed, calculated on the basis of historical cost of fixed assets) does operate against the public interest. The Commission do not object in principle to profits designed to cover replacement of plant, but they do object to the practice of fixing prices with the intention of providing profits to be devoted to financing the rapid expansion of the business as a whole in a market protected by import duties and subsidised by the Government. They recommend that Fisons Ltd. should adjust their pricing policy to yield a lower level of profit than has been
104 achieved in recent years. They record their belief that the company did not act in deliberate disregard of the public interest and can be relied on to carry out this recommendation.
- (v) The actions of Fisons Ltd. and of British Basic Slag Ltd. as predominant suppliers of basic slag neither operate nor may be expected to operate against the public interest. (In reaching this conclusion as regards British Basic Slag Ltd. the Commission did not consider the effects of certain agreements to which the company is a party and to which Part I of the Restrictive Trade Practices Act, 1956, applies.)
- (vi) The Commission consider it outside their terms of reference to make any recommendation to the Government on the action they should take on proposals which have been made for the introduction of a subsidy on potash.
6. The report is unanimous, subject to a note of dissent by Professor Allen on the subject of uniform delivered prices and a reservation by Sir Thomas Barnes on the conclusion of the Commission that it is against the public interest that Potash Ltd. should be part of an international organisation designed to eliminate competition.
7. One member of the Commission, Mr. Andrew Black, did not take part in the inquiry because of his past connections with the industry.
8. As soon as the industry has had time to consider the report, I propose, as a first step, to consult them on the various matters to which it gives rise, and to see how far they are prepared to give effect to, or co-operate in giving effect to, its conclusions.