§ Mr. Normanton
asked the Secretary of State for Trade and Industry when he expects to publish the report of the Monopolies Commission on the general effect on the public interest of the practice of parallel pricing.
§ Sir G. Howe
The report has been published today.
The commission found that parallel pricing was likely to be found in industries where a major share of the industry's market is concentrated in the hands of a few large sellers. Parallel pricing is the outcome of an appreciation by the industry that the interests of each member of the group might be best secured by the co-ordinated pursuit of the interests of the group as a whole. The commission did not wish to imply that a structure of a large number of sellers engaged in open price competition is necessarily and universally more in the public interest.
Nevertheless the practice of parallel pricing has consequences that may operate against the public interest. These include: the possibility of a higher level of prices and profits; the possible persistence of a wider range of cost differences between sellers for a longer period than would prevail with a more competitive market structure; and the possible general weakening of the pressures on all sellers to maintain a high degree of efficiency. In addition the commission found that there was a possibility that parallel pricing could retard technical change and sustain inflation.
The commission found the task of remedying such detriments far from easy. This is because when sellers simply choose not to compete on prices they cannot be directly required to change their behaviour, which is largely a consequence of the structure of the markets in which they operate. In these circumstances there appeared to be only two ways of limiting the extent of the damage to the public interest: to endeavour to restrict the development of situations in which the practice is most likely to arise, and to ensure that steps are taken to reduce the damage which might flow from a continuation of the practice.434W
Accordingly the commission recommends: (i) that the Department of Trade and Industry should bear in mind, when considering whether or not to refer proposed mergers to the commission, that a high degree of seller concentration is a prerequisite of parallel pricing; and (ii) that the Department of Trade and Industry should have such situations in mind when deciding what references to make to the commission under the provisions for referring industries in which conditions of monopoly or oligopoly prevail.
The report provides a very useful analysis of the detriments that can result from parallel pricing, and I accept its conclusions and recommendations, which I will bear in mind in making further references to the commission. After the Fair Trading Bill is enacted I shall draw the report and its recommendations to the attention of the Director General of Fair Trading.