CAB129-45 — Page 576

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34 The Government therefore propose to introduce legislation to make illegal collective measures designed to ensure that goods shall be sold at (or above) specified retail prices. It will be an offence to operate such arrangements or to take part in their operation. Trade associations which are constituted as trade unions will not be exempt from prosecution for this offence.

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Resale Price Maintenance Operated by Individual Producersylumbi

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35. The Lloyd Jacob Committee recommended that individual producers might be left to operate resale price maintenance by their own means but added that provision should be made for such price reductions as are justified by low- cost distribution or by a regular policy of distributing surplus profit to the customer. They then recommended that the Government should consult the principal trade organisations to see how this proposal for a more flexible use of resale price maintenance by individual manufacturers could be effectively carried out.

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36. For this purpose the Government first approached the Federation of British Industries and the National Union of Manufacturers and a meeting was held on 24th October, 1949. Neither of these organisations felt able, however, to give any general guidance to its constituent associations on the subject. It was, therefore, necessary for the Government Departments concerned to approach individually the many trade associations which include among their members manufacturers who prescribe and enforce resale prices for their own goods.

37. Accordingly letters were sent in the early months of 1950 to a great many such associations asking them for their comments on the policy recom- mended by the Lloyd Jacob Committee and for any suggestions they might have for carrying that policy into effect. This approach, however, met with no constructive response. Most of the Associations said that they did not concern themselves with their members' activities in this respect and could offer them no guidance.

38. Thus the situation is that the trade organisations concerned, while no doubt accepting the first part of the Lloyd Jacob Committee's proposal (i.e. that resale price maintenance by individual producers should be allowed to con- tinue), have not been able to suggest any means of carrying out the second part (i.e. that the practice should be operated with greater flexibility, so as to allow price reductions justified by low costs). The Government regards these two recommendations as standing together and cannot accept a situation in which the first is fulfilled while the second remains a dead letter.

39. In the Government's view the economic objections to resale price maintenance are no less great when the practice is carried on by individuals (so long as they can operate it effectively) than when it is done collectively. For this reason the continuance of the practice would be acceptable only if the manufacturers concerned were able and willing to introduce the required degree of flexibility into its operation. The Government has decided there- fore that the necessary modification must be achieved by statute.

The Government's Proposal

40. The Government proposes to provide in the legislation to be intro- duced that manufacturers shall be entitled to indicate, recommend or prescribe only maximum prices for the resale of their goods and it will be an offence to give any indication of resale price unless it is clearly stated that the price indicated is a maximum.

41. This means that the manufacturer will still be able to inform the public through advertisements and on wrappings of the maximum price at which they may expect to obtain his goods. The public will know that this price will not be exceeded and the manufacturer will be free to prevent distributors from spoiling the market for his goods by charging a higher price. (The importance of this to manufacturers was stressed in paragraph 40 of the Lloyd Jacob Report). On the other hand, the trader will not be debarred from making a reduction from the indicated price and the Government will be concerned to see that his freedom in this respect is not impaired.

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42. To sum up :-

SUMMARY

(a) The Government's objection to resale price maintenance is two-fold. First, by eliminating price-competition between shops with different levels of cost, it prevents price reductions which could and should be made. Secondly, the collective punitive action by which most fixed resale prices are enforced amounts to a private system of law which Page effect isfossile the jurisdiction of the Courts.

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