Skip to main content

Tobacco Industry (Monopolies Commission's Report)

Volume 643: debated on Wednesday 5 July 1961

The text on this page has been created from Hansard archive content, it may contain typographical errors.

asked the President of the Board of Trade when the Report of the Monopolies Commission on the supply of cigarettes and tobacco, and cigarette and tobacco machinery, will be published; and if he will make a statement about its contents.

The Report was published today. It covers the supply of (a) cigarettes and manufactured cigarette and pipe tobacco, and (b) machinery for the manufacture or packaging of cigarettes or of cigarette or pipe tobacco.Two references were made to the Monopolies Commission on 29th November, 1956, and as the two subjects were closely connected the Commission has dealt with them both in one Report.The Commission finds that the Imperial Tobacco Co. (of Great Britain and Ireland) Ltd. supplies nearly two-thirds of the total home supplies of cigarettes and tobacco (its share was 63·4 per cent. in 1959 and had declined each year from 78·8 per cent. in 1955). At the time of the Report no other manufacturer was found to be supplying as much as one-third of the total home supplies, although Gallaher Ltd. was not far below that figure (its share having risen year by year from 11·2 per cent. in 1954 to 29·3 per cent. in 1959).Imperial has financial interests in two other tobacco manufacturers, the British-American Tobacco Co. Ltd. (which does not supply the home market) and Gallaher Ltd. The company also controls, through its subsidiary, Ardath (U.K.) Ltd., the manufacture and sale of Ardath brands in the home market.The largest supplier of cigarette and tobacco machinery is the Molins Machine Co. Ltd., in which Imperial and British-American Tobacco each hold 25 per cent, of the equity. Of total home supplies of machinery in 1958, 56·5 per cent. was supplied by the Molins Machine Co. Ltd. and 40·5 per cent, was supplied to Imperial. No other manufacturer supplies, nor does any other user take, as much as one-third of the total United Kingdom supplies.The main conclusions and recommendations of the Commission are:

Cigarettes and tobacco
  • (i) the monopoly position of Imperial, as such, does not operate against the public interest nor may it be expected to do so.
  • (ii) the retention by Imperial of its shareholding in Gallaher operates and may be expected to operate against the public interest. The Commission recommends that Imperial should divest itself of any direct or indirect financial interest in Gallaher.
  • (iii) Imperial's practice of allowing a bonus to distributors conditional on the grant to the company of a proportion of their display facilities operates and may be expected to operate against the public interest. The Commission recommends that
  • (a) Imperial should terminate its existing Bonus Agreements.
  • (b) any bonus or allowance granted to a distributor by any tobacco manufacturer, whether by written agreement or otherwise, should in future be related solely to that distributor's turnover in the products of the manufacturer concerned,
  • (c) any such bonus or allowance should be completely dissociated from the grant of continuing advertising or display facilities by distributors (special arrangements for "campaign" advertising are in the Commission's view in a different category and unobjectionable),
  • (d) no tobacco manufacturer should in future enter into an arrangement with a distributor the effect of which is that if the distributor advertises a competing product he must also advertise that manufacturer's product.
  • (iv) Machinery—Neither the monopoly position of the Molins Machine Co. Ltd nor the position of Imperial as the preponderant buyer nor any things done by either company in this connection operate or may be expected to operate against the public interest.
  • The Report is unanimous, subject to a note of dissent by Professor G. C. Allen, in relation to resale price maintenance. The Commission concludes that on balance of a number of con- siderations, and so long as competition between manufacturers continues on the present scale, this practice is not against the public interest in the cigarette and tobacco industry. Professor Allen disagrees with this conclusion and considers that the practice should be abolished in this industry.

    One member of the Commission, Dr. L. T. M. Gray, did not take part in the inquiry because of his connections with the machinery industry. Another member, Mr. Ashton W. Roskill, Q.C., did not take part because he was only appointed to the Commission during the closing stages of the inquiry.

    As soon as the industry has had time to consider the Report, I propose, as a first step, to consult it on the various matters to which it gives rise, and to see how far it is prepared to give effect to, or co-operate in giving effect to, its conclusions.