asked the Secretary of State for Prices and Consumer Protection what progress the Director General of Fair Trading has made in his discussions with Rank Xerox Limited on the Monopolies and Mergers Commission's report on the supply of indirect electrostatic reprographic equipment in the United Kingdom.
The Director General has now completed the discussions with Rank Xerox (UK) Limited which my right hon. Friend invited him to undertake following the publication of the Commission's report on 16th December 1976. As a result of these discussions, Rank Xerox (UK) Limited has given certain undertakings to my right hon. Friend.
The Commission found that Rank Xerox's restrictive patent licensing policy operated against the public interest. The Commission did not, however, make any recommendation in this connection because of the then recent consent order negotiated between the United States Federal Trade Commission and Rank Xerox's United States parent, the Xerox Corporation (Xerox), which, inter alia, required Rank Xerox in the United Kingdom to grant, subject to certain conditions, licences to competing manufacturers in respect of its patents relating to equipment covered by the Commission's reference. In this connection the Commission noted that, whereas a licensee manufacturing in the United States could require Xerox to provide know-how associated with its patents, there was no requirement to provide know-how to firms manufacturing outside the United States.
The following undertaking will enable the situation to be monitored in accordance with a suggestion by the Commission:
" By 31st March 1980, we will provide the Director General with a list of licensees of United Kingdom patents of Rank Xerox Limited, Xerox Corporation, or ourselves relating to machines, as at 31st December 1979 ".
Rental/Sale of Machines
The Commission concluded that Rank Xerox's policy of only renting and not selling its machines operated against the public interest. In the course of the Commission's inquiry Rank Xerox abandoned its rental-only policy and started to offer most of its machines for sale.
The Director General has secured the following undertakings from Rank Xerox (UK) Limited which provide a basis for ensuring that a rental-only policy is not being pursued and that sale prices are fixed—in accordance with the Commission's recommendation—at levels which make purchase a feasible alternative to renting for a reasonable proportion of customers:
" We will make all types of machines and accessories that are generally available for lease or rental also available for outright purchase by any customer, except that:
(a) when a type of machine is no longer being produced, remaining stocks may be offered for lease or rental only; and (b) outright sale may be delayed for up to six months after the commercial introduction of a new type of machine.
We will provide all prospective customers with details of sale prices, and of prices at which purchased machines may be covered by full service maintenance agreements.
We will fix sale prices so that purchasing is a financially attractive alternative to renting for a reasonable proportion—which we would expect to be at least 10 per cent.—of acquisitions of each type of machine.
We will not discriminate in any way against users of purchased machines in favour of users of rented machines, e.g. in the provision of servicing.
We will offer users of purchased machines the option of having them maintained on the basis either of specified charges for labour and materials, or of a full service maintenance agreement under which we will provide all servicing, supplies—except paper and, where appropriate, toner—and spare parts. Where service by us is not practicable, we will offer to train personnel of users, at their expense, to service purchased machines.
We will make spare parts available for at least five years from the date of purchase."
The Commission concluded that Rank Xerox's policy of requiring some of the users of its machines to purchase toner —a printing agent—only from Rank Xerox operated against the public interest. The Commission recommended that the company should charge for toner separately and not include the charge for toner in the rental charges for its machines.
The Director General has secured the following undertakings from Rank Xerox (UK) Limited which have the effect of eliminating the restriction of competition to which the Commission drew attention and which will ensure that enough information is provided to enable customers to make an informed judgment as to the cost of a"toner-out"option:
" We will extend to all customers on the group pricing plan the option of purchasing toner separately, either from ourselves or from another supplier, and we will continue to make this option available to our other customers.
By 30th November 1978, we will notify the existence of this option to customers who are acquiring toner from us under group pricing plan terms.
We will inform customers of this option before entering into agreements with them.
We will show on our rental and service agreements our retail prices for toner current at the time.
By 30th November 1978, we will show the amount of charge for toner on the rental invoices of all customers who do not elect to purchase toner separately.
We will specify in rental and service agreements the terms on which customers may change to separate purchase of toner.
We will inform the Director General of Fair Trading of any proposed changes to those terms."
The Commission found that no aspect of the operation of Rank Xerox's copy bureaux operated against the public interest but suggested that it was desirable that the bureaux exhibit price lists. The Secretary of State asked the Director General to discuss this point with Rank Xerox and the Director General has secured the following undertaking from Rank Xerox (UK) Limited:
" We will exhibit in a prominent place at each of our copy bureaux and each of our show rooms which customarily provides copy bureau services price lists for normal repro-graphic work ".
Additionally under this head the Company offered the following undertaking:
" We reaffirm our statement to the Monopolies and Mergers Commission that our copy bureaux will continue to be required to stand on their own feet commercially."
Group Pricing Plan
On the discount arrangements then being operated under Rank Xerox's group pricing plan (GPP) the Commission concluded that they operated against the public interest. In pursuance of the Commission's recommendations relating to the GPP, in particular that it should be terminated within six months, my right hon. Friend asked the Director General to explore with Rank Xerox what modifications might be needed in the GPP arrangements to remove any significant anti-competitive effects.
As a result of the subsequent discussions between the Director General and Rank Xerox, the company has modified the GPP in a number of ways which satisfactorily reduce its anti-competitive effects. Moreover, Rank Xerox, by virtue of the following undertaking, will be submitting all future changes in discount arrangements involving aggregation of machines to the Director General:
"We will inform the Director General in advance of any proposed changes to our group pricing plan terms or charges, or of any other discount or pricing arrangement which we propose to introduce and which involves aggregation of more than one machine."
Finally, the undertakings provide for the provision of information by Rank Xerox to the Director General to enable him to monitor the performance and effects of the undertakings and to carry out an annual review of the undertakings.
My right hon. Friend considers that the undertakings given by Rank Xerox should be sufficient to remedy and prevent the adverse effects specified in the Commission's report and to meet the recommendations and suggestions made by the Commission. Copies of the undertakings will be placed in the Library.