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Price Restraint (Competition)

Volume 978: debated on Monday 4 February 1980

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14.

asked the Secretary of State for Trade if he will undertake a study to measure the effectiveness of competition in restraining prices.

No, Sir. There is no doubt that competition restrains prices substantially, but the effect is difficult to isolate in terms of precise figures and varies from industry to industry—[Interruption.] Labour Members should go out shopping. They might find out. The extent to which the absence or distortion of competition causes prices to be higher than they would otherwise be can be taken into account by the Director General of Fair Trading in deciding whether to refer anti-competitive practices or to make a monopoly reference to the Monopolies and Mergers Commission, and by the Commission in its investigations.

Is the Minister aware that that is a disappointing reply, as well as a long one? Even without such a study, does not the Minister agree that it is obvious that competition does not restrain prices? Does he not agree that, although competition has a role to play, it is totally inadequate in a modern economic system? Therefore, will he agree to reinstate some controls similar to those exercised by the previous Government in an attempt to restrain the present roaring inflation?

Obviously the sort of controls that the hon. Member has in mind are those which put one of the major bread suppliers out of business and led to a loss of competition in that industry. No doubt that has something to do with the fact that bread prices have gone up somewhat higher than they would otherwise have done.

Is there not a wealth of evidence that competition brings about more competitive prices—for example, with refrigerators and television sets? Is it not also the case that the Government's new Competition Bill will strengthen the Monopolies and Mergers Commission and the Office of Fair Trading, to the advantage of consumers?

My hon. Friend is right on all grounds. I suggest that those hon. Members who do not believe that competition holds down prices might care to look at the newspapers and the news tapes today and see that one grocery chain, under the pressure of competition, has again reduced its prices and estimates that this will save the average housewife about 50p a week.

Reverting to the question of references to the Monopolies and Mergers Commission. is the hon. Member aware that, if the GEC bid for Decca is successful, a monopoly will be created there? Is it his intention to refer this matter to the Commission?

That is an interesting question and, no doubt if the hon. Member tables it, he will get a reply when we have considered the matter.

Will my hon. Friend confirm that it is not the Government's policy in any way to encourage any of the nationalised industries to create a State monopoly for any of the products that they manufacture?