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Benefits from Restrictive Agreements: The British Experience*
Published online by Cambridge University Press: 07 November 2014
Extract
The British Restrictive Trade Practices Act, 1956, states, in Section 21, that “a restriction accepted in pursuance of any agreement shall be deemed to be contrary to the public interest unless the Court is satisfied” of one or more of certain specified circumstances. Thus, the onus of refuting the general presumption that restrictions on competition are against the public interest is placed on the parties to a restrictive agreement, and the arguments they may employ (or circumstances they may seek to prove) are stated in the legislation. One such argument or circumstance is given in Section 21 (1) (b): “That the removal of the restriction would deny to the public as purchasers, consumers or users of any goods specific and substantial benefits or advantages enjoyed or likely to be enjoyed by them as such, whether by virtue of the restriction itself or of any arrangements or operations resulting therefrom.” If the restriction passes through this, or any other, “gateway,” the “tailpiece,” or balancing procedure must still be faced, as the Court must be “further satisfied (in any such case) that the restriction is not unreasonable having regard to the balance between those circumstances and any detriment to the public or to persons not parties to the agreement (being purchasers, consumers or users of goods produced or sold by such parties, or persons engaged or seeking to become engaged in the trade or business of selling such goods or of producing or selling similar goods) resulting or likely to result from the operation of the restriction.” Thus, if an agreement, for example, convinces the court that it meets the “specific and substantial benefits or advantages” requirement of 21 (1) (b), it will be found not contrary to the public interest only if it also survives the balancing test in which any public detriments resulting from the agreement may be taken into consideration. These, in brief, are the guide-lines given the Restrictive Practices Court by means of which it performs its obligation to pluck, from the class of all restrictive agreements, those presumably few agreements from which the public derives, on balance, a benefit.
- Type
- Articles
- Information
- Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 30 , Issue 2 , May 1964 , pp. 228 - 240
- Copyright
- Copyright © Canadian Political Science Association 1964
Footnotes
*
The research on which this paper is based was commenced while the author was a member of the Institute for Economic Research, Queen's University, Kingston, 1962.
References
1 Restrictive Trade Practices Act, 1956, 4 & 5 Eliz. 2, c. 68.
2 That is, the court accepted the argument that the removal of the restriction would be likely to cause a substantial reduction in the volume or earnings of exports.
3 LR 2 RP In re Cement Makers' Federation Agreement, 276. (The letters LR RP indicate that the reference is to the Reports of Restrictive Practices cases published by the Incorporated Council of Law Reporting for England and Wales).
4 WLR Nov. 16, 1962, In re Net Book Agreement, 1378. (The letters WLR indicate that the reference is to the Weekly Law Reports published by the Incorporated Council of Law Reporting for England and Wales).
5 The court includes a number of lay members who are persons “appearing to the Lord Chancellor to be qualified by virtue of [their] knowledge of or experience In industry, commerce or public affairs.”
6 LR 1 RP In re Yarn Spinners' Agreement. The balancing operation is discussed at p. 196.
7 There appears to have developed a requirement that the defenders of a restriction establish that their prices, profits, and costs are reasonable if the agreement is to have any chance of finding favour with the court; the Registrar need not, however, demonstrate unreasonableness in order to have the agreement declared contrary to the public interest. For an elaboration of this point see my article “The Restrictive Practices Court and Reasonable Prices,” to appear in a forthcoming issue of the Journal of Industrial Economics.
8 The quotations from the judgment come from LR 2 RP, In re Black Bolt and Nut Association's Agreement. (Italics added).
9 For example, in the Wholesale Confectioners' Alliance decision, where it was stressed that the situation in Black Bolts and Nuts was “very special.” LR 2 RP, 163.
10 “I do not think that the absence of specific complaints establishes the reasonableness of prices. … The ordinary man's usage of the notion of being overcharged simply does not apply where there is, and has been for some time, only one price at any moment for all the alternative fastenings.” Worswick, G. D. N., “On the Benefits of Being Denied the Opportunity to ‘Go Shopping’,” Bulletin of the Oxford University Institute of Statistics, XXIII, no. 3, 274.Google Scholar
11 Ibid., 277.
12 Yamey, B. S., “The High Costs of Buying a Trivial Element,” Modern Law Review, XXIV, 490.Google Scholar
13 “On the Benefits of Being Denied the Opportunity to ‘Go Shopping’,” 279.
14 The quotations from the judgment come from WLR June 29, 1962, In re Permanent Magnet Makers Association's Agreement.
15 Jewkes, J., “Monopoly and Economic Progress,” Economica, XX, 206.Google Scholar
16 See the discussion by Wiseman, J., “Economic Analysis and Public Policy,” Economic Journal, LXX, especially 459–60.Google Scholar
17 As the court's use of the word “favourable” to describe a higher ratio of research expenditure to net output suggests it has done.
18 The quotations from the judgment come from WLR Aug. 17, 1982, In re Standard Metal Window Group's Agreement.
19 This point is stressed in Yamey, B. S., “Competition and Collaboration in Industry,” Modern Law Review, XXVI.Google Scholar
20 The quotations from the judgment come from WLR, Nov. 16, 1962, In re Net Book Agreement.
21 In an earlier decision the court had stated: “If the new entrant succeeds at all … he does so because he provides a more efficient service to his customers. … If … he attracts Customers from his competitors, this is merely the normal process whereby under competitive conditions less efficient tradesmen are driven out of the trade and replaced by the more efficient to the advantage of the public as purchasers.” LR 2 RP, In re Newspaper Proprietors' Association Limiteds and National Federation of Retail Newsagents, Booksellers and Stationers' Agreement, 492.
22 See Yamey, B. S., “The U.K. Approach to Restrictive Business Agreements: Some Observations,” International and Comparative Law Quarterly, Supplementary Publication no. 2 (1961), especially 24–5.Google Scholar
23 The quotations from the judgment come from LR 2 RP, In re Cement Makers' Federation's Agreement. (Italics added).
24 This expression appears in the valuable analysis of the decision by Beacham, A., “Some Thoughts on the Cement Judgment,” Economic Journal, LXXII.Google Scholar
25 Heath, J. B., “The Per Se Rule in the Light of British Experience,” Northwestern University Law Review, LVII, 171.Google Scholar