NOTES OF CASES
| Published date | 01 July 1959 |
| Date | 01 July 1959 |
| DOI | http://doi.org/10.1111/j.1468-2230.1959.tb00550.x |
NOTES
OF
CASES
THE YARN-SPINNEBS' AGREEMENT
:
ECONOMICS
IN
COURT
THE
second judgment of the Restrictive Practices Court is
momentous.' Its condemnation of the minimum price agreement
of the Yarn Spinners' Association has already led to the abandon-
ment of several restrictive agreements in other industries.
For,
rightly
or
wrongly, the decision has been taken to mean that the
court will only in rather special cases be satisfied that restrictive
agreements are
in
the public interest in terms of section
21
of the
Restrictive Trade Practices Act,
1956.
The fact that the court
condemned the spinners' agreement despite its finding that the
abandonment of the agreement was likely to have a
"
serious and
persistent adverse effect
"
on
unemployment in Lancashire lends
particular force
to
this interpretation of the
court's
"
temper."
The arguments advanced in support of the yarn spinners' price
agreement, the Registrar's criticisms of these contentions, and the
views and findings of the court are lucidly set out in some detail
in the case report, and there would be little point in reviewing
these at any length. The court, skilfully deploying data about the
working of the agreement, established that, contrary to the claims
made
for
it, the agreement was not
a
"
stoploss
"
agreement,
i.e.,
an agreement setting
a
low
floor
to price movements, designed to
operate only in temporarily very depressed market situations.
This finding weakened the case for the agreement.' Further, the
court rejected a number of arguments in the context of the yarn
spinning industry which are frequently and more generally brought
up in justification of price agreements. Thus the court found that
the agreement did not confer
''
specific and substantial benefits
or
advantages
''
on
the
"
public as purchasers, consumers
or
users
1
Re
Yarn
Spinners' Agreement
(1959)
L.R.
1
R.P.
118.
2
A
stop-loss price agreement, found to be such by the court,
was
considered in
the later case,
Re Blanket Manufacturers' Agreement
[1959] 1
W.L.R.
442.
Unlike in the yarn spinners' case, where it
was
found that the agreement
prices were frequently and for long periods the ruling prices (and hence that
the agreement
was
not of the emergency stop-loss variety), it
was
found here
that during the years
1955/58
sales at the agreement prices had been negli-
gible and that practically
all
sales took place at higher prices.
The
court
found, however, that the benefits flowing from the agreement could not be
regarded
as
''
specific and substantial
"
[as
required in
8.
21 (1)
(b)
of the
kt]
:
one of the difficulties facing the trade association
was
that of establishing
any likclihood of a recession sufficiently severe to bring it [the price agree-
ment] into really effective operation" (p.
452).
It seems therefore that
a
stop-loss price agreement, to have
a
reasonable chance
qua
stoploss agreement
of a siiccessful defence under the Act, should not have been in effective opera-
tion either too frequently or too infrequently. It is
a
case of "not too little,
not too much, but just right."
416
JULY
1959
NOTES
OF
CASES
417
of any goods
”
[s.
21
(1)
(b)]
by way of the following results
claimed for the agreement
:
price stability; maintenance
of
reserve capacity in the industry; maintenance of quality; modern-
isation of facilities and improvement of efficiency
4;
and prevention
of monopoly
or
near-monopoly conditions. The court did find,
however,
“
that the closing
of
mills consequent upon the abrogation
of the scheme to be expected in the eleven areas [in which the
industry is concentrated]
. .
.
will have a serious adverse effect on
the general level
of
unemployment in those areas. We find, though
with even greater doubt and hesitation, that that effect will be
persistent.”5 Thus the test laid down in section
21
(1)
(e)
was
passed.6 This particular conclusion was reached, inevitably, by a
process
of
“
speculation
”
and
‘‘
guesswork ”-thus providing an
unspoken commentary
on
the court’s apparent impatience with these
forms
of
mental activity in
Re Chemists’ Federation Agreement.‘
All this meant that the parties to the agreement had cleared
the first
of
the two hurdles erected in section
21,
and the court
had
to
examine the detriments to the public resulting from the price
agreement. The agreement came a cropper at this second hurdle.
The court concluded that there were three heads of detriment.
First, yarn and therefore cloth prices in the domestic market were
higher than they would have been. Second,
“
quite a considerable
export business has been lost
”
(mainly on cloth), and
“
we think
that anything which appreciably hinders
or
diminishes the export
trade must be regarded as a public detriment.”B Third, the
maintenance of excess production capacity and a swollen labour
force was
a
‘‘
waste
of
national resources,” and that, since
“
labour
and capital should be employed as productively as possible,”
“
excess capacity in the cotton industry is a public detriment.”
’
3
It was claimed that certain benefits accrued from the agreement
to
trade
pur-
chasers
of
yarn (weavers); and the Weavers’ Association supported this claim.
It
was argued that “although the sub-paragraph [21(l)(b)] refers to the
public
as
a
whole and makes
no
express provision
for
any
sectional interest
[weavers] being considered, it can be construed
so
that
in
a
case such
as
this
the advantage to
only
a
small section of the public,? sufficient to bring the
case within Ihe subparagraph.” We doubt whether this
was the intent of the draftsman, but we recognise that the grammatical con-
struction
of
the words may lead to this conclusion.” But, in view of their
final conclusion, the court did not find it necessary to decide the points of
construction (p.
190).
The benefits claimed were assumed
to
satisfy the test
in
s.
‘11
(1) (b!; but in the final balancing
of
pros and
cons
they were given
‘‘
little weight (p. 196).
4
The advantage to the public
of
the modeAnisation ascribable to the agreement
was
found to be “not
a
substantial one and could not therefore be brought
within the
Act
(p. 187).
At p. 195.
6
In most cases the abrogation of
a
minimum price agreement, by causing
a
reduction
in
ruling prices,
may
be expected to lead to some extension of
demand, and hence would not affect employment adversely. In the present
case the
court
did
not
refer to this extension of demand specifically in connec-
tion with its consideration of the employment position.
At p. 196.
The court said:
‘I
See note on this case (1959) 22
M.L.R.
213.
*
At pp. 195-196.
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