NOTES OF CASES
| Published date | 01 March 1963 |
| DOI | http://doi.org/10.1111/j.1468-2230.1963.tb00707.x |
| Date | 01 March 1963 |
NOTES
OF
CASES
COMPETITION
AND
COLLABORATION
IN
INDUSTRY
TWO propositions enjoy widespread support
:
(a) competition in
business is a spur to efficiency, enterprise and innovation; and (b),
organised restraints
on
business competition facilitate co-operation
by business firms which can promote research and.also improve
eficiency by the more rapid dissemination
of
technical and com-
mercial knowledge. The first proposition is standard equipment in
the armament of the Registrar
of
Restrictive Agreements in
his
suc-
cessive duels in the Restrictive Practices Court. The second pro-
position has frequently been deployed, with some success in
a
few
cases, by his opponents, the defenders of particular restrictive
agreements.’
It
was
not,
however, until the two recent cases, con-
cerning permanent magnets and standard metal windows, respec-
tively,2 that the second proposition was
in
the forefront
of
the
proceedings.
In
both cases the court decided (i) that collaboration
had been (and was likely to continue to be) productive of specific
and substantial benefit to consumers;
(ii)
that the collaboration
and the benefits would be materially reduced
if
restrictions
on
price
competition among the collaborating firms were to be terminated;
and
(iii)
that the benefits derived from collaboration outweighed
any detriments to consumers flowing from the price restrictions.
In
the
Permanent
Magnet
case collaboration yielded the benefits
“
summarily described as the availability to the purchasing public
of
improved magnets
from
a
wider field of manufacturers and
generally more quickly, and sometimes at lower prices than would
otherwise have been the case.” Here the collaboration took the
forms of collectively organised research and the interchange of
research findings secured by individual.efforts.
In
the
Metal
Win-
dow
case there was mutual exchange among the
firms
“
of informa-
tion as to their costs of manufacture, their respective operational
times for processes of manufacture, their technical developments,
and, to use
a
word which must now reluctantly be accepted as part
of the English language, their
‘
know-how
’
”;
and
it
was held
“
that the effect of the
full
and detailed exchange of information
1
See
Re
Water-Tube Boilermokera’ Agreement
(1969)
L.R.
1
R.P.
285
at
p.
342;
and
Re Black Bolt and
Nut
Aaaociation’a Agreement
(1960)
L.R.
?
R.P.
50
at
p.
87;
but
compare
Re
Associated
Transformer Manufacturers
Agreement
(1961)
L.R.
2
R.P.
a95
at
p.
340;
and
Re
British Bottle Associa-
tion’s Agreement
(1961)
L.R.
2
R.P.
346
et
p.
389.
*
Re Permanent Magnet Aaaociation’a Agreement
(1962)
L.R.
3
R.P.
119;
Re
Standard Metal Window Group’a Agreement
(1962)
L.R.
3
R.P.
198.
a
(1962)
L.R.
3
R.P.
119
at
p.
164.
185
VOL.
26
7
188
THE
MODERN
LAW
REVIEW
VOL.
26
has been in
a
substantial degree to reduce or contain the costs of
the manufacturing members of the group.”
It
is not the purpose
of
this note
to
attempt to assess the
specific results of inter-firm collaboration in the two industries.
For present purposes,
it
is accepted that collaboration in each case
has been (and
will,
if
continued,
be)
fruitful. The note is con-
cerned with other aspects of the two judgments.
In
the
Pemtonent Magnet
case the court found that the technical
collaboration would be largely discontinued
if
the price agreement
were struck down. Evidence was given to this effect. Moreover,
the court quoted, with apparent approval, from
an
earlier decision
:
“
We think that
it
is
right
to
say that cooperation of this kind
[i.e.,
technical cooperation and joint research] has been fostered
by the absence of price competition, since
it
is only human nature
to be more reluctant to impart
‘
know-how
’
to
a
competitor who
may use
it
to undercut.”
On
the other hand, one may suggest,
it
is also
part
of
‘‘
human nature
”
for those in’ charge of business
firms
to
take into account other presumed consequences of
a
diminution in collaboration, especially where one of these would be
to
hasten their
own
business decline.
It
was
stated
on
behalf of
the association that
“
technical improvements are the lifeblood of
this
industry
”;
that, without collaboration, the firms individually
“
arc
not laige enough
to
be able
to
maintain
on
their
own
the state
of
technical efliciency required
to
compete against, for example,
Philips of Eindhoven
”;
and that
“
the British industry depends
for its survival
on
keeping abreast of its foreign competitors in the
sphere of technical e5ciency.” The court itself observed:
“
Indi-
vidually, the members could not hope
to
match what their overseas
competitors can put
into
research. Under their cooperative system
they can and have
so
far,
with one serious lapse
.
.
.
,
managed
since the early thirties
to
keep well in the running.”
Thus
it
would seem
to
have
been
found that the discontinuation
4
(1969)
L.R.
3
R.P.
1%
at pp.
‘202
and
aS0.
The
Monopobes
Commission, in
a
report published
in
1956,
concluded that the
Metal
Window Association’s
?=on
price scheme did
not
operate against the public interest; it had
certain advantages and we do
not
6ud any overriding objection
to
it.”
I‘
We
Pccept the
M.W.A’s
contention
that
its methods of pricin together with
the exchange
of
costing and technical
information,
have felped towards
reducing its membem’ costs.
”
The Commission, however, thought th!,
Aemia-
tion’s
claims of cost-reduction
were
exaggerated in mme respects.
A
great
deal of what has
been
done through the Association might have been achieved
by individual
mannfacturera
in competition with
one
another.
We
note in
this connection that
M
indepandent manufacturer has been able since the war
to
build up
a
substantial and profitable buninems
at
prices not higher than the
AsEOCi~tiOn’S.”
(Report
on
the
Supply
of
Standard
Mstal
Windoor
and
Doors,
1956,
Chap.
10.)
At the,time of
this
inquiry,
Crittalls,
the largsst
firm
and
one
of the lowest-cost firms, was still
a
party
to
the price-fixing and technical
exchange arrangements.
It
withdrew in
1959.
(1962)
L.R.
3
R.P.
119
at
p.
166,
quoting from
(1880)
L.R.
2 R.P.
60
at
p.
87.
II
(1962)
L.R.
3
R.P.
119
at
pp.
139. 141
and
140.
7
Ibid.
at p.
163.
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