Report on the Supply of Cigarettes and Tobacco and of Cigarette and Tobacco Machinery
Total Page：16
File Type：pdf, Size：1020Kb
Report on the Supply of Cigarettes and Tobacco and of Cigarette and Tobacco Machinery Presented to Parliament in pursuance of Section 9 of the Monopolies and Restrictive Practices {Inquiry and Control) Act, 1948 Ordered by The House of Commons to be Printed 4th July, 1961 LONDON HER MAJESTY'S STATIONERY OFFICE PRICE IOJ. 6d. NET 218 MEMBERS OF THE MONOPOLIES COMMISSION R. F. Levy, Esq., Q.C. {Chairman) Professor G. C. Allen, C.B.E. Andrew Black, Esq., C.B.E. Brian Davidson, Esq. Dr. L. T. M. Gray* I. C. Hill, Esq., C.B.E. W. E. Jones, Esq., C.B.E. Ashton W. Roskill, Esq., Q.C* Sir Frank Shires A. S. Gilbert, C.B.E. (Secretary) * Dr. Gray, because of his connections with the machiii^i^ri^idustrv and Mr ROQUIT ^use he was appointed a member during the closing staged have n^l Seen part kifte inquiry. ii CONTENTS Page INTRODUCTION 1 PART I. CIGARETTES AND TOBACCO CHAPTER 1. General Background 2 CHAPTER 2. History of the Tobacco Industry 14 CHAPTER 3. The Imperial Tobacco Company (of Great Britain and Ireland) Limited 33 CHAPTER 4. Other Manufacturers 55 CHAPTER 5. Distribution 67 CHAPTER 6. Bonus 82 CHAPTER 7. Conclusions as to the Conditions defined in the Act .. 90 PART II. MACHINERY CHAPTER 8. General Background 92 CHAPTER 9. History and Organisation of the Machinery Industry .. 97 CHAPTER 10. Molins Machine Company Limited: Financial Arrange• ments and Organisation 102 CHAPTER 11. Molins Machine Company Limited: The Supply of Machinery 107 CHAPTER 12. Conclusions as to the Conditions defined in the Act .. 120 PART III. THE PUBLIC INTEREST CHAPTER 13. Prices, Costs and Profits 122 I. Cigarettes and Tobacco 122 II. Machinery 137 CHAPTER 14. Observations of Manufacturers, Purchasers and Others on Conditions in the Industry 144 I. Cigarettes and Tobacco 144 II. Machinery 154 CHAPTER 15. The Case for the Leading Suppliers 156 I. The Imperial Tobacco Company (of Great Britain and Ireland) Limited 156 II. Molins Machine Company Limited .. .. 177 CHAPTER 16. Conclusions on the Public Interest and Recommendations 182 I. Cigarettes and Tobacco 182 II. Machinery 208 III. Summary of Conclusions: Recommendations .. 212 iii (82730) A 2 APPENDICES 1. The References made by the Board of Trade 217 2. Principal Sources of Evidence 218 3. The Imperial Tobacco Company (of Great Britain and Ireland) Limited: Authorised Capital 1901-1960 and Issued Capital 1960 .. 219 4. The Imperial Tobacco Company (of Great Britain and Ireland) Limited: Mergers between Branches in the United Kingdom since the Formation of the Company in 1901 220 5. Copy of the Imperial Tobacco Company's Bonus Agreement 221 6. Profit as Yield on Average Capital Employed 223 7. Statistical Tables:— Table 1. United Kingdom Imports of Unmanufactured Tobacco: 1900-1959 226 Table 2. United Kingdom Imports of Cigarettes and Manufactured Tobacco (other than Cigars and Snuff): 1900-1959 .. 228 Table 3. Customs Duty on Tobacco Leaf: Basic Duty 1900-1960 .. 229 Table 4. Customs and Excise Duties, Drawbacks and Allowances on Tobacco Goods: Effective from 5th April, 1960 .. 230 Table 5. Imported Unmanufactured Tobacco: Quantities Retained for Home Consumption and Net Duty Receipts 1900- 1959 232 Table 6. Tobacco Manufacturers' Licences Issued: 1900-1959 .. 233 Table?. Tobacco Dealers'Licences Issued: 1900-1959 .. ..233 IV PRINCIPAL ABBREVIATIONS USED IN THE REPORT Amfoco .. American Machine & Foundry Company (British subsidiary: AMF Ltd.) Ardath .. Ardath Tobacco Company Ltd. Ardath (U.K.) Ardath (U.K.) Ltd. B.A.T. .. British-American Tobacco Company, Limited Bewlay Bewlay (Tobacconists) Limited (Formerly Salmon & Gluckstein Limited) Carreras .. Carreras Limited C.W.S. .. Co-operative Wholesale Society Limited Federation, The The Federation of Home & Export Tobacco Manufacturers Finlay Finlay & Company Limited Gallaher .. Gallaher Limited Godfrey Phillips Godfrey Phillips Limited Hauni London Hauni London Limited Imperial .. The Imperial Tobacco Company (of Great Britain and Ireland), Limited Molins Molins Machine Company Limited N.U.R.T. .. The National Union of Retail Tobacconists Robert Legg Robert Legg, Ltd. Robert Sinclair The Robert Sinclair Tobacco Company, Limited Rothmans Rothmans Ltd. S.C.W.S. Scottish Co-operative Wholesale Society, Ltd. T.A.C. The Tobacco Manufacturers' Advisory Committee Thrissell The Thrissell Engineering Company Limited (Formeriy Brecknell, Munro & Rogers Limited) T.T.A. The Tobacco Trade Association J. Wix J. Wix & Sons Limited W.T.T.A. The Wholesale Tobacco Trade Association of Great Britain (and Northern Ireland) (82730) A3 REPORT ON THE SUPPLY OF CIGARETTES AND TOBACCO AND OF CIGARETTE AND TOBACCO MACHINERY Introdaction (i) The following report on the supply in the United Kingdom of (1) cigarettes and manufactured cigarette and pipe tobacco and (2) machinery for the manu• facture or packaging of cigarettes or of cigarette or pipe tobacco is submitted in compliance with Section 2(1) of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948 (as amended). The two references (reproduced in Appendix 1) were received from the Board of Trade on 29th November, 1956. As the two subjects are closely connected we have dealt with both references in one report. (ii) We have received evidence from The Imperial Tobacco Company (of Great Britain and Ireland) Limited (Imperial), the principal supplier of cigarettes and tobacco and the principal purchaser of machinery, and from Molins Machine Company Limited (Molins), the principal supplier of machinery. (iii) We have also received evidence from other cigarette and tobacco manu• facturers and their trade association, from other machinery manufacturers, from wholesale and retail distributors of tobacco goods and their trade associations, from leaf merchants and from the Government Departments concerned and the former Tobacco Controller. From some of these witnesses we took oral evidence after we had considered their written submissions. A list of our principal sources of evidence is given in Appendix 2. Members of the Commission and staff visited certain cigarette and tobacco factories and one of Molins' factories. (iv) In June 1959 representatives of Imperial attended a meeting to clarify outstanding matters of fact, and in July 1959 representatives of Molins attended a similar meeting. (v) In September 1959 we informed Molins of our provisional conclusion that the conditions of the 1948 Act, as amended by the 1956 Act, prevailed in respect of machinery. In October 1959 we informed Imperial both of this provisional conclusion and of our similar provisional conclusion in respect of cigarettes and tobacco. Both Imperial and Molins made certain representations to us in writing. In December 1959 and March 1960 respectively representatives of Molins and of Imperial attended separate hearings for the purpose of discussing with us whether the " conditions " or any of the " things done " operated or might be expected to operate against the public interest. At these two hearings the parties concerned were represented by Counsel. A further short hearing was held with Imperial in October 1960 to deal with certain developments which occurred at a late stage in the inquiry. (vi) We wish to record our appreciation of the assistance given to us by Imperial, Molins and all the others who have provided us with the information required in our investigation. Some of the information relates to confidential business affairs and we have been careful not to disclose it in our report unless it is essential for a proper understanding of the issues. 1 (82730) A 4 PART I. CIGARETTES AND TOBACCO CHAPTER 1. GENERAL BACKGROUND (1) DESCRIFTION OF THE GOODS I. The goods to which the terms of the first of our references apply are cigarettes and manufactured cigarette and pipe tobacco. The total sales of these goods in the home market at manufacturers' selling prices in each of the years 1954 to 1959* are shown in the table below:— Cigarettes Tobacco Total £ million £ million £ million 1954 .. 680-9 95-6 776-5 1955 .. 712-3 94-5 806-8 1956 .. 748-7 93-7 842-4 1957 .. 793-1 97-6 890-7 1958 .. 813-6 100-6 914-2 1959 .. 833-4 99-7 933-1 These figures do not include imports, but the quantity, by weight, of imports of cigarettes and tobacco was not more than 0-2 per cent, of the volume of totalf home market sales in any of these years. 2. With negligible exceptions all cigarettes and tobaccos supplied on the home market are sold under manufacturers' brand names. Cigarettes repre• sented on average 88-7 per cent, of sales, by value, in these six years. The greater part of the cigarette trade (about 89 per cent, in 1959) is in plain, as distinct from filter tipped,J brands. Plain cigarettes can be divided into three main classes principally on the basis of price and size. The first consists of brands most of which sell at Is. 7d. for 10 cigarettes, each with a length of about 66 mm. and a circumference of about 23 mm. The second consists of brands most of which sell at 2s. 0|d. for 10 cigarettes, each with a length of between 70 and 74 mm. and a circumference of from 25 to 25-5 mm. Most of the cigarettes sold are and have been for many years in these two classes. The third class consists of brands sold at higher prices, the cigarettes often being of larger dimensions. For convenience in our report we refer to the three classes as small, medium and large cigarettes. Filter tipped cigarettes, of which many * Not all manufacturers work to calendar years. The table is based on figures for the nearest calendar year in each case. t Value figures for imports given in the Annual Statement of the Trade of the United Kingdom exclude duty and so do not afford a fair comparison with the figures for sales of home-produced tobacco goods, which include duty.