Monopolies body needs finer nose: William Kay says perfumiers' failure to halt discounting has shown up the MMC

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The Independent Online
IT IS A RARE accolade for a report by the Monopolies and Mergers Commission to be rubbished by the people who were supposed to benefit from it. But that is what has happened in the case of its report on the perfume industry.

That report, published last November, ruled that perfume makers were right to demand tight controls over where their products were sold, in order to protect the image of their precious potions - usually images of extravagance and infinite expense - and, thereby, maintain prices for that venerable standby beloved of any trade with a laboratory in its back room: research and development.

The commission's verdict was greeted with howls of outrage by retailers and consumer groups, particularly as perfectly legitimate high street chains such as Superdrug were proposing to stock mainstream perfume brands at well below recommended prices.

But now perfumiers have finally admitted that they cannot halt the tide, whatever the MMC may decree. 'If you limit distribution, there will be demand outside the network,' said Martin Hamilton, company secretary of Chanel, one of the leading manufacturers.

With those words he was conceding a reality his compatriots had been trying to deny for years. It turns out that a quarter of the bottles of perfume and aftershave sold in Britain come from the so- called 'grey market', whereby UK retailers buy genuine perfumes through the back door from other European countries unconnected with the main manufacturing nations such as France.

By contrast Graeme Odgers, chairman of the Monopolies Commission since March last year, insisted that fine fragrances were 'products of the imagination' and that imaginary quality had a value for which consumers were not only willing to pay, but should pay. It was a typical industrialist's point of view - and it is no surprise that Mr Odgers has spent most of his career at GEC, Tarmac and British Telecom.

He also sheltered behind European Union law, which is increasingly encroaching on the activities of Britain's MMC. He claimed that if he had found against the fragrance manufacturers, he might have found himself in the position of encouraging Michael Heseltine, the Secretary of State for Trade and Industry, to break the law.

Possibly so, but a staunch defender of the consumer and an opponent of monopolies would surely have decided that that was someone else's problem and dealt with the question before him: should distribution, and therefore prices, be liberalised or not?

A clearer indication of Mr Odgers's true feelings can be gleaned from his other justification for supporting the perfumiers, to the effect that the industry 'might have died' if he had found against them.

That melodramatic prediction is about to be put to the test, now that the manufacturers have crumpled of their own volition. I confidently predict that the fragrance industry will be alive and in robust health a year hence and for many years beyond that. Lower prices will widen the market, making it available to many more people and making the manufacturers even more profitable. And snob consumers will still find their exclusive niches.

The more important consideration is what Mr Odgers is doing with the MMC. It was never a cockpit of revolution, run as it always has been by lawyers and academics, but Mr Odgers is in danger of damaging its credibility irretrievably.

In the 12 months to June 30 this year, the Commission judged that no fewer than six groups of monopoly suppliers were not acting against the public interest.

The exception always proves - meaning tests - the rule, and on cue the commission ruled on Thursday that the way films are distributed to British cinemas hinders competition and hurts consumers. A dramatic victory for the consumer?

Maybe. The commission's solution is for distributors to end deals that align them with cinema chains, and to shorten screening periods for new releases to allow more time for other films. But at a time when the viewer is being bombarded with satellite channels and video tapes bulging with films old and new, the cinema trade is going to have to reform itself pretty drastically if it is to survive in any recognisable form.

Yet it is worth giving Mr Odgers a small cheer, if only to encourage him to think of the shopper a little more often.