Indirect electrostatic photocopiers: A report on the supply by manufacturers and importers of indirect electrostatic photocopiers in the United Kingdom

Summary of report (html format)
Full text (pdf format)

Adobe Acrobat Reader can be downloaded from http://www.adobe.com

Summary

On 12 September 1990 we were asked to investigate the supply in the United Kingdom of indirect electrostatic photocopiers, better known as plain paper copiers or simply photocopiers, by manufacturers and importers (see Appendix 1.1). Our terms of reference were later extended to cover indirect electrostatic digital copiers, and both sorts of copiers are referred to in this report as IEPs. Supply by dealers is outside the scope of the reference.

The Commission previously reported on the supply of IEPs in 1976. That report found that Rank Xerox Ltd had around 90 per cent of the market and that certain of its practices, although not the monopoly situation itself, operated against the public interest. As a result the subsidiary of Rank Xerox Ltd responsible for sales in the United Kingdom, namely Rank Xerox (UK) Ltd, gave a number of undertakings as to its future conduct. (In this report we use the term `Rank Xerox' to refer to one or both of these companies.) Rank Xerox was released from most of these in 1983 because of changed market conditions, but an undertaking remains in place which requires it to give customers the option of buying toner separately from IEPs. (Toner is a powder which acts effectively as the `ink' in the copying process.) In 1988 Rank Xerox sought release from this undertaking. Having made enquiries of various parties the Office of Fair Trading (OFT) decided to make a monopoly reference to this Commission, drawing attention to two issues, first the tying of toner to the supply of IEPs and secondly the refusal of some manufacturers to supply spare parts and manuals to third parties engaged in the maintenance of their machines.

We find that, within the meaning of the Fair Trading Act 1973, four monopoly situations exist. There is a scale monopoly situation because Rank Xerox supplies 31 per cent of the market; and there are three complex monopoly situations because of restrictions placed by a number of suppliers (a) on dealers, (b) on the supply of toner, other consumables and spare parts and (c) on maintenance. We consider the issues arising out of these monopoly situations in the light of developments in the market since our previous report and the current state of competition.

The structure of the market has been transformed since 1975. At that time although there were 15 suppliers, all except Rank Xerox were recent entrants with very small market shares. By 1989 there were 22 suppliers, Rank Xerox's share had dropped from around 90 per cent to 31 per cent, the share of Canon (UK) Ltd (Canon) had risen to 13 per cent, and ten other companies had shares in the range 3 to 8 per cent. Market concentration had thus fallen very considerably. On some measures Rank Xerox's share is still falling and new suppliers have continued to enter in recent years. There have also been major changes in the distribution of IEPs. In 1975 nearly all IEPs were supplied direct to end-users on a rental basis. The majority are now supplied through dealers, while sale or lease and maintenance inclusive cost per copy agreements have become important means of acquiring IEPs alongside rental.

Competition between the suppliers of IEPs is now very strong. The market is open, with around 80 per cent import penetration. The suppliers active in the United Kingdom include all the world's main manufacturers of IEPs, among them ten Japanese companies. While Rank Xerox is the only supplier to cover the whole range from personal copiers (PCs) to extra high-speed machines, users have a wide choice of brands at most levels. Canon is particularly strong in the supply of PCs, and Rank Xerox continues to be much the largest supplier of extra high-speed IEPs, but the positions of both companies in these segments are under attack from other suppliers. No supplier is in a position to set prices or other contractual terms independently of market pressures. Competition is based on product features, reliability and service as well as price. The statistics of suppliers' profitability, although subject to caveats about the effect of intra-group transfer prices, give no grounds for thinking that prices are generally high in relation to costs. Prices of IEPs and of maintenance appear to have fallen substantially in real terms over the past ten years.

IEPs are service-intensive and service quality is an important aspect of competition. In the competitive environment which we have described, and particularly in view of the number of IEP suppliers, the number of dealers, and the considerable diversity of arrangements between suppliers and dealers, we do not regard the restrictions imposed by suppliers on dealers as a cause for concern. As to the supply of toner, other consumables and spare parts, the great majority of end-users find it more convenient to purchase these items as a package rather than separately. There is little evidence that end-users are dissatisfied or disadvantaged by suppliers' practices here. The supply of toner, other consumables and spare parts is subject to market forces as a result of the extent of competition among IEP suppliers and dealers in the supply of IEPs, and some competition also comes from independent suppliers of the ancillary items. The supply of maintenance is widely seen both by end-users and by suppliers as part of the overall copying facility on offer. As with consumables and spare parts, there is little evidence of dissatisfaction on the part of end-users. Although there are few independent maintainers of IEPs, market forces are brought into play as a result of the competition which exists among suppliers and dealers in the supply of both IEPs and maintenance.

The conditions which led to Rank Xerox being asked to give undertakings in relation to the supply of toner no longer exist and we believe the undertakings should be lifted. The market in IEPs is highly competitive and likely to remain so. We find no facts which operate or may be expected to operate against the public interest.

Full text

Back to the top