Opium Derivatives:
A report on the matter of the existence or possible existence
of a monopoly situation in relation to the supply in the United
Kingdom of opium derivatives.
Summary of report (html format)
Full text (pdf format)
Adobe Acrobat Reader can be downloaded from http://www.adobe.com
Summary
On 16 June 1987 the Director General of Fair Trading
asked the Commission to investigate the supply in the United
Kingdom of six specified opium derivatives, morphine, codeine,
dihydrocodeine, diamorphine, ethylmorphine and pholcodine.
We established that Macfarlan Smith Ltd (MSL), a subsidiary
of Glaxo PLC, had around 87 per cent of this market and was
therefore a scale monopolist as defined in the Fair Trading
Act 1973.
The only other manufacturer is the Boots Company PLC (Boots),
which produces codeine (and small amounts of morphine), principally
for use in-house. There are no imports of opium derivatives
into the United Kingdom because it has been Home Office policy
for many years not to issue import licences. Opium derivatives
are subject to domestic and international controls under the
United Nations Single Convention on Narcotic Drugs 1961 and
any person wishing to
manufacture or process these products in the United Kingdom,
or to import them, requires a Home Office licence.
MSL faces little competition in the United Kingdom and there
is little prospect of new entry. MSL has exploited this monopoly
situation by engaging in price discrimination and has been
enabled to charge high prices in the domestic market, leading
to very high levels of profit. We find that both these aspects
of MSL's behaviour are against the public interest.
Shortly before we completed our inquiry, we were informed
by MSL that a list of maximum prices dated 26 September 1988
was now available to customers who placed orders. This list
already incorporates reductions in prices and is a welcome
development.
It is, however, of prime importance to increase competition
in this market. We believe that the desirable objective of
preserving a United Kingdom manufacturing base for the supply
of the reference products is incompatible with either their
free importation or more limited unilateral action to allow
importation from other EC countries. A preferable alternative
would be to negotiate freedom to import on a reciprocal basis
within the EC. We therefore recommend that the Home Office,
in conjunction with other Government departments, should work
towards the creation of a single EC market in the reference
products through the reciprocal opening up of trade between
EC member countries as soon as possible and not later than
1992.
Meanwhile a measure of price protection for MSL's customers
in the United Kingdom is necessary. Hence we recommend that
MSL should be required not to increase its maximum prices
for reference products to these customers for a period of
three years, except in the event of substantial and unavoidable
increases in its costs.
Full text
Back to the top |
