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Making and Selling Valves

Editorial Wireless World, May, 1959.
    
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It has been rightly said that valves and cathode ray tubes are at the heart of our affairs, and although in this journal we are concerned primarily with the technical aspects of their use, we cannot always stand aloof from the manner of their supply and marketing. Commercial considerations will always be an important factor in setting the pace of development in an industry where capital costs are high.

British valve manufacturers and their Association, the BVA, have never lacked critics of their marketing methods, and these critics have not concealed their satisfaction in the abandonment by the BVA of price-fixing agreements in 1956 just prior to the publication of the 'Report on the Supply of Electronic Valves and Cathode Ray Tubes of the Monopolies and Restrictive Practices Commission', and again last month in the decision of the BVA not to offer evidence at the Restrictive Practices Court hearing in support of a continuation of agreements on 'exclusivity. and maximum discounts or of the practice of limiting the number of wholesalers handling BVA valves.

The Restrictive Trade Practices Act, 1956, which requires registration of certain types of agreements and restrictions, is in many ways a new form of legislation - at least in this country. It has established a Court and a Registrar who may bring before the Court any association whose agreements are deemed to be contrary to public interest. The onus then rests on that association of proving to the satisfaction of the Court that the practices in question are, in fact, in the public interest.

What is 'the public interest'? In wartime it was the restriction of the supply of valves to the public to a mere trickle. To the man in the street today it could mean the reduction of prices to the absolute minimum - if necessary by cut-throat competition, which would divert the whole of the manufacturers resources to the cheaper production of existing types. To others it might mean an increase in prices so that more money could be applied to the discovery of entirely new valve techniques to keep this country in the lead and to improve the balance of trade. The Act enunciates no fewer than seven criteria by which the public interest is to be assessed. These are of a highly complex nature and must involve lengthy stage-by-stage legal argument before it can be decided whether an agreement may stand - or must be abandoned.

In the case of the BVA many of its trading agreements have their origin in the early days of broadcasting when the dumping of foreign valves was a serious menace to an industry which had not yet built up adequate capital resources. Today they are in a much stronger position. Set manufacturers and servicemen in general prefer to use BVA valves; in 1955, according to the Report mentioned earlier, imported valves not sold through BVA channels were estimated to amount to 5% of the total supply. Faced with the alternatives of fighting for the maintenance of the old-established collective agreements or standing on their own feet, the member firms of the BVA have, we think wisely, decided to take the latter course. The decision is unlikely to influence the prices of valves and tubes which have for a long time been determined by far more fundamental factors than trade agreements. The industry has already declared its profits and opened its books for analysis by the Monopolies and Restrictive Practices Commission and the results are set out in great detail in their 1956 Report. It should be compulsory reading for all would-be critics - in particular those who complain that set makers get valves for 2s 6d each which cost the best part of £1 to buy in the shops. This comparison over-looks the fact that the cheaper valves will be subject, as part of a set, to distributive costs which are of the same order as those which apply to a maintenance valve. It is true that valve manufacturers charge on an average 10% more to a wholesaler than they do to a set maker, but this is accounted for by the smaller bulk of supplies, the cost of special packaging and by the fact that short production runs of replacement valves for maintenance are often very expensive. Again on average, the valve manufacturers profit on cost to the set maker in 1954 was about 18% and to the wholesaler 28%. If this difference were levelled, television sets might cost anything up to £10 more to the customer. It is clearly in the consumers interest that the sixteen odd valves he must buy in the set cost him less per valve than the two maintenance valves that, on a statistical, basis, he may have to buy during the life of the set. (The ratio of 'first-equipment' to maintenance valves sold is about 8:1).

In spite of the fact that the valve makers have had difficulty in finding proof of specific and substantial public benefit from some of their past trading restrictions, we think that valve users, both professional and domestic, are well served by what is undoubtedly an efficient and well managed industry.

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