Is Anyone Getting the Message?

Lack of competitive enterprise among British businesses is a major cause of the country's economic woes. The Labor government does not seem to get this message--and last week two of Britain's most profitable companies were under bureaucratic attack precisely because they are fiercely competitive.

A Curious Bit. The two companies are Procter & Gamble Ltd. and Lever Brothers & Associates Ltd., both subsidiaries of corporations--one U.S.-based and the other an Anglo-Dutch combine--that are at each other's throats around the world. Between them, they control 90% of Britain's $192 million-a-year soap and detergent business. It was presumably for this reason that for many months the government's seven-member Monopolies Commission investigated the suds situation. The commission finally conceded that neither P. & G.'s 46% share of the market (worth $90 million in sales) nor Lever's 44% ($85 million) constituted any sort of monopoly. Then, in a curious bit of reasoning, the commission criticized both companies for spending too much on competitive sales promotions, urged that the regulatory Board of Trade require both P. & G. and Lever to pare 40% from their advertising and promotion budgets, and pass the savings along to the British housewife.

Both companies are, indeed, lavish in their woman-wooing expenditures. P. & G. puts out more than $24 million a year puffing its Fairy Snow, Tide, Dreft and other products through the telly, direct-mail coupons and door-to-door squads of costumed "Fairy Snowmen." Lever spends about the same hawking everything from Omo to Rinso. Mostly because of such methods, profits have been foaming at a rate of 37% on invested capital at P. & G., 16% at Lever. This seemed wrong to the commission, which pointed out that the average British manufacturer earns only 11%.

"Frankly Ludicrous." Understandably, the commission report stirred up dissent. Stocks of TV companies, whose revenues depend heavily on soap ads, plunged on the London exchange. Said Lever Chairman Edward Brough, 48; "Exercising her choice in a free market, the British housewife has struck a good balance between the high cost of unlimited choice and the low cost of no choice at all." P. & G. pointed out that detergent prices have gone up only 8% in the last seven years, as against 18% for the whole retail price index. Said London's weekly Observer: "The TV commercials are sickening, and the Fairy Snowmen frankly ludicrous. It doesn't follow, however, that any of this is wasteful. High-pressure marketing is increasingly the lubricant to economic growth."

For his part, Board of Trade President Douglas Jay, whose own hearing on the case starts next month, pronounced himself "in general agreement" with the commission. With that prejudgment in prospect, P. & G. and Lever will almost certainly be forced to cut their ad budgets--and perhaps to trim prices by as much as 20% .

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