Consumers’ Submissions To Grocery Inquiry

Press, Volume XCVIII, Issue 29052, 14 November 1959, Page 14

Consumers’ Submissions To Grocery Inquiry

(New Zealand Press Association) WELLINGTON, November 13. The Consumer Council regarded it as most important that every effort be made to set prices at a reasonable level and to reduce them where possible, and for this reason it had to be critical of lists “agreed to” by any trade, the council’s chairman (Mr G. E. Wood) told the Trade Practices and Prices Commission which today continued its inquiry into the effect of margins and prices determined by master grocers’ organisations.

This morning the secretary of the New Zealand Retail Grocers’ Federation, Mr R. M. Barker, continued his submissions and in the afternoon Mr Wood presented the submissions of the Consumer Council.

The commission consists of Messrs S. T. Barnett (chairman), R. D. Christie and F. F. Simmons. Counsel assisting the commission is Mr G. S. Orr.

Presenting the view of the council, Mr Wood referred to price lists which retailers were not in any way obliged to abide by. It was possible, he said, that the retailers would regard these prices as fair and reasonable ones agreed on by their association, prices which they were morally bound not to cut. There was, too, a difference in principle between official prices issued under price control where maximums were fixed after consultation with various interests and with provision for public hearings, and prices fixed by trade associations.

The procedure by which a trade association arrived at its list prices was not open to public expression of points of view. The council felt there should be competition in price, as well as in the provision of shopping amenities, and that the onus of justifying any departure from this principle should be placed on the associations issuing such lists, even where adherence to the lists was not obligatory. The council felt there was, at least, an assumption behind the issue of the lists that retailers would adhere to these prices, and it felt this action impeded the free flow of competition. If these lists were prohibited, there would be a period of uncertainty, but if competition was at all keen, the trader who overcharged would soon lose substantial trade to his competitors. Increased Turnovers A number of trades would take the opportunity to reduce prices with the object of increasing their turnovers. In circumstances of keen price competition, one would expect that difficulty might arise through many shops going out of business and localities becoming severely undershopped, Mr Wood said.

However, there would appear to be an ample number of grocery shops throughout New Zealand. Indeed, the position might well be that a smaller number of shops would result in a more efficient distributive system with benefits to consumers.

The danger in these circumstances of “approved” price lists r_s that the price margins might be high enough to keep inefficient units in business.

The council regarded as directly against the interest of consumers the issue of price lists with agreements or sanctions to observe or enforce. The council had no evidence concerning the practices of the grocers’ associations. It merely condemned this system as a matter of principle. Concluding his evidence, Mr Wood said, the Consumer Council was aware that, while the public’s complaints against high prices were usually directed at the retailer —the public’s point of contact with the distribution system —the retailer himself had control over only a fraction of the prices he charged, namely, the margin between his buying costs and his selling charges. The sufferance of public complaints which were quite often out of his control was indeed one of the occupational hazards of retailing. The official statistics of incomes of small traders suggested that, relative to other small traders, grocers’ incomes were not high, not as high at butchers’ incomes for instance.

Questioned by Mr Barker, Mr Wood said his council would condemn the practice of certain manufacturers fixing the retail prices at which their products were to. be sold. Advertisements Produced When he continued his submissions earlier, Mr Barker produced clippings of newspaper advertisements showing prices for some grocery items lower than those advised by the associations. Many of the advertisers were federation members, but no action h.-.d ever been taken against them by the federation, he said. He quoted decisions of annual conferences and executive meetings to show that the federation’s price policy had always been just.

He said it had acted at times against the wishes of large member associations, and had remembered that the basis of prosperous business was giving the customer a fair deal.

He believed if price control were reimposed tomorrow, the tribunal would be perfectly happy to gazette the margins set by the federation. Mr Barker said the report of the Commissionr of Trade Practices and Prices <Mr H. L. Wise), which is the basis of the commission's present inquiry, did not suggest that the prices being charged were not fair and reasonable. Did the commissioner now feel that some or all grocers should sell at lower prices so that the public might buy at prices which were not fair or reasonable to the vendor? If, on the other hand, the commissioner thought the prices had ceased to be fair and reasonable, why had he not recommended to the Price Tribunal the reimpositioncf price fixation?

up all the “specials,” said MiBarker. Price-cutting was not aimed at benefiting the consumer. It was intended to entice customers to buy higher profit articles as well as the price cut lines, to enable the sale of stock which would otherwise be left on the retailer's hands and to drive competitors out of business, thereby leaving him a local monopoly, to the ultimate detriment of his customers. The selling of goods at the same price was something which consumers appreciated and in which they found a sense of protection, said Mr Barker. Although grocery stores sold goods in small units compared with other retailers, they had the greatest turnover per unit of labour force. A grocer was seldom seen idle.

Such -a turnover could hardly have been achieved without competition. The average grocer operated on a gross margin of 16 per cent., and few, if any. retailers were likely to approach so low a figure. Turning to a detailed criticism of the commissioner's report. MiBarker said it stated that members of four named grocers’ associations “are to an agreement or an arrangement to sell goods only at prices on or terms agreed between them.”

He submitted that members of the associations were not parties to the agreement. “Members, as such, have not been consulted on margins and, therefore, they are not parties to any such agreement as alleged,” he said. “The fact that the members may have adhered substantially to the prices contained in the price guides does not make them a party to an agreement, nor does the fact of their using the markups recommended by my federation. Grocers belong to their grocers’ associations for the purpose of advice and guidance. “Because of the absurd margins allowed by the Prices Division on basic lines, grocers know that they must make recoveries elsewhere. *■ It is reasonable, therefore, that desirable expert advice should come from their association.” Objections to Report Mr Barker said he took particular exception to the “only” in the passage he had quoted from the commissioner’s report He said the allegation should never have been made and he trusted it would be retracted without reservation before the inquiry concluded. He submitted that any order the commission might make in terms of the commissioner’s recommendation would be ultra vires and therefore not enforceable.

Mr Barker said he would call evidence to show that for those who wanted it, goods were readily available at special prices. It would also be shown that the demand did not exist; that people were more interested in customer service and clean shops than in saving a penny on a tin of soup. If customers preferred competition at that level, why should it be denied them? In most professions, there was no competition at the level of fees, but plenty in the standard of service, he said.

The commissioner’s report said 83 per cent, of the prices charged were identical with the prices in the federation’s list, but there was nothing wrong with that any more than for public servants in the same grade to be paid the same salary. The fact that 17 per cent, of the prices checked differed from those listed by associations might prove that competition, in fact, existed When the commissioner was cross-examined, it might transpire that all the prices checked were in respect of lines still subject to price control, he said. Mr Barker said that if price lists were prohibited to all or any grocers’ association, the grocers would still have their scales of percentage mark-ups. They would still apply those mark-ups to their invoices and the end result would be the same. Wage Order The recent general wage order would have to result in increased production costs, which ultimately would be passed through the grocery trade to the consumer, said Mr Barker. He assured the commission that as far as was humanly possible, the retail grocery trade would be carried on within the limits of

the prevailing mark-ups, and the Prices Division would be advised if any adjustments were made. Grocers had no more love for price control than any other sections of the community. Mr Barker said that if no price lists were circulated, there

would be a tendency for grocers to overcharge to be on the safe side. On the other hand, new grocers might, in error, charge less than an economic price. Did the commissioner want the associations to advise their members that the prices were maximum only, and order some of them to sell at lower prices so that “competition” would prevail? Although there was no statutory provision for it, Mr Barker asked for witnesses’ costs, so the commission could express its dipleasure that the federation should have been called upon, at very considerable inconvenience, to justify a pricing procedure which had stood the test of time and had been ever mindful of the

a police officer. It had to wait for half an hour before the mother arrived. The children were cared for by members of the Hei Hei Kindergarten Committee, which is raising funds for the building of a kindergarten in its district. The children were given sandwiches, biscuits, and soft drink, and had plenty of books and toys at their disposal. A committee member said it was mostly the fathers who lost their young children. - The majority strayed into the crowds from where they had been told to wait, for a short time until their parents returned, she said.

No children were reported lost on the first day of the show on Wednesday, while 27 children were missing on the second day.

Correction.— ln a caption to a photograph published yesterday the award of supreme champion pig was wrongly credited to A. and J. Van der Velden’s Kashmir Lady Nancy. The supreme chamwinn uioc fho Panama P.risnn?*,