Inquiry Into TV Set Profit

Press, Volume CIV, Issue 30682, 23 February 1965, Page 3

Inquiry Into TV Set Profit

f.Xetr Zealand Press Association)

WELLINGTON, February 22.

A retail mark-up of 40 per cent on television receivers, radios, and other home appliances is the subject of an inquiy by the Trade Practices and Prices Commission.

It met today in the first stages of a three-day hearing, to consider whether profit margin agreements between manufacturers and retailers were contrary to the public interest.

Since December, 1961, New Zealand retailers have agreed to set up terms affecting the retail sale prices of television receivers, radiograms, radios, tape recorders, record players, refrigerators, washing machines, pianos, floor polishers, clothes driers, vacuum cleaners and dishwashers.

In the report by Mr A. B. McLauchlan, Examiner of Trade Practices and Prices, it is stated that the effect is unreasonably to reduce or limit competition in the sale of such goods. Mr G. S. Orr, counsel for the Examiner of Trade Practices and Prices, said under

the retailers and manufacturers agreements, there are permitted no “give-aways,” discounts, fixed or minimum trade-ins, interest-free terms on hire-purchase transactions. “The inquiry raises in an acute form whether it is in the public interest that the retailers should be able to raise their own price control,” he said. “It eliminates the major, if not the only form of competition. Public Interest “The public interest lies in seeing there is full and free competition at the level of retail prices,” he said. The object of the retail mark-up was to obtain a stable retail market by eliminating competition. Manufacturers and retailers denied the practice was contrary to the public interest, said Mr Orr.

They stated it was a fixed, but reasonable mark-up in price to cover the cost of after-sales service, as well as the presentation of the product. the service given to the consumer, and the promptness of delivery.

Mr Orr said the public would deal with the retailer offering the most attractive price. Consumers should have the advantage of low overhead enjoyed by suburban hire-purchase dealers, or of a busy city store offering more favourable prices and terms than the price list.

The retailer should be free to make his own judgment about the profit margin and the profit he made, he said.

Mr Orr said manufacturers and retailers were parties to two main trading agreements which the Examiner of Trade Practices and Prices considered as unreasonably limiting competition. Under the first, said to have been entered into in March, 1962, at the insistence of the retailers through their two organisations,-the manufacturers were obliged to agree to increase the markup and retail price of television sets. Margins Restored “Only a short time before, the manufacturers had decided to lower the retailers' mark-up and their own profit margin,” said Mr Orr. “It was their aim, it appears, to bring down the end price of television sets. “As a result of pressure by the retailers the manufacturers agreed to restore the margins.” Under the other agreement, made in November, 1961, rei tailers agreed to revert to manufacturers’ list prices for a wide variety of home appliances, said Mr Orr. According to the report of the Examiner of Trade Practices, retailers were receiving a mark-up of 40 per cent. “I have no doubt the retailers and manufacturers genuinely consider it is in the public interest to retain the agreements they have entered into and that the goods should not be sold below the agreed prices,” he said. The hearing is expected to take about three days.