A BAG OF FLOUR

Dominion, Volume 13, Issue 226, 18 June 1920, Page 3

A BAG OF FLOUR

ALLEGED PROFITEERING

DAVID ANDERSON AND SON CHARGED A case in which profiteering wa,.i> alleged *as heard in the Magistrate's Court yesterday morning by Mr. E. Page, S.M. David Anderson and Ernest Anderson, trading as David Anderson and Son, - Molesworth Street, grouers, were charged, on the information of tho Secretary of the Board of Trade, with having Eold to Ernest James Smith a 251b bag of flour at 7s. 6d„ a price which vub unreasonably high. ■ _ Mr. J. Prendeville, of the Crowii Law Office, appeared for the Department, and Mr. A. Blair for the defendants. ' n The information was laid under section 32 of the Board of Trade Act, 1919. This Bect on provides: "Every person 'jommits an offence who as principal or agent sells or supplies or offers for sale or to supply a.ny article at a! price which is "unreasonably high," and sub-Bection 2 defines "unreasonably high" as a pricewhich produces or is calculated to produce more than a fair or reasonable rate ot commercial profit, ■ Mr. Prendeville stated . that the sale was made by an assistant on behalf of .. the firm. The actual facts were that Mrs, Smith, of Turnlmll Street, sent her boy on March 13 to Anderson's, and gave him 6s. to pay for the flour Prior to that 'date she had been paying ss. 9d. for .a . 251b. bag of flour. The boy went to. the shop and put down the 6s„ 'jut he was told by the assistant ;that the price was 7s. 6d., and he was sent home to pet . tho , balance. It Being a Saturday, and Mrs Smith being short of flour, she gave the .boy tho additional money and secured the flour at 7s. 6d. Tho retail price was not fixed by the Board, of Trade, but only the wholesale price. In March, 1918, the, price was fixed at £'5 10s 'per ton f.o.b. port of shipment for 2001b. bags, in March, 1919, the nrice was fixed at £15, -and on April 12, 1920. it was fixed at £15, 10s. There was a conference between the millers and the Board of Trade in February, and it was anticipated by the formor that the price would be fixed at. £18 10s. per ton. But the price had not then been fixed by Order-in-Council, but was fixed. on April 12, 1520. when the price- "waß fixed at £15 10s., and not at £18, as tho millers anticipated. The cost of a ton of flour in 251b. bags in the defendants' store would be £17 135., if landed direct from Oamaru. and £17 17°. 6d if obtained ex store. Wellington At the fixed price of £15 per ton for 2001b. bagß tho rise.or increase for 25ib. bags w**s 30s. Andersons purchased Hour from Ireland and Co.. Oamaru, through Baldwin and Co.. Wellington.. There'was an invoice dated January 8. and that showed that the cost to the defendants, after allowing for the discount, of a'ton of flour was £17: January 22. one roiie, £17 4s. 9d,; February 23,' three-quarter ton (bought ex store, Wellington), £17 17s. 6d.: February 27. half-ton, £17 4s. 9d. : March 13. ; £20 10«. 3d but the -flour invoiced on the latter flat" ivas not delivered until March IJ. .so that t.he sale to Mrs. Smith wac of flour bought cither in January or February. The lot purchased by the defendants on March 13 was at a rale equal to ss. Oid. per bag, and had the prion been £21 ner ton. which they thought it was going to be, the ro«t- would. have heen ss. s!d. per bag. The profit at 4s. Id: per bag on the co«f, prion was 73.04 per ft; at ss. OJd„ 48 76 per cont... and at 37.40 por cent.: on the selling price the profit worlted out at 42.22, 32.77, and per cent. Mr. Blair: We also allow 25 per cent, (liscount up to 40 dayß . Mr. I'londeville said that with the. selling prise 2t 6s fid, the profits on the cost price would be 50 per cent., 25.92 per cent., and 19.08 per cent., and on the, sotlini? F/ln® ® cent., 22.43 ner cent.', arid 16.62 per cent.; with the relling price at 6s the profits would he respectively 38.46. 20.66, and 9.9 per -cent on cost price, and 27.77,' 17 26, and 9.02 ner cent, on selling nrice On March 13 the price charged by Hill Bros., Cuba Street, was ss. 6d, : per bag. and hv Warilnll Bros.. 6s. Vtoiir wan a quick-selling line v and therefore there was no warrant, for'charging an excessive pneo .... Evidence for the Prosecution. Margaret Smith gave f*rm.il evidence as to buying the flour at 7s 6d„ and' admitted that she received a discount coupon. Henry Baldwin, agent for Ireland and Co.. flour merchants, said that Anderson and Son were his customerj. He supplied them with flour sometimes, ox store, and somotimeß direct from the miller. Mr. Blair: What is the actual cost of a 25b'). baa at £21 per ton ill And'-reon's store?—"lt Would cOsl them ss.' sd. net cash." Witness did not know the running costs of Anderson and Son, but assuming 33J per cent., tho price would be 'I* 3d, per bag. A discount of 2} per cent, on 7b. 6d. would bb abou/L 2}d., and if a bag were, sold at 7s. 6d., less this discount, tho price would be about 7s. 3d. If tho bags were packed in sacks ; it would cost £l 25.. 6d per ton additional for, sacks.- Ar.deraou and Son made a contract with him in February. and on March, l he sent all his customers' a notification that the Government price was to be fixed at £1B per ton for 200lb bags, rißing to £21 for 251b. bags f.o.b.' Oamaru, less the trade discount. Since March 1,-1920, the difference between the 2001b. hags and the 251b. bags was fixed at £3, the price of the -smaller packages had increased owing to the. inIncrease in materials The Government price of £16 10s. per t,on for 2001b. bags would mean £19 10s for 251b, bags." On | the price nf .£l6 10s., and allowing 20 per cent, for working costs, 'and; 5 per cent, profit, he made the price 6b. 6d. per bag of 2511r.

• Mr. Blair: How did you come f o send out thoso Government, prices ns mentioned in your circular?—"l. received a tele cram from my miller to say that the Board of Trade had fined the price at £18 f.0.b,, and then Bent the circular out. Evidence waß also [riven by -William Thompson, It, Janson. S Mills, and,.Wardel!. all interested in tin grocery trade, showing the.price of Mlb. bags of flour on March 13 to : range from O.T, 'fid. to 6S. The Case for the Defence. ' ?j. r, x? la * l Y °P enin 2 f °r the defendants, laid tnoy had no casa to answer. Some people miff lit think that Wardell'a price waß high because they were charging 6s. while others-were charging ss. 9d The prosecution had, to establish that ' tho p £i charged by Andersons was unreasonably high, and what was. unreasonably nigh was defined in the Act. ' On, February 13 Anderson and Soil mnde a contract with Baldwin and Co., the agents for the Oamaru millers, for 20 tons of flour at Government fixed prico, monthly delivery .On February 23.Anderson and Son were oloan out- of. flour, and they obtained a small lot from Baldwin, ex store, which wan to be charged at, the Government fixed price. At that timo the Board of Trndo waß negotiating with the millers,,and an agreement waß reached subject to confirmation of Ministers that the price of flour.should be £18 f.o.b. port of shipment for 200's, and £21 for 25'e. On March 1 Anderson and Son were notified by circular by Baldwin and Co. that the Government prices would bo as ind'eated. Anderson discussed the. matter, with Baldwin, and they arrived at the, conclusion that unless their retail price was 7s. 6d. they would lose money. At £21 the flour cost Andersons 7s. per bag, and with their overhead charge of 20 per cent, the price would be 7s. 3d. At 7a. 6d. par bag,'with .. 52 j c ? nt - discount, v,.hich Andcrsonß allowed, the actual price wrs about 7s. 3'< l when Mr. Massey found that at £10 per • toil the bifltere would Jiavc.to advance luo price of bread, he became frighte/ied. and fixed the price at £16 10s. thir was not gazetted until April 12. An-' •.•ons fixed their price in accordance •', tho circular from Baldwin and Co, a ,hcn tljcy found that they were brinjj .undersold by other grocers, they reduc.'u their price for Hour, believing that they would be losing heavily. David William Anderson said that he and his brother had been in partnership In the business. Tn March last they sold the promises, and disposed of the Btock by auction Since 1915 the businesa was not paying, the partners had very little out of it, and they carried most of the insiirNnce themselves. He made a contract with Baldwin and Co. on February !3 for flour at Government price; towards the end of the month he heard from Mr. Baldwin nboiit the price and they worked out the retail, price. At £18, Government price, they worked it out at 75.. per bag for 251b.. and the retail price was fixed at 7s. tel., less 2! per cent, which would bring the actual price to 7s. 3}d. Per, bag. He Uept on selling at 7s. 6d until he discovered that he was be:Vg undersold, whan he reduced the price to compete with the others. Mr. Prendoville: Do yon think it right to base your priceß on a nrospective rise?Aot on the price nnmcd. In the case of Hour, on the Government price,'' Thiß flour was invoiced-to you on February 27 at £16 10s. per toil?—"I* never BP"" t l '"

Mr. Jilair: That is Jin amended invoice Witness added that he wa? bcinc undersold by other grocers bccnuso they had (lour purchased before J'urr'i 1. and he had to buy- nt the end o'f February, ex store. He understood this would bo invoiced nt the expected new (lovernmcit, price, which it was then anticipated would be £18 per ton. Krnest Henry Anderson. Hip nf.ber partner, Baid that he opened al Ithe letters of the firm, and there was considerable delay in the receipt of the invoice. The Businoss a Losing Ono Henry Arthur Clold, uf Gold and Arcus, roKistercd accountants, said that his firm was instructed some time aero to prepare a statement of the .business of, David'Anderson and Son for stamp duty, Before

the war the business did yield a profit, hut it was nothing; very much In 1915 and subßeauont years there wero losses, and the loss for . 1919 was £630. The defendants were not charging adequate rout for their preinipes, and they were carrying most of Iho insurance tliomselves. There was no provision made for interest on ,capital or remuneration for personal supervision Since the war started the business had been carried on at, a loss, and if ail charges that could legally be debited were so debited, the losses would have been very serious. In tho last two years the business had not been making a profit that,the partners were entitled to.

Mr. lilair, m addressing the Court, said that a reasonable rate of commercial •jroiit must he taken on (he general Irani-v-i and an isoluted item could not bo for estimating that profit. The -tion had not proved thut- tho price . unreasonable on 1 ?, and that, the pi-nut wiie not ii. commercii'l profit.

Mr. Prcndeville. in a br.'ef reply, said that the defendants, in anticipating a rise in the price, made a mistake. He contended that the price did not depend on the general turnover or the annual return: the profit was based on the cast,, and each nrticlo must be iudged by itself Tho Magistrate reserved his decision.