FLOUR PRICES

Evening Post, Volume CVIII, Issue 146, 17 December 1924, Page 9

FLOUR PRICES

VERDICT FOR MILLERS

A LENGTHY JUDGMENT

MONOPOLY IN ITSELF NOT

UNLAWFUL,

(Bl TELEGRAPH.—PPES'S ASSOCIATION.) DUNEDIN, 16th December.

In ono of the most important cases of its kind ever heard in New Zealand, his Honour Mr. Justice Sim this morning delivered a lengthy judgment which took him 45 minutes to read. This was the case in which the Crown claimed a penalty of £500 from Distributors Ltd;, and from each of four flour milling companies for alleged breaches of the Commercial Trusts Act. The Crown sought . injunctions to prevent Distributors Ltd. from acting as sole selling agent of the other defendants in flour, bran, and pollard, and to prevent the flour-milling companies from employing Distributors Ltd. as the sole selling agent for their products. His Honour gave judgment for the defendants. Remarkable features in connection with the case were the length of the hearing, which occupied over ten days, the large number of witnesses called on either side, and the size and high standing of the' Bar engaged; it included no fewer than three iKng's Counsel. The defendants were Distributors Ltd., Fleming and Co., Ltd., the Atlas Boiler Flour arid Oatmeal. Mills (Evans and Company, Ltd.), and Wood Brothers, Ltd. At the hearing. Mr. F. B. Adams (Crown Prosecutor) and «Mr. J. B. Callan conducted the case for the Crown. Mr. Myers, K.C., and Mr. A. N. Haggitf appeared for Distributors, Ltd., Mr. S. Solomon, K.C., and Mr. Campbell for the Crown Milling Company and Atlas Boiler Mills, and Mr. D. P. Skorrett, K.C., and Mr. J. Sim for Wood Brothers, Ltd., and Fleming and Co., Ltd. . • THE OFFENCE SET OUT. ■ His Honour said that the offence alleged in the statement of claim was that the defendants,, in company with other persons, firms, and companies, unlawfully, and in breach of section 5 of the Act, conspired together to monopolise wholly or partially the supply of flour, bran, and pollard in New Zealand, and in each part or district thereof, and to control, wholly or partially, the supply and price of "flour and pollard in New Zealand, and in each part or district thereof, such monopoly and control being of such a nature as to be contrary to the public interest. "In the present case it was contended on behalf of the Crown that the company had, been guilty of an offence under section 3 of the Act, and that the monopoly 'and control in question must be held to be contrary to the public interest. The first question to be considered, then, is whether or not the agreement between the company and the several millowners offends against the 'provisions of section 3 of the Act. Tiie combination is admittedly a com mcrcial trust, within the meaning of the Act, but such a combination is not in itself unlawful! "and the -Act does'not make every monopoly unlawful. A monopoly is made unlawful by section 5 of the Act only when it is contrary to the public interest. In determining whether or not a monopody offends in this way, the Court has to consider the potentialities of the. monopoly in the future, as well as its actual effects in the past." His Honour dealt at length with the circumstances in which the company was formed, and in which it commenced operations, and continued: "There does not appear to be any reason for thinking that it was established with any sinister design, or that its main, purpose was other than that of stabilising the flour-milling industry "by eliminating unrestrained competition, with its attendant evils.

"It may be the case that the chairman, at a meeting of millers in May, 1922, was guilty of exaggeration when he said that the position of the flourmilling business was nearly hopeless, but it is clear from the . evidence that there was a serious price-cutting on the part -of a number of millers- during that year. There is ample evidence-that this cutting competition arose in the first place from financial pressure and other factors, and was not war'anted or brought into existence by any. excessive margin of profit allowed by the maximum price. The fierce competition^for trade resulted in a reduction by as much as £2 per ton, but production costs speedily forced the millera to agree upon a reversion to a maximum price of £18 per ton. It is true that the effect of the monopoly, by eliminating competition between the members of the combination, will be to maintain the price of flour, but it does not follow necessarily from this that the monopoly is contrary to the public interest..

COMPETITION AND PRICES.

"The price secured by means of the jnonopoly niay be higher than would have been obtained under free competition, but that does not make a monopoly contrary to the public interest unless the price is unreasonably high. The case for the Grown seemed.to be based largely on the view that unfettered competition is.in itself a good ■ "thing, and that any agreement which interfered with such competition, unless justified by some cogent reason, must be contrary to the public interest, but unfettered competition is not always a blessing, and in considering the interests "of the consumers it is impossible to disregard the interests of, those who. are engaged in the production and- distribution of the articles of consumption. The consumer may derive benefit for a time from cut-throat competition, but in the long run it is not in the public interest to have such competition. "The flourmills in Now Zealand are capable^ of producing, it has been* said, three times- as much flour as the Dominion requires. In these circumstances, it is certainly wise for the' millers, in their own interest, 'to come to an agreement for rationing ' the' flour trade of the Dominion, and so securing for their products prices which will yield a reasonable profit. Such an agreement, by stabilising an ivportant industry, is really in the public interest, provided the consumers get good flour and do not have to pay a price that is unreasonably high, although such price may be higher than it would have been at times under free competition. So long as the law remains as it^ is at present there is little or no danger of any commercial trust attempting to exploit the public by charging excessive prices for any articles of food. It would not be reasonable, therefore, to condemn a monopoly as }>eing contrary to public interest merely Because under it at some future time such an attempt might be made. It was claimed, on behalf of the defendants, that the company was entitled to credit for having helped largely -.to stabilise the wheat-growing industry by bringing about agreements between farmers and millers as to the price to be paid for ■wheat. It was said by counsel for the frown that the preservation of the

over?'

wheat-growing industry was a matter for the Uovernment, and that, without political action in the shape of a duty on imported flour and an embargo on the importation of wheat and flour, tho company could not have done' mucii. mat is true, but the company is entitled, at any rate,, to credit for having helped the wheat-growing industry. If the company has helped, even in a humble way, towards this end it has served some useful purpose in the world, although this was not declared to be one of tho purposes for which it was brought into existence. '

SUGGESTED INFERIOR FLOUR NOT, SUSTAINED.

_ "The scheme is supposed to remain m operation for six years, but may be put to an..end much sooner if the .majority of the millers become dissatisfied, with it. In these circumstances it is hardly likely that any miller would be so indifferent with regard to trade in the future as to produce inferior flour./ The - evidence negatives the idea that anything of the sort is happening, and suggests that millers are anxious to preserve as far as possible their connection with their old customers. In order to do that they must produce the best flour they possibly can. The company certainly lias nothing to gain by the production of inferior flour. It may be the case that under the scheme the baker has less freedom in choosing brands than he had under free competition, but restriction of this kind is not necessarily an evil. " The question of brands appears to be of little or no importance so long as the baiter gets flour with which he can make good bread. It is the consumer who ultimately has to be considered. Then it is said that the effect of the scheme is to keep up the prices of flour and bread. The price of bread depends largely, of course," on the price of flour. * "

, "The first complaint is that the price of Oamaru flour delivered in'Dunedin was increased by 10s per ton by requiring purchasers in Dunedin to pay the cost of transit to Dunedin, which had previously been paid by the sellers in Oamaru. During the years 1920 and 1921 Oamaru flour Has sold in Dunedin at 10s per ton more than in Oamaru. the difference representing the cost of carriage to I>nnedin. In 1922 the pries was made tho same in Dunedin and Oamaru, namely, £15 10s per ton. This reduction was' made because the Dunedin millers, had reduced the price of Dunedin flour in Dunedin by 10s per ton below the gazetted price. They did tnis because they thought the Oamaru millers were : getting too much Otago trade. .The Oamaru millers had to follow suit, and made a similar reduction. This continued jn forco until April, 1923, when the former difference m price of 10s per ton was re-established, it seems to be merely a case of taking away from the Dunedin baker a concession to which he had no right, and does not constitute ground for saying that the monopoly is contrary to the public interest. ;

"I proceed now to deal.with the allegation of the > Crown, that the results of thp company's* operations have been such as to establish that the monopoly; is a pernicious one.-. .-The evidence relied on in support of this allegation was confined exclusively to what happened in the Dunedin and Southland districts. About seventeen witnesses from Invercargill and other parts of Southland gave evidence in support of .this case. They were bakers and storekeepers, and the burden of..their complaint was that they could not get the brands of flour they wanted. The witnesses doubtless were speakingqiiite-honestly when they said this, but I am' not satisfied; that their recollection of what happened in the past is altogether trustworthy. It is impossible that under a system of un-. regulated distribution each baker always got the flour he ordered, and always could get as much as he desired "of any particular brand of • flour." His Honour, said it was dear, however, that Southland bakers* and storekeepers did suffer inconvenience and • loss during the year 1923. in connection with the : supply of flour. This was largely caused by the fact that during part of that year bad flour was being produced at Fleming's mill. " That, and a small mill at Arrowtown, are the only flourmills in the (southland district. Fleming's Snowball flour was one of the most popular flours' in New Zealand, and during the early part of the year 1923 the difficulty was to avoid over-selling it, but when the flour ceased to be of good quality it soon lost its popularity, and bakers asked to be-supplied with other brands of flour, and mostly Oamaru brands. There was not enough Oama'ru flour to supply this increased demand,. with the result that the bakers could not get the flour they wanted. It was obvious that the company was not responsible for Fleming's bad flour, and it was certain that Fleming and Co. were not intentionally producing bad flour. On the contrary, they were doing their best to discover and remedy the evil. They succeeded in the end in doing this, and nearly all the witnesses agreed in saying' that since about January of the present year" Fleming's had been of good quality.

■"'ln the circumstances, it Eeems unreasonable to blame the monopoly lor the trouble that arose in. Southland, or to say that such trouble is a.ground lor condemning the monopoly." JUDGMENT WITH COSTS. After dealing with complaints regarding Dunedin flour, which his Honour said the distributors were not responsible for, and which were remedied, the judgment went on: "In view of the satisfaction of bakers generally with the operations of the company it is reasonable to conclude that the discontent in Dunedin and Southland is not a necessary result of the scheme, but is due to accidental causes, and will only be temporary. That discontent, I conclude, was largely responsible' for the present action being brought, but it does not justify the Court in holding that the monopoly complained of" is contrary to the public, interests, and as I have already said it is not contrary to the public'interests on the other grounds put forward by the Crown. The lvsult is that the Crown has failed to establish its rcase, and defendants are entitled to judgment with costs.

"In view of the fact that the interests of all the defendants were identical in all the questions raised, and in view also of the. way in which the case was conducted at the trial, rule 567 of code ought to be applied, I think, and only one set of costs aiiowed. If,' however, defendants -have any representation to make on the subject, I shall be prepared to hsar counsel before deciding the matter.'"

Mr. Solo.mon: "Perhaps, your Honour, in view of your .last remarks, will allow the question of costs to stand

His Honour: "It will be necessary to have an affidavit from tho solicitor who filed the defence."

Mr. Solomon church."

'He is in Christ-

His Honour agreed that the question could stand over.