FLOUR CONTROL CASE

Evening Star, Issue 19000, 23 July 1925, Page 3

FLOUR CONTROL CASE

—— APPEAL AGAINST DUNEDIN DECISION CROWN’S CASE CONCLUDED RESPONDENTS’ CASE OPENED, [Pek United Press Association.] WELLINGTON, July 22. In the Hour-milling appeal case, Mr Fair, continuing his argument ior the Crown, referred to the complaint from Stilton and Balclutha of the flour mentioned by Christie and Co. being increased by 5s per ton —namely, Irom £ls 10s to £.15 3.55, and said that the purpose of such evidence was to show that the tendency was to increase the price. He proposed to submit that another reason for the agreement between Distributors and the millers was to prevent the price of Hour being reduced. A circular was sent to millers in May, 1922, saying that the position was nearly hopeless, and unless the millers made a determined effort to get back to and keep a uniform price the cutting would quickly get worse, and the mills would be compelled to sell their, flour at well below crist, and would lose rot only that year’s profit, but also all moneys they laid made during the past tiro or three years. According to this circular the cuts in price by one mill wore so quickly heard of by other mills that the miller who was c.utitng gained no extra output, but merely reduced the amount of profit to all mills. Pricecutting, said Mr Fair, was not danger* ous; it only amounted to a slight extra discount. At the meeting on May 11, 1022, to which the circular reierrod, Mr J. Ronnie (chairman) had made a grossly exaggerated statement of the real condition of affairs. On Juno fid, 1922. the secretary of the Hoard of Trade sent to the millers a letter stating that the board thought the maximum price fixed by Order in Council was unnecessarily high, and wanted (o know if they had any objection to gazetting ns the fixed price the lowest maximum price millers themselves obtained. This letter was sent out by Mr MacDonald, and indicated that in threatening millers he failed to realise that ns president of the Board ol Trade he owed a definite duty to the public to keep prices low. The letter from "Wood Bros., Ltd., in reply, naturally protested against suggested lower prices, and showed that price cutting was then going on. That firm said: “It is. wo think, rather significant that, whilst price cutting has been prevalent during the whole period of control, your circular should follow so closely upon what appears to he an attempt to form a commercial trust; in other words, the millers’ combine. There is no more need for action today than there was on Juno 21, when a mooting of millers was held for the purposes of considering the formation of that trust, and yet wc have got no indication of any intended action.” Those remarks were highly significant, because at this_ time _ Wood Bros, were definitely against joining such a combine, although under unusual circumstances they did so later. Thu attitude taken by the Zealaudia Milling Company to Mr Macdonald’s letter was that its mill had always fought against tlie millers earning more than 2 reasonable profit on the capital invested in their business, and it had had some real stern battles with sonic who were asking what were considered excessive profits. Just prior to the genesis of Distributors, Ltd., there was a general cutting of flour prices throughout New Zealand. In Invercargill the cutting of price.-' lasted only a fortnight or so, and.llouri was reduced by £2 per ton,® ana on top of that one could get 5 per cum. discount. North of Invercargill there was strenuous price-cutting going on. Under Distributors, according to some of the witnesses for the defence flour was definitely fixed in price, end in consequence there was much less pricecutting. Mr Justice Reed 'asked; How is the quality of flour affected? Mr Fair: My point is that the bakers say that if they all got the same quality of flour and there is competition, prices will be less. Mr Skerrett: The evidence is that under free competition the cutting of bread prices by bakers would result in leaving out of the bread an improver, such as milk, malt extracts, and syrups, giving the public a loaf of flour and water.

Mr Fair: We say that under free competition the quality of the bread would be improved. The bakers would bo out to make better bread than their competitors in business. It is suggested that the combine was beneficial to wheat-growers. There is nothing in the document to show this. The monopoly was prepared to pay £1,500 per annum to keep a mill closed. This was a mill belonging to Wilkie and Co., of Mosgiel, who refused to join the combine unless given an output considerably in excess of their three years’ previous average trade. 'Jlio judge in the court below has taken the evidence of Mr Ireland that his linn lost £603 in Otago and Southland, and £.1,557 in shipped, while another company, of which he was managing director, I). H. Frown, Ltd., made a loss of £2,810, all losses being the result of price cutting. Those losses were not trading ones at all, but losses sustained for selling below the gazetted price. In cross-examination, Mr Ireland admitted bo had not made any trading losses at all, but ibis correction of his evidence Mr Justice Sim had overlooked.

Mr Myers: The position was made perfectly clear at the trial. Mr Adams: I must repudiate that suggestion. What the Solicitor-Gene-ral says is correct. It is in the interest of the public that the bakers should sell as cheaply as possible. It is iu ihe interest of the consumers that the bakers should sell cheaply rather than dearly. Mr Leicester: That will bo found in any trade. Mr Fair: One of the witnesses for the defence says that only since J)istribulors, Ltd., was incorporated has ho used bread improvers, but under restricted competition lie would use them also, since it the bread was better, his custom would improve.

Mr Adams; There was no serious trouble as to the quality of tho flour except iu the south. Mr Macdonald makes this clear in his evidence. Tho wheat and Hour available would suffice to carry the community into the middle of March. Tho affirmative defence is that the combine can bo justified by reference to the hairing trade. It was urged that the constitution and operations of Distributors, Ltd., were reasonable and necessary for the purpose of stabilising and maintaining important dominion industries. One baker said that Distributors, Ltd., was an advantage and a necessity to bakers. The Crown says that bakers’ attitude was purely one of self-interest and contrary to public interest. Several Canterbury mill-owners refused to join the combine, but their concern was not a matter of principle, but that they wanted better terms. MATTER OF CONTROL.

Mr Fair: What is raised as an affirmative defence is the supposed analogy between the operations of Distributors. Ltd., and Government control. The .allegation is that they acted in the same manner. The Crown submits in the first instance, 'that this is untrue: (a) Because Distributors. Ltd., fixes minimum prices of flour; (b) Distributors, Ltd., lixes the output of the mills

oyer a period of six years, a vastly different thing from the rationing of wheat; and (c) the combine centralises the disposal of flour in the hands of Distributors, Ltd. It is no answer to this case to say that Distributors, Ltd., acted in the same manner as the Government. The object of Government control, as stated by Mr Nosworthy. shows that its concern was with the price of wheat and supply of bread. The purpose of the Government jivas to prevent too high prices for flour, while the object of the combine was precisely the opposite. It was a price-maintaining scheme. Mr Justice Sim held that Distributors, Ltd., helped to bring about the wheat agreement of 1923 and 1924. The millers’ combine never set out to help the wheat industry, and the suggestion that it did was only an afterthought. There are no minutes at any of the millers’ meetings hearing this out. . . Mr Justice Heed: What is this wheat agreement? Mr Myers i This agreement was sanctioned by the Government on the prices for flour, bran, and pollard being sanctioned by the Board of Trade. Mr Adams: The Government did approve of the prices, with the result that the embargo was left on. The Chief Justice: Was all this wheat bought by individual millers? Mr Adams: Not one bushel passed through the company’s hands. In a letter dated March 1, 1923, counsel for Distributors, Ltd., forwarded a draft copy of the wheat agreement to the Minister of Agriculture. A perusal of the statement by Mr Nosworthy shows that he was not satisfied to concur with the agreement until after a full investigation and conference with the millers. Even il the. Government did deal with the millers, this is immaterial to the question whether the selling agency was good or bad. The mere temporary use of the combine does not import a permanent recorniition. My next point is whether Distributors, Ltd., effectively helped the wheat industry. Tin's firm has_ done nothing in that direction. _ It is not shown that a combine ol this nature is necessary. The scheme is a danger to the wheatgrowor, but if Distributors, Ltd., were to buy wheat that would make a difference. 1 submit, finally, It is the prerogative of the Government to control a wheat scheme. There is no reason to assume that the Government would ever have allowed chaos in the Hour-milling industry. RESPONDENTS’ CASE.

in opening ior the defence, Mr SkerIreit said ne proposed to summarise the | characteristics or the throe yudustries I —viz., wheat-growing, hour-milling, ' and Puking, 'me second topic would 1 Pc niier-reiated to the industry’s posi- ! Lion irom 191/ to 1922, particularly I in regard to the Government intervention. uie third topic would be a discussion of the law upon which the dclenco was violently opposed to tlie exposition advanced by me Crown. His lourth point was in regard to whether tiie monopoly was {a) contrary to puP- ; lie policy, and |b) contrary to public interest, because it might have been carried into operation in breacn ol sec--1 tion 3. Fifthly and lastly, his submis- ! sion was m regard to general rucis j relating to inconvenience, ins first j observation was that it is the lixed I policy ol New Zealand statesmen to i encourage wheat-growing hero, j The chief .Justice; lou could say that of any primary products.

I Air SKorrett; isspeciauy whept-grow-i iug. This desideratum is apart from war conditions and existed before the war period of 1914. New Zealand is not by nature a wheat-growing country. 'Duly 3 per cent, of wlieat is grown in the North Island, so that 97 IV,it, Kj UiUU fl tU LUV.' H)U>UIJI JlilillfLlj and in a comparatively small area lucre. Apart irom me emoargo, me price of wheat is determined by the world’s parity plus freight and duty. There is in modern years a temptation Jvi. me part or lai'mers to go m lor wLol-growiug m place ol wheat. fur Headley points out that if the combine had not uccu lormed, me larmer would have had to turn to Oilier industries. The court should accept the view that it is an economic necessity that wheatgrowing should bo encouraged in tins country.

Mr Justice Alpcrs: Is there any evidence that this was the fixed policy prior to the war? Mr Skerrett; Mr Nosworthy’s statement makes that clear.

Mr Myers: There has ajways been cTutv on wneat.

Ifir Justice Alpcrs: For twenty-five years there has been duly on pickles! Mr Skerrclt; Since 11)17 there has been continuously an embargo upon wheat being brought into New Zealand. Jn "191-1 the Government increased the duty on Hour being brought into the country from £2 10s to £3 per ton plus primage. The case stands part board.