FLOOR COMBINE CASE

Evening Star, Issue 19001, 24 July 1925, Page 3

FLOOR COMBINE CASE

THE CROWN'S APPEAL

FLOUR-MILLERS' CASE PRESENTED [Pkb United Pbebs Association.), WELLINGTON, July 23. The Appeal Court to-day heard further argument in the case in which the Grown is appealing from Mr Justice Sim’s decision against it in the prosecution of certain flour-millers and Distributors, Ltd., for alleged breaches of the legislation against trusts. Mr Skcrrett (for respondents) said that it was perfectly clear that the maximum price of bread must ho fixed in such relation to flour-milling as to allow a reasonable proiit to the mil lor. In 1910 tho. Government paid a subsidy to millers in addition to the fixed cost. in 1920 tho Government increased the subsidy to £4 7s Gd per ton. M,r Justice MacGregor: What was the subsidy for? Mr Myers: The Government was paying too high a price for tho wheat, and in order not to have this reflected in tho price of bread made the millers sell low and made it up to them. Tho Chief Justice: in other words, the Government was paying the money of tho people to millers to save tho people something on each loaf? Mr Skcrrett: The real fact is that the Government burked the situation bv increasing the price of flour through tho left-handed method of compensating tho mill-owner. Tho Crown may try to disguise the fact if it can. llcpresentatives of the Crown only sec one side of the picture. In 1922 the Government demanded 9d per bushel of wheat extra from tho millers to provide a sinking fund. For four years tho price of flour, wheat, and bread was fixed. Then a bolt from the blue fell. This was early in 1922. when the Government announced that it did not further guarantee the price of wheat. Nothing was said about the embargo. This was left in doubt. At this time wheat was being threshed, and contracts had been entered into with growers. Everything from tho growers’ point of view was in a state of chaos. In 1923 an investigation was made by the Board of Trade into the current; position. The Government in 1922 bought wheat for exportation. They were competing with millers for the best wheat. That competition induced tho millers to buy slocks. 'The-Minister announced in 1922 that there would bo no control the following year. In consequence of tho system of rationing the surplus wheat that year, the Government, having plenty of wheat, gave the millers all the warrants they wanted. As it was still under control, they had to have a warrant, and the price was fixed. There was no difficulty in getting warrants. The consequence of these conditions was that during tho early period of control the millers, being rationed, generally thought that il they could got a little more wheat they could do a larger flour trade. Jn 1922, when they saw that they could get all warrants they wanted, they applied for more, and bought more than their usual quantity of wheat as compared with the previous year. A certain number of millers over-bought wheat. They then endeavored to secure tho extra flour trade for which they had bought the wheat by cutting the price of four. That cutting commenced somewhere about April or May. There was very bad cutting in July, August, and September. In July, 1923, it was feared that the attempt to form Distributors, Limited, would fail. In July, with no prospects of Distributors, Limited, being formed, millers were faced with the position that, having purchased tho bulk of the wheat for that year to carry them to the end of February (that would be approximately 60,000 bags of wheat), they either had then to follow cutting or carry the bulk of their wheat over to the following year, because, owing to serious cutting, there was no chance of selling Hour at tho gazetted price. Knowing that the world’s market was considerably below the price at which they had bought this wheat from the Government, they decided to face their loss by selling the Hour at competitive prices.

Mr J ustice Reed: Are there in this country Huctuations of wheat and cost of production different from those in oilier countries?

Mr Myers: In Canada and Australia land upon which wheat is grown is not good for other purposes, but here, if tho wheat fanner is not going to discontinue growing wheat and grow or rear something else, he must be given a guarantee of a minimum price for wheat.

Mr Justice Alpers: Cohden would say that control by monopoly at its worst was bettor than Government control at its best.

Sir Skcrrett: Nothing is clearer than the fact that if the price-cutting that was going on was not. stopped, the Hour-milling industry would have boon destroyed. The Grown has maintained that there was no danger or evidence of destruction by price-cutting, but it is not to be expected that business men such as the miller* were going to wait until their business was on the verge of ruin before protecting themselves from the imminence of the evils of price-cutting. Now, Distributors, Ltd., was appropriate machinery for fixing prices and stabilising the position. Whcatgrowers under tho wheat agreement wore a commercial trust under the Act, and a combination to control prices and supply of wheat, and to eliminate competition. This agreement absolutely reduced efficiency. If the Crown’s contention is correct in regard to the-agreement of Distributors, Ltd., it does not limit the output of wheat as the other agreement did. Mr Clinkard. in his evidence, says that at the time the wheat agreement was entered into early in 1923 there was nothing to prevent the Government continuing its system of control, except that tho harvest was then being reaped, and it would have been rather late to readopt it, but it could have been done. The whole .scheme of Distributors, Ltd., was entered into not only without objection from flic Government but with its consent. The agreement was referred to the Minister, whoso agent saw it and put a copy on his file. Sir Justice ITerdinan: Did not the Government perpetuate its scheme after the war as the result of conditions arising during tho war?

Mr Skcrrett: The millers’ desire, in following the Government scheme, was to arrive at some method of stabilisation. There came a time when tho millers protested most strongly at being left at the mercy of cut-throat competition. Under the Cost of Living Act, 1915, which was repealed and substituted by The Board of Trade Act, 1919, there was ample provision for investigation of the affairs of Distributors, Ltd., if the propriety of that concern was doubted and there was further power of supression of Distributors, Ltd., if that company was operating in a manner contrary to public interest.

Mr Justice Rood; The fact that the company was permitted in 1022 does not necessarily mean that its operations should be right now. Sir Skerrett: The Government made no effort to prosecute or interfere with Distributors, Ltd., then, and must be held to have approved of it. Mr Fair: The opinion of one officer of the department cannot represent the attitude of the Government. Mr Justice Alpers: It was the_ duty of the Government to prosecute if the concern were illegal. The only inference from the fact of their being no prosecution is that the Government approved of the initial scheme. Mr Skerrett; There is no warrant for the contention of the AttorneyGeneral that wdiat eliminates competition is unlawful.

Mr Justice Hordman; I see that under the, agreement the managing director lias tho right to fix the price of Hour. _ I Mr Skerrett: Thai is so; and I ad-| init the clause is capable of misuse, al- ■ though it newer lias been abused. Coming to the law on tho subject, my first . observation is that a commercial trust is not an offence under tho Act. It is only when a commercial trust commits certain acts that there are punishable as offences. Secondly, the fixa- | tiou of prices by a trust is contemplated by tho Act, and is not an offence unless the prices are unreasonably high. In the statement of claim against the respondents the Crown pleaded that the prices of flour, bran, and pollard ; in New Zealand had been unreasonably high since October 1, 1922, and were | calculated to produce more than a fair I and reasonable rate of commercial profit. This allegation was expressly abandoned at the trial, so the court should take it as established, at any rate inferential!,y, that prices were not unreasonably high, and, therefore, constituted no offence under the Act. The rest of the sitting was occupied | by Mr Skerrett in citing Australian : cases in support of his contentions. The court then adjourned till tomorrow.