PRICE FIXING

Evening Star, Issue 19409, 18 November 1926, Page 14

PRICE FIXING

CANADIAN REPORT Reference was_ made recently In cable messages to an investigation in Canada of the operation of the Proprietary Articles Tariff Association. The following extracts from the report were published by the Toronto ‘ Star ’- “Tbe P.A.T.A. attempt, promoted by wholesale and retail distributors, to re-establish the wholesaler as the channel between manufacturer and retailer, or at least to enable him to hold his own in the trade, and at the same time to protect the smaller retailer from the price-cutting methods of his new and larger competitors,” says the report of F. A. M'Grogor, registrar under the Combines Investigation Act, made public by the Hon. Peter Heenan, Minister of Labor. “ Insofar as such price-cutting does not result from savings in operating expenses, bht represents selling below cost for mere advertising purposes, it would seem to be unfair to the manufacturer as well as to competitors,” the report continues. “If all price-cut-ting were of this typo, and if this were the only type of price-cutting to be restrained by the P.A.T.A., there would be less occasion for public concern. But tbe remedy applied by the P.A.T.A. has the effect, unfortunately, of preventing not only predatory price-cut-ting, but any reductions _in price, regardless of the substantial variations which have been shown to exist in the operating costs and rates of stock-turn of different stores and different types of stores. MAINTAINS OVER-SUPPLY. “ Furthermore, the P.A.T.A. tends to maintain the present over-supply of distributive agencies, and to restrict trade to the traditional channels of distribution, whatever less expensive methods may be in existence now, or may in the future be devised. When it is considered that Canada as a whole has one retail merchant to every seventytwo people, or one retailer to every sixteen families; that in the city of Toronto, to take one city as an example, there is one retail merchant to every fifty-nine people, or about one to every thirteen families (the proportion in Montreal is approximately the same), it is apparent that the number of distributors is excessive, and that this excess means higher distribution costs and therefore higher retail prices. The Canadian public are not purchasing enough in the way of patent medicines and toilet articles and drugs generally (and this is true also of the United States) to provide for the upkeep of the number of druggists who are operating. Wo have 3,300 retail drug stores for a population of nine and a third millions, as compared with some 9,000 or 10,000 chemists in Great Britain for a population of about 45,000,000. Even allowing for the larger territory to be covered, the comparison is unfavorable to Canada. In some Canadian towns the number of drug stores has doubled or even trebled in the past two decides out of all proportion to the demands made by increasing population. THE UNIT DEALER. “ The unit dealer has sought to meet the situation by cutting his own prices to develop volume of business. For the regular unit store, however, the margin by which sales can ho increased is comparatively limited, and consequently price-cutting is likely to bring meagre results. If, for instance, a retailer is handling a Idol article on a 40 per cent, margin, he must increase nis sales by 33J per cent, to offset a 10 per cent, cut in price. The practice of certain types of stores in selling ‘ leaders ’ at cost or below cost has led to the charge by the non-price-cutter that all reductions in price are simply ' honey to catch flies,’ and that the normal margin or more is made up on other lines. Since any store, chain or unit, operates for its net profit, undoubtedly all direct losses on advertising loadei?) are made up on other goods. It is not necessary, however, that they should be made up to the normal margin of other stores, since the price-cutter may operate at a lower cost. “Many manufacturers are now selling direct to the larger unit retailers, to groups of sinala retailers, to cooperative societies, and, of course, to department and chain stores, and are quoting them prices as low as those quoted to the wholesale houses. The retailers are now doing much 'of their warehousing, and much of their selecting and buying. Thus in many instances the functions of the wholesaler and his sales force are being assumed in part by the manufacturer, in part by the retailers. The cost'of these services is not eliminated, hut it is substantially reduced. The wholesale trade continues to give complete service to most of the small stores, hut only partial service to the others; it continues as the exclusive channel for the marketing of some manufacturers’ goods, but only as one of many channels for others.” The registrar also finds that:— “ Quantity discounts are to be given, hut no such saving may be passed an to the public. “ Any co-operative distribution of profits among customers by either a wholesale or retail firm or association is prevented by the agreements of the association. “There is nothing to indicate that manufacturers cannot sell direct to the retail trade, hut no saving so effected may he passed on to the public. “There is no provision for a reduction of price for the purpose of reducing stock or clearing out slow-moving goods.”-