PRICE CUTTING

Hokitika Guardian, 17 February 1932, Page 3

PRICE CUTTING

AIDED BY LEGISLATION. URGE FOR REPEAL. Bankruptcies, assignments and unemployment are not pleasant words but they were used with justifiable candour by a deputation from the New Zealand Master Grocers’ Federation which waited in the Goverenmnt recently to urge the repeal of the Commercial Trusts Act and Cost of Living Act, says a statement issued by the Associated Chambers of Commercje. Those words will be translated into fact in many businesses of different classes throughout New Zealand unless the Government repeals the statutes objected to, and releases trade from the intolerable restrictions imposed on it by these measures. The Commercial Trusts Act, 1910, and the remaining clause of the Cost of Living Act 1915, define as a commercial trust any firm or combination of persons dealing in agricultural implements. coal, mineral oils, tobacco and any article of food for human consumption (as well as the ingredients used in the nmniaeture of such foods) and having as one of its objects the controlling, determining or influencing of the supply or demand or price of any goods in New Zeoland. This definition embraces the bulk of the wholesale traders of the Dominion, whether firms or unincorporated companies. Tiie Commercial Trusts Act ■prohibits under penalty, tbe importer, manufacturer, or distributor of foodstuffs and of certain other commodities from controlling the retail price to the consumer. Also, prohibition is placed on the selling by traders at a price which produces, or is calculated to produce, more that a fair and reasonable rate of commercial profit. To deal with the second point first, this provision is of no effect because no business can operate on unreasonable profits, and even if it could, unreasonable profits are automatically prevented by competition. As to the matter of price maintenance, the orderly and profitable marketing of any commodity, and the extension of reasonable credit to retailers of that commodity, can result only when it i c sold to the consumer at a reasonable price capable of being maintained. Yet this is the. very essential that is denied legitimate traders.

EXCESSIVE PROFITS CHECKED These Acts are beneficieut shelter for price-cutters, who have multiplied so profusely that to-day they const.tute a very real menace to legitimate trade and enterprise. 'Hie practice of the price-cutting retailer is to select a well-known and widely advertised commodity in public demand and cut its price, often below cost. The impression gained by the public is that this-, retailer., is contenting himself with a smaller profit on this particular commodity, whereas, actually he is losing on the sale, and making up the loss on other lines. Where he resorts to general price-cutting as a curious means of increasing his profits, his business inevitably fails. Not only does be fall into the pit he lias dug, but he takes others with him. It is obvious that the price-cutting is really helping not at all to reduce the cost of living, because bis practice is totally uneconomic. Its effects are to destroy the sound trading that importers, manufacturers and distributors have built up by years of careful, well-managed marketing and advertising and to reduce all concerned to tbe one level of unprofitable trading. Other retailers sometimes cease stocking these price-cutting commodities, and the goodwill created by the importers, manufacturer or distributor disappears. Large sums of money are lost to wholesalers and retailers, and credit conditions are seriously disrupted. The benefits of price-cutting to the public are fleeting, its depredations to trade permanent and profound. All this comes back to tlu- 1 point we stated at the start, namely, that the orderly and profitable marketing of any commodity, and extending of reasonable credit to retailers, depends on the sale of the commodity to the consumer at a reasonable price, capable of being maintained. This will l>e possible only with the repeal of the Commercial Trusts Act and Cost of Living Act, which at present are giving full license to the baneful price-cutter. The consuming public lias nothing to lose because any unreasonable trade profits would inevitably bo checked by ever-watchfnl competitors.