SALE OF CLOCKS.

Lyttelton Times, Volume CXVIII, Issue 18435, 15 June 1920, Page 7

SALE OF CLOCKS.

PROFITEERING ALLEGED

CHARGES AGAINST SEVERAL FIRMS. Charges instigated by George Christie, on behalf of the Price Investigation Tribunal, against several commercial firms were sot down for hearing before Mr S. E. M'Carthy, S.M., in the Magistrate's Court yesterday. Hastie, Bull and Pickering, of Ohristchurch, were charged with having sold George Hart Christie, the Price Investigation Tribunal's investigating officer, a Big Ben alarm clock at a price—2ss—which was unreasonably high. Similar charges were laid against the following Christchurch firms:— G. W. Drayton and Co., Ltd., Mason ■ Struthers and Co., Ltd., and E. Reeee, Ltd. The offences were alleged to have occurred on April 20- i A. J. White, Ltd., wore charged for offering for sale on the date mentioned a Big Ben alarm clock at 255. Charges against tho Drapery Importing Company, of Christchurch, and Brown and Dureau, Atd., of Wellington, wero, also set down for hearing. Tho Drapery Importing Company were chaxged with having offered for sale on April 27 to George Hart Christie a coat at 455, which price was unreasonably high. Brown and Bureau, Ltd., weru charged with having unlawfully counsoiled another person—Hastie, Bull and Pickering, Ltd.—on March 1 to commit an offence under section 32 of the Board of Trade Act, I9ID, by asking and advising Hastie, Bull and Pickering, Ltd., to offer for sale alarm clocks at a price which was unreasonably high, contrary to the form of tho statute in such case made and provided. Brown and Dureau were charged also with a similar offence on the same date, it being alleged that they asked and advised A. Minson, of Christchurch, to offer alarm i clocks at an unreasonably high price. Mr W. 0. M'Gregor, of Dunedln, and Mr A. T. Donnelly appeared for the Crown. Sir John Findlay appeared alone for E. Reeco, Limited, Mr C. P. Skorrott appeared alone for Drayton's:. and they appeared jointly for A. J. Wnite, Ltd., Hastie, Bull and Pickering, and Mason, Struthers and Co.; Mr M. Myers appeared for Brown and Dureau. CASE FOR THE CROWN. r The case of Hastie, Bull and Pickering was taken first. Air Skerrett, who appeared with Sir John Findlay for the defendant, pleaded not guilty. Mr M'Gregor said that the case was t(he first of a series of cases of what was called profiteering in respect of the sale of "Big Ben" alarm clocks. It had been intended to take the D.I.C. case first, but the other cases were taken for convenience. In addition to the charges against local firms, thero were two charges against Brown and Dureau, who controlled the trade in New Zealand, and brought the clocks from America, of counselling and procuring tho sale at unreasonably High prices, which were fixed from time to time bv circular. Mr M. Myers appeared for Brown and Dureau, and an arrangement had been made that lie should have the right to appear in all the cases, and that the evidence against Brown and Dureau, where admissible, should be accepted in the first oases. Mr jGregor added that he was preCared to take all the cases together, ut for the moment he would open in regard to the first charge. THE ACT DEFINED. Mr M'Gregor said that the charges were laid under the Board of Trade Act, 1919, Section 32 (1) of which Btated that every person committed an offence who, either as principal, or agent, sold or supplied or offered for sale any goods at a price which was unreasonably high. Section 4 provided a penalty up to £2OO or imprisonment not exceedinrr three months, or £IOOO in the fcase of a body corporate who committed an offence or counselled, procured, aided or incited any person to commit an offence, or conspired with any other person. The Act was passed on November 4, 1919, to ma'ke better provision for the maintenance and control of the industry, trade and commerce of the Dominion; ,and an industry included every commercial business in the Dominion. A Department of Industries and Commerce was set up, and a Board of Trade was established, and full powers of investigation were provided. For the purpose of the Act a price was unreasonable if it produced "more than a fair and reasonable rate of commercial profit." • THREE MAIN CONSIDERATIONS.

The Big Ben alarm was sold for 255, Mr M'Gregor added, and three main considerations emerged:—

(1) For what sum of money was this clock bought?

(2) For what sum of money was this clock sold?

(3) Is the difference between those two sums more than a fair and reasonable rate of commercial profit? A shoTt and apposite definition of commercial profit had been given by that great master of commercial law, Lord Ellenborough, who said; "Are profits anything more than an excrescence upon the value of goods beyond the prime cost?" The facts were that on April 20 the secretary of the local tribunal called on the defendants, and bought a Big Ben alarm clock for 2qs. In the afternoon ho called back and saw Bull, and told him who he was and asked for the invoice. Bidl produced an invoice dated September 27, 1919, from Brown and Dureau, Limited, showing that twenty-four alarms were bought for lis lOd each, with 9d freight, added. The cost did not exceed 12s. Bull produced an indent order dated June, 1919, showing the conditions on which tho clocks had been bought. " Tt is rather an unusual document " Mr M'Gregor remarked, "and evidently of American origin. The point of it_ is that one of the conditions on which the goods aro purchased is that the purchaser agrees not to sell in any quantity at less than 17s 6d." Bull, ho added, also produced a circular dated September 13, sent out by Brown and Dureau to their customers, before the goods arrived, raising tho retad price from 17s 6d to 20s, with a tag that fcbo purchaser agreed to abide by the selling price. Bull also showed a further document, dated March 1, 192 1 ), from Brown and Dureau under which the retail price was again raised from 20s bo 255, and there was the same agreement for signature by the wholesale buyer. The goods were purchased for 12s to be sold at 17s 6d, which was in Juno then considered a fair amount of profit, hut they wero raised h<ter to ■2ss. Tho profit or excrescence was 13s, or slightly over 10S per cent. It was contended for the prosecution that if 17s 6d was reasonable 20s was obviously unreasonable, and 25s grossly unreasonable. The evidence supported two separate and distinct charges—(l) Against Hastie, Bull e.nd Pickering of selling at an unreasonably high price; (2) Against Brown and Dureau of counselling and procuring an offence. There was in the first case a clear breach of the section. The purchasing, : selling prices and tho profit in each case wore as follow: — Mason, Struthers— 12s, cent. Hastie, Bull and Pickering-~l2s, 25», 108 per oeuk '

A. J. White—Mb-, 255, 78 per cent. Reece, Ltd. — Los !)d, 255, 58 per oent, Drayton's—l4s 3d, 255, 75 per cent. A "FISHMONGERING" BUSINESS. " From tho array of distinguished counsel before your Worship," "Mr M'Gregor added, " I think it fair to assume that every conceivable argument will be employed on behalf of the defendants; every conceivable red herring will bo drawn across the trail—red herrings of all kinds, legal red herrings, economic red herring!)——" " You are fishmongoring," said Mr Skerrett. "No," said Sir John Findlay, "w« are tho fishmongers." "I am afraid we are fishing in troubled waters," said Mr M'Gregor. He added that attempts would be made to lure the Magistrate into by-paths of economio theory and business practices which he submitted had ceased to exist under the statute. The Aot Was a new departure in legislation, and affected the whole business life of the Dominion. Until 1919 an individual trader was largely free to control his own business on his own lines, to fix his own soiling price, to buy in the cheapest market and sell in the dearest if it suited him. But since the war all that had changed, and in the interests of the great body of consumers every trader was now forbidden under heavy penalties to sell any article at a price which was unreasonably high, no matter at what prices lie may have sold, or might be content to sell, the remainder of hiß stock. Under the Acb the Magistrate decided without looking beyond the particular goods, and a reasonable price was a question, of tact dependent on the circumstances of each particular case. An alarm clock was a Household necessity, and if it was bought at 12s and sold at 25s without any real reason for the successive rises surely it was a typical and flagrant case of profiteering—the very transaction that the Act was designed to prevent. His Worship would doubtless be told all about the cost of replacement, average profits, the hardship of isolating particular articles; but there was a jjlain meaning to the section, and a wider relation of business custom might become applicable only in considering the penalty. He hoped that the Magistrate would not be led aside by other considerations, however interesting to students of economics, but would concentrate his attention on the three main considerations he had outlined. IF ho followed the plain path set out in fcha statutory mandate it was difficult, or rather impossible, to see how he could escape the obvious conclusion that the Act had been broken. INVESTIGATING OFFICER'S EVIDENCE.

George Hart Christie, acting as sec- ■ retary for tho Ohristchurch Price In- ' vestigation Tribunal, gave evidence that Hastie, Bull and Pickering carried on a retail ironmongery business in Cashel Street. He called-there on April . 20 last land bought a Big Ben alarm clock. He received a bill. " Big Ben • clock, 255," produced. In tho afternoon he called hack with Mr Dyett, inspector of factories, and saw Mr Bull about } the cost of the clock. He asked Bull ! to produce the invoice showing, the cost. Mr Bull was quite frank. The • invoice produced showed the price to be lis lOd net. He also produced an ' indent order, with a schedule of prices; 1 and a pink schedule. Mr Bull said that ' the prices were controlled by Messrs • Brown and Dureau, the New Zealand • distributors. Mr Bull said most of the 1 shipment had been sold for 20s, and • that he had about six or seven of the clocks left. There were no bulk stocks. He said he had not landed any clocks ■ at the new prices. Witness was next asked to give evidence regarding Mason, Struthers and Co.. ironmongers, carrying on retail ' business at tho corner of Lichfield and Colombo Streets. Witness said he oalled on Mason, • Struthers on April 20 > and purchased three clocks, including one Big Ben' for £1 os. The three classes ol clocks were exhibited in the shop, with tho prices which he paid set out —255, 15s and 10s t>d. lie called back in the afternoon with Mr Dyett. They saw Mr Wright, in charge of the departI ment in which the clocks were. He referred them to Mr Pegler, a submanager. The prices of the clocks which witness saw announced in # the morning had been altered, the Big "Ben price being reduced to 20s. Witness; drew the attention of Messrs Wright and Pegler to the matter. Pegler said the action was the outcome of an article which had appeared in an evening paper the evening before, and not the result of witness's morning visit. Pegler said he had landed no Big Ben clocKs at the advanced prices. Witness asked Pegler for an invoice showing the cost of tho Big Ben, and was referred to Mr Morley, general manager. * Witness asked Morley for tho cost of the clacks, and Morley asked who laid the complaint, saying ho thought he was entitled to the information before the costs were produced. Witness said the Tribunal never disclosed tho of a complainant, as all complaints which they received were treated as strictly confidential. However, Morley preferred tnit to give the information asked for until he had consulted his solicitor. Witness drew his attention to the alteration made in the price of the Big Ben clock exhibited. "Morley made no reply. On April 26 witness again saw Morley, when he produced an invoice from Brown and i Dureau, for 144 Big Ben" alarms at Ills lOd. The invoice was dated Stpj tember 27. i "Mow we come to A- J. White, Ltd.," said Mr M'Gregor. "'ln that case the charge is offering to sell—it wasn't an actual sale." Witness said ho called on A. J. White, wholesale and retail merchants, and in company with Dyett, asked to I see some alarm clocks. They selected a Big Ben and asked the price, which proved to be 255. Other clocks, such as "sleup meters," which he asked for, were out of stock. They did not buy tho clock. They next saw Mr Beveridge, manager. Witness asked for an invoice showing the last cost price of Big Ben clocks. Boveridge mid thai' tho price's of tho clocks were controlled and at the same time went to produce a circular dated March 1. As witness already had a copy, ho said it was unnecessary Beveridgo was asked if Ids firm signed the agreement with Brown and Dureau regarding tho price Witness was told that it was the practice of tho firm to do so. An invoice was produced, showing tho invoice price to be 13s 9d. It was for 144 Big Bens. O'Connor, who was rdso present, and employed by A- J. White-, said they had not purchased Big Bens at the advanced prices. In regard to the charge against EReece, Ltd., wholesale and retail hardware merchants, of Colombo Street, witness said that on April 20 ho purchased a Big Ben there for 255. On the 23rd ultimo ho called back and sawMr Reece, tho manager, and Mr Alexander, tho secretary. Witness asked for the invoice showing the last price paid for Big Ben. Ho was told that they had ■ nin out of direct purchases, and that thev had had to procure two dozen locally from Messrs A. J. White. The invoice was produced. It was dated March 8, showing twenty-four Bie Ben clocks at 15s 9d. Recce said that th« prices wore controlled by the New Zealand ag«nts, for the Big Ben clocks. Alexander said ho hoped the tribunal took into consideration the cost of running departments, and establishment charges. Ho instanced tho case of the plate department, stating that it was necessary to get a higher rate of profit on these nnes than on what bo termed '•' heavy "lines.". The profit en tho latter, he said, could only he regarded as a commission. Witness'said he called at Drayton's on April 16 and bought a Big Ben for 255. He asked to see Mr Drayton, to whom ho made himself known, and asked lum te show him the cost of tho last purchase of Big Ben alarms. An invoice from Messrs Fairbairn, Wright and Co., " 24 Bis Ben alarms at Ida 3d

not,” was produced. Drayton also said that the prices were controlled, and produced, a pink circular, datod March 1. WITNESS CROSS-EXAMINED. To Mr Skerrett, K. 0.: Witness was told by Bull that the prices of Big Bens were controlled. Bull led wit. ness to believe that as the prices were set out they adhered to them, so that he would sell his stock at the fixed prices for the time'being, according to the circular. Bull added that ho had disposed of most of the Big Bens at' 20s, according to a circular then in Force. He only had, he said, some six or seven clocks on hand. Witness un- j Qerstood him to be speaking approxi- j mately. With regard to all the other ! cases, witness was given similar inlor- : mation with the exception of stocks. I Witness was informed by Mr Morley that “as a matter of fact, we’ve written our prices back again.” He was told this in an interview on the twenty-eighth, j Morley Baid that had he had the marking of prices, he would not have al-.: tered the prices. ! “ Is it the practice of the Tribunal to call before them those whose prices are the subject of investigation r" J j asked Hr Skerrett. Witness replied that this was only done where the information was not obtainable otherwise. _ ! “ Do you know that the Premier has #tatfed that the practice of the Tribunals was to call before them tne persons whose prices are the subject of investigation P” “ Yes.” " Will you explain why the parties concerning whom you have given evi- 1 dence to-dav were not summoned before the Tribunal to state the facts of the case?” Witness replied that any of thoso charged had an opportunity of going before the Tribunal. He asked Mr Morley if he would like to meet the Tribunal. Witness received no indication that he would. “Do you not see the propriety of calling these people before tho'Tribunal so that their view of the case can bo ascertained?” I “I do not wish to answer that question.” Witness added that he made inquiries from the merchants as to the course of dealing between them and Brown and Bureau. , To Mr Myers: Witness had seen the name of Brown and Bureau for a good many years- He knew from' the inquiries he made that Brown ana Dureau were handling the goods, but the tri-l buqal made no inquiries of Brown and I Dureau ! “ Is that not in direct contravention of your own knowledge of the promise made by tho Prime Minister—that the people would be given an opportunity if giving explanations to the tribunal before informations were laid?” I “ It does seem so.” | “Will you tell me the names of the members of this high and mighty Tribunal?” | “ Messrs Agar, Norton and Ellis.” ! Witness added that Mr Agar was the manager of a dairy company. i Mr Myers: Oh, a dairy company? ! “Do you know that the Columbia clock is one which competes with the Bjg BenP” asked Mr Myers. j Witness: “I did not.” | “Do you chance to have made any' inquiries as to the selling price of that line?” I “ I have not.” | “ Have you made any inquiries as to vendors of other alarm clocks other than those sold by Brown and Dureau?” i “ No.” “ Do you think, Mr Christie, that it is fair to„ launch these prosecutions without investigating profits made in competitive business lines?’* | “As secretary of the Tribunal I carry out my duties.” | A cirenla* was handed in which Mr M’Grcgor said was Brown and bureau’s own explanation of why the prices of the clocks were raised. The general leason given was increases in cost, etc. They asked retailers to apply the prices to docks in stock as well as new stocks. “ 1 ask you, Mr Christie, whether either you or the Tribunal knew the

Prime Minister’s promise before these inquiries were made?” “ No,” replied witness. Mr Skerrett said he had asked if Mr Christie was aware of the promise before the informations wero laid. \Vitiie9s said he was aware. of li after he had signed the informations. CASE FOR DEFENCE. Sir John Findlay, K.O-, opening the defence, said that the Court had been told that counsel would indulge in the objectionable tactics of drawing all sorts of red herrings across the course of justice. The suggestion was that counsel were defending all sorts of dishonest rascals. That, with all respect to Mr 'M’Gregpr, did not conform with his idea of the way in which n Crown Prosecutor should open a case The defendants were reputable business people who had carried on business on the established British lines. These, large concerns had a great number of officers and servants, very many of whom must be entrusted with, some matter connected with the selling of goods. The pricing of some goods had to be entrusted to some of these officers and servants, for it would be impossible for the general manager himself to investigate the prices of the infinite variety of goods that were sold by these great warehouses. And yet, if some Dody under him fixed the p' ice for one commodity, no f matter low small and contemptible, a charge of profiteering was liable to be hud against the firm. ” You cannot go oil inner these conditions, if these be die lipal conditions under which business mußt be carried on,” oaid Sir John bindlajj. “ I say, after the fullest thought, that if section 32 is read as my friend ii fords it should be read, it makes rn end of legitimate business.. We have had some illustrations of this. Some not very important person was entrusted in ellington with pricing certain h.w grides of flannel m a draper’s shop, rr.d, thinking the inherent value of tho flannel was worth more than the usual selling price, put 2d or 3d per vard more on tho price of the flannel. It was admitted that the flannel had the inherent value, and the Magistrate held the defendant not guilty Tho prosecution was ridiculous. The huge and mighty engine of the Profiteering Tribunal had been set into motion concerning a yard of flannel.” “ I repeat,” said Sir John Findlay, “ that if the contention of the prosecution to-day is accepted, you will break down the time-honoured system of business and bring chaos and commercial anarchy.”

FIXING RETAIL PRICES. Thera were two classes of business represented to-day—wholesalers and retailers, and retailers pure and simple. Tho question of whether a man had to lose wholesale profit because he had a retail trade must be nfct. There was 'no good reason why he should do so. Counsel were first concerned with the fixation of price system. It was not new. but had been in vogue in America particularly. It had been fdund m another case that allowing retailers to cell motor-cars at any price thev liked was leading to onoiuious profits. Tho makers contended that they should In allowed to fix the retail price, as under the other svstem the public was being bled and the name of tho makers of the cars was being damaged. They fixed the prices of the cars, and the result showed how beneficial reasonable fixation of prices could be. This seemed a far more reasonable method than allowing Magistrates to fix the prices ns thev thought fit. He said this with all respect to the Magistrate presiding that day. IHfferent Magistrates would be found to have varying ideas concerning equitable prices, and were not in so favourable a position as tho makers and wholesalers to gauge the position accurately. The luncheon adjournment was then taken.

Sir John Findlay said *ho had enlarged upon the advantages of a fixation of price system to show that it was not inherently vicious, but beneficial in many cases. Before the fixation took place in regard to Big Bens, these clocks were being used for “ price cutting,” and a decoy for customers, who after making a cheap purchase of the clock were cajoled into

buying other articles on which the profit made up for the loss on the docks. Thus some traders gave up the article, aa they were not in a position to retail such unprofitable goods. It was then that the fixation ol price was decided upon. The fixation had renultcd in the clock being kept on the market right through the war at a moro reasonable price than any other clock. The system adopted was: The f.o.b. price in America was fixed by the factory; to that price was added for tho purpose of sale in New Zealand all the expenses in connection with landing charges, etc., and on this basis the selling (retail) price was fixed in such a way that the article could he well marketed. Tho American f.o.b. price was remarkably low, hut the only question before his "Worship was the retail price.

INCREASED COST. In pre-war clays the price of the clock wag undeniably lower, but the increased costs had made rises essential. The retail price was affected by manufacturing cost, increaso m freight rates, the amazing rise in the rate of conversion, and the insurance and other charges. The retail price in New Zealand was originally 12s 6d, and it stood to this till December, 1916. It would be shown that so far from the manufacturers using the fixation price for the purpose of getting unfair prices, the company maintained the 12s 6d price for two years after the war began, losing meanwhile, in tjje hope that a decrease : n costs would como about. The war brought about scarcity and high price of metal and scarcity of labour, and tho manufacturer had to vield to increasing his price, which wont up from time to tune till it reached 20s. The inevitability of that increaso would be demonstrated by Mr Myers. It would be proved that wholesalers and retailers were making more out of the cloca before tho war than they were making for somo time after the war. That, be thought, a full answer to the charge. The profits, definite the higher price, were less than in pre-war conditions. Messrs Brown and Dureau were distributors for the Western Clock Company. They were advised that an increase in tho price of tho clock was inevitable. Tho Western. Clock Company realised that as they imposed a fixation price it would bo unfair if they changed the price while large stocks were being held by dealers. They pursued the policy of postponing changes in price until the Christchurch market was as bare 'if the clocks as it could be. At the time tho change was made on March 1, there were somo thirty or forty clocks, and no more, in New Zealand winch had been purchased on the earlier schedule. Thus, if these were sold at the advance price, they would realise some £7 10s to £lO in excess. The whole of the prosecutions depended upon the circumstance of the existence of these thiit\ or forty clocks. It was imperative that Messrs Brown and Dureau should pass on the increased price of tho Big Hens. THE SELLING AGREEMENT.

It might be asked why did Mason, Struthers and Co. and others sell at 25s clocks for which they paid only 12s or so? That was not really difficult to answer. They were involved in an agreement to sell no clock in stock except at the advanced price. These defendants had entered into the obligation both legally and morally. The total number on hand in Mason, Struthers’s was eighteen, and thus they would have made 90s on the advanced price. They got their clocks on the clear understanding that they would not sell Big Bens except on the schedule rates, and ns honourable commercial people they were obliged to submit to the conditions imposed and accepted. He submitted that the conditions so imposed were fair and reasonable. Mason, Struthers and Co. bought a certain number of Big Bens in September, 1919, and between then and March 1920, tlioy sold all except eighteen. The experience of merchants had shown that on certain lines no price fixation was nocessary or workable, but that on other lines it was essential to eliminate price-cutting. It was not contended that the hardware trade was carrying on a hazardous business. The regularity was really striking. Speaking broadly of the hardware trade, there were three sections—(l) “ heavy ” lines, sold at a small profit or a loss; (2) essentials. sold on a very moderate paying basis; and (3) non-essentials, on which larger profits were earned. It was the product of the sales on these three lines which produced the average rates of profit shown in the merchant's books. In section 1 gross profit was from 2J to 12J per cent on the turnover, and if overhead working expenses were deducted the lines were sold at a loss Among heavy lines were corrugated iron, wire netting, _ bolts and nuts, white load, linseed oil, paint and kerosene. As regards section 2, a return of from 25 per cent to 35 per cent gross was gained, but when overhead expenses were deducted the rate of profit was very moderate indeed. In section 3, the return on turnover might be as high as 50 per cent. The goods included silverware, jewellery, fancy leather and other fancy goods, art pottery and fancy toilet requisites. The' whole business of the mercantile community had to be conducted on those lines. It was the long-established principle on which business proceeded. The system, spelt out to its logical conclusion, was the taxation of the rich to relieve the poor, and it was universal. Thero was differentiation of profit proportionate to the needs of the buyers. If in some absurd way of profiteer-hunt-ing that system were to bo assailed, they were going to ascerbrate, and not relieve, the working men and women of this country. It would tie the hands of those traders who wished to include philanthropic methods in their business In London thero existed two prices, one for the well-off and one for the poor, and on the principle of plain humanitarianism it whs vindicated if the system were applied reasonably. The fixation of prices system was not adopted to put money into the pockets of tho trader, but in the public good as much as anything. It successfully killed the wretched system of price-cut-ting. Before the system, was adopted it was found that alarm clocks were unprofitable to the retailers. The system was largely parallel with the fixation of prices and shop hours. Fixation was the principle by which the worst sido of competition was checked. It fvrther secured steadiness of supply. It was an absolute fallacy to say that the fixation of prices was a policy which enabled merchants to make extortionate profits on stocks bought under one schedule when a new schedule came in, for a risk both ways had to be taken. The new schedule price might be lower or it might be higher than the previous schedule price. The Western Clock Company wanted neither to occur, and therefore waited till the market became as bare as possible.

SCOPE OF THE ACT Sir John Findlay then went into t!io legal aspect of the case. He said that the Bill was passed throngh the Lower House in “ a spirit of rugged profiteerhunting,” yet the House would not tolerate an amendment from the Upper House which would clearly have given the section concerned that day the interpretation which Mr M’Gregor aimed to gain for it. The clause which the Upper House wished inserted was: '■ For the purpose of this section the profit on any goods shall be deemed to be unreasonably high if it produces or is calculated to produce an unfair or unreasonable rate of commercial profit in respect of such goods.” That clause the Lower House struck out. The Statute should be so construed as not to necessarily interfere with the established course and system of trade hitherto pursued and adopted, unless the clear language of the section required it. In his opinion Mr M’Gregor’s remarks were to the effect that the Act was aimed at preventing the old system of

allowing a trader to inn his business in his own way. There were no words in the Statute which treated each article sold as a soparate and independent transaction, and not as an integral part of tho whole business of which it formed part, and in the absenco of such language no inference to that effect ought to be adopted. The rate of profit referred to in the section was not in respect of each independent article. It was ’laid down in the section that all circumstances had to bo considered. Thoso circumstances would involve consideration of what all other articles in the business were being sold for. of the trader being under* moral and legal obligations to charge certain prices, and in fact all tho applicable circumstances. Tho words *' rate of profit ” implied something from which a rate could bo determined, and therefore implied a series of transactions from which a rate could bo deduced. To apply the section otherwise, to prove a man a profiteer if he told, say, a pot of vaseline at 3d higher than tho usual price, was Gilbertian and grotesque. What was to determine the reasonable price of a fashionablo lady’s hat

Mr M’Gregor: Do you mean a lady’s fashionable hat or a fashionablo lady’s hatP Sir John: Wo will take it either way. The Magistrate: Possibly the depth of a husband’s pocket. Sir John quoted Shakespeare—“ Sir, the fashion wears out more apparel than the man.” It could, ho said, be aptly 'pplied to apparel and women nowadays. No man could successfully conjecture upon the sudden change of fashion. In many such cases no person could fix a price which was exempt from Mr M’Grcgor’s definition of profiteering unless he was prepared to meet very great loss on his business. The section proceeded upon a complete misconception of how business was carried on. “ There is not a commercial or mercantile man of any experience in this country who will tell you that uny business will produce a certain rate of profit,” said Sir John. “It depends upon contingencies” His submissions had the very best standing in the economic world. He quoted from Marshall’s “ Industry and Trade,” page 190: “ The cost of production which controls value relates to the whole process of production, and not to any particular parcel. The cost of any one thing cannot be definitely isolated from that of similar tilings made in the same process with it. . . . The cost of the article includes an appropriate share of all the general charges of the business ” He further quoted Marshall with relation to costing and price fixation: “The marketing side is an integral process, and not a series of independent transactions. . . . With very rare exceptions the costs and risks of marketing any one commodity cannot be separated from those of others which are handled in the smne business.” Ho asked the Magistrate to consider whetlior the Legislature in bringing down its anti-profiteering legislation disregarded these fundamental principles.

“ THE CHIEF PROFITEER.”

“ I ask your Worship,” said Sir John Findlay, “ if you have reflected on who is the chief profiteer in .New Zealand to-day? The chief profiteer is the farmer. I had an illustration tho other day of a man's land passing from £4O to £l2O an acre in the course of a year. A man who bought land before tho war at £lO an acre and a man who bought it the other day at £l2O ar£ getting precisely the same price for their commodities. Ib that fair under this section ?” Over and above the question of a fair price, Sir Jolm continued, they had to consider that the retailers concerned in the cases could get the clocks only under tho condition that thej would sell them at certain prices. lit certainly was not in the interest of tho manufacturer to fix an unreasonably high price. It was in his interest to fix the price as low as he could get retailers to sell it at—and this was what had been done. Tho test of pnee must) bo replacement value. There ivas no provision in the Imperial Statute for replacement value, but Imperial Tribunals had definitely established it as the tost, and had been instructed by the Hoard of Trade to take replacement value into consideration. Mr T. A 13. Bailey, S.M., had given a judgment in which he took the replacement value as part of the basis of his judgr ment. A roan could be absolutely killed in his business if the replacement value were not allowed as a factor, for stocks would gradually dwindle, without tho employment of additional capital, to nothing, given sufficient rises in prices. The commercial community regarded the fight against replacement value as most disastrous. Eight per cent profit to-day was no better than 5 per cent :n 1914, and on that his second to last point would hinge. The equivalent of 8 per cent before the war would be a little over 11 per cent to-day. This element must-be taken into consideration Sir John brought under notice “The Eoonomic Consequences of the Peace,” by J. M. Keynes. He said tho wnole

purpose 01 the book was to show the real sources of the present high cost of living, and incidentally profiteering was dealt with.

PROFITEER-HUNTING. u ■' Somehow,” said Sir John Findlay, it suits a certain class of public man to make proiiteer-Jiunting a true and radical remedy tor the nigh cost of living. One of the greatest writers on economics, the laie director of tho American Mint, says that to hunt and punish the profiteer is like cutting off leaves from a baleful, poisonous tree, and letting the roots remain. The system of poisoning tho public mind against merchants who had been carrying on business on creditable, straightforward lines oy raising tlio cry of ‘ profiteer ’ will recoil on those who are doing it wfien the eyes of tho public are opened. Let us got down to fundamental causes, and not bow to this absurd system of pro-Jiteer-mmting. £>et up a commission, and let proper regulations be devised which will bo acquiesced in by the merchant community. This absurd, misconceived Section 32, if forced as Mr M Gregor suggests, will kill honest industry and commerce. It will do no good. Jt will not ease tiio cost of living a i penny. I ask your Worship to bring to the consideration of this case the gravest judgment you can apply. Wo three lawyers are here to fight for a principle, and practically represent the whole merchant community of New Zealand."

CASE OF BROWN AND BUREAU. Evidence for the defence was called by Mr Myers.

John Wiimot Duncan, manager in New Zealand for Drown and Dureau, said the company had been carrying on business in the Dominion since 19U6. The company did not keep stocks—ita business was practically all indent. The prosecution had been instigatou against his company without an investigation or inquiry of it. Mr Dureau was at present in America, and. therefore, unable to be present at that day’s hearing. Dureau was general manager of the firm which witness represented in New Zealand, and from him witness received instructions regarding the New Zealand policy. The Western Clock Company was known in short as the Wostclox Company. Prior to 1911 the alarm clock trade was disorganised in New Zealand as the result of price cutting. As a result some merchants cut out their dealings in alarm clocks A representative of the Wostclox Company visited the Dominion in 1913, and as a, result a" price-fixing system was applied to the company’s goods. The system was based on a fair margin of profit to the wholesaler and retailer, at the same time ensuring that the public should get the clocks at the lowest possible price. Brown and Dureau got their,profit on a commission basis, arrived at in relation to the factory price. Their profit was not fixed by the selling price in New Zealand. Freight, insurance, exohange, duty (31 per cent) and subsidiary charges were incurred before the goods reached Wellington, and the f.o.b. price plu3 those charges was the price they sold to the New Zealand merchant. Most of the business was done with the wholesaler. The rate of conversion necessarily increased tho price as the Tate became adverse to the sterling. This had seriously affected the price of Westclox goods in Now Zealand. In January, 1920. the conversion rate became of great importance. The original retail price for Big Ben in 1913 was 12s 6d. The first alteration made in price was in 1915. The landed cost of the clocks had in the meantime increased without anything being passed on to tho public at all. The factory, the wholesaler and the retailer bore lor the time being the increase. The landed cost of the clock in 1913. was 7s 3d. The wholesaler’s price to the retailers was: Case lots 8s 6d, less 2£ per cent; broken lots, 9s 6d, less 2$ per cent. That repiesented approximately 14.3 per cent profit to the wholesaler on case lots and 20.9 per cent broken quantities. The retailer’s profit on turnover if he bought in two dozen lots was 34 per cent, and 30 per cent if ho bought m Droken quantities. On cost, case lots realised approximately 50.75 per cent, and broken lots 42.5 per cent. During 1915 freights commenced to rise, and the American exchange rato went down to about 4dol 59 cents. As the result the landed cost was raised by 3d per clock, making it 7a 6d. The price to the public was not raised, but a now schedule was prepared. The case lot price was fixed at 9s from the wholesaler to tho retailer and 9s 6d for broken lots, representing a profit of 3 6.9 per cent to the wholesaler on turnover and 23.6 per cent on broken lots; to the retailer, on turnover 30 per cent if he bought in case lots and 26 per cent if ho bought in broken lots; or on cost 42.5 tier cent and 34.9 per cent respectively. On .March 23, 1916, the f.o.b. price was increased, with- the result that the clocks cost about 3d Pach moro to land. That brought the landed cost to 7s 9d. Even then the selling price to the public was not raised, but the case lot quantity was raised 6d per clock from the wholesaler to tho retailer On May 29 the factory price increased to Idol 50 cents. The New Zealand price was not immediately increased, but delayed until December 1, 1916. on account of the substantial stocks on the market, and to allow these stocks to become depleted. To allow warehouses to sell the clocks at different prices after an increase in prices would result in a breakdown. A circular was sent out on December 1, 1916. At that time the clocks were costing, landed, 8s 7d, and a retail price of los was decided upon, the price for sale from wholesaler to retailer being 10s 6d case lots and 11s broken lots. That meant 19.5 per cent profit on turnover in case lots and 25.5 per cent broken lots. The percentage of profit to the retailer was 32 per cent

where he bought in case lots and 28 per cent when he bought in broken lots, or on cost 46.25 per cent and 40 per cent respectively. Those prices continued until April, 1918. In the meantime there was an increase in the f.o.b. from factory price. On April 14, 1918, the landed cost was 10s 10d. The wholesaler to retailer price was 13s 3d for caso lots and 13s 9d broken lots. The price to the public was fixed as 17s 6d The wholesaler made under this schedule 16 per cent where he sold m case lota ancf 19 per cent where he sold in broken lots, while the percentage of profit to the retailer was 26 per cent wh.en be bought in case lots and 24 per oent when ho bought in broken lots (on turnover). In July, 1919, the factory price increased again by J 7 cents. In addition to the increase in factory cost, the adverseness of the conversion rate increased. Again a delay was made in [ assing on the increase to the public, in order to allow stocks to become depleted. In September, 1919, the retail price was fixed at 20s, the wholesalerretailer prices being 14s 9d and 15s 3d. That gave the wholesaler on turnover 17 per cent-20 per cent profits. The retailer got on turnover 28 per oent and 26 per cent case and broken lots respectively Till March 1. 1920, that schedule was maintained. The Court adjourned until 10.30 this morning.