ROAD SERVICES

Manawatu Standard, Volume LVIII, Issue 82, 5 March 1938, Page 14

ROAD SERVICES

TERMS OF PURCHASE. ADOPTED BY GOVERNMENT. WELLINGTON,. March 4. The Government has adopted tho financial recommendations of the tribunal which was set up last year to consider the basis of settlement between tho Crown and certain longdistance road freight services. The basis on which the recommendations were made was described by the Minister of Transport (Hon. it. Semple) in an interview. They apply to 13 out of a total of 54 freight services with which the tribunal has had to deal, but tho financial details of the transactions which, have been concluded were not disclosed. “The initial step of negotiating for this first group of 13 services, which include the major freight services in the North Island, has necessarily taken some time to complete,” said the Minister. “This was because the tribunal. was anxious to consider typical eases in each of the three provincial districts of the North Island before submitting its recommendations to the Government and continuing negotiations with the owners of the remaining 41 services on tho list. “The main concern of the Government in these transactions lias been to do a fair thing by the road operators, having regard to the interests of the taxpayer on the one hand and the operator on tlic other. It was to ensure a sound basis of fairness that the Government sot up the tribunal consisting of one representative of the railways (Mr S. S. Millington), another from the roads transport interests (Mr L. H. Hcslop), with Sir Francis Frazer as chairman. The tribunal will now be able to proceed with the hearing of subsequent cases expeditiously and in the knowledge that the Government has_concurred in the principles the tribuifal adopted. “A most gratifying aspect for the Government is that the recommendations of the tribunal, representing the interest of buyer and seller, were unanimous, and in these circumstances it was not difficult for tho Government to ratify the findings and recommendations as representing a fair and equitable basis of purchase. The Commissioner of Transport lias accordingly been authorised to complete a settlement with tho interested parties.” TRIBUNAL’S REPORT. The tribunal, in its report, states tliat the members interpreted their warrant as requiring them to ascertain a fair goodwill value for each goods service and to deduct from that such a percentage as was thought reasonable as an allowance for the benefits derived from the operation of the transport licensing system, which had undoubtedly contributed materially (though in varying degrees) to the stability and profit-earning capacity of the licensed service.-

“It is impossible to arrive at an accurate assessment of what we may describe as quasi-monopoly value.” the report states. “While we recognise that the general tendency in cases of unrestricted road competition is toward rate-cutting by a succession of small operators, yet we are satisfied that the majority of the goods services with which we are concerned are well established and soundly-managed concerns, with business connections of long-standing with a large number of valuable customers. We have therefore made such an allowance in each case for quasi-monopoly values as appeared to us to be justified by careful estimate of all the relevant factors.”

Earlier in tho report the tribunal said that in considering wlnlt would constitute in each case a fair and equitable basis of settlement it had had regard to the gross revenue of the service, the freight rates charged, the route mileage covered, the road conditions on routes, the type and condition of vehicles used, the standard of service given to the public, the class and continuity of patronage, the amount of capital' invested, the rate of net profit, the trend of business expansion, and tlie amount of managerial ability displayed. “NO TRUE MONOPOLY.”

Having arrived at a valuation of the tangible assets and goodwill of each

service Tinder the existing conditions, the tribunal considered one of the overriding directions set out in its warrant of appointment—that the Government would not pay anything for any monopoly value created as a result of the transjTort licensing regulations. “In no case that we have investigated is there a true monopoly in the strict sense of the term. We have found that with different service routes varying degrees of protection are enjoyed jiy the present operators as a result of the legislation. This protection is tantamount to the granting of a quasi-monopoly, the degree of which is determined by such circumstances as the number of services licensed for a route, the number of vehicle authorities granted for that route, the prevalence of competitive practices among road operators on the route, the extent of competition

by rail, sea, and river services, and the competition of ancillary users and area operators.’' . The report also points out that, except where otherwise - expressly mentioned. the tribunal recommended that the whole route services of the operators should be included in the proposed purchases.