THE CEMENT INQUIRY.

New Zealand Herald, Volume LVIII, Issue 17935, 1 December 1921, Page 9

THE CEMENT INQUIRY.

h m JUSTICE SIM'S BEPORT, BOARD OF TRADE ACTIONS, PUBLIC INTERESTS GUARDED 'AGREEMENT SANCTIONED. OPERATION NOT DETRIMENTAL [BX TELEGRAPH.— PRESS ASSOCIATION.] WELLINGTON. Wednesday. The report of Mr. Justice Sim, the commissioner appointed to inquire into cement matters, was presented to Parliament to-day. The questions before the commissioner were: —(l) Whether the Board of Trade, in December, 1920, in sanctioning a maximum retail price for cement of New Zea and manufacture of £9 13s 6d per ton, ex store, Wellington, was guilty of any impropriety or of grievous errors of judgment.. (2) Whether companies manufacturing cement in Now Zealand during a period of acute shortago of cement, from January 1, 1920, and there- ' after, took advantage of the excess of demand over supply to oxtort unreasonably high prices from the public. (3) Whether the agreement dated May 5, 1921, set out in the schedule, constituted an offence against the Commercial Trusts Act, 1910, or any other Act, or was in any way criminal or illegal (4) Whether the price for cement of New Zealand manufacture was directly or indirectly determined, controlled or influenced by the parties to the agreement in such a manner as to make the price unreasonably high. (5) Whether the said agreement has in any manner operated detrimentally to the public interest, (o) Whether the Board of Trade, being aware of such an agreement, was lacking in any duty in taking no action with respect to 6uch atrroement. With respect to the urst two questions, j the commissioner finds as follows: — (1) The Board of Trade, in sanctioning i in December, 1920, an increase of £1 16s par toe., ex store, Wellington, was not guilty of any impropriety or error of judgment. . . . (2) The increase was quite justified in the then state of the cemont market. | (3) The importation of cement into New j Zealand was not in any way brought j about bv that increase, but was rendered 1 necessary by the shortage of cement in the Dominion. (4) The Board of Trade did not assist or permit the cement companies, or any of them, to flee:e the public. On the contrary', the board benefited the public at the fiipense of the shareholder in the companies by keeping the price of cement in New Zealand below its price in the , world's markets, and by controlling the distribution of cement. (5) The companies did not obtam unreasonably prices from the public at any time, and if they had desired to take any unfair advantage through the acute shortage of cement, the action of the board made it impossible foi them to do £0. With respect to the other questions, the finding of tie commissioner is :— (1) The agreement does not constitute an offence under the Commercial Trusts Act, 1910, or trader any other Act; (2) It is net in any way criminal or illegal j (3) It is in restraint of trade, but restraint is reasonable, having regard to the interests of the contracting parties and to the interests of the public; and it is therefore not invalid; {4) It was not made to prevent pe»ple from getting cement, or to stifle competition,,, or to increase the price of cement, and was not intended by the parties to operate to the detriment of the public in any way; (5) It has not operated detrimentally to the interests of the publio in general. The closing of the Golden Bay works has inflicted some hardship in individual cases, but the works probably would have been closed, whether the agreement had been made or not; (6) The stipulation in clauss 6 of the agreement that tie Golden Bay Company! should take no steps while the agreement was in force toward reorganising ite capital or improving or reconstructing its works or machinery, was, in the circumstances, reasonable; (7) The stipulation in clause 9 of the agreement that Wilsons Company should take over the Golden Bay Company's stock of bags was inserted in the interests of the Golden Bay Company, and without any sinister intention, and the sale of these bags will not prevent or delay a resumption of business by the Golden Bay Company when the agreement expires; (8) The price of cement has not been unreasonably high at any time during ,tho period in ' question, having regard to the price of cement in fie world's markets; (9) There was no action which the Board of Trade oon'd properly have taken in connection with the agreement, and the board was not lacking in its duty in the matter. On the question of costs the commissioner says: "It was suggested that an order should be made under ssction 11 of the Commissions of Inquiry Act, 1908, directing Mr. R. Masters, M.P., to pay the costs of tie inquiry. I am not satisfied, however that tie case !s one in which the jurisdiction conferred by that section should be exercised in the way suggested.'' JUDGE'S DETAILED REASONS HIGH AUTHORITY QUOTED. HOW AGENTS WERE AFFECTED. [BY TELEGRAPH.—SPECIAL EBPOHTEB.I WELLINGTON. Wednesday. Detailed reason are given by Mr. Justice Sim regarding his finding covering the action of the Board of Trade in sanctioning increases in the price of cement. He says:—"ln view of the ;«rue shortage of cement, it was of the Umost importance in December, 1920, that all tho works should be kept going, j Of the companies concerned the Golden 1 Bay was the weakest financially, and it' was to sanction any reasonable increate that would permit that com-1 pany to carry on. According to a sum- ; nary of the company's actual trading for I the year ended Jura 30, 1920, the average cost of a ton of cement was £4 lis ! lid, while the average return per ton was *4 12s Bd, leaving a profit of only nineWDce per ton, and this was the net result without proper provision being made for depreciation and reserves. In the circumstances the board was justified, I «»mk, in sanctioning tho increase in' question. In arriving at that conclusion i j am greatly influenced by tho fact that! [he price of £9 13s 6d, ex store Welling- ! wn, was considerably less than the price '. », which imported cement could bo ob- i tamed in New Zealand. ... So far, j' therefore, from the companies being wiped by the board to fleece the public, «ey were prevented by the board from obtaining what they might fairlv claim to ! «>. the legitimate reward of their enter- i P ns e- If the companies had been left ! {**> during that period they might have «** tempted to take advantage of the j '. ~T* Mortage of cement to demand high : Prices from the public, but they were not ■ '. ™t free and it is certain that the prices i ' e >' were allowed to charge were not mi- j reasonably high and wore not such as I tk m- falx rell:rn to the shareholders m I w» Wilsons Portland Cement Company I *} the Golden Bay Companv." 11 After discussing this in the light of the I m!S»u* given re S ardin S the dividends, ' : aD u the return on the capital of tho two i companies, the commissioner proceeds: "It i "clear, therefore, that neither company,] Wd obtained anything like a fair re- I juration for the capital emp.oyed in 11 jhe business, and in this connection I refer I JO the observations of Lord Parker, in de- j i nvermg an opinion of the Priw Council, | ™we he said that in considering | f r* interests 0I " consumers it is impossible < j* disregard the interests of those who are | > in tie production and (fetribution ij

of .articles of consumption. ' Ifc can news be,' said His Lorship, ' in the interests of consumers, that any articles should cease to b© produced and distributed, as it certainly would be unless those engaged in the production or distribution obtained a fair remuneration for the capital employed and the labour expended.' These facta, to which I refer, support the mew that the board was justified in sanctioning the increases in December, 1920. It ia true that at the ond of March, 1921, the cement market suddenly collapsed. This collapse was due mainly, it is said, to the financial crisis. Within a week the necessity for rationing had disappeared. The building regulations were suspended, and there was a supply of cement on the market more than suflkiont to meet the immediate demand. It is true also that as a result of this collapse the two conv | panics who had obtained the increases, reduced the price of coment in April to the former rate. " The action of the board in December, 1920, must bo judged, however, on the facts as they then existed, and not by j what a learned Judge described as ' the ! easy but fallacious standard of subsequent events.' Judged on the facte which were then before the Board of Trade, the increases sanctioned in December, 1920, were, I think, quite justified." The report then proceeds to discuss the circumstances leading up to the signing of the agreement botween the three companies, and the closing down of Golden Bay, with regard to which the Judge says:—"The agreement operates, it is true, in restraint of trade, but every restraint is not necessarily invalid. Such | a restraint is valid if it is reasonable in j tho interests of the contracting parties, ! and if it is reasonable, also, in the interests I of the public. The agreement was made ■ primarily in the interests of tho Golden I Bay Company, and the restraint imposed | thereby was suggested by Mr. Luttrell ! himself, and approved of by his coi directors. Tho directors owned most of the shares m the company and wore really the company. They woro the best judges of what was in their own interoste and it cannot be said that the agreement, from their point of view, was unreasonable. It secured for the company a sum sufficient to pay its outgoings for the year and tins was a clear gain, if, as Mr. Luttrell thought, the company nmst close j its works on tho price being reduced as i proposed by the Wilsons Company. Tho | agreement was in the interests also of the other companies because it probably would enable them to avoid' any suspension ef work during the year, and would enable them also to produce cement at less cost than if all three companies had been manufacturing. The agreement would not operate to the prejudice of the public so long as consumers could get all the cement they wanted at a reasonable price. It was not in the interests of the public that the companies should be forced to engage in a cutthroat competition, and the agreement was designed to • prevent that. There does not appear to be any grounds for suggesting that the parties to the agreement had any idea or intention of increasing the price of cement or of taking advantage in any other way of j the public by reason of the closing of the Golden Bay works. It was unfortunate that the workers who had been employed at the Golden Bay works were thrown out of work, but a certain amount of unemployment appeared to be inevitable, and the only question was who were to be the sufferers. Unfortunately for them, the Golden Bay workers had to be the sufferers. It was not in the interests of the companies or of the public, after the slump in April, 1921, that all the companies should continue manufacturing, with the result of work being intermittent at the works of all the companies, and all their workers suffering more or less from unemployment. The closing of the Golden Bay works inflicted some hardship on the agents for the sale of the company's cement, because after their stocks were exhausted they had to obtain supplies for their customers from other agents In this way they suffered a loss, of commission, and the evidence shows that the agents were doing much better out of the cement business than were the Golden Bay shareholders." DEBATE IN PABIIAMENT THE ORDER OF REFERENCE. MB. WILFORD'B CRITICISM. [dt teleoeaph.—PßESS iSSOCUTION.] WELLINGTON, Wednesday. The report was re&d in Parliament by the Hon. E. P. Lee, Minister for Trade and Industries, who concluded by saying there had been a full inquiry, and not I one charge had been proved. He could I not feel that the member for Stratford had tho interests of tfce public at heart when he made the charges. It would have been better for him to have made inquiries before making them. There had been a alight political advantage, but the day of reckoning had come. The Leader of the Opposition, Mr. T. M. WWord (Hutt), protested that the bringing down of the report at that hour might gag members unless the debate could be continued after the adjournment. The order of reference had been drawn up without the member concerned being consulted, which was quite contrary to all practice in such matters. It was unBritish, unfair, and typical of the whole proceedings, On top of that had come the issuing of a pamphlet giving the evidence of the chairman of the Board of | Trade at the commission, but without the cross-examination. That was most -m- j fair. The order oi reference did not deal with matters raised by Mr. Masters, but the Judge had been asked to report on prices which never had been mentioned by Mr. Masters. Th e whole report, therefore, was as a house built on sand. Why had the Minuter right throughout bean so solicitous on behalf of companies? Effect on Competition. Mr. Wilford quoted the remark of the Judge that " the agreement was restraint of trade, qualified by the statement that it did not act to tho detriment ef the public, so long as consumers could get all the cement they j wanted at a reasonable price. Farther the commissioner said, "It was not in the interests of the publio that the companies should be forced to engage in cuHhroat j competition, and the agreement wae do- j signed to prevent that." In reality, pro- j ceedod the speaker, that was just exactly what Mr. Masters had snd except that: the Judge had put in the word "cutthroat." As an old member of the legal profession he claimed that the report showed that the Judge had said to himself that he could not find under the oi der sf reference for Mr, Masters, but that Jie was not going to "land" Mr. Masters with Mr. Masters said he had no doubt that the cement companies were pleased with the report, but he did not think the publio would be whon they found they had to ■ pay £ 1 5,000 to the cement companies for , nothing. The Minister in charge of the | Board of Trade, the Hon. E. P. Lee, had | seen very solicitous in defending the companies. The whole attitude of the Board ii Trade had been one of solicitude for :he companies and " the public-be- i lamned." The Minister had said he did ' not hold any shares himself, but he (Mr. : Masters) wondered, when the Minister was j speaking, whether he was speakipg on be- l ( lalf of four members and their immediate relatives on the Government side of the j House who held 124,000 shares out ©fa, lotal of 600,000 shares in Wilsons Portr and C'em&nt Company. i Mr. Massey : Who are they? i Shares Held in Company. , Mr. Masters: Sir R. Heaton Rhodes mlds 32,157 shares, Sir William Herries 1 1509 shares, Mr. H. M. Campbell 847,1 shares, and Mr. K. S. Williams and his ainily 90;000 shares. He wondered why |, Jie Minister was so solicitous not on be-1 j iaif of tho people of New Zealand but of; | he cement company of which his imme- j lia-te friends are such big shareholders. , Mr. Lee: I have no knowledge of these I ] shares. _ j Mr. Masters, continuing, said the Minis- ' cr bad fixed the order of reference under ' vbich he himself should be tried. The fudge had said he had no power to alter s .hat. i I

' "" ' ' I' ff &F??. ?° unsel »M he was perfectly a satisfied, interposed Mr. Lee. To which d Mr. Masters retorted that he could not be a otherwise, as he could get nothing better. d Coming to the question of tbo rise in d the price of cement. Mr. Masters said he i- maintained previously, and in face of the a report he maintained now, there was * nothing to justify the rise of 36b in Decern--8 g« Th fi Board of Trade and the Golden s tfay Company were tho only ones who a favoured that rise. It was made because s of the financial position of the Golden e Bay Company. He proceeded to discuss r the financial position of the Golden Bay e Company, with a view to showing that the i company was not in a bankrupt condition, 0 that, in fact, it was in a sound position, s t Season for Increase, The chairman of the Board of Trade had. ' said tho increase had been given to help * tho company. The increaso given to the Wilsons Company was said to have; ' been given to enable the company to re-1 ' open the Warkworth works, but that in-1 crease was given last December arid the ' Warkworth works wore not opened yet. : Tho whole thing amounted to a gross scan-1 dal find a gross waste of public money. I Coming to the method by which the in- > crease was made, he 6aid that when Mr. j Lee came into office he said no increases ■ would bo allowed to be passed on to tho' > publio until full reasons wens given to ' the board. Then the whole mutter would 1 be decided on the evidence, but the chair- - 11 man of the Board of Trade had admitted I he had not asked Wilsons to produce their I cost of production when the increaso was I made. The increase was mado in DecemI I ber, but no papers were seen by the ohair- ,' ■ J man until Fobruary, or six weeks after 1 he sanctioned the increase, 1 The speaker then proceeded to analyse ' the balance-sheets of the companies conl aimed, in which he maintained that un- , | fair allowances were made by the Board , : of Trade in the matter of overhead i charges. The whole thing showed hopei less incompetency on the part of the ' Board of Trade. The public never had , been considered at all. and he could not help contrasting the treatment meted out i to these big companies with tho board's ( action in prosecuting small traders. The ; Court had found that these transactions i i were in restraint of trade, but that it j ! was not " illegal" restraint Tho mere i j fact that cement was not in the schedule | of the Commercial Trusts Act, 1910. was t not going to satisfy the people as to what had been happening, and in speaking to'; the people he was appealing to a higher ! J Court than that presided over by Mr. Justice Sim. Reply by Mr. Parr. The Hon. C. J. Parr (Eden) traversed j j the circumstances which led 'up to tho i i commission, and said that Mr. Justice j, Sim had found wholly against Mr. Mas- ] ters. No one was more highly respected I \ or sincerely trusted than Mr. Justice Sim, j j yet all that Mr. Masters could now say , was that Mr. Justice Sim was wrong. But i j the public would form its own concmsion j \ on the point. The House and the country | I would congratulate the Minister on the find-! ] j which the Judge had made. Mr. Masters evidently had not weighed his words, j and he hoped he would now realise that there was a difference between tho cool atmosphere of a Royal Commission and j tho heated air of a public meeiiing. ( The debate was continued by Mr. H. At- i more (Nelson), who defended Mr. Masters until interrupted by tho 5.30 adjourn- i ment. " (