ALLEGED ILLEGAL COMBINE

New Zealand Times, Volume LII, Issue 12197, 23 July 1925, Page 3

ALLEGED ILLEGAL COMBINE

WAS THERE GOVERNMENT APPROVAL OF FLOURMILLERS’ ACTION ? MANAGING DIRECTOR'S ACTION QUESTIONED ACT NOT IN INTERESTS OF THE PUBLIC Counsel for the Crown concluded their arguments yesterday on the third day of the appeal case in which the Crown seeks to upset the judgment.of Mr Justice Sim in the actino where 'the Crown sought to recover £SOO damages under the Commercial Trusts Act, 1910, from the Crown Milling Co.; Ltd. (Invercargill), Otago Roller Flour and Oatmeal Co., Ltd. (Timaru), Wood Bros., flourmillers (Christchurch), and Distributors, Ltd., flourmillers’ agents (Christchurch). Mr Justice Sim held that the association of interests was not contrary to public interest, and it is against this judgment th at the Crown is appealing. The court is composed of the Chief Justice (Sir Robert Stout), Mr Justice Herdman, Mr Justice Reed, Mr Justice MacGregor, and Mr Justice Alpers, both divisions of Court of Appeal being present in Wellington for the case. Counsel for the Crown are the Attorney-General (Sir Francis Bell, K.C.), the Solicitor-General (Mr A. Fair, K.C.), and Mr F. Adam’s, Crown Solicitor of Dunedin. For the respondents Messrs C. P. Skerrett, K.C., M. Myers, K.C., and W. E. Leicester are appearing.

Proceeding with his argument, Mr Fair quoted at length from the eri-. denco submitted in the lower court until the Chief Justice objected to this as being unnecessary, and taking up too much of the court’s time, whereupon Mr Fair suggested that he should in future give merely the outline, of the argument with the reference page. The Chief Justice: I don’t know how much good that will be. I read the whole case over long before the action commenced. Proceeding, Sir . Fair went on to show from evidenoe that an agreement had been arrived at between the millers and some of the bakers to the effect that no baker should buy flour from a mill which cut prices, and that no one of the mills concerned should supply such a baker. This was, he contended, a direct attempt to prevent any reduction :n the price of bread or flour. He read a letter from Mr MoDonald to the millers at the time during which he was president of the Board of Trade, threatening; that if the mills persisted in price-cutting, he would fix the maximum price at the lowest at which sales were made. This letter counsel stated, was written at a time when Mr McDonald was already considering accepting his position with Distributors, Ltd., and was a threat which, he contended, showed an absence of proper appreciation of his duty to the public by the late president of the Board of Trade. Under the system of open competition even under Government control normal price-cutting had prevailed. A number of the millers supporting the combine had, txransel admitted, stated that they had lost money under these out prices, but as they. had had an opportunity of calling evidenoe in support of this statement and had failed to do so, he contended that no weight could be attributed to such general statements. “Although it is a fact,” he said, ‘‘that the industry was heavily over-capitalised, it was generally admitted by the millers that in 1921 and .1922 they made very handsome profits. There is the further evidence that the combine was willing to pay £ISOO per year- to keep a mill —Wilkie’s-—closed, and so prevent competition from this source.” Reviewing .the evidence given in respect to Brown’s mills, where it was stated that a loss had been made dur- ■ ing the price-cutting period. _ he held that these losses were nothing more than the smaller return which had been received under these prices, rather than what would have been received had the Government fixed price been obtained. It was proved that for the year ending June 13th, 1923, an actual profit had been made on the year’s working. A lively interlude occurred at this stage between counsel as to the interpretation of a, clause quoted by Mr Fair, Mr Skerrett stating that Mr Fair was inadvertently misleading the court in his statements. Mr Adams further elaborated his colleague’s point, the interlude ending with Mr Justice MacGregor stating that in his opinion Mr Fair’s interpretation was the correct one. UNNECESSARY TO PUBLIC INTEREST Mr Adams, continuing the case for the Crown referred to the supply of wheat at the end of 1923, and quoted from a Ministerial statement as at February, 1924, showing that there was a substantial carry-over from the preceding year thus showing that at the end of 1923 there was plenty of milling wheat in the country, so. that it was unnecessary that the poor quality of flour milled at that time by Fleming's should have been foisted on to the public. Tire argument for the defence, proceeded counsel, was that the combine was in the interests of the bakers as well as the millers. He agreed that the bakers and millers were working in together. ‘‘We have here,”, said Mr Adams, “what is, I think, known as a ‘vertical combine.’ We have first the combine of millers, and side by side with this we have another combine of the bakers, who appear to have a poor knowledge of the price of flour and the relation between this and what they may charge for bread, associated to keep up the price of this .staple article of diet.” Counsel referred to the “persuasion” of recalcitrant millers to join the combine. His point was. that the bakers wanted to get fixed prices for bread, and they, therefore, brought pressure to hear on the millers to induce them to join. DUTY v. INTEREST Referring to the question of Government approval of the work of Distributors, Ltd., as claimed by that company,,or by Mr McDonald, on be-, half of the company, he submitted that Mr McDonald’s evidence was not to he thoroughly relied upon. My McDonald had stated that he had taken no steps in the formation of Distributors, Ltd. Counsel referred to a letter written by that gentleman on September 19th to this effect, although he (Mr Adams) held that for months Mr Mc-

Donald had heen concerned in this work, add quoted the minutes of the millers’ meetings to this effect. The first meeting he had attended was on May 12th. Mr Justice Herdman: Does this affect the question we have to decide? Mr Adams: It has a bearing on the credulity of Mr McDonald, who was one of the principal witnesses for the defence. Mr Justice MacGregor: When did Mr McDonald leave the service of the Government? Mr Myers: On October 31st or November Ist. Quoting further, Mr Adams pointed out that by June 20th Mr McDonald had actually accepted the position of managing director of Distributors, Ltd. He had then used, according to his own admission, the figures gained during his connection with the Board of Trade qn fixing the proportion of , the various, millers, this being, he (Mr McDonald) contended, done with the approval of; both Mr Lee and Mr Nosworthy, on behalf of the Government. In the light of that evidence, counsel asked the court to consider Mr McDonald’s letter to the millers written about this time, and after his definite connection with the millers, stating that if price-cutting was persisted in, the Government would fix the maximum price at the lowest price charged. “I submit,” said counsel, “that at this time Mr McDonald had placed himself in a position where there was an actual conflict between his duty and his interest. According to his official position he should have taken advantage of any possible lowering of the prices, on behalf of the public.” It had been held by Mr Justice Sim, proceeded counsel, that the company had _prevented chaos in the wheatgrowing industry by helping to bring about the agreements of 1923, by which the price of wheat was fixed after the conclusion of Government control, but he submitted that the extent of the millers’ assistance to the farmers was the guarantee of certain prices which were contingent on and depended entirely on the Government embargo on the introduction of foreign wheat. This wheat, incidentally, was all bought by individual millers, not one bushel of it passing through the hands of the company.... This agreement, made in 1923, was renewed in 1924. Mr Myers: With the approval of the Government. Mr Adams: I deny that. The opposing counsel must prove it if they can. As proof that the formation of the combine did not materially assist the wheat-growing industry, Mr Adams quoted that, in 1922, when the combine was first suggested, there was a crop of 10,000,000 bushels, in 1923 8,500,000 bushels, bnt in 1924 the crop was only 4,250,000 f the area under wheat being only two-thirds of that in 1922. Finally, he submitted that it was the province of the Government to take any such action as the wheatgrowers claimed to have taken: that action to he effective could only be taken with the assistance of the Government in retaining the embargo; and that it was a serious allegation against the Government to suggest that they would have permitted the wheat-grow-ing industry to fall into chaos. • THE DEFENCE OPENS Mr Skerrett, in opening for the respondents, said that he would base bis arguments on a comparison between the Government control from 1917 to 1922 ; and of Distributors, Ltd., particularly as to the reason for the Government intervention- in this direction. Next he proposed to deal with the law of the subject, and here he might say that he was violently opposed to the submissions of the law as made by the Attorney-General, and would submit that these were devqid •of any real authority. Next he would inquire whether the work of the control, or monopoly, if the word were preferred, was (1) contrary to the public policy; or (2) contrary to the public interest, and, therefore, carried out to the prejudice of sections 3 and 4 of the Commercial Trust Act. He would submit with confidence that the judgment of Mr Justice Sim in the lower court was correct. The last topic to which he would refer was the light in which accidental incidents should be looked at.- This was an important topic, since the real and great controversy between himself and bis .learned friends on the opposite side was as to whether combination having the purpose ■ of restricting competition was against the law. That he would show was the real contention of the Attor-ney-General. The other contention of the counsel for the Crown, other than the Attorney-General, was that certain inconveniences had been caused to the publio by the formation of the combine. He would, however, ask tbe court to look at the question as a whole, and measure the advantages to the country against possible inconveniences. The case will be continued to-day.