PROFITEERING PROSECUTIONS

Otago Daily Times, Issue 17974, 29 June 1920, Page 6

PROFITEERING PROSECUTIONS

THE CHRISTCHURCH CHARGES.

■IUDG-MENT AGAINST D.I.C.

ALARM CLOCK OASES DISMISSED.

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CHRISTCRIJ RCH, June 28. Reserved judgment was delivered to-day Mi' 'M'Carthv, S.M., in tho series of charges brought by tho Grown in respcct of \ano\is chargcs of profiteering. Six of tho eases woro concerned with the sale of alarm olocks, and the seventh ease wis a chargo nu. res .P oc ''. tho salo of a child's coat. Ihe Magistrate lieUl that the eases >in respect of tho alarm clocks should be dismissed. In tho case against tho D.I.C. in respect of tho sale of a child's coat a fine of £50 wis imposed, and the company was ordered to pay costs (£ls). informations relating to the sale of Big l Ben alarm clocks woro laid against Messrs Hastio, Bull, and Pickering, Ltd., Mason, Sitruthers, and Co., Ltd., E. Recce, Ltd., A. J. White, Ltd., Ci. \V. Drayton Mid 00., and Brown and Dureau, Ltd. In tho coutbo of his judgment the magistrate said: " There is no need to consider what wore tho soveral firms' average gross profits or expenses on the turnover or cost, or what their average dividends on capital daring a series of years or what amounts had been carried to reserve. Tho case each company has made out is that it wis bound to sell at certain fixed prices, and a material question for consideration is whether having bought whilst the clocks were cheaper in price they ought not to have sold to the public at prices corresponding to the prices at which they had respectively bought. One must not overlook tho fact that some of tho firms charged with selling the clocks axe wholesalers as well as retailers. Theso firms buy at the rate far wholesalers, and then, selling retail, were bound under their agreements to charge the general public the respective retail rates fixed from time to time. It was proved that apart from the Board of Trade Act, 1919, it was tho general and uniform practice in the mercantile world for dealers carrying on both branches of trade to charge the usual retail prices to the general public buying on a retail basis,, notwithstanding the dealers had bought as wholesalers and not as retailers. It was also proved that when there is an advance or decline in prices sales are effected at rates in force at the time of pale. This price is known as selling at replacement values, and it is considered sound and honourable business. Tho offer' to sell of tho General and Drapery Importing Com,piny of New Zealand, Ltd., was at 455, whereas the cost to the company had been at 21s 6d. This represents a gross profit on the turnover of 52.2 per cent., and on the cost of 1C9.3 per cent. The company considers 33 1-3 per cent, is a good percentage for gross profit on the general turnover, though it expects a slightly increased percentage for this department. Its explanation as to this sale is that the coat offered was one of a line of samples bought as a job line at a considerable reduction for sale to the public during August and September next. It further says that, had tne coat been bought in the ordinary way, it would have been iair retail value at the time ot sale for 55s or 57s Od. It was deposed to by Mr Cox, the manager of the defendant company, that tiio' .London price oi this article as on January b last was 52.4 per cent, higher than tho dominion cost price—namely, 17s lid, to which must ! bii added transmission and Customs charges. Mi- Oox and Miss Wraight (manageress of the children's department) each deposed that the pricing of tho raincoat had been in accordance with a regular and recognised trade custom. 'ihtxa? was no ovidence by anyone in tho drapery trade outside the employment of the company, and as Miss Wraight deposed that she carried r! 1 ! l policy, it cannot reasonably be held that the fixing of the price was in accordanco with a trade usage. The price was fixed as near a fair retail price as would seoure a sale, thus giving some slight advantage to the customer, even assuming there had been evidence of such a trade usage. I should have had no difficulty in fmdang that such a usage was unreasonable What is bought by the trader as a job line should be retailed as such. It had . . contended for the defenco that every individual sale of goods which is attacked under section 32 can only be so attacked in the light of tho average profit made by the defendant trader in his business. I cannot accede to this contention. To so interpret; the section would be to render its provisions a, dead letter. It would set the Crown the duty of chasing a 'will o' the wisp ; it would be called on to prove facts peculiarly within the knowledge of tho defendant. I seo no reason, keening in view the grave issues at stake, to depart from tho plain meaning of the soction, which is to permit of individual transactions being attacked if tho defendant's a.vorage rate of profit is reasonable, whilst the rate earned or proposed to be earned in an isolated case is unreasonable. That" is his misfortune, and the only relief which can 'bo tAltordod him is in fixing tho quantity of the penalty. The defendant firm first mentioned were bound to sell the clocks at rates fixed from time to time by the manufacturers, and it is not competent for them to rely on this fact as a defence in addition to the average general profit theory, the two being contrary. The Crown contended that a defence based on the fixation of prices by the manufacturer on a resale, and of selling at replacement rates, ivere two contradictory defences. I cannot agree. The one is complementary to the other 1 his brings us to discuss tho question what is a fair and reasonable rate of commercial profit within the meaning of section 32. j. here can be no quarrel with the general definition of profit laid down by Lord Ellenborough m Eyre v. Glover. We, however, haA c still to determine what commercial profits within the meaning of section 32. Such profits arc those produced according to usages and practices universal in the mercantile world, or in the particular industry as defined. Sections 12 and 2b assume the existence of these usages and practices, and the intention of tho Legislature is that they can only be made inoperative by regulations of the Board of Trade. Commercial usages and practices must, however, comply with each one of the four tests—namely, they must be (1) notorious, (2) ccrtain, (3) reasonable, (4) not contrary to -any positive law. Admittedly no Board of Trade regulations as to the reasonableness or unreasonableness of commercial practices and usages are questions of mixed law and fact. In estimating what is a reasonable rate of profit within tho meaJiing of die Statute one must not overlook two factors. One of those is the increased cost of living; the other is the contingency that the trader when a slump in prices arrives may have high-priced stocks on hand which he will bo compelled to release at a loss. In connection "with the alarm olocfc cases, the prices charged were those current at tho time of sale, whilst the high profits were earned .pursuant to well recognised commercial usages wli'ch comply with each one of the four tests set out I'urther, the increased prices .were not due to ajiy desire to exploit, but to economic conditions over which tho parties iiad no control. Such profits aro therefore based on a fair and reasonable rat© of coiipiieroial profit within the meaning of sub-section 20 of scction 32. Had it not'been for tho existence of these usages the profits in "most of these cases must have been hold,to be unreasonably high. If it, be necosr-arv for tho public welfare that these usages be declared illegal, the remedy is to bo Imd under sections 12 and 26. . . With regard to tho rainproof coat case, tho profit was clearly unreasonably high, and there was not a trado usage to justify it. With regard to the question of costs in the alarm clock oases, it may be that the local tribunal of tho Board of Trade failed to summon any of the defendants before it to give their version of the facte. The dutv of tile local tribunal ends when a prima facie oase has boon established. Such a case -was established aguinst each of the defendants, tho informations ' against whom have been dismissed. I shall, therefore follow the usual course and make no order as to costs against the Crown. It would however, save useless and harassing litigation if the local tribunal, before recommending the laying of an information, gave those proposed to be charged a ohance of making such explanations as to them irii«-ht seem expedient, though it is to bo honed if those persons are subjected to the inquisitorial powers conferred by Statute on tho local tribunals, they will not subsequently complain that prior to being summoned before tho ordinary tribunal tliev were placed on the rack by a modern economic Star Chamber."

As was stated tho D.T.C. intended to appeal, and security was fixed at £100. Til reply to counsel, who sujrqrofited that the Crown mifriu wish to n.npeal in the alarm clcck crises, the magistrate stated that tho Crown would not require any security.