PROFITEERING CHARGES

Otago Daily Times, Issue 18050, 25 September 1920, Page 13

PROFITEERING CHARGES

THIS "BIG BEN" CASES.

APPEAL BY THE CROWN.

HEARD BEFORE THE FULL COURT.

(Peb United Pkkss Association.) WELLINGTON, September 24. The. Full Court to-day was asked to interpret certain clauses of "The Board of I'rado Act,1919," in reference to a profiteering cose stated for tho consideration of their irionors Sir Bossell JBdwarus and Justices Chapman and lleidman. The case was luiowu as tho "Big Ben" alarm clock wise, m which several firms of ironmongers in Ohristchurcli were charged on the herniation of one George Hart Christie with profiteering. The Magistrate (Air S. K iVl'Carthy), in a judgment dealing exhaustively with, this case, and also with, one, against the D.I.C. for the sale, of a raincoat, dismissed the informations against tho ironmongery firms, but convicted and fined D.I.C. in the sum of £50, and costs. Tho case to-day was an anpeal by tho informant, George Hart Clinstio (Christchurch), a member of tho Prices Investigation Tribunal, against a decision of tho Stipendiary Magistrate. The defendant and respondents in the present case -were Hostie, Bull, and Pickering (Limited), Mason, Struthcrs, and Co. (Limited), A. J. White and Co. (Limited), G. W. Drayton and , Co. (Limited), ironmongers, all of Christchurch, and Brown and Dureau (Limited), merchants. Wellington. It was announced at tho outset that the D.I.C had abandoned its appeal against tho conviction and line. Tho object of tho appeals, said tho Solicitor-General (Mr W. C. MacGregor, K.C.J, was an interpretation of section 32 of " Tho Board of Trade Act, 1919," which provided, inter alia, that 'Every person commits an offence who, cither as principal or agent, sells or supplies, or oft'ers for sale or supply, any goods at a price wh'ch is unreasonably high. For tho purpose of the section the price of any goods shall bo deemed to bo unreasonably high if it produces, or is calculated to produce, more than a fair and reasonable rate of commercial profit to the person selling or supplying, or offering for sale or supply these goods, or to his principal. Tho object of the appeals was to have it authoritatively determined by tho Full Court what amounted to profiteering in the sense of the Statute. The Solicitor-General, in referring to the facts of tho cases, said the price at which the articles were sold was £1 6s, representing a, profit on tho turnover of 52' 2-5 per cent., and the gross profit of 111.26 per cent. Tho Magistrate said he found on the facts in favour of the Crown, and would havo convicted the defendants had it not been for a certain trade usage, which ho held to excuse tho offences. The' submission of the Crown was that these trade usages, even if proved, wero no answer in law in the offences charged against the defendants. Tho Magistrate should have entered a conviction on his own findings. After dealing with the question of reasonable prices, the SolicitorGeneral submitted that commercial profits referred to profit in the course of commerce. It would not, for instance, refer to a man who bought a tennis racquet for himself, and afterwards sold it. Mr M. Myers, in reply, submitted that the question was entirely a quesfion of fact, not of law. The informant had no right to a genial appeal. The pTesent appeal was on a. point of law, but ho submitted no point of law had been raised. He submitted the contentions of the Solici-tor-General would render the conduct of business impossible if they were upheld. It was tho rate of commercial profit which had to bs determined, and how could this be done without taking into consideration commercial practices and customs affecting the sale and tho selling price of the article. -The word " commercial ' did mean something known and recognised in commercial practices, usages, and customs, affecting , d fferent trades. This Act itself recognised that tho "rate of commercial profit" was a question of fact No evidence had been called to show the rate of overhead expenses on any point, but' the buying and tolling prices of articles. The practice of a firm or company, acting ,'n both a wholesale and a. retail capacity, affected the selling price. Tho object of the Act was not to ruin trade. It was to regular* trade in the proper interests of the people. Mr Myers submitted that the methods of business must have been known, to the Legislature, such as tho I fixing of the price and the selling of the goods at replacement values. Since the war tho adoption of the replacement basis had become moro and moro important on account of fluctuation in prices. He submitted that the first case was not appealable at all. As regards sub-section 2 of section 32 of the Act. the proper construction was placed on the section by the Magistrate when he took into consideration the known and recognised usages of the trade in determining whether tho profit was fair and reasonable. The mere fact that a charge was made against a trader brought obloquy upon him, oven if dt was not proved. Ho contended that the charges should never havo boon laid. The defendants throughout had acted honourably, and quite aboveboard. Tho Board of Trade should havo investigated tho whole business, and defendants would, as honest traders, have placed all tho facts before them The' court adjourned till Tuesday.

AN. AUCKLAND PROSECUTION. (Per United Press Association.) , AUCKLAND, September 24. Ihe profiteering- charge in respect to tho price at which a lady's costume was offered lor sale by John Court (Limited) was heard beforo Mr J, \V. .Foyiiton, S.M., to-day lhe defendants, for whom Mr A. H. Johiistone appeared, wero charged that they •" offered, for sale a lady's Kaiapoi costume at 12 guineas, a price which is unreasonably high."

Mr hunt, who conducted the prosecution stated that it would be shown that tho costume in question was offered for sale on •J"- 1 " 3 8 at lU guineas. It would bo shown that the costume was one of three obtained from the Kuiapoi Company in March, and the gross price of this particular costume was ±,7 7s, Ices a kudo discount of 32 per cent., making tho nc-t cost £7 Is 6d. Tho proportion ot postage on this costume -was negligible, being 4d. Tho position, said counsel, thus was that tho defendants had made a gross addition of £5 10s 6d to the cost of the article, rc-presentiiw a toss profit of 78 per cent. The Board of Trado had inquired into the matter, and had authorised tho prosecution, holding that tho profit asked <w:is unreasonably high. Tho defendants had made an explanation that tho costumes wero fashionable goods, and ■high prices had to bo charged at tho beginning of the season to provide for a loss at the end of the season. That seemed to bo tho | principle that a big prico ivas put on witii the .'dea that persons who were weak-minded enough would, nay it. Evidenoo would bo given to show that some other large and reputable firms in tho same business worked this class of goods on a dolinito percentage basis, witn an average of 50 pur cent. The defendant's balance sheet for the year ended August 1919, snowed the gross profit on the turnover to be 24 per cent. L. E. Philb'ps, secretary to the Prices Itwestipat.-.on Tribunal, stated that in June ho noticed a costume in Court's shop marked \2 guineas., and inquired the cost pnee, with a result that he brought tho matter before the tribunal. Defendants wero asked to justify fcho prico, ajid they wrote stating that the costumes fashionable goods that had to be cleared out every season. Tho result was that 'a price had to bo charged at tho beginning of the , season to cover a Ices made at the end of the season, when the goods were marked down week by week until it was necessary to finally _ clear them regardless of loss. It was mentioned also that costumes in "out" or extra large sizes cost 12s more, which was not charged to tho customer, and that costumes over 12 guineas were altered for customers free of ohargo. It was admitted that tho sross cost of the costume was £7 7s, and , tho not. cost £7 lo 6d. The price complained of representing a gross profit of 78 per cent, on tho cost and 43 ner cent, on the. turnover. T David Moikle, draper, said it was the practice in his costume department to make additions to the cost x ,r ' oc i ranging from 40 ner cent., and in some cases as low as 35 per cent., to as much as 65 per cent., and in exceptional cases 70 per cent Mr Hunt: You mean by an exceptional case that the costume is so ultra-fashionable that is nrit likely to remain a good selling proposition. Witness: Yes. He added that if tho costume in question had come into his stock ho would have made an addition of about 50 pur cent. He compared the costume with cno which cost him £9 ss, and which he marked at £14 10s, and had since reduoed to £11 15s. To air Johnstono: Ho aimed to make a gross profit on tho returns of 40 per cent, in his mantle dopartment. Louisa. Burton, buyer for the costume department of Messrs Frail-h and Cniifrhey for tho past 16 years, said the addi'rion mn.de to the eost prico by her department varied from 40 to 60 per cent. Her aim was to got 33 1-3 per cent, on tho returns. This closed the ease for the prosecution. Mr Johnstono said that in fixing the prices of costumes at £12 12s the defendant comjpany followed tie practice of the

drapery trade generally, which had been the iirm's custom since its establishment. : .Numerous conditions, such us fusJu'on, colour, and design ufi'wtcd tho sale ot goods. Tho niiuitio departmont was an exceedingly risky oiio for that reason. 'J he detendant compiuiy bought five costumes (rum the Kaiapoi Woollen Company, ami it Jollowed tho practico that it unci" every other drapery firm followed in' similar instances. Throe of tho costumes were bought at £7 7s each, and two, which wero oversizes, at £7 19s each. Tho cash discount of 3J per cent, could not be taken into account, because, if it wore not allowed, the company would be entitled to charge interest. It was purely a matter of finance, and must bo disregarded in tho present proceedings. Taking into consideration the necessity lor alterations, said Mr Johnstone, and the fact that some of the garments would not sell jit all, or would have to be sacrificed in order to sell, it would be realised that if tho costume department was to pay it must yield an all-round profit of , 40 per cont. Not one of tho costumes was sold for £12 12s. After three months' display they wero reduced to £10, and lator , to £8 Bs. at which figure two were sold. The remaining three were marked at £6 6s. two being sold. It was a well recognised , economic principle that in fixing tho prices of goods the number that was likely to be sold must bo taken into consideration. Thomas Davidson, general manager of the defendant company, said the costume department was under his own supervision. Ho gave evidence regarding the pricing of costumes on the lines of .counsel's statei mont. He looked for a net return on costumes of from 33 1-3 per cent, to 44 per i cent, to SO por cent. J. R. Rendell. managing director of Rcndcll's. Ltd., drapers, said the addition of a uniform rate of profit to the cost of goods was not followed in the drapery ■ trade. It was not until the end of the year that it was known what the profits were. A profit, of 33 1-3 per cent, was rei ga.rded ■as a usual safe margin for depart- ; ments. The mantle department, however, was very risky, being next riskiest to the millinery department. After hearing fi'Tther evidence for the » defence the magistrate said he would deliver written judgment.