PERCENTAGE BASIS

Otago Daily Times, Issue 26842, 5 August 1948, Page 6

PERCENTAGE BASIS

MARK-UP BY RETAILERS PRICES OF GROCERY LINES SUGGESTION TO PRICE , TRIBUNAL P.A WELLINGTON, Aug. 4. •An application was made to the ■ Price Tribunal to-day by the Director of Price Control, Mr H. L. Wise, for authority to enable wholesalers and retailers to compute the selling prices of certain groceries and foodstuffs on the basis of cost plus a defined percentage by way of “ on cost.”

The application, explained Mr Wise, was for authority to be granted by way of a price order to all approved wholesale and all retail vendors to compute and charge selling prices without prior approval on the basis of a schedule of percentage mark-ups on cost, which percentages, when applied, would reflect as nearly as may be the existing unit margins on profit. It was proposed that any authority granted should apply to groceries and foodstuffs enumerated in the schedules which he presented. “This is an unusual application in that it originates from the Price Control Division and not from some trader or group of traders,” said Mr Wise “It does not aim at an increase in price or prices. Its purpose is to change the procedure of dealing with price control in the grocery trade. Such a change of procedure will, it is considered by the division, bring about simplification, greater ease of administration, and a lessening of the amount of work involved on the part of grocers.

“With a view to assisting the tribunal, I have had preliminary discussions with members of the grocery trade, both wholesale and retail, and in particular with Mr R. M. Barker, secretary of the New Zealand Master Grocers' Federation and with members of the executive of the New Zealand Wholesale Merchants’ Federation, and I have secured their agreement to the nroposed change of procedure. "There is no change of policy proposed with regard to the unit margin of profit principle in terms of whic! the same monetary amount of profit per unit of commodity is granted as was obtained in September, 1939,” Mr Wise continued. “It is, however, proposed to express those monetary units by way of percentages and I will ask that subject to certain stipulations, members of the retail and wholesale grocery trade be permitted to apply those percentages automatically without prior application to the division or to the tribunal.

“ This is not the cost-plus system in the sense in which that term is sometimes used—for example, where it is used to infer that a percentage is applied to cost, whatever that cost may be, and in consequence that the higher the cost tlie greater is the monetary amount of profit. Neither the Price Tribunal nor the Price Control Division has ever operated price control that way.

“Provision for a situation where costs increase is made in my recommendations,” Mr Wise went on, “for I propose to recommend that in the event of further cost increases the percentage mark-ups are to be subject to review with a view to the introduction of lower percentage mark-ups so as to maintain the existing margin oi profit. Conversely, 1 think it is fair to provide for wholesalers and retailers to have the right of appeal to the tribunal for a review of the proposed percentage mark-ups in the event of costs receding and where in such circumstances their unit margins would otherwise become automatically reduced.”

Mr Wise said he would shortly ask the tribunal for the fixing of a date for the hearing of a similar application by the division for approval of a similar .scheme to operate in the wholesale and retail hardware trade. A similar scheme had been operating satisfactorily in the drapery trade for some considerable time, he said. Judge Hunter, president of the Price Tribunal, said the division’s scheme would lighten the burden on traders and lighten the work of the Price Control Division.

Mr H. Moss, secretary of the New Zealand Wholesale Merchants’ Federation, said members of his association would willingly give the scheme a trial. Mr Barker, secretary of the Master Grocers’ Federation, also sf

that, with some reservations, his association would support the scheme. The tribunal reserved its decision.