ALLEGED PROFITEERING

Otago Witness, Issue 3489, 25 January 1921, Page 42

ALLEGED PROFITEERING

STORY OF A PIECE OF CLOTH. CONSUMER PAYS THREE TIMES MILL COST. In tho City Police Court on Friday, before Mr J. R. Bartholomew, S.M., Douglas Bernstein was charged with selling to the D.1.C., on May 28, 105 yards of costume cloth — manufactured by the Bruce Woollen Company —at a price (12s 6d a yard), which was unreasonably. high. rhe D.I.C. was charged with selling one yard of the cloth at an unreasonably high price—2l3 a yard. The Clown Prosecutor (Mr A. S. Adams) conducted the cases. Mr J. L. Sinclair appeared for Bernstein, and Mr J. B. Callan for the D.I.C. Defendants pleaded not guilty. CASE AGAINST BERNSTEIN. The case against Bernstein was taken first. Mr Adams said defendant carried on business as a costume manufacturer and also handled goods from the Bruce Woollen Mills. On May 28 defendant sold a piece of dress stuff to the D.1.C., at 12s 6d a yard, subject to a discount of 31 per cent. 'The cloth was bought hy Berstein from the Bruce Woollen Company, and cost 7s a yard, subject to per cent, discount. Defendant therefore fold at an increase of about 5s a yard. It seemed to be a simple case. It was not a question of importing from overseas, anch having long periods of credit and charges against him. He simply bought at 7s, and sold at 12s 6:1, within 36 miles of the place of manufacture. The practice was to add 33 1-3 per cent, on cost, which would have enabled defendant to sell the cloth at 10s. Actually he had added ss, instead of 2s 6d, to the cost price—exactly double, or 66 2-3 per cent. Duncan Colquhoun, secretary of the Prices Investigation Tribunal, gave evidence as to obtaining from defendant the invoice for the cloth from the Bruce Woollen Company. To Mr Sinclair: He did not ask for any further explanation of the sale. Mr Sinclair: And the next defendant knew, he was prosecuted. William Charles Finlayson, manager of Sargood’s dress department, said his firm usually put 33 1-3 per cent, on cost in the case of flannel goods like the costume doth. To Mr Sinclair: Witness had never put on more than that rate on colonial stuff. He had put more on imported cloth once, but not for a long time. His firm obtained their cloth from their own mill at Onehunga. Witness had never determined his prices on replacement values, nor was he concerned with what other firms did. To the Magistrate: Witness based his prices on factory cost. Archibald John MacCallum, manager of Butterwort.h’s dress department, also gave evidence that it was the custom to add 33 1-3 per cent, on cost. Mr Sinclair: What would you consider a fair price for the cloth? Witness: That is not a fair question. Mr Sinclair: Just answer the question. Never mind whether it is fair or not. Witness: Since you ask me. I would say 9s lid. from a wholesaler to a retailer. Witness had bought similar cloth at 8s and sold it for 10s fed. This closed the case for the prosecution. REPLACEMENT VALUES. Mr Sinclair said that in April, 1919. the Bruce Woollen Company agreed to make and sell to defendant. 36 pieces of cloth, each piece having 50 yards. Delivery was to commence in August, 1919, and defendant commenced to sell on samples. Eighteen pieces were sold at 9s lid, and pieces were used by defendant for his own manufacturing purposes. About the beginning of August defendant, who was constantly in touch with the Bruce Company, realised that he would have difficulty in getting the order, and by the middle of October none had been supplied. Being- placed in difficulty with his clients, he sent Home an order on October 14 for 100 pieces of the nearest sample. Defendant found that the landed cost to him would be 10s 3d. It was not until April, 1920, that he sold 28 yards of the Bruce cloth to Cuming’s Stores at 11s, and lie sold 105 yards to the D.I.C. in May at 12s 6d. It would be 3een that 18 pieces out of the 24 were sold at 9s lid, and that the balance was not disposed of at the higher price until the defendant had ascertained the landed cost of the English cloth. Counsel contended that defendant was perfectly entitled to base his charges on replacement values, as had been established by the Appeal Court in the alarm clock cases. Defendant gave similar evidence, and said it was his custom to mark goods according to what he considered a fair market value, even if he had to sell at 5 per coni. His maximum was about 40 per cent, or 45 per cent. Sometimes he had to sell under cost. Mr Adams called the court’s attention to the fact that defendant’s profit worked out 67.28 per cent. , Tho Magistrate said he had not much doubt, but such an important, case warranted consideration. He would taka time to consider his decision. CASE AGAINST D.I.C. The ease against the D.I.C. was then taken. Mr Adams said this case concerned the same cloth, the profit on tho 21s beinn- Ss fed, or about 70.8 per cent. An explanation was made by the company that tho cloth was bought owing to their inability to procure Roslyu cloth at Ihe time, and that the price charged to them was high. It was also stated, curiously enough, that the firm wished to sell out three other grades of cloth, marked A. B. and 0, and that by marking this cloth higher, it would enable them to sell the others more readily. Margaret Inglis gave evidence as to buying the cloth, and Duncan Colquhoun as to

a conversation regarding prices with the D.l.C.’s departmental head. To Mr Callan : Mr Crow (tho manager) had been quite candid, and had assisted as much as he could. Isaac Green, dress department manager for Brown, Ewing, and Co., gave evidence that his firm put 50 per cent, on cost on such articles, with a maximum of 75 per cent., and that it had sold for 15s 6d and 17s fed cloth that cost 9s lid and Us 6d respectively. Chas. Jones, occupying a similar position in the D.S.A., and Wm. Robt Berry, head salesman in Cuming’s Stores, both gave evidence that it was usual to add 50 per cent, or 55 per cent, to the cost. r Mr Callaji said it was advisable, in such cases, that all the facts should be elicited in the course of examination. His clients had pleaded not guilty, but they were not going to endeavour to convince the magistrate that they had a defence, and anything he would say might bs considered in mitigation. 'lhe fixing of drapery prices was a matter of great difficulty, and was loft to the heads of departments. Mr Colquhoun had been impressed by the candour of the explanation. His clients wished him to say that they considered it was not a proper thing to do, but it was imnossible for a manager to be aware of all that was going on. The court would reasonably deal i n a different way with a case where the policy of a departmental head did not agree with the policy of the house. The Magistrate: They should have instructed their heads. Mr Callan: Th eir instructions, as I understand it, related to results, and I believe it is a fact that the drapers as a body determine what rate of profit will be returned by a particular department. In this case an error of judgment was made in a matter habitually left to the head of the department. The Magistrate : The drapers should have revised their instructions, in view of the anti-profiteering legislation. Counsel remarked that there was further an interesting point of law, which, however, his clients did not wish him to raise. The prosecution was made possible only by the information acquired during the investigation, and traders were entitled* to an indemnity against prosecution in the case of a judicial inquiry. In the case of an investigation. a section of the Act provided that information so elicited should be confidential. But having given candid answers from the first, his clients considered it would not be consistent to attempt to block the prosecut : on from using them. Mr Adams pointed out that the effect of the two profits in these cases had been to increase three times the price of a locally manufactured article. The Magistrate said he would take time to consider the amount of the penalty, and to give his decision in the first case.