DECISION RESERVED

Southland Times, Issue 19395, 8 November 1924, Page 6

DECISION RESERVED

END OF FLOURMILLERS’ CASE

EXHAUSTIVE SUMMING-UP.

THE ALLEGATIONS REVIEWED.

ADDRESSES BY COUNCIL. THE EVIDENCE SUMMARISED. (Our Special Reporter.) DUNEDIN, November 7. The flour-milling case concluded at 5 pan. to-day, the Court having been occupied for ten days with the hearing of the charges against the defendant companies. The case has been the most lengthy heard in Dunedin since 1910, and is said to come within the first six longest civil cases heard in the Dominion. As was natural in so protracted a hearing, an immense amount of verbal evidence was tendered, while the mass of documentary evidence submitted made an imposing if bulky display. The case has throughout been followed with interest from day to day, not only by directly interested parties but by members of the commercial community and the general public. Quite unusual too, has been the attendance of ladies, numbers having been interested listeners each day during the hearing. RIGHT OF CHOICE OF BRANDS. Continuing his address to the Court, Mr C. P. Skerrett, K.C., said it was not part of the scheme of Distributors, Ltd., nor was it their design, to take away the right of choice of brands from the bakers. It was no advantage to the millers or to Distributors, Ltd., to take away that right of choice: on the contrary it was to the interests of the millers and Distributors, Ltd., that the right of choice should be preserved as far as possible. There were periods when it was impossible to supply the brands ordered however, and they were necessarily rationed. Generally speaking there were difficulties in 1923, but they disappeared in 1924. The Dunedin and Invercargill bakers had obstinately refused to give their orders in time to allow Mr McDonald to make, as far as possible, allocations of flour to them. By ordering after the 25th of one month those bakers were able to obtain two months’ credit instead of one months’ credit. It was contended that the difficulties rose in the main through accidental or temporary defects in the mills. After the trouble, the flours which had been complained about had all regained their high positions on the market. He referred to Fleming’s, Crown, and Hudson’s. Temporary difficulties could hardly be said to counter the obvious advantages of the scheme throughout New Zealand. BAD WHEAT SEASON. Mr Skerrett went on to refer to the bad wheat season of 1923, which was largely responsible, he submitted, for the trouble with the Dunedin and Invercargill bakers. This applied from September, 1923, io January, 1924. Mr Callan’s complaint seemed to be that too much Oamaru flour was sent North during the trying period, but, submitted learned counsel, the position must be looked at from a Dominion point of view, and not a mere provincial or restricted point of view. It would be realised that prior to the formation of Distributors, Ltd., the mills employed agents and travellers, and it would be also realised that they would be likely to apply their activities particularly to certain districts, but Distributors, Ltd., was a Dominion-wide organisation, and a wider ground was being covered with all brands than ever before. Distributors, Ltd., had something between 8000 and 9000 accounts. It was only fair to say at this stage, that Mr McDonald had managed the task of distributing the flour with great judgment, and learned counsel might also say with great good temper and courtesy, as the correspondence showed. It might also be mentioned that his conduct with the Government had been quite above board. He did not know quite what was in his friend's mind during the cross-examination. Mr Callan: I at no stage intended to convey any such reflection. FLOUR SENT TO INVERCARGILL. Mr Skerrett expressed his pleasure at this intimation. Learned counsel proceeded to deal with the Invercargill complaints, quoting from the evidence. It would be noted, he said, that more Oamaru flour went into Southland in 1924 and 1923 than in any previous years. In 1923 the quantity was 2110 tons, when, as the Court knew, it was impossible ,to send Dunedin flour. In 1924 no less than 2380 tons of Oamaru flour went into Invercargill, and 542 tons of Dunedin flour. Learned counsel referred to the accident at Fleming’s mill, and reminded the Court that the evidence showed this trouble to be of brief duration. Learned counsel contended that the difficulties were only temporary, as would be seen from the evidence, and they were non existent now.

Mr Skerrett reviewed at length the statements of the Crown witnesses in regard to the quality of Southern flour, and submitted that they had completely established that the main difficulties were temporary only, during a time when unusual conditions obtained and they were remedied when the causes of the conditions ceased to exist. Since the harvest of 1924 came in, there had been no complaints as to the quality of the flour and no complaints as to difficulty in obtaining the desired brands. PROTECTING THE TRADE.

Mr Solomon then addressed the Court. He said that he had gathered that Mr Calland held that even if it could be shown that the combine benefited the public in one respect and yet injured it in another, the combine was guilty under the Act. He ventured to dissent from that view, quoting from judgments to support his argument that the raising of prices was not necessarily pernicious, if an important industry were thereby preserved in the interests of the public. He submitted that the contract was reasonably necessary for the protection of the millers and of the milling trade. His Honour: Do you suggest that it does not matter how much harm the public suffers ? Mr Solomon said that this was not so. His Honour: Where are you going to draw the line?

Mr Solomon: I hold that in the opinion of the learned judges, if it is held that a combine is necessary for the preservation of an important industry, the person who sets out to restrict its operations on the ground that the public has suffered an injury has a heavy burden. Learned counsel went on to quote from the evidence to show that the industry was in a precarious state when Distributors, Ltd. came into existence. He referred to the losses which the millers would have suffered if cutting had ben allowed to go on. , His Honour said that Mr Solomon need not address himself to that aspect of the matter. All of the defendants had clearly abstained from giving any information on the point. Mr Solomon referred to the copious admissions of their opponents that they were selling at a reasonable price. His Honour said the defendants might have brought up the argument that they were better off now than before they had abstained from giving any such information and it would be quite useless for Mr Solomon to address the Court on any view of that kind. EFFECT OF THE COMBINE. Mr Solomon, continuing, said it was important whether the combine had in its -ovedxi or in its wockinas produced evils

which neutralised the benefits it .conferred upon the public. He submitted that Distributors, Ltd., had produced the reverse and made possible an equal' distribution of flour in the country. Learned counsel submitted that the inconveniences caused were accidental, and not incidental to the scheme. ANOTHER COURSE FOR MILLERS. Mr Myers then addressed the Court. He explained that he agreed in general with the arguments of his learned friend, Mr Skerrett, but he wanted to be sure that he was not in any way committed to a view as to the application or re-application of the Trades Union Act to the Agency Agreement. It would be recalled that in his opening remarks he had mentioned that th Act might have some bearing on the agreement, and he submitted then, and he submitted now, that the point did not arise at this stage. His Honour agreed. Continuing, Mr Myers, said that the m‘fliers if they had liked to do so in 1922, could have formed themselves into one big company. His Honour: As the brewers have done! Mr Myers: Precisely your Honour. It would probably be remembered, he proceeded, that this was one of the suggestions made by Mr McDonald when he was approached. The merger would have had all the advantages to the millers of the present system, but learned counsel doubted very much whether it would have had the same advantages to the public; or, putting it another way, it would have resulted in a great deal of disadvantage to the public, with which the latter would have had to put up. For example, if a merger had eventuated, all the millers’ output would have borne one and the same brand. There were probably other distinct disadvantages involved in such a scheme, but that course was not taken and a scheme was adopted that he considered to be not only not against the public interest, but in the public interest. Mr Callan had argued that the scheme was inherently vicious, said learned counsel, remarking on the length of time the Government officers had taken to make the discovery. FUTURE OF INDUSTRY IN PERIL. Mr Callan continued to refer to the openness of the negotiations pending the formations of Distributors, Ltd., and contended that Mr Callan’s other argument (that Distributors, Ltd., had been formed by an infringement of Section 3 of the Act) was untenable. Mr Myers submitted that in 1922 the future of the wheat growing industry was in peril. The flour milling industry should always be considered in conjunction with the dairying and other allied industries. If there were nothing else than the importance of the flour milling industry to the dairying, he submitted that they had gone a long way towards securing judgment in their favour. Under Section sof the Act, as long as a duty exists on wheat, Distributors, Ltd., could be of great advantage in maintaining the essential wheat growing industry of this country. He submitted that the case was the outcome of the trouble with the Invercargill bakers. Hie Government could have employed the Board of Trade regulations to correct any inconveniences or disadvantages and left intact to the public all the advantages without the disadvantages. Referring to the shortage at the end of 1923, learned counsel said that there were only two things that would have met the situation, and they were not practicable in the circumstances. The Wheat Controller of 1923 could have brought into operation the Board of Trade regulations, or the Government could have brought flour from Australia, but Distributors, Ltd., did not have power to do this, and were therefore surely not to blame for the position that arose. In an ordinary year, in which there was no embargo, Distributors, Ltd., would have been able to meet the situation by quick importations. As it was they were guilty at the outside of nothing more than an error of judgment in not sending sufficient flour south. If that was held, was the whole scheme going to be swept away and those concerned with it to be held guilty under the Statute? BREAKDOWN AT FLEMING’S MILL. Referring to the difficulty in Invercargill, counsel said there could not have been milled more wheat, owing to the shortage created by the break-down of Fleming’s mill. Replying to the contention of Mr Callan that it was more important to Southland to have supplies of northern flour than for northern bakers, he drew attention to the evidence showing the largely increased supply of northern flour to Invercargill, whereas in normal times the supply of northern was in the proportion of 40 to 60, yet in the time of trouble complained of, it had been proved from Distributors, Ltd.’s returns that the proportion had been increased to 60 to 40, showing that Distributors, Ltd. were doing all in their power to meet the difficulty experienced in Invercargill. Supposing that in the cijrqumstances there had been no Distributors, Ltd. in existenpe, the position would have been infinitely worse. The shortage was merely accidental, not incidental to the scheme, and was consequent upon the wheat shortage, and was impossible of rectification, except by importation, which was prohibited under the Government embargo. Mr Mwrs here quoted figures showing that the shortage in the supply of flour during the period of trouble had been made up by the extra supply of northern flour. No evidence had been called with reference to the accident, but Distributors, Ltd. were in no way connected with the trouble. There had been such a number of conflicting statements regarding the actual reason that any evidence produced would have been valueless in determining the true cause. Northern wheat was not available to Fleming’s (had the cause been due to inferior wheat), because Ireland’s evidence had shown conclusively that all the northern wheat had been bought up, and the market was bare. BAKERS’ COMPLAINTS. Passing to the charge that bakers could not depend on receiving from Distributors, Ltd. the brand of flour they required, Mr Myers said it was not an incident of the scheme to force a particular brand of flour on the bakers, but it had been acknowledged by some of the largest bakers in the Dominion that prior to Distributors Ltd. assuming control, they had found difficulty in procuring the brands they required regularly. Mr Myers went on to deal specifically with the complaints of Dunedin bakers regarding the difficulty of procuring Oamaru flour, which he contended had been greatly exaggerated. He adopted Mr Skerrett’s argument that restrictions were a feature of all combines similar to Distributors, Ltd., and that these advantages should be balanced against their disadvantages. Had certain millers commenced a policy of price cutting with the object of forcing competitors out of the market, counsel said it had been shown that the producing capacities of the several mills in the scheme were far in excess of the quota allocated by Distributors, Ltd., and, therefore, if these mills produced to their full power, the market would have been flooded, and the smaller mills consequently forced out of existence, leaving to a group of the stronger mills a position favourable to the institution of a combine of a sinister kind. The cost of marketing under Distributors* Ltd. did not.

affect the price of flour to the public. The millers’ commissions on sale may have been less before Distributors, Ltd., but it had to be remembered that several millers had preferential customers. The alleged increase of 20/- per ton in Invercargill was not the concern of Distributors, Ltd., and those paying it had a perfect liberty to deal direct with Distributors, Ltd., and if, of their own initiative they paid to merchants extra for stocking flour for them, it surely would not be reasonable to hold Distributors, Ltd. responsible. FOR THE CROWN.

Mr Adams, in concluding the case for the Crown, said the prosecution did not for a moment suggest that combinations were necessarily noxious, but he would maintain that combination and control were dangerous instruments unless carefully watched and controlled, and required the closest scrutiny. * He submitted that the Court had to consider carefully the fact of restrictions. Mr Skerrett had contended that monopolies and control under modern trading conditions were necessary, and that a degree of restriction was inevitable in the nature of combines, but it would be that in the present case. CHARACTER OF THE COMBINE.

The combine had been shown, by the evidence of restrictions placed before the Court, to be of a pernicious character. The contracts between millers and Distributors, Ltd. were admitted by counsel for the defence to be unenforceable, and therefore the future benefits to the wheat growing industry were purely illusory, if they were under contracts that were unenforceable. In the Vend case it had been shown that a combine was essential for the maintenance of an industry in danger of extinction, but in the present case no such danger had been shown to exist in regard to the industries concerned. The Government was directly concerned in the protection of the wheat industry, and Distributors, Ltd. could not justify themselves, except under absolute necessity. Such had not been shown in the present case, and the bringing of the present action showed that the Government did not want the interference of Distributors, Ltd., but was concerned that it should itself have a clear field for the control of the wheat industry. It would admittedly be an onerous task to supervise a combine, and if the present one were to be continued, it would require close scrutiny and regulation. It was no business of the Government to be continually in supervision, and he would suggest that the only effective manner of dealing with Distributors, Ltd. was to completely suppress them, leaving the whole control to the organisations of the Government, which was more directly concerned to protect the public interest. It was admitted that Distributors, Ltd. could not conserve the wheat industry without the continued assistance of the Government. The Government, and the Government alone should be the sole authority to attend to these matters. Distributors, Ltd. could not, as the Government had done, guarantee to the grower a price in advance of sowing, and in the absence of any such ability their presumed necessity to the grower could not be substantiated. The necessity of the organisation had been refuted in actual practice by the experience in Auckland, where they did not exist, no trouble being occasioned under the ordinary conditions of trade in the industry. The Court was entitled to consider not alone the acts of the combine, but its tendencies and possibilities. The present combine had never had complete free play, because the Government had been exercising a certain amount of control. The Court was entitled to deduce what the probable future actions of the organisation would be. INCREASE IN PRICES. Returning to the increase by Distributors, Ltd. on 501 b bags of flour of 2/6, Mr Adams said that here was a clear case of increase to consumers, because none of the flour mills had charged that increase, which Distributors, Ltd. claimed was consequent upon the Board of Health regulations. That increase, though small in amount, had given Distributors, Ltd. £l2OO a year extra. Counsel drew attention to the evidence from Invercargill as to increased prices there. Though they might be small in themselves, yet he maintained that they showed the tendency of the concern, and its possibilities for evil should lead the Court to suppress it. His Honour said that the Government had sufficient power at present under various trade Acts to suppress any concern once it manifested evil tendencies. His Honour was quite sure that the bakers would make it known immediately they were overcharged RESTRICTIONS OF SUPPLY. With regard to restrictions, continued counsel, there had been a statement that the supply of Oamaru flour to Invercargill had been increased, but the capacities of the four Oamaru mills had shown an actual drop of 2362 tons per annum since Distributors, Ltd had taken over control, and these figures would go a long way towards explaining the shortage in Invercargill. As further evidence of the evils of restriction, be would point out that the Evans mill had had difficulties in supplying its customers, and that condition would be hard to reconcile with the statement that Distributors, Ltd had not interfered with the output. In the month of October, when Flemings were in trouble, there was a mill in Tim aru increasing its stocks, while a shortage existed elsewhere. The necessity for the combine, boiled down, simply amounted to a fear of price cutting. There appeared in all the millers' statements attention to the tendency towards price-cut-ting. According to the millers, prior to the formation of Distributors, Ltd., affairs were hopeless in the milling industry, but he opposed the suggestion, as the only evidence produced as to price cutting showed that it occurred subsequent to the negotiations for the formation of the combine. If such conditions had really existed, it was in the power of the millers to have brought forward evidence on that point, and that had not been done. The overbuying of wheat and the glut of stocks which existed would have adjusted itself in the course of time in connection with Fleming’s mill. The Gazette figures showed, said counsel, that the quantity of wheat in the Dominion was sufficient to the beginning of the new season (a five months’ supply), and yet they had been told that the shortage had been due to the scarcity of wheat. As to the price of Fleming's flour, allowed for railage, Invercargill could quite properly have been supplied from the north. JUDGMENT DEFERRED. Mr Adams concluded his address at 5 o’clock, His 1 Honour intimating that he would take time to consider his judgment. Before the Court rose, His Honour expressed his thanks to counsel for the thorough manner in which the evidence had been placed before him.