DAIRY BOARD DISPUTE

Waikato Times, Volume 103, Issue 17412, 26 May 1928, Page 8

DAIRY BOARD DISPUTE

MR GOODFELLOW REPLIES TO MR GROUNDS,

N.Z. CO-OP. CO.'S MARKETING POLICY UNCHANGED

CHAIRMAN'S PROPOSAL CUMBERSOME AND DANGEROUS

QUESTION OF LICENSES: THE LEGAL POSITION

Dealing with the statement of Mr W. Grounds, chairman of the Dairy Control Board, published in the April issue of the Dairy Exporter, Mr W. Goodfellow, .managing director of the New Zealand Co-operative Dairy Co., Ltd., makes the following reply: "Mr Grounds," said Mr Goodfellow, "claims to have been tolerant. Others have been even more tolerant I For that reason I have had nothing to say publicly regarding the new Control Board policy, as advocated by Mr. Grounds, and supported by a small section of the dairying community. A statement of facts, however, may help to correct some of the many inaccuracies made by Mr Grounds, who obviously wrote in the last Exporter whilst smarting under his recent defeat. Nevertheless, one has a right to expect the chairman of the Control Board, above all poeple, to be scrupulously careful to adhere strictly to facts, and on no account to misrepresent the attitude of an important section of the industry.

opinion and indicating their approval or otherwise. Thereafter the policy of absolute control was proceeded with by the board, with the knowledge that approximately 75 per cent, of the industry in New Zealand was favourable. One mgiht ask why was not this same procedure of consulting the industry adopted when the original scheme failed? On the contrary, Mr Grounds seemed to prefer Star Chamber methods, he has attempted to bluff through, despite the fact that it is commonly reported that the board is definitely divided and represents sectional interests. With a divided board, and without consulting the dairy companies. Mr Grounds attempts to force a large section of the co-operative interests into a position which is untenable. It is a monstrous position. Is it any wonder that w r e object?

Facts About the Dairy Co.'s License.

"Mr Grounds' statement to the effect that the New Zealand Dairy Company promptly signed the Control Board's license (a demand supported by a threat to hold up shipments) is correct, but why does he suppress the' facts with which he and members of the Control Board are conversant? The Control Board's license was sent to Hamilton during my absence, and was signed as a matter of form, and returned promptly to Wellington, in order to prevent the holding up of exports. Some weeks later this fact was discovered, and the directors of the company placed the matter at once in the hands of Messrs Earl, Kent, Masscy, and Northcroft, solicitors, Auckland; and, prior to the next meeting of the Control Board, Mr Kent and myself visited Wellington and interviewed Mr Grounds, when the company's position was clearly stated and accepted without question. Immediately the board met, the chairman acquainted members with the nature of Mr Kent's visit, and. I myself made it quite clear to the board that in no circumstances would the company agree to the new policy adopted by the board, without reservation. "Mr Grounds' statement regarding the treatment of the document as a scrap of paper, is not only uncalled for as far as the New Zealand Cooperative Dairy Co., is concerned, as he knows the facts, but is a gross insult to the company and its management. Board Acts Against Legal Advice. "Mr Grounds refers to the board's 'legal advisers' and their advice, but greater frankness on his pari, as to the actual facts might have been expected. He omitted to stale that the board's legal adviser is not Mr Gray, K.C. (whose view he gives), whose opinion was sought only after the board's own solicitor's opinion had been obtained, and found to be very unsatisfactory in relation to the policy the board was attempting to enforce. The board's regular solicitors are Messrs Chapman, Tripp, Blair, Cooke and Watson, and in their opinion, which is a very full and carefully considered one, they make it clear that the board is acting ultra vires. In discussing in detail the board's desire to incorporate in the license the conditions objected to, the board's solicitors declared:

"When advocating absolute control Mr Grounds followed a well-defined path, and simply applied to all New Zealand a system of marketing which had been thoroughly tried and proved satisfactory by the New Zealand Cooperative Dairy Company. in that campaign he had the consistent and solid support, not only of the Waikato, but of the South Auckland Province. Now, however, Mr Grounds is attempting an experiment which, if carried to its logical conclusion, may prove to be an even greater disaster than that which befell the industry with the downfall of absolute control.

This is the considered opinion of the management of the New Zealand Cooperative Dairy Company, with nearly twenty years' world-wide marketing experience. The Board's Present Policy. "What is the essence of the board's present policy? The initial step of collecting London account sales and obtaining a return of all f.o.b. sales 14 days after shipment, may in itself appear quite harmless, but this is in fact, only a preliminary to the formation of a national marketing scheme, as conceived by the chairman, which, without price fixing, would land the industry in an intolerable position. Even the initial steps so far made are cumbersome, dangerous, and annoying to the industry. For instance, all f.o.b. sales, other than those made by the New Zealand Co-operative Dairy Company are at present made by agents and merchants, and not by the co-operative dairy companies; therefore the required f.o.b. returns would give the agents, and not the co-opera-tive dairy companies, valuable information, which would result in the immediate undercutting of prices to the detriment of the producers. It is claimed that this information would be confidential Past experience in that respect is not consoling, and in any case, if confidential, of what use would it be?" Strenuously Opposed Board's Demands "Knowing from actual experience exactly what the outcome of the giving of this information would be, I strenuously opposed the demand of the board for this return, as it was an utterly stupid idea. Again, the Control Board's demand for copies of all account sales in London is another useless expense. Such account sales, without a daily sales return and a rigid audit, arc worth little or nothing for purposes of comparison. For instance, one London agent might sell 'to arrive," another l cx ship,' a third 'a fortnight after arrival, and a fourth might hold for several weeks for a rise in price. In other cases, the agents adjusted account sales to meet competition in New Zealand. This is what is happening under existing conditions. Under varying circumstances, each method in turn will make the best showing. How then can a comparison under the board's plan be of any value to the industry?

Our opinion is that in carrying out any schemes of limited control the board has no power to impose conditions other than conditions relating to the process of export. The conditions mentioned are both conditions that are of necessity capable of being performed only afler the process, of export has ceased. . We are of opinion that under a system of limited control the board has no power to impose such conditions in such a way. . .The board has neither power to make nor power to en-

force the proposed conditions. "It would interest the dairy industry to know that the foregoing opinion is supported by Mr M. Myers, K.C., and Messrs Earl, Kent, Masscy and Northcroft. In view of the very questionable lcgaf position thus revealed, it became necessary for the board to obtain signed authority from the whole of the dairy factories of New Zealand to enable it to pursue the course decided upon, and this was extracted by a threat to the cfTcct that the produce would not be exported unless the necessary authority was forthcoming. "Very strong exception has been taken to the chairman's attitude in regard to this matter, and it is pleasing to know that in the last analysis he was finally turned down by the board by 9 votes to .'5, when he made a final effort to prevent the export of produce, .and thereby force certain factories into acceptance of his demands." A Glimpse of Past History. Mr Goodfellow said that as MiGrounds had gone out of his way to pillory the organisations with which he was associated he felt justified in referring to matters which otherwise would never have been mentioned. "Mr Grounds is reported to have slated that the 'gloves are off.' I would like to add that 'people who live m glass houses should not throw stones.' The'facts of the inner history of the failure of absolute control leave a heavy responsibility upon the chairman of the board as the party chiefly concerned both by reason of his action and inaction. When the delegates, representing all the co-operative dairy companies of New Zealand, finally decided, after innumerable meetings, on a pol'icv of seeking better marketing conditions through a Control Board, a voluntary dairy council was elected, and the question arose of a suitable chairman, who should later become chairman of the Control Board. Negotiations were opened with MiGrounds, then an unknown man, to secure his support, for a policy which included the appointment, of a dairy council of thirty—twenty to he elected by the North Island dairy companies and ten by the South Island dairy companies; the council to decide upon a policy, and from its members (thirty in number) to elect a board of producers only, to carry out the policy. . The formation of tins dairy council, and several other vital matters, we're agreed to by Mr Grounds, and he was shortly after elected chairman by a substantial majority. "It is fair to say that Mr Grounds carried out his pledges, with the exception of that regarding the establishment of a dairy council; but that failure has been sufficient to produce the suhsfittuafti weelsase.

"The board has definitely decided not to fix prices nor to pay for an audit—how, then, can a pool be a success? The new scheme, if persisted in, will undoubtedly have a depressing cfrect on the market, and result in lower average prices. A pool wili.out price-fixing places greater power in the hands of Tooley Street, and gives more scope than ever for manipulation."

Waikato Opinion Still Constant. Proceeding, Mr Goodfellow said: "The New Zealand Co-operative Dairy Company inaugurated a London selling policy seven years ago, which, after exhaustive examination, was adopted without alteration by the Dairy Control Board. Subsequently the Control Baord changed its policy, and the New Zealand Co-operative Dairy Company immediately reinstated Mr J. B. Wright and its old policy, under agreement with Amalgamated Dairies, thus securing for the industry the services of Mr J. B. Wright, who is recognised on all sides as an exceedingly man. "Amalgamated Dairies has been formed by the New Zealand Co-opera-tive Dairy Co., Ltd., for the express purpose of carrying out the policy as adopted by the Control Board; and, in order that the maximum results might be obtained, the New Zealand Co-operative Dairy Company have agreed that all other co-operative companies in New Zealand shall be offered equal marketing opportunities gratis. Therefore the New Zealand Cooperative Dairy Co., through Amalgamated Dairies, is in fact, simply attempting to do by voluntary action, what the Control Board has failed to do. In view of that fact, why should the chairman go out of his way to indulge in inueudo and questioning of ;jie bona fides of the New Zealand Cooperative Dairy Co., and Amalgamated Uairics, and its policy and management, when the whole fault of the change lies with the board itself? The industry can rest . assured that the Waikato has not changed; it is the Control Board that has changed its policy. Chairman's Methods Criticised. "Before the. absolute co'atroi policy was agreed to all dairy companies "-.-onn-iiniit New Zealand had ample opportunities of hearing details of the scheme,, ajwl ft* .exprefi&laj? their

> "Mr Grounds personally coriaborater with the Government regarding the draft of the first Control Board Bill and subsequent amendments. I was absent in Australia, owning to severe illness, and had nothing whatever to do with this matter, but I have yet to discover that Mr Grounds made any serious attempt, either then or subsequently, to carry out his promise in relation to the council system of election; indeed, I have very good reason to suppose that his close alliance with certain Labour members who favoured the so-called democratic vote and his personal inclinations resulted in the stifling of any attempt to introduce the council system of election. Last Chance Neglected. *'On April 28, 1926, at the big meeting of the industry in Wellington (when the 25 per cent, minority walked out), Mr Grounds had his last opportunity of putting the claims of the council system before the industry and the Government. Mr Grounds flatly refused to bring this matter before the meeting; indeed, he refused to allow the Control Board members, at a board meeting held just prior to the big meeting to pass a resolution of recommendation, stating as an excuse that the method of election was no concern of the Control Board.

"In failing to keep his promise he is responsible to a greater extent than any other person in the community for the downfall of the absolute control pohcy, which, it is now generally recognised, was due to the so-called democratic method of electing the Control Board members. "Had a Dairy Council been in existence as originally planned (and accepted by Mr Grounds), a consistent business policy would have been possible. A Forecast Fulfilled.

"Upon returning to Hamilton after this famous meeting, I reported matters fully to the directors of the New Zealand Co-operative Dairy Company, and informed them that absolute control never could succeed if members were to be elected on a democratic vole, as we would be building a business structure on a foundation of sand, liable to be wrecked at any time by concentrated commercial propaganda and Press publicity upon voters who, in the nature of things, could not detect the fallacies of the matter put to them; that, as the board would represent sectional interests, unanimity would be impossible, and it would be only a matter of time before the Free Marketing League held the balance of power on the board. Subsequent events proved this forecast to be only too true. "Nevertheless the New Zealand Cooperative Dairy Company continued to support Mr Grounds, hoping against hope that some opportunity might present itself w ; hereby the method of election to the Control Board could be put on a basis calculated to secure the reforms so urgently desired. Had Mr Grounds stuck to his guns regarding the council system, there is every reason to believe that Parliament would have granted the demands of the industry, if the opportunity of the Wellington meeting has been taken and the result would have been that Mr Grounds, as head of the Dairy Control Board of New Zealand, would have led the industry from one success to another; whereas his actions have made the board simply the laughingstock of the dairy world. Yet Mr Grounds now endeavours publicly to damage and discredit his friends, in order lo minimise his own tragic failure."