RESTRAINT OF TRADE

Waikato Times, Volume 108, Issue 18166, 3 November 1930, Page 15

RESTRAINT OF TRADE

CONTROL OF PRICES. VITAL TO THE MANUFACTURERS. SAFEGUARD AG* t F=T EXPLOITATION. While pollectlns: evidence from diffprpnl trnriPß ih favour of the esfabRchmorit nf fivprl price' 1 for varmus commodities, the Executive Comm'tteo of the Fair Trarie Goncress considered a letter addressed hy Messrs. FntwistTe and Kenvnn. of Accrinston. to the Trnnmono-er<;’ Federated Assoeia(inn. The committee thought, that the nr<-iim°nt was so well sot, out that they obtained Messrs. Entwistle and Kenyon’s permission to publish it. It is as follows: “Taking the earliest opportunity to make a considered reply to vour letter of April 12. we bee to sav that we regard the stabilisation of retail nriees by means of price maintenance, in one or another of its forms, to be vital to the existence of the distributor and the manufacturer at, least in so far as trade-marked goods are concerned.

“Remembering the conditions which existed in the ironmongery trade before the introduction of nrice maintenance in 1806. and bearing in mind that scores of other cash traders are to-day more disposed to seek sensatiorial methods of attracting custom than was the case in earlier, days, we are convinced that an intensive attack upon the prices ,of identified goods would be the Immediate outcome of any legislative prohibition of price control; and. that the ultimate consequences would be disastrous, not alone to the manufacturers whose goods were exploited as the subject of sensational pricing but much more to the vast number of retail dealers who would be compelled to abandon the sale of articles on which a working profit could no longer be obtained. Of General Benefit. "Viewing the retail tradesman as an individual who has the inherent right to live, and also as a rate and ♦ax payer who bears his part,in the provision of local or national revenue, we believe it to be obvious that any '•'■’stem of price control which’ enables ’dm to maintain a solvent position is ♦mnefleial to the public, to the nation, •mrl to the manufacturer. The public ’’■enefit by the accessibility of his stock end the convenience of his delivery in many thousands of peaces scattered 'broughout the length and breadth of tho country, often „in situations far ’■nmoved from the great shopping centres. In many Instances there Is additional benefit derived from his technical advice and his local responsibility in case of need. The nation benefits bv his existence as an employer, a rate and tax /payer, a participant in social movements, and often a public worker. The manufacturer’s share of benefit takes a manifold form and therefore, having dealt'with what is obvious to every normal citizen, we will describe m n re particularly the circumstances in which we conceive the manufacturer to he. involved. "In the first place, It fs vital that every manufacturer should, so far as possible, be able to sell his goods to a' solvent distributor; to the end that bo may be paid for his products and so have the means of continuing to employ labour, to improve his plant, to develop his designs or inventions, -v-h generally to maintain himself in business as one of the vital national units from which emerge goods that provide the public with what they can employ and the tradesmen with what he seeks to sell. . , . i . ,I’ ■

Wide Distribution Essential. "In the second place, the manufacturer cannot leave the disposal of his • productions in the hands of one distributor, or even a limited number.'To utilise his resources and equipment to (he largest available extent he must endeavour to have his goods distributed throughout the entire area of the country wherever a receptive population can be found; and to do this it is vital that he should And distributors near the homes of the people. Hence, it is advisable for him so to control his retail price that the smallest dealer in the most remote place can sell the product on equal terms with the largest and most active dealer in the greater centres, and, in our judgment, it is largely -for this reason tha.t manufacturers have protected Itheir distribution by one or another of'the systems which are known generally as price maintenance. "If, on the other hand, a manufacturer, perhaps tempted by large orders, confides his product to an aggressive or sensational trader without impos-

ing a restriction on its price, he incurs the -isl.- of uisco'-c-mcr tbM 11m Under so described exploits the article in such a manner as to draw t’m ru=tomP"S nf n 4 !mr to h’rnsolf* a wb | ' ,v > is fniirm-oO hy h's competitors until pomnefiMou between qc tula diiomn-, marked al-

wnvs by a cutting of the. price, eventI nelly pomnels t’m ,er+m] rmndnepr of f’m o-nnU4 to realise fuel most, or even the whole, of his more normal distributors. whn would sell the goods foe profit, have abandoned them and left him with onlv a limited number whn discard profit in order to sell selected articles fo” advertisement.. Tn eases where manufaefurers have allowed their goods to h n exnloited bv aggressive traders for the nurpose of self-aggrandizement which, if successful. results in the abstraction of other traders’ customers and in the abandonment, of interest in the article by traders of a normal tvne, it is our argument that, the manufacturer suffers bv the shrinkage nf his market and eventually its extinction, while the nublic suffer from the narrowed distribution of an article which would have served them if the tradesmen of their locality had been enabled to continue-its sale. An Important Safeguard. “In the foregoing naragranh we have referred to the predicament of manufacturers who have allowed their goods to be exploited, but the annals i of the hardware trade, to select only this amongst many trades, contain numberless instances in which goods, not protected by patent, have been exploited by price cutters despite the most strenuous opposition of their manufacturers and have, as a consequence, disappeared from the market, to the disadvantage of manufacturers, potential distributors, and the public alike. “Where the manufacturer Is concerned in the production of an article the’ originality of which enables it to be patented, his interest in its survival as a marketable article during the term covered by the patent is even greater than that of the manufacturer whose p'roduct cannot he patented and therefore may be copied. Speaking broadly, it may be said that time and money have been consumed in the. development of a patented article and that the inventor is not unduly rewarded by the grant of an exclusive right to manufacture and, sell the article during a period of 46 years. Inasmuch as a portion of the period must be lost in the progressive work of introducing the article to its market, it is the experience of almost every inventor that a term of 16 years is ail too brief for the development of good will and recovery of profit. In consequence of this,,price maintenance has been found a most important safeguard-to inventors and manufacturers of patented articles, since It is the stabilisation of price and consequent security of profit that influence distributors in gradually increasing numbers to adopt the article, to extend its sale, and to continue selling it with a certain regularity, year after year, until the patentee: or manufacturer has at length had some opportunity to recover the original cost of development and eventually gain the reward merited by the invention. If, on the other hand, a patented article is given to the market without control, being placed on its selling price, there is abundant evidence to show that it is exploited by price cutters, abandoned by distributors who renuire a normal profß for their labours, and destroyed for the patentee long before the expiry of the 16-year.term. in. which if, is assumed bv the State that he will earn the profit due to his invention. Rights of a Patentee. “In considering the potential influence of the Government Commitlee mi the prices of goods which are the lvoperty of patentees, it is necessary to remember that the grant of an English patent endows the patentee with ee rt ain specific rights which cannot well he destroyed without a fundamental change first being made in the nature of Patent Law.

“To explain this point we may say that' our English Patent Law' is based on the principle of a bargain between the State and the individual inventor. It is, of course, 'generally known that' ‘novelty is the essence of the patent,’ but it is not so generally understood that behind this lies the principle that if a person invents something which is entirely new, he is encouraged by the State to disclose the details of his invention in the document known ns the specification, to the end that posterity may benefit by this addition to the resources of civilisation at the expiration of an appointed • time. 1 As a reward for his ingenuity the State, after due investigation into the 'question of novelty, grants the Inventor, for a period of 16 years, the monopoly of making the article and selling or leasing it in any manner that will best enable him, according to his judgment, to earn his recompense during the appointed term. Many inventors obtain their recompense by leasing the article on royalty to a number of manufacturers, while other lease their rights to vendors in various territories. Others again, like ourselves, retain the manufacture in their own hands and sustain the sale of the article throughout the period of the 16 years by controlling its price in such a manner as will induce all the available distributors to maintain continued interest in its welfare. A Just Price. “Thus, price maintenance, so far as a patentee is concerned, is really no more than a proper expression of an inventor’s contractual right to sustain his in the market, until ■ has earned hjs reward, and in order that this may he done without restraint it must be obvious that no patentee who operates in this manner will embarrass the sale of his product by hampering it with a retail price which will inflict any injustice on the public to whom he looks for his necessary sale. With the public encouraged by the application of a price that is just and the tradesman assisted to maintain himself in business as a solvent and essential distributor by means of a profit which is assured to him by the protection of price ijiaintenance.-we cannot believe interference to be justified and cannot, at present, conceive how the appointed committee can prohibit price maintenance of patented goods without the ■onstruction of new laws which can hardly fail to have a destructive influence on the development of inventions.

“With this we leave our view of the matter to your consideration.’’