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CONTENTS. PAGE Appendices .. .. .. .. .. .. .. .. .. .. .. 153 Appointment of Committee of Inquiry .. .. .. .. .. .. .. ~ i Evidence of Witnesses .. .. .. .. .. .. .. .. .. .. 1 Index to Witnesses .. .. .. .. .. .. .. .. .. .. xxi Majority Report and Findings of Committee . . .. .. .. .. .. .. . . xv Minority Report—-W. R. Hayward .. .. .. .. .. .. .. .. .. fxviii Minutes of Proceedings .. .. .. .. .. .. .. .. .. . . xix Opinion of Economists .. .. .. .. .. .. .. .. .. xiv, 153-164 P.A.T.A. in Canada (survey of) .. .. .. .. .. .. .. .. .. iv P.A.T.A. in Great Britain (survey of) .. .. .. .. .. .. .. .. ii P.A.TA. in New South Wales (survey of) .. .. .. .. .. .. .. iii P.A.TA. in New Zealand .. .. .. .. .. .. .. .. .. .. jy Price Maintenance in United States of America .. .. .. .. .. .. .. iv Scope of Inquiry .. .. .. .. .. .. .. .. .. .. .. X v Retail Shops in New Zealand .. .. .. .. .. .. ~ .. .. xiv Summary of Evidence against PA.TA. .. .. .. .. .. .. ~ .. x iii Summary of Evidence for PA.TA. .. .. .. .. .. .. .. .. .. x Trend of Marketing Methods .. .. .. .. .. .. .. .. ~ yjjj
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1927. NEW ZEALAND.
THE PROPRIETARY ARTICLES TRADE ASSOCIATION. REPORT OF THE COMMITTEE OF INQUIRY APPOINTED UNDER SECTION 13 OF THE BOARD OF TRADE ACT, 1919, TOGETHER WITH MINUTES OF PROCEEDINGS AND MINUTES OF EVIDENCE.
Presented to both Houses of the General Assembly by Command of His Excellency.
REPORT. To the Hon. A. D. McLeod, President of the Board of Trade. Sir, — 1. Some months ago it was brought to the notice of the Department of Industries and Commerce that an association known as the Proprietary Articles Trade Association of New Zealand (hereinafter referred to as the P.A.T.A.), was in process of formation within the Dominion for the purpose of controlling prices at which certain proprietary articles were to be sold. These articles comprised lines which are largely sold by chemists, grocers, drapers, and fancy-goods shops, and the articles which could be controlled by the association number many hundreds. A deputation of retailers waited upon the Acting Prime Minister and yourself in November last, and asked, first, that an inquiry be held into the proposed operations of the association, and, second, that the association be asked to withhold operations until such time as the inquiry had been completed and Government decision in the matter had been given. The executive officers of the association, when subsequently approached, expressed themselves desirous of having an inquiry, and readily agreed to postpone their activities. You thereupon decided that it was in the best interests of all concerned that the inquiry should be held, and accordingly the powers given by section 13 of the Board of Trade Act, 1919, and amended by the Act of 1923, were invoked, and you appointed as the judicial Committee— W. B. Montgomery, ex Comptroller of Customs; W. R. llaywak.d, Manufacturer, Dunedin; M. J. Reardon, ex Workers' Representative on Court of Arbitration; J. W. Collins, Secretary, Department of Industries and Commerce. At a preliminary meeting of the members of the Committee with yourself you intimated that the Government desired a thorough investigation, and practically left it to the members themselves to decide the procedure to be adopted. In order to enable the Committee to function under the Act, and in accordance with section 5 of the Board of Trade Amendment Act, 1923, you delegated your authority, for the purpose of holding the inquiry, to Mr. J. W. Collins, Secretary of the Department of Industries and Commerce, and joined as associates the other members named. 2. The Committee held its first meeting in Wellington, on Monday, 21st February, 1927. Mr. J. W. Collins was unanimously elected Chairman. Advertisements inviting evidence from persons interested appeared in newspapers published in the main centres throughout New Zealand. There was very little response outside Wellington, and it was deemed advisable, in conference with counsel appearing for clients, that it would be better to bring witnesses,
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if any, to Wellington. It was found, as the Committee proceeded, that it was not necessary to visit other centres, therefore the whole of the evidence was heard in Wellington. Evidence was given by thirty-one witnesses, the hearing of which occupied from Monday, the 21st February, to Friday, the 4th March. The following interests were represented : Twelve retail grocers, seven oversea manufacturers' representatives, two New Zealand manufacturers, two fancy-goods dealers, two retail chemists. These witnesses came from all parts of New Zealand. Other witnesses who tendered evidence were: Emile W. Ernest de Fenq, organizer of the P.A.T.A. ; W. T. Charter, director, English Wholesale Societies, Ltd. ; J. H. Barker, secretary, New Zealand Master Grocers' Federation; J. Roberts, secretary, New Zealand Alliance of Labour; W. Nash, secretary, New Zealand Labour Party. 3. In addition to evidence obtained from witnesses, the Committee thought it desirable to obtain expert opinion from the following Professors in Economics : A. H. Tocker, Canterbury College, Christchurch; B. E. Murphy, Victoria University College, Wellington; Allan G. B. Fisher, University of Otago, Dunedin. 4. The inquiry was held in private, in accordance with section 21 of the Board of Trade Act, 1919. Section 24, however, authorizes the publication of evidence which is deemed expedient in the public interest. 5. The Committee decided, with your approval, that the evidence should be printed after information of a confidential nature had been deleted. Counsel representing all parties agreed that the publication of evidence in this way would be quite satisfactory. P.A.T.A. IN GREAT BRITAIN. 6. Before proceeding to consider the position of the P.A.T.A. in New Zealand, the Committee considered it desirable that some reference should be made to the operations of the association in other countries. In Great Britain an association has functioned for thirty years, its sponsor being Sir William Glyn-Jones. The Committee has perused recent annual reports issued by the association, and has ascertained that its main objective was to prevent the cutting of prices both in the wholesale and retail trades. The council consists of representatives of manufacturers (proprietors), wholesalers, and retailers, who manage the affairs of the association. The manufacturers pledge themselves not to supply their goods to any one on the stop list, and any trader who persisted in cutting any one of the articles was placed on that list. The lines listed by the P.A.T.A. have grown steadily from year to year, and it may be fairly claimed that there are few nationally advertised proprietary articles which remain outside the scope of the association. The membership of the association in July, 1925, comprised 444 manufacturers, 6.3 wholesalers, and 7,750 retailers. As the constitution and objects of the P.A.T.A. associations are practically alike, it is not proposed to quote them, except in the case of the proposed New Zealand organization; but it may be said that the English association passed certain resolutions, which were not recommended in New Zealand, as follows : — (a) " That the Council of the P.A.T.A., having had its attention drawn to the purchase of P.A.T.A. articles for resale to other chemists at less than the minimum wholesale prices, desires to call the attention of the trade to the fact that such arrangement constitutes a breach of P.A.T.A. regulations." (b) " That no industrial co-operative society shall be supplied with any article on the P.A.T.A. list unless the society agrees not to sell below the minimum prices, and that no bonus or dividend on the purchase-money, or rebate in cash or goods, be given unless the value of such bonus, &c., be charged to the customer in addition to the P.A.T.A. minimum price of the article." The reports of the English society also show that discrimination was made in favour of wholesale firms dealing substantially in P.A.T.A. articles. Unless a wholesale house was able to prove that its business was predominantly wholesale, and that trading in proprietaries was the major portion of its turnover, it was not eligible for election to the association. Counsel for the P.A.T.A. quoted in connection with the operations of the P.A.T.A. in Great Britain a report issued in March, 1920, of a sub-committee appointed under the Profiteering Act, 1919, to inquire into the principle of fixed retail prices. This committee held five meetings, and examined eight witnesses, comprising one manufacturer, two wholesalers, three retailers, and four members of the general public. The committee reported, inter alia, that the margin of profit allowed to the retailers was not so much as to enable them to cut the prices even if they wished, but was adequate to enable them to earn a fair remuneration,
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although not so large as the profit on uncontrolled goods. In the committee's opinion, fixed prices, between the different interests concerned, were to the advantage of the public in times of scarcity and undue inflation of prices, and in times of plenty a good return of profits was allowed, which prevented speculative dealing by the middleman. It further added that this opinion was subject to the prices charged by the manufacturer being fair and reasonable. It should be emphasized at this point that the P.A.T.A., wherever it operates, does not take into consideration manufacturers' costs, and does not insist on these costs being fully disclosed. It cannot, therefore, form any judgment as to whether manufacturers' prices are reasonable or otherwise. The British sub-committee concluded that the Government should set up a tribunal under the Board of Trade to investigate specific complaints of excessive charges on the part of monopolies, trusts, or combines, and recommend such action thereon as they might consider advisable. (This power of investigation and for taking action is already law in New Zealand : Board of Trade Act, 1919, and its amendments of 1923.) This conclusion was come to by the British sub-committee after examination of two other suggested methods of action. See evidence section, pages 4-8. The British sub-committee's report further shows that price-fixation controlled by associations or otherwise was at that time (1919) the exception rather than the rule. A witness with a very long and wide experience of a certain section of retail traders, stated that out of two thousand articles stocked the retail price fixed or controlled by associations or otherwise would not, at the outside, exceed twenty. The report makes it clear that the demand for all goods was then in excess of supply, and that price-fixation tended to restrain undue inflation of prices. P.A.T.A. IN NEW SOUTH WALES. 7. This association was first formed in 1903, and it has a like constitution to the English society. In its early stages its members consisted of wholesale manufacturing and retail chemists, who framed rules for the strict preservation of minimum resale prices of proprietary articles and patent medicines. In February, 1921, the association's activities were investigated by a special inquiry made by his Honour Mr. Justice Beeby, President of the Profiteering Prevention Court. Counsel appeared both for the association and for the Crown. A few witnesses only were examined, but the whole constitution and operations of the association were discussed fully between counsel and the presiding Judge. In his judgment the President drew attention to the large number of important businesses, such as Anthony Hordern and Son, Ltd., Pattinson and Co., and Washington Souls, who were selling below the listed prices of the association, and to the fact that rigid enforcement of the stop list was not employed, but in the case of smaller concerns drastic action was taken. In the course of his summing-up, the President referred to certain effects of the operation of the association, and that the effect of the combination of wholesalers and retailers was undoubtedly the maintenance of prices, which might have been lowered by the operation of ordinary competition. The association, no doubt, had been actuated, in the Judge's opinion, by the legitimate desire to prevent cutting of prices in certain lines, and to eliminate unfair competition; but in attempting to achieve this purpose the members had lent themselves to a combination the effect of which was to restrain the trade rights of others, and to build up a system of price-regulation which was clearly against the public interest. Mr. Justice Beeby concluded his judgment as follows:— That within the meaning of section 10 of the Profiteering Prevention Act of 1920 the purpose of the Proprietary Articles Trade Association is the regulation of prices of commodities produced in New South Wales or imported into New South Wales, and its operations have tended to restraint of trade and abuse of a power to control trade. The New Zealand Committee has been officially advised recently that after receipt of the report the then Attorney-General ascertained that the association had modified its practices, and was, in fact, practically defunct. Later in the year further inquiries were made by officials of the Profiteering Court, as a result of which the Minister decided that, as there was no evidence that the association was exercising unfair methods, a further reference to the Court was unnecessary. The provisions of the Profiteering Act terminated in New South Wales in December, 1922, and the association was then reorganized and is functioning to-day. The number of manufacturers belonging to the association was stated to be sixty in 1925, but the number of retail members is not known.
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P.A.T.A. IN CANADA. 8. The P.A.T.A. commenced operations in Canada early in 1925, and was organized by the founder of the British association, Sir William Glyn-Jones. The objects of the association are practically the same as those proposed by the New Zealand society. Sir William Glyn-Jones made a public statement in connection with the operations of the Canadian Association as follows (Drug Merchandising, 9th June, 1926) :— If in your store you handle P.A.T.A. and non-P.A.T.A. proprietaries alike, you deserve all you get in the way of undue price-cutting. The organized retail druggists of the Dominion can, if they choose, make the merchandising of the non-P.A.T.A. proprietaries unprofitable to the manufacturer. There are perfectly legitimate ways of doing this, and I need not enumerate them. I make no apologies for asking you to make the path of the non-protecting proprietor of a proprietary article as hard as you know how. That should be your contribution to the success of the P.A.T.A. And in Drug Merchandising, March 1926, there is a statement as follows:— Another important point stressed by Sir William was the advisability of being very cautious in taking the first step in increasing prices, so as to avoid the possibility of a public investigation into the legality of the movement. " The legality of the P.A.T.A. has been thoroughly investigated, and there is nothing to fear so long as the druggist is moderate in his demands," said Sir William. " The retailer must not look upon this as the millennium at once. Every movement must be taken with an eye to the public and its possible reactions to increase in prices." A minimum price-list will be issued for the time being, containing price at which the druggist can sell the articles. For example, an article which should be sold for 40 cents will have a minimum price of, say, 35 cents. If this article has been previously cut to 25 cents, the increase in price will not be so drastic as it would if the top price was quoted. Furthermore, it will enable the department stores and " cut-raters "to show the price as 35 cents as against the advertised price of 40 cents, and still create the impression that they are selling below the market value of the article. In time the minimum price idea will be abolished and the one price put into effect. The association was receiving considerable support from manufacturers, wholesale druggists, and chemists. The latest records show that 150 manufacturers, 28 wholesale druggists, and 2,732 retail druggists had joined, this latter number representing nearly 90 per cent, of the retail drug trade in Canada. In August, 1926, a petition, bearing nearly five thousand signatures, was presented to the Government requesting an investigation into the proposed operations of the association, and the Registrar of the Combine Investigation Act, 1923, was authorized, in connection with Dr. W. A. Macintosh, Professor of Economics, Queen's University, to submit a report. This report, which was carefully considered by the New Zealand Committee, and which was largely quoted by counsel on both sides at the New Zealand inquiry, concludes that the operations of the P.A.T.A. in Canada, while of benefit to the interests included in its constitution, was disadvantageous and detrimental to the public interest, and therefore was a combine within the meaning of the Act under which the inquiry was made. Since the publication of this report, a Royal Commission has been set up in Canada to take evidence upon the proposed operations of the P.A.T.A., and this Commission, so far as the Committee in New Zealand knows, has not yet given its finding. PRICE-MAINTENANCE IN U.S.A. 9. The P.A.T.A. does not operate in the United States of America. Price-fixing between competitors is unlawful, both under the Sherman Anti-trust Law and under the Federal Trade Commission Act. Agreements to fix resale prices between a manufacturer and his dealers, or between a distributor and subdistributors, is unlawful under the above Acts. Resale pricemaintenance plans or schemes involving any element of co-operation between the manufacturer or distributor and his vendees or sub vendees are an infringement of the Federal Trade Commission Act. A manufacturer or distributor acting entirely alone may announce in advance his resale prices and may thereafter decline to sell to those who he ascertains, without any co-operation from his dealers or subdealers, fail to maintain such prices. P.A.T.A. IN NEW ZEALAND. 10. The formation of the P.A.T.A. in New Zealand was the outcome of a meeting of the Chemists' Defence Association, held in September, 1920. It was decided by members present
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that a P.A.T.A. should be formed. No constitution appears to have been drawn up until May, 1926. Various meetings were held between the above dates, but no active steps were taken to put into effect the principles laid down by the English association. At a meeting held on October 28th, 1925, Mr. Emile de Fenq, formerly connected with the New South Wales P.A.T.A., was engaged to organize the association throughout New Zealand. In July, 1926, Mr. de Fenq reported that he had 443 lines applied for listing. He further reported that practically every chemist had consented to join the association, that wholesalers and manufacturers had given full support, and grocers were very favourable as a whole. At a meeting of the wholesale section of the New Zealand council, held on the 3rd August, 1926, it was recommended to the whole council that arrangements as to wholesale prices should not be permitted from manufacturer to retail distributor. At a meeting of the manufacturers' committee on 24-th August, it was recommended to the council that retailers might buy from manufacturers at wholesale prices in such quantity as manufacturers nominated. At a meeting of the New Zealand council on 25th August, 1926, the following rates of profit were recommended : — Wholesalers —per cent, discount (no extra for cash) ; 15 per cent, on quick sellers 20 per cent, on slow sellers: Retailers —2-|- per cent, discount cash (afterwards altered to 5 per cent.) ; 2| per cent, monthly; 25 per cent, on quick sellers; 33| per cent, on slow sellers, new patents, and toilet goods:! and the following constitution was adopted:— Constitution. (Adopted 25/8/1926.) 1. The name of the association is the Proprietary Articles Trade Association of New Zealand. 2. The office of management and control of the association to be in Wellington until otherwise determined by the New Zealand council, and sub-offices may be arranged in any other centres as required. 3. The objects are — (a) The discussion of matters of common interest to the branches of the trades represented, with a view to decision and, if necessary, concerted action. (b) The taking of such steps as the association is advised are legal to deal with cutting of prices ; to maintain fair distributing prices ; to give advice and render assistance to its members in preventing substitution; and to restrain excessive prices of listed proprietary articles. (c) The doing of all such other things as may appear to be of benefit to the trade. 4. Membership is open to manufacturers of proprietary articles or their agents, wholesale distributors, retail distributors. 5. For the purpose of the association— (a) Retail distributors are defined to be those who keep open shop, dispensary, or other place to which the public (other than those in trade) have access, or those who sell direct to the consumer ; and retail sales have a corresponding signification. (b) Wholesale distributors are defined to be those who sell to retail distributors for sale again to the public, but who do not keep open shop ; and wholesale sales have a corresponding signification. (c) Manufacturers are defined to be those who control the source of supplies of one or more proprietary articles. 6. There shall be a provincial committee of each of the branches of trade—viz., manufacturers, wholesalers, retail chemists, and retailers other than chemists —in each of the four centres —viz., Wellington, Auckland, Dunedin, and Christchurch—to discuss and recommend matters relative to their particular section of the trade. Each provincial committee may consist of not more than seven members of the respective trades, and they shall be elected by the members of their respective section. 7. The election of the provincial committees shall take place annually. Any extraordinary vacancy occurring shall be filled by the committee, but its actions shall not be invalidated by reason of a continued vacancy. 8. There shall be a New Zealand council consisting of two members, or their proxies, of each of the provincial committees of manufacturers, retail chemists, retailers. other than chemists, and four members of the wholesalers' provincial committees (two wholesale druggists and two others, other than wholesale druggists) of each Auckland, Wellington, Christchurch, Dunedin ; such members to be appointed by ballot or otherwise by the respective committees of which they are members. The New Zealand council shall consist of three sectional committees —viz., manufacturers, wholesalers, and retailers —to whom matters particularly affecting their branches of the trade shall be referred, but any decision arrived at by such committees to be subject to ratification by the council. All questions placed before the meetings of the provincial committees, sectional committees of the New Zealand council, the New Zealand council, or the executive shall be decided by vote, and in the case of
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equality the chairman shall have a second or casting vote. In matters placed before the New Zealand council each manufacturers' vote shall count as four times the value of a wholesaler or retailer. In matters placed before the executive each manufacturer's vote shall count as two. 9. There shall be an executive in Wellington consisting of two members from each section of trade in Wellington, in addition to the chairman of the New Zealand council or his nominee. In the event of a vacancy occurring on the executive the provincial committee of the section in which the vacancy occurs shall elect a new member to fill the vacancy. 10. The executive be empowered to— (a) Appoint a secretary and/or other officers, and to engage offices as may be required ; (b) To grant registration or otherwise of any proprietary articles that may be submitted ; (c) To put into action the necessary machinery for the maintaining of prices as registered with the association ; and (d) To carry out the'management of the association on the general terms of this constitution. 11. The meetings of the executive shall be called by the secretary at such times as the chairman or any two members of the executive may direct. 12. The New Zealand council shall be vested with power to make rules and regulations, in addition to this constitution, for the government of the association, and to annul or alter the same from time to time as occasion may require. 13. The annual subscription shall be as follows : Manufacturers of proprietary article or their agents, £3 3s. for the registration of one article, or £5 ss. for the registration of two or more articles ; wholesale distributors, £5 ss. for each warehouse ; retail chemists, £2 2s. for each shop ; retail distributors other than chemists, £1 Is. for each shop for those not employing any assistants, £2 2s. for each shop for those employing one or more assistants. For the purpose of interpretation, members of the family who may be employed shall be regarded as employees, and in the case of partnerships all other than one partner to rank as employees. 14. The financial year shall end on the 31st December. 15. Any person desiring to withdraw from the association shall give three months' notice in writing to the secretary. 16. The association reserve the right to deregister any article at any time by giving notice in writing to the manufacturer and refunding the subscription paid for that respective year. Applicants for enrolment as members of the association were requested to enter into agreements according to the respective classes of business which they conduct. These agreements provided— (A) For manufacturers —■ Agreement. To the Secretary, P.A.T.A., of New Zealand, 49 Ballance Street (Box 1434, G.P.0.), Wellington, N.Z. Sir,— In consideration of your placing the goods mentioned in my/our application on back hereof on the protected list of your association, I/we agree — (1) To fix for New Zealand the prices stated in columns Nos. 2 and 4 as (a) the minimum selling-price to the public ; (6) the minimum selling-prices from wholesalers to retailers. (2) On being advised by you that these goods and prices have been accepted by your association, to notify (as per draft letter printed at side hereof) all New Zealand wholesale houses and brokers and all New Zealand retailers who purchase from me/us direct in wholesale quantities that on and after ,19 , any of these goods purchased by them for resale in New Zealand will only be supplied on the understanding (a) that such goods will not be resold by them at less than the prices fixed by me/us and specified in columns 2 and 4 of the application attached hereto ; and (b) that they will, if requested by me/us or my/our duly accredited agent, refuse to supply any cutting distributor with our goods, and will procure the making of the agreement as set forth in the said draft letter. (3) To use my/our best endeavours to induce or assist you in inducing any distributor who cuts the price of such goods to increase his prices to those appearing on the P.A.T.A. list, or to stop (or assist you in stopping) supplies of such goods to any distributor who sells any article on your association's protected list under the minimum prices therein specified. (4) The secretary for the time being of your association is hereby appointed my/our agent for all the purposes of this agreement, and in particular is empowered by me/us to take whatever action may be considered necessary to maintain prices and stop supplies of my/our goods to any cutter of any listed line. (5) To endorse all invoices of the goods with conditions of sale as supplied by your secretary. (6) This agreement is to operate from ,19 , and may be cancelled or altered by my /our giving you three months' notice in writing of my/our desire for such cancellation or alteration. All proposed alterations of prices are subject to acceptance by your association. Date: Yours truly, State whether signed as principals or agents :
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Draft of Letter to be sent by the Firm signing the Agreement at Side hereof to all New Zealand Wholesale Houses and Brokers, and to all New Zealand Distributors and Retailers purchasing direct in Wholesale Quantities. See Clause (2) of Agreement. Dear Sirs, — We beg to notify you that, having placed our goods, as under, on the protected list of the Proprietary Articles Trade Association of New Zealand, we shall be pleased to supply you direct on your agreeing with us that you will not resell them at less than the following prices, or any that may from time to time be substituted therefor on the latest issue of the New Zealand protected list of P.A.T.A. lines
And further agreeing that you will not supply any of them to any distributor whose name we may at any time advise you of, or whose name may be on the stop list of the P.A.TA., and that you will if and when required by us obtain from purchasers from you a signed agreement, to be prepared by us, binding the purchasers not to sell any of the goods mentioned above at less than the prices herein set forth. Further, you will not sell or supply any of these goods to any wholesale trader unless and until you ascertain from the secretary of the PA.T.A. that such trader has signed an agreement similar to this. Further, that you will endorse all your invoices of these goods as from this date with our conditions of sale, viz. : " Those goods in this invoice, which are included in the current list of the Proprietary Articles Trade Association of New Zealand, are sold by us as agent on the conditions that they shall not be resold at prices less than the respective prices fixed by the manufacturer and stated in such list, and no rebate, bonus, coupon, or allowance greater than 2J per cent, shall be made or given. Acceptance of the goods is acceptance of these conditions." And, further, that for the purpose of maintaining the sale conditions as endorsed you will when requested by the secretary of the P.A.T.A. give him all reasonable assistance and information in respect of any sale by you of any of our goods to any named purchaser. All protected goods sold by us are supplied upon the express condition that the agreement as above is rigidly maintained both as regards goods on hand and further supplies, and the acceptance of such supplies is considered as evidencing an agreement on the part of the purchaser to observe these conditions strictly. Will you please signify your acceptance by signing and returning to us the copy herewith of this letter. Trusting to be favoured with your esteemed orders. Yours faithfully, We/I agree to accept supplies on the terms of this letter. Date : Signature : Application to list Lines or alter Prices op Lines already listed. To the Secretary, Proprietary Articles Trade Association of New Zealand, Box 1434, G.P.0., Wellington, N.Z.
State whether applicants are proprietors of or sole New Zealand agents for above goods : If above are imported lines, state (a) whether they can be imported by other (a) : firms than the applicants ; and, if so, (b) whether at the same prices as [> the applicants J (b) : State (a) whether supplies to the New Zealand market can be controlled ; and'] (a) : (b), if answered affirmatively, state method fully, either here or on a separate [> sheet J (b) : Cheque for annual subscription herewith, value £ Name of applicants: Address: Date :
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Price to Retailers less not more than Name of Goods. 5 per Cent. Cash over Counter or Price to Public. 2J per Cent. Monthly Settlements.
. Proposed Prices to Proposed Minimum Proposed Minimum Wholesalers, showing Price , 0 U K ' A s " Prices from Whole- Discounts and Quanti- ® 1 . ze . more than 5 per Cent. N ame 0 f Article. salers to Retailers, less ties, also Size of MiniAdvertised Price. Cash over Counter, not more than mum 0rder oonsidered AT °Ii,i q 6 L, e + 2J per Cent. Discount, a Wholesale Quantity. Monthly Settlement. i r A . \ * (Not jor Publication.) (1.) _ (2.) (3.) J40 (50 I i
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(B) For wholesale agents — Agreement. In consideration of being appointed a wholesale agent of those manufacturers or any of them who are members of the Proprietary Articles Trade Association of New Zealand, and of being supplied with and granted discounts on their goods included from time to time in the protected list of the said association, we hereby agree with the secretary of the said association, as the authorized agent of the said manufacturers— (a) That we will not sell or offer for sale the goods or any of them included in the latest published protected list of the said association at prices less than those stated respectively in such list, nor give nor make any rebate, bonus, gift, or allowance on such goods other than the bonus, discount, or allowance as registered by the manufacturers (if any) on the goods sold. (b) Further, that we will not supply any of such goods to any person, firm, or company named by the secretary of the said association as selling any of them below the stated prices, or as allowing or giving such cash or other discount, rebate, bonus, coupon, or other allowance on sales as will thereby have the effect of reducing the prices charged below the said prices. (c) Further, that we will not sell or supply such goods to any wholesale trader unless and until we ascertain from the secretary of the said association that such trader has signed an agreement similar to this. (d) Further, that we will endorse all our invoices of goods as from day of , 192 , with the manufacturers' conditions of sale, viz. : " Those goods in this invoice which are included in the current list of the Proprietary Articles Trade Association of New Zealand are sold by us as agent on the conditions that they shall not be resold at prices less than the respective prices fixed by the manufacturer and stated in such list, and no rebate, bonus, coupon, or allowance greater than 2J per cent, shall be made or given. Acceptance of the goods is acceptance of these conditions." (e) And, further, that for the purpose of maintaining the sale conditions as endorsed we will, when requested by the secretary of the said association, give him all reasonable assistance and information in respect of any sale by us of any of the said goods to any named purchaser. Signature of firm : Date : Witness: (C) For retailers— To the Executive of the P.A.T.A. of New Zealand, 49 Ballance Street, Wellington. Dear Sir, — Please enrol me/us as a member of the retail section of the P.A.T.A. of New Zealand. I/we enclose guineas (being guineas for each of the stores operated by me/us and detailed on the back hereof). I/we agree not to sell any articles registered with the association below the minimum prices registered with the association by the manufacturer. I/we agree that when asked for an article on the list of the association I/we will not attempt to influence the customer to purchase any other article in its stead. I/we agree that in the event of my/our giving a bonus, coupon, or discount on sales of any of the articles registered with the P.A.T.A. the prices charged shall be the minimum retail price, and that I/we will not allow a rebate (in cash or kind) greater than 2| per cent, for cash over counter or monthly settlement. I/we agree not to purchase or barter any P.A.T.A. goods at prices below the manufacturers' prices. I/we understand that any breach of the agreement will involve the withholding from me/us of all articles protected through the agency of the P.A.T.A. Counsel for P.A.T.A. of New Zealand emphasized two important points not included in the constitution of other P.A.T. Associations: (1) The allowance of a cash discount to the public of 5 per cent, for cash over counter off listed prices, or 2J per cent, monthly settlement ; (ii) non-interference with co-operative societies in the granting of annual bonuses to their shareholders. TREND OF MARKETING METHODS. 11. The Committee heard a good deal of evidence regarding the evolution of marketing, and was impressed with the rapid changes made in distributive methods, particularly during the last ten years, in the Dominion. In his work, " Marketing and Merchandising," Mr. R. S. Butler ably sums up the general changes made throughout the world, and, for general information, the following extracts are quoted :— " For many years many manufactured products passed through a series of trade channels consisting of five stages —(1) manufacturer, (2) commission merchant, (3) wholesaler, (4) retailer,
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(5) consumer. This traditional chain of distribution is not unknown to-day. In some of the textile trades, for instance, these links in the chain are still found. This condition, however, is not typical of modern marketing. Many circumstances have operated to obviate the former •necessity for a long string of middlemen. Advertising has brought the manufacturer and consumer close together ; increased demand from consumers for fresh styles has necessitated the shortening of the chain. Quickened methods of transportation have made unnecessary the long graduated series of warehousemen formerly needed to give the consumer the goods when he wanted them. There is no typical chain of modern distribution. Almost every industry has its own system of middlemen, and often the different units in the same industry vary widely in their methods of reaching the market. For example, shoes are sold in large quantities through chains of stores owned by the manufacturer; other shoe-manufacturers sell direct to retailers; while still others utilize the traditional wholesaler-retailer method. Despite the many methods used to carry manufactured goods to consumers, it is possible to generalize regarding channels of trade so far as certain great staple lines are concerned. Most chemists' lines, groceries, dry goods, and hardware are sold through the wholesaler. Hence, if we are to recognize any normal current in modern trade, it must be that which flows from the manufacturer to many wholesalers, from each wholesaler to many retailers, and from each retailer to many customers. It is true that thousands of manufacturers do not use this method of selling. Nevertheless, the manufacturer-wholesaler-retailer-consumer system is still strongly entrenched; and it is in the shifting relations among the four members of this chain of distribution that most of the complicated problems of modern marketing have their origin. " A generation ago manufacturing was the hardest problem in business ; to-day selling has taken its place. Science and standardization have gone so far that almost any manufacturing riddle can be unravelled when brains and money are concentrated upon it. This is because there are two factors in manufacturing —the machine factor and the human factor. The former, at least, can be absolutely controlled. In marketing there is no machine factor ; there is only the human element, and no one has yet devised a sure plan to harness human nature and make it act in definitely predetermined ways. It is said that 95 per cent, of all business problems are selling problems. Whether this is so or not, no one will deny the number and difficulty of selling problems, and their most complicated phase is the relation of trade factors arising out of the characteristic indirect exchange of modern industry. " The outstanding figure in merchandising is the middleman. When the present distributing system is criticized it is the middleman with whom fault is usually found. Some of this faultfinding is justified. The word ' middlemen' is often incorrectly applied to the wholesaler. Actually a middleman is any one who stands between the prime producer and the consumer, and who exacts a profit for the risk he runs in addition to payment for the cost of his services. " The burden of the selling of goods, formerly borne all but exclusively by the wholesaler and retailer, is now being assumed in large part by the manufacturer. Many manufacturers are now selling direct to the larger unit retailers, to groups of small retailers, to co-operative societies, and, of course, to department and chain stores, and are quoting them prices as low as those quoted to the wholesale houses. " All these changes are but a part of the modern revolution in merchandising methods. The whole distributive system is in a state of flux, and the • wholesale trade has been unable to adjust itself to the rapidly-changing conditions. It performs less service, but its operating-costs have not been correspondingly reduced; consequently it requires for its present limited services as much compensation as formerly, when it performed more or less complete services for all manufacturers and all retailers. " The co-operative movement has but one purpose, to reduce prices by eliminating all the profit and part of the expenses of the middleman. Carried to a logical conclusion, its ultimate effect would be to eliminate the independent middleman entirely. Although the movement has developed very slowly in the United States of America, it has made tremendous strides in other countries. Its inherent elements of strength suggest the possibility of development that is of vital importance both to distributors and to manufacturers. " The modern co-operative store idea probably started in Rochdale, England, in 1844. Twenty weavers banded together to run their own grocery store. The beginnings were small but successful. From this tiny start has grown the modern co-operative movement throughout the world. In the United Kingdom one of every four families to-day is said to get most or all of its food-supplies from co-operative stores. The co-operative societies- of Great Britain now represent a membership of nearly five millions, and an annual turnover of about £200,000,000.
ii—H. 44a.
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The retail co-operatives have banded together into wholesale societies that exercise far-reaching industrial power. Some of them own tea and coffee plantations, operate their own factories and control steamship lines. "On the Continent the co-operative idea has developed astonishing strength. Its chief stronghold is in Denmark, where the co-operatives control half of the total business in foodstuffs. In Germany, one out of every five families is associated in some co-operative buying plan; in France the ratio is one to ten. In Russia, before the experiment in communism, its cooperatives were very strong. All over Europe the idea is taking firm hold of the people. It is a movement that can not be ignored. " The development of the chain-store method has Jiad pronounced influence on all factors in merchandising. The independent retailer has found in the chain store a competitor of great strength and remarkable vitality. The wholesaler sees in the chain store an organization that deprives him of much of his best business and that assumes for itself wholesaling functions and wholesaling profits. The manufacturer has discovered that traditional methods of selling are of little avail if he seeks an outlet through chain stores, and he finds in the chain's ability to develop and control its own sources of supply a limitation to the market for his own goods. The consumer, by re-acting favourably to the chain-store appeal, has indicated his belief that the movement satisfies a social need and that it is a legitimate factor in competitive merchandising. " Not all chain stores use the low-price appeal for trade. Some of them charge market prices but give merchandise coupons that represent the equivalent of a fixed cash discount. Most of the chains try always to be under the market, at least on the leading item in their line, and it is probable that the price appeal, more than any other one thing, has been chiefly responsible for the great spread of the chain principle of merchandising. The lower prices of the chain stores have made it difficult for the smaller retailers to hold their own, and the loss of business to the wholesalers through direct buying from the manufacturers has been a severe one. " The chain store has entered into competition not only with the retailer in the larger cities, but also with the wholesaler and the manufacturer, and tends to cover ultimately the entire field from manufacturer to consumer. Part of its economy results from the replacing of the wholesale warehouse with the chain's warehouse. There is a tendency, also, for the chain to develop its own brand and to manufacture on its own account. The chain store has been held as the worst offender in the chemistry trade in the matter of price-cutting. Seeking to build up its own goodwill rather than that of the manufacturer, it has specialized on the cutting of well-known advertised articles and also in the substitution of privately branded articles of a similar nature. " The chain store at times may be able to undersell the independent, but it cannot ' overserve ' him. This is the independent's opportunity. Chain stores will undoubtedly continue to grow in size and influence, but only the extreme chain-store enthusiast forsees a time when there will cease to be abundant opportunity for the well-mangaged independent retail establishment. " Another modern development of retail distribution in Canada and the United States particularly is the grocerterias. These shops cater for strictly cash custom in grocery and proprietary lines. The goods of these shops are ready packed, plainly marked in price, and arranged in order of popular demand. All that a customer has to do is to select from tables the goods required, and when the selection is made a cash register-clerk checks and counts the selection and receives the money in payment. The only assistants in sight are those who attend to goods requiring cutting and weighing, the others being employed in the rear of the shop in packing and preparing goods to replace those purchased." THE CASE FOE THE P.A.T.A. 12. It was claimed by counsel for the P.A.T.A. that the necessity for the existence of such an association is due to the unfair practice of certain traders in cutting prices of proprietary articles just above or down to cost, or even below cost, and thus injuring the trade of the manufacturers, wholesalers, and retailers, who respectively either make the goods or hold stocks which they wish to sell at a reasonable profit. Counsel also pointed out that manufacturers who may have spent very large sums of money in advertising their goods and forcing them upon public notice found that the wholesale and retail distributors refused to take further stocks or to push sales. On the other hand, retailers stated in| evidence that if they attempted to sell at a reasonable profit while cut prices were adopted elsewhere they
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gained a reputation for overcharging and their businesses were damaged. In self-defence they recommended to the public lines in substitution of those which were being cut and upon which they could make their usual profit. One of the strongest arguments relied upon by counsel for the P.A.T.A. was the " Findings and Decisions of the Sub-committee appointed in Great Britain by a Standing Committee on Trusts to inquire into the Principle of Fixed Retail Prices," and referred to in paragraph 6 of this report. These findings and decisions are quoted in full in the opening address of Mr. M. Myers, K.C. (pages 4 to 8). Other instances relied upon by P.A.T.A. counsel for support were— (a) The New Zealand case of The Crown v. Distributors Ltd. and the millers associated with that company. In this case the judgment of Mr. Justice Sim was upheld by the Privy Council. The following is an extract from this judgment:— These, then, are the circumstances in which the company was formed and commenced its operations. There does not appear to be any reason for thinking that it was established with any sinister design, or that its main purpose was other than that of stabilizing the flour-milling industry by eliminating unrestrained competition, with its attendant evils. The case for the Crown seemed to be based largely on the view that unfettered competition is in itself a good thing, and that any agreement which interferes with such competition, unless justified by some cogent reason, must be contrary to the public interest; but unfettered competition is not always a blessing, and in considering the interests of consumers it is impossible to disregard the interests of those who are engaged in the production and distribution of the articles of consumption. The consumer may derive benefit for a time from cut-throat competition, but in the long-run it is not in the public interest to have such competition. (b) In Ware and De Freville v. The Motors Traders' Association reported in [1921] 3 K.B. 40, Lord Justice Scrutton said, —• While low prices may be good for the public for the time, they are not a benefit if all suppliers are thereby ruined. A steady level price may have considerable advantages over violent fluctuations from very high prices in times of scarcity and fierce competition, and unremunerative prices in times of plenty or financial pressure. (c) In the Coal Vend case, before the Privy Council, reported in 1913 Appeal Cases, at page 796, Lord Parker says,— The chief evil thought to be entailed by a monopoly, whether in its strict or popular sense, was the rise in prices which such monopoly might entail. The idea that the public are injuriously affected by high prices has played no inconsiderable part in our legal history. It led, no doubt, to the enactment of most, if not all, of the penal statutes repealed by 12 Geo. 111, c. 71. It also lay at the root of the common-law offence of engrossing, which, according to Hawkins's " Pleas of the Crown," vol. 11, Book 1, ch. 79, consisted in buying up large quantities of wares with intent to resell at unreasonable prices. It influenced the Courts in their attitude towards contracts in restraint of trade. Although, therefore, the whole subject may some day have to be reconsidered, there is at present ground for assuming that a contract in restraint of trade, though reasonable in the interests of the parties, may be unreasonable in the interests of the public if calculated to produce that state of things which is referred to by Lindley and Bo wen, L.J J., as a pernicious monopoly—that is to say, a monopoly calculated to enhance prices to an unreasonable extent. At page 797, Lord Parker says,— The right of the individual to carry on his trade or business in a manner he considers best in his own interests involves the combining with others in a common cause of action, provided such common cause of action is undertaken with a single view to the interests of the combining parties and not with a view to injuring others. Then, at page 800, Lord Parker says,— It was strongly urged by counsel for the Crown that all contracts in restraint of trade or commerce which are enforceable at common law, and of combinations in restraint of trade or commerce which if embodied in a contract would be enforceable at common law, must be detrimental to the public within the meaning of the Act, and that those concerned in such contracts or combinations must be taken to have intended this detriment. Their Lordships cannot accept this proposition. On page 801, Lord Parker says,— It was also strongly urged that in the term " detriment to the public " the public means the consuming public, and that the Legislature was not contemplating the interest of any person engaged in the production or distribution of articles of consumption. Their Lordships do not take this view ; but the matter is really of little importance, for in considering the interests of consumers it is impossible to disregard the interests of those who are engaged in the production and distribution. It can never be in the interests of consumers that any article of consumption should cease to be produced and distributed, as it certainly would be unless those engaged in its production or distribution obtained a fair remuneration for the capital employed and the labour expended.
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Again, at the bottom of page 809, he says, — In the present ease, however, it was proved that the prices prevailing when negotiations for this agreement commenced were disastrously low owing to the " cut-throat " competition which has prevailed for some years. Even Isaacs, J., who decided in favour of the Crown, was apparently of opinion that there was, early in 1906 at any rate, some case for raising the price of coal considerably above its then selling-price of 7s. 6d. per ton. It can never, in their Lordships' opinion, be of real benefit to the consumers of coal that collieryproprietors should carry on their business at a loss, or that any profit they make should depend on the miners' wages being reduced to a minimum. (d) The Salt case, reported in 1914 Appeal Cases, page 461 (House of Lords), and in the Court of Appeal, vol. 107, Law Times, page 439 : In this case reference was made by counsel to the Court of Appeal because Lord Justice Kennedy made certain observations which he wished to quote. The judgment of Lord Justice Kennedy was a dissenting judgment, but the House of Lords reversed the judgment of the majority. Lord Justice Kennedy says, at page 447, Law Times Report, vol. 107, — The doctrine of the invalidity of a covenant or contract on the ground of its being in restraint of trade rests upon what is called public policy. How is one to ascertain and judge of the interests of the public ? Do they consist solely in the cheapness of a manufactured article ? Or may. the Judge consider the possibility, or even in some cases the probability, that unregulated competition may result either in destroying the production or the manufacture by making the trade unprofitable, or ultimately in raising the price of the commodity to the loss of the buyers by leaving a practical monopoly in the hands of the most wealthy or most powerful of the competitors ? In the same case, in the House of Lords, 1914 Appeal Cases, at page 469, Lord Haldane says,— " Unquestionably the combination in question was one the purpose of which was to regulate supply and keep up prices. But an ill-regulated supply and unremunerative prices may in point of fact be disadvantageous to the public. Such a state of things may, if it is not controlled, drive manufacturers out of business, or lower wages and so cause unemployment and labour disturbances. It must always be a question of circumstances whether a combination of manufacturers in a particular trade is an evil from the public point of view." Lord Parker, on page 480 of the same volume, says,— Some combination limiting output and regulating competition within the area, so as to secure reasonable prices, may have been necessary not only in the interests of the saltproducers themselves, but in the interests of the public generally. For it cannot be to the public advantage that the trade of a large area should be ruined by a cut-thraot competition. In view of the findings of the Sub-Committee on Trusts, and of the judgments quoted, counsel for the P.A.T.A. contended to the following effect: — (i) That it is unfair for a trader, or a section of traders, to cut the price of proprietary articles down to cost or below cost, and damage, if net ruin, the trade in that particular article, and thus act to the detriment of the manufacturer and to the detriment of every wholesaler and retailer interested in selling the goods. (ii) That the P.A.T.A. does not fix the prices of goods. These are fixed by the manufacturer, and the function of the committee of the P.A.T.A. is to see that these prices are not too high. (iii) That ■ it is not the object of the P.A.T.A. to prevent competition, to restrain trade, or to debar any person from selling articles on the P.A.T.A. protected list, so long as such person observes the minimum price fixed by the manufacturer. (iv) That it is quite fair that persons who break their agreements in respect of any article under P.A.T.A. conditions should be debarred from obtaining any of the goods in the protected list. (v) That people who resort to cutting are deliberately endeavouring to damage the trade of the manufacturer, and when they use goods for purposes of advertisement are also being unfair to the public through inducing them to believe that the prices of the goods in their shops are, as a whole, below those charged elsewhere. (vi) That price-cutting induces substitution, which is unfair to the manufacturer. (vii) That the Committee was bound to interpret the words of section 13 of the Board of Trade Act, " detrimental to the public welfare," in accordance with the quoted judgments of' the Privy Council. (viii) That many of the stores that cut prices, especially in the grocery trade, are working on too small a margin of safety, that their methods are not healthy and sound trading, and that owing to their precarious financial position they are really a menace to the community.
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THE CASE AGAINST THE P.A.T.A. 13. Counsel for the firms opposed to P.A.T.A. control first of all drew attention to the wording of section 13 of the Board of Trade Act, and held that under its provisions the Committee was entirely unhampered by precedent or any existing law; that the Board of Trade Act was peculiar to New Zealand, and under it the Committee might recommend amendment of the law, while at the same time taking into consideration the wider question of the public welfare. Counsel said that the law of England and New Zealand was generally against monopolies, but that if it could be shown in any particular trade or industry there was such a thing as price-cutting and trade warfare, and that no one in the trade could carry on at a, profit, then control was permissible. He cited the judgment of Sir Joshua Williams in the case of Merchants' Association of New Zealand v. The King (32 N.Z. L.R. 1268), known as the sugar case : — The effect of the monopoly and control sought to be obtained by the merchants was to keep up the price of sugar to subpurchasers, which, had it not been for the monopoly, would have been reduced, and to make it impossible for the public to get the benefit of such reduction. Prima facie such a monopoly would, in our opinion, be of a nature contrary to the public interest. There may, however, be other considerations which negative this conclusion. Thus, if the monopoly is reasonably necessary to prevent the destruction and crippling of an important local industry, and if it is reasonably necessary in order to secure the efficient and economical distribution of the product of that industry, the monopoly might not be contrary to the public interest although it tended to keep up prices. Counsel then argued — (i) That no important local industry was affected; nor was the efficient and economical distribution of products affected by the operations of his clients, the cash grocers, fancy-go.ods dealers, and storekeepers ; nor had any proprietary article been driven off the market by pricecutting. (ii) That the cost of living in New Zealand was extraordinarily high, and that any scheme to increase the cost of living was, prima facie, detrimental to the public interest. (iii) That the public was not represented on the P.A.T.A., and it had no say in the fixing of the prices of articles vended under P.A.T.A. rules. (iv) That the control of the manufacturer's price by the P.A.T.A. was a solemn farce, as the association's officials themselves admitted that they do not require the manufacturer to produce his costs ; that in the . case of foreign manufacturers it is impossible to investigate them; and that, as the most important element in determining what is a fair price to the consumer is the manufacturer's cost, the association cannot prevent an excessive price being charged. (v) That the association is a combination of manufacturers, wholesalers, and retailers to fix prices, to control supplies, and to eliminate the competition of outside firms and goods not registered by the P.A.T.A., to boycott traders who refuse to fall in with their scheme, to prevent reductions made possible by efficient trading from being passed on to the consumers, and, from an economic point of view, worst of all, endeavoured to stereotype the present wasteful system of distribution. (vi) Counsel quoted from page 9 of the Canadian report, as follows : —• In his " Modern Economic Tendencies " (1921) Sidney A. Reeve observes that in 1850 the effort employed in selling and distributing goods represented about 20 cents of the consumer's dollar, the productive effort represented the 80 cents ; whereas nowadays the consumer pays more like 50 cents for the article itself and 50 cents for the expense of selling and distributing it; and further contended that manufacturers and wholesalers associated with the P.A.T.A. would get a fixed margin of profit, irrespective of whether their business system was antiquated and out of date or otherwise, and whether they were attempting to improve their distributive system and reduce costs to the public or not. (vii) It was argued that all proprietary articles must, if the scheme operated, come within the ambit of the organization, first, because of the assured profit, and, secondly, because the retailer was bound to push a P.A.T.A. article in preference to one not registered. (viii) Counsel said that traders would be forced against their will to join the P.A.T.A. owing to commercial pressure, and that they would be bound to observe P.A.T.A. prices irrespective of overhead costs, and that consequently an increase of prices to the public was inevitable.
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(ix) Page xci of the Cost of Living Report, 1912, was quoted as follows : — 4. Your Commissioners are of opinion that an amendment to the Commercial Trusts Act is necessary, and should be widened to embrace all commerce and include the following additional provisions : — (1) That it is illegal for any combination of traders to arrange selling-prices to the retail trade or the public with a direct or indirect penalty to any trader refusing to do so. (Note : This would not prevent traders in any business mutually arranging to sell at uniform prices, without obligation or penalty to any one refusing to do so.) Counsel then remarked, as referring to the P.A.T.A., " Here, although there is no obligation or penalty expressed, the obvious intention is that if retail prices are not observed we will boycott you." (x) Reference was made by counsel to the scheme of improved distribution practised by " cash and carry" grocers, and it was claimed that if the P.A.T.A. functioned they would have to go out of business, and that the public would lose the very considerable benefits at present obtained. The effect on the co-operative stores was also referred to, and it was claimed that such stores would be prevented by the P.A.T.A. from giving their customers the benefit of their efficient methods of buying and distribution. It was stated by counsel that the difference in overhead expense between these businesses and credit businesses might vary as much as 10 per cent. (xi) It was pointed out that, as nearly the whole of the chemists and grocers would be forced into joining the P.A.T.A., no new proprietary product could come upon the market unless controlled by the association, because the retailers were bound not to recommend or push it in preference to a registered article. (xii) Counsel said that there was no evidence of a mass attempt to cut prices; that cutting was sporadic, and that the lines cut were generally unessential lines which did not seriously affect the buying public. Counsel further said that the goods most commonly cut, such as tooth-paste, baby-powder, and toilet soap, were those which lent themselves extraordinarily to competition and substitution; that these were more or less luxuries, and that any of them could be dispensed with and an equally good article used instead. OPINION OF THE ECONOMISTS. 14. The Professors of Economics at Victoria University College (Wellington), Canterbury University College (Christchurch), and Otago University (Dunedin) were supplied with — (a) A copy of the published constitution of the P.A.T.A.; (b) an interim report from the Registrar, Department of Labour, Ottawa, Canada, upon the operations of the P.A.T.A. in that country ; (c) the Board of Trade Act, 1919, and the Commercial Trusts Act, 1910 —and were asked to give opinions upon the proposed operations of the P.A.T.A. in New Zealand as disclosed by the constitution of the association. These opinions were accordingly given, and appear in the Appendix to this report. In addition, Professor Murphy, of Victoria University College, Wellington, appeared in person before the Committee, and his opinions were subjected to crossexamination by counsel appearing for the parties. This examination is embodied in the evidence section in this report. The opinions given by Professors Murphy and Tocker were distinctly unfavourable to the P.A.T.A., whilst that of Professor Fisher was more qualified. RETAIL SHOPS IN NEW ZEALAND. 15. The only official statistics that were of service to the Committee in regard to the number of retail shops in New Zealand related to chemists. Comparative statistics are available of the number of drug-stores to population in Great Britain, Canada, and New Zealand for the year 1925 as follows : Great Britain, one to every 4,500 people; Canada, one to every 2,624 people ; New Zealand, one to every 2,100 people. In the principal towns of New Zealand it is generally conceded that there are too many retail shops selling goods of the same class, and that chemists' shops particularly are in excess of the requirements of the public. It will be recalled that Mr. Justice Frazer, Judge of the Arbitration Court, made a pronouncement in respect of the number of small retail shops se ling general lines. He said (Book of Awards, vol. 25, page 390), — We are of the opinion that a multiplicity of small shops, in close proximity to one another, that are able to make a living—and a meagre living at that —only because they can take advantage of being able to observe unrestricted hours when some of the larger shops in their vicinity have to close at specified hours is not in the public interest. The public is generally not so well served by the very small shop, with its small range of stock and high ratio of rate of rent to turnover, as by the larger shop.
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SCOPE OF THE INQUIRY. 16. Section 13 of the Board of Trade Act, 1919, under which this inquiry is made, reads as follows : — The Board of Trade is hereby authorized and empowered to hold such judicial inquiries as it thinks fit (whether of its own motion, or on a reference from the Governor-General, or on the complaint of any person) into any matter whatsoever relative to any industry carried on or proposed to be carried on in New Zealand, or relative to any industry wherever carried on which may affect the industries of New Zealand, for the purpose of obtaining information which may be required for the due control, regulation, and maintenance of the industries of New Zealand ; the due observance, enforcement, or amendment of the laws relative thereto ; the discovery of breaches of those laws ; the prevention or suppression of monopolies, unfair competition, and other practices detrimental to the public welfare ; the proper regulation in the public interest of the prices of goods and the rates of services ; or for any other purpose relative to the industries of New Zealand. It is evident from a perusal of this section that the law contemplates that the Board of Trade should have very wide powers. The words that more particularly apply in the present case are, " the prevention or suppression of monopolies, unfair competition, and other practices detrimental to the public welfare ; the proper regulation in the public interest of the prices of goods and the rates of services; or for any other purpose relative to the industries of New Zealand." The main questions at issue are, therefore, — (а) Is the P.A.T.A. a monopoly detrimental to the public welfare ? (б) Does it engage or does it propose to engage in unfair competition or other practices detrimental to the public welfare ? (c) Does it interfere or does it propose to interfere with the proper regulation of the prices of goods ? 17. The Committee feels that the evidence and opinions submitted were sufficient to guide it in coming to its findings and recommendations. The evidence certainly covered a wide field, and dealt with, as has been shown, not only the proposals of the New Zealand P.A.T.A., but the operations of like associations in Canada, New South Wales, and Great Britain. The able interim report of the Registrar of the Combines Investigation Act of Canada (Mr. F. A. McGregor) and his associate (Dr. W. A. Mackintosh), dated 25th September, 1926, was also available to the Committee. In regard to the P.A.T.A. in Great Britain, the Committee has relied upon the publications issued by that body, the report of the Profiteering Committee in Great Britain, and the evidence of one witness, Mr. W. A. Charter (page 11 et seq.), a director of the English Wholesale Co-operative Association. In regard to New South Wales, Judge Beeby's report was made available to the Committee. Recent reports, however, of the association and price-lists issued were available. The local evidence, however, covered a wide field, and with the addresses of counsel, together with the statement of economists, all phases of the proposed activities and likely effect of the P.A.T.A. in New Zealand were fully gone into. FINDINGS AND RECOMMENDATIONS. 18. The Proprietary Articles Trade Association aims essentially at the maintenance of certain prices fixed or to be fixed for the resale of specified articles. The leading objective of the association is the elimination of what is commonly termed " price-cutting," the grounds for the association's action being that such price competition or price - cutting is detrimental to the best interests of manufacturers, wholesalers, and the general body of retailers. It is therefore necessary to examine (a) the extent and nature of price-cutting, (b) the extent of the detriment to manufacturing and trading interests arising therefrom, and (c) the justification or otherwise for the system of price-maintenance proposed to be adopted by the association. It is abundantly evident that the price competition or cutting may be classified under two headings — (1) Price-reductions which have an explanation and justification based upon certain savings in costs of distribution or sale, economies, or advantages in buying and/or trading necessity arising from' changes in demand or fashion or from financial reasons; (2) Price-reductions which are designed either to eliminate competitors or to draw customers in the hope of selling other articles upon which a relatively high rate of profit is fixed.
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The majority of the members of the Committee see no grounds for objecting to pricecutting of the class referred to in (1) above. To deny the justification of such price competition would be to suggest the elimination of all price competition, or, in other words, to challenge one of the fundamental principles upon which commerce the world over is based. Competition in price and its counterpart, competition in quality, are two most important factors in trade in any community, and it is to both of these that the consuming public must look for protection from exploitation and progress in distributive methods. The evidence in this inquiry shows that it is mainly price competition of this class which has given rise to objection by wholesalers and certain sections of the retail trades concerned. In some few cases goods have certainly been sold by retailers at net cost, and in many instances at prices which represent only a small percentage addition on net cost. In so far as net cost has merely been covered, distribution has been carried out at a loss equivalent to the cost of selling; but these instances are so immaterial in extent that it would be unreasonable to impugn the validity of the general price practice of the retailer in question. Such exceptional instances of price-cutting are usually of a sporadic nature, and constitute extreme instances of the general sales policy of such retailers rather than special " draw lines " having a special objective. The effect of such sales, both from the point of view of buyer and seller, is lost in the averaging of prices and profits on many other lines of goods. Retailers doing business on the basis of a generally low level of prices have been shown to possess certain definite and fundamental advantages over these competitors. The advantages of these retailers . may be enumerated as follows : — (1) They pay cash and secure special discounts from suppliers; (2) They buy in large quantities and secure " quantity" discounts ; (3) They buy direct from manufacturers abroad; (4) They make in some instances their own shipping arrangements ; (5) They eliminate from their costs the expenses incidental to credit and delivery services ; (6) By selling at lower prices for cash they secure a greater volume of business than they otherwise would do, and consequently reduce overhead and selling expenses ; (7) By contrast with such businesses as those of retail chemists they have evident savings in selling-costs. The majority of the members of the Committee consider that nothing should be done to limit the power of traders to bring producer and consumer as close together as circumstances will allow. While some improvement has been made in recent years in the Dominion in retail distributive services, there is a continuous need for progress in that matter; and the experience of other countries indicates possibilities of much greater improvements, as, for example, in the increased adoption of the system of grocerterias already referred to in this report. Bearing further upon the matter of the extent and nature of so-called price-cutting, it may be said that the general explanation of this lies in the fact that the selling and overhead costs of some retail grocers is as low as 6 per cent, on turnover, while with other grocers (giving additional service by way of credit and delivery, and organized and conducted on fundamentally different principles) the distributive cost runs as high as 20 per cent, on turnover. Retail chemists —the other class of retail trader concerned in this inquiry—find it necessary to have a still greater average margin, which approximates 30 per cent. To suggest that the firstmentioned class of trader is " cutting" prices merely because he sells below the prices of the other classes referred to is manifestly unreasonable. In relation to the matter of sales below cost having the objective of attracting custom, the majority of the Committee is of opinion that this is an evil, and that, like its converse, the selling of goods at unreasonably high prices, it is detrimental to public interest. Whilst the Board of Trade Act gives power for the making of regulations for the suppression of mtethods of competition, trading, or business which are considered to be unfair or prejudicial to the public welfare, and further gives power to maintain the prosperity of the industries and the economic welfare of the Dominion, the Committee is of opinion that such regulations are unnecessary in view of the limited extent to which harmful price-cutting is practised. We consider that the position is adequately safeguarded by the powers of investigation contained in the Board of Trade Act, and we would suggest that in any cases where traders or manufacturers feel aggrieved by the selling of goods below cost the Department of Industries and Commerce should be askecl to make such investigation as in each case appears necessary. It seems probable that in all such instances adjustments could be effected without recourse to the extreme step of fixing, under the Act, minimum retail selling-prices.
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Turning to a consideration of the extent of the detriment to manufacturing and trading interests as a result of so-called price-cutting, the Committee believes that some financial loss has been occasioned and some trading difficulties brought about. So far as manufacturers are concerned, it may be said at once that the lines proposed to be listed by the P.A.T.A. are almost wholly of overseas origin. Learned counsel on both sides have expressed the view that under certain circumstances manufacturers may fix and enforce resale prices of their goods. The experience of witnesses shows that this is a substantial safeguard to manufacturers against any evil arising from price-cutting. It has to be recognized, too, that, while a manufacturer may suffer loss of business through disorganization of distributive channels arising from price competition, there is likely to be, as. an offset, some increase in the demand due to sale by some retailers at lowest possible prices. Wholesalers have undoubtedly suffered as a result of the keener competition among retailers, which in its turn has increased the intensity of competition in the wholesale section. Margins of profit have been reduced and financial risks have been taken which in some instances have resulted in definite losses. It is, however, not unlikely that the difficulty arises from an excessive number of wholesale distributors whose position can only be maintained with comfort to themselves by the establishment of a maintained or fixed margin of wholesale profit over at least an appreciable proportion of lines handled. The P.A.T.A. would ensure some such result. While the majority of the Committee recognizes the difficulty of manufacturers and wholesalers in this matter, the opinion is held that these difficulties are not such as to justify in full the claims put forward. The P.A.T.A. proposes to arrange for the fixation of resale prices and to maintain those prices by a system of boycott, the effect of which is to withhold supplies of all articles registered with the P.A.T.A. should a trader sell one article below the fixed selling-price. In view of the foregoing, the majority of the members of the Committee believes that the proposals of the association constitute a danger to the public, are too far-reaching in effect, and are not justifiable under existing conditions. The element of force obtained by the boycott is a weapon which no body of citizens could use without coming sooner or later into serious conflict with public opinion. The possibility of abuse and private vengeance cannot be ignored. While the proposed operations of the association might be to the benefit of certain (mainly overseas) manufacturers, wholesalers, and certain retailers, the Committee cannot overlook the effects on the public, the word " public " being interpreted in its widest sense. The majority of the members of the Committee considers that the Proprietary Articles Trade Association is a combination detrimental to efficiency in distribution, likely to unduly encourage the credit system, dangerous to public interest, and generally retrogressive. The majority of the members of the Committee therefore recommends that, if necessary, the Government should arrange for the making of regulations, under clauses (a) and (b) of subsection (1), section 26, of the Board of Trade Act, 1919, to prevent the Proprietary Articles Trade Association from operating in New Zealand. Mr. W. R. Hay ward finds himself unable to agree with the findings of the majority of the Committee, and accordingly he submits herewith for your consideration a minority report. We all desire to place on record our appreciation of the work of the secretary, Mr. F. Johnson, of the Department of Industries and Commerce. Not only in his secretarial duties but in important accountancy investigations arising out of the inquiry Mr. Johnson performed most satisfactory services. We have the honour to be, Sir, Your obedient servants, J. W. Collins, Chairman. W. B. Montgomery. M. J. Reardon.
iii—H. 44a.
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MINORITY REPORT. 19. I conclude from the evidence submitted that Hardship and loss of business are suffered by manufacturers and distributors owing to the practice of cutting prices below a safe trading margin of profit. Price-cutting has existed for a long time, but has become intense during the last four or five years. Objectors to the operations of the P.A.T.A. contend that a dealer, having purchased certain goods, has a right to dispose of them as he wishes, without having regard to the interests of the manufacturer or others. I cannot concur in this view, as I consider the manufacturer has the right to state at what price and on what conditions his goods are to be resold; otherwise his business may be much damaged, and his product may even be driven off the market. In reaching my conclusions I am guided to some extent by the experience of the P.A.T.A. in Great Britain, where the association has been in operation nearly thirty years. The margins of profit allowed by the P.A.T.A. there are not so large as the retailers wish, and are lower than the margin obtainable on uncontrolled goods of similar classes. The principles underlying the exchange of goods are world-wide, and I cannot admit that the public interest would be adversely affected by the operation of a similar association in New Zealand, especially as in this country the P.A.T.A. makes provision for a rebate from the fixed retail price in favour of the cash purchaser, and also it does not discriminate against co-operative societies. According to the evidence submitted, and also in the opinion of an economist of note, quoted during the inquiry, the greatest saving that can be made by the " cash and carry" system as. compared with the usual store is about 5 per cent., and the P.A.T.A. suggests that this saving be passed on to the consumer. The P.A.T.A. has expressed its willingness that an officer of the Board of Trade be associated with its executive committee while prices are being considered, or it is agreeable to submit the suggested prices to the Board of Trade before bringing them into operation. I do not consider either of these precautions necessary, as the Board of Trade Act gives ample power to deal with any abuses which may be attempted. " Experience generally raises some doubts as to the efficiency of legislative methods intended to abolish such organizations" as that under consideration. Any Governmental attempt at suppression of the P.A.T.A. will, in my opinion, be difficult to enforce, and will hinder and hamper the business of the manufacturer and trader, the continuance of whose trade depends on the creation and maintenance of the goodwill of the public. I have the honour to be, Sir, Your obedient servant, W. R. Hayward.
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MINUTES OF PROCEEDINGS. Monday, 21st February, 1927. The first meeting of members of the Committee was held on Monday, the 21st February, in No. 21 Committee Room, Parliamentary Buildings. The Hon. A. D. McLeod, Minister of Industries and Commerce, met the Committee and briefly explained the reasons why the Committee had been set up. As far as the appointment of Chairman was concerned he had no recommendation to make, but left the appointment entirely in the hands of the Committee. The Committee then proceeded to elect a Chairman. It was unanimously resolved that Mr. J. W. Collins be appointed Chairman. The authority conferred by the Act on the Minister to bring the Committee into being was read. Letters were received from the Star Stores, Ltd., Christchurc.h, intimating that they would appear before the Commission to give evidence ; and also a letter from Messrs. Young, White, and Courtney, solicitors, intimating that they would appear on behalf of the P.A.T.A. The Secretary was instructed to write to Professor A. H. Tocker, of Canterbury College, requesting him to submit a report of what would be the economic result of the operations of the P.A.T.A. ; also inviting him to appear before the Committee at an early date. The Committee rose at 12.30 p.m. The Committee resumed its sittings at 2.30 p.m. The question of procedure was discussed with counsel representing witnesses who desired to give evidence, and at the suggestion of the Committee Mr. M. Myers, K.C., agreed to open the case on behalf of the P.A.T.A. The provisions of the Act prevented the proceedings being open to the public. The meeting then adjourned until Tuesday, at 10.30 a.m., when the taking of evidence was commenced. Tuesday, 22nd February, 1927. The Committee met at 10.30 a.m. All members of the Committee were present. The following witnesses were examined on oath : Emil William Ernest De Fenq, organizer of the P.A.T.A. ; W. T. Charter, director of the English Wholesale Societies, Ltd. Wednesday, 23rd February, 1927. The Committee met at 10.30 a.m. All members of the Committee were present. The following witnesses were examined on oath : Emil William Ernest De Fenq ; John Pearson Page, New Zealand representative for Potter Birks, Ltd. ; Albert George Carey, grocer, Oamaru. Thursday, 24th February, 1927. The Committee met at 10.30 a.m. All members of the Committee were present. The following witnesses were examined on oath : E. S. Pilcher, New Zealand representative of the Palmolive Co. ; W. S. Larkin, manager of Sharland and Co., Ltd. ; J. Stark, manager of Kempthorne, Prosser, and Co., Ltd., Dunedin ; J. A. Lorrie, grocer, Timaru. Friday, 25th February, 1927. The Committee met at 10.15 a.m. All members of the Committee were present. It was resolved that (1) the evidence be printed as revised ; (2) the whole of the evidence be revised by Mr. Montgomery, and that he submit to the Committee proposed excisions of a confidential nature. The following witnesses were examined on oath : Edward Smith, chemist, Auckland ; Frederick Robert Marriott, New Zealand manager, Bourjois et Cie, France; James C. Burberry, chemist, Hataitai; H. Hook, manager for 0. Hurney, grocer, Cuba Street, Wellington ; J. H. Barker, secretary New Zealand Master Grocers' Federation, Auckland. The meeting adjourned at 4.30 p.m. until Monday, the 28th instant, at 10.30 a.m. Monday, 28th February, 1927. The Committee met at 10.15 a.m. All members were present. The following witnesses were examined on oath : H. J. Hay, commercial traveller ; A. F. Crisp, grocer, Wellington ; A. W. Press, manager, Thompson Bros., Ltd., merchants, Wellington ; E. Salmon, Messrs. Salmon and Spraggon, manufacturers' representatives, Wellington ; J. Mcllraith, grocer, Wellington ; J. Roberts, secretary, New Zealand Alliance of Labour ; W. Nash, secretary, New Zealand Labour Party. The meeting adjourned at 4.30 p.m.
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Tuesday, Ist March, 1927. The Committee met at 10.15 a.m. All members were present. The following witnesses were examined on oath : R. A. Wilkie, manager, Star Stores, Dunedin and Christchurch ; A. L. Cropp, manager, Edmonds and Co., Ltd. ; B. Sutherland, manager, Sutherland's Cash and Carry Stores, Wellington. The meeting adjourned at 4.30 p.m. Wednesday, 2nd March, 1927. The Committee met at 10.15 a.m. All members were present. The following witnesses were examined : B. Sutherland, manager, Sutherland's Cash and Carry Stores, Wellington ; W. Tuck, grocer, Christchurch ; Professor Murphy, Professor of Economics, Victoria College, Wellington ; G. G. Marriott, grocer, Auckland ; G. R. Horsborough, grocer, Hawera ; A. A. Kelly, grocer, Hastings, Napier. The meeting adjourned at 5.30 p.m. Thursday, 3rd March, 1927. The Committee met at 10.15 a.m. All members were present. The following witnesses were examined : W. Earle (of Earle Bros.), grocer, Johnsonville and Khandallah; N. B. Boyd, manager, Macduffs Ltd., Wellington; R. A. Wilkie (recalled); R. J. L. Thomson, fancy goods, Wanganui. The meeting adjourned at 5.30 p.m. Friday, 4th March, 1927. The Committee met at 2.30 p.m. All members were present. Mr. M. Myers summed up on behalf of the Proprietary Articles Trade Association. The hearing of evidence having been completed, the Committee adjourned until the 29th inst. Tuesday, 29th March, 1927. The Committee reassembled at 10.30 a.m. All members were present. Correspondence was read and received from the secretary, Public Service Association ; Potter and Birks ; Kempthorne, Prosser, and Co., Ltd. ; T. J. Edmonds, Ltd. * The Committee discussed the order of precedence in framing the report to the Minister. Wednesday, 30th March, 1927. The Committee met at 10.30 a.m. All members were present. Thursday, 31st March ; Friday, Ist April ; Monday, 4th April ; Tuesday, sth April ; Wednesday, 6th April ; Thursday, 7th April, 1927. The Committee met on these days and discussed the report, drafted and completed same.
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INDEX TO WITNESSES.
iv—H. 44a,
XXI
Name of Witness. Address. Occupation. : Page. I Barker, John Heaton .. .. Auckland .. Secretary, New Zealand Grocers' Association .. 73 Boyd, Noel Blaney .. • • Wellington .. Director, Macduffs Ltd., Fancy Goods .. 128 Burbery, Charles James Staunton-Vere Wellington .. Chemist .. .. .. . . .. 67, 72 Carey, Albert George .. .. Oamaru .. Grocer .. .. .. .. .. 37 Charter, Walter Thomas .. .. London .. Director, English Wholesale Societies, Ltd. .. 11 Crisp, Arthur Frederick .. .. Wellington .. Grocer .. .. .. .. .. 79 Cropp, Albert Leonidas .. .. Christchurch.. Manager, T. J. Edmonds, Ltd. .. .. 107 de Fenq, Emile William .. .. Wellington .. Organizer, New Zealand Proprietary Articles 17 Trade Association Earl, William .. .. .. Johnsonville.. Grocer .. .. .. .. .. 124 Hay, Harold James .. .. Wellington .. Manufacturers' Representative .. .. 78 Hook, Harold .. .. .. Wellington .. Grocer .. .. .. .. .. 68 Horsborough, George Robertson . . Hawera .. Grocer .. .. .. .. .. 119 Kelly, Alfred Alexander .. . . Hastings ., 1 Grocer . . .. .. . . .. 122 Larkin, William Fair .. .. Wellington .. Manager, Sharland &. Co., Ltd. .. .. 39 Marriott, Frederick Robert .. .. Wellington .. New Zealand Manager, A. Bourjois et Cie .. 63 Marriott, George Gladstone .. . Auckland .. ; Grocer .. .. .. .. . . 116 Murphy, Bernard Edward .. .. Wellington .. Professor of Economics, Victoria University .. Ill Mcllraitli, John .. .. .. Wellington .. . Grocer .. .. .. .. .. 88 Nash, Walter .. .. .. Wellington .. Representative, National Labour Legislation 92 Committee Norrie, John Alexander .. .. Timaru .. Grocer .. .. ,. .. .. 55 Page, John Pearson .. .. Auckland .. Representative of Potter and Birks of New 34 Zealand, Ltd. Pilcher, Ernest Sydney .. .. Wellington .. New Zealand Representative, Palmolive Co. .. 52 Press, Arthur William .. .. Wellington .. Manager, Thompson Bros., Ltd. .. .. 83 Roberts, .fames .. .. .. Wellington .. Secretary, New Zealand Alliance of Labour .. 90 Salmond, Edwin .. .. .. Wellington . . Of Salmond and Spraggon .. .. .. 85 Smith, Edward .. .. .. Auckland .. Chemist .. .. .. .. .. 58 Stark, James .. .. .. Dunedin .. Manager, Kempthorne, Prosser, and Co., Ltd... 46 Sutherland, Benjamin .. .. Wellington .. Grocer .. .. .. .. .. 109 Thomson, Ralf James Lander .. Wanganui .. Fancy Goods .. . . .. .. 137 Tuck, William .. .. .. Christchurch.. Grocer .. .. .. .. .. 110 Wilkie, Robert Abraham .. .. Christchurch.. Grocer .. .. .. .. .. 100,135
H—44A.
MINUTES OF EVIDENCE. Wellington, Monday, 21st February, 1927. Committee : Messrs. J. W. Collins (Chairman), W. R. Hayward, W. B. Montgomery, and M. J. Reardon. A preliminary meeting of the Committee was held in Room 21, Parliamentary Building, on Monday, 21st February, 1927, at 2.30 p.m. The following also attended : — Mr. M. Myers, K.C. (with Mr. Young), representing the P.A.T.A. Mr. M. J. Gresson (Christchurch), representing the Self-help Company, of Wellington, and the Star Stores Company, of Christchurch. Mr. R. Kennedy, representing Macduffs Limited, of Wellington. Mr. H. F. O'Leary, representing the members of the Amalgamated Society of Railway Servants. (Mr. O'Leary said that the members of the society considered they had sufficient interest in the result of the inquiry to be heard.) Mr. O'Leary also appeared for Mr. W. R. Boyd, grocer, of Day's Bay. Mr. C. B. Walker, representing Earl Bros., grocers, of Johnsonville and Khandallah, and the New Zealand Railway Tradesmen's Association. The Chairman said the members of the Committee had that morning met the Hon. Mr. McLeod, Minister of Industries and Commerce, who had stated that the procedure to be adopted in conducting the inquiry was left entirely to members of the Committee, and it was also left to the Committee to decide whether it should travel to other centres. The object of the present meeting was to decide the times of meeting. He did not know whether Mr. Myers would open the case, or whether he would expect those who sought the inquiry to open it. The Committee had decided to leave that matter to counsel themselves, but would prefer that Mr. Myers should open, for the sake of sequence. Mr. Myers : I have no objection to that. For some reasons I should have preferred that those who are attacking us should open, but I quite understand that this Committee can frame its own order of procedure, and we are prepared to place ourselves in the hands of the Committee. I would like to say that my opening the proceedings will necessarily mean that I may have to call some evidence in rebuttal of any statements which may be made, because, naturally, I cannot anticipate all possible kinds of objection. Mr. Gresson: That will suit me entirely. The difficulty otherwise would have been that we would have been asked to attack an association as to which we have no information. Mr. Myers : Nevertheless, you have made the attack already. Mr. Collins: With regard to the question as to whether it is necessary or expedient to visit other centres, this, I take it, is a matter that the Committee will decide itself. We are somewhat in a difficulty in that the advertisements calling for witnesses or persons capable of giving any information on the subject have met with little response—certainly insufficient to warrant the expense of going to other centres. Mr. Myers: I doubt very much whether the expense of visiting other centres would be justified, but we might reserve our decision on that till later on. Mr. Collins: Do you think, Mr. Myers, we are likely to obtain evidence outside Wellington different from that which we obtain in Wellington ? Mr. Myers: So far as the evidence against the P.A.T.A. is concerned, I should say, certainly not. So far as the evidence for the P.A.T.A. is concerned, as you know from your official experience, there are a great many manufacturers outside Wellington, and it may be necessary for us to have representative manufacturers here from other centres, but I cannot definitely say at this stage. Mr. Gresson : From our point of view I do not think there will be any reason to go to the other centres. Once you have heard the type of evidence we will lead in Wellington, it will be the same in Canterbury and Dunedin. I think it would be merely duplicating the evidence if we went from one centre to another. Mr. Collins: We naturally regard ourselves as a Committee of investigation for the whole of New Zealand, and we do not wish it to be thought that in not visiting the other centres we desire to choke of! any one who might wish to be heard. Mr. Gresson : I have brought one of my clients to Wellington from Christchurch to give evidence. Mr. Collins: With regard to the presence of the Press, the Committee has concluded that they will leave it to you to decide whether they are to be present or not, or as to whether confidential evidence should be reported or not. If any witness objected to his evidence being reported we could honour his wishes, but we decided that you should be asked whether you agreed to the Press being represented. -
I—H. 44a.
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[MR. MYERS.
Mr. Myers: That places counsel, I think, in a rather invidious position. So far as the P.A.T.A. is concerned, we have not the slightest objection to anything which occurs here being made public ; but there are witnesses—business men—who say that if their business is to be made public they would sooner suffer any inconvenience or loss than give the details of their business for publication in the Press —or, for that matter, anywhere else. May I refer the Committee to the Board of Trade Act, section 21 ? That section states that an inquiry shall be held in private. Is not the Committee bound by that ? I cannot help feeling that the provision contained in section 21 is mandatory. Mr. Gresson : I share my friend's view that the section is mandatory. Mr. Reardon : The essence of-the whole thing is that the public should know what is taking place. Mr. Gresson: The objections I have are similar to those of my learned friend. I think, with him, that the section is mandatory. And, while neither of us, I am. sure, wish to burk inquiry in any way, it would not be satisfactory for me to have evidence taken up to a certain point, and then suddenly when it came to balance-sheets and profits have to ask the Press not to report it. Mr. Myers : The general evidence, of course, I should prefer to have published : I mean the general evidence as to the reasons for the existence of the association, the circumstances which have led to its formation, and as to the cutting tactics and the effects of those tactics. But the difficulty will arise the moment any trader is examined as to his private business affairs. Mr. O'Leary : I am bound to say that I start out with a prejudice against the body which Mr. Myers represents. We are open to conviction, of course, if we can be persuaded that the activities of his association do not mean what we think they mean. I think, however, that my friend's contention is correct —that the inquiry must be held in private. That does not mean that this Committee cannot sanction the publication by the newspapers of what they choose to allow them to publish ; but I am afraid the provisions of the section are mandatory and that the hearing must be in private. Mr. Walker: I would like to endorse the views just expressed by my learned friends. The question of profit and loss accounts and balance-sheets is one which we all know is closely guarded by business men. I suggest, therefore, that it would be bound to hamper the course of proceedings if private figures of any business are going to be published in the newspapers, or even finally published in a report issued by the Committee. I cannot see that any disservice would be done to the public by conducting the proceedings in private. Mr. Collins : We are indebted to you, gentlemen, for pointing out section 21, and we agree with you that it leaves us no option but to conduct the inquiry in camera. How far do you think the section would govern the publication of the evidence as supporting the report of the Committee ? Mr. Gresson : I would suggest that when the Committee finally decide on their report, and attach their evidence, they should ask counsel on either side whether they wish any part of the evidence deleted. Mr. Myers : We should have to leave that to the discretion of the Committee. Mr. Collins : I think it would be helpful, when a witness arrived at a stage when his evidence should be regarded as confidential, that that fact should be indicated. Mr. Myers: I think there will be no difficulty about that. (After some discussion it was agreed that the Committee should commence its sitting at 10.30 a.m. on the following day, Tuesday, 22nd February, 1927, and that at the close of each day's proceedings the Committee would fix the hours for the next meeting.)
First Da? : Tuesday, 22nd February, 1927. Mr. Myers (representing the P.A.T.A.), addressing the Committee, said : Mr. Chairman and gentlemen, as arranged yesterday, I propose to open, perhaps at some length, the case for the P.A.T.A. My opening, of course, is subject to the observation made yesterday that I may take some time because Ido not know precisely what it is we have to meet. Therefore, though I cheerfully accept the position, it is a difficult one, because one is in the position to a certain extent of having to prove a negative. However, I quite understand that this is a mere inquiry, and is not like an action at law, and that therefore any difficulty in that respect cannot possibly operate in the minds of the Committee to the prejudice of either one side or the other. The inquiry is under section I' 3 of the Board of Trade Act. That section authorizes the holding of inquiries for certain purposes. One of these purposes is the discovery of breaches of the law ; another, the prevention or suppression of monopolies, unfair competition and other practices detrimental to the public welfare, the proper regulation in the public interest of the prices of goods, and so on. Let me say at once that that section becomes very important in two ways. True, this Committee has to inquire as to whether in its opinion the practices proposed to be adopted by the P.A.T.A. are fair, and whether they are or are not contrary to the public interest; but in determining that question the Committee has to look into the practices of those traders whose actions have called for this action on the part of those persons who form the P.A.T.A. Let me say at once that one of the worst evils that certain trades have to meet with is unfair cutting of prices ; and it is submitted —and with confidence—that it is unfair on the part of a trader, or a section of traders, to cut the price of a line, particularly what are called the proprietary lines of goods, down to the cost, or below the cost, of those goods, and thus damage, if not ruin, the trade in that particular article, to the detriment of the manufacturer, and to the
2
MR. MYERS.]
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detriment of every wholesaler and retailer who is interested in the selling of the line and who is desirous of obtaining a fair and reasonable margin of profit on his dealing in the line, and no more than a fair and reasonable margin of profit. I want to emphasize that point, gentlemen, because I repeat that it is because of the action of traders in cutting prices that the formation and establishment of the P.A.T.A. has become necessary in this country, as it has become necessary in other countries. Ido not want to elaborate that point at present, but in the course of evidence illustrations will be given to this Committee in verification of the point I am making. I would like to mention one line in passing, and that is Edmonds' baking-powder. It is a fact, gentlemen, that Edmonds' baking-powder is being sold by retail traders at less than its cost. What does that mean ? That is not to the public interest. Surely it is to the public interest that the manufacturer should continue his manufacture—particularly if it is the manufacture of a good article—and that he should get a fair and reasonable profit. If retail traders cut that particular line, or any line, if they are to maintain themselves and their families and to earn a living they must get their profit from something, else. And is it to the public interest that they should be cutting this line and that line, and, by attracting customers to their shops, sell other lines at probably higher prices than other traders are charging ? That is not to the public interest. That is not fair trading —at least, not fair trading as the bulk of the mercantile men —whether they be manufacturers, wholesalers, or retailers — understand fair trading. I propose to leave that aspect of the matter for the moment. I shall show by evidence that an association of this character became necessary in the interests of manufacturers, in the interests of wholesalers, and in the interests of retailers. And if it became necessary in the case of these three classes of traders, then I submit, on authority and on common-sense, that it became necessary in the interests of the public, or, at all events, that its establishment was not contrary to the interests of the public. I need hardly point out that a manufacturer always has the power to fix the prices at which his goods shall be sold by wholesalers who purchase from him, and retailers who deal with the goods. The Chairman : As an individual ? • Mr. Myers: Yes, as an individual. It may be that certain difficulties arise in his path—that the line in which he is dealing, and the line he is manufacturing, comes within the ambit of the Commercial Trusts Act; but we need not trouble about that in this case, because I tell you at once that so far as the P.A.T.A. is concerned it does not contemplate touching foodstuffs at all. It proposes to touch —I am not using the words "to deal," because the P.A.T.A. does not deal in anything—it proposes to touch, I say, only proprietary lines other than foodstuffs, because you may conceivably have proprietary lines which are foodstuffs, but it does not intend or contemplate to touch foodstuffs at all. Mr. Gresson : Apart from proprietary foodstuffs ? Mr. Myers : Not even infants' foods. Mr. Collins : Nor ingredients used in the preparation of foodstuffs ? Mr. Myers : No. That is an essential difference between the P.A.T.A.'s proposed operations in New Zealand and the operation of the P.A.T.A. in Australia. In Australia the P.A.T.A. touched foodstuffs as well as proprietary lines in the ordinary sense of the word, and it is partly because they touched these foodstuffs that Mr. Justice Beeby's report was to a certain extent, at all events, of a hostile character. I shall deal with that later on. I want it, therefore, to be understood at once that the P.A.T.A. in New Zealand has no intention of touching foodstuffs, but only the proprietary lines in the general sense, apart from foodstuffs. I apprehend that there is no doubt in the minds of the Committee that what I have said with regard to the rights of the manufacturer is correct. Mr. Gresson : I admit it. Mr. Myers : But if there be any doubt I need do no more than refer to the judgment of our own Full Court. I refer to the case that is generally known as the " Big Ben " case, reported in 1921 N.Z. L.R. 1 ; and the particular portion of the judgment to which I desire to refer is at page 11, where Mr. Justice Edwards says : — The manufacturers have fixed not merely the prices at which they will sell the goods to traders, but the prices at which those traders mu3t sell to the public. This is a well-known commercial usage common in many trades, and the Solicitor-General does not dispute its validity. Now, gentlemen, it may be thought—l do not know whether it is thought or not—that the P.A.T.A. is a price-fixing organization. It is nothing of the kind. The P.A.T.A. does not fix prices. The prices which are fixed are fixed by the manufacturer in each and every case, subject only to this observation : that the prices which the manufacturer proposes to fix it is intended should be referred to the committee of the P.A.T.A., whose only function is to see that the prices proposed to be charged are not too high ; because it is not in the interests of a manufacturer, nor is it to the interests of a wholesaler or retailer, that the price at which a proprietary article is sold should be too high, because that checks sales and does not promote them. Moreover, it is not the object of the P.A.T.A. to prevent competition. It is not the object of the P.A.T.A. to restrain trade in the ordinary meaning of that term. The P.A.T.A. primarily does not in any way say or suggest that any person should be debarred from selling this or that article, or any article. So far as the P.A.T.A. is concerned, any article which comes upon its list may be sold by anybody. All that the association is concerned with is that the price which is fixed by the manufacturer for the retail sale of that article is observed. And all that the association intends to do in the event of its ascertaining that any particular retailer is not adhering to the price is to report that to the manufacturer, with the idea, of course, which I admit, that unless the offending retailer is thereafter prepared to adhere to the price he shall not
3
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[MB. MYERS.
be permitted to sell the article. Is not that fair ? What is there contrary to the public interest in that ? It is the mere protection of trade—the trade of the manufacturer and of every other honourable trader who is dealing in the article, and who is desirous of obtaining a fair and reasonable profit on his dealing in the article, and no more than a fair and reasonable profit. Mr. O'Leary: Will you tell us that that is the only penalty ? Mr, Myers: As I understand it, that is the object. But the representatives|of the association will be giving evidence, and they will perhaps be able to amplify it. But Igo further still, and I say with confidence that a trader who uses a proprietary article for the purpose of advertising—in other words, for the purpose of selling it at or below cost in order to enable him to do business in other lines—l say that person is not an honourable or honest trader. He is deliberately endeavouring to damage the trade of the manufacturer, to begin with. And I say that his course of conduct is not fair to the public. Take, for instance, the case of a dealer in fancy-goods. I dare say you gentlemen of the Committee know that so far as most lines of fancy-goods are concerned the public does not know their value. And if a fancy-goods dealer advertises, we will say, Cuticura soap, which costs him, say, Is. Id., or thereabouts, at Is. or ll|d., with the idea of getting customers into his shop, and selling them other goods on which he is making perhaps 100 or 200 per cent, profit, I ask, is that in the public interest ? And that is the question you gentlemen will have to consider in connection with this inquiry. I propose to put in a copy of the constitution of the P.A.T.A. I do not know that I need do more at present than read clause 3, which is the " Objects " clause. That clause reads, —■ 3. The objects are— (a) The discussion of matters of common interest to the branches of the trades represented, with a view to decision and, if necessary, concerted action. {b) The taking of such steps as the association is advised are legal to deal with cutting of prices; to maintain fair distributing prices; to give advice and render assistance to its members in preventing substitution, and to restrain excessive prices of listed proprietary articles. (c) The doing of all such other things as may appear to be of benefit to the trade. And, as no doubt you gentlemen of the Committee know, membership is open to manufacturers of proprietary articles, or their agents, and to wholesale distributors and retail distributors. This is not the first inquiry into the operation of the P.A.T.A. I said yesterday, and I say again now, that the operations of this association—or of its parent association—have been inquired into in Great Britain. And I shall put in the findings and decisions by a sub-committee appointed by the Standing Committee on Trusts to inquire into the principle of fixed retail prices. It is contained in a parliamentary paper dated 1920, and the inquiry was made under the provisions of the Profiteering Act, 1919. The report, gentlemen, is of so much importance that I shall make no apology for reading it in full. It has to be read some time or other, and I think it would be an opportune time now. The members of the Committee were Mr. Douglas Wenham (Chairman), Mr. G. W. Bailey, Mr. E. Bevin, Mr. John Hilton, Mr. J. W. Hope, Mr. T. B. Johnston, Blr. H. L. Symonds, and Mr. Sidney Webb. The report is the report of all these gentlemen, except Mr. Sidney Webb and Mr. Ernest Bevin, who preferred not to sign the report, as they had been unable to attend any meetings of the sub-committee. Mr. O'Leary : Is it stated why those gentlemen could not attend the meetings ? Mr. Myers : No ; it says they were unable to attend. Mr. Hayward : There was no minority report ? Mr. Myers : No. There is an addendum by Mr. Hilton, but Ido not think it will be necessary for you to read it. Ido not think there is anything in the addendum which has any real bearing on the matters now under consideration. The report is as follows :— To the Chairman, Standing Committee on Trusts. Sib, — Terms of Reference. We were appointed to report the extent to which the principle of fixing a mimimum retail price by manufacturers or associations prevails; what are its results and whether the system is, in the interests of the public, desirable or otherwise. I would pause at this stage to remark that it may be said with truth that the English legislation on the subject of trusts and of the Board of Trade is not the same as ours. My answer to that is that it is not material at the moment, for this reason : that this Committee was charged to inquire into and report upon the same point as you gentlemen are asked to inquire into and report upon—that is to say, as to whether or not the operations in question, which included there the operations of the association, and which are here the operations of the association, are or are not contrary to the public interest. Mr. Collins : This Committee's inquiry is rather wider than that. Mr. Myers : No doubt; but it all comes back to a question of the public interest. They were asked to inquire as to whether the system of fixing a minimum retail price was desirable or otherwise, and I may say at once that they came to the conclusion that it was desirable. The report continues, The Committee have held five meetings, and have heard evidence from eight witnesses. They have also had before them a list compiled by the Profiteering Act Department comprising a large number of articles of common use, retail prices of which are known to be fixed, and a memorandum by Sir William Glyn Jones, describing the genesis and procedure of the Proprietary Articles Trade Association, which embraces solely articles dealt in by retail chemists and druggists and vendors of patent medicines. While recognizing that a considerable further body of evidence was available, and that we might have continued our investigations so as to cover a large field, and to include in our report a fuller account of the various methods of, and schemes for, fixing retail prices which we understand to be in existence, we are
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unanimous in believing that we have sufficient information before us to enable us to present our general conclusions on the subject. We consider it important that our report should be presented without any avoidable delay, as the subject for consideration is one which has recently been referred to in the Press, and has on several occasions been before local profiteering tribunals. The witnesses before us have included those representing various classes of manufacturers, merchants, and retailers, who have practical experience of the working of the different systems of price-maintenance in vogue, and we have also had the benefit of the views of a representative of the co-operative movement, who is also a member of the Consumers' Council, and of the Standing Committee on Trusts, and who was able to place before us some aspects of the question which were of great interest and assistance to us. Our discussions have led us to the view that there are two distinct headings under which the subject of the fixing of retail prices should properly be considered, and it is proposed to treat these more or less separately in this report, as we believe it to be important for the proper understanding of the question that they should be somewhat clearly distinguished. These headings may be set out as follows : (A) Proprietary articles sold under trade-marks or trade names, or made under patentg, these in the case of medicines (a very numerous class), being subject to the Inland Revenue stamp duty. (B) Goods of common or general use, controlled by associations or combinations, which fix prices at which retailers must sell or below which they must not sell to the public. (A) Taking this class first, it will be found to include (inter alia) the large bulk of articles comprised in the list referred to above, which has already been circulated to members of the Standing Committee on Trusts, and to which a further reference is suggested. It should be noted that, generally speaking, the prices for these articles are fixed by the individual manufacturer producing them, and not by combines or associations, except in the case of the Proprietary Articles Trade Association, which is more particularly referred to later. In the cases of such proprietary articles as are referred to in this section of our report, there have been placed before us two separate memoranda setting out the origin of the system, and the reason why its adoption has been considered necessary. We refer to the memorandum named above by Sir William Glyn Jones on the Proprietary Articles Trade Association, and to that submitted to us by the Imperial Tobacco Company, from whom we also received oral evidence. These memoranda are in agreement on all essential particulars as to the origin of the plan of fixing retail prices, and may be summarized as follows : — I would here remark that this summary is very valuable, because the circumstances are precisely the same here, and it is precisely the same in other countries where such an institution as the association has been found by traders to be in their interests. The report goes on to say,— At the time when open competition in proprietary articles was in vogue it was found that there was very keen cutting of pricos between retailers themselves, proprietary articles being sold at a margin of profit which left less than a living-wage to the retailer. Many of the smaller men were driven out of business, and this reacted on the manufacturer, who found the number of retailers who were prepared to push the sale of, or even to stock his product, diminishing. In addition to this, it was found that the large stores were in the habit of selling proprietary articles at a price less in some cases than the actual cost to the small retailer. This was done in order to attract purchasers for other goods, and not by way of legitimate competition, it sometimes being found that the proprietors of a large store, after accomplishing their object, ceased to stock the article any further, with the result that the manufacturer of it was " let down," and the small retailer had lost that part of his business without any corresponding advantage to the public. We believe this to be briefly the history of the origin of systems of price maintenance in proprietary and named articles. With regard to this portion of our report, we believe it to be the case that where, as at the present time, the demand is in excess of the supply, the method of fixing retail prices has undoubtedly restrained or tended to restrain any undue inflation of prices, such as might easily have taken place if no such method had prevailed. The standard or fixed price is usually a matter of common knowledge to the consumer, and no retailer has a chance of obtaining a higher price except in very rare instances. The evidence has satisfied us that the price fixed by the manufacturer has, in almost every instance, been adhered to by retailers. We further find that the margin of profit allowed to the retailer is in most cases not so large as to enable him to cut the price even if he wished to do so, except at a loss, but that it is such as the experience of the particular trade has shown to be adequate to enable him to earn a fair remuneration for his services as a distributor. We may add that the evidence of the retailers whose evidence we have taken was generally to the effect that the margin of profit on goods for which retail prices are fixed is not so large as that which they would, on the average, obtain for uncontrolled goods, and that, while they recognize that in most cases a not unreasonable profit accrues to them from the sale of these goods, they would have been glad to be allowed a more liberal scale of profit. It is, we submit, clear that a manufacturer of a proprietary article, in fixing a margin of profit to the retailer, must determine a rate which (1) will afford the retailer a sufficient inducement to stock and push the sale of his products on a sound basis of trading, and (2) will not be so high as to deter the public from purchasing, or to induce them to look out for a substitute which will equally serve the purpose at a lower price. You, gentlemen, will hear something during the course of the evidence as to this substitution, and I shall show you a case where one of these concerns, setting themselves up as selling goods at reasonable prices and on fair terms to the public, has substituted a cheap article called Palm and Olive soap when asked for Palmolive soap, which is fi proprietary article. Is that kind of trading in the public interest ? Is it honest ? Yet that is the kind of thing which we know happens, which our commonsense tells us must happen in the case of the ordinary cutting trader. Mr. Reardon : Is not that a case where a British firm is trying to get in against an American firm ? Mr. Myers : Ido not care whether that is so or not. The point is that you or I ask for Palmolive soap ; we may or may not—probably we do not—look at the article given us. We expect to get Palmolive soap. That is what we ask for and pay for. We may be paying less, perhaps, for the substitute, or for the real article, than we would pay in the shop which adheres to the tariff. That is not the point. We expect to get the article we ask for, and not an article cheaper and probably inferior ; at all events, it is not what we want. That is all right so far as you and I are concerned ; but what about the other people, who are attracted by this apparently cheaper price, and who ask for this or that specific article and are given some other cheap substitution ? Is that the kind of thing that we should tolerate ? Yet we know that is what happens. Mr. Gresson : Do you suggest that because of the similarity in the names they would be able to " get away with it " 1
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[MR. MYERS.
Mr. Myers : All I say is that they do it. And, further, in the case I have in mind the trader invoiced the article as " Palmolive." Mr. Montgomery : Will that evidence be submitted ? Mr. Myers : Yes. Mr. Reardon : I think there is an interesting history concerning those two names. Mr. Myers : That may be so, but I am not concerned with that. Mr. Collins : It is the dishonest practice you are concerned with ? Mr. Myers : Yes ; and I say that that is the kind of practice which is brought about by the operating of cutting traders. While lam on this topic I would like to say that I have already referred to the case of the fancy-goods dealer. May I refer to the case of the cutting grocer ? It may be said by my learned friends that if thes§ cutting grocers are not allowed to sell these proprietary lines at such prices as they think fit, even if at a loss, that the public is likely to suffer. I venture to say with confidence that that view is incorrect. They may say they are giving the public a benefit. My retort is that, if they are anxious to give the public any benefits, they can do it in another way ; but that other way will not suit them. That way is this : If they do not wish to sell the proprietary lines at the fair and reasonable prices fixed by the manufacturer, and think that the profit they are getting on these lines is too high, very well. My answer is that they can sell their flour, sugar, tea, and other staple lines at cheaper prices, and give the benefit that way. But that is not what they do. This is what they do : Such lines as Amber Tips and Bell tea, which they have to stock because people ask for it, they sell at or below cost, but the tea which they buy in bulk and sell readily they sell at a very handsome profit. And, of course, when a person asks for Amber Tips or Bell tea he will be told, "We have an excellent tea ever so much better than that, and it is such-and-such a price " ; and that tea is sold at a considerable profit to the detriment of the blending or wholesale concern which is dealing with Amber Tips or Bell tea. Their trade is ruined for the benefit of this particular retailer, not for the benefit of the public at all. The report proceeds as follows : — We are satisfied that these considerations will effectively check any tendency to profiteering on the part of the retailers in the case of such proprietary goods. In times, on the other hand, where the supply is in excess of the demand, the ordinary conditions of competition will usually necessitate the price of proprietary artices being adjusted so as to meet the conditions of the market. (B) The second section of this report is, however, the one which we conceive will be of more immediate and particular interest to the Standing Committee on Trusts. While in the case of proprietary articles referred to in section (A), the practice of fixing retail prices is and must of necessity be almost universal, we have been unable to satisfy ourselves that the fixing of retail prices by combines or associations is by any means widely prevalent, though no doubt it will tend to increase as the closer and more complete organization of various trades is gradually brought about. A witness who has a very long and wide experience of a certain section of retail traders informed us that, while the average number of articles regularly kept in stock by members of the retail trade on whose behalf he was speaking would number at least two thousand, he did not think the number of articles of which the retail price was fixed or controlled by associations or otherwise would at the outside exceed twenty, and even these he was not able to specify at the moment. He was speaking of a trade which is generally regarded and spoken of as being "pretty well organized," and we are of the opinion that the percentage stated in this case might fairly be taken as the outside limit of articles of general use which are the subject of price-maintenance controlled by combines and associations. We have had the advantage of hearing the full details of the method of fixing retail prices in two particular trades as between (1) the producer, (2) the factor or wholesaler, (3) the retailer, and (4) the public, or consumer. The margin of profit allowed in such cases has generally, we find, been such as the experience of each trade has shown to be, in the opinion of those fixing the prices, adequate to remunerate each class of trader for the services performed by him. The view taken by the wholesalers, and still more by the retailers, whom we have heard is, however, we are bound to add, that the margin of profit allowed to them by the manufacturer, though it cannot be called unfair or inadequate, is less than they would have liked to obtain, and less than they are actually able to obtain in many instances in the case of uncontrolled goods. The price at which the retailer is under such arrangements allowed to sell to the public is in most cases, we believe, a minimum price, but we are informed that in practice this minimum price usually becomes a maximum or fixed price. Two reasons for this were given—(1) That in course of time the standard or market price becomes generally known to the purchasing public, and (2) that competition between one retailer and another prevents anything beyond the minimum price being asked for. We believe that in the majority of cases one or both these factors will regulate the retail price, but it should be pointed out that cases might arise—e.g., where one retail shop serves a small village or district and rival shops are far away in which the retailer might take advantage of his position. This, however, he would do even more easily were there no fixed retail prices. In cases also where goods are handed over the counter in very small lots the minimum price may sometimes be exceeded. In the latter instance it must be admitted that some excuse may be made for the higher price being charged. We are satisfied, however, that, broadly speaking, where a minimum retail price is fixed, this tends more and more to become a standard or recognized market price. In some cases the retailer is hound not to sell at either more or less than the fixed retail price, and this system, of course, provides an additional protection to the consumer, as also does the system of marking upon the goods themselves the retail selling-prices where this is practicable, as in the case of the scheme recently adopted for the provision of standard boots. Various methods are adopted for enforcing upon the retailer the observance of the minimum price fixed. In almost all eases a clause is attached to the invoice to him, making it a condition of the sale that the article shall not be sold below the fixed price. Such a clause is, we understand, legally enforceable, and has in some cases been so enforced. In addition to this, it is not unusual to deprive the retailer failing to observe the pricemaintenance condition of some special discount or rebate offered to those who observe the terms, and it might be in extreme cases that supplies would be withheld from those who fail to do so. No actual evidence has been placed before us that this latter step has in fact been taken. It is not unusual to coxiple with the price-maintenance conditions some special inducement in price or discount to those retailers who agree to confine their purchases to the particular body of manufacturers who fix the retail prices. The object of this, from the manufacturer's point of view, is obvious ; but it has been pointed out that from the retailer's point of view it is. also, advantageous in that it protects him from price-cutting by his rivals selling other and possibly inferior goods at a lower price. It is further supported on the ground that it tends to the closer and more complete organization of the trades concerned, and provides a bond of common interest between the manufacturers and the retailers. The above is a description, as brief as possible, of the extent and methods of price-maintenance combinations as they have been presented to us, and we believe it will be found to be a fairly comprehensive summary of the position as it at present exists. I pause here simply to say that the question of exclusive dealing does not arise here in the operations of the P.A.T.A.
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Mr. Reardon: Do you say that the New Zealand association does not propose not only to prevent the man from getting the particular article he is cutting, but also does not propose to prevent his getting all other articles listed ? Mr. Myers : I would prefer that that question should be asked of one of the representatives of the association. The reason I suggest that is because Ido not want to give you a reply which might be incorrect. lam not sure whether my answer would be right. Mr. Gresson : We have been under the impression that the P.A.T.A. did propose to prevent a trader obtaining any articles on the list. Mr. Reardon : My question arose out of your remark. Mr. Myers : No ; that means exclusive dealing with a manufacturer who sells to a number of retailers who agree with him that they will not stock any other article of the same kind. Mr. Kennedy : Perhaps you could give a pretty good guess at the right answer. Mr. Myers : That is not a fair observation, and it implies a reflection. At any rate, if the answer to Mr. Reardon's question is in the affirmative, and that it is part of our policy to stop the offending trader from getting any of the goods on the P.A.T.A. list until he agrees to adhere to the prices, I say that it is justified. I cannot say more than that. Mr. Gresson : It is a question of the agreement. Mr. Myers : I say that, if that is the policy, I justify it. The report goes on to say : — In this connection, we should like to observe that we consider that, broadly speaking, the equitable basis of a fixed-price policy is that all retailers should receive an equal discount, irrespective of the volume of their purchases, this principle, however, being subject to the modification that it is not unreasonable for manufacturers to give relatively better terms to those retailers whose larger volume of purchases tends to reduce the manufacturer's costs of production and distribution. Our attention has also been drawn to the report of the Electric Lamps Sub-committee, from which it would appear that there has been a competition in discounts leading to the retailers obtaining what may be considered unreasonable profits, owing to competition between associated and non-associated firms to secure the retailers' interest. The circumstances in this case appear to us to be quite exceptional, but we think that the recommendations made in this report should be adequate to deal with such cases. Looking at the matter from the position of the consumer—i.e., the purchasing public—the crux of the whole position, and upon which all further considerations appear to depend, is the price which the producer or original seller charges to the trader (whether wholesaler or retailer) to whom he directly sells. If this point can be dealt with in the manner indicated later in this report, it would appear that the fixing of selling-prices and margins of profits as between subsequent sellers, and finally to the consumer, cannot in practice be detrimental to the latter. The fixing of a fair margin of profit to the retailer is obviously beneficial to the latter, who, it must be remembered, represents a large and not unimportant element of the community. It also prevents unfair and ruinous competition, which it is submitted is not in the long-run in the general interest. Further, while eliminating mere competition in prices (as apart from competition in quality and services) among retailers, and thus preventing prices to the public in times of depression falling as low as they might otherwise do, it does, as already shown, tend to stabilize prices in times, such as the present, where the demand exceeds the supply. It must be remembered that the manufacturer is extremely unlikely to allow to the wholesaler or retailer such a large margin of profit as will (1) tend to check the sale of his products, or (2) deprive him of a proportion of the eventual profit which he might have retained for himself. The evidence of retailers themselves is clear upon this point, their view being that the manufacturer is niggardly rather than otherwise in the margin of profit allowed. We incline to the view, however, that, on the whole, the margins of profits allowed are fair and adequate to the services performed, but that on the grounds named above they are likely to be moderate rather than excessive. Provided, therefore, that the original price charged by the producer is a fair and reasonable one, the price eventually paid by the consumer will only be such as to provide a fair remuneration for such services as are performed by those through whose medium the article is conveyed to him from the producer. Such services, if performed by the producer himself, would undoubtedly be in many cases more costly than if performed through the usual channels of trade, and would therefore have to be added to the original prices. The consumer, therefore, is not, we repeat, in our opinion subject to the proviso named above, unfairly prejudiced by the system of fixed retail prices. Jt has been represented to us that where a trader has purchased from a manufacturer certain articles at a price agreed between them it is an undue interference with the liberty of the trader to lay down any fixed price at which he is compelled to resell, and that on broad general grounds a trader, having purchased such goods, should have unrestricted liberty to dispose of them as he deems best in his own interest. We cannot on a close consideration of the subject concur in this view. In the first place, a manufacturer selling certain goods is we conceive, entitled to say that they must be resold on certain terms or not at all, on the grounds that he can foresee that if they are not sold on these terms the market for them may be altogether destroyed by the action of retailers competing among themselves, and thus gradually causing some similar product to be substituted for that which he produces —e.g., particular brands of tobacco or cigarettes, or proprietary medicines in common use. A further consideration is that if unrestricted competition is permitted the factor, or middleman, is in a position to take advantage of the fluctuations of the market, and to put in bis own pocket profits which ought to go either (1) into the pocket of the manufacturer or retailer, or (2), which is more important, in reduction of the price at which the public can purchase. Thirdly, we believe it to be in the general interest that a fair living should be provided for the large and valuable class of the community who may be described as " shopkeepers," who, if unrestricted competition is allowed to run unchecked, may gradually and piecemeal come to be devoured by their more powerful competitors, who, by dealing in a large range of goods, are able successively to swallow those who rely for their living upon a single range of articles. We regard it as an outstanding fact of the present condition of affairs, where there is a difficulty in obtaining supplies of almost every commodity, and one which is not open to dispute, that those articles where some form of control exists, either external (by action of the Government) or internal (by action of the traders concerned themselves), have been far less subject to undue and unnatural inflation of price than those which have been subject to little or no control except that of the natural law of supply and demand. Without entering into a detailed survey of this question, which would be quite outside our province, we may instance the case of textiles and woollen goods as against (say) tobacco or proprietary medicines. The reasons for this we need not enlarge upon, though they have to some extent been touched upon previously in this report, but the fact is we think, self-evident and could be illustrated by reference to many articles of common use. Our view then in regard to the general question is that the system of fixing retail prices as between the four classes referred to above —viz., (1) the manufacturer, (2) the wholesaler, (3) retailer, and (4) the public— is (subject to the general proviso stated hereafter) to the advantage of the latter in that (1) in times of scarcity it does in fact check the undue inflation of prices ; (2) in times of plenty it tends to ensure to all classes, including labour employed in manufacture and distribution, a fair rate of remuneration for the services respectively performed by them ; and (3) in all conditions tends to prevent speculative dealing by the middle-
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[MR. MYERS.
man, who is prevented from taking undue advantage of violent market fluctuations, and allocating to himself what properly belongs either (a) to the consumer or (b) to the trader or manufacturer. These remarks are, however, subject to the overriding consideration that it is necessary that the price charged by the original producer or manufacturer shall be a fair and reasonable one, and not one which yields him an unreasonable profit or allows him to exploit for his own advantage the various conditions of the market, either in raw materials, labour, or other factors of production. The witnesses who appeared before us, however divergent their views were on other aspects of the question, were unanimous on this point: that, provided the original price charged by the producer to the particular purchaser to whom he sells is fair and reasonable, the further steps in the transactions as between wholesalers, retailers, and the consumer may be fixed and controlled to the advantage rather than to the detriment of the latter. The final point, therefore, on which we have to express our view is as to what steps are practicable to ensure a " fair start " in the case of those articles for which a retail price is fixed. The methods suggested to us to this end are three, viz.,— 1. That a Department shall be set up whose duty it shall be to investigate at the source the actual cost of every article of general use, and to lay down a price beyond which the producer may not sell. In our view this plan, though it would undoubtedly check profiteering in all its forms, would be far too cumbrous and costly to justify its adoption, even if it wore practicable, apart from the fact that it would perpetuate and render an integral part of the national life the system of government and bureaucratic control. It would also, we believe, hamper unduly the development of industry and initiative. It would require legislation of an intricate and comprehensive character, going far beyond anything which it is believed would commend itself at present to public opinion. In short, we cannot recommend it as a practical solution of the problem. I may point out here that, whatever may have been thought practical in England, we have it here in our Board of Trade Act. Mr. Collins : But one is a free-trade country and the other is protected. Mr. Myers : My point is that if we require a remedy we have it in the Board of Trade Act, which enables the Board of Trade to fix maximum or minimum prices, and which also makes it an offence on the part of any person to sell any article at an unreasonably high price as defined by section 2 of the Board of Trade Act. Mr. Reardon: The investigation mentioned there is already operating here ? Mr. Myers : Not by this inquiry. Mr. Reardon : No ; by the Board of Trade. Mr. Myers : Yes, that is quite true. The report goes on : — 2. A scheme has been suggested to us which has, we believe, already been adopted in certain trades, and which in our opinion deserves further consideration, and might eventually, subject to any modifications which experience may prove necessary, lead to a practical solution. As, however, legislation which might be difficult to secure would be required to render its adoption effective, we cannot see our way to recommend it at the moment as a practical solution of the question on which we are asked to report. The method suggested may be summarized as follows That every association (as defined in the report of the Committee on Trusts) which fixes retail sellingprices should be required to obtain from its members, and at the end of each six-monthly period publish or deposit with the Board of Trade a statement showing (1) the average trading profit and the average net profit in relation to the turnover of the industry in so far as it is covered by such association ; (2) the average ratio of turnover to capital; (3) the average wages earned per hour of skilled, semi-skilled, and unskilled labour. Such a statement would, it is suggested, enable the consumer to judge whether the price he was called upon to pay was reasonable in view of all the circumstances. Again I say that our Board of Trade Act gives the Board power to call upon any trader to give any such information which is suggested by that alternative scheme. 3. The third method is the one recommended in the report of the original Committee on Trusts, which provided, in effect, for the setting-up of a tribunal under the control of the Board of Trade or other Department having charge of commercial matters which could investigate specific complaints of excessive charges on the part of monopolies, trusts, or combinations, and would be empowered to take or recommend such action thereon as they might consider advisable. We cannot at present suggest any procedure more likely to attain the object in view — viz., that in any trade where retail prices are fixed, facilities should be afforded for ensuring that the prices at which the goods controlled are originally put on the market by the producer are not unfair or excessive in view of all the circumstances. Douglas Wenham, John W. Hope, Geo. Wm. Bailey, T. B. Johnston, John Hilton, H. L. Symonds. Again my reply is that all the necessary power is already conferred in New Zealand by the Board of Trade Act. The next point 1 want to make is this : That the report which I have just read is in consonance with the opinions of the highest Courts in the land. I refer to the House of Lords and the Privy Council. Ido not desire to lay too much stress upon the recent litigation in New Zealand and in England relating to the flour question, but it is not without its importance in this inquiry. It is not without its importance for this reason : that the charge made by the Crown against Distributors Limited and the millers associated with that company was that the organization and the operations of the organization or combination were contrary to the public interest. I desire to point out that in that case the proceedings were under the Commercial Trusts Act, and I desire also to point out that the article which was dealt in was a stable article of the people's food. The object of the combination was mainly to prevent dislocation and disorganization of the flour-milling trade. True, there were other questions involved, such as the maintenance of the wheat-growing industry and other industries, but the principal point was that the combination was brought about by reason of certain mills cutting the price of flour, which would in time have brought about the inevitable result of chaos in the flourmilling industry. The object of the combination was to ensure that a fair and reasonable price—not more than a fair and reasonable price—would be obtained by the millers for the product they were manufacturing—" products,l should say, because there were the products of bran and pollard also ; but flour was the main article in dispute. It was contended that by reason of the competition being prevented, by reason of a price being fixed which was in excess of the price at which flour might and
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probably would have been sold but for the combination, the combination was detrimental to the public interest. I emphasize those words, " contrary to the public interest," because the same words, or similar words, " detriment to the public interest," occur in the statute under which this Committee is set up. In the Supreme Court of New Zealand Mr. Justice Sim held that that was not contrary to the public interest He held, as he thought has been held by higher Courts in England in other cases, that the " public " included not only the consumer, but the manufacturer or producer and all others who were dealing in the article. They were sections of the public, and the public as a whole had to be considered. And Mr. Justice Sim held that the combination of flour-millers was not contrary to the public interest. It is quite true that by a majority of three to two the Court of Appeal reversed Mr. Sim's judgment, but the judgment of the majority was in turn reversed by the Privy Council, which, although we have not yet seen its judgment, must have decided the matter upon the ground upon which it was decided bv Mr. Justice Sim, because that was the whole point in issue—as to whether the combination and the operations of the combination were or were not contrary to the public interest. And, I ask, if that was not contrary to the public interest, how can it be said that the operations of the P.A.T.A. are contrary to the public interest ? They have to meet a similar position. It is much more serious in a sense, because it is quite plain that unless the operations of the P.A.T.A. are to be allowed very serious results must happen to a very large body of the public, consisting of members of various sections of the public —the manufacturing section and their employees, the wholesalers and retailers and their respective, employees. After all, what is the difference between the fixing of a price for the goods so long as it is fair and reasonable, and the fixing, as we do fix in New Zealand, the price which an employer has to pay his workers ? What on earth is the difference ? Surely, in principle, there is none. And the reasons for the one thing, it is submitted, are reasons for the other. Mr. Gresson : In your opening you referred to the results which would follow. Do you propose to deal with that ? Mr. Myers : I have referred to the results of the cutting operations, and when we give evidence we shall see what happened in actual practice in regard to certain well-known and recognized lines. I would like, if I may, to refer to what was said by Mr. Justice Sim in the Flour case. I will refer to it very shortly, and I refer to it for the reason that it seems to me that his judgment must have been affirmed on the same ground as he took. After referring to the origin of the combination, he says : — These, then, are the circumstances in which the company was formed and commenced its operations. There does not appear to be any reason for thinking that it was established with any sinister design, or that its main purpose was other than that of stabilizing the flour-milling industry by eliminating unrestrained competition, with its attendant evils. And a little later on he says : — The case for the Crown seemed to be based largely on the view that unfettered competition is in itself a good tiling, and that any agreement which interfered with such competition, unless justified by some cogent reason, must be contrary to the public interest; but unfettered competition is not always a blessing, and in considering the interests of consumers it is impossible to disregard the interests of those who are engaged in the production and distribution of the articles of consumption. The consumer may derive benefit for a time from cut-throat competition, but in the long-run it is not in the public interest to have such competition. Then, again, in the Court of Appeal in England, in a recent case, Ware & De Freville v. The Motor Trades Association (reported in [1921] 3 K.B. 40), Lord Justice Scrutton said this :— While low prices may be good for the public for the time, they are not a benefit if all suppliers are thereby ruined. A steady level price may have considerable advantages over violent fluctuations from very high prices in times of scarcity and fierce competition and unremunerative prices in times of plenty or financial pressure. And it was held in that case that the Motor Traders' Association, being manufacturers of motorcars, were justified in fixing the retail selling-prices of cars, and enforcing the observation of those selling-prices by the use of a " stop list." Then, I would like to refer to one or two extracts from the case before the Privy Council, reported in 1913 Appeal Cases, which is known as the Coal Vend case, and also to a few observations of their Lordships in the House of Lords in the Salt case. In the Coal Vend case, at page 796, Lord Parker says : —• The chief evil thought to be entailed by a monopoly, whether in its strict or popular sense, was the rise in prices which such monopoly might entail. The idea that the public are injuriously affectetj by high prices has played no inconsiderable part in our legal history. It led, no doubt, to the enactment of most, if not all. of the penal statutes repealed by 12 Geo. 111, c. 71. It also lay at the root of the common-law offence of engrossing which, according to " Hawkins' Pleas of the Crown," vol. 2, Book ], ch. 79, consisted in buying up large quantities of wares with intent to resell at unreasonable prices. It influenced the Courts in their attitude towards contracts in restraint of trade. Although, therefore, the whole subject may some day have to be reconsidered, there is at present ground for assuming that a contract in restraint of trade thought reasonable in the interests of the parties may be unreasonable in the interests of the public if calculated to produce that state of things which is referred to by Lindley and Bowen, L.JJ., as a pernicious monopoly—that is to say, a monopoly calculated to enhance prices to an unreasonable extent. I have already pointed out, first of all, that it is not part of the policy of the P.A.T.A. to enhance prices to an unreasonable extent, but, on the contrary, to keep them down to a reasonable extent, and the whole idea of the association and of the manufacturers is to sell the goods at a fair and reasonable price, and no more than a fair and reasonable price. Then, at page 80(), Lord Parker says It was strongly urged by counsel for the Crown that all contracts. in restraint of trade or commerce which are enforceable at common law, and of combinations in restraint of trade or commerce which if embodied in a contract would be enforceable at common law, must be detrimental to the public within the meaning of the Act, and that those concerned in such contracts or combinations must be taken to have intended this detriment. Their Lordships cannot accept this proposition.
2—H. 44A.
9
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In other words, what their Lordships held was that you may have contracts in restraint of trade—contracts which are unenforceable which may not be contrary to the public interest at all, but which may actually be in the public interest. On page 801 Lord Parker says : — It was also strongly urged that in the term " detriment to the public '' the public means the consuming public, and that the Legislature was not contemplating the interest of any person engaged in the production or distribution of articles of consumption. Their Lordships do not take this view, but the matter is really of little importance, for in considering the interests of consumers it is impossible to disregard the interests of those who are engaged in the production and distribution. It can never be in the interests of the consumers that any article of consumption should cease to be produced and distributed —as it certainly would be unless those engaged in its production or distribution obtained a fair remuneration for the capital employed and the labour expended. I pause to point out that unless the cutting tactics of these cutting grocers and other traders can be prevented—and we know of no other way to prevent them than that which we are adopting— then those who are engaged in the distribution of the article will not be obtaining a fair remuneration for their capital and labour, and you will have the very state of things arising which is regarded as reprehensible by their Lordships of the Privy Council. And then, again, at the bottom of page 809, he says : — In the present case, however, it was proved that the prices prevailing when negotiations for this agreement commenced were disastrously low owing to the " cut-throat " competition which had prevailed for some years. Even Isaacs J., who decided in favour of the Crown, was apparently of opinion that there was early in 1906, at any rate, some case for raising the price of coal considerably above its then selling-price of 7s. fid. per ton. It can never, in their Lordships' opinion, be of real benefit to the consumers of coal that colliery-proprietors should carry on their business at a loss, or that any .profit they make should depend on the miners' wages being reduced to a minimum. So much for that. I also want to refer shortly to another case, and to some observations by their Lordships in the House of Lords ; and this also was a case where a contract had to be considered which was considered to be in restraint of trade in an essential article —namely, salt. The case I refer to may be shortly referred to as the Salt case, and is reported in 1914 Appeal Cases, page 461 (House of Lords), and in the Court of Appeal, 107 " Law Times," page 439. I refer to the report in the Court of Appeal because Lord Justice Kennedy makes some very interesting observations, which I propose to read. It is quite true that in the Court of Appeal his was a dissenting judgment; but the House of Lords reversed the judgment of the majority, and their observations are very much on the same lines as those of Lord Justice Kennedy, whose views were upheld by the House of Lords. On page 447 of the " Law Times Report," Vol. 107, this is what Lord Justice Kennedy says : — The doctrine of the invalidity of a covenant or contract on the ground of its being in restraint of trade rests upon what is called public policy. How is one to ascertain and judge of the interests of the public ? Do they consist solely in the cheapness of a manufactured article ? Or may the Judge consider the possibility, or even in some cases the probability, that unregulated competition may result either in destroying the production or the manufacture by making the trade unprofitable or ultimately in raising the price of the commodity to the loss of the buyers by leaving a practical monopoly in the hands of the most wealthy or most powerful of the competitors ? In the same case, in the House of Lords ([1914] Appeal Cases, p. 469), Lord Haldane says : — Unquestionably the combination in question was one the purpose of whicli was to regulate supply and keep up prices. But an ill-regulated supply and unremunerative prices may in point of fact be disadvantageous to the public. Such a state of things may, if it is not controlled, drive manufacturers out of business, or lower wages and so cause unemployment and labour disturbances. It must always be a question of circumstances whether a combination of manufacturers in a particular trade is an evil from a public point of view. And Lord Parker deals with the same subject at page 480 of the same volume, where he says : — Some combination limiting output and regulating competition within the area, so as to secure reasonable prices, may have been necessary not only in the interests of the salt - producers themselves, but in the interests of the public generally. For it cannot be to the public advantage that the trade of a large area should be ruined by a cut-throat competition. So that it will be seen that the view taken by the sub-committee in England to whose report I have already referred coincides with that which has been taken by the highest Judges in the land in England. It will be said against me that there was an inquiry in New South Wales, held by Mr. Justice Beeby, of the Arbitration Court, and it will be said that his report was against the P.A.T.A. As a matter of fact, I did not see the report until last night, when I saw it through the courtesy of my learned friend Mr. Gresson. We had been informed that the report had never been released by the Government of New South Wales, and that we were unable to obtain a copy. Ido not know how Mr. Gresson's client obtained his. As I say, our information was that the Government there had not allowed the report to be released. Be that as it may, however, the fact is that, although that report must have been made in 1920 or 1921, the P.A.T.A. has been operating and is now still operating throughout New South Wales, and it has never been proceeded against. No steps have ever been taken against it by the Government, and one can only assume that the Government must have been advised by their legal authorities that the effect of Judge Beeby's report was erroneous — as 1 submit, with confidence, it is. It ignores—it does not refer to—the judgments in the cases to which I have referred. It is contrary to them. There is no reference in the report, nor, so far as I have been able to learn, was there any reference during the whole of the proceedings, to the report made in England, so that Judge Beeby did not have the benefit of perusing and considering that report, so far as I can learn. Mr. Gresson : Perhaps that report had not then come out. Mr. Myers : That may well be so. Ido not suggest that it was anybody's fault. Mr. Gresson is quite right in saying that it might not have reached New South Wales at the time of their inquiry.
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H. 44A.
But I venture to suggest that if that report had been available for Mr. Justice Beeby it must have had a considerable influence 011 his mind. More than that, it is not unimportant to observe that Mr. Justice Beeby's report does not touch-the vital question, or what I suggest is the vital question, and that is this : that the cutting in some cases of the prices of goods to the extent of selling those goods at or even below cost inevitably tends to ruin the trade of the manufacturer and of otherdealers in those goods, and must inevitably tend to the necessary profit of the trader being made up by overcharges on other classes of goods. You will not find in Mr. Justice Beeby's report a single word —I think lam right in saying that—dealing with that aspect of the case, and I submit with great respect that inasmuch as he does not deal with that aspect of the case the value of his report becomes seriously diminished. My friends say they will rely 011 the Canadian report. My submission is that the Canadian report is of no value whatever, for this reason : that it was not the result of an inquiry at all. It was simply, so far as I can understand it, the report of a Government officer, made ex parte, without hearing the P.A.T.A. —without hearing their evidence or giving them, an opportunity of being heard. What is the use of saying that a report made in such circumstances is to be relied on 1 No reliance can be placed on it at all; and, moreover, in Canada, just as in New South Wales, the P.A.T.A. is operating throughout the length and breadth of the land and challenges the Government to take any proceedings it likes. I venture to say that unless they have legislation in-Canada which is stronger than we have under our Commercial Trusts Act and Board of Trade Act—and I do not think they have, because they have no legislation that I know of as we have in New Zealand—unless they have that, I say, their Government would have no chance in the world of succeeding against the P.A.T.A., or any one associated with it, on any charge they could possibly bring. Mr. Gresson : I notice from a newspaper report that there is some litigation going on in Canada in|connection with the P.A.T.A. Mr. Collins : I believe one of thej)ig " chain stores " is taking the matter up. Mr. Myers : Unless the P.A.T.A. has done something in Canada which it certainly would not be within the scope of the P.A.T.A. to do here in New Zealand I should say that the result of the proceedings would be a foregone conclusion. Mr. Collins : You know that there is a further inquiry in Canada '! Mr. Myers : No, I did not know that. Mr. Gresson : Is there a report ? The Chairman: No. Mr. Myers : Is that the inquiry which Sir William Glyn Jones asked for ? The Chairman: Yes. Mr. Myers : It may, of course, furnish a different report from that already furnished by the Government officer. I will conclude at this stage by repeating, first of all, that it is no part of the scheme of the P.A.T.A. to raise prices to an unreasonably high figure—quite the contrary. It is their policy to endeavour to have prices fixed which will return a fair and reasonable margin of profit, and no more than a fair and reasonable margin of profit. Furthermore, I desire to emphasize the fact that it is no part of the scheme or policy of the P.A.T.A. to ruin any trader or section of traders, or to ruin competitors of any sort or kind. That is no part of their policy. Their policy is devised for the protection of the honest trader who is desirous of obtaining a fair and reasonable margin of profit, and no more than that. Mr. Reardon : I would like to read you an adaptation of Hamlet's soliloquy having reference to the New South Wales inquiry. Mr. Myers: But I am not dealing with New South Wales; I am dealing with New Zealand. I say that it is no part of our scheme to ruin any section of traders. What we say is that we do not want any section of the traders to ruin us. That is all we are setting out to prevent, and we submit that we are setting out to prevent it by honourable means and by legal means, and by means which are not contrary to the public interest, when it is properly understood what is meant by " public interest." The Committee adjourned at 12.5 p.m. till 2.30 p.m. On resuming at 2.30 p.m., Mr. Myers : Mr. Chairman, may I just refer to one passage to which my attention has been called in the Vend case, which I omitted to refer to this morning ? It appears in the judgment of Lord Parker, at page 797 in the 1913 Law Reports already quoted. This is the passage : — The right of the individual to carry on Ms trade or business in the manner he considers best in his own interests involves the combining with others in a common cause of action, provided such common cause of action is undertaken with a single view to the interests of the combining parties and not with the view to injuring others. Walter Thomas Charter, sworn and examined. (No. 1.) 1. Mr. Collins.] I understand that you are a visitor to this Dominion ? —Yes. 2. And you have at some inconvenience attended this inquiry this afternoon. I may say that, quite apart from the invitation of counsel to you to attend, it was the desire of my colleagues and myself to secure you as a member of your delegation to tender evidence or submit information before this tribunal, and therefore we are indebted to you for your kindness in coming along this afternoon, and we trust that the information or the evidence which you will tender will be of material service. —Thank you. 3. Mr. Kennedy.] You are a visitor to this Dominion from England Yes. 4. And you are a director of the English Wholesale Co-operative Association ? —The English Wholesale Societies, Ltd.
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5. In addition to being a director of this wholesale company, you occupy a certain official position with the Board of Trade ?- In addition to being a director of the Co-operative Wholesale I am also a director of the Joint English and Scottish Wholesale Societies, which is a joint body financed by both the English and Scottish Wholesale Societies. I have served on Government Committees and on the business men's advisory committee to the Post Office. I am at present a member of the Advisory Committee of the Overseas Department of the Board of Trade, and I am also a member of the Board of Trade Committee which is now sitting in the interests of industry and trade. 6. What is the size of the wholesale organization with which you are associated as director 1— We are a federation of 1,200 retail co-operative stores. The trade of the wholesale society of which I am a director would be from £70,000,000 to £80,000,000 per annum ; but we are the manufacturers and wholesalers for these joint and retail societies, that have a trade of from £250,000,000 to £300,000,000. 7. You have become acquainted with the operations of the P.A.T.A. in England ? —Yes. 8. Will you describe to the Committee how they have operated and how it has affected your co-operative stores, and the effect on the public interest I—Of course, from our point of view, we always say that any price-fixation which renders the possibility of the consumer getting no advantage of efficiency or of anything that might lead to the lessening of the cost of living is a harmful institution. So far as the operations of the P.A.T.A. are concerned, all I can say is that it is not in the best interests of the people. I may say that from fifteen hundred to sixteen hundred people, representing a membership of three million heads of families, have on two occasions unanimously passed resolutions asking the Government to bring in legislation to deal with the matter of the Price-fixing Association, of which the P.A.T.A. is a member. 9. Can you tell the Committee how long it is since these resolutions were passed ? —Two or three years ; but the position is just as acute now. 10. Were you aware of a certain Committee investigating the P.A.T.A. in 1920 ? —I know of no public investigation. There was an investigation, and it might have been an interdepartmental investigation consisting of officials of the Board of Trade. As I say, I know of no public investigation. I may say that the great difficulty we have and the great objection we have to the operations of the P.A.T.A. so far as the co-operative movement is concerned is that it prevents us giving our retail buyers any benefit derived from mutual trade that is financed by their own capital. I want you to understand that the co-operative movement in Britain is financed by purchasing members— that is to say, they provide the capital, and they appoint the officials and control the business of the purchase and sale of commodities on their behalf with their own money in their own interest. The practice is to sell in the retail stores at the usual price charged in the local stores for a given commodity. At the end of every half-year the accounts are presented and they are audited by public auditors, and after the expenses of management have been met and provision made for a reserve the difference—which is termed " surplus," or, as you term it, " profit " —is divided after the interest has been paid on the capital and 5 per cent, is divided among the customers according to the value of their purchasing-power. Our objection is that if we sell through our co-operative organization articles of the P.A.T.A. our members are not allowed to get the benefit of their own mutual trading by a reduction in price. 11. If, for example, you sell below the P.A.T.A. in one article, how does that affect you ?—We are liable to have the supply stopped of articles manufactured under the association. 12. Mr. Myers.] Until you come back into line ?—That follows. 13. Mr. Kennedy.] Can you give the Committee, in a rough way, information as to the number of articles on the list of the P.A.T.A. I—l1 —I cannot. Mr. Myers: Is that of any importance ? It does not follow that the number of articles in New Zealand is the same as those in England. I cannot see that that has any relevancy. Mr. Collins: You can understand, Mr. Myers, that we are only trying to obtain information as to what operates in England. Mr. Myers : Quite so. « Witness : I want to make it quite plain that I have no particulars by me. lam only quoting from my knowledge and experience. 14. Mr. Kennedy (to witness).] In England foodstuffs are not touched %—Up to the present there has been a considerable agitation amongst certain members to extend the principle to certain foodstuffs. 15. How does the price fixed by the P.A.T.A. compare with what your association desires to sell an article at ? —I cannot quite follow you. Do you mean whether we have manufactured anything similar to-day to meet the needs of our customers in the direction of control ? 16. No ; I want you to tell the Committee whether the price fixed by the P.A.T.A. is more, or just the amount you require to show what you deem a reasonable profit I—l should say, in the majority of cases, more, because it would provide a greater profit than was necessary for distribution. That is my opinion in regard to manufacture. All I can say is that we would, as we have done in hundreds of instances, be compelled to manufacture articles of a similar character to meet the demand for certain articles produced by the P.A.T.A. 17. Mr. Myers.] You do not advertise to the same extent ?—That is so. 18. Mr. Kennedy.] Why did you embark on the manufacture of certain lines ? —Because our members had a very distinct objection to having their limit of purchase taken from them, and they objected to purchasing an article when the price was dictated to them, and where their efforts were not allowed to reflect themselves in the advantages that would otherwise accrue to them ; and, further, they said, "We want a certain article of this character and you must produce it," and we are producing several hundred lines through our various factories. As a result of our laboratories and research work we are producing such articles as cod-liver oil and emulsion, and we are selling them cheaper than the price fixed by the P.A.T.A.
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19. Have you in the case of certain articles been compelled by P.A.T.A. boycott to come into line with P.A.T.A. prices ? —We are in this position : that unless co-operative societies sign an agreement that they will not only maintain the price fixed by the P.A.T.A., but will also add to that price any dividend they may pay, they will not be supplied. That means we are not allowed to pass on to our customers any rebate they would get on account of much handling, and the customer is not allowed, on his part, any benefit of his mutual trading. 20. It is powerful enough to dictate to your powerful association ? —Yes, to that extent. And it means this : " Unless you accept our terms of sale you cannot have our goods." That is their dictum, and that is where they stand. 21. You had no option but to submit and buy to their dictation ?—Yes, if we want to sell the goods. Their goods are very largely advertised, and in consequence of advertising their goods are in great demand. Our great objection to the whole thing is, first, we object to the fixation of prices, which is against the interest of the consumer in particular ; and, second, that they should have the audacity to dictate to us as to whether we shall hand on any benefit of efficient distribution to our customers. 22. You think that a retailer should be free to hand on to his customer, if he so desires, some of the benefits of efficient management and efficient service ?—Yes, I think so. 23. Is it a fact that the P.A.T.A. in England has one price or more than one pried ? —I should say that they have one price so far as I know T . Of course, their prices do vary to this extent, as you can readily understand—namely, where a man is in a big way there is a certain amount of allowance for quantities ; but the basic price is the same. 24. Is there anything else which you would like to let this Committee know about ?—I only want to say that I believe every public inquiry that has been held has expressed the view that price-fixation with a minimum-price fixation to the consumer by any manufacturer of any article is harmful to the consumer. I believe that has been the finding everywhere ; and the only reason why we have been unable to get satisfaction is because the Government cannot move without introducing new legislation, and I think every one knows the trouble there is to move a Government without legislation. The objection to the P.A.T.A. is very, very real, and when I tell you that our customers represent three million heads of families, which is, roughly, a quarter of the population of Britain, you may know that their voice would not be expressed unless they felt they had some grievance. 25. Mr. Walker.] Has the P.A.T.A. organization at any time approached you and asked you to give them your figures of costs of doing your business, either as between your company and the retailer, and the retailer and the consumer ?—No. 26. In other words, whatever method of price-fixing adopted by them, they have not asked you what it costs you to handle your business I—The only time they approached us was when they found the retail societies were not adding on a certain percentage. 27. Mr. Myers.] In connection with interdepartmental inquiries, I understand they do not examine witnesses on oath ? —No. 28. They simply do not examine witnesses ?— T would not like to say that. Of course, they would report the result of their investigations. 29. And probably would not take evidence from witnesses ? —I should say they would. 30. Do you know ? —Yes, they do. 31. Do you know of your own knowledge as to whether they do or not ? —1 should not like to say, but I would be surprised if they do not. 32. I have here a list showing six names of members of a certain tribunal which has already been referred to : do you know those men ? —Some of them. 33. They are not Government officials ?—Some of them are, and some of them are not. 34. Can you tell me for certain ?—lt is not my business to answer that. 35. But you must ? —I must object to that. 36. I am asking, of those men, how many of them are Government officers, and how many are not ? —(No answer.) 37. Mr. Collins.] Are you sure of them ? —No, lam not. You must remember that you might have two men with the same names. 38. Mr. Myers.] That is quite right. Which of those men are Government officers, and which of them are not ?—I cannot tell you. 39. Your business is a wholesale business, is it not ? —Yes. 40. You are not a retailer ? —I have already explained that we are a wholesale medium for the society. 41. You are not in control of any retail businesses X —No; but the whole of our shareholders are in the retail business. 42. You said in the course of your examination by Mr. Kennedy that the P.A.T.A. come along to you and say that unless you accept their terms of sale they will not supply goods ?—Yes. 43. Does the P.A.T.A. supply goods at all ? —To whom ? 44. I am asking you : do they ?—The firms comprising the P.A.T.A. do. 45. That is quite a different thing ?—You control the firms that are in your association. 46. One must assume from what you said that the P.A.T.A. keep stocks and sell them to the dealers ?—Any one knows different to that. If I implied that, I must have made a fallacious implication. 47. What you mean is that goods are sold not by the P.A.T.A., but by manufacturers in the association ? —And who have signed an agreement of the P.A.T.A. 48. I suppose you will admit that a manufacturer is entitled to fix the price at which his goods are sold, both wholesale and retail ? —lf he fixes a minimum sum, I say he is not entitled.
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49. You say that you object to the principle of any manufacturer fixing the minimum price at which his goods are sold ?—To the final consumer. 50. You say that that is contrary to the interests of the public ?—I say so. 51. Do you know how long the P.A.T.A. has been in operation in England ?—I cannot tell you definitely, but it has been in operation for many years. 52. Before your institution came into being ?—No. 53. Since ? —Yes. 54. I suppose you know something of the cutting of prices by retailers}? —Yes. 55. Is there much cutting going on in England ?—Just as much as anywhere else. 56. Do you have, for instance, a retailer selling any particular proprietary article outside the P.A.T.A. at cost price or below cost price ?—They might. 57. Is there much of that done ? —I cannot tell you ;I am not in private trade. It is not done i n the co-operative societies. 58. You say that you cannot tell the Committee what is done outside co-operative societies ? — That is so. 59. Can you tell us anything of the extent of cutting operations ?—ln some instances retailers do take a line and slaughter it. 60. Supposing a retailer sells a particular line at cost or less under normal conditions, would you not call that slaughtering ?—I would call that bad business. 61. Why ? —Because he is doing his business for nothing on that particular article ; and, besides, it is immoral. 62. lam very much obliged to you ?—I will admit that. 63. lam not doubting anything you say, but lam just trying to get your real views. You say that that practice is immoral in practice ?—Yes, certainly. 64. And the co-operative societies would not do it ? —They do not practise it. 65. But you would admit that against such an immoral practice a manufacturer is entitled to protect himself ? —Up to a certain limit, yes. 66. I suppose you will admit that if that kind of cutting became general it would mean the ruination of business in that particular line in the course of time ? —lt would mean the ruination of the retailer. 67. It would damage the sale of the line ? —After twenty-five years' experience in the retail trade I should not think so. It wpuld popularize it. 68. Do you not know that cutting operations of that kind almost invariably lead to the substitution of another article for that particular line ? —Not necessarily. The public are not so stupid as to be palmed off with a substitute. 69. You say you are prepared to admit that a manufacturer is entitled to protect himself against cutting operations I—What I say is that he is thoroughly entitled to sell his article at a price which covers the cost of his production and a reasonable profit. 70. I am putting to you the case where a cheap-jack or a few cheap-jack stores here and there are cutting the article in this immoral way that you have mentioned. I suggest to you in such a case the manufacturer is entitled to protect himself by seeing that the article goes to the public at a reasonable price fixed by him ?—To the public, I disagree. 71. That is what is done by a number of manufacturers through the operations of the P.A.T.A. ? —You ought to know better than I do, because you are connected with the P.A.T.A. 72. You are giving evidence ? —lf you ask me a definite question relating to the operations of the P.A.T.A. as affecting the consumers I will answer you. 73. Does not the conference of the P.A.T.A. consist merely of a number of manufacturers who are associated with the P.A.T.A. and fixing the price at which their goods are sold to the public ? — They go beyond that—in the first place, in fixing such a price which, in my opinion, is too high for the consumer to pay ; and, in the second place, they prevent, whether it is a co-operative society or a well-managed private establishment, giving the consumer the advantage of efficient distribution. 74. You have stated that so far the P.A.T.A. has not touched foodstuffs. Does it not touch infant-food ? —Yes ; and I would like to say something in regard to that. 75. Does not the P.A.T.A. in England have foodstuffs on its list ?—Yes. I appeal to any fairminded man and ask him whether it is fair in the event of, say, my wife going into my store and wanting to buy a bottle of perfume that is on the P.A.T.A. list, and the manager serves her with that bottle of perfume without putting on the dividend, that that would entail not only the supplies of perfume being stopped, but would entail the stoppage of infant-food as well. 76. Until you toe the mark with regard to the perfume ?—" Toe the mark "is a very good expression. 77. I know that. However, I suppose in England there are quite a number of infant-foods on the list ?—Yes. 78. In the case of your own manufactures, do you sell your manufactured goods to traders outside your own organization I—No. 79. Why not ? —Because we are a federation of co-operative capital. 80. Precisely ? —And we are registered under the Industrial and Provident Act, which provides that we must supply to our members. 81. And anywhere else ? —We do supply to others. We are not debarred from supplying others. 82. In point of fact, your immense organization does not supply its manufactured goods to any persons outside your own organization —that is, to traders outside ? —lf an ordinary customer comes into an ordinary co-operative society and buys the goods, he is entitled to do it. 83. In other words, you do not sell to the trade outside your own organization ? —Exactly.
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84. So that the public does not get the benefit of your having manufactured these goods which compete with those on the P.A.T.A. list at a lower price ?—Any person can become a member of the Co-operative Society and can share in the benefits to be obtained. 85. I am speaking of the trade ? —And the law provides that we shall accept any person who applies for membership, and that means that any person who comes into our shop and asks for our goods can get the benefit of co-operative goods. 86. Exactly ; they have to join your association before they can get all the benefits ? —Not altogether. 87. The point I am putting to you is this : unless a person goes to buy at your establishment he cannot get the benefit of the cheaper price at which you manufacture goods competing with the P.A.T.A. list ? —That is so. 88. You do not give the whole of the public the benefit of your services ? —Yes, we do. 89. You say you do ? —Anybody can become a member of the Co-operative Society. 90. By leaving his own trader and becoming one of your constituents ? — I That is a different proposition altogether. I say that the door is open to them if they care to accept. 91. I suppose your constituents prefer to buy an article that is manufactured by your concern to buying a competing article that is on the P.A.T.A. list ?—Not always. The larger advertising that is done by the P.A.T.A. attracts the people to the commodity, and this necessarily creates a demand in our shops. 92. In the case of these proprietary articles a large expenditure is necessary to popularize the article ? —I think that a great deal of money is wasted in that way. 93. That may be your opinion ?—You asked me for my opinion, and I have given it to you. 94. Is it not the general experience that a large amount of money is spent in advertising an article and thereby popularizing an article ? —lt is questionable whether it is right or not. I say it is not. 95. That is not your business, nor is it mine. I suppose you will agree that where a manufacturer has spent a large amount of money in popularizing his article he is entitled to some protection ? —He gets it, because he charges the consumer with it. 96. Does he get it if by immoral tactics on the part of retailers the trade, so far as his article is concerned, becomes ruined ? —The trade, so far as his article is concerned, would not become ruined, because the cheaper the article is sold the greater the demand. 97. That is not correct. Do you not think that if a proprietary article is slaughtered in price by a retailer here and there that the ordinary retailer will endeavour to stock as little as possible of that article ? Is that not common-sense, and does that not meet with your own experience ?—I do not know. Personally, I should not stop stocking it. 98. But they would stock as little of it as possible, and sell other lines in preference ? - I would only stock those articles in accordance with the demands. Mr. Collins : I want to say that so far as the questions that may be put to any witness or witnesses during the course of this inquiry they are made, so far as the members of the Committee are concerned, without prejudice and without any suggestion of bias. For instance, a question that is asked by a member of the Committee may show, in your opinion, that it is biased. Mr. Myers : AVe recognize that. As a matter of fact, you are a Board of inquiry set up to consider the whole of these matters. 99. Mr. Hayward (to witness).] I have here a list showing the price in Britain for Allenbury's food : what do you consider is a reasonable rate of profit on goods of that class in England ? —Do you mean the profits of the retailers ? 100. Yes, retailers' profits ?—That is a very difficult question to answer. 101. So far as your co-operative stores are concerned, what rate of profit would you put on infantfood, for instance I—Something1—Something about 15 per cent, to 17 per cent. 102. The wholesale price is 20s. per dozen and the retail price is 2s. Id. each ? —I may say that my principle as a manager was to fix the profits on these goods that were stable in character, and in general usually as low as possible. 103. This rate is 20 per cent. ? —That is not a great deal too high. If you come down to other things you will find that there is a very different rate of profit. 104. Mr. Montgomery.] In connection with the effect upon manufacturers that the cutting of the price of goods might have there is one question I would like to ask, and it is this : whether the cutting or the slaughter of goods is generally confined to one article, or whether it is spasmodic in its nature ? — It is very spasmodic. The man who does that sort of thing would take a certain, article for one fortnight and another article for another fortnight : he would not stick to one article alone. 105. Would you not consider that, unless a very considerable number of these articles were the product of a particular manufacturer, that the occasional slaughter of goods in that way by cutting would greatly affect him ?—lt would have no effect on him. 106. Mr. Reardon.] Reverting again for a moment to your retail experience, what was the rule as to the percentage over landed cost ?—We have no landed cost. Do you mean over the stock ? 107. Yes, over the stock ? —lt all depends on the nature of the stock. Any one who is in the business will know that there is a very much less rate of profit on articles such as butter, bacon, cheese, and other things where the stocks are turned over much more quickly than in articles such as soap, &c. 108. Broadly speaking, the P.A.T.A. articles were among the articles of goods that you consider slower-selling lines ?—Yes. 109. That would affect the amount you would put on the article above the landed cost ? —Yes, except in the case of infant-food, which is done up in packages, and consequently there is no depreciation. In regard to fancy toilet-soaps, I may say that we do not stock them and have never done so. We
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manufacture, a toilet-soap of our own which is manufactured cheaper and consequently is sold at a cheaper rate. The same applies to drapery—that is to say, you get a greater profit on millinery. 110. I understand that you would have to make a difference in the case of butter and that class of commodity than on articles turned over at slower intervals ?—Yes. 111. On that principle 20 per cent, would not be very much, in fairness to their own products ?— I consider that 20 per cent, on an average is too high. As I say, my objection is to fixing to the consumer 20 per cent, or any other per cent., and I see no reason why you cannot give the consumer an advantage, whether it is through efficient organization or through a less rate of profit. 112. You say that you have the right to determine the price when the article is in your shop ?— I think so. I think the responsibility and obligation are mine. 113. Mr. Collin?.] Have you any idea of the strength of the P.A.T.A. in manufacturers as compared with the total manufacturers in the United Kingdom ? —I should say they are very strong. 114. And what about the wholesale section ? —Yes, and the wholesale section too. 115. You say there is also a majority in the wholesale section too. I notice in the twenty-ninth annual report, published in 1925, it states that their retail strength is 7,750 ?—Members ? 116. Presumably retail shops ? —I should think so. 117. How would that total compare with the number of retail shops in England—they would not have the same strength there ? Could you submit to us a ratio ? —No, I could not give you a percentage at all. 118. Could you give particulars, so far as your personal knowledge goes, of some town of their operations ? —I should be surprised to know that there are only seven thousand retailers who signed an agreement with the association. 119. That number is stated in the report, and you think it is low Mr. Myers : I think they are only chemists. 120. Mr. Collins (to witness).] There is no doubt but that they are very strong in the United Kingdom in all sections. To what extent does your association support the P.A.T.A. I—No more than we can help. Of course, lam only quoting from memory, but I should think that our wholesale trade with the P.A.T.A. would run to about £40,000 or £50,000 per annum. 121. What are your total purchases ? —They run about £70,000,000. 122. And your trade with the P.A.T.A. is only about £40,000 or £50,000 per annum ? —Yes ; and lam only speaking from memory. I may say that for two or three years we closed the account of the P.A.T.A. —that is, of people who were associated with the P.A.T.A.—but on account of advertising it brought such a sudden demand on our society that we were compelled to reopen an account to supply the needs of our members. I should say, speaking roughly, that by making our account with the P.A.T.A. at £50,000 to £80,000 per annum you would be well within the mark. 123. Can you buy direct from .a manufacturer in the P.A.T.A., and thus avoid wholesale profits ?— They will not sell to us. So far as a manufacturer who is connected with the P.A.T.A. is concerned, their conditions have to run right through their business. 124. You cannot, even giving a huge order for supplies to the manufacturer, take delivery yourself ?—Not until we agree to his terms. 125. You are not employing the wholesaler ? —I am speaking of our business as wholesalers. I cannot say what the amount of the retail trade with the P.A.T.A. would be. I have only knowledge of what our account is with them. 126. Your expenses of management, wages, rental, and so on : have you any advantages in that respect over the ordinary retail societies ? —I think they are at a disadvantage, and I make the statement that from the point of view of wages they would pay better wages than any traders. 127. What about the question of rent ?—Most of the premises are owned by the society. Their rent would be 5 per cent, of the interest on the capital cost, and 2| per cent, is allowed for depreciation and 10 per cent, on factories—that would be the rent, and they would have no advantage that way. 128. Mr. Reardon.] They still fix 5 per cent, after the cost of the ground and buildings have been paid for ?—They give a building forty years' life at 2f per cent. 129. Mr. Collins.] If you pay the same wages and you have the same overhead expenses, where do your economies come in as compared with competitors ?—lt is only by a large turnover ; and you as a business man know that the larger your turnover the smaller the ratio of expenses to that turnover. In view of the efficiency of the trade the profits would be too much, and you consequently want to pass on economies to the consumers, but you cannot do this if you are selling P.A.T.A. goods. 130. Do you ever find it necessary to have clearing sales ?—Yes, but not for fancy departments. 131. You apparently seldom find occasion for the ordinary slaughtering of goods, even in saletimes ? —Yes. So far as the P.A.T.A. goods are concerned, we always buy as required, and that class of goods would never be slaughtered—not by a sale. 132. You do not penalize your shareholders who join your society and take their business elsewhere ? —They are allowed to shop where they like. 133. Similarly, customers who sometimes support you would be at liberty to deal elsewhere if they thought they could buy cheaper ?—They are perfectly free to give their trade to any one else. 134. Would you as a director instruct your shareholders in any way to keep off proprietary lines and support their own lines ?- - Naturally, we would prefer to push our own lines ; that is only natural. 135. It is an instruction to your societies to push your own lines ?—Certainly. 136. Mr. Myers.] What do you consider would be a fair and reasonable profit for the retailer to obtain on flour —I mean, the rate of profit ? —Do you mean flour in bulk or sold in small quantities ? 137. Flour sold in quantities such as 31b. or 41b., or, say, Is. worth ?—lO per cent. 138. Is that on turnover or cost ? —Turnover.
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E. W. DE FENQ.]
H.— 44A.
Emile William de Fenq, sworn and examined. (No. 2.) 1. Mr. Myers.] You are resident now in Wellington, are you not ? —Yes. 2. And are the organizer of the P.A.T.A. in England ? —Yes. 3. I understand that some years ago you were associated with the P.A.TA. in New South Wales ? —Yes. 4. For how long ?—Roughly speaking, for about eleven years. 5. You know, I think, that there had been an inquiry, which has already been referred to, held in or about the year 1920 ?—Yes, 6. At the time of the inquiry, I think, the operations of the P.A.T.A. had been temporarily suspended ? —Yes. 7. When did you first become aware as to the nature of Mr. Justice Beeby's report ? —This morning. 8. Did the P.A.T.A. endeavour to get a copy of it ? —-It was never released to them. 9. You can tell us, I suppose, whether or not the P.A.TA. is now in active operation in New South Wales ? —Yes, it is. 10. And has been for how long since the inquiry ceased ? —lt was reorganized in 1922. 11. And has been continuously operating since ? —Yes. 12. Throughout New South Wales I—Yes. 13. Have proceedings ever been taken against it ? —-None whatsoever. 14. When did you come to New Zealand ?—Originally in October, 1925. 15. Did you remain here then ? —Until December ; and I returned to Australia, and returned again in January, 1926, and have remained here ever since. 16. Are you aware that prior to your coming here there was a society called the Chemists' Defence Association ? —Yes. 17. And did that operate on practically the same lines as the P.A.T.A. ? —Yes. 18. I think you have organized the P.A.T.A. at the request of a number of traders in New Zealand ? —Exactly. 19. Has the P.A.T.A. actually commenced operations in New Zealand ? —No. 20. I think you voluntarily agreed not to at the suggestion of the Board of Trade ?—Exactly. 21. Seeing that an inquiry would be held ?—Yes, early in November. 22. However, you can tell the Committee to what extent you have succeeded in obtaining adherence to the P.A.T.A. You can take any particular section you like ?—lt has been organized in four different sections —namely, the retail chemists, the wholesalers and the retailers, and manufacturers and manufacturers' agents, and something like forty manufacturers have signified their willingness to join up with the association because they realize that such a movement is necessary for the protection of their various articles. 23. When you speak of manufacturers' agents I suppose you speak of manufacturers outside New Zealand ? —Exactly. I think there are about two or three wholesalers who have not actually signified their intention to support the P.A.TA. ; every chemist in New Zealand but five, and 147 retail grocers in Wellington and over 150 retail grocers in Auckland. At that period I discontinued organizing for the time being. 24. At the time when you commenced organizing did you make any investigation yourself as to the necessity or otherwise of such an organization I—Yes.1 —Yes. I interviewed a number of manufacturers first, and in each case it was unanimously agreed that something had to be done owing to the drastic state of affairs. 25. What drastic state of affairs ? —The cutting of prices—that is to say, many lines being sold at below invoice cost; and this meant a natural dropping-off of sales and a consequent loss to the retailers who were handling the goods. 26. Did you make inquiries from the retailers and wholesalers ? —I interviewed the wholesalers and then the retailers. 27. I think you have copies available of your constitution. Did you bring them with you ?—No. 28. I have a copy of them here. This is the constitution ?—Yes. 29. That also shows the list of your executive, does it not ? —Yes. 30. Before proceeding any further, you heard the last witness, Mr. Charter, giving his evidence, did you not ? —Yes. 31. Have you in your constitution any rule against co-operative societies such as he has referred to being in existence in England ?—No. 32. Co-operative societies are supposed to sell at fixed prices if they join up with your association ?— Yes ; they may make ,a rebate to their customers according to the amount of their profits. 33. If they make an increased profit they may give it back ?—Yes. 34. Give it back on the produce or in the form of dividends ? —Yes, exactly. 35. How would you describe the majority of the articles which you anticipate going on the P.A.T.A. list : would they be chemists' goods, or what ? —Wholly and solely patent-medicine preparations— patent-medicine and proprietary toilet preparations. 36. Soaps Yes, maybe. We have had many applications for lines that might be termed foodstuffs, but they refuse their application in the way of foodstuffs, such as Allenbury's. 37. So far as the business of the chemist is concerned, from the knowledge you have acquired in the P.A.T.A. business in Australia and from your investigation in New Zealand, are there any special features about the business of the chemist which require protection of this kind ?—Do you mean in reference to price ?
3—H. 44A.
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38. No. First of all, the chemist's turnover : is it large or small ? —Slow. 39. Are you able to tell the Committee, for example, what effect it would have upon a. chemist's business in regard to his dispensing if he were unable to obtain a fair and reasonable profit on what I call the proprietary articles I—As1 —As a matter of fact, the price charged for dispensed articles in New Zealand is considerably in excess of that charged in New South Wales. 40. Supposing a chemist is not able to sell a proprietary article at a fair and reasonable profit, what is the result ?—He has to sell at a price greatly in excess of the price now charged for dispensed medicines or go out of business. 41. You have had experience of the result on broad lines of the cutting of prices on particular proprietary articles by retailers ? —Only from the principal agents of a line. 42. You cannot give us figures, except by hearsay ? —That is so. 43. Have you, as a matter of fact, purchased certain goods at the establishment of some of these cutting stores in Wellington —that is, both fancy-goods stores and grocery stores ?—Yes, I have. Mr. Myers: I may say at this stage, Mr. Chairman, that Ido not want to mention names unnecessarily, but I am prepared to give them if it is deemed desirable. Mr. Collins : We quite realize that. 44. Mr. Myers (to witness).] I think in that six months you have been investigating some of the prices charged by certain fancy-goods stores in Wellington with respect to a number of leading lines ? —Yes. 45. What stores ? —(The witness mentioned three stores). 46. I have here an advertisement of which appeared in the Evening Post on Wednesday, 16th February, 1927. I want you to look at this advertisement ? —Yes. 47. It says there, " Is. 6d. bottle Dr. Morse's Indian Root pills, I Ud. bottle " : do you know what is the best wholesale price at which that article can be purchased ? —The best price at which the wholesaler can buy is lis. per dozen. 48. Then it says, " Is. 6d. cake Cuticura soap, llld. tab.": what is the best wholesale price ?— 13s. per dozen. 49. And is selling at I I J-d. a tab.? —Yes. 50. Mr. Montgomery.] What is the best price that the retailer could obtain if he got in touch with the manufacturer ? —— Mr. Myers : I am afraid you are at cross-purposes with the witness, sir. 51. Mr. Myers (to witness).] Do you know the manufactured price of Cuticura soap ?- I am not quite sure. Mr.' Montgomery : It is important to know that. Mr. Gresson : I think it has been made clear that the price quoted by the witness was the price that the manufacturer charged the wholesaler. Mr. Myers : That is in the case of Dr. Morse's pills. is charging at less than the wholesaler would charge to the retailer. 52. Mr. Myers (to witness).] You do not know what is the price which the wholesaler has to pay for Cuticura soap ? —No. 53. — would have to pay —what ? —Not less than 13s. per dozen. 54. The next is, " a 6d. tube Piver's shaving-cream " I—2os.1 —20s. per dozen is the price from the wholesaler to the retailer. 55. The next is, " 9d. tin Calvert's carbolic tooth-powder, 2 tins 1 Lid." ? —The best price that the wholesaler can buy from the manufacturer is 6s. Id. per dozen. 56. These are all proprietary lines ? —Yes. 57. Now we come down to another portion of the advertisement, wherein it says, " Is. 9d. tin Palmolive talcum powder, lljd. tin " ? —l2s. per dozen is the best wholesale price. 58. Now we come to the advertisement for Blue Seal vaseline, which shows that a bottle of vaseline at Is. 3d. can be purchased for 7-Jd. per bottle. What is the best price at which it can be purchased ?— 7s. lOd. is the best wholesale price. 59. Now we come to a 3s. 6d. bottle of Clements' nerve and brain tonic, advertised at 2s. 7d. per bottle ?—The best wholesale price is 31s. 6d. per dozen. 60. Then we come to De Witt's bladder pills ? —The best wholesale price is 535. 3d. per dozen, buying it in £20 parcels. 61. Mr. Montgomery.] For what length of time do these prices remain in operation ? Mr. Myers : It is a general advertisement. Mr. Montgomery : 1 am under the impression that they restrict their sales at that price to one day in the week. Witness : At times, but they advertise it everywhere. 62. Mr. Myers (to witness).] This is a general advertisement: this store is not primarily a store for the sale of chemists' sundries or proprietary articles ?—No. 63. He deals in, I suppose, hundreds and hundreds of different articles which are commonly called fancy-goods ? —Yes. 64. He has to make up his profit somehow ? —Yes. 65. You made a number of purchases at Macduff's store, did you not ? —Yes. 66. You have in your possession a tab. of Palmolive soap which you purchased there ?—Yes. [Soap produced.] 67. You bought that soap yourself, did you not ? —Yes. 68. What did you ask for ? —A cake of Palmolive soap. 69. You asked for an invoice, did you not ? —Yes. 70. And they invoiced it as one cake of Palmolive soap ? —Exactly.
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71. Palmolive soap is a well-known proprietary article ? —Yes. 72. Is that the same article which you have produced ? —No. 73. This is a different brand. Of course, it may be as good, but the point is that you asked for the recognized Palmolive soap ?—Yes. 74. This is the invoice, is it not ?—Yes. 75. Were you told that it was not Palmolive soap ? —lt was simply handed to me. This soap is made in England. 76. What is the price at which Palmolive is sold generally ? —There has been an alteration this month ; it has been, reduced to 7 Jd. 77. For this soap which you have produced they charged you 6d. ?—Yes. 78. You also bought two photo-frames, did you not ? —Yes. [Photo-frames produced.] 79. And you paid Is. 3d. each ?—Yes. 80. I think you were able to ascertain the price at which these photo-frames were purchased '!— Yes, at Bs. per dozen. Mr. Myers ; In other words, they were purchased at Bd. and sold retail at Is. 3d. each. lam not complaining, sir, but I am only showing that profits are made by these people. 81. Mr. Myers (to witness).] What was the price paid for the Palm and Olive soap which was substituted for Palmolive ? —The worst price at which they could buy it here would be 48s. per gross. 82. You also bought a cigarette-case, did you not ?—Yes. 1 83. At what price ?—ls. 6d. [Cigarette-case produced.] 84. What is the wholesale price ? —-Bs. 6d. per dozen. 85. Then you also bought a tin of baby-powder ?—Yes. [Produced.] 86. You paid for that Is. : what is the cost price ? —-7s. 7d. per dozen. 87. Then you also have some hair-slides: for those how much did you pay I—For1 —For two I paid Bd. each, one at 9d., one at 4d., and one at 3d. [Produced.] 88. Do you know what these articles cost wholesale ? —Yes. The one sold at 4d. cost 2d., the one sold at 9d. cost 6d., and the others sold at Bd. cost 4d. 89. Are they the worst or best prices ? —The worst prices. I have since found that they were bought at even better prices than that. 90. I think you also had a look at Macduff's window in order to see some of their prices ?—Yes. 91. That was on the 17th of this month, was it not ?- —Yes. 92. Take McClinton's talc ?—l3s. per dozen, less 5 per cent. 93. Is that the wholesale price to the retailer ? —Yes. 94. What is the selling-price I—lOd. 95. Palmolive talc ? —l2s. per dozen, and sold at lid. 96. Lane's emulsion ? —22s. sd. per dozen, and sold at 2s. 97. Cuticura soap ?—Sold at is. 2d., and cost 13s. per dozen. 98. And Kruschen salts % —The cost is 21s. sd. per dozen, and is sold at Is. 9d. 99. I think you also had a look at two or three other shops which profess to sell articles cheaply : we will take, for instance, , Courtenay Place % —Lane's emulsion, costing 425. 5d., selling at 3s. 6d. 100. Now take ———■, Cuba Street ? —Eno's, costing 38s. per dozen, selling at 3s. 101. Mr. Montgomery. ] With reference to these articles here and the profits made thereon, have you purchased any similar articles from any stores that do not cut prices—that is, on ordinary lines ? —No. 102. There is no comparison, then, as between the price of the baby-powder [produced] and those hair-slides which you have produced and similar articles sold by shops which do not cut prices ?— I have not attempted to compare prices. 103. I think it is necessary that this inquiry should have that information. Mr. Myers : I submit that it is very difficult, because if you take one article for the purpose of comparison you could not get the same article elsewhere. 104. Mr. Myers (to witness).] We come now to ——■—■. I think you have a bottle of tomatosauce which you purchased at one of their stores ? —Yes. [Produced.] 105. From what shop was that purchased ? a store at Kilbirnie. 106. How much did you pay for it ?—9d. 107. I think you have ascertained the wholesale price of that bottle ? —4s. 6d. per dozen, less 10 per cent, and 2J,- per cent. Mr. Collins : That is over 100 per cent, profit. Mr. Myers : Yes. We have the invoice, and there is no question about that: it is 140 per cent, on cost. I have not worked it out on turnover. Ido not like to take it on cost, but I have only done so because I have not the other figures here. I admit that it is on turnover that we should take all the figures. 108. Mr. Myers [to witness.] Take mixed spice ? —I bought a packet of mixed spice for which I paid 3d., and it costs Is. Bd. for sixteen packages. 109. That, again, is 140 per cent, on cost. Yon bought a small quantity of boracic acid, did you not ?—Half a pound for 6d., and the wholesale price is 6fd. per pound. 110. They charged you 6d. for half a pound, whereas the cost price is 6fd. per pound ?—Yes. 111. Take Worcester sauce : you paid how much 6d. 112. And the wholesale price is what ? —The particular sauce in question is an unwrapped line of Young's, and the price is 4s. 6d. per dozen, less 10 per cent, and 21 per cent. 113. Then you purchased a tin of Hillsdale's asparagus at store in Lambton Quay for 2s. 3d. per tin : what is the wholesale cost ? —l6s. 9d. per dozen. [Produced.]
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114. Then in regard to flour ? —3|- lb. for Is. in a Willis Street shop. 115. You asked for a shilling's worth of flour ?—Yes. 116. And you were charged what price ? —3J lb. for Is. 117. What is the wholesale cost ? —2|d. per pound. 118. On cost that would be 62 per cent. : and I suppose it would be about 40 per cent, on turnover—that is, roughly speaking ? —Yes. 119. I think you bought 1 lb. of washing-soda ?—Yes, for 2d., and the wholesale price is 6s. 9a. per hundredweight. 120. On cost that is over 130 per cent. ?—Yes. 121. And what do you say it was sold at ?—1 lb. was sold at 2d. 122. Where was that ? —ln Vivian Street. 123. I understand that at an Island Bay shop you bought 1 lb. of carbonate of soda- and paid what ?—3d. 124. And the wholesale price is what ? —l|d. 125. Then in regard to rennet tablets, what is the cost per bottle ? —9d. per bottle, and 6s. per dozen is the wholesale price. 126. Then with respect to coffee and chicory ? —The wholesale price is Is. 9d. per pound, less 10 per cent, and 2|, and I bought J lb. and paid 7d. 127. Then with respect to cinnamon; you paid what? —I paid 4d. per packet, and it costs 2s. 3d. for sixteen packets, less 10 per cent, and 2| per cent. 128. Then there is a packet of turmeric : you paid what I—l1 —I paid 6d. It costs 2s. 3d., less 10 per cent, and 2| per cent. Mr. Gressen : I take it that as regards the ——■ stores all the articles you have shown are those where large profits have been made. Are you going to contend that they also cut goods as well % Mr. Myers : I am not sure about that. My point is that it is the -——— people who are attacking us. Mr. Gressen: You do not complain about our making profits ? Mr. Myers : Not in the least. They are the persons who are seeking to prevent us making a reasonable profit. They want to sell our lines at any price they like. Mr. Collins : I think we had better leave questions like that to the cross-examination of the witnesses. Mr. Myers : It was as a result of my friend's statement that made me reply. (At this stage it was decided that the continuation of the examination of the witness should be continued next day.) The Committee adjourned at 4.30 p.m. until 10.30 a.m. next day.
Second Day : Wednesday, 23k d February, 1927. The Committee met at 10.30 a.m. Examination of Emile William de Fenq continued. (No. 2.) 1. Mr. Myers.'] Have you copies of the agreements into which it is proposed to ask the manufacturers, wholesalers, and retailers respectively to enter ?—Yes, I hand the documents in. L is the manufacturers' agreement, and is entitled " Application to list Lines, or alter Prices of Lines already listed." M is the wholesalers' agreement, headed "Agreement." Nis a copy of the proposed retailers' agreement, and is headed " The Proprietary Articles Trade Association of New Zealand," and is addressed to the executive of the P.A.T.A. 2. You referred yesterday to the purchase of some asparagus from the Self-help shop ? —Yes. the Self-help shop in Lambton Quay. 3. Are you able to say whether there is any variation in the prices charged for that same article at the different Self-help shops ? —Yes ; the same day as I made the purchase at the Lambton Quay shop I called at the Cuba Street shop, and in the window of that shop there was a tin of the same brand of asparagus, marked Is. lOd. I went in and asked the manager what the price was and he said Is. Bd., and I bought and paid for a tin at that price, although it was marked in the window at Is. lOd. 4. What did you pay at the Lambton Quay shop for the same article ? —2s. 3d. This is the tin I bought at Cuba Street shop [produced]. Mr. Montgomery: It looks as if it were a little battered. 5. Mr. Myers :] Was it reduced on that account ? —I do not think so. Asparagus-tins usually look like that. 6. So that at Lambton Quay, where I suppose more of the " expensive " trade is done, the article is marked and sold at 2s. 3d., while in Cuba Street it is marked at Is. lOd. and you got it for Is. Bd. '( —Yes ; I can Dot say why it should be so. 7. I think you wanted to say something about some lobster which you bought ?—'Yes, I purchased this tin [produced] at the Courtenay Place shop. It is Cape Spiney lobster, and is packed by the Sadanha Bay Packing Co., of Capetown, of which lam a shareholder. I sold ten cases
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of the lobster to the Self-help Co., for which I have the order on my file. That was at the end of 1925, and the price was 755. per case of eight dozen, c.i.f.e., Wellington. That lands into the store at a cost of 9s. 10|d. per dozen, including duty. Some little time after the lobster arrived I noticed it in the Courtenay Place shop window, marked at Is. 9d. a tin. A little time later I met Mr. , and a week later the price of the lobster was reduced to Is. 3d. in the various windows and is still being sold at Is. 3d. I purchased this tin at Is. 3d. a few days ago. 8. The Chairman ;] Its actual cost would be about lOd. ? —Yes, something less than lOd. 9. Mr. Walker:] They still have some in stock ? —Yes. The order was booked in 1925, but it would probably be the middle of 1926 before the goods were delivered. 10. Mr. Myers :] 1 think you have also something to say about packed teas ? —I purchased 1 lb. of tea at the -— Vivian Street shop, and at the same time I purchased I lb. I submitted the I lb. to two experts, and they are prepared to swear that the tea is not worth more than Is. Bd. When 1 say ,Is. Bd. a pound 1. am referring to the cost. I paid 2s. 6d. a pound retail. It is their own tea, packed by the . That would leave a profit of lOd. on a outlay of Is. Bd. at the most, or equal to 33J per cent, on turnover. 11. Do you know anything about the way in which the same firm treats Amber Tips and Bell tea ? —They sell Amber Tips and Bell at 2s. lid. 12. The Chairman.'] What is the fixed price of those brands ?—On the packet the price is shown as 3s. 4d. That is the price expressed by the manufacturer. 13. Mr. Myers.] Do you know what it costs ? —I believe it cannot be bought at less than 2s. 10d., less 5 per cent. 14. And they sell it at 2s. lid. ? —Yes. 15. And sell their own packed teas at a profit of lOd. per pound ?—Yes. 16. Do you know of any statement made by Mr. — of stores regarding his refusal to stock aspro ? —Yes, there has been such a statement made by him in a public advertisement. 17. What was the reason he gave ?—Owing to the abnormal profit that he is required to make ? 18. I think you know what the profit is ? —I know the figures that the quote, but I do not think they are correct. 19. What is the figure they quote ?—55 per cent. 20. Is that on cost or turnover ? —lt does not say. 21. But he would not stock aspros because of the abnormal profit ? —That is so. 22. Do you know whether he stocks any particular line of asprin ? —At the time of the issue of the price-list in April of last year, he was stocking a brand of " Arrow " asprin packed by the Nonpariel Packing Co., of Wellington, which cost him not more than 3s. 9d. per dozen—perhaps less. 23. And he was selling those for 6d. per bottle ? —Yes, which showed a profit on outlay of over 60 per cent. 24. You produce a piece of cheese [produced] ? —Yes ; it weighs 1 lb. 2| oz. I bought it from the < — Lambton Quay shop this morning. I inquired the price of cheese, and was told Is. per pound. I asked for 1 lb., and was supplied with that piece, which they said weighed 1 lb. 2i oz., for which they charged me Is. 2d. That cheese should not have cost more than 7£d. or, if badly bought, Bd. per pound. 25. You have given some idea, by your evidence and production of documents, of the operations of the P.A.T.A. Since I opened yesterday I understand from you that in the event of a trader selling an article which is on the P.A.T.A. list at less than the price fixed by the manufacturer the association refers the matter to the manufacturer ? —Yes. 26. And to no one else ?—No, not at first. If the manufacturer is agreeable to his price being cut he is asked to remove his line from the list, and the P.A.T.A. is no longer concerned with him. 27. If he takes a different attitude ? —The manufacturer then notifies the wholesalers not to supply his goods to the particular retailer concerned, and the association secretary also notified the wholesalers that this particular retailer has cut a registered line, and is not to be supplied with any association registered article. 28. That is to say, unless and until the recalcitrant trader observes the registered price of the article in respect of which he was offending ? —That is so. 29. I want you for a moment to look at this advertisement in the Waikato Times. It is dated Monday, 7th February, 1927 ?—Yes, I see it. 30. It is an advertisement, is it not, of an establishment calling itself the — Stores ?— Yes. 31. It is an advertisement setting out some dozens of lines which will be sold at ll|d. between the hours of 9 o'clock in the morning and 4 o'clock in the afternoon on a specific day ? —Yes. 32. Do you know whether this institution makes a habit of this kind of business, with, different articles for each day %—I believe it does. 33. Do you notice in this advertisement certain articles featured at the bottom of the page Yes. 34. Do you see, Kolynos tooth-paste, Johnson's baby powder, Cuticura soap '( —Yes. 35. Each advertised at lljd. ?—Yes. 36. Do you know whether in each of the cases I have mentioned the prices quoted are above or below the cost price from the wholesaler to the retailer ?—Yes, they are below cost. 37. I think you gave us the cost of Cuticura soap yesterday ? —Yes, I think it was 13s. 6d. or 14s. a dozen. 38. And you also see in the advertisement Baxter's lung-preserver is advertised at ll|d. ?—Yes.
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39. Can you. tell us something about that ? —-The best price from the wholesaler to the retailer is 14s. per dozen, less 2| per cent; but Baxter's do supply to some of the larger retailers as if they were wholesalers ; the best price that the wholesaler can buy at from Baxter's is lis. lid. a dozen for five-gross lots. 40. I see Rexona soap is also set down in the advertisement ?—The best price at which the wholesaler can buy is 1 2s. 4d. a dozen net for five-gross lots. I believe the best .price from the wholesaler to the retailer is 12s. lOd. a dozen for six-gross lots. 41. I see there are a number of other items, like Coalgate's shaving-soap, at the same price ? — Yes. 42. Mr. Gresson,] You have given us a good many wholesale pribes : how do you get these wholesale prices ?—From various sources. 43. The reason I ask is that my information is that in many respects those prices are quite wrong, and I would like to know whether you may not possibly have been mistaken ? —There may be fluctuation in prices. For instance, one wholesaler may do better in one line than another, and a retailer who confined his purchases to one or two wholesalers might not always get the best price. 44. Well, take as an instance Amber Tips tea. You told us, I think, that the price was 2s. lOd. less 5 per cent, to retailers. I believe the right price is 2s. Bd. less 10 per cent., and I have people here who will say that they can buy at that price ?—I question that price. 45. But if I call the witnesses ? —I would prefer to see the invoice. 46. You would prefer to see the invoice rather than believe the evidence of a witness ? —Yes, I would prefer to see the invoice. 47. How long have you been associated with the P.A.T.A. ?—lndirectly, about eleven years. 48. Are you still associated with the organization in Australia ? —No. 49. How long is it since you have been associated with it in Australia ? —About eighteen months. 50. Did you come over here to form the P.A.T.A. here ?—Yes, I came over here at the invitation of the traders. 51. Which section of the traders ? —Generally, retail chemists and a number of other manufacturers. 52. Who actually approached you first ? —A retail chemist. 53. By letter ?—By word of mouth. I was over here in the middle of 1924 on other business and a retail chemist approached me on P.A.T.A. matters. It was Mr. Cotterell, of Auckland. 54. Then, how did the manufacturers and wholesalers and retailers come into it ?—After I saw Mr. Cotterell I saw Mr. Laird, of the Auckland Drug Co., and then saw different manufacturers of popular proprietary medicines and toilet preparations for the purpose of ascertaining the position here, and one and all told me that conditions were in a very bad state —that their lines were being " hawked about " and slaughtered, seriously damaging their business. They informed me that they would appreciate such an organization as the P.A.T.A. to protect their interests here. 55. Then, I suppose, you would approach the manufacturers, wholesalers, and retailers to join up ? —Yes. It is not necessary to have the co-operation of all. The next thing, after having decided to come across and organize, I called meetings of Grocers' Associations in each of the four centres. Three out of the four centres were unanimous in supporting the association. One centre was somewhat apathetic about it—that was Christchurch. 56. So Christchurch held the fort ? —lt was not so much a, question of that as a matter of internal trouble. At one meeting I held there they were unanimous, but when they came to consult other members those other members were content to " let the other fellow do it." 57. Is the association actually formed yet ? —Yes. 58. And functioning ? —No. 59. As regards all this preliminary work that you had to do, who paid your expenses ? —They were paid from subscriptions collected by me from retail chemists. 60. And manufacturers ?—No ; the manufacturers' subscriptions were held in trust. They were not used to finance the organization of the association. 61. Why.did they subscribe? —To register their goods. 62. I notice that in your organization you set up various provincial committees ? —Yes. 63. And I notice that you have a provincial committee for Christchurch, which, according to your literature, consists of certain gentlemen who are named ? —Yes. 64-. When and where did. you approach any of those gentlemen and ask whether they would act on the committee, and when did you get their consent ?—ln the first place, the minutes of the meeting which they attended will show the appointment of the different gentlemen to the committee. 65. Appointment by whom ? —By themselves ; the meeting appointed them. 66. Were all of the gentlemen whose names 1 have read appointed ?—No, all but two. 67. How did you get their consent to act on your committee, because those gentlemen say they never consented to act on the committee ?—The minutes of the meeting show that two of those gentlemen were not at the meeting. One of them, Mr. , arrived just as the meeting was closing. It was explained to him that he had been appointed, and he accepted the position. The next morning I saw Mr. and explained to him that he had been appointed, and he also accepted the appointment, verbally. Mr. — and Mr. and Mr. were at the meeting. 68. Did all those gentlemen agree to act on the committee ?—Yes. Further than that, they appointed two delegates to come to Wellington, Mr. and Mr. . Neither of those gentlemen came to the conference in Wellington, but both appointed proxies which were sent to us. 69. What actually do you regard as a proprietary article — I speak of proprietary articles in the general sense, patent medicines and toilet preparations ? —Proprietary toilet preparations and patent medicines.
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70. Suppose you were able to extend your operations to foodstuffs, such as creamoata, would you call that a proprietary article ? —We have not considered extending it to foodstuffs. 71. You have, in fact, refused to accept foodstuffs ? —Yes, there are a few patented foodstuffs, such as Allen and .Hanbury's and ovaltine. 72. Since you have been organizing here, have you contemplated extending to foodstuffs ? —No. 73. Are you sure ? —Positive. 74. Does some of your literature deal with the question of foodstuffs ? —No. 75. By " foodstuffs," do you mean foodstuffs in their widely accepted sense or proprietary foodstuffs ? —Creamoata, which you have just cited and " K " jam—they are proprietary. 76. 1 will read the following letter, writen by you to the grocers' section of the Canterbury Employers' Association, dated the 19th July, 1926. The letter is as follows : — Dear Sie, —Yours of the 15th instant to hand; contents noted. It is evident that your committee does not realize that although it is proposed that for the purpose of formation the P.A.T.A. embrace only patent medicines and toilet preparations, there are many other proprietary lines, such as soaps, polishes, &c., that will be included as soon as the association is established. There is no reason that even proprietary foodstuffs will not be included at a very early date. Even if the P.A.T.A. confine its operations to patent medicines and toilet preparations it would be worth while to the grocer who wished protection against the cutting store who uses the popularity of these lines as "bait" for the purpose of inciting the public that "theirs is a cheaper store." We quite understand that the formation of the P.A.T.A. will not meet with the approval of a few members of your association, but we feel sure that the majority of your members will welcome it. I trust that it is quite clear that, although we appeal to the members of your association for a committee, it is not an association matter. That letter was signed by you. Have you any comments to make ? —lt refers to patent foodstuffs only, such as ovaltine, and Allen and Hanbury's, and lines of that nature. 77. Then, I understand that the association can include any form of food which comes under the heading of a patent food ?—That depends on the scope which the Board of Trade allows. 78. But you contemplate extending to them ?—Only in accordance with the law. 79. But you will cover things like Mellin's food ? —lf the Board allows us. I mean, patented proprietary foods. There is a difference between ovaltine and creamoata and "K " jam. 80. You will admit, I suppose, that the object of the association is to'either stabilize or increase prices ? No ; it is to stabilize prices, not to increase them. The tendency is to reduce them. 81. Can you tell me in what way the tendency is to reduce them ?—Yes ; by the manufacturer fixing the selling-price for his goods his turnover would be increased ; or, in other words, he would get the full value of his advertising, and through the increased turnover the cost of production would be reduced and there would be a tendency for him to pass that benefit on to the consumer —first, in an endeavour to get his goods to the consumer at a better price than is being charged for a similar article ; I mean a lower price, a maintained price. That is practically the only reason. 82. As I understand it, you agree that the sale of a manufactured article at a low price does not, as one witness said yesterday, increase sales to the general public ? —A low maintained price would increase the sale to the public, but a cut price would reduce sales. 83. I understand that one of the lines sold on the market at the present time showing the smallest margin of profit is Edmonds' baking-powder ?- Yes. 84. Has that been going for long ? —lt is an isolated case. I mean the cutting of the price of Edmonds' baking-powder is confined to isolated territories. It is being sold in isolated places at a near-cost price. 85. Would you not expect that to affect the total sales of Edmonds' baking-powder ? —No. 86. Why not ?—Because the cutting of Edmonds' baking-powder is confined to very small territories. The price in Auckland is different from that in Wellington. I believe it is Is. 4d. in Auckland, and I think the Christchurch price is even better than that. Ido not know much about it, but I know it is sold in Wellington for Is. 2d., which is only a small portion of New Zealand. 87. Do you know that it is a fact that Edmonds' baking-powder during the last year or two has doubled its sales ?—I would attribute that to their clever advertising and to the virtue of their article. They themselves realize that it costs them more in advertising to sell their goods owing to the nonobservance of a standard price, and sales which might be retarded in one section are made up in another. 88. It follows, then, on your own showing, that if a line is seriously cut the manufacturer, by suitable advertising, can do away with the effects of the cutting ? —No ; the manufacturer realizes that it costs him considerably more in advertising to sell his goods, and that there must come a time when there will be a reckoning- in other words, a big falling-olf in spite of his forceful advertising. 89. Suppose all proprietary articles in New Zealand were put on your list, it would mean that no retailer who refuses to join your association could handle any of those articles ? —That is not so. 90. Why not ? —There is no restriction made in that way by the association. Anybody can handle the goods, irrespective of whether they are members of the association or not. 91. You mean, if they observe the conditions ? —Yes. 92. Assuming, as I say, that every proprietary article in New Zealand is put on your list, then a retailer who refuses to observe the stipulated price can obtain no article on your list ? —lf the retailer does not observe the price laid down by the manufacturers, supplies of all registered goods are stopped to him. 93. And the price is to be fixed by the manufacturer, the wholesaler, and the retailer by virtue of the machinery you have set up ?—No ; but the wholesaler does not enter into the fixing of prices-— the manufacturer does. 94. Has the wholesaler no representation on the committee which fixes the prices ? —No ; the manufacturer is the only one who fixes the price. 95. Suppose I have a proprietary article and sent it to you, and I say that the wholesale price is to be Is. and the retail price Is. 6d., who does it go before ? —Before the executive of the P.A.T.A.
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96. Who are the executive ? —The executive are representatives of the manufacturing, wholesale, and retail sections. 97. So that all three are represented ? —Yes. 98. What is the function of the committee ? —The function is to " police " the prices fixed by the manufacturer. In the event of the price which is submitted by the manufacturer being approved, he then fixes his price with the wholesalers and the terms under which they are to supply to retailers The association does not fix either wholesale or retail prices. It issues a list of retail prices to all retail members and others, showing the prices which have been fixed by the manufacturer. 99. So that virtually that middle body has only really got the right to say whether it approves of the price the manufacturer has already fixed ? —And " policing " the maintenance of the prices by the manufacturer. 100. On that committee that you have explained to us, who represents the interests of the public as regards price ? —I think the manufacturer is representing the interests of the public. The manufacturer has the interest of the public first and last in his mind. The natural law of competition is best in the public interest. 101. You consider that the public is adequately represented by the fact that owing to the economic laws the manufacturer will not endeavour to place an excessive price on his goods ?—Exactly, and that we are not dealing in necessary commodities. If they will not bear one kind of cough-mixture there are plenty of others. It is a matter between the manufacturer and the consumer. 102. Can you point to anything in your constitution which prevents your dealing with necessary commodities ? —No reference has been made in our constitution as to what we cannot do. 103. And what is there to prevent you from dealing in necessary commodities ? —lf you will define what you mean by " necessary commodities " I might be able to answer. 104. lam using your own words. You used the expression ?—You mean foodstuffs 1 105. Yes ; what is to prevent your dealing in foodstuffs ? —The law of the country. 106. But the objects of your association are quite wide enough, if the law permits it, to deal in any form of article ? —lf the law permits it, it is for the public benefit. 107. If the law permits it, I say the objects of your association are sufficiently wide to permit you to deal in any form of article ?—As far as the P.A.T.A. are concerned, it is set up for certain objects—to maintain prices of proprietary patent medicines and toilet preparations. It has never given any consideration at all to foodstuffs—not even proprietary foodstuffs. 108. But you remember that in your letter of the 19th July you say, " There is no reason that even proprietary foodstuffs will not be included at a very early date." They were the words you used ? —Yes, but proprietary foodstuffs was not what I meant; I meant patent foodstuffs. 109. In fixing your retail prices, do you differentiate in New Zealand between the cash and the credit man ?—The association in New Zealand recommends to the manufacturers that they allow a difference in price for a cash-and-carry sale as against a booked sale —a fixed difference of 5 per cent. That is a recommendation. 110. Do you draw any distinction between the various classes of cash grocery business ? —There is a difference if it is a cash-over-the-counter transaction. 111. Are you aware that there are at least four types of grocery businesses ?—That is a matter for the manufacturer to analyse. If he wishes to provide for an individual grocer to sell his goods at say, 10 per cent, off list, and another at 5 per cent, off list, and another at list price, that would come before the committee and it would be considered. 112. Have any prices been fixed in New Zealand yet by your association ? —No prices have been fixed. 113. In New South Wales did they fix different prices between the cash businesses and the credit businesses ?—No ; the price fixed was the cash-and-carry price, the booking trader being allowed to charge for such service if he wished. 114. What was the difference between the cash and the credit business ? —There was no stipulation at all. 115. Then, the arrangement in New South Wales was that the retail cash price was fixed and the credit man could charge what he liked ?—Exactly. The P.A.T.A. here is not based on New South Wales ; it is based on that of England. 116. Did you have anything to do with the formation of the P.A.T.A. in New South Wales ?- No ; it was formed eighteen years ago. 117. In New South Wales, if you only fixed the cash retail price, that really largely does away with the usefulness of the association so far as the manufacturer is concerned ?—Not so far as the cash-and-carry man is concerned. The manufacturer cannot control the credit man except by the law of competition ; the minimum is invariably the maximum. 118. Did you have much experience of the association in Australia ? —lndirectly, for eleven years. 119. Can you tell us the name of any single article reduced in price as a result of the operations of the association ? —No, I do not know of any. We cannot remember all the prices ; they are altering all the time. 120. Can you tell us the name of any article which increased as a result of the association's operations ?—No. 121. Is it not a recognized fact that the operations of the association, wherever their prices have been observed, result in increased retail prices and not in decreased prices ?—Positively no. 122. Although, after eleven years, you cannot point to any single case in New South Wales where an article has been reduced in cost ? —Not from memory. I cannot remember all the prices. 123. I do not ask you to remember the prices, but can you give us the name of any article which has been reduced ?• —You might attribute it to some other reason.
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124. When you are fixing these retail prices, how are you going to make it act evenly as between a firm with a turnover of, say, £10,000 and another with a turnover of £200,000 ? One trader must be able to trade on better terms than another. How are you going to reconcile these traders ?—The association does not attempt to reconcile them. That is for the manufacturer. He fixes his price and is responsible to the consumer for his goods. If the man with a big turnover does not wish to handle an individual article, that is a matter between himself and the manufacturer ; it has nothing to do with the association. 125. As I understand it, then, you say that the manufacturer, in fixing his price, may differentiate between a cash and a credit business ? —Yes. 126. Have you ever known that happen in the past in other countries 1- It has not happened in the past. 127. So it is to be pioneer work in New Zealand I—Yes. 128. Whose idea is it ? —lt is because of the local conditions. 129. Has it been discussed here ? —Yes. 130. Two prices ? —Yes. 131. Why not mention so in your literature I—lt is mentioned on the manufacturers' agreement. [The agreement was here produced to the witness, and attention was drawn to an imprint by a rubber stamp in column 2, reading " Less not more than 5 per cent, cash over counter or 2f per cent, monthly settlement."] 132. Mr. Gresson.] When was that stamped interpolation on the agreement put in ?—I cannot tell you. 133. As originally drawn up, there was no provision for two prices. Now, the words I have referred to have been inserted. When was that alteration made, and why was it not included in the original form ?—The original form was printed before the association was brought into being. After the association was brought into being it was decided that manufacturers be recommended to differentiate between cash-over-counter sales and booking sales. This is referred to in the minutes of the association of the 25th November, 1926. This is the minute :— Question of cash and book prices was discussed as a possible handle for opposition, Mr. De Fenq explaining that he had strongly advised 5 per cent, cash, 2£ per cent, booked, each manufacturer to provide for this in his application. And the following resolution was passed : — That every manufacturer be written to recommending him to make, a cash-and-carry price. 134. Suppose a credit grocer sells at the cash price, what would be done ?- It would be pointed out to the retailer, and if he refused to sell at the booked price he would be treated as a cutting retailer. 135. And the cash man, of course, is at liberty to sell at the credit price if he wants to ? —No ; if the cash man sold at grea'ter than the cash-and-carry price he would be treated as selling at an excessive price. 136. And this question of the two prices had its inception since this minute ?—No ; you can trace it back to the meeting of the grand council in August, when representatives from each of the four centres met in Wellington, and. I recommended that they provide for the cash-and-carry trader, to allow for 5 per cent., and the meeting decided that 2\ per cent, was sufficient difference between the cash-and-carry and the booked price. The meeting decided that in August, but since then the executive have decided that 5 per cent, would be a more equitable allowance. 137. And are you aware that, as a matter of experience, the figure approximates more closely to 10 per cent, than to 5 per cent, as the difference between the cash and credit trader ? —I do not think that is right. 138. But you admit that 5 per cent, is more or less a guesswork figure ? —No ; it is taken from the Committee's recommendations. 139. What is the " stop list " ?—That is a list of those traders wlio are cutting the price of registered goods, or charging excessive prices for registered goods. 140. He is put on that list if he cuts the price ? —Yes. 141. What is the effect of putting him on the list ? —lt should stop him from getting supplies. 142. That means to say that if you can succeed in getting the vast majority of the manufacturers and retailers in these particular articles to join your association you can keep out of business any man who does not come into your association, by refusing to supply him with your articles ? —No. You will keep going back to the question of a trader being compelled to become a member of the association to obtain these goods, but that is not so. A trader, whether he subscribes to the association or not, provided he observes the prices as fixed by the maufacturer, is no concern of ours. 143. Suppose you get a sufficient number of articles on your list, then you can prevent the supply of those articles to any trader who refuses to observe the retail price as fixed by the manufacturer ? — That is so. 144. And, therefore, if ultimately you become strong enough in New Zealand, you can impose your retail price on any retailer as a condition precedent to your dealing with him ? —The manufac turer, if he does not wish to fix his price, leaves it open. 145. Can a manufacturer join your association and register his article without fixing a price ?— No. I regard the association as being for the convenience of the manufacturer to enable him to maintain his price, both wholesale and retail, as fixed by the manufacturer. 146. With the assistance of the united wisdom of your committee ? — No ; the committee has no jurisdiction.
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147. But you say, Yes, if the price is excessive ?—Tf the price proposed by the manufacturer is excessive, it is pointed out to him that the profit is too great. 148. That is exercising control ?—lf the manufacturer insists that the retailer enjoys a big margin of profit he may fix his price on his own account, but not through the association. 149. The Chairman.] Has your council any idea as to the cost of production of the articles of which the manufacturer fixes his prices ?—lt would have some idea. 150. Mr. Gresson.J With regard to the articles you bought from the Self-help store, when you went to those shops and got the goods at what you suggested was an excessive profit did you find any evidence of cutting ? —Yes. 151. What articles ? —Granose biscuits, sold at lid. per packet; I believe they cost lis. 6d. per dozen. Edmonds' baking-powder, sold at Is. 2d. a tin ; I think the price is 14s. per dozen. They are the only lines I can call to my mind. 1.52. Were there any others ?—I did not see any others. 153. Actually, then, we may take it that as a result of your inspection of the Self-help stores these were the only two items you saw ?—I did not inspect for cut prices. 154. How did you notice those, then ?—They were obvious. 155. It is, nevertheless, a fact that they were the only two articles found in the shop ? —Yes. 156. Mr. Kennedy.'] The P.A.T.A. operations seem to be directed against the cash stores, are they not ? —No, not against any section of traders. 157. Do you suggest there is any cutting by any of the credit stores ? —I do not suggest anything about it. 158. The stores that you have mentioned this morning are all cash stores ? —Yes, I believe they are. 159. You told us that you saw no objection to a manufacturer passing on to the consumer the economies that he effected by reason of a large turnover ?—I have no objection to that. 160. If that is permissible, do you agree with your counsel that it is immoral for a retailer to pass on to his consumer the benefit of the economies which the retailer may effect in his own business. Mr. Myers : I protest, Mr. Chairman. I did not say anything of the sort, and I have never made any such stupid statement. What I did say was that I accepted one of the witness's statements that he regarded it as immoral. Mr. Kennedy : I accept the explanation without reservation. 161. Mr. Kennedy (to the witness).] Do you contend that the retailer should not pass on to the consumer the benefit of the economies that he makes in his own business ? —The retailer may do what he likes with his own goods —that is, the goods he packs himself ; but when he is dealing with a manufacturer's line —that is, a proprietary line—he is dealing with the good name of that article and the goodwill of that particular manufacturer, which is not his own. While he may own the physical goods, he does not own the goodwill in them, so that he has no jurisdiction over them. 162. So that you object, if he buys well or turns over his stock well, to his passing over the benefit in the shape of a lower price to the consumer ? —With his own goods he may do as he likes. 163. As a matter of fact, you define manufacturers as including not only the person who manufactures, but you include those who control the goods, do you not ? —We define a manufacturer's agent as a manufacturer because he is to .all intents and purposes the manufacturer. 164. I suppose the definition as contained in your constitution still stands —that manufacturers are those who control the source of supply of one or more proprietary articles ?- Exactly. 165. That is still the definition ? —Yes. 166. And may I take from you that the association is out primarily to protect the interests of manufacturers so defined ?—Yes. 167. Do you say that the retail chemists were the first to send out this S.O.S. to New South Wales ? — They were the first to speak to me. The matter has been discussed in New Zealand since 1906. 168. Are the chemists specially identified with the manufacturer, that they should fight his battles ? —I do not know. 169. You mentioned a list of articles sold by Macduff's : have you got your invoices there ? —Yes. 170. How many of those articles that you complained of are manufactured in New Zealand ? Bath salts, for instance : are they manufactured in New Zealand ? —No, I think not. 171. Hair-slides ? —No. 172. Cigarette-cases ? —I do not know whether they are manufactured here. 173. Palmolive soap ?—That is an English soap. 174. White Cross baby-powder ? —English. 175. Cuticura soap ? —I do not know where that is manufactured. 176. Lane's emulsion -New Zealand manufacture. 177. Piver's shaving-cream ? —French. 178. Calvert's tooth-powder ?—English, I think. 179. Palmolive talcum powder ? —Australian, I believe. 180. Pond's cream \—English. 181. Blue Seal vaseline ? —English. 182. Clements' tonic ? —I believe it is manufactured in New Zealand. 183. McClintock's talcum powder ?—From overseas. 184. Kruschen salts ? —Overseas. 185. So that practically all those items you complained of in regard to the price at which Macduff's sold are manufactured abroad, with a few exceptions ? —Yes. 186. They would be handled in New Zealand by the manufacturers' agents or by the ordinary wholesalers ? —Not always ; in some cases the manufacturers have their branch office here. 187. Prices have been fixed by the association prior to this agreement being set up in New Zealand ?—No.
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188. Registered with your association, then ? —No. 189. Have you seen any of the circulars which are being sent out in the trade stating that prices have been registered with you ?—1 have not seen them. If that statement has been made it is wrong. 190. I produce here a circular letter addressed by Parfumerie L. T. Fiver [Exhibit Q] in which, after giving a list of prices at which their goods are for sale they say,— These prices are registered with the N.Z.P.A.T.A., and it is a condition of sale and purchase that the minimums as set from time to time must be maintained. Distributors are authorized to cease supplies when sold below these minimums. Is that statement, that the prices are registered with the N.Z.P.A.T.A., false ?—lt is not true. No lines are registered by the association. 191 Has it ever been registered in New Zealand ? —No. 192. Has it been considered ? —No. 193. Very well, I ask that you produce for the Committee the minutes of your proceedings, so that the members may peruse, them—-They are here. No applications have been dealt with. The Chairman : Do you accept that assurance, Mr. Kennedy ? Mr. Kennedy : No ; I would like the Committee to see the minutes. The Chairman : Mr. Kennedy presses to know whether that matter was dealt with in the minutes. Mr. de Fenq has said " No." Mr. Kennedy is not satisfied, and wouid like the Committee to see the minutes. 194. Mr. Rear Aon (to witness).] Who are the agents of that line ?—lt is not stated on the letter. 19-5. Mr. Kennedy.] Can you tell us how that letter came to be written ? —Middows Bros, and Taylor have applied for registration. We have their application here. But it has never been considered by the committee. 196. What reply was sent to their application ?—That it would be considered in due course. 197. The Chairman.'] How did you intimate that—by letter or what ?—I cannot say at the moment whether it was by telephone or letter. 198. Mr. Kennedy.] Have you seen the application before ? —No ; that is as it was attached by the girl in the office. There has been no occasion to consider applications yet. 199. Do you have nothing to do with the office organization ? —I am the organizer. The secretary and his assistant would get the correspondence and would acknowledge receipt of applications, which would be filed for consideration in due course. They are available, of course, for me to inspect at any time, but I have not gone through them. 200. Do you know anything about an application from in respect of Coty's perfumes ? —I know that they have applied for registration, but the prices they have submitted have not been considered yet. 201. I produce one of their circulars, to which is attached a slip bearing these words : " Enclosed we hand you new price-list, effective Ist November, which has been registered with the P.A.T.A." Is that statement untrue I—lt is untrue. 202. Are members of your association ? —They are ; they have paid their subscription, or, I should say, they have tendered their subscription, which is held in trust until such time as their application is considered. 203. Where is the money —in your ordinary bank account ? —Yes. 204. Have you since you commenced operations in August considered any cases of what were reported to you as price-cutting ? —No ; the association has not considered any case. 205. Do you say that so far you have no " stop list " ?—We have no stop list. 206. Why were these applications, which, I suppose, came in early in August, not considered ?— There has been no occasion to consider them, because the association is not ready to function, and until it is ready there is no occasion to consider them. 207. Why is it not ready to function ? —Owing to lack of funds and the necessity for organizing the traders. 208. Do you want to canvass further throughout the country to get more members before starting ? —Further subscriptions, yes. 209. It does not function, then, simply because of the lack of financial support ? —Yes. The association came into being late in August. In the beginning of November we discontinued organizing. Had we not discontinued organizing, those applications would have come up for consideration early in January. 210. Is it, then, a fact that without canvassing further you could not get sufficient support from manufacturers, wholesalers, and retailers to justify you in functioning ? —No ; the support was there, but it had to be finalized. 211. When did you come over from New South Wales ?— -In October, 1925. 212. And I presume that since that time you have been actively canvassing ?—No. 213. When did you start your campaign ?—On the Ist September, 1926. 214. But your association was born in August '? —Yes ; I had convassed and organized to bring the association into being. 215. But even with that canvassing you had not received sufficient support to justify the association operating ? —There was no appeal to the manufacturers, wholesalers, and retailers for funds prior to the Ist September, 1926. 216. Have you, since the association was brought into being, ever considered any cases of excessive prices being charged to the public ? —There has been no consideration of prices at all. We did not propose to function, at any rate, until January or February. 217. I suppose you have not received any complaints from any of your wholesale members about excessive prices being charged to the public ?—The association has not received any such complaints.
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218. Or from any of your retail members ?—Not that I know of. If a retailer did so notify us the reply would be that we are not yet functioning, and were powerless to deal with the matter. 219. We gave an undertaking to the Board of Trade in November that we would not function. 220. In the form of application for enrolment by a retailer these words are used : —• I (or we) agree that when asked for an article on the list of the association I (or we) will not attempt to influence the customer to purchase any other article in its stead. That is so, is it not ?—Yes. 221. Those words are still used ?—Yes. 222. What is the reason for using them ? —The retailer may strike out those words if he wishes when signing the agreement. If he does not strike them out he agrees that when he is asked for the article of a specific manufacturer he will supply it without trying to substitute any other article for it. 223. In whose interests do you suggest that is ?- -The consumer's. 224. And do you suggest that your association has incorporated those words for the consumer's protection, and not for the protection of the manufacturer ? — I The protection is a general one —for the manufacturer, the wholesaler, the retailer, and the consumer. 225. How does it protect the consumer ?—Because he gets what he asks for, and is not prevailed upon to accept something else. 226. The Chairman.'] Suppose I go in to a chemist's shop and ask for, say, aspro, and a qualified chemist recommends me to buy aspirin on the plea that it is a better article, and I accept that because of his knowledge as a chemist —it has actually happened to me : what then ? —lf you take his advice, or appeal to him as a chemist, then you are buying goods plus service. 227. But you would not apply that to grocers ? If I ask for Palmolive, say, he would not be entitled to point out that there was a cheaper and equally good article made in New Zealand ? —Not unless you asked him. 228. Mr. Gresson.] And if he does recommend other articles without being asked, he is put on the " black list " ? —lf he substitutes other articles for those asked for it would be pointed out to him. 229. Mr. Kennedy.] You said the natural law of competition is the best protection for the public ? —Yes. 230. Is that your considered view ? —Yes. 231. But the aim of your association undoubtedly is, you will admit, to prevent competition by retailers among certain lines ?—No. The retailer may do as he likes with his own goods, but when he is dealing with a proprietary article he is dealing with the proprietor's name, and he has no right to do what he likes with that. 232. So that the effect of your association is to prevent competition by retailers in your proprietary 1 ines ? —No ; it is to prevent retailers from using proprietary articles as cheap advertising. 233. It is to prevent the retailer from reducing the price of that article to the public ?—No ; it is to prevent the retailer from presuming to do something that he is not entitled to do—that is, to use the manufacturer's line as bait to bring customers into his shop. 234. The Chairman.] Mr. Kennedy's question is that the association fixed certain prices for proprietary lines, and that these prices must be adhered to. Is that so ? —Yes. Mr. Myers : Mr. Kennedy was asking for the motive. The Chairman : He was asking whether competition was allowed. Witness : I maintain that competition rests with the manufacturer. The, Chairman : But if the manufacturer fixes the price there can be no competition ? Witness : He is trading with other manufacturers. 235. The Chairman.] Your answer is that in other lines they can do as they like, but that in association lines there is no competition, because prices are fixed ? —Yes. 236. Presuming a manufacturer of soap, let us say, has joined the association and fixed a price for his commodity from wholesaler to retailer, and suppose another manufacturer in the soap business has a similar article selling at half the price, and he applies to join the association, would he be allowed to join, knowing what the effect would be on the price of the article of the manufacturer whose article was already registered on your list ? —That aspect would not be considered at all. If his article showed a fair margin of profit it would be registered, irrespective of the number of similar lines already on the list. Even if, say, Palmolive were registered and some one registered an exact replica, that would have nothing to do with us. 237. If he is a new man starting in business you would undoubtedly register him ? —Yes. 238. Mr. Hay ward.] You would not be concerned with his price, except so far as profits were concerned ?—That is so. 239. The Chairman.] Who decides whether an applicant is accepted as a member of your association ? —The council of the association. 240. Has the council any right of discrimination as to membership ? —None whatever. Mr. Myers : It is part of their policy to get every manufacturer to come in, whatever his prices may be compared with those of another manufacturer who may be on the list. 241. Mr.. Gresson.] In one of your clauses in the constitution it says the association reserves the right to deregister any article which may have been registered on the list. Under this rule the association may at any time put a man off the list and hand back his subscription ? —The only case which could arise under that would be where a retailer cut prices and the manufacturer condoned it. 242. Mr. Reardon.] An interesting question arises out of the history of Palmolive soap and Palm and Olive soap. We know there is a serious conflict between the respective manufacturers. Let us assume that Palmolive is already in the association and Palm and Olive apply. The position would be that Palm and Olive is selling at lower prices than Palmolive. Suppose the Palmolive
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people, being already in the association, says, " This Palm and Olive soap is such a clever imitation of ours that unless they fix their costs approximately the same as ours we ought to refuse them admission," what would you say \—The individual's objection would not be considered. 243. There are a number of manufacturers whose costs vary greatly. If a manufacturer is struggling to keep down his costs and is compelled to fix the price of his article according to the costs of the manufacturer who is working more expensively, the man who is running his business cheaply would make handsome profits compared with the other ? —Yes. 244. The same situation would arise in the case of the Palmolive soap that I have suggested ? —I can only say that the association has no power to refuse registration provided all matters are in order, their prices are in order, and that they will do the necessary things. The Committee adjourned at 12.30 p.m. till 2.30 p.m. On resuming at 2.30 p.m. Examination of Emile William de Fenq continued. (No. 2.) Mr. O'Leary : As representing a large body of consumers I was pleased to hear this statement from your counsel yesterday : "It proposes to touch, I say, only proprietary lines other than foodstuffs, because you may conceivably have proprietary lines which are foodstuffs, but it does not intend or contemplate to touch foodstuffs at all." Mr. Gresson : Apart from proprietary foodstuffs. Mr. Myers : Not even infants' foods. Mr. Collins : Nor ingredients used in the preparation of foodstuffs ? Mr. Myers : No. That is an essential difference between the P.A.T.A.'s proposed operations in New Zealand and the operation of the P.A.T.A. in Australia. In Australia the P.A.T.A. touched foodstuffs as well as proprietary lines in the ordinary sense of the word, and it is partly because they touched these foodstuffs .that Mr. Justice Beeby's report was, to a certain extent at all events, of a hostile character. 245. Mr. O'Leary (to witness).] You heard that ? —Yes. 246. That statement is correct ? —Yes. 247. I am surprised to hear to-day that your reason for not touching foodstuffs was because the Board of Trade did not allow it, or, in the words of your counsel, that the law did not allow it ?—Yes. 248. So that this exclusion of foodstuff's that your counsel referred to yesterday is not from any desire to help the consumer, but because the law will not allow it: Is that not the position ? —Yes. 249. Have you and those associated with you in the formation of this association and the planning of this work in New Zealand any regard for the welfare or interest of the consumer ? —Yes. The system requires a certain amount of special protection, and if unscrupulous traders are allowed to continue the cutting of articles obviously the consumers will not get the benefit in the long-run. That is one of the reasons I think of for the moment. 250. Is that the only statement you can give of how the interest of the consumers have been considered ? —The natural sequence of price-maintenance is reduction in price. 251. I take it that if there was any great consideration given to the consumer you would be well able to remember what the consideration is ? —lt is the only consideration without discussion. 252. When you say that foodstuffs are excluded, may I ask whether such articles as olive-oil, magnesia, and things of that kind, which are used by the ordinary people, come within that province —that is, those articles particularly in reference to infants ?—They have not applied for registration, and, when they apply, their applications will be considered. 253. Is there any reason why they would be refused ? —I cannot speak for them. 254. I understand that quite a number of articles in New Zealand have been applied for registration under the association ? —Yes. 255. Have you the applications here ?—Yes. 256. Would you mind producing them ? —No. Mr. Myers : They will be handed in later with pleasure. 257. Mr. O'Leary (to witness).] Yesterday one of the members of the Committee—Mr. Montgomery, I think—asked you a very pertinent question, and it was this : You made various purchases at what you called the cut-rate stores of articles on which the storekeeper was making a handsome profit ? —Yes. 258. He asked you if you had made similar purchases at stores that were not considered cut-rate stores ? —I did not. 259. You are unable to say, then, as to whether or not the prices that you would have paid at the other stores would have been greater or less or the same as what you paid ? —I am not able to say. 260. You have, therefore, left the Committee in the dark on that very important question : Is that not so ? —Yes, they are in the dark so far as those articles are concerned; but the lines I produced are lines on which the price is not fixed by the manufacturer —that is to say, the manufacturer sells them at an open price and the buyer fixes his own price. I may say that I merely bought those articles to show that those lines are not confined to a percentage of profit they confine themselves to on the control lots of which the price is stipulated by the manufacturer. 261. That means that the purchaser may be able to get the cut-rate goods at, say, the and other stores, and by going to the other stores he can get those goods at a higher rate ? —Not necessarily higher, because he has to pay the price that the manufacturer stipulates to the consumer for that respective article.
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262. You say, " not necessarily higher " ; but you gave us examples yesterday of articles which you bought and which you stated were sold at less than cost: Is that not so ? —I did not buy any articles sold at cost or under cost; but I cited articles that were sold at cost. 263. I thought they were really purchased. However, you purchased some goods in certain stores and you quoted the cost price, and I was led to understand they were being sold at a loss ? —No ; they were sold at a big profit. 264. If you can purchase them at less than cost, that is not going to be the price that the manufacturer will fix if he comes in under your association ?—Exactly. 265. The purchaser would have to pay more for the cut-rate items in one store than would be the case if he purchased at, say, the store, on which a fair profit is made ?—lf they are recognized cut-rate items. 266. Yes ? —He would have to pay more. 267. I suppose you suggest that it is for my nine thousand railway men to do that ?—They are paying more in the long-run. 268. Has Amber Tips been offered for registration ? —No. 269. I understand from you that the basis of your objection to the method of trading is this : that on account of these goods being undersold by some shops the other traders will not stock them, and as a result the manufacturer loses because there is no demand for the goods ? —The other traders are antagonistic to the line. 270. That means a loss of business on the part of the manufacturer ?—Yes ; the inability of being unable to get those goods to the consumer. 271. Can you give the Committee any lines where the manufacturer has been affected in that way ?—I can give you one —for instance, Dr. Lyons's tooth-paste. 272. Where is that manufactured ? —That is an overseas line. I do not know where it is manufactured. Mr. Myers : I am going to call evidence on those points. 273. Mr. O'Leary (to witness).] I will suggest a reason, and a reason out of your own mouth. You remember dealing with Edmonds' baking-powder this morning ?—Yes. 274. I take it you remember Mr. G-resson putting it to you that Edmonds' baking-powder was being undersold in some localities ? —Yes. 275. And yet the sales had doubled over the same periods ? —Yes. 276. Your answer to that was this : " I attribute that in the case of Edmonds' baking-powder to two causes : one, clever advertising, and, second, the quality of the article —the virtue of the article." I think you said that. Do you remember that ? —Yes. 277. I suggested to you that these lines are perhaps undersold, and you say that it reflects on the manufacturer if lines are cut ? —That is so. In answering your question relative to the toothpaste which you mentioned a little while ago, I attribute the loss of sale to the cutting. 278. That is your answer to my question ? —Yes. 279. I take it that you, as a business man or a commercial man, realize what can be done by way of advertising—-that is to say, an inferior article can, by means of advertising, be put on to the public and sold to the public for a considerable time before it is found out ? —I do not admit that. 280. Have you been in New Zealand long ? —I have been in New Zealand for twelve months. 281. You have not been here, apparently, long enough to find that out ?—(No answer.) 282. Mr. Walker.] There was a lot said in your evidence in reference to cut-rate prices ? — Yes. 283. And the suggestion was made very plainly by you that some of these prices were slaughtered at cost, and even under cost ? —Yes. 284. You told us what you believe is a fair average wholesale price at which would be likely to buy those goods ?— No ; I cannot tell the price at which the traders should have sold the goods. 285. No, you gave us the wholesale price ? —They may have got certain articles in a job way. 286. You are aware that there are men running factories here of world-wide experience, and those men are anxious at times to put in certain lines to traders cheaper in order to boost up their returns for the quarter ? —1 do not think there is much of that done with those lines we are referring to. 287. You do not know that it is the practice at times to do that ? —I do not know that it is the practice. 288. If it was the practice, would it not be customary to go to some of the big buyers and the notorious advertisers, like and put in in a big parcel cheap ? —Not if they knew it was going to damage the business. 289. You do not know whether they do it or not ? —I do not think that they do. 290. You do not think it is likely they would do it '? —Not unless there is a reason. 29.1. I suggested a reason—that is, to give a fillip to sales ?—The goods may be damaged. 292. In other words, you cannot tell us whether is selling those goods for cost or under cost 1 —1 know that if he bought the goods in the regular channels he has not paid the price at which he is selling them at. 293. With respect to your evidence relative to slaughtering cost, you do not know from whom he gets his supplies ?—I know that so far as certain lines are concerned he is unable to buy them direct from the manufacturer. 294. That is only surmise. Are you relying upon certain agreements not to supply people direct ?— No. 295. In the course of your evidence you made an interesting point in regard to the supply of articles to chemists. You said that the dispensing prices in New Zealand were higher than they were in most parts ? —I said they were higher in New Zealand than in Australia.
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296. Do you not think it is possible that that may be due to a possible price-fixing amongst the chemists themselves ? —No. 297. You consider that the ingredients, so far as medicine is concerned, does not lend itself to pricefixing ? —I know that the price for dispensing medicine is fixed here and in Australia. 298. In other words, you say that the price is very high here ? —Yes. 299. Do you know that the man who first dispenses it costs it up and puts his sign on it, and you cannot go anywhere in New Zealand, even though your boots are falling off, and get it cheaper anywhere ? —I do not know. 300. You admit it is price-fixing, and the medicine is higher in New Zealand than in Australia ? — There they are able to get their profits on proprietary lines. 301. That may be so, or it may not be so ; Ido not care ? —lt is a fact. 302. You brought a piece of cheese for the purpose of showing that the gross profit on suitable lines was 40 per cent, on cost ?—I did not work it out. 303. It was bought at 7d. and sold at Is. ? —And about which the made a squeal. 304. Y/hen you go in and buy a bit of cheese you do not see what has to be done in regard to it — you do not see the initial stage, when they have to wash the cheese, and you do not see the occasional bad condition the cheese gets, and the time occupied in looking after it —— Mr. Myers : I do not really want to raise any objection as to how my friend should proceed with his cross-examination, but surely, sir, this is unnecessary, because the same practice has to be followed by all the grocers. Mr. Collins : The point that Mr. Walker wants to make is that the trouble involved in selling that cheese and in looking to its quality is infinitely greater than passing it out. Witness : I think the comparison is grotesque, sir. 305. Mr. Walker (to witness).] There is some arrangement whereby you give a rebate of 5 per cent. ? —(No answer.) Mr. Myers : They do not give a rebate at all. Witness : The manufacturer gives that. 306. Mr. Walter.] When was that started ?—lt was first mooted in August. 307. When did you notify your retail constituents by circular or otherwise as to that ? —They will be notified in due course. 308. An important change in the price-fixing like that has not been conveyed to your constituents yet ? —The prices have not come up for consideration yet. 309. I understand that if a man goes into a chemist's shop and asks for a certain line, the chemists, however competent, must not voluntarily advise the person as to other similar lines to obtain ? —lf he is asked for a specific lines he is expected to give it. 310. 1 understood you to mention that there was to be a system of control of prices, &c., and if you think a certain price is excessive you will not register that price ? —That will be considered by the Committee in due course. 311. The whole thing is between the wholesaler and the retailer ? —The price as from the manufacturer to the wholesaler. 312. Does that come into the question ?—lt does. 313. How are you going to exercise any supervision over them if you do not know the manufacturer's price ? —lt would be impossible to find that out, because there are so many other things to be taken into consideration. 314. The cost of an article is a vital matter in relation to its selling-price ?—I am not the adjudicator. 315. Mr. Myers.] I will deal first with those questions raised by Mr. O'Leary. Supposing a storekeeper, be he a fancy-goods dealer or a grocer, sells a number of lines at, say, below cost, may we take it that he loses substantially on those lines ?—Yes. 316. In ordinary business trading is it not necessary for a storekeeper to make on his turnover a sufficient rate of profit—of gross profit—to cover all his expenses and leave something for himself ? —- Yes. 317. Very well ; have you ever heard of what is called " recovery " or " come-back " lines ? —Yes. 318. Would you mind explaining what is meant by that ?—The lines that show a greater margin of profits than is sufficient to cover overhead expenses, plus a reasonable percentage for the money involved. 319. If, then, a storekeeper, be he fancy-goods dealer or grocer, sells a number of lines at or below cost, what has he got to do with some other lines ? —Make a profit to allow for those he loses on. 320. Exactly. The consumer, of course, has to pay ?—Yes. Mr. Gresson : That means turning them into recovery lines. Mr. Myers : Of course. 321. Mr. Myers (to witness).] In the case of the ordinary grocer who sells for cash, are you aware whether the people who go in to purchase flour purchase in small lots or in 70 lb. bags ? —I should say that flour is a stable item of diet. 322. And is purchased by every one, and naturally the poor people buy in small quantities ? —Yes. 323. Do you think it is in the interests of the people that flour should be dealt with by these cash-and-carry grocers as a come-back or recovery line ?—I must admit that flour would be much cheaper if it was not used as a come-back line. 324. Mr. O'Leary asked you where the interests of the public come in : can you see where the interests of the public come in in another direction than that you have stated ? —They would buy necessary commodities —that is, articles they are buying every day—at a much reduced price. 325. Now, with regard to Edmonds' baking-powder, I think you have a letter from T. J. Edmonds, Ltd., dated 17th December, 1926, in which they deal with the question of advertising, to which you referred previously ?—Yes. [ Letter put in.]
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326. Edmonds Ltd. say that they have to spend a great deal more on advertising by reason of these price-cutting tactics than they would otherwise have to do : can you see another reason of the interest of the public being conserved ?—lf they were able to reduce their cost of advertising they would naturally pass that on to the public in reducing the price of the article to the public. 327. The public is consequently affected adversely because the selling-price of this article cannot be reduced, and the public cannot get the benefit of any reduction ? —That is so. 328. You were asked by Mr. Gresson this morning as to whether you were aware of any articles in New South Wales which had come down in price by reason of the P.A.T.A. I think you have been thinking over that aspect of the matter ? —Two lines have crossed my mind—namely, aspro and Palmolive soap. 329. What was the price of aspros ? —I think it was Is. 9d. ;I am not quite sure. 330. That is your recollection ? —Yes. 331. And it was brought down to Is. 3d. ? —Yes. 332. There was a substantial reduction in the original price ? —-Yes. 333. And Palmoilive soap was brought down to what ?—lt is now 6d., but originally I believe it was Is. 3d. 334. You were asked also, I think, by a member of the Committee—l am not sure by whom— and by counsel also, whether if you had manufacturer A on your list and manufacturer B was making a similar article at a lower price, manufacturer B could get on your list. Would you mind indicating what the position is in England in that respect ?—There are only two lines that cross my mind. Lysol is one. There are over twelve different brands of Lysol on the list. Ido not know how many there are, but there are more than I have named. So far as the price is concerned, they do not know haw, they arrive at the price. There are quite a number of different manufacturers. 335. And fixing their own prices ? —Yes. 336. Mr. Collins.] Presumably, for the same article ?—Well, presumably for the same article — namely, Lysol. When one manufacturer of Lysol applied for registration it was not submitted to any other Lysol people. 337. Mr Myers: And just the same thing applies to aspirins ? —Yes. 338. In England there are quite a number of different aspirins manufactured ? —Yes. 339. And soap, as well ?—Yes ; there are many different kinds of soap manufactured. 340. And on the list competing one with another at different prices ?—Yes. 341. Now, I think also you searched the records of your secretary with a view of ascertaining whether there was a reply sent to Messrs. Middows Bros, and Taylor ? —Yes. 342. This is a copy of the letter sent ? —Yes. [Letter put in.] 343. You were asked by Mr. Kennedy whether the action of the P.A.T.A. and the manufacturers would prevent economies which a trader might effect being passed on to his customer ? —That is not part of our policy. 344. It comes back to what we were talking about before —that is, assuming that a trader makes fair and reasonable profits upon proprietary lines, then by cutting them below what is a reasonable profit, and he is charging more for flour or for some other necessities of life than he should, what do you suggest he should do for the purpose of passing on his economies ? —Reduce the price of the essential articles. As a matter of fact, they are his articles, to do what he likes with them. 345. So that he is helped, and not prevented, by the action of the P.A.T.A. ? —Yes. 346. You were asked whether, when a manufacturer sends on his application to be placed on your list, you know anything about his manufacturing cost ? —We do not know anything about that. 347. You do know, however, what he proposes to charge the wholesaler ?—Yes. 348. That is on his application ? —Yes. 349. You do know what the wholesaler is to charge the retailer ? —What the manufacturer proposes the retailer should charge ? 350. That is on the application ? —Yes. 351. And your council can see as to whether or not that leaves a fair and reasonable margin of profit or too much profit ? —Yes. 352. You also know what it is proposed by the manufacturer the retailer should charge to the public ? —Yes. •353. And what ratio of profit it involves ? —Yes. •354. That is on the application ? —Yes. 355. And you can see at once whether that is a reasonable or unreasonable rate of profit ?—Yes. 356. And may we take it, then, that in regard to proprietary articles, where the manufacturer or manufacturer's agent applies to be placed on the registered list, your council can check the price which the wholesaler charges the retailer, or it is proposed he should charge the retailer, and the price at which it is proposed the retailer should charge the public ? —Yes. 357. May we take it, unless you refuse that, you are in the position to protect the public interest as well as the interests of the manufacturer —that is to say, of seeing that the public is not charged too much ? —The minimum price is invariably the maximum price. I can produce written evidence, if necessary, of' where a dealer of a proprietary article or controller of two articles, having one registered with the P.A.T.A., was sold at a figure of 6s. 9d., and the other article, not registered, was sold at 13s. 6d. ; and the complaint was that the chemist charged excessive profits for the particular line not registered. That was in New South Wales. 358. If that article had been on the P.A.T.A. list would you have insisted on the profit being very much less ? —Yes. 359. You were asked about the operations of the P.A.T.A in New Zealand : I think you had an opportunity of looking through the minute-book of the Chemists' Defence Association ? —I have seen|it.
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360. And did you see from that—in 1920 or thereabouts—the question of forming a New Zealand P.A.T.A. was under consideration ? —Yes. [Book handed for perusal by the Chairman.] 361. I think you said yesterday, in a modified form, that the P.A.T.A. was in existence for some years prior to your coming—that is, in the form of the Chemists' Defence Association ? —The P.A.T.A. has been in the course of organization since 1906. 362. And prior to your coming here the Chemists' Defence Association was in existence ? —Yes. 363. Exactly—that was a price-fixing association ? —Yes. Mr. Collins : Yes, but it did not extend so far as the P.A.T.A. is concerned. 364. Mr. Montgomery (to witness).] I want to ask you whether any provision has been made, or is it proposed to make any provision, for the disposal by retailers of shop-soiled goods which may have deteriorated through sweating, accident, fermentation, or through any other natural cause ? — That would be a matter for the manufacturer. If they should agree, and the manufacturer wishes his line released, he will remove it from the association until such time as the stocks are cleared, and then he will re-register the line. 365. Mr. Hayward.] Does the manufacturer replace such goods ?—Yes, that is a common practice—that is to say, he takes them back and either refunds the money or replaces them with other goods. 366. Mr. Montgomery.'] Do the majority of retailers, or a proportion of them, deal through the middlemen or wholesaler ? —That is the very point. Some deal direct with the manufacturer and some deal through the wholesaler. 367. I was asking about the majority of the retailers ? —The majority of the retailers deal with the wholesaler. 368. Or with the middleman. lam offering these questions simply as arguments that have been advanced, and I want to give you an opportunity of replying to them—you must not consider them hostile questions ? —I understand that. 369. If a retailer wished to do his own storing, and to deal directly with the manufacturer, should he not be able to sell at prices which would be impossible if he obtained the goods through the middlemen—that is, provided he was not bound by the P.A.T.A. prices ? —lf he is buying direct from the manufacturer and storing his goods he incurs the same expense as the wholesaler would incur. 370. It would depend upon the location of his store and what his overhead expenses were generally, and whether he had that store at Island Bay or in town. If the store were at Island Bay, would he be able to buy cheaper ?—He should be able to sell cheaper than a retailer that buys from a wholesaler. 371. Do you agree that a shop which turns its stock over, say, three or four times a year should be able to sell at a lower price than one which turns its stock over only once a year ? —Yes. 372. Is that not the position between the grocer and the average chemist ? —Yes ; the grocer turns his stock over much quicker than a chemist would. 373. Does that not suggest to you that many of those lines which are at present sold by the chemist should, in the public interest, be sold by the grocer ? —There is no idea of confining it to the chemist. 374. The point of the argument is that if the grocer can turn, over his stock a great number of times during the year at a smaller profit than the chemist, then the public should get the benefit of the reduction in price ? —Those lines carry a smaller amount of profit than what the chemist would turn over in a year. 375. Many of the lines I have described are sold by both ? —That is true. If they are quickselling proprietary lines they carry a big margin of profit. It is not proposed that these quick-selling patent-medicine lines carry even a sufficient margin of profit to satisfy a chemist. 376. Do they more than satisfy the retail gr6cer ?—No, I do not think so. 377. Is there any reason to suppose that by reason of the turnover of the P.A.T.A. goods the druggist is adversely affected by the large number of druggists in business ?—No, I should not say that. 378. I may tell you that in Great Britain there is one druggist to every 4,500 people ; in Canada one to every 2,600 people, and in New Zealand one to every 2,100 people, so that the druggist's business in New Zealand as compared with Canada and Great Britain appears to be rather crowded. Would it not be beneficial for more druggists to be situated in the small outlying districts ? —That is a solution of it. 379. This is another argument that is advanced : Would you accept the suggestion that the fixation of prices by the P.A.T.A. is an encouragement to the inefficient trader, and that such fixation may eliminate wholesome competition ; also that the system will assist the inefficient shop and fix the greatest margin on all P.A.T.A. goods : that the inefficient will be helped in his inefficient ways and the more efficient will be restrained from passing on to the consumer any benefits from any increased business and also cost of operation ? —I would not accept that. There are many of the same lines for the ordinary efficient trader to deal with and to compete in price. For instance, whilst there may be twenty different cough-mixtures on the New Zealand market, there may be three or four with the registered price, and they would have seventeen cough-mixtures to advance their efficiency and ability on. Those lines are for the efficient traders to do what they like with. 380. You are assuming that the seventeen would not be in the P.A.T.A. ? — Yes ; not all manufacturers stipulate their prices to the consumer. 381. I think it has been shown in evidence that the aim of the P.A.T.A. is to impress all the manufacturers of these proprietary articles ? —Who wish to fix their price from their own centres to the consumer, yes ; but there is no pressure brought to bear on the matter.
5—H. 44A.
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John Pearson Page sworn and examined. (No. 3.) 1. Mr. Myers.] You are the representative for Messrs Potter and Birks, of New Zealand, Ltd. ?— Yes. 2. Are they a New Zealand firm ? —Yes. 3. Their headquarters in Auckland ?—-Yes, the New Zealand headquarters. 4. I think one of your lines is Johnson's baby-powder ?—Yes. 5. Are you agents or manufacturers ? —Agents in New Zealand. 6. Manufacturers' agents in New Zealand ?—Yes. 7. Is it a very well-known line ? —Very. 8. How long has it been on the market in New Zealand ? —I cannot say definitely, but considerably over twenty years. 9. How long have you been connected with it ? —About the same period. 10. I want to ascertain from you what has been happening in recent years. Is it an article which has commended itself to the cutting traders for cutting purposes ? —Yes. 11. Is that a recent development, or a development for years ? —For a period of years. 12. There has been more or less cutting ? —Yes. , 13. Did the cutting of recent years become more or less severe ? —More severe. 14. Is it an article that you advertise largely ?—Yes, considerably. 15. And have you reduced your advertisement during recent years or maintained it ? —lncreased it. 16. Do you mind telling me at what price that article is sold to the wholesaler and by the wholesaler to the retailer ?—lt is sold to the wholesaler at 13s. sd. net in 12-gross parcels. 17. Are they the best terms ?—They are the best terms. 18. That is sold to the wholesaler ?—Yes. 19. And the wholesaler trades with the retailer ? —He sells to the retailer at 15s. 9d. net, after which we give a rebate of 35., which brings the retailer's price back to 12s. 9d. 20. What is the usual price at which the article is being sold to the public—l am not speaking of the cutters ? —ls. 6d. per tin. 21. That is the recognized price ? —Yes. 22. You know that the price has been cut very badly ? —Yes. 23. Cut down to what ?—Below cost. 24. And I think you tell us that that cutting of recent years has become intensified ? —Yes. 25. With what result ?—With the result that our sales decreased considerably over a period of years. 26. Will you give us the percentage of decrease —say, take from 1924 onwards, taking the first figure given as 100 per cent. ?—Up to 1924 our sales had maintained a normal increase each half-year; from 1924 they started to fall each half-yearly period. 27. During this period the cutting was becoming intense ?—-Yes. 28. Give the Committee the period and figures ? —I shall take as 100 per cent, the last half-yearly period of 1924. 29. That is, Ist July to Ist December —you will take that as 100 per cent. ?—Yes. 30. Take January to July, 1925 ? —Our sales came to 93 per cent. 31. July to December, 1925 ?—They came to 62 per cent. 32. January to June, 1926 ? —They came to 53 per cent. 33. Did you then take a drastic course ? —We took a drastic course and established a price-fixing scheme of our own. 34. And what was the retail selling-price under that fixation ? —ls. 6d. 35. You made that uniform I—Yes. 36. Making it clear if a retailer did not sell at your price he would not get supplies ?—Exactly. 37. Would you mind telling me the result since the beginning of July —take half-yearly to 1926 ?—They came back to 114 per cent. I might add that during that period when our sales fell our sales should ordinarily have increased, because during that period we advertised intensively, and nevertheless our sales fell to an alarming degree. 38. The moment you put into operation your price-fixing scheme they went back at once to more than they were ? —Yes, to our 1924 period. 39. How are they this year ?—We have just started on it. Since the beginning of this year the sales have been all right. 40. To what do you attribute the decrease of your sales ? —We feel sure it was due to the antagonistic attitude of what we call the legitimate retailer, and this attitude was forced upon him by the tactics of the man who cut to cost or below cost. 41. During that period of intensive cutting were there other baby-powders on the market ? —Yes. 42. And still on the market ?—Yes. 43. After you introduced your scheme you have bettered your sales ?- —Yes. 44. I undertand that you go round New Zealand interviewing your customers ?—Yes. 45. Are you able to tell the Committee from your own knowledge, and from your own experience of meeting your customers, as to whether or not the reason you have given for the decrease is the correct one ? —I am sure that in a great number of cases our clients refused to stock our line simply because of the cutting that was going on by other retailers. 46. I think you produce correspondence between one of your customers in Invercargill and yourselves relative to this point ? —Yes : Mr. Brown. He refused to stock our line because he said he would be called a profiteer if he sold at the recognized price whilst the other man was selling below cost. [Letters put in.]
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47. You do not know what each individual business does?—We have no record, because our business is done through wholesale houses. 48. Can you tell us whether this is an isolated case or general ? —lt is general right throughout New Zealand. 49. General with the chemists ? —The chemists are the only people I call on. 50. You have been connected with the business for a number of years in New Zealand ?—Yes. 51. Twenty years ? —About. 52. In various lines—that is, chemical lines ? —ln pharmaceutical lines chiefly. 53. Have you had experience of cutting other lines ?—Yes, very much. 54. Can you tell the Committee whether in the case of other lines there has been a similar experience—that is to say, that the cutting has operated in very much the same way so far as sales are concerned ?—I think our case is by no means an isolated one. 55. You also have a copy of the letter from the manager of the Auckland Drug Co., Ltd., dated 18th February, 1927, complaining that owing to the cutting tactics of one firm in Hamilton the sales to their clients in Hamilton dropped to almost nothing ? —Yes. These people had old stock. 56. While they were doing that your ordinary sales dropped to nothing ?—That is so. 57. After your scheme came into operation their sales have been increasing ? —Yes. 58. I think you produce another letter, from Mr. Churton, assistant manager, Messrs. Sharland and Co., Ltd., dated 21st February, 1927, wherein he says, " As requested, we have examined our records and are surprised to find that our total sales of Johnson's Baby-powder for the period September, 1925 (not 1926), to December, 1926, to the chemists in Hamilton total 10 dozen." Is that large or small ? —There should be about 15 gross in that period. 59. On a very conservative estimate your sales should be 15 gross .Approximately. 60. During the period mentioned it was 10 dozen ? —Yes. 61. What was the price of the article when it was cut during that period ? —ll|d. 62. It would appear that the cutters did not sell a quantity ?—They do not want to sell our baby-powder. 63. What is the object ?—lt brings the people into their shop, because it is a line so well known. 64. Mr. Gresson.] How long has that article been on the New Zealand market ? —For twenty years or more. 65. It may be taken as a well-established article ?—Yes. 66. Is this price-cutting method a thing of modem days, or has it always been in existence ? —The intensive cutting has been a thing of modern days. 67. Since when ? —I should say, for the past four or five years. 68. And during the other period has there always been a certain amount of cutting going on ? —Since the article became so well established it has been a cutting line. 69. During those years you have not been able to carry on at a profit in New Zealand ? —Yes. 70. When your sales went down in proportion from 100 per cent, to what you tell us, does it follow again that your profits went down in proportion ? —Exactly. 71. So that in the year when you only had 53 per cent, of sales your income dropped by half ? —On that particular line. 72. Do you suggest that if this cutting had gone on you would have been forced off the market ? —Yes. 73. There must be other factors that enter into the matter—for instance, there is the factor of competition with other lines ? —We cannot see it. 74. I am told that during the time you are complaining of this cutting there were other good powders on the market which could be bought for 6d. and Bd. as against your Is. 6d. ?—We still have that competition. That competition is not of recent times. 75. That competition was going on at the time you complain of ? —-And long before that period and since. 76. And yet you have not found that they could affect your general output ? —No. 77. During the time that you have had experience of these chemist preparations in New Zealand have you found any preparation put off the New Zealand market by low prices ? —For the moment I cannot think of any. 78. I want to ascertain if the competition is as bad as you say it is ?—Pears' soap comes to my mind. 79. Pears' soap is on the market now ; as a matter of fact, in the hotel where I am staying I saw Pears' soap this morning ?—I think it is oft' the market. Mr. Collins: It has for a time been off the market. 80. Mr. Gresson (to witness).] You say that, if this cutting goes on, in about four years you would be pushed off the market altogether ?—lt will always be on the market. 81. It represents a very small proportion of your output ?—Our sales came within the vicinity of 100 gross per month, roughly speaking. 82. You say that you have the same competition before and after with cheaper powders ?—Yes. 83. Mr. Kennedy.'] It is a fact, is it not, that your powder was being sold in Wellington at Is. 2d. prior to your scheme of price-fixing coming into force?— Lower than that, too. 84. It was sold by Macduff's ? —Yes. 85. And that was bought either from you or your wholesalers at 12s. ?—Yes. 86. Representing a profit of 16 per cent. The price under your fixation scheme is la. 6d. ?—Yes 87. Representing a profit of 47-| per cent., or approximately that ? —No. 88. How much ?—Do you mean the profit to the retailer ? 89. Yes ?—29 per cent, on his turnover.
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90. In the meantime you yourselves put up your figure. Instead of being able to buy at 125., how much would the retailer pay ? —l2s. 9d. ; and that price is for 6-gross parcels. 91. Do I understand you to say that the chemists prefer to keep your baby-powder in the cellar rather than to sell it when they cannot get more than 16J per cent. ? —No, that was not inferred ; but the price at which that line was being sold was Is. 92. In general terms, did you find, in effect, that the chemists declined to take your goods because they could not get the margin of profit they wanted ? —They could only get a margin of profit which we recognized as reasonable. 93. And the margin of profit they wanted ? —Exactly. 94. It was a larger profit than what you term the "cut-throat" trade was getting?— The cutthroat man was not getting any profit. Mr. Collins : I think you are at cross-purposes—that is to say, Mr. Page is thinking of Invercargill and you are thinking of Macduff's. 95. Mr. Kennedy (to witness).] May I take it from you that the chemists were not buying from you because under the conditions of the market they were not able to get the profit they wanted ? —They were not able to compete with the cut-rate shops. 96. So that it was through the non-purchasing of the chemists that your sales went down ? —lt was not only by the chemists. 97. Well, then, chiefly by the chemists ? —Partly by the chemists. Every storekeeper, however little, fancy-goods or otherwise, stocks our powder. 98. Do the chemists require a larger profit than the grocer ?■—l cannot say. 99. You have given certain instances of increases, and you show an increase during the last six months, since your scheme came into operation ? —Yes. 100. I suppose when it became known that you had a price-fixation scheme in force large stocks of your baby-powder were purchased ?—That is so. 101. Are you aware that in Wellington during the period when you say you had increased sales practically all the stock of baby-powder here was purchased, so that wholesalers had to refuse orders ? —That is not so. We knew the stocks they had right through the period. 102. Would you be surprised to know that Macduff's bought in Wellington when your fixation scheme was started every bit of baby-powder they could get their hands on ? —That is not so. I know that is contrary to fact. 103. I suppose, also, when your price-fixation scheme came into operation the chemists who had boycotted your line because it did not give a large enough profit would be replacing, would they not ? —Quite likely. 104. So that to test the accuracy of your figures we will have to go over another six months ? Perhaps so ; it does not take six months to do that. 105. However, these factors which I have mentioned, if you assume the correctness of my facts, would put up the sales for this period that you have increased sales ? —You say so. 106. Mr. O'Leary.] In the course of your travels throughout New Zealand did you find any chemist who indulged in this pernicious policy of price-cutting ?—Yes. 107. How many? —I cannot say offhand how many. The balance asked us either to meet the competition in this particular line that was being cut by the cut-rate people or they would take this line off their shelves. 108. What proportion would you give us ? —I could not give you the proportion. 109. Could you give me any number, because I am interested to know, due to the fact that there are five chemists who have not joined up with the P.A.T.A. Do you think the number would be five ? —I do not think so. If you let me know those chemists who stood out of the P.A.T.A. I will tell you whether they are the price-cutters or not. 110. In a general way the chemist is not a price-cutter ?—That is so. 111. Mr. Myers.] If a person buys an article like yours at 12s. 9d. per dozen how much would he have to take ? —-He must take a gross before he could get the article. 112. If he sells it at Is. 2d. is he making a profit equal to his overhead expenses ?—I should not think so. 113. Even assuming the most advantageous circumstances in favour of the trader ?—I should say not. 114. It was suggested to you that possibly it might require a longer period than six months to ascertain as to whether or not your price-fixation is effective —what do you say to that ?—We are nearly two months in the price-fixing scheme and our sales are most satisfactory this year. 115. Just so ; and the chemists are selling the article ? —When it is asked for. 116. Mr. Reardon.] I would like to ask this question, Mr. Page : Supposing a firm such as, for instance, Hart or any of those firms had an agent in London, would it not be possible for him or them to buy this powder at a lower price than what it could be purchased here ? —By the time they paid their duty and other charges involved it would bring it to a higher price than they could purchase it for here. 117. Supposing they could buy this article from the manufacturer in London and land it in New Zealand and put it on the market at a price that was returning them a fair margin of profit, would you say that that is unfair to the other traders ? —They could not do it that way. 118. I know they could not. Supposing the manufacturer did not know that the article was intended for New Zealand ? —Even though the manufacturer did not know to what part it was going they could not bring it here at a price to enable them to sell it at the same price that we could. In that respect we are giving the New Zealand consumers the advantage. 119. It would take the difference between Bs. and 13s. to pay the cost of carriage, &c., between England and New Zealand ? —Yes, after duty, freight, &c., are paid.
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120. There is one question that I would like to ask you that has been partly covered by the re-examination of Mr. Myers : Supposing you had decided to fix the price at Is. 2d., what would have happened—you are selling it in England at Is. 2d. ?—lt would not have recovered to the extent it has recovered. I may say that no manufacturer wants his line to be cut. 121. Therefore you are offering a special inducement to the retailers to push your line ?—We do not give the retailer what he asks for, but we give him what we consider is a fair margin of profit. The same applies to the wholesaler. 122. Mr. Collins.] I take it that you will permit an accountancy examination as to the sale of this powder if the Committee consider such a circumstance is warranted ? —Quite. 123. You have succeeded in establishing a price in New Zealand satisfactory to your clients by fixing this range of prices, both wholesale and retail ? —That is so. 124. It was not necessary for your firm to join up with the P.A.T.A. ? —Except that we support it in principle. 125. You have succeeded in satisfying the price to the distributors by acting on your own behalf ? —Yes. 126. Are you satisfied with the position as it stands to-day ? —Yes. 127. Presuming that the cost of the distribution of articles through the chemists' shops is greater than through grocers or shops selling fancy goods, you have arrived at your price of Is. 6d. by taking into consideration the chemist who has the higher cost of those I have mentioned ? —Yes. 128. You would not consider it expedient, then, if you could double your turnover in New Zealand by cutting out the chemist and putting your article through the grocers and sell it at Is. 2d. ? —We claim that our figures prove that such an action as that would be detrimental to our business, and, moreover, our figures would go back again. 129. You have looked upon the chemist as your chief distributor—he comes more in direct touch with babies : that is your point ? —Yes. I may add further that the majority of the cutters have been anxious and willing to fall in with our scheme ; but they want to be assured that there is no likelihood of any one cutting below them. 130. The overhead cost in the different distributors varies as between the grocer and the chemist ? —Yes. 131. And the public are not getting the advantage of your dealing with the distributor who is getting the quicker turnover ? —We claim that our article is better than many of the substitutes. 132. Is your house connected with the P.A.T.A. in New South Wales ? —Yes. Our Sydney house tells us that they have not the same trouble in Australia as we have in New Zealand. 133. Has the price been reduced there ? —I cannot say. 134. In all cases you deal through the wholesalers ? —Yes. 135. You give no advantage to a big store like the New Zealand Farmers' Union in Auckland, who could buy huge quantities ? —They have always bought through our wholesalers in Auckland. 136. There is no way of escaping the wholesalers in your line ?—That is so. 137. Mr. Myers.] You told Mr. Collins that your price-fixing scheme is satisfactory and that you could work it without reference to the P.A.T.A. ? —Yes. 138. Is there any advantage in the P.A.T.A., either in the way of policing or otherwise of your article, and thereby saving expense to you ? —Yes ; and we have made application for the registration of Johnson's baby-powder. 139. For which you pay £5 ss. per year ? —Yes. 140. Do you regard that as a good investment ? —-Quite. I may say that we were hoping that the P.A.T.A. would be functioning before this, and if they had been functioning we would not have had to introduce this scheme, but it became a matter of such urgency that we could not wait. Albert George Carey sworn and examined. (No. 4.) 1. Mr. Gresson.] You come from Oamaru, and are a grocer there ?—Yes. 2. And you deal strictly in cash ? —Yes. 3. In addition to dealing in cash, you deliver goods up to a value of more than £2 10s. ?—Yes, in the town. 4. Are you the only cash grocer there ?—Yes, I am the only cash grocer there. 5. And what is the result of being a cash grocer as compared with your credit competitors ?—The result is that I am in a happy position. 6. Do you sell at the same prices as they do ? —No. 7. Do you sell under or over them ? —I sell under them. 8. Do you sell goods in the way my learned friends suggest — namely, below cost ? — I have no lines that may be called bread-and-butter lines that are cut below cost. 9. Do you find that on nearly all occasions you are able to undersell the credit men ? —On practically every article, yes. 10. Owing to the reduction in your overhead expenses ? —Yes, absolutely. 11. You have come up against the P.A.T.A. in Johnson's baby-powder ? —Yes. 12. You refused to sign the agreement in regard to that powder ?—Yes. 13. And similarly with aspros ?—Yes. 14. In the case of aspro, they charge 365. per dozen of 100 tablets, which works out at 3s. per bottle, and they want you to sign up at 4s. 6d. and to sell at a profit of Is. 6d. ? —Yes. 15. As regards the P.A.T.A., do you agree with its operations ? —No.
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[A. G. CAREY.
16. Supposing that all the proprietary articles came under the P.A.T.A. how would it affect your business ?■ —I could cut about 50 per cent, off my business. 17. If the P.A.T.A. comes into operation it forces you to discontinue that part of the business ?■— It means forcing me out of business eventually. 18. Unless you agree to their retail prices ?—Yes. 19. Mk. Myers.] How long have you been in business as a grocer on your own account ? —On my own account I have been in business eight years. 20. And what length of time at Oamaru ?—Four years and a half. 21. As a cash grocer, that is, how long have you been running this cash business on your own account ?—Three and a half years. 22. Would you mind telling me what is your turnover ? —I came here quite unprepared, but I will post particulars up if you like. My last balance-sheet will show that my turnover was somewhat over 23. How many men do you employ ? —I have one man, my own daughter, and my father-in-law. 24. How much a week do you pay your father-in-law ?—He is seventy-five years of age, and is unable to obtain a pension, and lam giving him £2 10s. per week and keeping him. My daughter is getting £1 15s. per week, and my man receives £4 15s. per week. 25. What do you allow for your own expenses ? —£4 ss. 26. What is your rent ? —£s. 45., including rates and taxes. 27. Have you an auditor who inspects your balance-sheet ?—Yes. 28. Would you mind telling me what is your percentage of gross profit ? —My gross profit runs out at 12| per cent. 29. Over all ? —Yes. 30. Do you issue a price-list ? —No, just through the ordinary advertisements. 31. Your business is for the most part a cash-and-carry business ? —Yes. 32. And I suppose the people take their goods away ?—Yes, small lots and large ones. 33. I suppose there is very little of it done for £2 10s. lots ? —I have had orders up to £50. I may say that I do a fair amount of business with the farming community, and they are not small items. 34. I take it that your business is done with people who come in and take their goods away ?—Yes. 35. Do you stock any baby-powder ? —Yes, I have two or three different kinds of baby-powder. I cannot get stocks of Johnson's. 36. But you sell other baby-powders ? —Yes. 37. In any case, those sort of lines are not often asked for ?—No, it is not a big sale with me. 38. You could well afford to buy an article and sell it at Is. ? —I am not in the habit of selling below cost. 39. You stock Bell tea ? —Yes. 40. What do you sell it at ? —3s. 2d. 41. What does it cost you ? —2s. 10d., less 5 and 2| per cent. 42. What is the fixed price ? —3s. 2d. 43. So you do undersell, then ?—No, Ido not undersell other people. We have retailers down there who give 6 per cent, reduction. They take an order, say, on the 25th February and it is delivered, and the order is paid for in April. If you work out the percentage on that you will find who is the cutting man. 44. However, you sell a pound of that tea at 3s. 2d. ? —Yes. 45. From whom do you buy that tea ? —From the agent in Otago. 46. Who is he ? — . 47. Do you buy Amber Tips tea ? —Yes ; it is the same price—namely, 3s. 2d. 48. From whom do you get that tea ?■ —It comes from . 49. Do you sell any tea that you put up in your own packets ?—Yes. 50. What do you pay for it ? —I blend my own tea myself. I may say that one line will cost me perhaps Is. Bd., another 2s. Id., and another 2s. sd. 51. And you sell tea up to what price ? —3s. 52. You do not sell much Amber Tips or Bell tea ? —No. Of course, I sell my share with the quantities that are going. 53. But you sell a great deal more of your own blended tea ?—I suppose I do. I sell about the same proportion of bulk tea as I sell proprietary tea. 54. I understood you to say .that you sold more of your own tea than the others : do you wish to withdraw that statement ? —Yes, I withdraw that statement. 55. Because you saw what 1 was driving at, you want to withdraw your previous statement. However, do you stock such lines as Kolynos ? —Yes. 56. What do you charge for a tube ?—ls. sd. 57. What do you pay for it ?—l4s. 6d. per dozen. Of course, it depends on the quantities you buy. lam not a big buyer of those lines. 58. Do you deal much in proprietary lines ?-—I handle a few of them, but not a great lot. I suppose 10 per cent, of my business might be proprietary lines. 59. What do you mean by that ?—I mean proprietary lines such as syrup of figs and sundry other things—Johnson's baby-powder. 60. Which you do not stock. On the average, how much per week do you think you would take so far as those proprietary lines are concerned ? —lt is a hard thing to say. 61. I want to find out if I can —I am speaking now with respect to the turnover ?—lt is a hard thing to say, because Ido not section my business to that extent. I suppose if I went into details I could tell you.
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62. I suppose you could tell me the total amount of proprietary lines you purchase during the year ? —Are you going to bring baby-foods into this ? 63. Certainly not. Are you including those in your estimate ?—Yes, I was including them. 64. Does the selling of baby-foods constitute a considerable proportion of your business ? —There is a fair amount of it. 65. When you say that 10 per cent, of your turnover might be in proprietary lines, I suggest to you that at least half of it would be in baby-foods ? —Yes. 66. I suggest to you that it would be more than that ? —No. 67. I suggest that it would bring your trade in proprietary lines down to 5 per cent, of your turnover ?—I was working it the other way round. 68. You have gone outside what I had in my mind ?—Yes. 69. So. you are reducing that proportion of your turnover to 5 per cent.—that is, proprietary lines other than infant-foods ? —Hardly. 70. If you have 10 per cent, of your total turnover in proprietaxy lines and foodstuffs, and half of that is baby-foods, then the proportion is 5 per cent. : as you know, half of 10 is 5 ? — You have got me in rather an awkward position so far as proprietary lines are concerned, because I have been mixing them up with other things. When you come down to patent medicine it would give over 5 per cent. 71. You keep all your invoices, do you not ? —Yes. I have them for the last ten years. 72. Would you have the invoices for the patent medicine and what I call proprietary lines from the different people and from those who supply you with other goods ? —Hardly, because they are all classed in together. 73. Do you stock Eno's ?—Yes. 74. What do you sell it at ?—3s. 9d. 75. What does it cost ? —The last I paid was 365. per dozen. 76. You sell ?—Yes. 77. At what price ?-—4s. 3d. 78. And what do you buy it for ?—3Bs. per dozen. I cannot be certain. 79. If that is correct, Ido not know what you have to fear from the P.A.T.A. ?—lf they fix the prices with my competitors I have to close my doors. 80. If you can give your customers the benefit of 5 per cent, right away, that would be all right ? —I think I could do better than 5 per cent. 81. If you were giving a discount of 5 per cent, to your cash customers you would be on equal terms with the credit men ?—No. 82. Why not ?—Because he will come along and canvass orders, and deliver orders, and wait for nine weeks for his money. 83. In the case of flour, you sell that commodity on the same terms as your competitors ?—My flour, on the average, works out at 10 to 12| per cent, on cost. 84. That is not so bad on cost ?—I am telling you that so far as lam concerned it is not a cutting business, and lam not going to the limits that some people go. The point where this is going to affect me is this : whether they have to be brought up to charge prices the same as the next man. 85. Have Lane's a retail shop in Oamaru ? —Yes, and their price is 4s. 6d. 86. Mr. Hayward.] Do you think that by your system of selling for cash you can beat the credit seller in regard to your overhead expenses on more than 5 per cent.: you cannot run your business to make a profit on it on less than 12 per cent. ?—I can run it on 10 per cent, over all. 87. I have had a little experience in this connection. However, you have not had any experience of the P.A.T.A. in actual operation : your experience is confined to New Zealand ?—Yes, with aspro and baby-powder. 88. That is not the P.A.T.A. ? —That is all that has been under any control at all. 89. Mr. Reardon.] Are you not aware that there are hundreds of lines that are controlled so far as the retailers are concerned in New Zealand ? —We know that they have their tariff lines, but we understand that there are a good many broken day after day. 90. Do you get any amount of them ? —Yes; for instance, salt and things like that. The position is that if a man is in a position to buy those goods on a better market he can sell them on a better market. 91. Are you a member of the Otago Grocers' Association ?—I am not a member of any association. The Committee adjourned until 10.30 a.m. next day.
Third Day : Thursday, 24th February, 1927. The Committee met at 10.30 a.m. William Fair Larkin, sworn and examined. (No. 5). 1. Mr. Myers.] What is your occupation ? —I am manager for Sharland and Co., Ltd., Wellington. 2. I suppose you describe yourself as a wholesale chemist ? —I am a wholesale druggist. 3. You have been in this business, the wholesale druggists' business, for many years ? —About thirty years. 4. With Sharland's all the time ?—Yes. 5. And you have been through all the stages of the business ? —I have been everything from office-boy to manager. 6. Does your company deal in a wholesale way in proprietary lines ? —Very largely.
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7. Is it also a manufacturing company ?—To a certain extent. 8. In the questions I am going to put to you now I want you to confine yourself to proprietary lines. What do you say as to the advisability or otherwise of wholesale trading on a satisfactory basis when the retail prices of proprietary articles are being cut by the retailers ? —lt brings about a very disturbing condition and makes wholesale trading very difficult. 9. How does it affect the trade generally in the article so far as the manufacturer is concerned ? —It may affect him in a number of ways. He may lose sales. 10. Have you yourself had that experience in various lines ? —There are certain lines I could mention where the cutting of prices by retailers has led to the demand for those articles being affected. 11. Where the retail price is being cut by a few, in places, say, like Wellington and Christchurch, what is the effect on other traders dealing in the same article ?—The trader who institutes the cut prices makes it so that the general retailer cannot handle the lines so cut with profit, and usually discontinues stocking such lines. 12. And in your experience does he usually look round to see whether there is something else he can sell at a lower price ?—I should say so. 13. I want you to tell us something about Bno's fruit-salts. What is the best price at which wholesalers in New Zealand —that is, firms like yourselves —can buy Eno's fruit-salts I—As1 —As a matter of fact, we do purchase to the best advantage, and to do that we have to buy in 50-gross parcels, for which the price is 345. 6d. net. 14. Is that the best price at which Eno's can be bought by wholesalers ? —Yes, it is the best I know of, and the best I have been able to get. 15. And I suppose Sharland's are as anxious as any one else to buy their supplies on the .best terms ?—Yes. 16. Will you tell us what expenditure of capital is required to buy at that best price ?—For that particular line it means £1,000 in order to buy at that price. 17. I think you know that it is being sold by retailers at very low prices ? —The lowest price I have heard is 3s. a bottle. 18. Is that a price at which a trader can sell and make that profit which is necessary to enable him to conduct his business on proper lines ?—lt is not possible, at the price at which the retailer can buy it from the wholesaler, to sell it at 3s. a bottle. 19. What is the best price that the retailer can buy from the wholesaler ?—The best price is 38s. per dozen. 20. That does not seem to leave much of a profit ? —lt does not cover working-expenses in our particular business. Mr. Hayward: It works out at 9 per cent, on returns. Mr. Myers:: We all know that a business cannot be carried on on that margin. The Chairman : It depends on the turnover. Mr. Myers : Yes, but a druggist's business cannot be carried on on that margin. 21. Mr. Myers (to witness).] So that you are selling this article at 3s. 2d. per bottle wholesale, which does not leave you a working-profit on the article ? —That is so ? 22. And they are sold in some shops at 3s. a bottle ? —Yes. 23. Take Morton's seidlitz powder ; what is the price at which these goods are sold by the wholesaler to the retailer ? —l2s. 2d. net. 24. Can you tell at what price some retailers are selling that article ? —lt has been sold at Is. a box. 25. What have you found in regard to Eno's : It is an article, I suppose, which you have to stock ? —Yes, its merit makes it necessary, no matter what the price, for us to stock it. 26. And you have to meet this competition of the retailer selling at 3s. a bottle in order to keep your customers attached to you ? —lt would perhaps assist the Committee if I replied to that by quoting a letter which we received from one of our travellers on the West Coast the other day. It reads— Sms, Mr. , chemist, Nelson, suggested that our price for Eno's fruit salt, 38s. prompt net cash for order received lately, does not compare favourably with our competitors. I assured him that this line has been used as a sprat to catch a mackerel, and that I would write about the matter and get the firm's attitude in regard to same. He retails it at 3s. 6d. He is not in any way annoyed—in fact, gave the enclosed order —but am sure would appreciate reason for difference in price of 365. 4d. and 38s. I think 365. 4d. is — price. Yours faithfully, So that in order to meet the competition caused by the retailer selling at 3s. you will probably have to bring your price down to cost or below cost ? —ln order to retain the good will of Mr. —■ we would have to reduce our price. Mr. Reardon : So the merchant is cutting as well as the retailer. Mr. Myers : He has to. Someone else is buying at 3s. and unless the retailer can get the wholesaler to come down he will not do business. Someone must lose money. That is my point, and because the retailer is selling at this price it means that the wholesaler must come down also and that the bulk of them must make up their profits on other lines. 27. Mr. Myers (to witness).] Supposing you do not bring your wholesale price down to meet Mr. , would you expect to keep him as a customer for other lines ? —lt would not assist us in keeping him ; we might, of course, retain him. 28. You have to make a gross profit on your turnover of a certain percentage ? —Yes.
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29. Is there any objection to your telling the Committee what percentage you aim at on the whole of your turnover ?—According to figures I have taken out, it is necessary for us to obtain at least 15 per cent, gross to cover our working-expenses. 30. I think you do not pay anything extraordinary in the way of dividends to your shareholders ? —The dividend paid by the company at its highest was 7J per cent., and of recent years it has been 7. 31. If you are losing money on Eno's you have to make it up on some other article or articles ? Yes, that would be necessary. 32. You must make up your 15 per cent. ? —Yes, that must be done. 33. So that if the public are not paying on one line they are paying on some others ?—That is so. 34. I think you instance Creme de Menthe dental cream as an article which is cut, do you not 1 — Yes. Some two or three years ago a manufacturer in Sydney, Mr. Warne, put on this line. Big sales were made to wholesalers, one of the conditions being that the retailer's price to the public must be Is. 9d. per tube. That was fixed by the manufacturer as a condition of his trading. 35. Was it an advertised line ? —Not through the newspapers, but it was through display matter and show-cards. 36. Did it acquire a substantial market in New Zealand ? —No. 37. Why not ?—Because the conditions under which it was sold by the manufacturer to the wholesalers and retailers were not observed. 38. What happened to it in some of the retail stores ? —lnstead of being sold at Is. 9d., it was sold first at Is. 6d. and then it went down to Is. 3d., which was below the price at which it could be purchased, and it was discontinued. 39. What attitude did the non-cutting retailer adopt towards it ? —They discontinued stocking it. 40. And I suppose as a consequence you had to discontinue it ? —Yes. 41. I think you can tell us something about Cuticura soap. Is that a well-known line ? —Yes, very well known. 42. Has it been well advertised and kept before the public by propaganda ?—lt has been advertised continually for very many years. 43. When it became a well-known and favourite article, did the cutters get to work on it ? —The first case of cutting was when the retail drapers used it as a cut line to advertise their business. 44. At what price did they sell it relative to its cost ?—ln some instances as low as cost price. I know that. And I believe in some instances it was sold below cost. 45. What was the effect of that on the other retailers ? —lt lost favour with other retailers, and was not stocked to the same extent as previously. 46. I think you can tell us the effect it had on your sales ? —Yes. Taking the year 1923 at 100 per cent. : in 1924 there was a decrease of about 5 per cent., in 1925 the decrease was 33 per cent., and in 1926 it was 50 per cent. Those decreases are below the 1923 figures. 47. They are based on your own sales of that article ?—Yes. 48. And were you carrying on your business in regard to Cuticura during these years in the same intensive way as you were in 1923 ?—Yes ; we were stocking it largely and doing our best to sell it. 49. Is it an article which throughout this period has been a favourite amongst the cutters for cutting purposes—l mean from 1923 onwards ? —lt has been a leading line with the cutters. 50. Do you find the non-cutting retailers taking the same interest in Cuticura soap as they did previously ?—Judging by our sales, no. 51. I think you can give us similar figures with regard ( to Colgate's dentifrice? —Yes. I will take the year 1922 as representing our sales at 100 per cent. : in 1923 the decrease was 50 per cent. ; in 1924, 66 per cent, decrease ; and in 1925, 66 per cent, decrease. 52. During those periods under review, were Cuticura soap and Colgate's dentifrice being advertised as widely as previously ? —I should say so. 53. And were your efforts to promote sales as efficient as they had been previously ? —Exactly the same. 54. Knowing what you do of your business and of the necessity to get an all-round profit, can you see any benefit to the public by the cutting tactics of these cutting retailers —or wholesalers, for that matter ? —lt is not apparent to me. Ido not see where any benefit to the public comes in. 55. We may take it that on the whole of their commodities the public have to find the average rate of profit for both retailer and wholesaler ?—Yes, I think so. It must be done to carry on. 56. I think you have some knowledge of what happens to some of these cutting people themselves. Do you remember a man named Wheeler ? —Yes. 57. Was he a retailer ? —Yes. He started originally in Auckland and had a chain of stores throughout the North Island. That was about three or four years ago. He was carrying on business in a large way. 58. Adopting cutting tactics of proprietary lines ?—Entirely. 59. How long did he last ? —About eighteen months. 60. And then what happened ?—He crashed, and a big loss was incurred by all his creditors — wholesalers, principally. 61. I suppose those wholesalers had either in that or in following years to make up the losses they had incurred through Mr. Wheeler's failure ?—Yes, it was against them and they had to make it up. 62. So again it comes back on the public ?—Yes, it must. 63. While Mr. Wheeler was operating, what was the effect on other retailers and wholesalers so far as concerned the proprietary lines which he was cutting ?—Any retailer in the vicinity of Wheeler's operations was compelled, in order to keep the connection of his customers, to meet his price. In order to do that he had to effect arrangements with the wholesalers to obtain lower prices. Both were selling at a loss.
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64. And, I suppose, again that had to be made up by the public in the way of increased prices for other articles ?—Yes. 65. Let us take another illustration in regard to this—what we say is false economy. Do you know the in Auckland ?—Yes. 66. Is that a company which cuts prices ?—lt makes a specialty of doing so. 67. And what has happened to that concern ? —lt is common knowledge that within the last eighteen months its ordinary shares have had to be written down from £1 to 65., and their other shares proportionately. 68. Is it a co-operative concern ? —Oh, no ; anybody can buy from them. 69. With regard to the question of substitution, do you know an article called Nazol ?—Yes. 70. Where is that made ? —ln Auckland, by Sharland's. 71. I think the cutters have been at work on that ? —Nazol has been sold at lower prices by cutting people. It has led to other articles being brought in by chemists here who were selling Nazol fairly freely at the ordinary price of Is. 6d. They had to do it to compete against the cutters. , 72. I think a result of that cutting was that some of the other retailers instituted an opposition line ? —Yes. There was one called Nazal Drops, and there have been others. 73. I think this is a letter that you have recently received from your Auckland office, dated 27th January, 1927 ? —Yes ; T will read it. It is as follows Dear Sib, — We have to acknowledge yours of the 14th, and regret wo overlooked replying to yours of December 2nd, 192ti. Ever since Nazol was placed on the New Zealand market it lias been our endeavour to control and see that the retail price was observed by all dealers. Generally speaking we have been very successful in doing this, as we consider that the maintenance of the retail selling-price arranged by the manufacturer is in the interests not only of the manufacturer but the retailer as well. If the fixed selling-rate is cut, and the fair profit on the line brought down, it compels the retailer to lose interest in the line and to become antagonistic to it. As an illustration of this, we have in mind a number of chemists in an inland town where Nazol was being eut rather badly, who decided to combine and put up a similar line, under a special name ; and further they took steps to discourage the sale of Nazol when specially asked for by customers, notwithstanding the fact that Nazol was a largely advertised line. Fortunately the proprietois of Nazol were able to induce the above cutters to fall in with their wishes, and the antagonism of the chemists was removed and the normal interest in it was restored. We are quite sure that where cutting of proprietary articles takes place it is inimical to the interests of both the general retailer and the manufacturer. Yours truly, Nazol, Ltd. 74. That letter was sent to the secretary of the P.A.T.A., I believe ? —Yes. 75. So that was your experience in regard to one of your own lines ?—Yes. 76. And, apparently, your own fixation of prices—that is, the manufacturer's fixation—without further assistance was not sufficient to prevent price-cutting or to prevent substitution ?—That is so. 77. I think that distribution charges of late years —that is, since 1914—have increased? —Yes, the cost of doing business has increased. 78. Why is that ? —There has been a general increase, including wages, travelling-expenses, accommodation expenses, and in other directions. 79. And how has that affected the prices at which you had sold your goods ?—lt has affected them adversely. Previous to the war trading-conditions, or margins allowed to wholesalers by manufacturers, were in the main 20 per cent. Now 15 per cent, may be said to be usual. There are some who are still allowed 20 per cent. But the margin is less now and the cost of doing business has increased. 80. And have prices to the retailer and the public increased proportionately ?—No. It is not the policy of the manufacturer, when he puts a proprietary article on the market, to disturb the price at which it sells to the public. Take Baxter's lung-preserver or Bonnington's Irish Moss : Those lines have been advertised at Is. 6d. at all times. It has been the endeavour of the proprietors to sell at Is. 6d. Similarly with Lane's emulsion: That was put on the market years ago at 2s. 6d. and 4s. 6d. It is still advertised at those prices. Lane has been forced by circumstances to reduce his margin to the wholesaler, but the public have not been called upon to pay any more. That applies to a number of articles. 81. That is to say that the manufacturer does not increase his price to the public unless the increase in cost is so large as to compel it, but he shortens the profit to the wholesaler ? —Yes. 82. And, possibly, to the retailer ? —Yes. 83. Notwithstanding the fact, as you say, that the manufacturer of Baxter's lung-preserver and the manufacturer of Lane's emulsion have had to pay more for the cost of manufacturing their goods, and have not charged the public any more, have those articles been made cut lines by some of the retailers ?—Yes, very strongly. 84. You have said that your company, as the manufacturer of Nazol, was unable by its own efforts —although it fixed the price to the wholesaler and retailer —to maintain those prices, and that notwithstanding that fixation the line was cut, and that substitutes were sold for it ? —Yes. 85. You have also told us that Lane's emulsion is a line which is cut ?—Yes, very much. 86. I want you to look at this invoice, which is one you yourselves received from Lane's ? —Yes, I see it: it is dated sth December, 1926. 87. This is a sample of the invoice which has been used by Lane's for a considerable time ? —Yes, from the inception. 88. And on the invoice occurs these words —" These goods are supplied on the conditions that they are to be sold as hereunder, any breach of which will stop supplies " —and then follow the prices at which they are to be sold ? —Yes. 89. Apparently, from what you say, although Lane's have imposed these conditions and have fixed their prices, they are not able merely by their own efforts to maintain their prices 1- That is so ; they cannot maintain them.
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90. It has been suggested during the cross-examination of one witness that a cutting retailer might have been able to obtain Lane's emulsion at less than the ordinary wholesale price, and therefore sell it for less. Could he do that without breaking the conditions on which the article is sold ?—No, he could not. 91. Take Kruschen salts : is that a well-known line ?—Yes, very well known. 92. We have heard that it is being cut. Does this circular set out the conditions on which Kruschen salts are sold % —Yes, it was received by us from the manufacturers. 93. If the line is being cut, therefore, as we heard yesterday it was, and it is suggested that the person doing the cutting has obtained the goods cheaply, could that have been done without a breach of the conditions laid down by the manufacturers ?—I say, no. 94. Is Kruschen salts a favourite line of the cutter Yes, very strong. 95. Take Kruschen salts, Eno's fruit-salts, or any of these proprietary lines you like : speaking generally, what class of trader—chemists, grocers, fancy-goods retailer, or draper—does the pioneering work with the public in these lines ? —The wholesale druggists entirely. 96. Does that mean people like yourselves, and Kempthorne, Prosser, and Co., and other concerns ? —Yes. 1 do not say " entirely," but I do say " principally." 97. Then take such a line as Johnson's baby-powder : what class of retailer does the pioneering work there —is it the retail chemist or the grocer ?—The chemist. 98. At what stage, generally speaking, in the development of a particular line does the cutting retailer take a hand ? —When it becomes a very well established and popular line. 99. And we may take it, then, that he had had all the benefit of the advertising of the manufacturers and possibly of the wholesale merchants in New Zealand, and the whole of the pioneering-work done by the chemist ?—Yes. 100. You have been dealing with retail chemists during the whole of your career with Sharland's ? —Yes. 101. Can you tell the Committee whether or not is it possible for the chemist to carry on and make a reasonable living without having his trade in the proprietary lines that he now has ? —I should say not. 102. Perhaps you can tell us the best wholesale price at which certain articles which 1 am going to name to can be bought on the New Zealand market. By " wholesale prices " I mean the price which the wholesaler charges to the retailer. Take, for instance, Dr. Morse's Indian root pills : what is the best price at which a retailer can buy that line from a wholesaler ?—The prevailing price is 12s. 6d. a dozen, less discount. 103. And what is the best price at whic'h the wholesaler himself can buy ?—I am only speaking from memory, but I think it is 10s. 6d. a dozen. 104. It was stated yesterday to be lis. ?—I think it is 10s. 6d. 105. But the best price at which the wholesaler sells to the retailer is 12s. net ?—Yes. 106. Take Cuticura soap : what about that ? —The best price at which the retailer can purchase from the wholesaler is 14s. 6d. a dozen less discount, which brings it to 13s. 6d. net. 107. And Piver's shaving-cream ? —I cannot remember that. 108. Palmolive talcum powder ?—I could get these figures, but I cannot say at the moment. 109. Blue Seal vaseline ? —I think the wholesale price of that is 9s. a dozen—that is, for the small size, which sells at Is. 3d. 110. Would it be possible, in your opinion, for the manufacturer to deal direct with the retailer and eliminate the wholesaler ? —I think it would be impossible for him to do so. 111. For example, where a manufacturer is a resident overseas ? —He could not distribute. 112. Mr. Oresson.] With reference to your last answer, what is to prevent the manufacturer having an agent here who could deal with the retailer ?—The expense of distributing one line would make it too high to do business satisfactorily. 113. But surely that depends on the amount of trade in that fine ?■—Yes, naturally. 114. If, therefore, a line has a sufficient amount of trade, there would be nothing to prevent the manufacturer having an agent here and dealing with the public ? —I am not aware of any. 115. Could you give me an idea of what amount of trade would be necessary to make it payable ? —It is rather too vague. 116. Do all wholesalers keep to the same price ? —No, they do not. 117. A retailer will buy from the cheapest house ? —Yes. 118. I think there must be some mistake in the price you gave of 12s. 6d. a dozen for Indian root pills. lam informed by a witness here that he buys that line at lis. a dozen, less 7\ discount. Is there a definite wholesale price, or do wholesalers cut among themselves ?—The wholesalers are obliged to cut if the retailers do. 119. Well, you say the retailers cut, and they say the wholesalers cut. It is a question of the pot calling the kettle black ? —Yes. 120. It may be that the wholesalers cutting have forced the retailers to cut ?—I am not aware of that. 121. Anyway, we have the fact that there is cutting going on among the wholesalers. You have also said that, in your opinion, the chemist could not carry on without proprietary lines. I put it to you that that must be very largely the result of guesswork on your part, because no chemists do carry on without proprietary lines, do they?— Generally speaking, they all carry proprietary lines. I believe there are a few instances where they do not, but it does not enter into this discussion. 122. Can you say that a chemist cannot carry on without proprietary lines ? —I could not say that. 123. You have no material on which to form an opinion ?—No.
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124. You have told us that some years back the manufacturer usually allowed the wholesaler a margin of 20 per cent. : could you tell us at the same time what percentage goes on to the article before it gets to the public after it has left the wholesaler ?—Take Lane's emulsion ; it was sold to us at 245., less 20 per cent. ; now it is sold at 245., less 15 per cent. The increase between the wholesaler and the public was from 245. to 305., and it remains at that to-day. 125. Take the article you manufacture yourselves, Nazol: is there anything in it which would prevent any other article being substituted for it ? —I should say that the fact that it has not been possible to successfully substitute it justifies me in saying yes. 126. But you were complaining, were you not, of substitutions ? —At attempts to substitute ; but those attempts were unsuccessful. 127. Well, then, what are you complaining about ?—They had to be fought by advertising. 128. Nazol has always been a fairly good line ?—Yes. 129. You mentioned the case of Wheeler, and you suggested that he carried on business for three years and then filed a petition in bankruptcy as a result of his cutting tactics. Are you aware that Wheeler was carrying on business in Auckland successfully from 1908 to 1923 ?—I do not know that. All I know of him is his connection with Wellington. 130. Are you able to tell of any of the circumstances which led to Wheeler's disaster ? —No. 131. Or of the liquidation ?—None whatever. 132. With regard to Creme de Menthe tooth-paste, you say that because of price-cutting the article went off the market. In the first place, was it ever a well-known article ? —lt was attempted to make it well known. 133. Might it not have gone off the market because of its own inherent difficulties ? —I onlj r know what the circumstances were connected with it. 134. I suggest that if you have an article which is not very good, and a slow-seller, you will find people naturally cutting the price in order to get rid of stocks ?—lt did not have time to become a slow-seller. 135. How long was it on the market ? —The cutting began immediately. I believe it is still sold. 136. Is not tooth-paste one of the lines whic 1 ! gets the fiercest competition ?—I suppose that could be said. 137. With regard to the cutting of Eno's that you complained of, as I understand it, you say the cutting cannot hurt any one, because you have to stock it ? —That is because it is such a good article. 138. Then we may take it that as regards a good article the question of cutting will not affect its sale one way or another ? —lt may. 139. In what respect do you suggest it would affect them ?—A good article may not be as well known as Eno's. Eno's has a world-wide reputation. There may be a good article of its kind which is not so well known, and which cannot achieve such a wide distribution because of some distributors not stocking it owing to its beinj; cut. 140. Is it not fair to say that although cutting may prevent a new article getting a footing on the market it cannot harm an already established article —except, possibly, increasing the cost of advertising ?—That would be correct. 141. I would like this information for my own purposes : What is the difference between what Mr. de Fenq referred to yesterday as a proprietary article, and a patented proprietary article ? — There is no difference. A patented article is a misnomer. The majority of articles are proprietary articles, but patent articles are not in existence nowadays. Proprietors do not patent their preparations. 142. Are all the articles we have been referring to proprietary articles ? —Yes, that covers the field. 143. What actually constitutes a proprietary article ; is it simply a man's name, a particular form of container or receptacle ? —No. He would register his design or trade-mark ; that makes it proprietary. 144. If, for instance, Woods' flour is registered, is that a proprietary article ? —That is taking me out of my line of business. Mr. Reardon : I think the reason medicines are not patented is because it would be necessary to disclose the formulas; so proprietors register a trade-mark. 145. Mr. O'Leary.] Do you seriously suggest that any argument can be used in support of your contention based on the fact that one or two price-cutters have gone bankrupt ? —I suggest nothing. 146. Do you know a man named ?—Yes. ■ 147. We were told yesterday that he was a notorious price-cutter ? —I was not present yesterday. 148. I understand he is not a pauper as a result of his operations in New Zealand ? —lt is not within my knowledge that he is a notorious price-cutter. 149. Well, perhaps the word " notorious " was not used. We were told he was a price-cutter, and that he had to toe the mark. It has not pauperized him ? —I do not recognize him as a pricecutter. 150. All your argument, apparently, is on the assumption that every proprietary line that goes out is good and something which is worth purchasing ?—Yes. 151. I suggest that it would be a good thing for the community if half of these proprietary articles died a natural or an unnatural death. A lot of it is only rubbish ? —No ; the manufacturers maintain they are good articles. 152. Mr. Myers.'] Apparently you claim, the cutters get to work on the best lines ? —Yes, exactly. 153. So that we need not bother much about the rubbish that my friend has spoken of ?—No. 154. With regard to — , does he deal only in proprietary lines or in fancy-goods generally in a large way of business ? —ln fancy-goods in a large way. 155. Mr. Hay ward.] You mentioned just now that, while price-cutting may injure a good line which was not established, it would have little effect on a good line when it once became established
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In the illustrations you gave you cited Cuticura soap, the sales running down from 100 in 1923 to 50 in 1926, and Coalgate's dentifrice from 100 in 1922 to 33 in 1925. You would call these good lines ? —Yes. 156. And you regard the falling-off in sales in those two instances as a result of price-cutting ?— I do. 157. Mr. Montgomery.] Does is not occur to you that the fall in the consumption of Colgate's dentifrice might have been in some measure at least due to heavy competition of new soaps and dentifrices on the market within recent years, such as Palmolive soap, Euthymol tooth-paste, and the like ?—lt would have an effect. 158. Is it a fact that these soaps have been very serious competitors of Cuticura soap during recent years ? —Palmolive must be regarded as a serious competitor of Cuticura, but at the time Cuticura soap was selling largely it also had serious competitors other than Palmolive. 159. But has not the competition in soaps become peculiarly acute during the last two or three years ?—lt could be said, yes. 160. The Chairman.] Have your sales of Eno's fruit-salts decreased materially during the last three years as a result of cut prices ?—Yes. 161. Have you, as a matter of policy, merely stocked Eno's because of the cutting which goes on— that is, you stock as little as you can ? —Yes, we stock it because we just keep the good will of those customers who will buy from us. 162. In the case of Creme de Menthe, why did not the manufacturer punish the retailer for cutting the price, by stopping his supplies ? —Because such a quantity came back on the hands of the wholesaler from the retailer that the manufacturer could take no action. 163. There was some evident objection to its qualities, if you had so many returns ?—No ; the retailers who bought from the manufacturer through the wholesaler, on the understanding that the line would be retailed at Is. 9d., found they were unable to obtain that price, and therefore returned the goods to the wholesaler. The manufacturer, therefore, could not sell further supplies to the wholesaler. 164. Could he not have re-established his position by dealing with the price-cutters ? —He evidently failed in his effort to so do. 165. But in other lines manufacturers have succeeded in taking drastic action ?—Yes, at a very great cost to themselves; probably this particular manufacturer was not able to stand up to the cost. 166. Could you give us the total sales of your tooth-pastes and soaps during the periods you have referred to ?—No. We do not completely separate the accounts. 167. Can you say whether your total lines have generally decreased during the last few years, of all brands ? —Speaking from memory, I should say the aggregate would be higher over all. 168. And has competition been pretty severe in all lines during the last five years ?-— Yes, competition is very severe at the present time in all classes of goods that we handle. 169. And has competition been so severe that you have had to consult with other wholesale druggists in conference as to protecting your own interests ?—Yes ; this P.A.T.A. movement is the outcome of it. 170. You have agreed amongst yourselves to support the P.A.T.A. movement ?—Yes, as being the machinery which would best effect an improvement. 171. What do you consider would be a fair profit to your shareholders : do you consider 7 per cent, fair ?—I should say that 8 per cent, is not a high return. 172. So that you are a little disappointed with the last three years, of 1\ per cent., 7 per cent., and 7 per cent. ? —1 am. particularly pleased that the shareholders are not as disappointed as I am. 173. Has the number of wholesale chemists increased during the last ten years ?—There has been no increase during the last ten years. 174. Have any gone out of business ? —No. 175. You have been in the business of Sharland's for thirty years ?—Yes. 176. You have a very good knowledge of trading-conditions over those thirty years ? —Yes. 177. Have you noticed a general evolution in trade over that period ? I mean, in your earlier stages with the firm your main trade was with the chemists and druggists ?—Yes. 178. Then, at a later stage, you did an increasing trade with the grocers ?—Yes. 179. And less with the chemists ?—No. 180. Has it steadily increased with the chemists during all that period %—Yes. 181. Despite all the cutting by the new distributors of goods, the draper and the cut-rate man, your business has steadily increased with the druggists and chemists ? —There has been a general increase. 182. You understand that my question relates purely to proprietary lines ? — Then, I withdraw the answer. I thought your question referred to general lines. 183. Then, I ask you, has there been a change of trade during the last few years ? First, in proprietary lines it was mainly with chemists and druggists ? —Yes. 184. Then the grocers started to have an important connection with you ? —Yes. 185. At what period of time, did the grocer have a bigger trade with you than the chemist ?— I should say from fifteen to twenty years ago. 186. And has the drapers' connection with you been improved during recent years ?—No. As a matter of fact, we do not do a great deal of business with the drapers. 187. And only in recent years have the cut-rate stores been your customers to a considerable extent ?—To some extent; not considerable. 188. Are they not considerable customers with you to-day ? —No ; quite the reverse. 189. Where do they make their purchases ?—I could not say. Ido not enjoy their confidence.
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190. To what extent do you deal with fixed-price goods in proprietary lines ; is not the majority of the lines you deal with fixed in price ? —No. 191. Not the wholesale or the retail price ? —No. 192. There would probably be many hundreds, although you may not be successful in getting the fixed price. Still, the manufacturers request you as far as possible to get a fixed price?— .Fixed, but not. maintained. 193. Then, you are dealing with hundreds of lines which are fixed in price ? —Yes, that is so, but not maintained. 194. I suppose you have no objection to letting the Committee have copies of your balancesheets for the past five years ? —I do not think there will be the least objection. 195. In connection with proprietary lines, where you can keep out the grocer and the cut-rate man, do you think it- would be in the best interests of your business to deal entirely with traders who deal exclusively in what may be regarded as baby-goods ?—1 think circumstances would give them an advantage under such a- procedure, but 1 do not advocate it. 196. You believe in the widest distribution through any channels and a fixed price ?—I do. 197. Mr. Myers.\ Can you tell us for how long serious cutting in proprietary goods has been going on (a) by the drapers and (b) by other than drapers—that is to say, fancy-goods dealers or grocers ? 1 mean, is it a matter of thirty or twenty years, or only recently ?—Cutting with drapers has always been in evidence, but not seriously. The serious and extensive cutting has been going on most acutely within the past five years. 198. That is what brought about your anxiety and the constitution of the P.A.T.A. ? —Yes. 199. You say a large number of lines have prices fixed, in the sense that you are requested by the manufacturer to try to get those prices, but that they are not maintained ; why are they not maintained ?—For the reason that the retailer cuts his price, and the wholesaler has to come down to hold his trade. James Stark sworn and examined. (No. 6.) 1. Mr. Myers.] What is your occupation ?—I am manager of Kempthorne and Co., Ltd., Dunedin. 2. I want to ask you a few questions with regard to Kolynos. Has your company dealt specially in that line ?—We are sole agents in New Zealand for Kolynos. 3. Does that mean sole distributors ? —No ; we rely on other merchants to assist us in that. We are the sole importers. 4. How long has that article been on the market in New Zealand ?—I think, since about 1908. 5. Is it a line which has been much advertised ? —Not at first, but latterly it has been very largely advertised—this is, within the last ten years ; perhaps longer. 6. Is it a line which became established on the market ? —Yes. 7. Is it a line that was stocked by all the chemists throughout New Zealand ? —Yes. 8. Is it a line that has been regarded as one of particularly good quality?— Yes. 9. Was an endeavour made to market it readily at a price which would be attractive to the public ? —Exactly. 10. What was the price fixed ?—The price fixed by the manufacturer was Is. 6d. per tube. 11. Would you mind telling the Committee at what price the retailer purchases that article from the wholesaler ?—There have been changes from time to time, but the present price is 14s. 6d. a dozen, less the usual settlement discount of 3§ per cent. 12. The retail price has never varied ? —lt has not varied for a number of years. During the war-time it was Is. 9d., owing to increased cost during the war period. 13. Except during the war period, the price has never varied ? —No. 14. Eliminating the war period, has the price varied at which the retailer purchased it from the wholesaler ?- —There was a time when, owing to certain circumstances connected with duty, the price was 15s. 3d., and it was then retailed during that period at Is. 9d., but since the present tariff has been in operation there has been no change in price. 15. How does the price of Is. 6d. compare with other favoured dental creams on the market ?— It is very much better in quality than some of the competing lines at Is. 6d. 16. Are there, then, other cheaper lines which in your view are not the same quality ? —They have been on the market. 17. Are there on the market other lines at less than Is. 6d. which in your view are of less value than Kolynos ? —Yes, I have seen them in the shops. 18. What do you say the price was at which the retailer purchased from the wholesaler ?— 14s. 6d., less 3f per cent, for single dozens, and for 12-dozen lots 13s. 6d. net. 19. So there is very little difference really ? —About 6d. a dozen. 20. Speaking generally, in what parcels is Kolynos purchased by the retailer ?—Twelve dozen has been the usual parcel for chemists and other retailers until comparatively recently, when we found that the usual average size of the parcels sold was not maintained. 21. That is, until comparatively recently? —Yes. 22. Has this article suffered in the hands of the cutting trader ?—Very considerably. 23. Commencing how far back ?—About three or four years ago, or possibly five. , 24. Has that cutting continued ; and, if so, to a greater or lesser degree ? —lt has continued to a greater degree.
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25. Has it existed only in operations here and there sporadically through the country, or generally through the country ? —For some time we had a price-agreement arrangement in Dunedin whereby the price of Is. 6d. was maintained, but it was broken about a year ago. 26. What class of trader was it who commenced to break the agreement in Dunedin ? —The fancygoods dealers and haberdashers. 27. At what price did they sell it ? —lt commenced at Is. 4d. and it dropped down gradually until 111 d. was reached. 28. That means that every one of those cutting traders was selling that article at a loss ? — Exactly. The standard cut price was Is. Id. 29. Confining your attention to Dunedin, what effect did that have on your Dunedin sales ? — Our sales dropped immediately. 30. So far as the cutting people were concerned, were they selling large quantities or not ?—lt is difficult to estimate because large quantities of Kolynos were sold to other merchants, and no doubt they sold to the cutters. 31. But you would know whether the general sales went down ?—Yes, they did. 32. First of all, then, the sales to the non-cutters decreased substantially ? —Yes. 33. People would still be buying some dental creams from the non-cutting traders, so that it would have to be some dental cream other than Kolynos ?—Yes. 34. I am still referring to Dunedin. Did you still maintain your advertising ?—Yes; there was no diminution in any way. 35. You were still using the same efficiency in your attempted distribution of the goods ? — Undoubtedly. 3(5. Can you account for the diminution of sales in any other way than this price-cutting ? —No ; a policy of substitution must have been adopted. The Committee adjourned at 12.35 p.m. until 2.30 p.m. On resuming at 2.30 p.m. Examination of James Stark continued (No. 6). 37. Mr. Myers.] When the Committee rose for the luncheon adjournment you were dealing with the position in Dunedin ? —Yes. 38. Did a similar position obtain outside the Dominion when cutting operations commenced intensively ? In other' words, did you experience a fall in the sales outside New Zealand ?—A general decline. 39. I think you are in a position to give percentage figures, are you not ?—-I have prepared some figures, and they cover a brief period. 40. Taking 1922-23 as 100 per cent., the decrease in 1923 was to 94 per cent. ; 1924-25, to 92 per cent. ; 1925-26, to 90 per cent. ; and from 1926-27, to 82 per cent. ? —Yes. 41. These were in respect to Kolynos ? —Yes. 42. You say there was a steady decline ? —Yes, especially in the later stages, when cutting became general. 43. Did that cause you trouble with the manufacturers in England ? —Yes. 44. They became alarmed, did they not ?—Yes. 45. Did they ask you the reason for that ? —Yes, and we reported that it was due to the extreme cutting. 46. What did they do then—they sent Mr. Kemp, did they not, to inquire into the position ? —Yes, and he has inquired very fully into these things, and he can bear me out in these figures that I have mentioned. 47. Is there any other reason to which this decline can be attributed other than the results which came about from the cutting of the line ? —As regards the quality of the product ? 48. Was any undue competition or anything of that sort very pronounced ?—The advertising of Kolynos has been maintained —in fact, it has been very extensively carried out. As a matter of fact, they had a stand in the Exhibition held in Dunedin for a period of six months and during that time they distributed many thousands of samples, and I consider that had it not been for the Exhibition the decline would have been more. 49. During the latter end of 1926 was the cutting very intense ?—The decline was most emphatic in Dunedin for some time. 50. That was for the time being. Was the cutting more intensive there ?—lt was down to Is. 51. Can you tell the Committee to what extent your sales declined in Dunedin in that period ? —In the second half of 1926 the sales decreased by 33 per cent. 52. Is that during the period of intensive cutting ? —Yes. 53. And elsewhere in New Zealand, for the same period, where the cutting was not so intensive ? —10 per cent. 54. Are those the results which you as a business man would expect from price-cutting ? —Yes, exactly. 55. In proprietary lines ?—Yes : and you can look for nothing else. 56. Do you know of your own knowledge, or has it come to your notice, whether the public has had difficulty in obtaining supplies of Kolynos at certain shops which were not cutting ? —Some of
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the chemists declined to stock it, as they said it was unprofitable. They could not sell it with confidence, and they substituted it with other preparations. 57. And they would not stock the line ? —That is so. 58. Kolynos, I think you informed us, was a well-established line ?—Yes. 59. And, being a well-established line, you say that it was seriously affected by the cutting ? —Exactly. 60. You would expect in the ordinary course those results in the case of a line, no matter how well established, with the cutting of prices ? —The tendency is for the line to shrink in sales because the distribution is interfered with. 61. We have heard that most of the manufacturers of the proprietary lines which are sold in New Zealand are in England or in Australia —at any rate, out of New Zealand ? —Very largely. 62. There is a small proportion here ? —Yes, but the bulk of them are outside New Zealand. 63. Speaking generally, are they represented by their own officers in New Zealand, or are they represented by agents, or do the merchants buy from the manufacturers abroad and import them ? —It varies. The great bulk are represented by agents, who do not necessarily carry stocks. They may collect the orders, but others do carry stocks. 64. Some have no agents ? —That is so. In the case of our agencies we do carry stocks. 65. When you speak of the manufacturer having an agent in New Zealand do you mean an agent like your own firm ? —Exactly. 66. You would estimate your capacity in respect of those articles that an agent or distributor holds —do you work on commission ? —No ; we work on a trade profit. We have to stock to suit the market. 67. I suppose we may take it that in regard to most of the lines that are manufactured outside New Zealand the distribution is done by the merchant in New Zealand and the retailer ? —Yes, that is so. 68. That brings me to this question : Is it feasible, in your opinion, for a manufacturer, generally speaking, to maintain a fixed price, both wholesale and retail, without the assistance of some body such as the P.A.T.A. ?—Emphatically, no. 69. Could you amplify that by giving reasons ? —Because the function of a merchant is not to carry on a price-protection scheme, but to sell goods. He has not the time to devote to what may be termed detective work in connection with the price-protection scheme. 70. Has your company joined up with the P.A.T.A. ?—Yes. 71. Have you found that a commercial necessity? —That is so. 72. There is one question that I want to mention to you : At an earlier stage of your evidence in connection with the price that the wholesaler charged the retailer for Kolynos you gave us the price of 1-dozen lots and 12-dozen lots ?—Yes, that is so. 73. Were those the only prices in existence ? —Yes. 74. Did you have any other lots ?—There was the 5-gross-parcel lots. 75. It was withdrawn owing to cutting, was it not ? —Yes, recently, by Mr. Kemp. 76. What was that price ? —l3s. net cash. 77. There was cutting down to llfd. was there not ?—Yes. 78. Mr. Oresson.] You said that you approve of the P.A.T.A. : do you also approve in a particular commodity having a cash price and a credit price ?—Very often for a cash price a coupon is given to the retailer. We do not object to that; that is a matter for the P.A.T.A. 79. And you as a manufacturer do not take a stand ? —That is so. 80. As regards most of these proprietary lines which you tell us are manufactured in England, I presume you will agree with me when I say that the New Zealand trade must be a very small proportion of the total world trade so far as that article is concerned ?—I think so ; yes. 81. And therefore, as one may put it, a fairly small result on the profits of the manufacturer— that is, taken as a whole ? —Yes. 82. One thing I want know is this: Has price-cutting always been an evil in the trade?'— For many years past, and as long as I can remember. It has been going on in all parts of the world for many years. 83. It has been suggested that it has become acute during the last five years ? —Yes. 84. That has always been present ? —Yes. 85. You have told my learned friend that during 1926, when you said the price-cutting was worst in Dunedin—you gave figures —how did you form the opinion when price-cutting was worst ? —In connection with the Dunedin line we kept figures, and as the sole importers we knew the total number imported, and sold each month in each centre. 86. How do you know that that was the worst period in New Zealand ? —The point is, I referred to Dunedin figures when cutting was worst. I did not refer to the figures being the worst all through. 87. My learned friend used the word " worst." You do not say that cutting was the worst at that time ?—[ cannot say that cutting was worst at one time right throughout New Zealand. 88. You have given this general decline in prices, ranging from 94 per cent, down to 82 per cent. : surely that must depend on whether a better and more efficient substitute comes on to the market ? If they could work their line up to the standard that Kolynos has obtained by years of work, very well. 89. Is there not an article on the market of the identical formula Dr. N. S. Jenkins, packed by [Name deleted], and this costs 75., and sells at lOd. instead of Is. 6d.—-I have no knowledge of that. 90. I am told by my grocers here that that is so ? —There was a Kolynos tooth-paste put on the market, but that was subsequently withdrawn.
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91. Mr. Kennedy.'] Is your business largely confined to chemists, or the greater part of it ? — That is a difficult question to answer, because I have not the percentage of figures ; but we do a very large business with chemists. 92. Would you tell the Committee, when the price was reduced below your tariff figure, what section of the community it was that would not push your line of Kolynos ?—The chemists would not push the line. There are others besides the chemists. 93. But particularly chemists ? —Yes. 94. I suppose you found that the boycott, if I may use the term, was confined to the area in which the price was being reduced ? —Yes, those were our observations. 95. So that if the price was cut in, say, Invercargill, that would not affect your sales in another town ? —-Not so much in the remote districts ; in the centres they would get that effect. 96. Would not the objection to stocking your line when the price was reduced be confined to that area where the price was being reduced—as a broad generalization it is true as I have put it ? —Yes. 97. So far as the public were concerned, if they wanted Kolynos they would get it at the cheap price, and the chemists would not stock it ?—-That is so. 98. Do you not concede that from the point of view of the consumer it was of some advantage to get it, even in limited quantities—that is, Kolynos—at a reduced price, and, as I say, it would be of some benefit to the consumer ?—To some extent, I suppose, on direct purchase it is. 99. The cost of living has been quite a problem in recent years, has it not ? —Yes. 100. It is always an advantage to the consumer, especially the wage-earner, to make his purchases keenly ? —Yes. 101. Under your price-fixation scheme that benefit is to be taken away from the consumer, is it not ? That is to say, if your price-fixation under the P.A.T.A. comes into force in Dunedin, for example, where you say the price was cut, the consumers must pay an increased price for the article ?—Yes, that is so. 102. If the price was cut in, say, Wellington, the same will obtain in Wellington, Christchurch, Dunedin, and elsewhere ?—Yes. 103. So that the consumers who under present conditions go to the best place—namely, the exit-rate stores —will, if the P.A.T.A. functions, pay more for their Kolynos ?—lncidentally, they will not get the advantage that they should not have got. In other words, the consumers will pay a little more for that line. 104. That is part of the function of the P.A.T.A.—to make them pay more ? —To make them pay a fixed price, which must be more than when the cutting is taking place. 105. That is, a larger price than is obtained under free competition ? —lt cannot be otherwise. 106. I suppose you will concede that that is intended in all the lines that are to be registered under the P.A.T.A. -Yes. 107. On all lines registered under the P.A.T.A. ? —That is, I suppose, the general scheme. 108. You want them to make the consumer pay a higher price than would obtain under free competition ? —That is the effect of it. 109. And that is, as a member of this council, the aim of it ? —The aim is to protect prices from being cut below a reasonable price, which is considered to be a fair and reasonable price for the benefit of the trade. 110. But you want prices to be above free competition—you frankly conceded that ? —I say it is unavoidable if you protect the prices that are not cut. 111. It is unavoidable "Yes. 112. Your article, I suppose, is not the sole dentifrice on the market ? —Not by any means. 113. Do you know when Gibbs's dentifrice was put on the market ?—I cannot tell you that. Speaking from memory, I should say it would be within the last two or three years. 114. I suppose the large advertising campaign so far as that article is concerned would have some effect on the sale of Kolynos ? —I suppose so. 115. I suppose you do not expect under competition that an article will perpetually preserve its sale on any market ? —Under fair conditions it will. 116. Mr. Reardon.] That rather contradicts the answer you gave where you inferred that they all have their innings ? —-They develop their business and very often drop it. They do not carry on intensive advertising campaigns, and they fall through. 117. Mr. Kennedy, I suppose the rise of Kolynos was due to the fact that it displaced some other article ? —Kolynos was the first firm to get to any size. 118. Kolynos may be subjected to the same rule ?—Yes, it is the law of human nature ; but we do not intend to let it go too far. 119. Did Kolynos supplant any other dental preparation on the market ? —lt must have done. 120. What do you attribute that to —price-cutting on the other lines, or due to the superiority of Kolynos ?—lt came on to the market not as a result of advertising alone, but as a result of the doctors and dentists recommending it, and also as a result of a certain dental conference supporting it. 121. Did not your preparation supplant a lot of other lines —at the present time you are telling us that other lines are supplanting yours notwithstanding the fact that your article supplanted something else ; it may have supplanted them for many reasons ? —Yes. 122. Your market-price cutting could be one, superior quality could be another ?—Yes. 123. We will leave it at those two. There is also the question of advertising—to which of those do you ascribe the supplanting of Kolynos ? —I would like you to say that again. 124. You tell us that your line is supplanted by other lines ? —I have not exactly said so, except that it has been recognized that the sales have gone down. 125. The sales have gone down ?—We do not use the word " supplant." I say that other dentifrices are being sold by chemists, and in consequence they could not get a profit on Kolynos.
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[j. STARK.
126. You said that it was, in your opinion, due to the price-cutting ? —Yes, that is the direct effect of price-cutting. 127. Now, we will go back. Previously your preparation was the substitute for something else ; is that not so ? —That is a hard question to answer, because I do not know what everybody used before Kolynos came on to the market. I submit that our dentifrice, as a consequence of its excellence, developed a public demand. 128. Through its excellence ? —Yes. 129. You do not suggest that you got on to the market because the previous article was not a cutting line —you got there through its excellence ? —That is so. 130. May not that be a very good reason why your article is being supplanted at the present time ? —I would not like to say that. Ido not think the public consider there is any preparation that is better than Kolynos. 131. If you go to the pictures you will see, according to the advertisements on the screen and in the programmes, that there are some that are as good ? —Many other lines are advertised. 132. They may not be better in quality, but we are told they are as good. Where is this preparation manufactured ?—ln England. 133. Have you any knowledge of the profits of the manufacturer ? —None at all. 134. They are not obtainable ?—Not to us. 135. Nobody could obtain them in New Zealand ? —I do not think so. 136. Mr. Walker.\ When you commenced to put Kolynos on the market, about the year 1910 or 1912, you created a favourable impression by sending out circulars, and also by sending out a limited amount of samples ?—Yes. 137. As a result of that you gained favour with the public ? —Yes. 138. That is going back a good many years now ? —Yes. 139. Can you be quite certain that the agents, &c., have not changed, so to speak, their loves ? They do it after a series of years. However, you have told us that the recommendation of the doctors and chemists has had an important effect on your article ?—Yes. 140. You would be the last man they would tell if they decided to change their views ?—I have got evidence to the contrary. We evidently must have the continued support of these men because we have created a professional department. 141. You have no evidence that they have not cast a favourable eye on some other line ? —We cannot keep track of what they are doing and as to what they are recommending. 142. Mr. Myers.] You were asked about the question of cutting : you have told us that cutting was intense in Dunedin % —Yes. 143. You were asked by Mr. Kennedy and Mr. O'Leary what was the reason, and what could have been the reason for the decrease in the sales throughout New Zealand ?—Yes. 144. Is it your suggestion that the chemists —I do not mean they all refused—in different parts of New Zealand refused to stock Kolynos because of the cutting that was going on ?—Yes. 145. Has there been during the last three or four years any well-advertised dentifrice, that has come on the market that you know of ? —I cannot say that there has been. Mention has been made of one line. 146. That is Gibbs's dentifrice. Is that advertised to anything like the same extent as Kolynos ? —I do not think so. 147. Let us assume that a certain amount of Gibbs's dentifrice has been sold : do you know some of the people who refused to take Kolynos bv reason of its being cut stocking Gibbs's dentifrice because it was not cut ?—I have knowledge to that effect. 148. So that accounts, in your opinion, for Gibbs's dentifrice being on the market ? —Yes. 149. Precisely. Is that the way outside lines do come on to the market ?—Yes. 150. Through the cutting of some particular proprietary line to the detriment of that proprietary line ?—-That is so. 151. You know Gibbs's dentifrice, do you not ? —Yes. 152. If that is not a cut line the chemists can sell it at a better price than they can sell Kolynos when Kolynos is being cut by other people I—That1 —That is so. 153. You were asked by Mr. Kennedy, I think, whether the reduction in Kolynos by cutting is not an advantage to the consumer who purchases it at the cut price, and you said that it was. I want to put this question to you : Is it an advantage to the consumer if he has to make up by an increased profit on some other line the reduction in profit of Kolynos ? —I think not, because he has to contribute his profit to the shop on other lines. 154. Mr. Reardon.] I understand that you are one of the executive officers of the P.A.T.A. ? — No, sir, ; I am a committeeman. 155. I suppose that your deliberations are not subject to your Loard of directors?— No. 156. You can come to any decision that you like ? —ln regard to the P.A.T.A. generally ? 157. Yes ? —Our entry into the P.A.T.A. system is with the permission of our chief executive officer and general manager, who is also chairman of one of the committees. 158. Before you went into it you looked at the operations elsewhere ? —We have known in the drug trade of its existence in England for twenty years, and it is not unfamiliar to us as wholesale druggists. 159. In Australia ? —They have it in force there. 160. Have you had in mind the desire to go as far as they have gone in Australia ? —I am not a member of the executive ; the executive is the governing body. I am only a member of the provincial committee in Dunedin,
50
J. STARK.]
H. 44A.
161. I will just put this to you by way of speculation : You feel at the present time the position of Gibbs's dentifrice as against Kolynos—supposing the representatives of Gibbs's dentifrice were selling their article at Is. and you were obliged to sell Kolynos at Is. 6d., would you endeavour to use your influence on the P.A.T.A. to bring the two prices more into line ? —We have no influence at all in the P.A.T.A. executive. 162. You are a member of the committee ? —Yes. 163. That has something to do with that body ? —lt would have to be done on proper lines. Moreover, we would never think of using any influence on the executive of the P.A.T.A. in that direction. 164. You would not think of doing it ? —lt did not occur to us that such a thing would be possible —that is, to use influence to have the price brought up to the same level as another line. It may differ in size, and also as to the quality, altogether from the particular line you have mentioned. 165. Are you aware that such has been the practice ? —I have no knowledge of anything of the kind. 166. Mr. Collins.] How long have you been agent for Kolynos ?—Since 1908. 167. In regard to this number of 100, for what year is that ? —1922-23, the first month of 1923 ending our financial year. We have not the records before that. 168. Could you supply to the Committee the actual numbers that the percentage represents ?— I think there would be no objection to that, Mr. Chairman, but it would take a little time to prepare it. 169. Your evidence has been mainly in connection with Kolynos, has it not ? —Yes ; it is one of our big agency lines. 170. That, I take it, is your most serious complaint ? —That is so. With the general business we have the same thing, but I do not make a point of surveying the whole of our drug-prices. 171. How many lines from overseas have been cut in your trade during the last three years ? —What loss ? 172. Proportionately ? —it is very difficult to say, sir. I cannot give you any idea, even on percentages. 173. I would like some indication, even if it was 10 per cent, or more ? —One could not give an answer of that description definitely, but I should say 20 per cent. It is only a guess. 174. That would be of no use to us. Does your firm experience much cutting in New Zealand greatly in proprietary lines ? —More or less, yes. 175. Could you not adjust the position on the spot ? —You cannot do that. 176. Do you think that price-fixing is general in New Zealand ? —No, not general. Many firms issue a list. The general run of proprietary articles are cut right throughout the Dominion. 177. You are manufacturers of certain articles, are you not? —That is so. There is a special price on a line costing up to 13s. 6d. to 14s. per dozen, but it gradually gets cut down to below that. 178. You have to put up with that ? —That is so. Sooner or later it comes down, through competition, to a lower level. 179. To some extent your prices have to be moveable because of competition ?—That is so. We endeavour to establish a line at the policy price. 180. Do you know of the existence of a trade competitor in New Zealand deliberately slaughtering Kolynos, and encouraging the slaughtering of Kolynos, with a view to putting on a competitive line ? —No, not in relation to Kolynos. 181. I was taking Kolynos merely as an example. In your wide experience you do not know of a wholesale competitor deliberately purchasing your line in large quantities and slaughtering it so as to pave the way for his line ? —No, I do not think he could afford to do it. 182. Has your business generally been fairly prosperous ? Can you state generally in regard to your firm ? —My attention is more particularly confined to our warehouse trade. 183. Has that been fairly prosperous during the last five years ? —Yes. 184. What I meant was generally on your sales of proprietary articles. Speaking generally, do many of your customers go off one line and go on to something else—you say that you have done fairly well ? —Yes, there seems to be an idea in the trade that if you lose one trader you get another. 185. Have you any knowledge as to the cost of running a retail chemist-shop ?—Not a retail chemist business. 186. Of a grocery business ? —No. 187. Of a cut-rate-store business ? —No. 188. Or of a drapery-store business ? —No. 189. In fixing the retail price for, say, Kolynos, the manufacturers can have no regard to the changing overhead cost with respect to those different distributors ?—They have to take it in a general way. They know that a chemist must get a fair margin of profit because his turnover is limited. He is not like a grocer turning over his stock, say, ten times in the year. 190. To be fair, the P.A.T.A. fixed a price of Is. 6d. at the behest of the chemist ?—Yes. 191. Whereas the cut-rate shop might be quite satisfied with Is. 4d. ? —That is an element of competition that we consider very unfair from the wholesale point of view. 192. Your sympathies are with the chemists ?—Yes. 193. To help him to maintain his business ?—lt is absolutely necessary. Ido not know of many chemists who have retired as a consequence of what they make out of their chemistry business, other than outside speculations, &c.
51
H.—44a.
|e. s. pilcher,
Ernest Sydney Pilchek sworn and examined (No. 7). 1. Mr. Myers.] You live in Wellington, do you not ? —Yes. 2. And you are the New Zealand representative of Palmolive Company ?—Yes. 3. Which sells soap ?—Yes, shaving-cream, and other toilet preparations. 4. Have your preparations been largely advertised ? —Yes. 5. How long have they been on the market in New Zealand ?—For a period of about five years. 6. Up till 1924 were your articles becoming established on the market ? —They were becoming established. 7. Up to then were your sales decreasing or about steady ? —lncreasing slowly. 8. In 1924 did you find any alteration ? —Yes. 9. We will take, first of all, Palmolive soap. Up to 1924 you have told us it was increasing. At what price was it being sold retail ? —9d. per cake. 10. And that price has been generally maintained up to 1924 ?—Yes. 11. In 1924 was there any alteration so far as the selling-price was concerned- 1 do not mean any alteration made by you, but any alteration in the method of trading ? —The cutting of prices began in 1924. 12. You were still advertising largely ? —Yes. 13. And cutting went on to what extent ?—lt became worse as the year went on. 14. And what did the price come down to ? —lt has been sold at 6d. 15. At that time what was the wholesale price—that is, the price to the retailer ?—Bls. per gross. 16. That is, 6fd.? —Yes. 17. And it was sold at 6d ?—Yes. 18. What happened to your sales ? —They dropped very considerably. 19. Did you find that any customers were refusing to keep up their stocks of the article ?—Yes, many of them. 20. That went on till 1925, did it not ? —Yes. 21. In 1925 did you adopt a new system ? —We introduced a price-maintenance scheme. 22. And when did that become effective ? —ln August, 1925. 23. What happened then in regard to your sales ? —They remained steady again, and as time went on they increased when we got the system generally known and the retailers knew that we were endeavouring to maintain the price. 24. Have the sales increased since ?—They are gradually increasing. 25. To a small or a large extent ?—To a large extent. 26. You say that there has been a steady increase ?—Yes. 27. By reason of the increased sales have you been able to make any reduction in price ? —Yes. 28. What is the reduction ?—The retail price is now 7|d.. per cake. 29. The increased sales were not only in New Zealand ?—ln Australia combined. 30. Have you found your scheme completely effective ? —Not completely, but it is very efficient. No scheme can be 100 per cent, efficient. 31. Have you found under your scheme that there is a certain amount of cutting ? —Yes. 32. Not long ago you brought an action against a grocer in Blenheim, did you not ? —Yes. 33. He was selling under the fixed price ?—Yes. 34. And you obtained an injunction from the Supreme Court against him, did you not ? —Yes. 35. You do not know how many more people throughout New Zealand are adopting the same course V —No. 36. Have you seen this soap [cake of Palm and Olive soap produced by Mr. de Fenq in his evidence shown to witness] ?—Yes, I have seen it in the windows. 37. That is not your manufacture ? —No. 38. Were you present at these proceedings when it was put in the other day ?—No. 39. That was sold in response to an order for Palmolive, and was invoiced as Palmolive soap ? —That is a substitution for our article. 40. Mr. Reardon.] Your article is wrapped, is it not ?—Anything that is not wrapped is not Palmolive soap. 41. Mr. Myers.] You have joined up with the P.A.T.A., have you not ?—Yes. 42. Why is that ? —We supposed that our scheme was 90 per cent, efficient and we want to get the other 10 per cent of efficiency. 43. Apart from the question of efficiency, what about the question of what may be termed policing-work ? —We would sooner pass that aspect of the matter on to an organization that would have more effective means of putting a stop to the unauthorized practice than would be the case in a small office like ours. 44. What is your price to the wholesaler ? —6os. per gross. 45. And the wholesale price to the retailer ? —6Bs. per gross. 46. Is that less a discount ? —Yes. 47. And the retail price is fixed at what ?—7|d. per cake. 48. Mr. Gresson.] I see that you are a member of the executive of the P.A.T.A. ?—Yes. 49. Who elected you : was there a meeting of the P.A.T.A. ?—I was proposed and seconded. 50. What did the meeting consist of ? —lt was representative of the wholesale and retail houses in New Zealand. 51. And you were elected on the executive of that body ?—Yes. •52. Can you tell me, as regards the proposed operations of the P.A.T.A., as to whether they are limited in any respect ?— I The operations ?
52
11. 44a.
E. S. PJLCHEK.]
53. Yes I—ln1 —In what respect ? 54. Can you refuse registration, or are you going to refuse registration of foodstuffs ?—Yes. 55. Why —what about baby-foods ? —Yes. 56. Do you know what applications you. have had in ? Is that the secretary's business ?—Yes. 57. Have you functioned yet ? —No. 58. You do not know very much about it ? —That is so. 59. You do not know what the objects are ? —Yes. 60. About any of the details of the job—even price-cutting ? —Yes. 61. Have you examined any of the workings of the P.A.T.A. in Australia ?—1 know it was effective. 62. Do you know what other effects it has ? —No. 63. Do you know that it had the effect of putting small traders out of action I—No. 64. Did you consider the economic aspect of it before you joined up ? —To a certain degree, yes. 65. How far did you consider it ? Did you consider the possible effect of the organization on the, consumer ? —Yes; I knew there would be a lot of arguments against it. 66. Is that the only effect on the consumer that you considered ? —Yes, I suppose so. 67. Did not Mr. de Fenq explain to you any more than what you are able to give us now ?— Perhaps I was not at the meeting when he went into all the particulars. 68. Did you consider whether the effect of its operation would be the raising of prices to the consumer ? —I do not know about raising the price. 69. You may fairly say then that you mean stabilization of existing prices ? —Yes. 70. Did you consider that the tendency was in general to the stabilization, or to increasing prices ?—I am speaking for my firm. 71. Putting it fairly, you said that you wanted to protect prices ?—Yes. 72. And particularly your article, which was being cut ?—Yes. 73. Mr. Kennedy.] You are the representative in New Zealand of the Palmolive Companv ? — Yes. 74. And your product is manufactured in Australia ? —Yes. 75. And you have made application to the P.A.T.A. to register your article, I suppose ?—Yes. 76. Why was not the application considered, or was it considered ? —lt was not considered at any meetings when I was there. 77. Have you met since August, 1926 ?—Yes. 78. Frequently ? —No. 79. How many times ? —1 would say twice, or it may be. on three occasions. 80. Not much business doing, was there ? —Yes, a lot. 81. Why did you not consider these applications for registration ? —The P.A.T.A. is not functioning yet. 82. Why are you waiting—you were, so to speak, born in August, 1926 ? —That is only four months old. Mr. Myers : In order to save time, why does not my friend examine the chairman of the board ? Mr. Kennedy: This witness is an executive officer. Witness: Mr. de Fenq is the organizer. 83. Mr. Kennedy (to witness).] It would be a matter that would come under the notice of the executive ?—Yes, under the notice of the executive. 84. Can you not tell us any reason ?—They have not been brought up ; they are not all in yet. When the P.A.T.A. functions they will be all considered then. 85. Can I take it from you that you yourself would have no information as to the cost of the manufacture of this article in Australia ? —That does not concern us. 86. And you have not that information to submit it to the executive of the P.A.T.A. when it considers the matter I—lt1 —It has nothing to do with the P.A.T.A. so far as the cost of manufacture is concerned. 87. You are not concerned about it ?—No. 88. I suppose all you are concerned with is that there is a sufficiently high figure on for the wholesaler and a sufficiently additional high figure on for the retailer ?— A sufficient figure to pay the transportation charges and put the article on the market. 89. So that you are not considering whether an abnormally high figure is added to it ? —What do you mean by that ? 90. I said "an abnormally high, figure " ? —1 will not agree to that. I want to see a figure put on that pays. 91. That pays the manufacturer ?—-He would be a fool to carry on if it did not pay. 92. As a member of the executive of the P.A.T.A., can you tell us whether you have any objection to a retailer who is able to carry on his business very efficiently and with little overhead cost giving some of the benefits of his economies to the consumer in reduced prices ?- He could give discount or issue a coupon. 93. But supposing he wants, without any camouflage, to give the benefit to his consumers in the way of reduced prices, have you any objection to that ? —I would sooner he did not stock our goods. 94. Do you object in principle to his doing it ? —lf he starts cutting, that starts the ball rolling. 95. You think it unfair to pass the efficient management on to his customers ?— He can do it by way of discount or coupons. 96. What harm is there in him doing it in reduced prices ?— He is upsetting our market. 97. Supposing, for example, I go into a shop and buy one cake of Palmolive soap, how could I get 5 per cent, discount on that ? —You will be pretty lucky if you do. Very few people give a cash discount on purchases of 6d.
53
H.—44A.
[E. S. PILCHEII.
98. Cannot you see that your percentage of discount on small purchases is absolutely impossible ? How could a man give 5 per cent, like that ?- -He could give it by coupon. 99. I suppose you will admit that if the retail price is fixed by the manufacturer at a very high figure, with a big profit to the retailer, it is encouraging him to reduce the price to the consumer ? No ; that will increase our volume of sales, which means decreased cost of manufacture. 100. Supposing a man can carry on business on a profit of, say, 10 per cent., and if the price is fixed which allows him 70 per cent., would you not concede that that is so high a price that it almost encourages a cut ? —We do not extend it to 70 per cent. 101. As a matter of fact you fixed a very high percentage on it ?—lt depends on how much he bought. 102. Do you remember a circular being issued by the Palmolive Company referring to the price fixed wherein it says, " The Palmolive Company (Australasia), Ltd., have shown their support of the retailer in their untiring work to maintain prices, and ensure you a, proper profit. In addition they have enabled you to make abnormally large profits on Palmolive soap during the past four months." Do you remember that circular ? —Yes. 103. I will put in this circular later. Is that statement true ? —That is not specifically high for some of them. 104. Do you agree that that statement is true ?—Yes. 105. Here is another, which is headed " Extra Profit," and it says,ln the meantime the price of Palmolive soap will be maintained at 9cL per cake to give retailers the chance to make large profits." You stand by that statement ? —May I explain that every now and again the company has special advertising stunts. 106. I suppose you have seen this little pamphlet, headed " Price-cutting and Price-control" ? —Yes. 107. At page 16 it reads, " It would be too broad a statement to say that computed margins of profit have little relation to net profits. However, too much stress is usually laid on ' Margin of profit' and not enough thought given to ' Rapidity of sale.' How often one hears the statement, ' Your product shows me only 25 per cent, profit: I prefer to handle and push XYZ brand, in which there is 40 per cent, profit, or my own brand of superfatted skin-soap [whatever that is] with a 50 per-cent. margin.'" I suppose you will concede that the stores that you complain about cutting your price have been stores that have acted on your margin of giving thought to rapidity of sale, and that has been their success ? —I do not know what their success is due to. 108. You have not an idea ?—No. 109. I have here an advertisement for Palmolive soap in the pamphlet called Aussie, and there is a little maxim contained therein which says, " First, because we believe it is fair to pass on to you, madam, the saving which your favour has earned." Now, can you tell this Committee your company's claims that it is fair to pass on " the saving which your favour has earned " —can you tell me any reason, or can you suggest a reason, why it is unfair for a retailer to pass on to his customer the saving which his custom has earned ? —We fix a price so as to get the volume of sales. 110. May I, at this stage, interrupt you. I want you to assume that the retailer in question does the same? —When we get the volume of sales we lower our production - costs, which are in turn handed down. 111. Do you consider it is right for a retailer to pass on to his consumer any reduction as a consequence of reducing his overhead cost ? —We will do the same to the public with our own goods. Mr. Myers : That is a matter of argument. 1 want to save time if I can ; but it is admitted that the whole point is this : we know that they cannot pass it on. It is part of our scheme that the goodwill in the article belongs to the manufacturer, and he cannot allow the retailer to damage his goodwill by cutting and even passing something on to the consumer. Mr. Collins : We understand the position quite well. Mr. Kennedy : It is clear that there is a certain amount of uneasiness on the part of my learned friend. Mr. Myers : It will take a good deal more than my friend to make me uneasy ; but what does make me uneasy is the taking up of time unfairly. Mr. O'Leary : I must say that that is unfair on the part of my learned friend. Mr. Myers : The position is that my friend Mr. Gresson said that, with the consent of his learned friends, it was proposed to so arrange matters that one counsel should take the cross-examination of witnesses. Ido not mind, but so far every witness has been subjected to cross-examination by counsel, with the exception of Mr. Walker, who has kept to the arrangement. 112. Mr. Montgomery (to witness).] So far as your article is concerned, is it not a fact that prior to 1924 the price for your article was not 9d. per cake, but Is. 3d. ?—Yes. 113. It started at Is. 3d., and came down to Is., then to 9d., and then to 7id. :is that not so ? —Yes. 114. Mr. Collins.] Are you the agent for any other line or lines in New Zealand ? —I represent the Palmolive Company. As a matter of fact, lam a member of the office staff. 115. Mr. Reardon.] What is the capital of the company ? —I cannot say offhand ;it is registered in Australia, and not in New Zealand. 116. Mr. Montgomery.] Do you consider that the reduction of the price from Is. 3d. to 7|d. was due to price-cutting ?■—No. Mr. Kennedy : I wish to hand in these several circulars, &c.: " Palmolive Soap is now Sixpence per Cake," " Price-cutting and Price-control," " Extra Profit," and " New Schedule of Prices Palmolive Soap."
54
E. S. PILCHER.]
H. —44A.
] 17. Mr. Myers.] You were asked as to why the applications had not been examined, and I think you said that the P.A.T.A. has not yet functioned. That is correct. Do you know that it is at the request of the Board of Trade that the P.A.T.A. has not functioned : I believe that is right ? —I do not know. Mr. Collins : Yes, that is correct. 118. Mr. Myers (to witness).] You had this read to you : "In addition they have enabled you to make abnormally large profits on Palmolive soap during the past four months." That is so, is it not ? —Yes. 119. But you did not have read to you the remainder of the sentence, which says, " by allowing you to buy Palmolive soap at February Ist price, months in advance of the reduction to the consumer." It was allowing them to purchase in larger quantities ?—Yes. You cannot reduce the price in a day ; you have to notify the people. 120. When you speak about normal profits, can you tell us what the turnover was ? —lt varies. John Alexander Norrie sworn and examined. (No. 8.) 1. Mr. Gresson.] You are a grocer at Timaru ? —Yes. 2. You were originallv a credit grocer, and you changed over to a cash grocer in the year 1921 ? —Yes. 3. Cash over the counter, and delivered all parcels of £3 and over ? —Nothing less than £3. 4. What did you find as a result of your conversion of your business as regards the volume ?—ltjumped ahead by leaps and bounds. 5. Were you able to undersell your credit competitors ? —Yes, any line. 6. You have figures showing your turnover ? —Yes. 7. Mr. Collins.] Are they confidential ?—They are, but if the members of the Committee wish it I will put them in. 8. Mr. Gresson.] In 1919 you had two seniors and a junior ? —That was commencing 1919. 9. What was your turnover per month ?—[Figures deleted.] 10. Next year ?—[Figures deleted.] 11. With the same staff ? —Yes. 12. You were still carrying on a credit business ? —Yes. 13. In 1921 ?—The financial year finished in 1922, and I took the horse and cart off and for two and a half months I was credit and delivery. I finished that in April. 14. What was the turnover ? —[Figures deleted] per month. 15. In 1922 you added a junior ? —Yes, and the turnover was \Figures deleted.] That is the average for the month. lfi. The next year ? —[Figures deleted.] 17. The next year ?— [Figures deleted.] 18. The next year you added to your staff ] —Yes, and the turnover was [Figures deleted] per month. In 1927 I have not got my balance-sheet out yet, but my figures are [left blank] for the year ending January. 19. So far as you are concerned, you have been underselling your competitors on all sides ?— Yes. 20. Will you hand your balance-sheets in ? —Yes. [Balance-sheets handed to the Chairman], 21. In respect of that and speaking generally you have made a good profit on your business ? — Yes, a handsome profit. 22. How do you view the application of the P.A.T.A. as regards your own business ?—They are going to force me out of business through not being able to purchase certain lines or go back to the old system, which I refuse to do—that is, the old credit system of delivery with extra overhead expenses. 23. You have already felt the effect of price limitation in the case of aspro and Johnson's babypowder ? —Not on Johnson's baby-powder, because I have a stock which was obtained before the price was fixed. I will be unable to get any more unless I sign up. 24. What about aspro ? - lam absolutely boycotted. They were charging me 365. less 2f per cent, per dozen, and a reasonable profit was 3s. 6d. They wanted me to sell at 4s. 6d., which I refused to do. 25. Are aspros wha.t you may call a quick-selling line or slow-selling ? —lt is a fairly good seller— that is, when I had it. 26. Since you have gone on the cash basis —I do not want to put it with unnecessary detail —I think on three occasions you have had to change the butter that you were supplied with, because the other merchants boycotted you on account of the fact that you were underselling that butter ? That is so. 27. That is to say, the merchants threatened to boycott the butter company if they supplied you with butter ? —They did everything they could to cut me out, which they did. That happened on two occasions, once in Timaru and in Temuka. 28. As a result of your experience in all classes of business do you consider that there would be no fear or risk of price-cutting at all if business concerns were conducted on a cash basis on the same lines as your business ?—That is so. 29. Do you wrap up parcels in your shops ?—Yes,* that is the service we give. 30. Mr. Myers.] Of course, you do not suggest that it is possible for all retail business concerns to sell on a cash basis ? —I do not see why they should not. 31. You do not see why every one should not deal for cash, and cash only ?—I think it is quite feasible.
55
H. —44A.
[J. A. NORRIE.
32. Very well, that is your idea of business management ? —My reason is that it eliminates a lot of work. May I say that before I was in my present business I had a business—that is before the war —in another part of the town, and as a consequence of the war I was compelled to go to camp. In that business my wife was helping me, and we worked from 5 o'clock in the morning—l assisted with the housework as well—until late at night, and we worked like niggers. I did not know what it was to have a half-holiday, and we got. very little out of it. It is quite different to-day. 33. Mr. Collins.] Did you lose very much by this credit system ? —Yes, very considerably. 34. Mr. Myers.] A man who is doing a credit business has to take a risk and provide for it ? — Exactly. 35. Would you mind telling me, if you can, what was your percentage for overhead—that is, percentage of turnover ?—About 5 per cent, it would work out at. 36. That is right through ? —That is on the cash system. 37. It is your own shop ? —lt is my own business. 38. Is the property yours?— No. 39. What rent do you pay ? —[Figures deleted.] I am on a lease. 40. That is a pretty low rental ? —Yes. 41. What would it cost you to renew it —would it cost you about £6 to renew it ? —I do not think so. I may say that lam right in the heart of the town. 42. How long has your lease to run ?—Just a few months. 43. What is your wages bill ? —lt is in the balance-sheet. 44. Has it been audited ? —Yes, by a public accountant —namely, Mr. A. C. Martin. [At this stage witness asked that the balance-sheet should not be disclosed, and all reference to wages, deleted from the notes of evidence. As a result of the cross-examination of Mr. Myers witness admitted that the gross profit worked out at llf per cent, on turnover.] 45. Mr. Myers.] Your gross profit apparently worked out at llf per cent, on turnover ?—Yes, that is about it. 46. That means on some lines you have to make a substantial profit—that is, more than 11| per cent. ? —Yes, for the reason that it is imposible to make it right. 47. You are selling a lot of flour and sugar, and so on, at a low rate of profit % —Yes. 48. On what other lines do you do that—for instance, salt ?—Yes. 49. Tea ?—A small profit. Tea that costs me in bulk 2s. Id. f retail at 2s. 6d., and the bag I put it in costs me ljd. 50. At what price do you sell Bell tea ?—3s. Id. 51. And Amber Tips ? —3s. 52. What does it cost you ? —2s. 10d., less 5 and 2-| per cent. 53. You are making more on your own tea than you do on the others ? —No, I do not think I am. I think my margin is pretty small. I average over 10 per cent. 54. Would you mind telling me the capital you have employed in your business ? —lt is in the balance-sheet. 55. How long have you been in business ? —Altogether about fifteen years. 56. In business on your own account ? -Yes, and twenty-eight years in the grocery trade. 57. How long have you been doing the cash business ? —Since April, 1921. 58. On what terms do you buy from the merchants—cash on the 20th of the following month % —It varies. 59. By selling for cash it means that by the 20th of the month you have sold sufficient to pay your accounts ? —Yes. 60. Otherwise you could not do it on the capital % —No. I worked on an overdraft previously, but I do not require it now. 61. In other words, you are using the capital of the merchants to finance you ?—Yes. 62. Otherwise you could not carry on your business ?—Not on that capital. 63. If the merchants required from you the same terms as you require from your customers it would be good-bye to your business ? —No, because I would arrange other finance. 64. In other words, you object to giving credit to the customer but you take credit from the merchant ?—Yes, so long as it is offered. 65. I know that, and I am not blaming you ; I am only making the point to show that you are taking what you object to yourself giving—that is correct, is it not ? —That is quite right. 66. In order to enable you to carry on business in this way you have to sell cheaply, which you can afford to do as a consequence of your getting cash ?—Yes. 67. You say that you can undersell your competitors in every line ?--Yes, that is what I aim at. 68. So tha/t it would be easy enough for you, supposing you are making more profit upon slow-selling lines even —say, 11| per cent., I suggest, to reduce the price of flour to the public than do what you are doing- that is, getting something like 25 per cent, on small lots ? —I aim at making as small a margin as I can on everything. 69. Would you mind telling me how many tons of flour you get in the year ? —I could not offhand. 70. Can you tell me the extent of your turnover in flour in the year ?—No, I am not going to guess at it; but it varies. 71. Cannot you give me some idea ? —I do not dissect the business. 72. I know you do not. Surely you know the average purchases of flour per month from the miller ?—As much as [Figures deleted] per month I pay out for flour..
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73. What percentage of your turnover would be in sugar ? —I cannot estimate it. 74. Would it be 10 per cent. ? —I could not estimate it. 75. You cannot tell me. what you pay out per month for sugar ?—No, I am not going to guess. 76. Will you give me what percentage of your turnover is represented by proprietary lines ?— I cannot possibly keep anything like an estimate, because it is mixed up with other goods. 77. Do you get the proprietary lines from grocery-merchants or druggists ? —From the grocerymerchant. 78. But I suppose you are mainly a provision-dealer ?—I do not claim that lam a provisiondealer—l am a grocer. 79. Your turnover in patent-medicine and proprietary lines would be a small proportion of the turnover : would it be £50 per month ? —No. 80. Can you give me any idea ? —No, I could not. 81. Can you give me any idea of the number of proprietary lines you stock ? —lt would take some counting-up. It depends on what you call proprietary lines, because there has been nothing laid down as to what is called proprietary lines. 82. Do you stock Cuticura soap ? —Yes. 83. Palmolive soap ? —Yes, stocks that I bought two years ago. 84. And then you will cease supplying ?—Unless I sign up with their agreement, which I will not. 85. Do you stock Kolynos ? —Yes. 86. What do you sell that at ? —ls. 4d., costing 14s. 87. Do you keep Baxter's Lung Preserver ?—Yes. 88. Wood's Great Peppermint Cure ? —Yes. 89. Johnson's baby-powder ? —I am very nearly out of it. 90. What have you been selling it at ? —ls. 4d. ; the price is fixed at Is. 6d. 91. You will get no more when your stocks are finished ? —Not unless I adhere to the price fixed. I can still get it at 16s. 9d. without signing. 92. Cannot you see that the manufacturer has a goodwill in the product; do you not recognize that ? —Certainly. 93. Do you not see that the goodwill in his article is being damaged if it is cut below what he thinks is a fair selling-price ? —lf it has the quality and there is a fair margin of profit in it it should drop a bit. 94. By cutting ?—-It should not make a scrap of difference to the article. I have a man opposite me who is cutting below me in many lines. 95. What is he selling Kolynos at ? —ls. Id. 96. And Cuticura ? —ls. Id. 97. Are you selling the same goods ? —Yes. 98. Are you selling many of them ? —I get my fair share, and Tam satisfied. 99. Of these particular lines ? —Yes. 100. Well, you are lucky ?—Perhaps I am. 101. You do not issue any price-list? —Only through the newspapers. I keep an Sin. space in both the newspapers down there. 102. And you advertise mostly the ordinary grocery lines ? —This week it consists of groceries and other things. 103. Does it include articles like Kolynos ?—I very rarely advertise Kolynos. 104. McKenzie's are making a loss ?—I do not know what it costs them. 105. You know what it is costing you ? —Yes. 106. If he is getting it at the same price as you he is making a loss ?—Yes. 107. Do you think that cutting like McKenzie's below cost, does any good, or does it not do harm to the manufacturer as well as the particular article ? —Well, I will say in this particular case I do not believe in selling a line below cost. 108. Do you suggest that the cutting of any article can do anything but harm to the manufacturer whose goods are being cut in that way ? —I do not think it does any harm. He is creating a demand for the line by cutting the price. 109. Cannot you see that this is eliminating the sale to the other storekeepers ?—That is not the point. My aim is the more you can turn over the better for all concerned. 110. You cannot see that the manufacturers' interests are being interfered with in the least ? — So far as I can see, when I buy the goods they are my property and I can please myself what I do with them. 111. Your contention is that once you have paid for them you can do what you like with them ? —I can deal with them in any way I like. 112. You think that that is an honourable business —-— Mr. Gresson : This is too much. Ido not object to my learned friend using the word " immoral," but there is no justification for suggesting that this is not the right method of making an honest living. Mr. Collins : I want to give counsel the fullest amount of latitude, but counsel can make up its mind that so far as the evidence is concerned we appreciate the position very fully from Norrie's standpoint—that is to say, he endeavours to make a certain rate of profit for strictly cash prices— and anything that Mr. Myers has got out of his cross-examination has not altered that. Mr. Myers has reached a position where he is assuming a position and is asking Mr. Norrie for his opinion. Mr. Myers : May I point out, sir, that my learned friend's own witness characterized anything of this sort as immoral.
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Mr. Gresson : " Dishonourable " is a nasty word to use. Mr. Myers : Mr. Norrie claims the right to sell at any price he likes. Mr. Collins : As a matter of fact, he does not do it. Mr. Myers :He claims the right. However, I will use the word " immoral." Mr. Gresson : I do not mind the use of the word " immoral." 113. Mr. Myers (to witness).] I will put it in this way : Do you consider that that would be a proper thing to do ?—lt is not in my interests to do so. 114. But you regard it as improper on the part of anybody else ?—That is so. The Committee adjourned at 5 p.m. until 10.30 a.m. next day.
Fourth Day : Friday, 25th February, 1927. The Committee met at 10.30 a.m. Edward Smith sworn and examined. (No. 9.) 1. Mr. Young.'] What is your occupation ? —I am a retail chemist, carrying on business in Auckland. 2. How long have you been in business on your own account ? —About eighteen years. 3. I think you have made application to join the P.A.T.A. ? —Yes. 4. What reasons prompted you to make application ?—First of all, there was the reason of selfpreservation : I found that part of my business, in common with that of others in my profession, was being chopped about and spoilt by the tactics of some of the cutters. Secondly, I had seen the results of the operation of the association in Australia, and they appeared to be equitable to all parties. Thirdly, it seemed to me that our own system of stabilizing wages in New Zealand had been so beneficial that a system of stabilizing business would be likewise beneficial. 5. Can it be said that chemists do the pioneering-work in putting goods on the market ? —Yes, absolutely. 6. Can you give us an example ?—Yes, take, for instance, tooth-paste. In the case of a new line the public are prepared to take advice from a doctor, a druggist, or a chemist in regard to the quality of tooth-paste, and in regard to the advisability of using it. They are not prepared to take advice from any other kind of trader, so the vendor of a new tooth-paste naturally seeks the co-opera-tion of the chemist in putting that article on the market. Just as soon as it is well established and the public are asking for it, then it has been taken by the cutter and made a catch line in his particular business. 7. Notwithstanding that, I take it that for a number of years you have always stocked toothpaste ? —Yes. 8. Supposing some ten years ago a new tooth-paste came along, what factors would you take into consideration before stocking it ?—Naturally, the factor which would enter into consideration first would be the price, and then the quality. 9. And what comparison, if any, would you make with your existing stock —We should want to know, first of all, that we had just as good an article. It would have to be as good an article at a better price, or a better article at as good a price as our existing stocks. 10. What do you mean by a better price \—At a price which would show a better profit to ourselves. 11. What sort of pioneering-work do you do with a new line which comes to you ? —ln the past we have been distributing samples if the manufacturer gave them to us, but we do not do that now. We make window displays free of charge to the proprietor of the article and generally help to put the line on the market. .12. Why do not you do that now ?—We found that it did nor pay us. We put in a tremendous lot of work, and as soon as the article is firmly established we find that the price is cut about so much that it is no longer profitable to handle it, and our work has gone for nothing. 13. Do you know of any line that you have not pushed that has been cut ? —I cannot think of one occasion where a line which has not been pushed has been cut. 14. Can you afford to sell a well-known article at a cut price ? —No. 15. Why not? —The cost of'running the business has to be taken into consideration, and the price of some articles are cut to such a margin that they will not bear their share of the overhead charges. 16. Suppose you deal with an article which is heavily cut, and you charge the full price for it, does that affect you in any way ? —Certainly ; the public soon get you " set " as a high-price man and avoid you. 17. If all proprietary articles—that is, all proprietary patent medicines and toilet preparations — were cut, how would that affect your business ? —lt would simply mean that so far as we were concerned we should have to rely wholly and solely on the professional side of our business ; I mean the dispensing side. 18. Does the dispensing side of your business pay you handsomely ?—Yes, proportionately it does. It is much the most profitable part of the business. 19. Will your dispensary support your business ? —No,
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20. If the proprietary articles were eliminated from your business how would that affect your business ?—Prices would have to be materially increased. 21. Does dispensing represent a large proportion of your business ?—That varies in different places. In some places the dispensing might represent the major portion of the business, but not in my case. 22. Is the turnover in dispensing large ?—lt is a varying one. If there is a lot of sickness or an epidemic, then the turnover is large. Ordinarily speaking, it is only medium. 23. Can you give us the ratio for twelve months of the proportion of dispensing business compared with that in proprietary lines ? —No, I could not give that offhand, but I could send the information to the Committee. The Chairman : We will have an inquiry made through our local office. Witness : I will undertake to forward the information. • 24. Mr. Reardon.\ I suppose the friendly societies would do a greater proportion of dispensing business than you would, for instance ? —Yes, but that a friendly society has its business guaranteed. They can go ahead with their dispensing at a certain rate, and if they do not make up the necessary amount of money are entitled to levy. 25. But the proportion of dispensing business done by the societies would be higher than yours ? —Oh, yes, the proportion done by them would be erormously ahead of ours. The two could not be compared. Mr. Myers : I suppose the friendly societies do not aim at making a profit ? Mr. Reardon : I think so long as they make ends meet they are satifised. Of course, the average chemist would depend mostly on proprietary lines. Witness : Some dispensers do not bother about proprietary lines. 26. Mr. Young.\ Do you know whether, as a rule, friendly societies make a levy ?—They certainly make a levy on each of the lodges to conduct the society, according to their membership, and if the dispensary makes a loss I know they have the right to make a levy, and 1 know of one occasion where they suffered and they had to make one. 27. I think you have an all-night dispensary in Auckland ? —Yes. 28. Does that do business other than dispensing ? —Practically nothing. They stock Antiphlogestine and certain well-known remedies which doctors may order, but apart from such lines they do no other business than dispensing. 29. Have they any rivals in business ?—None whatever. 30. It is a concern run by chemists for the convenience of the public ? —Yes. 31. Can you give an indication of the charges made by that dispensary compared with those charged by the ordinary dispensing chemist ? —Yes ; the dispensary charges are in all cases Is. extra. 32. Does that extra shilling enable the all-night dispensary to show a large profit ? —No ; it has never shown a large profit. The largest it ever had in one year was £100. To the best of my recollection, it was in the neighbourhood of £80. 33. What sort of a turnover does the all-night dispenary have in comparison with your own ? — The all-night dispensary would do slightly more than I do in dispensing. 34. What was their turnover, for example, last year ? —I am speaking from memory. I think the average turnover for last year was about [Figures deleted] a month. I would not be quite sure about it, but I am pretty certain it was under [ Figures deleted,] for the year. 35. The Chairman.'] And yet their dispensing business is larger than yours ? —Yes. 36. Mr. Reardon.] How many chemists are interested in the all-night dispensary ?—Practically all of them are interested. 37. Mr. Young.] How do the wages you have to pay a dispenser compare with the wages paid to a grocer's assistant ? —I think one of the witnesses said yesterday he paid his assistant £4 7s. 6d. a week. The award wage for a chemist just out of his apprenticeship—an unqualified assistant without examination —is £4 7s. 6d. a week. That is the minimum, and there are few men employed receiving only that, because if an assistant is not getting more than that he would not be worth much. 38. That is for an unqualified man ? —Yes. 39. Can you say what a qualified man is worth ?—I think the minimum for a qualified man is £5 12s. 6d. It is certainly over £5. 40. The Chairman.] What do you pay your man ?—I have not a qualified man. I have a senior apprentice at the present time and pay him £1 12s. 6d., and then I engage extra assistants at certain busy periods, for which I pay 3s. an hour. 41. Mr. Young.] Can you give us the name of some tooth-paste which you stock at present ? — Yes, there is Kolynos, Colgate's, Euthymol, Pyrex, Royle's, Nyal's, and Pepsodent. 42. If a person, comes into your shop and asks for a tube of tooth-paste what would you give him ?—Either Royle's, Nyal's, or Pyrex. 43. What are the prices of those brands ? —Round about 12s. 6d. a dozen wholesale, and they retail at Is. 6d. per tube. 44. Why do you not give them either Kolynos or Colgate's ? —The price of Kolynos or Colgate's varies all over the town, and will continue to vary unless something is done to stop the variation. I mean that the retail prices of Kolynos and Colgate's are cut. 45. Is there any Other reason why you would not offer that person Kolynos or Colgate's ?—No, there is no other reason than that. 46. Do you consider [Name deleted] is as good as the others ? —Well, at the present time I do not consider [Name deleted] is quite as good as [Name deleted.]
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47. Is it as well advertised ? —Far better. 48. At what price do you sell Kolynos, when you do sell it ?—ls. 6d. a tube. 49. And under what circumstances do you sell it ? —lf we are asked for it. We never interfere with a person's choice. If we are asked for our advice we give it, otherwise we give people what they ask for. 50. Do you display Kolynos and Colgate's ?—No. 51. Why not ? —lf you display an article it is necessary to put your price on it, and you will find that the " cut-throat " man puts it in his window at Id. or 2d. less, in order to attract people to his shop. 52. What do you say your overhead charges are ?—I have never worked them out exactly, but we reckon in our association in Auckland that they are round about 25 per cent. That is on the whole turnover. Twenty-five per cent, of the turnover is absorbed in charges—that is, for a retail chemist and druggist's business. 53. Does that include payment of salary to yourself ? —Oh, no. 54. The Chairman.] Do you pay yourself wages, or profit ? —Profit, usually. 55. Mr. Young.] Is the cutting going on extensively a.t present in Auckland ?—There is no cutting going on by any large chain of stores, but there is continually arising cases of small fancygoods dealers cutting prices. That prevailed for a little while until they fizzled out. That is always going on, but we have not experienced it in any chain of stores. 56. But you have had experience of serious cutting in Auckland ?—Yes. Wheeler was the last man who cut things about. He had a chain of stores, of course. 57. Do you know of any limited company which has done cutting lately ?—Judging bv the papers the Farmers' Union Trading Company are doing it at the present time. 58. You know what happened to Wheeler, of course ? —Yes. 59. And why did you say that you did not display these articles and push them in the window ; what was the reason ?—The reason is that these articles are being cut from time to time, and we know that as soon as an article becomes well known it will certainly be cut by any chain of stores which starts a cutting campaign, and we prefer to push the articles which are not likely to be cut. 60. And you push an article because it will show you a margin of profit ? —Exactly. 61. If two articles of similar quality show different rates of profit, which do you push ?—Naturally, the one which will show the better profit. 62. Mr. Gresson.\ Do all those lines of tooth-paste to which you have referred sell at Is. 6d. ? — Yes. There are two sizes in Pepsodent; with that exception they all sell at Is. 6d. 63. With the exception of Kolynos, I think you can buy all those brands at 12s. 6d., and Kolynos at 14-s. 6d. ?—Pyrex, Royle's and Nyal's are 12s. 6d., but the others lam not certain of. I think Colgate's is the same as Kolynos. 64. But on the three lines you have mentioned you would make a higher profit than on Kolynos ? -Yes. 65. And naturally you would sell those in preference to Kolynos ? —Yes. 66. We have been told by some witnesses that price-cutting has been more severe during the last five or six years : is that your experience ?—Yes, that is so. 67. Well, in spite of that you still stock the cut lines, like Kolynos ? —Yes, we must do that. We have people coming in who perhaps do not want to buy the cut lines only: they may be making considerable purchases of other lines, and it is policy to be able to give them Kolynos, even without profit. 68. Would it be fair to say that, in addition to the factor of price-cutting reducing the sales of Kolynos, their sales are also affected by the fact that there is a cheaper p.rticle on the market competing with Kolynos ?—No, I would not say that. 69. But you yourself have said so. You have said that you naturally push the article that you buy cheaper than Kolynos ?—Yes, because Kolynos is cut. 70. But if it is a fact that you push the article which is cheaper than Kolynos, the sale of Kolynos will go down ?—Yes, because it is cut. 71. You have already told me that you, as a chemist, will sell the article on which you make the most profit ?—Yes. 72. Therefore you will sell those three other tooth-pastes in preference to Kolynos ? —No ; if the price of Kolynos had been maintained, we consider that we should not have had to stock those other three. 73. When did Kolynas come down to 14s. 6d. ? —I could not say. 74. But it has been 14s. for the last two or three years ?—Yes. 75. If it has been 14s. for the last two or three years, and if those others have been 12s. 6d., you will naturally sell the cheaper paste ? —Yes. 76. With reference to the all-night dispensary, do many chemists in Auckland reside on their premises ?—Practically none. 77. So there is really no outside trade competing with that of the all-night dispensary ?-—No. The chemists in Auckland are loyal to the dispensary. 78. I did not quite understand your statement about the pioneering done by the chemist. When you sell a new article on the market and push it you make your profit on each package you sell ?—Yes. 79. Well, why do you complain ?—For the simple reason that when we have done the pioneeringwork there is a certain demand for it—it may not be big. Then the prices are cut, and we find Durselves with duplication of stocks, our work has been done for nothing, and our money is lying idle simply because these lines are cut.
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80. Bnt that would be due to your bad buying in stocking so many lines ? —No. 81. Why buy so much ? —We have to buy many varieties. 82. But you are assuming that fourteen or fifteen lines would be cut at the same time ?—No, some of them are being cut; but we are continually getting other lines coming nicely along, and then they start cutting those. 83. Actually, then, you have made your profit on the goods you have sold, and what you complain of is not being allowed to go on making further profits ? —Yes. 84. Mr. Kennedy.'] You say you want to see prices stabilized?— Yes. 85. And I suppose stabilized prices will ensure to the chemist his ratio of profit ? —N®, to the manufacturer. 86. Well, the manufacturer will fix his price, but it is your desire that his price shall show a profit to the chemist ?—Naturally. 87. And you recognize that a price which is to show a profit to a chemist may be a much higher jwice than would show an adequate profit to a grocer ?—No, I am not prepared to admit that. We are not asking for anything out of the ordinary in the way of profits. 88. A competitive price that you are complaining of is the competitive price of a man who is not a chemist ? —Yes. 89. Mr. O'Leary.] It is a very general belief that such things as shaving-soap, shaving-cream, tooth-paste, and the like, can be bought cheaper at fancy-goods shops—like Hart's, say—than at the chemist's. Do you agree that that is so ? —Yes, I agree that that is so. Those shops make a catch line of them to draw people to their premises and get them inside, and there are any number of lines inside showing tremendous profits over and above anything of that kind. 90. Taking the case of a man who only goes to the fancy-goods shop for his shaving-cream, or soap, or tooth-paste, or anything else, he is benefiting by going there instead of to a chemist ? — Provided he never buys anything else, yes. 91. But for those lines and nothing else ? —He gains, certainly. 92. Mr. Myers.] I understood you to say to Mr. Gresson that cutting brings about a reduced demand ?—Yes. 93. I would like you to explain the reason for that ? —Take a line that becomes popular and is returning a reasonable margin of profit, which will enable a distributor to pay 20s. in the pound, and then some trader or number of traders start to cut that line to such an extent that it does not pay its way in the business : The retailer naturally loses interest in it. He sells it if he is obliged to do so, but he does not push it. Of course, the manufacturer may continue with a course of advertising and keep the demand going, but the line ultimately suffers. 94. You say that the non-cutting trader will not push, the line, but rather discourage it ?—Yes, I suppose he does. 95. So that whereas it was suggested yesterday by a witness that in theory, at all events, cutting brings about an increased demand, you say that practically the contrary is the case ? —Yes. 96. From what you said before, that Kolynos had acquired a big demand, what does that mean in regard to a proprietary article or patent medicine ? —That the article practically sells itself. 97. When it comes to another line, such as Pvrex, does that sell itself, or do you have to push it ? —We have to push it all the time, because no money is spent by Pyrex. 98. That is what you do ?—Yes, because the price of that is fixed. 99. You said that, naturally, where you have two tooth-pastes, and one shows a bigger profit than the other, you try to sell that which gives you the bigger profit. Is that so invariably—take for instance, the case of Kolynos, which is selling at a fixed price and giving you no adequate profit, as against a less-known line which might show you a better profit ? —We would rather sell the Kolynos, because we can make the money quicker, and let our customer get away, and when we are busy that is what we want to do. 100. That is what you do ? —Yes. 101. So that it does not invariably follow that you sell an article which gives you the higher rate of profit ? —No. If the price of Kolynos was fixed at Is. 6d., and it cost us 145., and some one came along with an identical article at Is., the average chemist would not bother with it. He would rather sell the Kolynos easily than look for an extra 6d. at the expense of a lot of bother and trouble. 102. Mr. Hayward.] There was a report, Mr. Smith, on the P.A.T.A. by the Registrar of the Department of Labour in Ottawa, Canada. He deals with marketing methods. You are an experienced retailer, and you may be able to express an opinion on this. The report states : " Marketing methods have been continually improved through the competitive attempts on the part of manufacturers and distributors to find better methods. Marketing channels and methods are not cut and dried. There is continuous experimentation. In some cases trade associations have attempted to block changes in selling methods. Manufacturers have been boycotted by jobbers, for example, because they gave attempted direct sale to retailers. This is not right. Progress in marketing methods can be made only under a regime of free competition whereby each producer or middleman is free to try new methods. Artificial restraints are to be condemned." Do you think that the distribution of goods under such a method as is practised under the operations of the P.A.T.A. in overseas countries is a restraint in the marketing of those goods ? —No, I do not think so. 103. You do not think it restrains the sale, or has a general trend in that direction ? —No ; otherwise we would not have the support of the manufacturers, who have had experience of the working of the PA.T.A. in England, Canada, and Australia. If they thought it interfered with the marketing of their goods in any way they would not be anxious to join up.
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104. Do you think that the observance of the fixed selling-price of a manufacturer's goods lulls that manufacturer into avoiding, or disregarding, the necessity for instituting improved methods of manufacture ?—No. 105. You think competition from other manufacturers stimulates him in that direction ?—Yes; the competition is still there. Other manufacturers are trying to get a share of the trade, too. 106. Mr. Montgomery.] How does the pressure of competition among your own people —that is, among other chemists —affect you ? .Do you consider there are too many chemists in business in New Zealand ?—No, Ido not think there are too many in New Zealand. They might perhaps with advantage be more widely distributed. There is a tendency perhaps to congregate in the cities and to neglect the country places. 107. As to the question of dispensing and selling of proprietary medicines, are there any other avenues of support to dispensing than the sale of proprietary lines I—No, 1 do not think any could be named. 108. I would suggest to you the keeping of optical goods or the testing of eyesight —that a chemist would be well suited for that, and, say, photographic goods, and other avenues of enterprise which might enable him to practically do without the sale of proprietary lines ? —But why should the chemist give up the sale of those lines ? 109. lam suggesting that there are other avenues of support. Ido not suggest that you should give up anything ?—Some chemists do practice as opticians, but the number of opticians necessary to do the optical work is not very great. If every chemist practised optics lam afraid there would be be nothing in it for anybody. Then, with reference to developing and printing photographs, a chemist must be ready to dispense medicine for anybody who comes into his shop, or to attend to any one who may have been injured as the result of an accident. He could hardly be in the dark room and attend to somebody who may have met with an accident. 110. You are replying on behalf of the chemist who is single-handed ? —A great number of them are single-handed. And, if not single-handed, a chemist may have as an assistant a young man with, say, two years' experience. In the event of a person meeting with an accident you could hardly hand him over to such an assistant. At least, it would be policy to go oneself. 111. I suggest that the photographic side of the business could be conducted during the slack time ? —But we can never tell when the slack time will come. Often we are slack in the morning and very busy in the afternoon. 112. It would average up ?—I do not think it would in practice. We never know when a slack or busy time will come on us. 113. The Chairman.] How long have you been in business ? —Eighteen years. 114. Has your business been progressive ? —Yes. 115. Grown from year to year, and with the growth of the city ?—Yes. 116. And in recent years has business been fairly prosperous with you ? —Taking into consideration we have had some lean years, yes. 117. In handling proprietary lines, you told. Mr. Youug that you considered price before quality ? —No ; 1 wish to qualify that. As a matter of fact, when a question of that sort is put one is taken unawares. We mostly handle lines introduced to us by the recognized wholesale druggists. They do not send you a line which is not of good quality. We quickly get to know what the quality is likely to be. For instance, if Kempthorne Prosser's or Sharland's traveller introduces and recommends a line we do not question the quality, because we know their reputation for handling good lines. Naturally, we look at the line, but the question of quality is not the main outstanding feature. We are not taken in by those people. 118. Is yours a credit business % —No ; strictly cash. 119. If the overhead expenses of a grocer, or a retail draper, or even of a cut-throat store, are, say, but 15 per cent, as against yours of 25 per cent., do you not think those businesses could afford to sell cheaper than you I—l do not think the overhead in a drapery business is as low as 15 per cent. 120. lam putting a supposititious case. Take the grocers : their overhead is lower than yours in this class of trade, and they could afford to sell proprietary lines cheaper than you ? —Experience has not shown that. 121. Your opinion is that their cost of running is much the same as yours ? —Yes, if you take into consideration the number of grocers in business. For, say, twenty years we have found that their prices for proprietary articles are very much the same as ours. The firm of [Name deleted] in the early days of their business got the name of being cutters, and I think they deserved it. They still exist, but they are not now cutting, and, with few exceptions, we are quite prepared to sell at [Name deleted] price-list. But many others have started within the last twenty years, and they have declared their ability to run at a lower overhead than ours, but we do not admit that. 122. Do you have period sales to clear out dead stock ?—No. 123. Have you much dead stock ? —No ; but it is largely a matter of opinion as to what is dead stock. Some stock might be considered dead to-day, but it might be very much alive to-morrow. 124. You prefer to take the risk ? —Yes. 125. You have fixed minimum prices for dispensing ? —Yes. 126. That is, in consonance with the resolutions of the Pharmaceutical Society ? —rYes. At the annual conference each year the pricing committee goes into the question of dispensing prices, and recommends any alterations or adjustments it considers necessary, and those are adopted by the conference. 127. And there is generally a loyal observance ? —Yes, speaking generally. Provision is made for any cases of hardship which might arise. Provision is made for their cases according to merit. 128. And you will supply to the Committee a statement showing the percentage of business done by you in proprietary lines, such as those controlled by the association in New Zealand, and the percentage of trade done for the last twelve months in dispensing ?—Yes.
62
F. R. MARRIOTT.]
H. —44a.
Frederick Robert Marriott sworn and examined. (No. 10.) 1. Mr. Myers.] What is your occupation ? —I am New Zealand manager for A. Bourjois et Cie, of Wellington. They are a French firm, and ours is a New Zealand company. 2. The articles you sell are manufactured in France, but there is a New Zealand company which markets them in this Dominion % —Yes. 3. 1 take it that the New Zealand company is the sole representative and distributor of the goods made by Bourjois ? —Yes. 4. It is a well-known perfumery concern in France ?—That is so. 5. Have their goods been long in New Zealand % —Some of them have been here probably, for twenty years. Most of them have been here for five years and under. 6. How long have you been managing the business in New Zealand ? —Nearly five years. 7. In the first year of your operations what was your total turnover ?—Very small; I think the first year it was about [Figures deleted.] 8. It is now a great deal more ? —Yes, it is now about [Figures deleted] a month. 9. How has that been built up ?—Partly by our own efforts ; to a very great extent by supplying expensive show-cards, and giving the chemists every opportunity to display and sell our goods, and recently by expensive advertising. 10. So that you have, one way or another, been spending considerable sums of money in establishing your goods on the market ? —Yes. 11. During the last year or two what do you estimate your advertising expenses have been ?— Last year we spent slightly over £2,000. This year we are spending over £3,000. That is in newspaper advertising only. Of course, we give away a considerable amount in show-cards, and samples, and perfume cards. Then, we brought out a little perfume calendar. We gave away £150 worth of those last year. That is not included in the £3,000 I have mentioned, which only includes newspaper advertising. 12. Have your goods been made the subject of cutting operations ? —-Recently they have. 13. What do you mean by "recently"? —I have had increasing trouble during the last two years. L 4. But for how long past has it become intense ?—During the last six months. 15. Apparently the cutters have left your goods alone while you have been building up your trade, and then when you have built it up and established a reputation on the market, they have started on your goods ?—Yes ; they had no reason to cut them until they were established. 16. Why ? —No one was interested in them up to that time. 17. And when you establish the goods, and gain the interest of the public, the cutters get to work on them ?' —Yes, they look for cheap advertising. 18. Have you endeavoured to stop that ?—I have endeavoured to stop it by persuasion. In fact, that is practically the only weapon I have had. 19. I think you have joined the P.A.T.A. ? —Yes, with the object of getting machinery which will stop it for me. 20. We have heard something of the altruism of some of the cutting traders. Can you tell us of any cutting trader—you need not mention names—threathening you in regard to the cutting of your goods ? —Yes. To my certain knowledge I have experienced three cases where I have had to interview a cutter on account of his cutting, and he has insisted that unless I put him on the very best terms —that is, the terms at which we would sell to wholesale houses such as Kempthorne Prossers and Sharlands- he would continue to cut. There has been no correspondence on this subject; it was all by word of mouth. I hand in the name of the person I refer to. [Name handed in to Chairman of Committee.] 21. What terms do you refer to ? —2O per cent, off list. 22. He threathened to continue his cutting unless he received 20 per cent, off list prices ? —Yes. 23. That being the discount which you allow to wholesalers ? —Yes. 24. What is the discount allowed to chemists and other retailers ?—To chemists who buy small parcels the prices are net; for purchasers of over £10, a discount of 5 per cent. ; and for purchases of £25 or over, 10 per cent. 25. Had these people already been cutting your prices ?—Yes. 26. Of course, you do not wish your prices cut, and you had no protection, such as the P.A.T.A. to fight for you. What did you do ? —I had to submit to it and make a provision that in all cases a £50 parcel should be taken. 27. And what was the result ? —The result was that they have not in one instance cut. 28. But instead of getting the 10 per cent, as they were getting before, and cutting your prices so that they would get no profit, or very little, and preventing any one else from getting a profit, they are quite content to stop cutting so long as you give them 20 per cent. ; then they will sell at list prices ?—Yes, that is so. 29. And you say that in the absence of some such organization as the P.A.T.A. you have to submit ? —Yes. 30. I think it is part of your policy to see that your goods are sold to the public at not too high a price ?—Yes, we insist on it. 31. I think you could give us an illustration of that ? —Yes. We put up a small concrete powder, to be retailed at Is. That costs a chemist who buys on the worst terms Bs. 6d. a dozen. The article is supposed to be one of particularly good quality. It was introduced to stop the infringement of our registered name. We had had a lot of trouble in England and Australia in fighting firms who were imitating our line. This cost us a lot of money, and we considered it was cheaper to introduce a new competitive line. On this line we make practically no profit. By concrete powder I mean
63
11—44 A.
[F. R. MARRIOTT.
a face-powder compressed into a compact form. Of course, we had in view the object of advertising also. This line was introduced throughout New Zealand. On my visit to one large town I found that it was universally displayed in the windows and marked Is. 3d. I insisted on the price being reduced to Is., which was the proper price. 32. That was a special line, of course ; but you say it is in accordance with your general policy that goods are sold to the public at reasonable prices ? —Yes, and it is also the policy of the P.A.T.A. 33. I think you aim at a certain maximum profit for the retailer ? —Yes. That maximum is 33J per cent, on turnover for the retailer. 34. Do any of your lines show more than 33J per cent. ?—There may be one or two isolated cases where an expensive perfume might show more than that, but only one or two. Most of them show 33 J, and some of the quick-sellers show less. 35. I think you are a member of the executive of the P.A.T.A. ? —Yes. 36. We have been told that applications for membership have not been officially examined ? — That is so. 37. But I think you have seen a number of them ? —No, I have not seen any. 38. Take, for instance, a line like . Does that show a greater or less profit that you think should be asked from the public ?—I think it shows a greater profit than should be asked by storekeepers. 39. That being so, what has been your own attitude so far as putting that line on the P.A.T.A. list is concerned ? —As a matter of fact, I brought this matter up at a meeting of the executive and pointed out the necessity for extreme caution in considering applications, and I mentioned this line as being one which I should be against registering. , 40. Unless, of course, prices were fixed at a reasonable level ?—• 41. Mr. Oresson.] Dealing with this article of you are one of the members of the executive ?—Yes. 42. And, so far as you are concerned, if the retail price in your view be excessive you think proprietary articles should not be registered with the P.A.T.A. ? —Yes. 43. How do you reconcile that with Mr. de Fenq's statement that the executive has no power to refuse application to have an article registered ? Mr. Myers : What Mr. de Fenq said was that they had no jurisdiction over the prices which were fixed by the manufacturer, but that if they thought the prices asked showed too high a margin of profit they would refuse to put it on the list. Witness : At any rate, whether he said it or not, that would be the case. 44. Mr. Gresson.] Do I understand that you, as a member of the executive, reserve to the executive the power to refuse acceptance of the nomination of proprietary articles if the retail price is in your opinion excessive I—Yes,1 —Yes, if they refuse to amend the price to conform with our ideas. 45. Do you at the same time claim the right to decide whether the cost at which the manufacturer sells to the retailer is excessive ? —We have no means of finding out whether it is excessive or not. 46. Then, if you do not know the real cost to the manufacturer, how will you form any opinion as to whether the retail price to the public is a fair one ?—The public will very soon decide that. 47. Rut I put the question again to you : If you do not know the cost of the manufactured article, how will you be able to form an opinion as to whether the retail price to the public is a fair one ?- — We will not endeavour to find out. That is not our office. 48. Your position is that you police the prices between the wholesaler and the retailer ? —Yes. 49. But you cannot form any judgment as to the basis of the manufacturing cost ?—No. 50. Presumably you are not carrying on in New Zealand on a basis of profit ? —Oh, yes. 51. You say that in respect of your turnover you are spending approximately £2,000 in advertising. That is 8| per cent, on turnover ? —Yes. 52. If you can spend 8J per cent, on turnover and still make a profit it would seem to show that your profits are large. Is the £2,000 spent by your company, or by the manufacturing company ? —It is spent by the manufacturing company. 53. Has the £2,000 spent by the manufacturer no relation to your own turnover ?■ —Yes ; we pay it out of our profits or losses here. 54. If you pay it out of your profits and losses, that surely works out at 8§ per cent, on turnover ? —Yes. 55. If you can spend 8t per cent, on turnover in advertising, in addition to incurring your ordinary overhead charges, the rate of profit must be high ? —These things always adjust themselves. When we get a sufficient turnover we will probably be able to pass on the benefit to the public. 56. Mr. Kennedy.'] You said that the profit on was too high for a storekeeper ?—Yes. 57. I suppose you do not contend it is too high for a chemist ? —The chemists do not sell — It is a store line. 58. So that if the price of that article was in any way reduced to the consumer there would be no ground for complaint on the part of the chemist ?—No. 59. And I suppose that would apply to a very large number of articles ? —I do not know. I am only talking of . 60. But lam asking you about the others ?—I cannot call any to mind. That is the only one I have in mind. 61. You say you have a certain article which you put on the market to sell retail at Is., and you complain of its having been sold at Is. 3d. ? —Yes. 62. Were they chemists who were selling it at Is. 3d. ?—Yes, generally.
64
F. R. MARRIOTT.]
H.—44A.
63. So the complaint is that chemists were selling your line at an excessive price ? —Largely, yes. Not many people outside chemists stock our goods. Those who were stocking it were selling it at Is. 3d. ; every one was selling it at Is. 3d. 64. You mentioned a certain firm, or, rather, you handed in certain names. Who was the firm doing the cutting: was it [Name deleted,] ? —lt was not actually [Name deleted | head office ; it was done by one of their branches. 65. Are you aware that [Name deleted] have no branches ? —No, I am not aware of that. 66. Would you tell us in what town that was done ?—That was done in Wanganui. 67. I point out to you in this room the gentlemen who are interested in [Name deleted] : do you know them ? —Yes, I do know them. 68. Do you suggest it was either of these gentlemen ?—No, it was not either of them. The man's name was [Name deleted], 69. Do you admit that the firm I represent was not affected ?—No ; they were affected. Mr. Kennedy : Of course, I did not happen to be present when the witness handed in the names, so that I am not clear what happened. The Chairman : Three names were given confidentially to the Committee by Mr, Marriott. The witness said they were the names of three persons who demanded that they should receive the same discount on their purchases as were allowed to wholesalers like Kempthorne Prosser's and Sharland's, and who stated that unless they did receive similar discounts they would cut the price of the goods, and conditional on their receiving those discounts they would observe the prices fixed by the manufacturers of the line in question. 70. Mr. Kennedy (to witness).] Had you granted such terms to any one else in New Zealand ?— Yes. 71. That is, to people other than Kempthorne Prosser and Sharland's ?—Oh, yes. 72. So that the men you refer to were really only bargaining for what you had previously allowed to others ?—That is so. 73. Had you made such an arrangement with any one else in the City of Wellington ?—Yes. 74. I suppose that that fact became known ? —There was no reason for it to become known. 75. But, if it had become known, there was nothing terrible in their asking you to extend to them the same benefits ? —There was nothing to prevent their asking for it. 76. They are large buyers, are they not ? —Yes. 77. None bigger, T suppose, in the town ? —Yes. 78. Not many ? —There are bigger ones. 79. Mr. O'Leary.] Have you any preference in regard to the class of shop through which you wish to retail your goods V —Yes. 80. What preference ? —Shops which will observe our prices. 81. Ido not mean that; I mean the class of shop ?—Yes ; we always endeavour to have our goods sold in recognized toilet-shops, such as chemists, and drapers who have a special toilet department, and fancy-goods shops with toilet departments. 82. But you want a special toilet department ?—We prefer them to handle our goods. 83. Have you any preference between them and a chemist ? —Our first preference is towards chemists. 84. Mr. Myers.] You have said that you have no method of ascertaining whether or not the price charged in the first i istarxe by the manufacturer is reasonable or not ? —That is so. 85. When a manufacturer makes application to be registered are you able to see what is the margin of profit respectively for the wholesaler and retailer ? —Yes, we are able to decide whether they are fair and reasonable. 86. And it is when both are, or either is, in your opinion, too high that you would object ?—Of course, lam speaking personally. I should say that if either price were in my estimation wrong I would object, unless the manufacturer reduced his prices to what I considered fair and reasonable. 87. The articles you are interested in are perfumery lines ? —Yes, toilet articles. 88. You mention the name of [Name deleted]. Is lie in the employ of [Name deleted| ?—1 have been given to understand so. 89. They have a branch in Wanganui ?- 1 have treated it as a branch. 90. And you have sold to it as a branch of [Name deleted] ?—Certainly. 91. You told Mr. Kennedy you had granted similar terms —that is, 20 per cent, off list—to others than | Name deleted] ?—Yes. 92. Did you do that of your own volition, or under a similar threat ?—The others were made on my own volition. They were recognized by the wholesale trade as being entitled to it. 93. The Wellington name on the list you handed in is one of them ? —Yes. 94. The Chairman.] You have nothing to complain about, then ? —No. 95. Mr. Myers.] You were not in a position to stop it ? —No. 96. Would you have given those terms to anybody but for the threat that unless you did the price would be cut ? —Certainly not. 97. Mr. Hayward.] You have had overseas experience in these lines ? —No. 98. You have ha I no experience in handling these lines where the P.A.T.A. has been in operation ? —No. 99. Mr. Montgomery.] Have you any experience of New South Wales methods of fixing prices ? — No, none whatever. 100. Mr. Reardon.] I suppose you would not claim that, let us say, your standard of morality is higher in New Zealand than in New South Wales ?—I have a lot of respect for the stand a r.. of morality in New Zealand. Ido not know anything about New South Wales.
<) —H. 44A.
65
H.—44A.
[F. R. MARRIOTT.
101. If you believe that it is in your power to limit the profits of the man who is between the manufacturer and the retailer,-it would also be within your power to increase his profits '? —I do not think we consider that. We would only be interested in whether he was getting too much. 102. Not too little ? —Certainly not. 103. The Chairman.] Your firm has a price-fixation scheme from wholesaler to retailer ?—Yes, right from the wholesaler to the consumer. 104. In dealing with firms outside chemists, why have you not been able to ensure your prices being observed ?—ln common with other articles, they are using them as an advertisement. 105. You mentioned, I think, that what steps you have taken have been persuasive ? —Yes. 106. You have not threatened to withhold supplies ?—-No. They would laugh at me. It cannot be done. It cannot be done where you are dealing with hundreds of lines, as we are doing. With one line it would be possible. 107. Were you present yesterday when the representative of Palmolive soap was present ?—Yes. 108. Were you present when he claimed that 90 per cent, of his scheme was efficient ? —Yes. 109. Threatening to withhold supplies would not be effective ? —lt would not be possible. 110. With reference to the names you have submitted to the Committee, were they approached by travellers, or by yourself ? —One by myself, and another by a traveller. My purpose in seeing him was to get him to come into line, and not to cut prices—to ask them to refrain from cutting and to keep to standard prices. 111. You were anxious to continue trade with him ? —Yes, but we wanted them to observe the price. 112. Had they at this time been buying direct from you, or from recognized wholesale chemists ? —I think most of their supplies were bought from recognized wholesale chemists, but I imagine that one or two transactions were made direct with myself. 113. Has your trade steadily increased in New Zealand during the last five years ? —Yes. 114. Increased as well as you expected ?—Yes, quite as well. Jl5. You are quite satisfied with the business you are doing ? —Yes. 116. Do you know anything about the trading of your firm in other countries ? —Yes. 117. Has it increased in the United States ?—I do not think we handle the same lines there as we do here. 118. But it is a valuable and increasing trade ? —Yes. Right throughout the world, in South Africa, England, and Australia, it is showing enormous increases. 119. In all the States of Australia ? —Yes. 120. Despite the fact that in some States there is a P.A.T.A. and in others there is not ? —I do not know much about Australia. I know there is an association there, but whether it operates or not I cannot say. 121. But, whether there is a P.A.T.A. or not, your export trade generally throughout the world has shown very satisfactory increases ? —Yes. I would like to qualify that by saying that these lines that we handle come into favour very rapidly. In,fact, some of our lines which are having a good sale at present have not been on the market more than a, few months. Some of them are quite new lines, and have not reached the stage yet where the demand is so intense that it is worth while pricecutting as a general principle. We have one or two lines which have been substituted, as a matter of fact, for other lines which have been cut. It has helped us in some instances to get our lines on the market, the fact of others being cut. I would refer to Johnson's baby-powder. Dozens of times our powder is being substituted for Johnson's, and the vendor goes out of his way to recommend us because our price has been maintained. That, of course, is not fair to Johnson's or anybody else. Ours will get it next. These cutters sell below cost, at cost, and without a working margin of profit. 122. Have your goods ever been sold below cost ? —No. If we were to go to some of these people who were selling at ridiculous prices and ask them to push our goods at the same price they would not consider it for a moment. And yet when we have spent thousands of pounds in advertising those lines and in establishing them, and done the best we can to give the public value, the cutters will get to work with an ulterior motive and spoil our whole trade to advertise other lines on which they can make enormous profits while they are cutting ours. Mr. Myers : I desire, Mr. Chairman, at this point to put in an invoice from the W. H. Comstock Co., Ltd., which will show the price of Morse's Indian root pills to the wholesaler. It is an invoice from the manufacturers to Messrs. Sharland's. I think the question of the Indian root pills arose earlier, and I would like to put the invoice in for the information of the Committee. James Chaet.es Staunton-Veee Burberv sworn and examined. (No. 11.) I. Mr. Young.'] What is your profession ?—I am a retail chemist, carrying*on business at Hataitai. , 2. Do you consider that a chemist has any public function to perform ?—Yes. We have an onerous calling, subject to many risks. These risks are not understood by the general public. There are occasions where a chemist is subject to claims as a result of a small error. . One case occurred in the South Island, where through the minor mistake of a chemist it cost him £400. That might happen to anybody. 3. That is to say that your calling is one which requires a certain amount of skill ?—Certainly ; we have to be specially trained. 4. Does that training cost you much ?—I would not like to say how much, but there are four years' apprenticeship. A boy must be matriculated before he can start now ; then they have a second examination, the B section ; and finally, the C section. If they get through those stages for less than £600 or £700 they are lucky. 5. And the result of these qualifications is that you become legally recognized as qualified dealers in certain articles ? —Yes, a verv limited number of articles,
66
J. C. S. BURBERY.]
H. —44 A.
6. Such as ? —Dispensing medical prescriptions, as well as a number of poisons which stores do not sell. I should like to mention that one of our chemists was penalized to the extent of £10 for selling Lysol without taking a signature from the buyer. 7. In addition to these things in respect of which you are legal licensees, you carry other things in your stock ? —Yes, we have quite a substantial list of things in the ordinary way of business, but the encroachment of other stores on these things has made it very difficult to carry on. 8. What things do you refer to ? —Toilet preparations, patent medicines, drugs, and the like, and many which should not be sold at other stores. I would instance Baston's Tablets, Three Syrup tablets, and others. 9. Do you regard your dispensing business as sufficient to enable you to carry on ? —No ; it would be impossible to carry on without other lines. 10. Is there a chemist near you ? —Yes, there is one right opposite. 11. Is that a dispensary ? —Yes. 12. Any other chemist in your locality ?--Not within a mile. 13. In regard to proprietary lines, generally speaking, they are in small and compact form ? — Yes. 14. Do you do the pioneering-work in selling those lines ? —Yes, it has always been so. Chemists usually undertake to market the line for the manufacturer. 15. Do you get any assistance from the manufacturer ? —lt is a little different now from what it used to be. Chemists generally charge for making a window display. 16. So far as cutting is concerned, in your experience does the cutter operate on the known or unknown lines ? —On the known lines. 17. Can you give any instances ?— Yes, Vinolia sachets. I sold those during the last twelve months for Is., and I have seen them sold in other stores for 2s. 6d. Vinolia was a well-known line, and was practically run off the market through cutting. • 18. When was it that you saw the high prices ?—Last December twelve months. That was sold at 2s. 6d. 19. What does it cost ?— It costs me 6|d. in Auckland, and I sell it for Is. 20. I think you have prepared a, return showing the proportion of various sundries which you stock ? —-Yes. These are the proportions of individual goods to turnover : Patent medicines, 25 per cent. ; proprietary lines, § per cent. ; photographic goods, 5\ per cent. ; drugs, 12 per cent. ; sundries, 12 per cent. ; combs, § per cent. ; surgical dressings, 1|- per cent. ; dispensing, 21 per cent. ; toilet goods, 10 per cent. ; dyes, 1| per cent. ; brush ware, 3 per cent. ; perfume, £ per cent. 21. Those figures were given by you to me as a result of some information prepared for a conference in Dunedin in 1925 ? —Yes. 22. What do you mean by " sundries " ? —Teats, and odds and ends, not included, in..the others. 23. Did you work out your overhead expenses ? —Yes ; my overhead at that time was about 25 per cent, on cost. 24. Does that include paying wages to yourself ? —No ; the overhead to-day is about 25 per cent, on cost, or 33 per cent, on turnover. « 25. From those figures it would appear that the greater proportion of your sales are patent medicines ? —They were on that date. Since then they have gone down considerably. On last year's working we lost about 10 per cent, on the previous gross profit. 26. At the time you took out those figures what would you say was the average profit shown on proprietary lines ? —Practically no profit on proprietary lines. It would be 25 per cent, on cost, which meant no profit at all. Some of them would show more, of course. Thirty-three per cent. Would cover overhead. 27. Do you know of any lines which have been affected adversely by cutting?— Yes, those Vinolia lines I have mentioned, and one line which had a particularly good sale- —I refer to Dr. Lyons' tooth-powder. We used to buy those lines by the gross, but they are now entirely eliminated from our stock. 28. To what do you attribute that ? —They were cut to pieces, and jobbed off at any price at the finish. 29. Coming now to Kolynos : in what quantities did you used to buy that ?—ln 5-gross lots. 30. And how do you buy it now ?— By the dozen. 31. You are not turning it over much ?—We avoid selling it at all. We try something else in its place because it does not pay. 32. Do some traders have lines of face-cream made up and sold under their own name I—Yes, I could mention several firms who do that. 33. What is the object of that ? —To increase the profits on those lines as a set-off against the losses on other lines. 34. Can you say whether, generally speaking, these firms are cutters ? —As a general rule, no. They do on some lines, but they make up for it on others. 35. Mr. Gresso-n.] On those figures you have given us, which I understand are altered now, you say your sales of patents amounted to 25 per cent., and proprietary lines 8 per cent. ; that is. 33 per cent, altogether. As I understand you, you are now making no profit on those articles ?. —Proprietaries are our own goods, which we make up ourselves. 36. So that means to say that as regards 25 per cent, of your business it is ineffective from a profit point of view ?—Yes. 37. Which means to say that for your business only 75 per cent, of it is effective from a profit point of view ?—Yes. 38. Would you mind writing down for the Committee your turnover and income for the last two years, approximately ?— I could only guess at it now. I will supply the information. The Committee adjourned at 1.50 p.m. till 2.30 p.m.
67
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On resuming at 2.30 p.m. Harold Hook sworn and examined. (No. 12.) 1. Mr. Myers.'] What are you ? —A grocer. 2. A retail grocer ? —Yes, a retail cash grocer. 3. Are you in business on your own behalf ?—I am managing for Mr. Owen Hurney. 4. Now, I think you have been engaged in the grocery business for a good many years ?—Yes, for about thirty years, I should say, roughly speaking.' 5. During what portion of that period have you been in business on your own account ? —About fifteen years. 6. Do you remember Wheeler, of Auckland, starting in business in Wellington in 1922 ? —1 would not be sure of the date. 7. Were you in business at the time I—Yes,1 —Yes, in Courtenay Place. 8. Had you been in business for some time ? —About twelve months. 9. Doing a cash business or a credit business ?—All cash. 10. Were you making a living out of it ?—Yes, I was doing very well. 11. Wheeler started business near you, did he not ?—Yes, about 50 yards away, or perhaps 100 yards away ; I could not be quite sure. 12. And was he doing a cash business ?—Yes, I think so —that is, as far as I know. 13. Did he adopt any special tactics in his business ?—Yes ; he was always notorious as a cutter, and did cut very strongly in every line. 14. Can you say in a general way what class or classes of goods he cut mainly ? —On some proprietary and other lines. 15. Can you remember any particular proprietary line where he indulged in cutting ? —He used to cut Kolynos. 16. Down to what ? —Down to a shade over cost, and lower. 17. Of course, you are speaking of a few years ago. Can you remember other items on which he cut ?—Yes ; he used to cut on tobacco and cigarettes, Edmonds' baking-powder, &c. 18. Can you remember in a general way whether he was cutting in more lines than those you have described ? —Sunlight Soap. 19. What was the consequence so far as you were concerned : what did you have to do ? —I had to meet the competition. 20. Can you remember whether Baxter's lung-preserver was cut by him ?— I cannot say as to that. 21. When you say that you had to meet the competition, what do you mean 1— By cutting down to his price ; I could not do anything else. 22. What was the result so far as you were concerned ? —I think my profits were much lower and the expenses were just the same ; and I considered the matter, and I did not think it was worth while to carry on, and therefore 1 sold my lease and got out. 23. You came to the conclusion that vou could not make a living ? —I could make just as good a living elsewhere without having capital in the business. 24. You sold-out on the assumption that he would remain in business ?—Yes. 25. What happened ?—He closed his business a few hours before 1 did. 26. Where is Hurney's shop situated ?—At the corner of Abel Smith Street and Cuba Street. 27. How do you find the position now in regard to cutting ? —lt is a shade worse; in fact, it is every bit as bad. 28. Than at the time when you had to meet Wheeler's competition ?—Yes. 29. Have you any cutting shops near you now ? —Yes, fairly near. There is Hill Bros, down the road ; the Self-help ; and there is another one in Cuba Street. It is not very close, but it is near enough to affect us. 30. Do you know a certain line of goods called the Pacific goods ? —Yes. 31. What class of goods do they comprise ?—General goods, such as vinegar, methylated spirits, &c. 32. By whom are those articles put up ?—They trade as the Pacific Manufacturing Company, in Newtown. 33. It is a local manufacturing company ? —Yes. 34. Have you handled any of those goods ?—Not to a great extent; that is to say, not to buy from them generally. I have only a few of their lines. 35. Is there any particular reason why you do not or could not '! —We always like to stock a line that is not being cut. 36. Is that line being cut ? —Yes. 37. What lines of a similar character do you stock ? —Anybody-else's lines that have not been cut, if we can get them. 38. As a matter of fact, is there any particular line to which you are giving preference for that reason ?—Yes, Murdoch's. 39. What is the name of their brand of goods ?—I think it is the Red Funnel brand. 40. At what price do you sell Edmonds' baking powder ? —ls. 2d. 41. What does it cost you ? —l4s. per dozen. 42. You are selling at cost: why do you do that ? —lt is worse if you try to charge more than the other man. 43. Why do you sell that particular line at Is. 2d. ?—Because the other fellow is doing it. 44. I suppose there are some cut lines which you have to stock ? —Yes. 45. When a person goes into your shop and asks for a line upon which you are cutting under a profit, or a profit that does not pay you, what do you do ? —We substitute it if we can ; that is to say, in a lot of cases you can introduce something else, or some other maker, I should say.
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46. Do you know a soap called Velvet soap ?—Yes. 47. Where is that soap made ? —ln Christchurch. 48. Is that a line on. which cutters have been at work ? —Yes, for a long time. 49. In consequence of that, do you stock it ?—No. 50. By reason of the cutting ? —Yes, It is cut by everybody. 51. Do you stock another line of soap, which you try to sell to the public in substitution for soap ? —Yes, a brand that is called soap. 52. l)o you get many people coming in for Velvet soap ?—Yes. 53. What do you do ? —We try and introduce the other soap. 53a. Are you successful or otherwise ? —Yes. It is a good article. 54-. The people go in for soap and they get soap I—Yes. 55. We will now take granose biscuits : do you stock them ? —Yes. 56. Why do you stock them ? —lt is a line that is asked for. 57. Is that a cut line ? —Yes. 58. What do you sell it at ? —lljd. 59. There is another line that has come in ?—Yes. 60. What is the name of that line ? —lt is called the Weet Bix. 61. Are you stocking that line now ? —Yes. 62. Are you selling any of it ? —YeS. 63. The people who come in and ask for granose biscuits are told what ? —We introduce it in front of granose. 64. 1 suppose you get a profit on it ? —Yes, we sell it at Is. 2d., as against granose llid. 65. What does it cost you % —lis. 6d. per dozen. 66. You stock Bell tea, do you not ?—Yes. 67. What price do you get for that tea I—2s.1 —2s. lid. per pound. 68. It costs what ?—2s. lOd. 69. Do you sell Amber Tips tea %—Yes, at 2s. lid. 70. Why do you sell those two classes of tea at that price ? —To meet the competition, as before. In other words, the other people are selling it at 2s. lid. 71. To whom do you refer particularly?— Self-help, and, I think, almost all the grocers now. 72. Somebody has to start cutting on those lines ?—Yes. 73. Do you know who started it first ? —I think it was . The stores were 3s. for a long time, and came down to 2s. lid. I think it was ———• who actually started selling it at 2s. lid. 74. After that, do you know who started cutting the line ? —Self-help. 75. Do you pack any tea yourself ? —Yes. 76. Do you buy it in bulk and pack it yourselves ? —Yes. 77. Do you buy more than one quality ?—Yes. 78. What is the price of your best quality ?—2s. per pound. 79. And what do you sell it at ? —2s. lOd. 80. Suppose you were getting 3s. 4d. for Bell tea, could you sell your own packed tea at less than 2s. lOd. ?—Yes, we could afford to, certainly. 81. Which kind of tea do you sell in preference—that is, Amber Tips, Bell tea, or your own tea ?—Our own. 82. Supposing a customer comes in for Amber Tips and Bell tea, what do you try to do ? —1 may say that it does not do to push these things in all cases, but if you get a slight opening you try to sell your own lines. 83. Do you succeed in some cases ?—Yes, in quite a lot of cases. 84. You woidd have to do that to make the business pay ?— That is so ; but you cannot do that when people want Bell tea particularly ; but you can do that wherever you can. 85. Do you sell a line such as Clements' tonic ? —No. 86. Why do you not stock it ?—lt is sold at 2s. 6d., and I cannot buy it at that wholesale. The general merchants want 325. 6d. per dozen for it. 87. We all know that if you cannot get a profit on one line you have to get it on others to make up your overhead expenses ? —Yes. 88. The lines on which you make it up are called recovery lines, or come-backs ? —Yes. 89. What are your best recovery lines ?—Cheese, Hour, amd currants. 90. Salt ? —Yes, and soda. 91. Washing-soda ?—Yes ; bulk vinegar, kerosene, &c. 92. You have not mentioned sugar : is that one % —Sugar is not altogether a good line. 93. The articles which you have mentioned are articles which everybody uses ? —Yes. 94. Can we take it that if you were able to sell proprietary lines at a fair and reasonable profit you could give corresponding benefits on the sale of the articles which you now refer: to as recovery lines ?—Yes, we could sell them at a lot cheaper. 95. Until the cutting commenced you had in view what was a good profit on any line : what was that ?—A profit of about 18 per cent, to 20 per cent. 96. On turnover ?—Yes. 97. Is that over all ?—Yes. 98. Well, in view of the cutting, what is the effect upon a number of lines on which you used to be satisfied with a lower margin of profit ?—You have to increase them any way you can without being noticed. 99. Do you stock Kolynos ?—Yes.
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[h. hook.
100. At what price were you in the habit of selling it ? —1 keep it under the counter ;we never sell it. 101. What do you mean by that ?—We do not boast about the price we are selling it at —in fact, we are what may be termed ashamed of the price. Many people are selling it at Is. 102. Mr. Hook, could you tell the Committee, in a grocery business like yours, about what is the percentage of overhead expenses ?—Prom 10 to 12| per cent. 103. Does that include your own wage or salary ? Not including your own wage or salary 104. Mr. Gresson.] In reference to the last question asked by my learned friend, in the present business where you are manager you include your own salary in that estimate ? —That is the general estimate of all business. 105. You said that you sell Amber Tips tea at 2s. lid. —Yes. 106. What is your own tea like ?—lt is good tea. ' 107. Do you put it up in packets ?—Yes. 108. Is it sealed up ? —Yes. 109. Do you consider that tea is as good as [Brand deleted] ? -It is better than \ Brand deleted.] 110. According to what you told my learned friend, you always sold granose biscuits at cost ?—No. 111. I think you told him so?— How far back do you refer? 112. When did you sell granose biscuits at Is. 2d ?—Three years ago. 113. Since then you have been selling them at ll|d. ? —Yes. 114. You are one of the cutters, then, are you not ?— We like to appear so. We have to meet the competition of the other fellow. 115. There is nothing to compel you ?—The public wants it. 116. Your point is that, if the public wants a thing, you have to cut ? —We have to cut the same as the other fellow. 117. In this particular case, since you have been where you are, you have always been selling at cut prices ? —As I say, we have to meet the competition of the other fellow. 118. In regard to your Coronation soap and Velvet soap, which you have referred to, is there very much difference between them so far as quality, &c., go ? —ln the quality I should say, no. 119. It does not matter,, then, so far as the public is concerned, whether they buy your soap.or Velvet soap ?—They are entitled to have what they ask for. 120. You supply them with as good an article as they ask for ?—Yes. 121. You told us that when you had to sell your shop out you could make a living there ; but owing to the amount of cash you had involved you considered you could do as well outside, and that it was not worth your while carrying on there. In other words, would you mind writing down on this piece of paper what profit you made at the time you felt it was wiser to go out of business than to keep on the way you were doing. [Mr. Hook wrote down particulars on a piece of paper, and, after perusal by Mr. Myers, Mr. Greeson handed same to Mr. Collins, Chairman.] 122. You have told us that you were carrying on business in Courtenav Place as a cash grocer —that is, on your own behalf ? —Yes. 123. Did you wrap up the goods ?—Yes. 124. Did you deliver them to your customers ?—No. 125. It was simply a " cash and wrap-up " business ?—That is so. 126. You were not " cash and carry," but in your business you did tie and wrap up parcels ? —Yes, like respectable tradesmen. 127. And delivered it over the counter ?—Yes. 128. Mr. Kennedy.] I suppose the returns in your present business are satisfactory—that is, the business you are at present managing ?—Yes. 129. Very satisfactory ?—I would not say that. As lam speaking about another man's business, 1 do not want to say much. 130. I suppose you will concede that these competition prices are lower to the public than if there had not been competition ? —The prices are lower, yes, some of them. 131. Do you mean by a cutter a man who sells lower than you ? —No ; a cutter is a man in a lot of cases who appears to be cheap, but does his best to undercut the other man if he can —that is to say, puts his prices down to-day and puts them up to-morrow. 132. Some men can buy better than other men because they are keener buyers ; is that not so ?— Yes, I will concede that. 133. Will you also concede that some men can run their business concerns better than others ? — Yes, I will. 134. And some men have the benefit of large turnovers ? —Yes, some of them. have. 135. So you will concede it follows that some can sell at a lower price than others and still make an adequate profit ? —Some can. lam not admitting that a man with a larger business can sell cheaper than a man with a small business. Some men are competent, whilst others are incompetent. 136. What you desire is that every man, irrespective of his capacity, shall sell at the same price ?— I am not suggesting that at all. 137. Do you not suggest that every man shall sell one article at the same price ?—I am not suggesting ; I am here to answer questions. 138. Do you approve of every man selling at the same price ? —I approve of getting a reasonable profit on every article you handle. 139. Supposing a man can carry on his business efficiently and sells his goods at a less price than his neighbour and still gets a less profit, do you think that that man should be prevented from doing it and be compelled to sell at the same price as his neighbour ?— No man can handle a thing for 2| per cent, when his overhead is 10 or 12J per cent.
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Mr. Myers : [s this not argument, sir ? Mr. Collins : It savours very largely of it. 140. Mr. Kennedy (to witness).] You do not want to answer my question ?—I will answer any question. 141. Mr. O'Leary.] Has bulk tea varied in price during the last six or seven years ?—Yes. 142. Is it cheaper now or dearer than it was ? —lt is about the same —that is, for the last couple of years. 143. What is'the highest price that you have sold Amber Tips tea and Bell tea at, say; during the last three or four years ? —3s. 4d. 144. How long is it since that price operated ?—I should say that that is during the last three or four years. 145. Three or four years since it was 3s. 4d. ? —Yes. 146. You tell us that you are selling it at 2s. lid. : when was it sold at 3s. 4d. ? —I cannot say exactly. 147. When you sold Amber Tips tea at 3s. 4d., what did you sell your best bulk tea at ? —2s. lOd. 148. Do you remember a little while ago answering Mr. Myers this question : If it was not for the cutting in tea or in other lines you would be able to sell bulk tea at much less ? Mr. Myers. —I did not say that, I put the general question of recovery lines.. Witness : General lines. 149. Mr. O'Leary (to witness).] Then, you would be able to sell general lines at less, except for cutting ? —That is so. 150. According to your figures, the public get no benefit in tea when you sell your Bell tea at 3s. 4d. ? —We are cutting so many other lines that we cannot afford to. 151. I suggest, Mr. Hook, that that is a very good answer. You heard the suggestion that the public would not be overcharged in the other lines if it was not for cutting ? —Many say that it was as bad months ago as it is to-day. 152. Mr. Walker.] I believe that when you opened up business on your own account you opened up in a notoriously bad spot ? —I did not think so when I bought the lease. 153. You did not know that your two predecessors went into bankruptcy ? Mr. Myers : I want to know, sir, whether my friend is asking a question when he is referring to bankruptcies, or making a statement, which he is not entitled to do. Witness: I should say that it was a good place, and I would like to be back there again. 154. Did you know about the bankruptcies ? —ln one case it was only a woman selling hats. 155. What rent did you pay ?—£7 10s. 156. Did you pay the same rent as your predecessors paid ? —Yes. It is £12 10s. now. 157. It was not that when you went there ?—No. 158. Did you not advertise yourself as a price-cutter ?—I do not think that I ever used the words " price-cutter." 159. When Wheeler opened you closed down, did you not ?—I did not close down when he opened. 160. You closed down some time after then. You found that you were both cutting prices ? — And both doing no good. 161. He was, in your opinion, the bigger price-cutter of the two ? —1 was the same as him. 162. Were you not a price-cutter in those days, as the expression is understood ?—Yes, I had to be. 163. Was that so before Wheeler opened ?—No. 164. How long had you been in business before Wheeler opened ? —Twelve months. 165. Had you not been a price-cutter before that ? —I may have told the public I was a pricecutter, but, all the same, I was getting good prices for my goods. 166. Mr. Myers.] During the first year you were in business in Courtenay Place did you or did you not make a profit ? —Yes, a good profit. 167. At that time you say you used to sell cheaply, but when lines were subject to fixed prices did you sell below that price ? -Yes, some of them. 168. Did you reduce to anything like mere cost ? —Yes. .169. Before Wheeler came on the scene ?—No. 170. Did you do any cutting in that connection prior to his starting business? —Not any bad cutting. 171. You told Mr. Gresson, in cross-examination, that the returns of the present business where you are situated are satisfactory ? —Yes. 172. Would they be satisfactory if you did not charge an increased margin of profit on your socalled recovery lines ? —No. 173. Mr. Collins. \ Is your business—namely, the one you are at present managing on behalf of Mr. Hurney—continuing to make progress from year to year ? —I cannot talk about another man's business. As a matter of fact, 1 have only been there eighteen months. Prior to my going there it was a business run down. 174. I suppose you are proud enough to claim that this improvement which you speak about is due to your present, management ? —1 am no better than the other man, but I have always been looked upon as competent. 175. You do not sell below cost at any time ? —Not below cost. 176. With respect to the question of tea, do you sell a greater proportion of bulk tea than proprietary tea ?—Not as much. 177. Could you put it in percentages ? —lt varies so.
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178. The proprietary tea, according to what you say, is sold in bigger quantities by your firm than the tea made up by you in packets ? —Yes. 179. I judge from your evidence that you think the position to-day in regard to cut prices is most extreme ?—Yes. 180. Worse than it was, say, three years ago ?— 1 think so. 181. Despite the fact, that and the cut-rate stores are inclose proximity to your premises, you have been able to maintain your position ? —We are still able to make a. living. Examination of Charles James Staunton-Vere Burbery continued. (No. 11.) 1. Mr. Gresson.] I notice in the analysis you gave in .1924: you show proprietary medicine 8 per cent. : what class of medicine would that be ? —Cough-medicine and such things as that. 2. Are you in favour of the P.A.T.A. ?—Certainly. 3. If you come into the P.A.T.A. you will have to register those articles with them No. 4. Why not ?- They are too small, and are not sold outside our own business. 5. Do you realize that if you 'go into the P.A.T.A. place and ask for a P.A.T.A. article you have no right to endeavour to sell to the customer an article of your own that is not on the P.A.T.A. list ? — That is the principle of substitution. 6. Do you realize that ? —Certainly 1 do. 7. I will accept that ? —Except, as a chemist, I am asked to prepare something else. 8. What do you mean by that ?—Say for argument's sake you come in for Baxter's and I do not stock it, and you say, " Will you make me up something ? " I would be able to do it. 9. You consider that you have the right to do that if you join up with the P.A.T.A. ? — Certainly. 10. You realize that if I were to go into your shop and say to you, " I want a bottle of Baxter's lung-preserver," you have no right to say, " I have a better article here ? " —That is foolish business. 11. You realize you have not the right to say that to the customer ?—Certainly 1 do. 12. Mr. Kenvedy.] You are not the only chemist in your particular locality ? —No ; there are two now. 13. 1 suppose you are able to do the prescription-work for the whole district ? —Yes. 14. I suppose the same thing happens in other parts of New Zealand —that is, there are two men to-day where one of them might do ?—The same thing applies to doctors and all the professions to-day. 15. Do you agree that it applies a very great deal more to your profession ?—At the present time, yes. 16. There has been a very large increase in. numbers in recent years ? —Yes, there has been quite a number of them. 1 cannot say the average increase. 17. I suppose it is because there are so many that you cannot make a sufficient return out of prescriptions and you are seeking other lines ?—No ; I beg to differ from you. Our business is different. 18. Do you wish the Committee to understand that you would like to have certain articles restricted to chemists ? —That is how it should be —that is to say, patent medicine and things of that nature. 19. I take it you will agree that a grocer is in a position to carry on the sale of certain proprietary lines and requires a smaller profit than you do ?—lf I were to sell his tea, for instance, I could sell it cheaper than he could, for that matter. I used, to sell tea and other things like the best of them. I may say that a lot of these things are sold in order to advertise other lines. On the occasion I refei to, when I was selling various lines, I was stopped from doing so by the -Labour Department because I kept open after the grocers had closed, and if I wanted to retain my privilege as a chemist to remain open on a Saturday or Sunday 1 had to discontinue selling the articles I have mentioned, but if I wanted to sell grocery articles I had to shut and open at the same time as the grocers. 20. Then, there is no complaint from you because there is price-cutting by reason of the fact that as a chemist you could undersell him in his own line We cannot sell those articles at all, but 1 say if we were we could pick the eyes out of it the same as they are doing. 21. Did you undersell the grocers in the things you mentioned ?— Of course 1 did. When the question was brought up in regard to the sale of the face-cream mentioned by a cutter in Willis Street, 1 forgot to mention that the face-cream which was sold for 2s. was brought by them at Bd. 22. Mr. Hayward.] 1 did not quite understand you when you were asked a question of what percentage of your takings were consumed by your overhead expenses, and you said 25 per cent, on cost and 33J on returns ?—I may say that 25 per cent, on return is 33| on cost. 23. You cannot take overhead except on anything but returns. The question was, What percentage of your turnover is consumed in rent and your general expenses of running the business ? — My rent is not as bad as a lot of other people. 24. The question as you answered it has conveyed nothing ?—When talking to a chemist yesterday he said that the cost of doing business was 40 per cent, on turnover. 25. What is yours ? —Mine would be 33. 26. That is, one-third of your takings is consumed in your expenses ? —Yes ; 1 cannot give you actual figures ; that is worked out in proportion. I could give you details later on that probably cover this point. 27. Will you send that information in ? —Very well. 28. Mr. Myers.] The 33 per cent, includes a wage to yourself at £6 per week ?—That is tabulated out in that particular return. 29. Mr. Reordon.] You take shop cost, so you pay interest probably on a mortgage ?—What Mr. Myers has is a detailed list worked out for 1923. 30. Mr. Myers.] It conies to over 30, from what I can make it. You cannot include depreciation ? That is so.
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31. Mr. Montgomery.] Do you deal in photographic goods ? —Yes. 32. Do you develop films ?—We have that done, like everybody else. 33. What percentage of gross profits comes out of the photographic department ? —We get 33?, by simply taking the stuff in and handing it out: it is the best-paying thing we have in the shop. 34. Do you sell cameras ? —Very few. 35. Do you engage in other activities ? —I manufacture fruit-syrup. 36. What is your opinion as to the state of the chemistry business in New Zealand numerically — that is, is it too great for the population or otherwise ? —lt is too great at the present time. It is on a par with Austrailia ; but, at the same time, with the present high examination standards so far as Matriculation and that sort of thing is concerned, from now onwards it will mean that the numbers coming forward will be much less than hitherto. 37. Mr. Collins.] How long have you had competition with neighbouring chemists ?- For three or four years. 38. Prior to their setting up business in your town were you doing quite well ? —Yes. 39. And you have had a very close fight since, so to speak ? —We do not fight; we try and agree Of course, it certainly makes a difference. 40. Your takings have not been as good : you probably share the business ? —We have to. 41. Is your business progressing—that is, is it satisfactory to you ?—We have to meet competition through the price of goods, which means a reduction of 9 per cent, in the net profit. 42. Is it satisfactory as it stands to-day ?- It is just a living. 43. Is it a good living ?—I would not say that. 44. To maintain a good living you have to manufacture other lines, do you not ?■ —That is so. 45. The most serious check you have had to progress has been the starting of a business —that is, another chemists' business—next door to you ? —No. I think that the cutting of prices has made a big difference to us, because we are not selling the volume that we used to sell. We are up against this difficulty: that we cannot reduce the price to meet competition during the week, and if we keep our business open during Saturday and Sunday we have to pay somebody overtime. 46. Despite the cutting which is at present going on, if your competitor were to close his shop it would make a big difference to you ? —Naturally, of course. John Heaton Barker sworn and examined (No. 13). 1. Mr. Myers.] What is your occupation ? —I am secretary of the New Zealand Grocers' Association, and I am also editor of the New Zealand Bakers' and Grocers' Review, and I reside at Auckland. 2. Mr. Collins.] Do you wish to make a statement to this Committee ? —Yes. As secretary of the New Zealand Master Grocers' Federation and as editor of tha New Zealand Bakers' and Grocers' Review, in giving my evidence I claim to represent a very large body of traders whose interests have a right to be considered. The New Zealand Master Grocers' Federation was organized some few years ago, its aim being to promote, protect, and raise the standard of the retail grocery trade of New Zealand, and for uniting retail grocers to stand by the cause of honest and fair trading. The New Zealand Government has already recognized that the employees have a right to combine with a view to securing a fair return for services rendered. I submit the manufacturer and the distributor —both wholesale and retail —have an equal right to a. measure of protection to secure for them a fair return for capital and labour employed. This principle, I would point out, has been in a measure recognized by the recent legislation passed by the Government relative to the control of motor service when in competition with municipal enterprise. I further suggest the same principle is recognized by one of the Government departments —namely, the State Fire Insurance—which, it is understood, having regard to rates charged, acts in co-operation with other companies taking similar risks in the Dominion. The movement for a minimum-price fixation is not new, and is, I contend, one in the right direction. The desire and aim of those interested is to make for the stabilization of business. The Dominion has had too many experiences resulting from the reckless trader, who finally, having either to compromise with his creditors or seek the protection of the bankruptcy Court, has inflicted a serious loss not only upon those with whom he has been trading, but on the community as a whole. Its justice, I suggest, has been recognized by the British Government, for the P.A.T.A., as it is in England, has been in existence for thirty years. I submit the manufacturer has an absolute right to protect his interests, and in turn the right, by adopting a method of minimum-price fixation, to secure for the distributor an equitable return for capital employed and service rendered. I would like to make reference to the business of Boots, Ltd., a concern controlling about seven hundred drug-stores in England and, it is claimed, serving one hundred million customers per annum. The sales-manager of this company, during the course of an address which has been recently reported, stated his firm had been selling goods on the price-maintenance basis for years, and when any one came to them with a trade-marked article the first question asked was as to whether the line was on the price-maintained list. The fact that this company is doing so large a business may be accepted as evidence that the general public are satisfied with the goods, the price at which they are sold, and the service rendered. From what I have been able to ascertain, those responsible for the formation of the P.A.T.A. have no desire for anything other than a fair and reasonable profit. Competition must continue to determine profit, for a manufacturer seeking an undue margin either for himself or for those distributing his goods will soon find competitors in the field who will compel him to
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make the needed adjustment. At the annual conference of the New Zealand Master Grocers' Federation held in Taranaki last week the following resolutions were unanimously passed :—• That this conference affirms the principle of the minimum resale price, with a view to providing reasonable and equitable protection to the public, which is deceived by the reckless trader, who destroys the best interests of manufacturer, distributor, and consumer by methods of trade piracy. Delegates assembled strongly maintained that the manufacturer is not properly supporting his distributors — either wholesale or retail —when he fails to use every means within his power to prevent cutting of the prices of his brands by the distributor who resorts to unfair methods of competition. Believing that all unfair competitive practices are unlawful and detrimental to the public welfare, this conference calls upon Government, through the Department of Industries and Commerce, to assist the retailer in his endeavour to secure an adequate return for capital and labour employed. It will be noted, in the first place, that delegates in conference assembled recognized that the public was entitled to reasonable and equitable protection against the reckless trader who destroyed what was regarded as being the best interests of all concerned by methods, too frequently adopted, of trade piracy. It is clearly recognized that the opposition to what many recognize as being a fair and equitable method of trading comes from a very small section of the community— those engaged in what is known as " cash and carry " business. Let it be distinctly understood that no opposition has been raised to this class of trading, but strong exception has been taken to the methods too frequently adopted. I respectfully submit that very absurd claims are made as to the difference in the relative cost of trading between what are known as " cash and carry " and " cash and credit " stores, and the public have again and again been misled by reckless statements that have been made. Many statements so made have been either due to ignorance on the part of those making them or have been made with the wilful intention of misleading the public. One great fact that has been overlooked is that the trader to-day who gives credit is doing a large percentage of business for cash, and from careful investigation made I am satisfied that to-day the " cash and credit " grocer is doing a larger proportion of cash trading than was being done a few years ago. I would hei;e point out that the policy of the N.Z. Master Grocers' Federation has been to urge upon the trade the necessity of aiming at securing a minimum margin on the goods it handles. I would here point out that this seems to be the only course open. During the evidence given here by Mr. Norrie he mentioned that 011 sugar he was getting approximately 1\ per cent., on flour a trifle over 8 per cent., and yet he had to confess that he did not know what proportion of his business consisted of either sugar or flour ; and I submit that the average grocer to-day is absolutely unable to determine the margin of profit on his goods so that his total margin is sufficient to meet his overhead and leave him something for himself. In Victoria and, I think, in one or two other States of the Commonwealth the policy of the grocery trade has been the securing of a margin of 25 per cent. This is due to the rapid increase of overhead expenses. An adequate margin is absolutely necessary. As an illustration of this fact, and without going into detail, I would point out that the business of Wheeler's Stores, Ltd., one of the largest of its kind, and which ultimately went into liquidation, was practically conducted on the " cash and carry " system. At a private meeting of creditors Mr. E. S. Wheeler, the managing director, claimed that his company had been endeavouring to trade on a margin of 16 per cent. From figures published by the liquidators, who were prior to the liquidation the auditors of the company, I find that with the exception of one period—and that, I think, was either for three or six months' trading—-the overhead expenses were 16 per cent, or over. The period when the overhead expenses were below they amounted to 15-8 per cent. And here let me draw attention to one item in the liquidators' report on the said business. It mentioned that it was a practice in the mail-order department to offer several lines for a certain period at cost price. With all the emphasis possible, what they object to is not the difference in the price between the " cash and carry " and the " cash and credit " concerns, but the methods which they adopt. For instance, it was the common practice of Wheeler to take a full-page advertisement and have it headed, "At Cost —Why pay more ? " The underlying suggestion of that was that his competitors were overcharging. This practice might result in anxiety for the manufacturer, because others would not stock the same lines, but substitute them. I want to mention in respect to Wheeler's Stores —I do not want to be misunderstood, because he has many good points—that what we do object to is misleading those who have not been educated. As an indication, Wheeler's Stores, Ltd., a company with a capital of £10,000 —according to the statement made by himself—£B,ooo approximately was represented by so-called goodwill, and six thousand or seven thousand of these shares were ultimately sold at a price a trifle over 3s. apiece to the present manager of Wheeler's Stores, Ltd., in the South Island. I would here mention that he was a member of the Auckland Grocers' Association, and was also a member of the executive. It was the policy of the association to endeavour to obtain a margin of 20 per cent, all round. In mentioning these matters Idoso to indicate some of the methods that are adopted. As I say, Wheeler had a full-page advertisement which was deliberately misleading. The Auckland Grocers' Association, notwithstanding the fact that they adopted a policy whereby it was expected they would get a profit of 20 per cent. —4s. in the pound—on every article sold, and the advertisement said, "We refuse to be a party to further increasing the cost of living : We have decided to let the twenty-per-centers have it on their own." 3. Mr. Myers.\ That is, 20 per cent, on turnover ? —Yes. As I say, he admitted that he was trying to work 011 a 16-per-cent. margin. This is the kind of practice which I suggest is too frequently resorted to by concerns similar to that of Wheeler's Stores, Ltd. Morally the position is wrong. Such practices are adopted with a view of misleading the public, and necessarily cast a reflection upon other traders, and ofttimes result in a grave injustice to the manufacturer. As a well-known manufacturer remarked —he was one who had experienced considerable trouble as the result of the cutting of prices of his particular brand of goods,—" The retailer can either make or mar my business." He then told me how he decided a certain point where his line was stopped or being sold at a price by one trader which in the opinion of the other grocers in the town did not
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allow of sufficient margin. He approached the said gentleman in a friendly way and suggested to him to put his price up. The reply was that he would see him damned first, because he bought the goods and he was going to do as he liked. My friend put the position to him, and said, '' Here is my position to-day : lam faced with this —am I going to allow you to sell my goods at a price which does not allow of a sufficient margin, because, if so, the other thirteen grocers in this town have one and all assured me that they are going to buy some other line and substitute it for mine." I want to say that I may view things somewhat differently, but a man in business owes something to those who are associated with him in the same trade. I contend that it is not right for a man to inflict an injury upon his fellow-tradesman, because he is a man upon whom he is more or less dependent. The policy of the P.A.T.A. is to protect the manufacturer against the unscrupulous and unfair trader. One outstanding fact that, alas, is too frequently lost sight of is that, when losses such as those instanced occur, finally the public is called upon to bear the burden. Roger Babson, of the United States, who, I believe, is regarded, as one of the world's greatest economists, states that " cash and carry " is fine in theory, but not good in practice. He says that, at most, " cash and carry " can only save about 5 per cent. This statement is confirmed by other investigations that have been made. It is contended that, other than in exceptional cases, the most equitable way of conducting retail business is for sales to be conducted allowing for a margin sufficient to cover overhead expenses and provide a reasonable return on capital employed. Strong protest is made against the trader who wilfully seeks to deceive the public by selling various goods at a small fraction over cost, but without consideration being given to an equitable margin necessary to defray expenses and allow, as already stated, a reasonable return for capital and labour employed. I could quote innumerable instances of deliberate attempts to mislead the public. In this connection it is probably not here out of place to draw attention to the fact that prior to the recent Weights and Measures Act being introduced the grocers, as represented by the New Zealand Master Grocers' Federation, urged upon the Government the desirability of bringing down legislation to protect the public against what in its opinion were unscrupulous and unfair methods adopted, having regard to the weight of innumerable goods being sold to-day within the Dominion. Whilst recognizing the difficulty there may be in producing actual evidence, if one is to accept statements made by men whose word I have no reason to doubt, then I am satisfied that some of those who to-day are objecting to the margins the result of price-fixation are not sincere in the attitude they have taken. I know of instances where those who have protested against minimum-price fixation have expressed their willingness to sign an agreement with this object in view, conditional that their names were placed on the wholesale list, thereby securing a margin considerably in excess of that which they professedly considered as being adequate for the safe conduct of their business. I have in mind one instance where an unscrupulous trader was deliberately cutting the retail price of certain goods, and on being approached by a representative of the manufacturers expressed his willingness to raise his prices, conditional that he was put on the wholesale list. I should be very reluctant to suggest that amongst those who are engaged in the " cash and carry " business there are not those who seek to run their business in accordance with the policy of the New Zealand Master Grocers' Federation, which, as already stated, seeks to unite retail grocers to stand by the cause of honest and fair trading. I am, however, satisfied that many of the methods adopted are with one deliberate aim—to deceive the public and to secure the trade of their competitors by methods which cannot commend themselves to those who desire to trade fairly and honourably. As already stated, the, movement for minimum-price fixation is becoming world-wide. As will be noted in this connection, a demand has been made by the New Zealand Grocers' Federation upon the Government, through the Department of Industries and Commerce, to assist the retailer in his endeavour to secure an adequate return for capital and labour employed. I notice that under the Board of Trade Act, 1919, the GovernorGeneral in Council may, on the recommendation of the Board of Trade, make regulations for the prevention or suppression of methods of competition, trading, or business which are considered to be unfair or prejudicial to the industries of the Dominion or to the public welfare. Business is becoming increasingly difficult, and the P.A.T.A. has been brought into operation to remove some of the difficulties at present existing. As representing probably the largest and, without question, the most important class of traders —-the distributors of foodstuffs —I respectfully claim the right of the said traders to take such steps as will ensure for the manufacturers, their distributors, and the public, for whom they cater, reasonable and equitable protection. What is needed is the support of the Government in the honest endeavour now being made through the medium of the P.A.T.A. to stabilize business, and to reduce to a minimum those losses which ultimately have to be borne the public and which too often are the result of reckless trading. In conclusion, I submit for the consideration of the Committee the desirability of amending legislation which shall extend the scope of the P.A.T.A. in relation to those goods which at present it is prevented from dealing with, so that the manufacturers and distributors shall have a right to demand a measure of protection against the ignorant and reckless trader, the number of whom would appear to be rapidly on the increase. 4. Mr. Gresson.] Your Review has supported the P.A.T.A. ever since it was mooted in New Zealand ? —Yes, and before. 5. From, the first you have hailed it with favour ? —Absolutely. 6. Would you just explain to me this : You say that your federation, and, I take it, all reasonable grocers, raise no opposition to the class of trading called " cash and carry " : what do you mean by that ?—We have no objection to the differentiation in price between the " cash and carry " and the " cash and credit " grocer. 7. That is to say, on fixation of prices the " cash and carry " is to be allowed to sell at a lesser retail profit ? —Yes.
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8. in taking that into consideration have you considered the various classes of " cash and carry " businesses that there are —there are at least three ?—I do not worry if there are three. 9. We have what is known as the groceteria ? —ls it in existence in New Zealand-v 10. In Dunedin. The second class is the class in Wellington known as the " cash and carry," with no wrap-up of parcels, and no string, even, in the shop, and where the person comes in and brings a basket and takes away butter, &c. ? —What about rice and sugar ? 11. Bags would have to be provided in that case. The third is " cash and wrap up," and then there is a fourth, known as " cash, wrap up, and deliver " : the fifth, known as " cash, wrap up, deliver, and credit." We will take the first three : you say you will have to fix three different prices for those three different classes of business ?—I suggest that the difference in the service they render is so minute that it is useless to attempt to discriminate. 12. It means the service of one assistant. Take the case of butter and string ; it means the services of one assistant to wrap up butter and tie it with string ? —No. 13. Surely it appeals to one's common-sense that if you do not wrap up a parcel and tie it up you can do away with an assistant ?—No. 14. I am told that you can do away with the services of more than one assistant ? —You are going into the vexed question as to the relative size of the business. You get many business concerns where it is only a one-man concern, and it is not going to take him more time, because he otherwise might be idle. 15. You yourself have had no experience in a " cash and carry " business, and do not know what it is ? —I do. 16. Have you had experience of it, and where ? —ln Auckland. 17. What business ?—Wheeler Bros. 18. You were not in the business ?• —No, but I had an experience of it. Mr. Collins.] I take it that the reply of Mr. Barker is that there is very little difference in cost. 19. Mr. Gresson (to witness).] As regards Wheeler's, you suggest that the reason why Wheelers met with disaster was because they carried on this " cash and carry " business ? —No, I do not suggest that. 20. You are aware that there were other reasons why Wheelers collapsed ?— Yes. May I say this in regard to differentiation—l want the Committee to understand the position : that there is no more difficult problem facing the grocer to-day than this differentiation in price. Personally, I have always pointed out, notwithstanding the fact that some individual wrote to the paper here and did not have the courage to sign his name, that the man who paid cash was always entitled to consideration. I want to say that there is no more equitable method than that of giving cash-register receipts ; but you cannot compel every one to use them. Another method that has been considered.—it has much to commend it —is of charging a booking fee of 5 per cent. The Farmers' Union Trading Company adopted that; but they charged their method and allowed a discount subsequently, conditional that the amount was paid on a fixed date, of 1 per cent, on the Ist of the month. Now, the difficulty in regard to that is to get a uniform system. At the Grocers' Federation conference which was held in Dunedin a resolution was passed along those lines, but that has not been given effect to. Here is the difficulty between the respective classes of trading : Those who sell for " cash and carry " immediately say that if a price is fixed by the P.A.T.A. as the minimum price, that the grocer is going to charge and book at the same price. The reply to that on the part of the " cash and credit " grocer is this : if he complies with the credit account no one who knows the respective classes of trade can continue what I believe to be, especially affecting that " cash and carry " business, a more or less unprofitable business. I want to say that one of the great troubles this season in regard to the " cash and carry " was caused by their attempt to differentiate. They have not been fair in the prices they have been charging for the cash and carry "as compared with the prices charged where goods are sold on (jredit. The prices have been placed right down on cost. I can speak of five years' experience in the early days. We had actually three prices sometimes ; and there is no more difficult business than to attempt two prices—namely, one cash and one credit —because the position becomes exceedingly difficult when you get down to articles sold ordinarily at Is. 6d. or below. To have two prices, in my opinion, is wrong, and the only way to overcome the difficulty is to add 5 per cent, in order to adequately meet the position. 21. Mr. Kennedy.] Do I understand you to admit that there is a difference in the case of a credit business and that of the " cash and carry " business, and that there should be some reduction to the " cash and carry " customer ? —Yes, certainly. 22. You do not see anything unfair in giving the exact amount of that benefit to the consumer ? —I might ask you for an interpretation as to what is meant by that. 23. I cannot answer you any more than that. lam asking you the exact amount of benefit ? —There has got to be some fixed amount, for the simple reason that what you term the exact amount of the benefit might vary considerably. Take, for instance, a man who is running his business on an exceedingly low rental, and therefore if you are going to take that fact into consideration he cannot go and cut his price considerably below the other trader who is doing the same business and who is paying an equitable rental. 24. You want to preserve in business not only the inefficient and efficient, but the man who cannot carry on ?—You are putting words into my mouth to which I did not give utterance. We only want the efficient man in the grocery trade, the same as in the legal profession. If he is more proficient he should be allowed to retain those advantages for himself and his family. 25. And to have a compulsory organization to enable him to live as against the competition of the more efficient man ? —I do not know that any such organization is suggested at the present time.
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26. Would you allow the " cash and carry " man to pass on a benefit up to 2£ per cent. ? —I would go further, and say up to 5 per cent. 27. Why would you set it at 5 per cent, if in actual fact economies in his business would enable him to give 8 per cent, or 10 per cent, to his customers ? —I have quoted one of the greatest economists, who said that the difference is not more than 5 per cent. ; and this is confirmed by other investigations that have been made. You may get individuals saying it is better than that, but when you analyse their statements you will find that they leave out certain items which have not been included. 28. Assuming they are making these profits, would you limit it at 5 per cent,., and not pass on 10 per cent, when they made it ? —ln the interests of the trade I would think he should stick to 5 per cent. I have quoted you Wheeler, which is the biggest thing of its kind in New Zealand, and that is 16 per cent., and we aim at 20 per cent. 29. You regard the P.A.T.A. as necessary to secure a fair and reasonable profit ?—Yes, for the manufacturer and distributor. 30. The wholesaler ? —And retailer, sir. 31. You know in actual fact that in most cases the P.A.T.A. will not have the slightest idea of the manufacturing cost ? —lt is not concerned with it. 32. How, then, do you suggest that the P.A.T.A. is necessary to secure for the manufacturer a fair and reasonable profit, when it is not concerned with this question ? —Let me put it to you by asking another question. Mr. Collins : Please answer the question, Mr. Barker. Witness: If the manufacturer is placing on the market an article that should be sold at Is. 6d. and it is being cut to Is. 2d. and he is losing his business, then it is perfectly right, surely, for him to protect himself. Mr. Kennedy : That is your answer, or what is intended as an answer; but it is not an answer. Mr. Myers : It is an answer. Mr. Kennedy : It was a question he gave. 33. Mr. Kennedy (to witness) : In the absence of competition, would not wholesalers and retailers treat as fair and reasonable the utmost they could get ? —No, sir. I resent that question. I want to say that there is no suggestion of any movement in the direction of increasing profits, or anything of that kind. 34. Mr. o'Leary.\ At the conclusion of your statement to the Committee you said, " In conclusion, I submit for the consideration of the Committee the desirability of amending legislation, which shall extend the scope of the P.A.T.A. in relation to those goods which at present it is prevented from dealing with, but manufacturers and distributors of which have a right to demand a measure of protection against the ignorant and reckless trader, the number of whom would appear to be rapidly on the increase." Do I understand from that that you suggest an amendment to the Commercial Trusts Act ? —Yes. 35. So that the operations of this association could extend to the commodities that it is prevented from dealing with under the present law ? —Absolutely, yes ; but I would go this far, and suggest that the price should be approved of by the Department of Industries and Commerce. 36. That is why you want an amendment ? —I have in mind a well-known brand of tea the sales of which have suffered because that tea has been sold at cost price or a fraction over. 37. Can the " cash and carry " grocer obtain the same rate of profit, of gross profit, on all the articles he sells, or is there a lower rate on some articles than on others ? —Judging from the prices, there is a lower rate on some articles and a mighty big one on others. 38. If the " cash and carry " grocer sells some articles at cost or below, what about the others • He has to get an extortionate profit on them. 39. Just so. Speaking generally of what we call proprietary articles as compared with bread-and-butter goods, it is the fact, is it not, that the proprietary lines are slower selling than the others ? —Yes. 40. When you speak of allowing the " cash and carry " man to give 5 per cent, to the customer I take it you are referring to the proprietary goods ? —Yes, certainly ; and other goods, too. 41. If a grocer is allowed to give the benefit of only 5 per cent, to his purchasers on proprietary lines, is there anything to prevent him, if he wishes to do so, still being altruistic enough to give the whole of his economies to his customers on bread-and-butter lines if he wishes to do so ? —There is nothing to prevent him. 42. Mr. Hayward.\ You are secretary of the Master Grocers' Association, are you not ?—Yes. 43. That organization extends all over New Zealand ? —Yes. 44. What percentage of the grocers are in your organization ? —That is difficult to say, sir. The federation has only been in existence four years. With one exception —namely, Christchurch— all the grocers' associations, I think I am right in saying, in the Dominion are affiliated. 45. You do not know the individual grocers ?—Well, three or four years ago I went over the whole of the Dominion and came into contact with them. I want to say this : that you will always find a very large number of grocers —the same applies to other traders —who are prepared to take all the advantages which the association forces upon them, but they are not prepared to link up and pay their subscriptions. We cannot Compel them. 46. What is the total membership of your association throughout the whole Dominion '(—I cannot tell you. 47. Are there two hundred members? —Certainly; we have over 200 between Wellington and Auckland. 48. Could you give me any indication of the percentage of turnover that the credit grocer would lose in bad debts? — I will say without hesitation that it does not exceed, if it reaches, J per cent. It is grossly exaggerated by the " cash and carry " trade.
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49. Do you know the rate of profit under the Queensland Government price-control ? —Roughly speaking, it was 20 per cent. 50. Mr. Montgomery.] Have you given any consideration to the question of the expenses of distribution as .between the manufacturer and retailer ? —No. 51. Do you consider from your experience that the present system of purchase by the retailer through the wholesaler is the most beneficial to the public ? —Not necessarily. To put it in other words, under existing circumstances the wholesaler is regarded by some as the necessary evil. The manufacturer is faced with this : that the only method he has of distribution so far as his goods are concerned is through the wholesaler. 52. Have you any idea of the difference in overhead expenses as between the grocer and chemist— that is, the average retail chemist ? —No, I have not. 53. What would be the grocers average overhead ? —lt is to-day anything from 14 to 18 and 19 per cent. 54. Mr. Reardon.] Take an old-established firm like Wardell's : supposing they could go to the source of supply and get their goods direct, does the Grocers' Association object to that firm passing the saving on to the public ? —Yes, because of the injury it does to the smaller men in business. You cannot get away from the fact that you have to give consideration to them. 55. Mr. Collins.] Do you think the fixation of prices should reach the conditions in Queensland — they can go as far as they like in regard to price-fixation ? —There are good points to be found from what we may call bad Governments. 56. Have you taken any steps to try and meet cutting, particularly in Auckland, as an official of the Grocers' Union ?—I have interviewed those individuals who were cutting, but unfortunately not with much result. For instance, one man that I have in mind was selling flour and sugar at barely 5 per cent, on cost. On one occasion when I was speaking to him a woman came in, and I was pleased when she asked for a bag of sugar and a bag of flour, and I said to him that I wished to heaven everybody would come in like that. I submit that there is plenty of room for competition without this cutting of prices which is at present practised. The Committee adjourned until 10.30 a.m. on Monday, 28th February, 1927.
Fifth Day : 28th February, 1927. The Committee met at 10.30 a.m. Harold James Hay sworn and examined. (No. 14.) 1. Mr. Myers.] lam a traveller representing an English firm at present. I live in Wellington. 2. You are not employed by or with Mr. Marriott ? —No. 3. Have you ever been employed by him ? —Yes. 4. Up till when ? —Last November or beginning of December. 5. Do you know [Name deleted] ? —Yes. 6. What is he ?—A fancy-goods man. 7. With whom, if anybody, have you associated him ? —I have been under the impression that he was working with Macdufis, of Wellington. 8. What gave you that impression ? —He made a statement that he would be buying goods through that firm. 9. From you ?—From our house, Bourjois. 10. We have had it from Mr. Marriott that goods which were ordered by [Name deleted] were delivered to Macdufis in Wellington ?—Yes, ordered through Macdufis, delivered to Macdufis, and paid for by Macdufis. 11. Were you present at any conversation with [Name deleted] when the question of cutting was discussed ?—Yes, I was present. 12. When was that, about. I could not say exactly. I think it would be about July last. 13. That, of course, is more or less a guess ?—Yes. 14. Tell us what the nature of the discussion was ? —Mr. Marriott was present with me. Several firms were cutting our lines in [Name deleted], and [Name deleted] started to cut as well. We interviewed [Name deleted] and he complained about other firms cutting. He said he was ready to sell at proper prices and not cut provided he received the 20-per-cent. discount which was allowed to wholesalers. 15. Who made that suggestion ? —He made the suggestion in order to get on the wholesale basis. He said if he were put on the wholesale basis lie would not cut the lines. 16. And if he were not put on that basis ? —He would go on cutting to meet the competition of the other people. 17. Have you had any other experience in regard to Bourjois' lines with firms other than [Name deleted] ? —Yes, I could mention [Name deleted] of Dunedin. They used the same arguments as [Name deleted] that they would not cut if put on the wholesale terms, but that they would do so unless they were. 18. Any other firms ? —They were about the only two prominent firms with whom I had persona] arrangements.
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19. Mr. Kennedy.'] Do I understand you to say that this conversation took place in Wanganui ? —Yes. 20. And that there were present [Name deleted], Mr. Marriott, and yourself ? —Yes. 21. Was it at [Name deleted] own shop ? —Yes. 22. You and Mr. Marriott had gone to see him ; he was not seeking you ? —That is so. 23. Did [Name deleted] complain of other people price-cutting ? —Yes. 24. You had previously put other retailers on the special-terms list, had you not ?—That was the first discussion I had with him. 25. But you had put other retailers in New Zealand on special terms, had you not ? —Yes. 26. So that [Name deleted] was only asking from you a privilege that you had already extended to others ? —Yes. 27. Was it about the cutting of this article that [Name deleted] complained ?—Several articles. 28. He was not at the time cutting it ?—Yes, he was cutting it at the time. 29. But he complained about other people doing the same ? —Yes. 30. Mr. Montgomery.] Did I understand you to say that 20 per cent, was allowed by your firm to the wholesalers ? —Yes. 31. And what is the discount to the retailer ? —2 J per cent, and other discounts for special quantities. 32. Mr. Reardon.] There is nothing morally wrong in a retailer endeavouring to deal direct with an indent agent ? —No, nothing morally wrong. 33. The Chairman.] Outside of a few firms, I suppose there is not much cutting going on in lines you represent in the Dominion ?—No, very little in regard to the lines I am associated with. 34. Was this Wanganui firm selling all the lines you represent ? —A good range of them. 35. Was he cutting all or one of them ?—I should say half a dozen out of fourteen or fifteen lines. 36. Did he cut below cost ?—No, not below cost. 37. Do you know what percentage ? —I expect some would not be more than 15 to 20 on cost. 38. Mr. Myers.] When you said 20 per cent, to the wholesale, what did you mean ? —2O per cent, off the list price to the wholesaler. Arthur Frederick Crisp sworn and examined. (No. 15.) 1. What is your occupation ? —I am a grocer on my own account. 2. And your place of business ?—282 Willis Street and 47 Aro Street. 3. How long have you been in the grocery business ? —About twenty-three years. 4. All that time in New Zealand ? —No, three years in New Zealand and previously in England. 5. Have you in the neighbourhood of your shops any cutting rival I—Yes.1 —Yes. 6. How near, and who is the rival ? —There is one six doors away from the Willis Street shop— that is the Self-help Co. ; and about 100 yards away from the Aro Street shop —the same company. 7. How long have thosd shops been operating against you ? —All the time 1 have been there—two years. 8. Have you joined the P.A.T.A. ? —Yes, in order to protect myself on standardized articles, if possible. 9. Protect yourself against what ?—Cutting. 10. Is there much of that ? —Yes, a good deal of it. 11. What do you do now to meet that cutting ? —We have to do the best we can wherever we can. 12. What do you mean by that ? —That we buy stuff they do not stock and try to make a fair margin on that, and work against the articles that are being cut as much as possible. 13. I suppose that might be called substitution ?—lt is substitution of a fair article at a fair profit. 14. For the article which the customers wants ? —Exactly. 15. Does that require persuasion ?—Yes, every time. It requires salesmanship. 16. And the customer gets something he does not want in place of something he does want ? — Yes, we introduce another article. 17. Apart from the question of substitution, do you know the expression " recovery lines " ?— Yes, I know that expression. 18. Do you have to use other goods for recovery purposes other than those which are being cut ? •—Yes ; we have our regular lines in substitution. 19. But suppose you cannot substitute : suppose a customer demands a certain article ? —We have to sell it. 20. Even if that line is being cut ?—Yes. 21. How do you make up your losses on those lines ?—There is one way —by taking up a similar line ourselves. I refer to tea. 22. Take Lane's emulsion : is that sold by ? —Yes ; it is sold at 3s. 9d. bv them, and it costs 3s. 9d. 23. Kruschen salts ? —Yes ; it costs Is. Bd., and sold by at Is. 9d. 24. Clement's tonic ?—Yes ; costs 2s. 7|d., and is sold by them at 2s. 6d. 25. Do you stock it at all ? —No, I cannot stock it. 26. And Velvet soap ?— I get a |d. profit on Bd. I have to stock that. It costs me Bd. and and I have to sell it at BJd. to meet competition. 27. Why ? —The other people are selling it at that price. 28. You are endeavouring to substitute something else for ? —Yes, a soap called —a slightly larger bar, which we sell at 9d.
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29. Do you consider it is as good or a better article ? —I cannot say; but I consider it is, because I have to tell people so. 30. What does it cost you ?—lt costs me, roughly, 7Jd., and I sell it at 9d. and make lfd. profit. 31. Have you made any special arrangements in regard to your stocking of that ? —Yes ; the conditions are that my competitors are not to be served with it. 32. Otherwise you fear that would be cut too ? —Yes, it would be. 33. Take Eno's fruit-salts : in order to buy Eno's on the best terms, how much do you have to spend ? —£lo 16s. 34. And, buying in that way, what is the cost to you per bottle ?—3s. a bottle. 35. And you have been retailing it at ?—3s. 3d. a bottle ; sometimes 3s. 2d. 36. That does not show a big profit ?—No ; it is insufficient. 37. But still you sell it at that price ?—Yes. 38. As a matter of fact, can you sell it at that price ?—No. 39. I mean, are you forced to sell it at that price ? —Yes ; we make a slight profit. 40. At what price is the Self-help selling it ?—At the same price, so far as I know, or probably cheaper. 41. Do you know of other people selling it below 3s. 3d. ? —Yes, some are selling it at 3s. 42. Take Bell tea : what do you sell that at ? —2s. lid. ; that is sd. under the marked price. 43. What do you make on that ? —About a Id. a pound. We have to buy five cases to get 2f per cent. off. 44. That is not a paying profit ? —No. 45. Why do you sell it at that price ? —To meet the competition of the Self-help, who are selling it at the same price. 46. I think you used to sell Bell tea ?—I was selling five cases a month before Christmas. It enabled me to buy less 2-J per cent. I was selling at 2s. lid. 47. May the Committee assume you were selling Bell tea to anybody who asked for it ? —Yes. 48. Did you at the time you are speaking of make any alterations in your methods ?—Yes ; I came to the conclusion that it was no good to me. 49. And what did you do ? —I set about packing a tea under my own brand —one that I could get a reasonable rate of" profit from. 50. At what price do you buy your bulk tea ? —Prom Is. 7d. to 2s. 2d. 51. Do you blend it ? —Yes. 52. Are you an expert ? —I do not say lam an expert, but I know how to blend. 53. And you get for that tea ?—From 2s. 4d. to 2s. lOd. 54. So that you get a profit of about Bd. ? —-Yes, from 6d. to Bd. 55. What priced tea do you buy most of ?—I pay about 2s. mostly for the bulk tea. 56. Whereas you used to sell five cases of Bell tea a month, what do you sell of that brand now ? —About two cases. 57. Are you selling much of your own tea ? —Yes, selling a fair amount. 58. Are you selling it to people who ask for Bell tea—l do not mean in every ease ? —lf a person asks for | lb. of tea we hand them our own brand and they are satisfied. 59. Suppose anybody asks for Bell tea ?—We give them Bell tea. 60. Do you suggest to them that you have something just as good ? —Sometimes, yes. • 61. If you were getting a reasonable profit from Bell tea, would you bother much about your own ? —Not so much, because it entails a lot of labour. 62. Bell tea has come down from 3s. 4d. to 2s. lid. ? —Yes. 63. What view do your customers take of that fact—l mean the mere fact of its price coming down ? —Some ask whether it is the same Bell tea —the right Bell tea. 64. It creates suspicion in the minds of customers ? —Yes, certainly. 65. Take another line —St. Mungo's soap : do you stock that ?—Yes. 66. At what price do you sell that ?—ls. 7d. 67. What does it cost ? —ls. 7d. I believe that by buying 10 cases from one firm you can buy less 10 per cent. ; but sometimes a man does not want to carry ten cases. 68. Why have you been selling that at Is. 7d. ? —To meet the competition of the Self-help. They are selling it at cost. 69. And you find you have to keep it ? —Yes ; it is an every-day line—everybody uses it. 70. During the three years that you have been in business have you managed to make both ends meet ? —Just about, and that is all. 71. Will you explain what you mean by that ? I mean, do you make substantial profits, or small profits, or a living-wage ? —I make a living-wage. 72. You have succeeded so far, at any rate, in making a living-wage ? —Yes. 73. And no more ? —No more. 74. What do you regard as a living-wage ? —(Witness handed in a slip of paper on which he wrote his answer to the question.) 75. Is that apart from your living-expenses ? —That includes my living-expenses. 76. The Chairman.] Do you supply your family with|groceries ? —That is included in the figure I have supplied. 77. Mr. Myers.] What sort of hours do you work ?—I am always there at Bin the morning and we close at 5.30 in the evening. If anything has to be done, Igo back and do it.J 78. So that you work long hours ? —Yes. 79. How many men have you been employing ? —One man, a junior, and a boy. 80. And you do a cash and credit business ? —Cash and credit at Willis Street, and cash only at Aro Street.
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81. Where have you employed those persons ? —The junior is at the Aro Street shop, and the man is at the Willis Street shop, together with my wife. 82. Do you still keep both those hands ?—I have discharged the man a week ago, because I could not afford to keep him, but I am still carrying on both businesses. My wife and a boy are carrying on at Willis Street. 83. So that you have your wife and a boy at Willis Street, and yourself and a boy at Aro Street —Yes. 84. So that you were compelled to "sack" a man and put in a boy at Willis Street ? —Yes. 85. Would you have had to do that if you had been getting a fair and reasonable margin of profit on these different lines which are being cut ?—No, 1 do not think I should have had to do so. 86. And on some of those lines which are cut quite a substantial business is done. —Yes ; they are some of the best lines which are cut. 87. Mr. Kennedy.'] What profit do you say you would have earned if there had been no competition in prices ?— The profit I should expect would be 15 per cent, on turnover. 88. I mean your net profit to yourself. You have put down a figure : what would that figure have been had there been no competition in prices ? —5 per cent. 89. What would that have worked out to ?- About the figure I have given to the Committee. 90. So that had there been no competition you would not have earned any more than the figure you have given to the Committee ?- That is what I am living on at the present time, but it is not sufficient. 91. Do you suggest that if there had been no competition in prices you would have earned a larger figure ? —Yes. 92. What figure do you think you would have earned if there had been no competition ? — About another £2 10s. a week. 93. That is without any increase in volume of business ?—Yes. 94. So that in the case of your business the use of recovery lines does not mean that all the loss s recovered by you ? —That is so. 95. The consumers have collectively got £2 10s. a week by reason of these competitive prices ? —Yes. 96. Was the Self-help there when you started in the region ?—Yes, they were there. 97. And, I suppose, carrying on under the same system as they are now, when you commenced in the locality ? —Yes. 98. And I suppose you were well aware of the method under which they carried on their business prior to your commencing, and that you went with your eyes open ? —Yes. 99. And I suppose the first thing you did was to endeavour to meet their prices ? —Yes. 100. You buy comparatively small quantities compared with the quantities bought by the Selfhelp ?—Yes ; they have twenty shops and can buy larger quantities. 101. So that they start with an initial advantage over you by reason of the fact that they are bigger buyers ? —Yes. 102. I suppose you will concede that different grocers can afford to sell at different prices?'— Different things, yes. 103. Because some buy better than others ? —Yes. 104. And because some have a quicker turnover ?—Yes. 105. And because some perform less service than others ? —Yes. 106. Service costs money ?—Yes. 107. So that you expect some difference in prices under normal conditions?—No, I do not. 108. Do you expect, notwithstanding the fact that some men buy better than others, and some have larger turnovers, and some give less service, that there should be a uniform price running throughout the grocery trade ?—For a standardized article, yes. But if a man can buy, say, prunes, at a better price than his competitors, and he likes to cut that price, and the same applies to all open lines, I say " good luck to him." 109. That is to say, that if he buys at better prices than others he may pass that on to the consumer ? —Yes. I would do the same. 110. Did you have a good capital to start with ? —I would prefer not to go into details. 111. Would you write it down for the Committee? —1 would rather not write it down for the Committee —that is, the capital I started with. 112. You mentioned St. Mungo's soap : That is a line you substitute ?—No, we cannot substitute that. 113. Laborlite —you said it was a slightly larger bar ? —Yes, we get fd. more on that. 114. What does it cost compared with the other soap ? —lt costs the same price, less 10 and 2| per cent. 115. But the selling price to the consumer ? —A halfpenny more. It is slightly larger than the others —say, from I oz. to 2 oz. 116. Is it as good as the other ? —Yes, I think it is as good. People stand by it. They are the best judges. 117. Do you find that the average housewife is a discriminating buyer ? —Yes, very discriminating. 118. Keeps a keen eye on prices ? —Yes. 119. So that you have to reduce prices to hold her trade ?—Yes. 120. It is hard, I suppose, to work those recovery lines on to her ? —No, not always, once you get into their confidence. 121. But she is a careful, discriminating buyer ? —Yes ; she compares the prices in the various shops.
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122. And I suppose that would apply to practically the whole range of ordinary groceries?— Yes. 123. I suppose it is only in out-of-the-way things that she is not discriminating ? —There are no such things as out-of-the-way things in the grocery business. Everything is handled every day. 124. Mr. o'Leary.\ Do I understand that the Self-help shop was established in Willis Street when you opened your shop in that street ?—When I took over, yes. 125. Then, subsequently, did you take over or open another shop in Aro Street ? —I took over the shop, less the stock. 126. And the Self-help shop is so placed that it trades with both the Aro Street and Willis Street locality ? —Yes. 127. I take it that there are many lines which you sell and the Self-help sell on which there is no cutting ? —Oh, yes, there are certain lines which are not cut. 128. How do your prices for the non-cut lines compare with those of the Self-help ? —The same. 129. Mr. Walker.] I put it to you that you fought your way to your present position bv hard work and good salesmanship ? —Yes. 130. You are a well-trained salesman with long experience ?—Yes. 131. A good salesman-is the very reverse of an order-taker ?—Yes. 132. It would follow, therefore, that in any kind of trade you would naturally employ the methods of salesmanship for your benefit ? —Yes. 133. Does it not follow, then, from the fact of your being a good salesman that a customer would frequently go out of your shop with a different article from the one he or she came in for ? —That is a sound argument you put up, and it is quite right that in my position as a smaller buyer than the bigger man I have to do that; but Ido not substitute an inferior article, otherwise customers would not come back. 134. Substitution is capable of an ordinary interpretation or a sinister one. There are two forms— one a despicable one, deceit, and the other, legitimate salesmanship ?—Yes. 135. And you admit that in any trade you would use your gift of salesmanship ? —Yes. 136. Mr. Myers.] Do you mean to tell Mr. Walker that where a person comes in for a particular article which you have in stock, and on which you would obtain a reasonable profit, you would endeavour to sell something else in its place ?—Oh, no ; certainly not. 137. But if the same line is being cut elsewhere, and you cannot obtain a reasonable profit on it ? —Then we would endeavour to substitute. 138. You were speaking of cutting having gone on from the time you started in Willis Street and Aro Street: would you say whether that cutting has become more or less intense during the last three years ? —I think it has found its own level. 139. But during the last three years ? —I think it has remained about the same. It has, of course, extended to new lines. 140. You were asked whether different groceries did not sell at different prices, and whether some grocers cannot afford, in certain circumstances, to take less profit than others. Can any grocer, in your opinion, legitimately afford to sell at cost or at a very small percentage above cost ? —No. 141. You stated that in respect of the non-cut lines you get the same prices as the Self-help ? —Yes. 142. When you speak of those non-cut lines, are you referring to proprietary articles which are not cut, or open lines which are not cut, or both ? —I was speaking of both. 143. So that you do not take advantage of " come-back " or recovery lines except where you substitute in the manner you have already mentioned ? —That is so. 144. Take, for instance, an article like flour : is it usual or otherwise for persons to come in and say, " I want six-pennyworth of flour ? " ?—Yes, it is quite usual. 145. Without asking for any particular brand of flour ? —Yes. 146. Do you, or do you not, know how much flour Self-help give for, say, Is. ? —I did know. 147. Have you seen their packages ? —Yes ; this week they had it marked in the windows 4i lb. for Is. 148. But, as a rule, how much have they been in the habit of giving ?—I have not seen their packages, but I know what they were giving when flour was costing £20 a ton. 149. Were they advertising ? —No ; it was announced in their windows. 150. Do you know, or have you seen from any of their packages, how much flour they have given for, say, Is. or 2s. 6d. ? —No. 151. So that in an article like flour you do not know whether you are selling at the same price or not ? —No. 152. And do you not know whether or not they use it as a recovery line ? —I could not tell you. 153. Or whether they use salt or soap as a recovery line ? —No ; I do not know. 154. Mr. Hayward.] You mentioned that you had had twenty years' experience of the grocery trade in England. The P.A.T.A. has been in operation there for many years. Have you had anv experience of its operations in England ? —I was in the co-operative movement in the Old Country. 155. But have you been in a business where you were observing the P.A.T.A. list prices ? —No. I was in private business before the P.A.T.A. came into existence. 156. It has been going for twenty-nine years ? —I observed the prices on the list, but it would not come under my notice. 157. In estimating your earnings which you handed in just now you did not allow for interest on your capital ? —No. 158. Your capital is only buying you a position at the rate you handed in ? —Yes. 159. You derive no interest at all from, what you have invested in vour business ?—No.
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160. Mr. Montgomery.] When you see the Self-help prices 011 their window, how does that affect you ? —I have to follow. If I happen to be -|d. more than they are I have either to come down to their level or do no business. 161. Mr. Reardon.\ Do you allow your wife a wage for running the shop ?—No; I allow her nothing. I cannot see my way to allow her anything. We work together, and if we are successful we share it; if not, we will have to go out. 162. The Chairman.'] Have you arrived at the difference in cost of running your Aro Street shop as compared with the Willis Street shop ?—I have arrived at the difference in expenses, yes. 163. Which is the cheaper shop to run ? —Aro Street. I got it at an exceptionally cheap rent. 164. But one is a cash business, and the other cash and credit ?—Yes. My Aro Street shop is strictly cash. 165. Are you satisfied, in view of the competition which you have to face, with the return you are getting ?— No, I am not satisfied. 166. Are you satisfied with your present position compared with your position in England ? —No. 167. You were better off as an employee in England than you are in New Zealand to-day ?—Yes. The only thing is that lam freer here. lam my own master, and I should never have become my own master there. 168. In view of the existing competition, did you expect to do a great deal better than you are doing to-day ? —Yes, I did. 169. Even having regard to the methods and cut prices ?—I thought I could hold my own. 170. What is your overhead in Aro Street ? —I reckon it works out at 10 per cent, in Aro and Willis Streets. We have to pay more rent in Willis Street, and I have to pull it down. 171. How do you pull it down ?- —I do not pay my wife wages. Arthur William Press sworn and examined. (No. 16.) 1. Mr. Myers.] What is your occupation ?—I am managing director of Thompson Bros., Ltd., of Wellington, wholesale grocery merchants. 2. Your company is the agent for the proprietors of Amber Tips tea ?—Yes. 3. Are the proprietors of that, tea a New Zealand company ? —Yes ; they are Messrs. Fletcher, Humphreys, and Co. 4. Do you remember when that tea was first placed on the market ? —Somewhere about 1908. 5. Is it a tea which is blended in New Zealand by Fletcher, Humphreys, and Co. ? —Yes. 6. Are they experts, or have they an expert whom they employ for the purpose of blending teas ? — They have experts. 7. And is that their principal proprietary line of tea ? —Yes. 8. Perhaps their only line ?—Up to a year before last it was their only line, but they now have a line called Empress ; but. Amber Tips is their main line. 9. Is it a line which they advertise ?—Yes, very extensively. 10. Is it a line the sale of which started in a small way ? —Yes, very small. When we first, took over the agency our first order to them, which I gave, was for five cases. I fancy that was in 1908. 11. By dint of advertising and quality, I suppose, did this tea become established on the market ? — Yes. 12. It became a popular tea ? —I believe it was looked upon, and still is looked upon, as a leading packet tea. 13. Can you say when the sales of that tea reached their peak ? —As far as Wellington is concerned, about three years ago. 14. When you say " Wellington," you mean ? —The Wellington Province. Why I speak only of that is because we are only concerned with the Wellington Provincial District. Our agency only takes in Wellington this side of Palmerston North and Woodville. 15. Wellington District up to Palmerston North and Woodville ? —Yes. 16. Have the sales suffered since then ? —They have in the Wellington District. 17. Can you attribute any particular cause to that ? —We attribute that to cutting, as up to that time sales showed a steady progress. 18. And up to that time had there been much cutting ? —Only in isolated cases ; but it became intensive from three years ago onwards. 19. When you say it has become intensive during the last three years, has it increased ? —Yes, it has increased, because there has been a " follow on." 20. Have you during the last three years maintained the advertising, and have you maintained the efficiency of your salesmanship ? —Yes ; in fact my principals inform me that they have spent more money on advertising during the last three years. 21. What price do you pay for that tea ? —As wholesalers we pay 2s. 10d., less 6J- per cent, trade discount, plus 7d. per case landing charges, less 2| per cent, monthly settlement. 22. Can you tell us what that means net ?—No, I have not worked it out. 23. How many pounds in a case ? —6O lb. 24. My friend Mr. Young makes it 2s. 10d., less 8| per cent.? —Very likely that would be right. The 7d. represents per cent. 25. Can you tell us the price the wholesaler charges to the retailer ? —2s. lOd. for up to five cases ; 2s. 10d., less 5 per cent, for five cases and over, with the usual 2| per cent, for monthly settlement 26. I think the proprietors of the tea mark the price on the package ?—-Yes, 3s. 4d. per pound . It is marked on both ends of the packet.
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27. You say that the line has been cut during the last three years : do you know to what extent it has been cut ? —lt started off by coming down to 3s. ; then it seems to have been maintained at 2s. l id. ; and I understand it has recently been cut to 2s. lOd. Some time ago it was 2s. lOd. at the Hutt; but the 2s. lOd. to-day is in evidence at Courtenay Place. 28. I. suppose you have been in business for a number of years ? —Yes, roughly, thirty-five years. 29. As a result of your business experience, what results do you anticipate to Amber Tips tea and its proprietors if this cutting continues ? —lf the cutting continues I think it will have very detrimental effects, and in time it might put the line off the market. 30. We have been told by several grocers that what they do is to buy bulk tea, blend it themselves, and sell it under their own brand, substituting that tea for the Amber Tips and other brands. Is that what you would expect to find ? —Yes, it is what obtains. In a case where a line such as Amber Tips is cut, I suppose if you went round to the retailers you would not find Amber Tips on show. If a customer asks for Amber Tips and the salesman has time he will endeavour to sell another brand, and particularly hi.s own brand, if he has one, out of which he makes more profit. 31. Have you yourself seen that done? —Yes. I was in a store recently, and a customer came in and asked the retailer: "Have you any Amber Tips at 2s. lid.?" to which he replied "No, not at 2s. lid., but at 3s. 4d ; but here is my own tea at 2s. lOd. —it is just as good." When the customer left I said to the retailer, "That is rather hard on us, isn't it?" He answered, "Well, what do you expect ? I made lOd. on that." 32. You have been in business in tea during the whole of your business life ?—Yes. 33. Is tea-blending in itself a science? —I should say so. We have not tackled it, and I would not like to tackle it. 34. You know Nelson Moate teas and the proprietors of Bell Tea : who are they ? —lt is a company called the Bell Tea Company. 35. Do those companies or firms which blend teas and sell them under brands or proprietary names all get experts for blending purposes ? —So.far as my knowledge goes, they do. They could not make a success of it unless they did. 36. Has the ordinary grocer who buys bulk tea and attempts to blend it, and sell it in his own packet, any knowledge or experience of blending tea ? —1 should say not. The fact that tea-blenders receive exceptionally high salaries and take particular care of themselves in order to keep their palates clear inclines me to the opinion that a man doing such small blending could not call himself an expert. 37. Are you able to say whether during the last three years the cutting has been worse in some places than in others ?—Wellington has been the storm-centre. 38. But there has been a certain amount of cutting in other places ?- - I understand that there has been cutting at Auckland and Dunedin, but we are not concerned there ; but we are told that it has been going on in those places. There has been a little cutting in Wanganui, but I believe that has been " patched up." 39. Can you tell us, speaking of your own district, whether the diminution of sales has been in places where the cutting has been most intense, or in other places ? — It has been most noticeable within a certain area —say, the town area —where the cutting has taken place. For instance, at Miramar and Day's Bay there has been no cutting, and the retailers have maintained their area. At Karori and Upper Hutt also the prices are maintained. 40. We have heard that Mr. Sutherland, of the Self-help Company, sells Amber Tips at 2s. lid. Can you tell the Committee whether it is possible to buy at such a price as to enable him. to sell at 2s. lid.—l mean, and make a profit ? —He could buy at 2s. 10d. less 2-J- and 2\ per cent., and I should say that selling at 2s. lid. was not an adequate profit for his or any business. 41. It may be suggested that he is buying better than that. Do you know from any conversation you have had with him whether he has been, or could, buy better ? —Mr. Sutherland approached me about twelve months ago and asked for supplies of Amber Tips. He had previously been drawing his supplies elsewhere. He told me he was only able to buy at 2s. 10d., less 2-J, and desired to obtain supplies direct from us. 42. And did you give him those supplies ? —No, I asked him to observe the price. By observing the price, we suggested that 3s. 2d. was fair for a cash trade, and that we would not regard 3s. 2d. as cutting. 43. That would leave him 4d. a pound ?—Yes. 44. That is 13 per cent, on sales. Is 13 per cent, on sales, in your opinion, a fair and reasonable profit even in a cash business ? —Judging by cash returns of retailers, that is about what they would look for in a cash transaction. 45. Did he agree to sell at 3s. 2d. or any particular price ? —No, he said he would if we supplied him direct. 46. So that he was not objecting to taking the profit ? —I do not think so. 47. You do a general grocery business ? —Yes. 48. And you stock many of the proprietary lines which are sold at chemists and grocers ? —Yes. 49. Have you experienced much cutting by some retailers in those lines ? —Yes, there is cutting in the proprietary lines. 50. Serious cutting in some of the lines ? —Yes. 51. At all events you have joined the P.A.T.A. ? —Yes, because we believe it will be for the improvement not only of the trade but generally the whole people interested —that is, buyers, sellers, and the public generally. 52. Mr. O'Leary,] From your knowledge, has the practice of grocers buying tea in bulk and blending it existed for a number of years ? —lt has been more or less, yes, but not so extensive as recently. 53. Has that increased recently ? —Yes.
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54. I take it from what you said that the grocer, generally speaking, makes more on the sale of bulk tea that he purchased and blended than on the proprietary lines—say, Amber Tips or Bell ?— It is generally understood so. 55. Then it is to his advantage to push the sale of what I might term the bulk tea as against Amber Tips ? —Yes, it would be. 56. It occurs to me, and I put it to you, that that is a fairly reasonable explanation of the decrease in your sales ? —No, I do not agree with you. 57. It seems to have a logical sequence ? —lt would appear so, but, at the same time, the practice has been that where they can sell a proprietary article with no trouble and get a fair return on their turnover they would just as soon sell that as go to the trouble of blending. 58. But does it not seem quite the natural sequence ? They buy this tea, pack it themselves, get a better profit than on the Bell or Amber Tips: they therefore push the sale of their own tea, and Amber Tips.suffers ? —They push the sale, and the fact that they cannot get the turnover on their own lines is the reason why sales in proprietary lines can be brought to their present standard and steadily advance where there is no cutting. 59. I take your own example of the grocer whom you saw selling his own bulk tea, and making a profit of lOd. Selling Amber Tips at the best rate for himself, he would make 7d. ? —Yes. 60. He would still have a margin of 3d. over his packing and extra work ? —Yes ; but he is not getting the satisfaction of repeat sales. 61. I am afraid that does not convey much to me ? —lt means that his quality of tea may not satisfy the customer, and he has only made one sale, whereas he will make continuous sales of Amber Tips. 62. However, that is the position between the two sales ? —So far as making a profit on that individual sale, yes. 63. Bell Tea is a serious competitor of Amber Tips ?—Yes. 64. Have you any knowledge of their relative positions during the last twelve months ? —No. 65. Mr. Walker.] With regard to Amber Tips, I believe that tea is known as a " fine " tea ?— It is advertised as one. 66. It is regarded by tea men as a " fine " tea ? —Yes. 67. It being a " fine " tea, 1 put it to you that it will naturally appeal to " fine " palates ? —We will agree with you. 68. And for other palates I suggest that it has not enough " kick " in it for the ordinary person ? —I do not agree with you. 69. I put it to you that it is the lightest liquor tea on the New Zealand market ? —I could not tell you. 70. I suggest that there is a limitation to the sale of Amber Tips, in that it only appeals to fine palates which can appreciate it ? —I do not agree with you. 71. The market for fine teas in Colombo —and most of these teas come from Colombo—shows some nasty variations ? —Yes. 72. And that, as there was a limit to the price of fine teas in Colombo, Amber Tips has not always succeeded in maintaining its quality ? —I do not agree with you. 73. Do you suggest that when fine teas rise in Colombo the makers put the same quality of tea in Amber Tips, and that with such a big rise in the Colombo price of tea they can sell it at the same price for the same quality ? —I understand that their purchases are sufficient to carry them over the rises. 74. You talk about the inexperience and inability of the retail grocer to do his own blending ? — Yes. 75. You know that the big wholesalers, like Harrison Ramsay, George Ginn, and several others, have their tea experts ?—Yes. 76. And have blending experts to advise clients ?—Yes. 77. Are you not aware that any grocer can go to any of those big firms and say to them he wants to put up, say, a 2s. Bd. packet of tea, and that those firms will give that grocer the best advice and fix his standard of blend ?—That is something new to me. 78. So that you have no knowledge that the grocer can get expert blending knowledge without any cost I—Not to my knowledge. Edwin Salmond sworn and examined. (No. 17.) 1. Mr Myers.] You are a member of the firm of Salmond and Spraggon ? —Yes; they are manufacturers' agents. 2. Do you also keep stocks of lines in respect of which you are agents ? —ln some instances we have to keep stocks in New Zealand, and in other instances the wholesaler imports these lines direct, and we simply act for the manufacturer here on commission for those lines. 3. Your firm has joined the P.A.T.A. ? —Yes. 4. I think you personally are chairman of the executive of that organization ?—Yes. 5. Why have you joined the association ?—The main reason is that the great bulk of my principals, manufacturers of proprietary lines, are members of the association in the Old Country and are keen on the association, and we have practically received instructions from them to put their lines on, so I thought it was my duty to go on the association. 6. But you know the objects of the association ?—Yes.
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7. We have been told that the association does not fix prices, and that it has the right to refuse a manufacturer if the executive think that the profit allowed to the wholesaler and retailer are too high ? —Yes. The manufacturer makes his own price, and the association has'the right to veto it. 8. Have you in your own experience as a manufacturers' agent in New Zealand come to any conclusion as to the desirability or necessity for the existence of the P.A.T.A. ? —Yes. I think some such body is highly desirable in New Zealand, on account of the excessive price-cutting that has been going on in standard lines within the last few years. 9. You have had experience in excessive cutting in proprietary lines ? —Yes. 10. Would there be any objection on the part of your association to an officer of the Board of Trade being on your executive, or officers of the Board of Trade, for the purpose of exercising some supervision ? —So far as lam concerned, there would be no objection. I think the association would rather welcome it. 11. So that an officer or officers of the Board of Trade would have an opportunity of joining with your executive in seeing that prices were not charged which were giving undue rates of profits to either wholesaler or retailer ? —That is so. 12. And supposing it were not considered advisable by the Board of Trade to have one of their officers on the association, would there be any objection, so far as you know, to the proposed prices being submitted to the Board of Trade ?—There would be no objection whatever to the prices being submitted to the Board of Trade. • 13. May the Committee take it that the desire of all those who are joining the association is that trade in these proprietary articles shall be stabilized at fair and reasonable prices ? —Yes, that is our object. 14. Mr. Kennedy.'] I suppose that trade in the lines you represent is quite satisfactory ? —Yes. 15. You have no reason to feel dissatisfied with your own efforts in connection with the lines you represent ?—I do not quite understand your meaning. 16. You are satisfied with the results you are getting ? —No, we are not altogether satisfied. 17. They are reasonably good, although they do not satisfy your ideal standard ? —They are reasonably good. 18. Your manufacturers have no legitimate complaints against you or the results you are getting ? —No. 19. When registration of the association is applied for, no information as to cost of manufactured articles are supplied to you ? —None whatever. 20. So that you cannot profess to revise in the public interest the profit that the manufacturer is getting ?- -The manufacturer's profit has nothing to do with it. 21. The association is only concerned as to the conditions imposed by the manufacturer ? —The association is concerned with the price at which the article is being sold. 22. To the wholesaler and retailer ?- -Yes. 23. You are concerned to see that the wholesaler gets an adequate profit ?• —Yes. 24. And what really concerns you is more the adequacy of the profit to the wholesaler that the fairness of the price to the consumer ? —No. 25. Do you know the Commercial Trusts Act ? —I have not a great knowledge of it. 26. Have you sufficient knowledge to express an opinion as to whether you think it advisable to extend that Act to cover all articles ?- -I know it cannot cover foodstuffs. 27. But can you assist the Committee by stating whether you consider it advisable or inadvisable to cover those proprietary articles in the public interest ? At present it applies to a limited number of things : would it be wise to extend it to include other articles ? —I should say, generally, that every branded article has a right to be protected. 28. What is your answer ?—I have answered it. I think it would be wise to extend the Act to include all branded articles, whether foodstuffs or not. 29. I suppose, really, you are beginning in a small way with the P.A.T.A. I—No1 —No ; we were just in the middle of getting our organization going when we were held up, so that I do not know whether we are going to start in a small way or not. 30. I suggest that you wish to start diplomatically ? —We do not think we have deceived the public at all. 31. I suppose the full effects of your operations will not be felt until it has been in operation for some time ? —Naturally, it will take us some little time to get our organization operating fully. 32. And I suppose, frankly, you are out for higher prices than are ruling in the present competitive regime ? —The ruling prices to-day at the advertised prices. Those will be still observed under the P.A.T.A. The cut prices can hardly be said to be the ruling price. 33. You want, then, to have one fixed price throughout the country for each article ? —No. The association agree that there should be some difference in the price of an article sold for cash and that sold for credit. 34. Why do you make that differentiation ? —We believe that where a man sells for cash, and does not wrap or deliver, he is entitled to sell for a lower price than when he delivers and gives credit. 35. That is because it costs him less to run his business in that way ? —Yes. 36. If you admit that, why may not a retailer pass on to his consumer the other savings he effects —for example, better buying or larger turnover ?—The manufacturer comes into the situation. The manufacturer has to be considered in that connection. In putting a proprietary article on the market the manufacturer has to consider three things. The first is the merit of the article. The second is, What are the channels of distribution ? That is to say, that no manufacturer of a proprietary article can finally make a success of his article unless he has the good will of the bulk of the distributing trade. Obviously, no manufacturer can be his own wholesaler and establish his own shops to market
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his goods ; he is dependent on the machinery already in existence—the wholesale chemists and grocers, and the retail chemists and grocers. Obviously, he has to set aside a margin of profit for these distributors if he wishes to gain their interest in his article and sell it with a good will to the public. The average manufacturer knows all this, and provides a reasonable profit for the wholesaler and retailer. He also advertises his line to bring it before the notice of the public and proclaim its merits. The usual method is that, for a new article, the advertised article for the first three years makes little progress. The manufacturer is paying out money all the time. If the manufacturer has a good article and all goes well we can assume that at the end of three years he is beginning to get a return, and the line becomes popular; and then the danger-point arises, because it is then that the cutting-shop steps in and sells the article at cheap prices. The result is disastrous to the manufacturer. From that point the trade throughout New Zealand begins to turn against his article and substitutes others for it. So that in answer to Mr. Kennedy I would say that the manufacturers' price to the retailer should be observed, and that the manufacturer, through the association, should have the right to fix that price. 37. In that discussion you have just given us you indicate that the interests of the manufacturer are apparently paramount. I put it to you, in considering any article one must not lose sight of the good will and demand of the consumer ?—Quite so. 38. And I put it to you that the interests of the consumer must in a matter like this be paramount over the interests of the manufacturer ?—I do not agree with you. But I think the manufacturer must in all cases give the public a fair deal. He cannot possibly charge too much for hisarticle, otherwise he will not sell it. 39. But in your view it is possible to charge too much to the consumer because you object to a retailer passing on to the consumer some of the economies he effects in his own business ? —I agree that it is not right to do that on an article the goodwill of which has been obtained by the manufacturer's money. 40. But the goodwill is the consumers' demand ? —No ; it is the distributers' goodwill as well as the public's. 41. But if your wholesale houses are useless without the goodwill of the consumer the ultimate thing is the demand of the consumer ? —Then, I say again that no proprietary article can get the goodwill of the public if the retail price is fixed too high. One of the essential things for the manufacturer is to be able to say that his article is not retailed at too high a price. 42. But under the machinery of your organization you have no means of ascertaining whether, having regard to its manufacturing cost, the manufacturer is not fixing too high a price to the consumer ?—I say that the price at which it is sold to the consumer will depend largely on the price of competitive articles —and competition is very severe. It is hardly possible that the manufacturer would make his price too high. 43. Do you think competition between manufacturers desirable ? —Yes, highly desirable. 44. But not between wholesaler and retailer ? —Certainly ; they can compete in service. 45. What objection is there to allowing them, to compete in the matter of prices where a consumer wants price but not service ? —We say he has no right to use the manufacturer's nam?, to make his business by reducing the fixed price, so long as that price only shows a reasonable profit, and the association is out to see that only a reasonable profit is made on a line. 46. Mr. O'Leary.] What are the chief lines you deal in in your business ? —Our agency lines are mostly toilet, perfumery, soaps, and medicines. 47. Do you deal in foodstuffs ? —ln some lines. 48. Proprietary foodstuffs ? —Yes. 49. So that the free operations of the association and an amendment of the Commercial Trusts Act is very desirable from your point of view ? —Yes, we would like to see these lines listed. 50. I was interested in the suggestion made that on your association you would permit a representative of the Board of Trade. I will go further, and ask you would you agree to a representative of the consumers sitting on your association ? —He would be represented, by the Board of Trade official. I would not be in favour of a member of the general public being included. 51. Your principals are. quite satisfied with the operations of the association in England ?—Yes. 52. They have quite pointedly brought the matter before you and shown you the benefits of the association ? —What we did was simply to write to all our principals and inform them of the proposed association here and ask whether they wished their lines to be listed. 53. So the creation of the association here was inspired from England ? —We received various replies from our principals in England, and they agreed as to the desirability of forming a similar association in New Zealand. 54. Mr. Walker.] The manufacturer of a new line offers what you call a reasonable margin to the retailer to use his salesmanship on that new line ? —Not exactly for that reason. He fixes his price to start with at a reasonable rate. 55. But if he goes on the market with a new line he wants the retailer to push, the line ?—He wants the retailer to sell it with a reasonable goodwill. 56. In other words, the manufacturers wish the retailer to push a new line in preference to lines he may be already carrying ?—He would very much like the retailer to do that, of course. 57. Mr. Myers.] Who creates the goodwill ? —The manufacturer creates it by advertising. 57a. You have been asked about the manufacturers' prices to the wholesaler : Is it possible for the association or any other body to influence those prices ? —Absolutely impossible. 58. Whether you have an association or not, or any similar body, can there be any control, except possibly trade control, for the manufacturers' prices to the wholesaler ? —I do not see how it is possible.
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59. You have here a declaration from Mr. Anguin, one of your commercial representatives, with regard to Icilma ? —Yes. [Document put in.] 60. Is Icilma one of your lines ? —Yes. 61. And I suppose this declaration is in answer to your inquiries of Mr. Anguin as to why there was a decrease in sales ?—Yes. 62. Mr. Reardon.] If a retailer imported direct from London a line which you represented here, you would get your commission ? —Yes. 63. Would this proposed organization object to such an importer getting-those advantages ?—Not necessarily. If he were able to buy in wholesale parcels there is nothing to prevent his getting the benefit of that trading. 64. So that he would get two profits—the wholesaler's and the retailer's ?—Yes. 65. The Chairman.'] Your organization contemplates giving a fair margin to all classes of retailers —chemists, grocers, drapers, and fancy-goods shops ? —Yes. 66. You have to consider them as a whole ? —Yes. I think each individual line which comes up is pretty well considered. For example, some lines would be essentially grocers' lines, others essentially chemists'. We would consider that on a line which was essentially a grocers' line the margin of profit should not be so great as the line which was essentially a chemist's line. 67. But on a line suitable to all four the margin of profit would be uniform ? —Yes. We do not, of course, fix the profit, nor the percentage ; but we could veto it. We would not stand for too high a profit. The manufacturers say, in the first instance, what the profits shall be for the trader, and then it is the intention of the association to revise them if necessary. We have the power of veto. 68. Therefore, the manufacturer knows that he does not have the last word ? —Yes. 69. In considering prices in that way your executive cannot possibly take into account the higher efficiency of chain stores as against isolated stores ?—We do to a certain extent, in that we intend to make a difference between the " cash and carry " grocer and the other class of trader. 70. But as a business man it must seem anomalous to you that you cannot take cognisance of a man who can operate his business on a smaller expense ratio than can the man with a smaller business, who in order to live must make a larger profit ? —lt is a difficult matter, I admit. Of course, if generally the costs of running retail businesses came down as a result of chain stores, so would the prices come down. The manufacturer is only trying to arrange a price to give the ordinary retailer a profit. 71. But in so doing he is giving the others an inordinate profit ? —There would be some difference. I think the word " inordinate " is too strong. 72. Mr. Montgomery.'] There seems to be a great number of articles on the patented list of which the association cannot possibly know the formute ? —Yes, that is so. 73. And these articles might, for all the P.A.T.A. know to the contrary, be marked at such a price as would enable the manufacturer to make an unreasonable profit for himself ? —He would naturally try to make a big profit, but competition is so severe that he cannot make too big a profit. 74-. But his formula would not be known to you ; therefore you could not know ? —But nearly all these articles are put up for some specific use, and there is no article manufactured against which there is not competition. 75. But some of those articles are sold on advertising alone, without any peculiar merit in the formula ? —I cannot agree with you in that. 76. For instance, I suggest that an article made up almost wholly of anhydrous sulphate of soda, purchased at 31s. per hundredweight on the London market and landed in New Zealand at 405., can be ground, and put up, and sold by the manufacturer at a price of Is. 4d. per pound ; that it can be sold by him, or resold, when packed, advertised, and put up in packets, at a price of 20s. per pound to the retailer ? —Yes. 77. Would you not call that an inordinate profit ?—Yes. 78. I say that there are many preparations of that kind of proprietary article which are put up which gives the manufacturer an inordinate profit; but the association cannot control that ?—We cannot control the manufacturer. I was merely speaking on the point that competition does not necessarily.ensure to the retailer a fair price. The Committee adjourned at 12.50 p.m. till 2.30 p.m. On resuming at 2.30 p.m. John Mollraith sworn and examined. (No. 18.) 1. Mr. Young.] You are a grocer, and have been in business for a number of years ? —Yes. 2. For how long ? —Thirty years. 3. On your own account ? —Yes. 4. Prior to that you had an experience in your trade other than on your own account ?—Yes. 5. I think you also have in conjunction with your business wine and spirits ? —Yes. 6. What is your reason for joining the P.A.T.A. ? —Well, my reason is to try and stabilize the trade, and fetch it on to a better basis than it has been for a long time. 7. By stabilizing, I take it, you mean eliminating cutting ? —To an extent, yes. 8. Would you say that the cutting is prevalent at the moment ? —Yes, it is prevalent at present. 9. Does it just exist, or is it bad ?—ln the grocery business generally it is bad.
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10. Do you refer to the general business or proprietary articles ? —When I made my comment I referred to business generally. 11. Do you stock many proprietary articles ?—I do not think the grocers push proprietary articles if they can help it, because they do not allow them a fair profit. 12. And you suggest that the grocers do not push them as a result of that ? —That is so. 13. In the event of a person going into your shop and asking for something which you have in a proprietary form or in a non-proprietary form—say, Edmonds' baking-powder or some other bakingpowder—what do you try and sell them ?—We try and sell them something else, if possible. 14. When they ask definitely for Edmonds' baking-powder what do you do ? —We supply it to them, but it goes against the grain, because it is changing Is. 2d. for fourteen pence. 15. Why do you sell Edmonds' baking-powder at that price ? —To meet the conditions ruling in the city at the present time. 16. That is to say, you turn it over at what it costs you ? —Yes, and give service for nothing ; that is not a very successful way of doing business. 17. Have you in stock any other lines of baking-powder ? — Yes, we have " K " brand and Tucker's. 18. I take it from what you have told the Committee that if any one goes into your shops and asks for baking-powder you do not offer them Edmonds' baking-powder ? —No. 19. You run both a credit and a cash business, do you not ?—Yes. 20. What proportion of your business is credit, and what proportion cash ? —Two-thirds credit, and one-third cash. 21. What do you estimate your overhead expenses to be ?—I2J per cent, on turnover. 22. Do you suffer in the way of bad debts ? —Like most people, we get hit. 23. Have you worked out your percentage of bad debts ? —I have not worked it out for about three years ; but the last occasion I worked it out it was under J per cent. 24. Mr. Kennedy.] What percentage of your business is credit and cash ? —I have already said two-thirds credit and one-third cash. 25. What service do you extend to those people who pay cash : do you wrap up ? —Tie up and make a neat parcel to take out of the shop and deliver. 26. I take it that you see no objection to a grocer, if he does not perform the service of wrapping up or delivering, making a reduction to his customer ? —lf it is a genuine reduction there can be nothing said against it. You must bear in mind that you cannot sell at cost and keep going. 27. Is it not a fact that there is a considerable difference in the cost to different grocers to run their businesses ? —I suppose a business that is well managed is better than one ill-managed : you must reduce the overhead. 28. You would not object, then, to a man who runs his business efficiently passing on some benefit to his customers ? —I am very skeptical about any giving to the customer. 29. You would not object to it being done ?- [ would rather see him giving it to some charitable institution. 30. You want the price to be kept up to a certain figure, and not reduced to the consumer ?—No ; that is not right. We want a fair return, and in return to serve the public as cheaply as possible ; but we cannot work for nothing. We have to pay award rates fixed by the Arbitration Court, and we must have something to pay the wages and that kind of expense with. 31. Then, may I take it you would not object to a man who pays high rates and runs his business efficiently passing on to his customer some of the savings he has made in running his business ? —I cannot say that, because I have no confidence in that whatever. 32. If you are satisfied ?■ —If he is satisfied to give it away, that is his lookout, no matter whether he makes it or not. You cannot give much away to the people in a grocery business at the present time. 33. How do your prices compare —if you think this question unfair I will not ask it—with the prices, say, of the Self-help ? —Below in some and above in others, but not much. lam speaking generally. 34. In proprietary lines ? —Proprietary lines are not a big feature with us. 35. I suppose you sell your own tea ? —We do. 36. And have done so for many years ?—Yes, for many years. 37. L suppose your present business .has given you reasonable returns ? —Yes, we have managed to pay our debts. We have not got wealthy, and we have managed to keep out of the Bankruptcy Court. 38. You have done very well ? —Just fair. 39. You do not set yourself a high standard ?—I have set myself a high standard, but it is a trouble to reach it. 40. Mr. Walker.] How many women come into your shop and ask you for baking-powder ? — That is a question which I cannot answer you. I want you to understand that lam not much at the counter. 41. Do not all women who ask for baking-powder ask for it by a different name —that is, the name they know ? —Edmonds' mostly. 42. Mr. Reardon.\ You have told the Committee that you carry on a wine and spirit business as well as a grocery business ?- Yes. 43. Would your business be as successful if it were not for the wine and spirit branch ? —I think not. 44. Do you dissect the two branches ? —Yes. 45. When you said in answer to my question a few moments ago, " I think not," what did you mean ? -The other is a better line than the grocery.
12— H. 44a.
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46. There is not so much cutting in the wine and spirit line ?—There is a bit there, too. 47. You said that you have got on fairly well ? —Yes. 47a. Would you be able to cover yourself to that extent without the wine and spirit branch ?— I do not think that I could. 48. Mr. Collins.]'How many employees have you got in the grocery business ? —Four and my son. 49. Is he an employee ? —Yes, he receives his wages. 50. Would you be in favour of the extension of fixation of prices to proprietary lines ? —Not to a great extent. 51. Why ? —Because of the Act, and because we do not want to be unfair or to raise the cost of living any more than we can help. Our aims are to give good service and to sell as cheaply as possible. 52. You admit that price-fixation may increase the cost of living : that is a fair deduction to be taken from your answer ?--I do not admit that. 53. Can you suggest any remedy to prevent cutting proprietary lines other than the fixation of prices ? —I cannot see any. 54. Has your business been progressive during the last ten years ? —lt has grown slowly. 55. Do you endorse the opinion expressed by the secretary of your association, Mr. Barker, that the loss in bad debts throughout the Dominion would not exceed £ per cent. ? —I do not know about others, but we do not go over that. 56. Do you give any concession to a cash customer as against a customer who has a monthly account I—They1—They get per cent, discount. 57. Do you treat them on the same basis ? —Yes. 58. Do you suggest that the average customer gets just as fair a deal from you as through, say, a cut-rate store ? —There is a lady I have in mind who came into my shop and she purchased about 30s. worth of goods. The boy started to tie the parcel up neatly, and she said, " I have a bag here to put them in," and as he was packing them in just the same as if it were a parcel she said, " This is not the way I got them before in other shops ; I get them thrown at me." 59. That is not an answer to my question. Supposing I had £3 to spend in your store, would it go as far as if I dealt with a cut-rate store —that is, not in proprietary lines, but in general lots ? —Yes. 60. Would you give these services and the prices existing at present without the competition of cut-rate stores ?--We have always done so. 61. I take it from what you say that you have always endeavoured to serve the public with the best of goods at the lowest possible prices ?—Yes. 62. Therefore you take cognizance of cut-rate stores, but they do not affect your policy That is so. 63. Do you deal largely in tea ? —Yes. 64. Do you stock all proprietary brands ? —None. 65. How do you get on with the customer who wants, say, Amber Tips ?—We induce them to try some of ours. 66. What profit do you make on the tea you sell at, say, 2s. lOd. per pound—l want it in percentages ? —About 33-j. 67. Is that on return ? —On return ; we are not profiteers. 68. Is it your policy to make up your own tea ?—Yes. 69. Who does the blending ? —I start them out and give them the quantities. 70. Are you capable of blending your own tea ? —I was with the Amber Tips man before they started. 71. Is your brand of tea popular with your customers? —They come from all parts for it — namely, Day's Bay, Kilbirnie, Seatoun, and other places. 72. Your business is in no way interfered with by not stocking proprietary tea ? —I cannot see that it is. 73. Has your trade in tea increased ? —Yes. 74. Very considerably over a period of five years, or taking the years 1921 to 1926 ? —lt has kept growing all the time. Everybody cannot put up the tea. 75. You consider that you have special skill in blending your tea ? —Yes. 76. Why do you not stock packet tea ? —I did stock packet tea, but Ido not do so now. 77. Why ? —Because they were no good to me. I was working for the packer. 78. Were the prices cut at that time ? —Yes. 79. You could make more profit out of your own packed tea ? —Yes. Jambs Roberts sworn and examined (No. 19). 1. Mr. Collins.] I understand you are not represented by counsel ?—No. 2. You propose to make a statement to this Committee, do you not ? —Yes, a brief statement. 3. Is it by way of evidence or by way of opinions ? —By way of expressed opinions in connection with the trade-unions here on the P.A.T.A. business. 4. Whom do you represent ? —I represent the New Zealand Alliance of Labour to-day, to which is affiliated forty-five trade-unions of New Zealand. I am secretary of the Alliance of Labour. 5. Will you please make your statement in your own way ?—I am given to understand that this Committee at the present time is for the purpose of inquiring into the fixation of prices on proprietary articles, I want to say that lam opposed to the fixation of prices if the fixation is allowed
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to the proprietary people alone. The fixation of prices may be a guarantee to the retailer so far as he is concerned, but it does not protect the worker against high prices. Again, I take the proprietary articles and the commodities that we use which are sold on the market, and compare them with the commodity that the worker sells —namely, labour-power. On the other hand, we have an independent tribunal adjusting the price of that commodity —that is, the price of labour. The worker in this country is not allowed to say, " I will sell it for so much." He is debarred by law from withholding his commodity ; he must sell it at a price stated by an independent tribunal. He buys proprietary articles, and the manufacturer who owns those proprietary articles claims the right to charge whatever price he pleases for the other commodities. That is obviously unfair to one side of the community. I have no objection to the fixation of prices if they are fixed by a public tribunal—absolutely none ; but I have a strong objection to the owner of a commodity fixing his'price while another man is selling his labour—without consideration, and which he must sell to live, in order to buy the commodity that the other man sells at his price. I submit that the position is absolutely unfair. On the other hand, sir, I want to make it quite clear that I do not advocate low prices or cut prices for commodities. I believe that the price of the commodity should be at least sufficiently high to enable the manufacturer or the distributor to pay decent wages to the men employed, and thereby generally enable the people who handle these commodities to maintain a reasonable standard of living. As I say, I am not in favour of cut prices ; but I am certainly not in favour of one section of the community deciding what price the other section of the community shall sell at while the owner of another commodity has no power in that direction. Now, in every commodity that I am aware of in the world there is a certain amount of labourpower crystallized in that commodity. You cannot get away from it. That is the view we take in connection with the fixation of prices of commodities generally. There is just another matter that I would like to draw attention to and it is this ; it is stated here that there would be no fixation of prices on foodstuffs. Mr. Collins: That is the law. Witness : Yes, that is the law; but there would be fixation on house-rents. We have a Parliament in this country that can alter these things from time to time. There would be fixation of house-rents, but the landlord would fix the price. So far as I understand, the claim is that the P.A.T.A. will fix the price themselves. How far is this going to extend ? It applies to washingsoap, &c. to-day ; it might apply to houses to-morrow. Apart from that, I want to point out that certain people who manufacture goods in New Zealand are given the privilege of fixing the price of these goods, or import these goods and allow them to fix the prices. I say it would be grossly unfair to the producing farmer to deny him the same privilege of selling his butter and cheese ; it would be grossly unfair to the worker who sells his labour. If we are going to have fixation of prices, let us have it generally, or let us not have it at all. We ask this Committee to view the working-man's point of view in this matter. As I say, he has his wages fixed by an independent tribunal, and therefore I say the same should apply so far as this particular matter is concerned. 6. Mr. Myers.\ I suppose, Mr. Roberts, you appreciate the fact that nowadays, without the P.A.T.A., a manufacturer is not in a position to fix his price—that is, proprietary articles ? —I do not think so. Ido not appreciate those facts, and I will not accept them. 7. I do not care whether you accept it or not, but it is a fact ? —He can fix it at certain limits, but as soon as they get the business the prices go back again. That has happened thousands of times in New Zealand. 8. I want you to confine your attention for a moment to what we call proprietary articles ?— What are proprietary articles ? [At this stage Mr. Myers mentioned Palmolive soap as an instance.] 9. I want you to assume, if you will —because it is the position—that the manufacturer of an article like Palmolive soap is in a position to say at what price goods should be sold wholesale and retail, and I want you to assume that if a person who purchased his goods and sells them at a lower price than is provided for the manufacturer can obtain an injunction from the Supreme Court to prevent it ? —For your purpose I will assume it. 10. Is that what you are objecting to ? —No. I am objecting to what may be termed unfair trading by these people—that is to say, these people saying, " We will all join together in connection with certain proprietary articles, and will put them on the market and charge onr own prices," while at the same time they will not allow the men who work for them to do the very same thing so far as they are concerned. 11. I quite understand you. Then, your assumption is, I take it, that the P.A.T.A. is going to fix prices ? —Yes. 12. And what you object to is the P.A.T.A. fixing prices ? —lf the P.A.T.A. is the proprietary people, yes. 13. But supposing the P.A.T.A. are not the proprietary people—perhaps you misunderstand me —and that the prices remain fixed just as they are now, by the manufacturer himself, and not by the P.A.T.A., what do you say ? — If the prices are fixed by the manufacturer himself it applies as if it were the P.A.T.A. If the manufacturer fixes the price himself he cannot have any objection to the worker fixing the price of his commodity. 14. Then, you are taking exception to his power as a manufacturer to say at what price his goods should be sold ?—Yes. I submit that no set of individuals in any well-governed country should be allowed to have the power to say that my commodity must be sold, but that his will not be supplied to anybody. In other words, if a worker withholds his services he is fined or kept in gaol for it, but the manufacturer, under your proposals, could refuse to supply his goods.
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15. No V —l have read about the Commission of Inquiry in Canada, and I have my views. I may possibly be taking quite a wrong view of the P.A.T.A. 16. I quite appreciate your point of view, and I have got it now : You take exception to the manufacturer saying at what price his goods should be sold ? —Unless he sets the same right to the man himself ; and if he allows that right I will say that we are in agreement. 17. You are not an opponent of the principle that, so far as labour is concerned, there should be a minimum price under a particular set of conditions ? —I am not opposed to that at all, and in proprietary articles either, provided it is done by an independent tribunal or a kindred tribunal. 18. You must see that the Arbitration Court cannot have the same facilities for fixing prices as they have when dealing with the principal question which they are now dealing with ? —Precisely. 19. You understand the constitution of the Board of Trade, do you not ?—Yes. 20. Supposing prices were fixed, would you object to that so long as they had the approval of the Board of Trade ?—I would only agree to the Board of Trade fixing prices of articles after first making investigations into the labour cost, the cost of distribution, and the elimination of waste in distribution which is going on to-day. 21. What kind of tribunal do you suggest ? —A tribunal consisting of the Government, the people who buy the goods, and the people who manufacture the goods. 22. You understand what is meant by a patented article as distinct from a particular article or any other article —an article which is protected by patent under the Patent Designs Act: you know, of course, that the manufacturer of such an article can fix his own price and insist upon that article being sold at that price fixed ?—No ; that does not generally follow. 23. I can assure you that it does ? —For instance, Edison invented the phonograph, and he charged what he liked ; but other phonographs were invented later on, and Edison had to come down in price. It has its limitations. You want me to agree with you. 24. I would never be able to do that ? —The point is that these things have limitations. As an illustration we will take the monotype. The man who invented that said that he would charge whatever he liked; but six or seven years after the linotype was invented, and down came the price of the monotype. In all the inventions that have been on the market, after a while there is a brother invention that will spring up. 25. Exactly. In other words, you have competition among the manufacturers ? —Yes. 26. The remedy is this : if Mr. Edison, as you say, charges too high a price—well, the people will not buy his goods so long as there is something on the market which will do the work as well, or nearly as well ? —That is so. What I would object to is this : any one saying, " I will supply you with Edison's machine," but if I want to buy another machine I have to go to Napier for it. As I say, I would object to that very strongly. That is the point. 27. When you make objections to the P.A.TA. do you assume that that is how it will be carried on ? —lf you give the power of any section of the community to fix the price it is a dangerous practice. 28. You say that you have no objection to fixation so long as it is done fairly I—Absolutely. Walter Nash sworn and examined. (No. 20.) 1. Mr. Collins.] What is your official position % —I am here to represent the National Labour Legislation Committee, which consists of representatives from the Alliance of Labour, the Trades and Labour Councils Federation, and the New Zealand Labour Party. I understand that the Proprietary Articles Trade Association, otherwise known as the P.A.T.A., has been established for the purpose of fixing minimum prices for certain commodities in general use ; that the membership of the association consists of manufacturers of proprietary articles, wholesalers, and retailers ; that, the Minister of Industries and Commerce has set up a Committee of inquiry to inquire into the working of the association, to determine whether the results will be beneficial or otherwise to the general public. Whilst the method by which the association proposes to attain its end may deserve some consideration, it is not, I understand, the main subject of the inquiry. If the result of the method of working proposed by the association is likely to work to the disadvantage of one or two individuals and is yet beneficial to the public, then there is at least some reasonable ground to allow it to commence operations. If it is found that the fixing of minimum prices will be beneficial to the general public, then the means or method by which it can be accomplished should be found, and if it is also beneficial to the P.A.T.A. I believe that it will be found. If it is admitted that an individual has, subject to his ability to exercise it, the right to determine the conditions, including the price upon which he will transfer any commodity manufactured, owned, or controlled by him, then it appears reasonable to assume that he also has the right to obtain assistance from another person, particularly in cases where two persons co-operate for each other's benefit. If two, then three ; if three, then why not any number ? The establishment of the association, I understand, has chiefly been brought about for the purpose of preventing price-cutting ; and with some experience that I have had there is evil pricecutting, and if effective and justifiable means can be found to check or suppress cutting of this type, then it should be done. With qualifications regarding old stock and other factors, I consider that, irrespective of its advertising value, it is dishonest to sell articles under cost; but with this qualification I consider that it is not possible to fix a legitimate minimum profit on any article. The equitable price under the present system cannot be determined. It has been stated, I believe, that all pricecutters are working for the advantage of the public of New Zealand. Well, Ido not know whether
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W. NASH.]
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that is right; but the urge of the price-cutter is not always lower prices to the consumer, but because lie considers it a more effective means of making profit, or, rather, an effective means of increasing profits. If a person can distribute commodities at, say, 5 per cent, on cost and can cover his overhead and also leave a margin for his own labour, it appears to me to be quite reasonable and just to allow him to do so, provided his doing so is beneficial to the public, and to prevent him would be detrimental to the public interest. I may say that I have sold goods in one wholesale department at 4 per cent, on turnover and in another department at 22 per cent, on turnover, and the return on the capital invested was comparatively equal. It appears that under the P.A.T.A. the goods must be sold at a fixed price—l hope Mr. Myers will put me right if lam not defining the operations of the association correctly—and I believe that the fixing of the minimum price as proposed by the association will retard sales. ■ The sales of a commodity at, say, Is. 6d. are not likely to be so extensive as the same commodity at, say, Is. 3d., and in so far as the proposals simply cut out the sales at lower prices the turnover of the manufacturer will decline, and to recoup himself he will automatically increase his price to the wholesaler and the retailer, or he will reduce the sale price to the public without a corresponding reduction in price to the wholesaler and the retailer. The proposal of the association limits— almost abolishes—competition between retailers ; but there is to be competition between the manufacturing members of the association so far as attractiveness of get-up, quality of the article, quantity of the article, advertising, &c., are concerned. This means, for example, that the job of each manufacturer is to induce the general public into using more of his commodity, and when " sales resistance," as it is called, has been overcome, and the public are using it to saturation, the job then is obviously to capture the trade of every other manufacturer of a like commodity. In so far as the sale costs go up, and to the extent that they can retain the market, they will advance. If they cannot advance the sale price to the public they will advance the price to the wholesaler and the retailer, and to the extent that they have captured the public demand the retailer will be compelled to stock the line. The association proposes to control the registration of articles and to determine what articles shall be sold under its auspices. This cannot be beneficial to the general public and the members of the association. If a manufacturer with a new commodity for sale, the marketing of which may tend to cut out some of the articles already under the control of the association, applies for registration, the association may either refuse to register or may register. If it registers, it will be detrimental to its existing membership ; if it refuses, it may be so powerful as to cut off all possibility of marketing a new commodity, which will not be beneficial either to the enterprising manufacturer or the general public. Presuming the manufacturer endeavoured to market his commodity outside the association, it would probably resort to the steps proposed in Canada : it would render assistance to its members to prevent substitution. The assistance would probably be by way of quiet persuasion, through coercion, and the stopping of supplies. That is the only way I can find under association rules, where they can stop assistance being given to the substituted article. I have had the experience of the methods adopted to coerce wholesalers or retailers who did not see things with the same eye as the powerful manufacturers. In 1904 I was in business in Birmingham, England, and among the firms from whom I purchased was the Imperial Tobacco Co. A difference of opinion with one of the members of the combine —namely, W. D. and H. 0. Wills —-lasted for some time, and ultimately Wills' representative threatened to stop supplies. I was fairly easy about it, and I said, " You can go on with the job ; I will find other sources of supplies." I could at that time obtain all the supplies that I required at 1 per cent, on, and I took my supplies from another man. Wills' representative was not taking that, and said, " All right; maybe you do not understand that the stopping of supplies would not be confined to Wills, but would extend to Players, to Ogdens, to Churchman, to Lambert and Butler, and all the manufacturers associated in the Imperial Tobacco, Ltd., and that not only would your supplies be stopped, but that supplies to any other wholesaler or retailer who supplied you would be stopped also." That is exactly the method of the P.A.T.A. that they propose to adopt here —that is to say, the P.A.T.A. would act just as powerfully in New Zealand, and the power they would be able to exercise would be such that very few, if any, retailers could afford to disagree with them. Whilst a case can be made for the manufacturers exercising some reasonable control over his articles, the effect of minimum-price fixing is likely to be detrimental to the public, and ultimately detrimental to the retailer also. An example of the effect of charging reasonable prices for goods is set out below. Whilst acting as the representative of a British manufacturer I carried, among other articles, one good line which I sold at 2s. 6d. f.o.b. British ports, and with landing charges added the cost in the shop was slightly less than 3s. 4d. In one of the cities I visited a client's order included one gross of the article referred to, while another client ordered one dozen. On my next journey, twelve months afterwards, I found that the man who had purchased the gross had sold his first consignment and two gross in addition, whilst the man who had purchased the dozen had either eight or ten left. The one had featured it at 4s. 6d., whilst the other had marked it at 10s. 6d. He thought it was a good article, of exceptional value, and he priced it, as I say, at 10s. 6d. That is one illustration, but there are many others of that description. The man who had sold that article at 4-s. 6d. had advantaged the public, himself, myself, and the manufacturer. The P.A.T.A. would stop anything of that kind occurring. To the extent that the P.A.T.A. is an organization of manufacturers, wholesalers, and retailers, it is different from the accepted type of monopoly of primary producers or manufacturers. The three agencies from which the public obtain supplies are agreeing with one another to charge higher prices, and there is only one body left to pay the higher price, and that is the general public. If a distributive genius can find ways and means of supplying the public needs at a lower cost than the average he is entitled to use those ways and means to make his living, and if he finds that he can increase the return to himself by reducing the price to the public, then I see no reason why he should not do so, always presuming that he does not sell under cost. There are
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two sources from which a distributor may make money : he can sell below the cost and obtain sufficient for the time being to carry on, but it will ultimately lead both he and the manufacturer from whom he has bought to the Bankruptcy Court, or he may make it out of the public. Returns can only come from either the man you buy from or the man you sell to. By way of general remark, I may say that whilst I was going into the question of the P.A.T.A. I also went into one other feature that I think is of particular interest to the general public and should be taken notice of by this Committee, and which I consider is a dangerous tendency. This is illustrated in a return of occupations, industries, and employment that was made out by the Government Statistician and which was published in 1925. It sets out in detail the occupations of various people in the years 1901, 1906, 1911, 1916, and 1921. I have just a summary of the figures that I will put in. The dangerous tendency is this : the tendency is for professional and commercial classes to increase out of proportion to the increase of the industrial and primary producing classes. The extent to which those classes have increased is illustrated by the return which I attach hereto. | Return put in, marked " Exhibit Ad."] If these figures are analysed it will be found that an extraordinary advance in the professional and commercial groups is revealed, with a corresponding decline in the industrial and primary groups. The actual percentages are shown iti the following table : —
In other words, in 1901 516 out of each 10,000 persons were engaged in commercial transactions in connection with the disposal of the production from 2,758 persons engaged in secondary, primary, and imported commodities. In 1921 650 out of each 10,000 were engaged in like transactions for the production from 2,361 persons —that is, the number of persons that are engaged in industrial production has gone down by 397 as against the number engaged in actual distribution, which has gone up by 144. Just by way of final remark, I think that if the rules as set out are rigidly enforced the association's method would completely cut out co-operative stores from the sale of articles registered by the association. That is mentioned in the Canadian report. There are, I contend, already too many shops in existence, and the effective organization of the P.A.T.A. will extend the number. It will add to the overhead cost of distribution, and ultimately to increased prices. To the limited extent to which competition operates in the present system the power of exploiting the public is also limited. Competition, in my opinion, is useful only where we have some rational form of co-operating together for the purpose of distributing that which the public of New Zealand wants. 2. Mr. Collins.] In quoting those figures about the various occupations, what deduction do you want this Committee to take : is it that the cost of distribution is going up because of the number engaged in it ? —Yes. 3. Mr. Reardon.] Does that differ in any part of the world ?-—No. 4. It is the same everywhere ?—Yes. 5. Mr. Hayward.] It is the same in the United States ? —I do not want to suggest that, because that would be going beyond the scope of this inquiry. There is a lot to be said against the competition system which is operating in the United States to-day. 6. Mr. Reardon.\ As a matter of fact, the whole thing bristles with theories that have been contradicted —in evidence you say that it is unfair to the co-operative stores. We had a director of a wholesale society in England here the other day, and he said that they declined to trade with the P.A.T.A. articles to any extent, and that they were successful ? —Yes ; but supposing the co-operative stores in New Zealand have proprietary goods on hand to-day and a proportion of their trade has been built up by that means and they are demanded by the public, if they are not allowed to purchase those articles in the future, then obviously it will affect their trade. 7. Would you be surprised to know that the statement of the director to us was that they reluctantly stocked proprietary articles, but the proportion sold was something like £45,000 as against a total trade of £20,000,000 ? —1 should say that the co-operative wholesale societies in Great Britain are so organized and so effectively stocked with their own proprietary lines that they would not be affected by the P.A.T.A. as would be the case so far as co-operative organizations in New Zealand would be. 8. It is the popular theory that if you reduce the price you increase the sales : would you be surprised to know that almost the whole of the evidence led on behalf of the P.A.T.A. as to effective price-cutting in New Zealand is that where proprietary articles are cut the sales fall ?—No. I can give you evidence from my own experience where cutting has definitely harmed the proprietary articles. lam not considering the manufacturer ; the people lam thinking of are the general public, and will it be beneficial to the general public ? The Committee adjourned until 10.30 a.m. on Tuesday, Ist March.
94
I Number occupied per 10,000 Percentage Difference. ,v of Total. Occupational Group. Year. Increase. Decrease. 1901. 1921. PerCent. PerCent. Professional . . .. j 504 410 .. 34-8 Commercial .. . . j 516 650 26-0 Industrial .. .. .. 1,310 1,154 .. 11-9 Primary .. .. .. 1,4-48 1,207 .. 16-0
MR. GRESSON.]
H. —44A.
Sixth Day : Tuesday, Ist March, 1927. The Committee met at 2.30 p.m. Mr. Gresson: If the Board pleases, as a result of ray having spent the week-end in Christchurch and the evidence being available I have been able to go through it, and I think I shall be able to shorten very much the remarks I have to make, as I have endeavoured as far as possible to eliminate all detail and only address my remarks to questions of principle which should guide the Committee in coming to a conclusion. First, I want to direct attention to the wording of section 13 of the Board of Trade Act, as that is the section from which the powers of the Committee spring, and under which the inquiry is held. It was pointed out —I think, by Mr. Collins—when my learned friend was addressing the Board that the inquiry under section 13 is a far wider inquiry than the inquiries which were held in Canada and other places. For that reason I would like to read to the Board the actual wording of the section. It is : — The Board of Trade is hereby authorized and empowered to hold such judicial inquiries as it thinks fit (whether of its own motion, or on a reference from the Governor-General, or on the complaint of any person) into any matter whatsoever relative to any industry carried on or proposed to be carried on in New Zealand, or relative to any industry wherever carried on which may affect the industries of New Zealand, for the purpose of obtaining information which may be required for the due control, regulation, and maintenance of the industries of New Zealand ; the due observance, enforcement, or amendment of the laws relative thereto ; the discovery of breaches of those laws ; the prevention or suppression of monopolies, unfair competition, and other practices detrimental to the public welfare ; the proper regulation in the public interest of the prices of goods and the rates of services ; or for any other purpose relative to the industries of New Zealand. The main objects which are set out in that section are four : first, to obtain information for the purpose of the due control of the industries of New Zealand; secondly —and, I submit, one of the most important—the desirability or otherwise of the amendment of the laws relative thereto ; thirdly, the prevention of monopolies, unfair competition, and practices contrary to the public interest; and, fourthly, the proper regulation of the price of goods. The point I wish to make at present is one to which Ido not think your attention has been drawn, and that is that this inquiry is entirely unhampered by the existing laws. It is entirely within your scope, should you think fit to do so, to recommend alteration or amendment of the law, and therefore you approach the inquiry simply from the point of view of whether these various matters which are mentioned in the section will cause you to think that there should be any amendment or alteration in the law. I would point out that, so far as I know, this Board of Trade Act has no counterpart in any English-speaking country. It is an Act peculiar to New Zealand, and is an Act which gives the widest power to committees of investigation such as this Committee : but the point is that the Committee, in coming to its conclusion is unhampered by precedent at all. It does not matter what they do in England or in Canada. The qiiestion is whether you, sitting as a New Zealand tribunal, consider the operations of this Proprietary Articles Trade Association involve a monoply, or whether the law should be amended in New Zealand so as to prevent its operating in this country. Of course, I admit at once that to a large extent your deliberations must be governed by the wider question which my friend touched on —namely, whether the operations of the P.AT.A. are contrary to the public welfare. I may still admit at once, as it will clear the ground, that I entirely agree with my learned friend's observations that at the present time it is permissible by the law, both of England and of New Zealand, for any manufacturer to fix a wholesale and a retail price for his goods ; but that, it is submitted, is entirely irrelevant to the present inquiry. The question is now whether it is desirable that in New Zealand, under vastly different conditions than those which exist in England —where we are hardly a manufacturing country at all compared with England, and the great part of our manufactured articles come from abroad —whether it is desirable, I say, that the law should be altered to prevent- that form of price-fixing operating in New Zealand. There is a very good reason why the law may not have been amended in England. I think it was touched on by Mr. Charter, one of the first witnesses, where he pointed out that in England it is a very difficult thing to obtain an amendment in the law, whereas in New Zealand it is a matter of comparative ease if the welfare of the public is involved. But, of course, we know that in England when you touch on the manufacturers' rights you are attacking vested interests, and that it is a matter of the greatest difficulty to get amending legislation passed where those rights are concerned. Here, again, I want to clear the ground, because lam in agreement with my learned friend to a great extent. The general effect of the English law at the present time on this subject is to this effect: that, generally speaking, the law of England and of New Zealand does not like monopolies ; but to this there is an. important corollary —that if it can be shown that in any particular trade there was such a thing as price-cutting, and trade warfere, and that no one in the trade could carry on at a profit, then control was permissible. The only passage I will cite to the Board (from a decision not yet referred to) is a passage from the judgment of Sir Joshua Williams in the case of Merchants' Association of New Zealand v. the King, reported in 32 N.Z.L.R. 1268. That is the case known as the Sugar case. I cite this because it puts in better language than I could what the general effect is. The learned Judge said:— The effect of the monopoly and control sought to be obtained by the merchants was to keep up the price of sugar to sub-purchasers, which, had it not been for the monoply, would have been reduced, and to make it impossible for the public to get the benefit of such reduction. Prima facie such a monopoly would in our opinion be of a nature contrary to the public interest. Now follows the exception : — There may, however, be other considerations which negative this conclusion. Thus, if the monopoly is reasonably necessary in order to prevent the destruction and crippling of an important local industry, and if it is reasonably necessary in order to secure the efficient and economical distribution of the product of that industry, the monopoly might not be contrary to the public interest although it tended to keep up prices. Mr. Myers: Those observations were only made in a case brought under the Commercial Trusts Act.
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[MR. GRESSON.
Mr. Gresson.] Nevertheless they are relevant to the general question as to what is the law applicable to general monopolies. That, at any rate, is my submission. I contend that even if that is the law in New Zealand at the present time, it is not applicable, for two reasons. The first reason is that it has not been shown that any important local industry has been crippled — not a single proprietar}'' article, with, I think, perhaps the exception of that Creme de Menthe tooth-paste, has gone off the market; and I think I am putting it fairly when I state that, summed up, the maximum effect of price-cutting as detailed in the evidence has been that certain popular lines, notably Kolynos, have largely decreased —in one case I think by 50 per cent. - in their sales during the period of price-cutting. Rut even if it had been found that price-cutting was rife in New Zealand, and had reached a stage when some form of legislative control was necessary, I still stress the fact that you gentlemen have it in your power to recommend, if you choose, any amendment of the law which you think right, and that therefore you are not hampered by precedent at all. Frankly, why I am opening on this point is for this reason : that I want to get the inquiry into its proper limits. An inquiry such as this is apt to become diffuse and spread, and I want to recall the Committee to the point which I have referred to. I suggest that the sole inquiry is whether, in your opinion, it is true that in the present economic position of New Zealand it is desirable that the P.A.T.A. should function, or whether the existing laws should be amended to suppress it or whether it should be suppressed by Order in Council under the Board of Trade Act. These I suggest are the relative boundaries of the inquiry. The Chairman: Do you suggest that under section 26 ? Mr. Gresson: Yes, under section 26, for the economic welfare of New Zealand. Of course, it is idle for me to stress —and I do not intend to stress it beyond mentioning it—that one paramount factor to be borne in mind in approaching an inquiry such as this is that, for reasons which I' am not competent to deal with, the cost of living in New Zealand is extraordinarily high, and any scheme which might tend to increase that cost of living would prima facie be detrimental to the public interest. The Chairman : You are arguing that the operations of the association may increase the cost of living. Mr. Gresson : That is one of the heads of my argument, and I would ask you to examine what is the scheme of the association. I admit at once that there are two alternative ways of looking at it. The first is the way my friend looks at it; the other is the way that I and my friends look at it. I will put the other side's aspect first. Under their view the manufacturer fixes his own wholesale and retail price. The association has nothing to do with that matter beyond simply deciding whether or not the prices are excessive—l mean, of course, the wholesale or retail prices. The association decides that point, and then stipulates that if the proprietor of the article is a member of the association his article shall not be sold under his fixed price. That is my friend's view. 'On that I have two comments to make. The first is the obvious one that, even if his view be correct, no member of the public has any say in the fixation of wholesale or retail prices. My second comment is an even stronger criticism, and that is that the control of the manufacturer's price by the association is a solemn farce. The association officials themselves admit that they do not require the manufacturer to produce to them his costs, and for the best of all reasons —that in a country like New Zealand, where our manufactured goods are almost entirely obtained from England, you could not get the cost price. Suppose that you as a Board of Trade were investigating this question of prices in respect of an article manufactured in England : how could you get at the costs ? The association are perfectly candid about the matter, and they admit that they cannot get the manufacturer's costs and that they do not know them. Is it not, then, justifiable for me to say that it is a solemn farce for them to pretend that they exercise' the slightest control over those prices. Ultimately the most important element in determining what is a fair price of an article to the consumer is the manufacturer's cost,' and as to that the association and everybody else is ignorant, and yet they say they prevent an excessive price being charged. Those are the two criticisms I have to offer on the views of the operations of the association which are the views of my learned friend. I want now to put to the Committee a different view of the operations of the association —namely, the view held by myself and my learned friends associated with me. Under that view we say that the association is a combination of manufacturers, wholesalers, and retailers to fix prices, to control supplies, and to eliminate the competition of outside men and outside goods, to boycott traders who refuse to fall in with the scheme, to prevent reductions being passed on to the public, and, from an economic point of view, worst of all. to stereotype the present wasteful system of distribution. That, apart from the economic point of view, is its greatest evil. Thq Canadian report, which has been referred to several times, contains an interesting passage to which for a moment I would like to draw your attention. On page 9, in dealing with the question of the costs of distribution, the Registrar says : — In his "Modem Economic Tendencies" (1921) Sidney A. Reeve observes that in 1850 the effort employed in selling and distributing goods represented about 20 cents of the consumer's dollar, the productive effort represented the 80 cents ; whereas nowadays the consumer pays more like 50 cents for the article itself and 50 cents for the expense of selling and distributing it. That is, for an article costing 100 cents half the cost of the article is eaten up in wasteful and, as we say, unnecessary methods of distribution. What the Committee will have to decide is which of the two conflicting views that I have put before you is the proper view in which to regard the association. If you examine my friend's view, I suggest that you will not be content with deciding on the matter by an examination of the scheme in its present condition. The real risk is, of course, in its potentialities. So long as it is dealing with a few twopenny-halfpenny articles like Cuticura soap and perfumes it will not have much effect on the public at all; but when you examine its potentialities it will be seen that
96
MR. GRESSON.]
H.—44a.
in the future it may prove to be a very real menace. From the manufacturer's point of view the scheme, of course, must be of benefit. It benefits the manufacturer and the wholesaler. It benefits them because it enables them t« < get a fixed margin of profit quite irrespective of whether their overhead system is antiquated and out of date, and whether they are attempting to improve their distributive system and to reduce the cost of it to the public. That is its vice economically. But the further effect, which is just as evil, is that it is inevitable that all proprietary articles must, if the scheme once comes into operation, come within the ambit of the organization —first, because of the assured profit. No man is going to put a patent medicine on to the market and not avail himself of the association, because he gets his fixed profit. Secondly, because under the scheme the retailer is bound to push an association article in preference to an outside article. I have never read a report quite like that Canadian report, where the high priest of the scheme, Sir William Glyn-Jones, speaks so frankly about what the objects of the association are. In his report, to which I have already referred, the Registrar, at page 19, says : —• As between manufacturers, too, there will be less competition from those who do not join the Proprietary Articles Trade Association, because of boycotting measures which have been advocated by the managing head of the association. The following is quoted from a statement of Sir William Glyn-Jones appearing in Drug Merchandising on June 9, 1926 : "If in your store you handle P.A.T.A. and non-P.A.T.A. proprietaries alike, you deserve all you get in the way of undue price-cutting. The organized retail druggists of the Dominion can, if they choose, make the merchandising of the non-P.A.T.A. proprietaries unprofitable to the manufacturer. There are perfectly legitimate ways of doing this, and I need not enumerate them. I make no apologies for asking you to make the path of the non-protecting proprietor of a proprietary article as hard as you know how. That should be your contribution to the success of the P.A.T.A." It certainly is very good of Sir William Glyn-Jones to express his opinion so frankly. The real risk, as has appeared during the course of the cross-examination, is, of course, that it might, and possibly would, extend to foodstuffs. I know what my friends' comments on that will be. They will say that there is the Commercial Trusts Act, and the schedule to that which prevents the foodstuffs coming under such a scheme. All that I say in answer to that is that lam not as certain as they appear to be that such a scheme as this comes within the Commercial Trusts Act, and personally I would feel very much safer if the matter were made clear by an Order in Council. A further objection to the scheme is this : that if all proprietary articles have to come in under it—and so far I have contended that the effect of it must be that they will have to come in under it—then a pistol is held to the head of every trader. How can my clients not join the association if all proprietary articles come in under it ? How can any cash grocery refuse ? We would be dominated by the others. Certainly, we are not bound to join. I admit that the association does not bring any pressure to bear in inducing our joining, but they make business life impossible by withholding things we have to sell if we do not join. Mr. Myers : It is not necessary to join the association. The Chairman : That is quite understood. Mr. Gresson : But I say the economic effect is that we will be pushed into joining it by commercial pressure. We will be pushed into having to observe the conditions of resale — I say the association's conditions. That is the real crux of the position, I submit, but the clear effect of the operations of the association is that they say to every trader, be he free or controlled, " Unless you sell all goods which we control at a price fixed by our association in conjunction with the manufacturer—we admittedly knowing nothing of the manufacturer's costs —we will supply you with none of them unless you observe the retail price." Why I say that is the crux of the matter is that if that be the correct view, then that constitutes monopoly naked and unashamed. It is absolute control of all the articles on the association's list. I would like to have recorded on the notes a definition of monopoly, and I will quote the definition as given in Ely on " Monopolies and Trusts " : " Monopoly means that substantial unity of action on the part of one or more persons engaged in some kind of business which gives excessive control, more particularly, though not solely, with respect to prices." If that view be correct, what are the results which will naturally flow from it ? First of all, there must be a largely increased number of proprietary articles —I say extending to foodstuffs; my friends dispute that. You remember that Mr. de Fenq said to me in cross-examination, when I asked him whether there was anything to prevent the operations of the association extending to foodstuffs, " No, we do not intend to register them." But Mr. de Fenq cannot bind the association. They may not register them now or next year, but they may in the future. And the sole question is whether the existing law prevents their doing it. Ido want to stress this point: that if the operations of the association are going to result in a largely increased number of proprietary articles, that in itself is socially wasteful and economically wasteful. When a proprietary article is sold, the consumer pays for the tin or the package and a large amount of money expended in advertising, and I cannot on this point stress my argument better than by giving an example. Mr. Wilkie tells me that in the Star Stores in Christchurch he can sell a good quality of cocoa of the same weight as that which is supplied in the Bourneville cocoa-tin for 4d. ; that an analyst will certify that it is of the same quality as the Bourneville cocoa and the same weight as is sold for Is. The difference of Bd.. is paid for the tin, advertising, and packing. Therefore I would point out to the Board that proprietary articles are not matters which in the public economic interests it is desirable extensively to protect. The next and by far the more important factor from the public point of view is that, if the association operates, an increase in price of the controlled articles is inevitable. For that I cite as authority the reports both of the Canadian and the Australian Commissions. Further, Professor Murphy will say, when giving evidence, that there is no case cited in economic literature where a price agreement has ever been followed by a fall in prices. Again—and Mr. Collins will know of this, because the matter has already been investigated by the Cost of Living Commission in 1912—that Commission, after the maturest
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consideration, deliberately reported against price-fixing agreements and recommended an alteration of the law to deal with, that aspect. At page xci of the Cost of Living Report it is stated : — 4. Your Commissioners are of opinion that an amendment to the Commercial Trusts Act is necessary, and should be widened to embrace all commerce, and include the following additional provisions : — (1) That it is illegal for any combination of traders to arrange selling-prices to the retail trade or the public with a direct or indirect penalty to any trader refusing to do so. (Note : This would not prevent traders in any business mutually arranging to sell at uniform prices, without obligation or penalty to any one refusing to do so.) Here, although there is no obligation or penalty expressed, the obvious conviction is that " If you do not observe our retail prices we will boycott you." It is too plain to be argued. Ido want to refer the Commission—and this is the only passage I will read —to pages 20 and 21 of the Canadian report dealing with the question of enhancing of prices. The Registrar reports : — But this is only the first P.A.T.A. list; the margins which it provides for the wholesale and retail trades are not as generous as they will be, according to the assurances of responsible officers of the association. It is evident that, in issuing its first price-list, the association-has had in mind, wisely enough in its own interests, the public feeling which would inevitably be aroused were prices to be immediately advanced to the full extent contemplated. This is emphasized by the following extract from the report of an interview given by Sir William Glyn-Jones to a representative of Drug Merchandising, in Toronto, in March of this year : — " Another important point stressed by Sir William was the advisability of being very cautious in taking the first step in increasing prices, so as to avoid the possibility of a public investigation into the legality of the movement. ' The legality of the P.A.T.A. has been thoroughly investigated, and there is nothing to fear so long as the druggist is moderate in his demands,' said Sir William. ' The retailer must not look on this as a millenium at once. Every movement must be taken with an eye to the public and its possible reactions to increase in prices.' A minimum-price list will be issued for the time being, containing the lowest price at which the druggist can sell the articles. For example, an article which should be sold for 40 cents will have a minimum price of, say, 35 cents. If this article has been previously cut to 25 cents, the increase in price will not be so drastic as it would if the top price was quoted. Furthermore, it will enable the department stores and ' cut-weighters ' to show the price as 35 cents as against the advertised price of 40 cents, and still create the impression that they are selling below the market value of the article. In time the minimum price idea will be abolished and the one price put into effect." Again, in an article in Drug Merchandising, in April of this year, Mr. Charles W. Tinling, president of the National Drug and Chemical Co. and a vice-president of the P.A.T.A., states: "There can be perfect confidence that eventually full prices will be secured for everything, and this will be as soon as possible." In the same article he repeats : " When the P.A.T.A. is fully operating, full prices will be obtained." I will not weary you with any further extracts, but if you will read the next page of the report (page 21) you will see that out of 105 articles which were included in the association's list an investigation was made and it was found that sixty-three had previously been sold at lower than the association minimum, thirty were the same as the association minimum, and four were higher than their minimum. But that is the investigation of 105 articles. I submit that the evidence is overwhelming—with the possible exception of Great Britain, because we have had no evidence in respect of that country — that the effect of the operation must be increased prices. The Chairman : We have had no evidence as to that from the Commonwealth. Mr. Gresson : Has not Judge Beeby's report been put in ? The Chairman : No, it was not put in. Mr. Gresson : I thought it had been; I will put it in. There are two main objections to the operations of the association : First, that it will largely increase the number of proprietary articles ; secondly, that it will involve some increase in price. But here again Ido not want to appear to be talking academically. But economically there is a far greater objection, and that is that it involves the stereotyping of a costly method of distribution. If we are ever going to get down the cost of living —and we had it that, if an article costs 100 cents, it costs 50 cents to put it on the market and sell it to the public—it must be in the interests of the country, and every economist will agree with us that every effort should be made to improve distributive systems and so lessen the ultimate cost to the public. Why I feel this so much is because that is the very scheme which my own client, Mr. Sutherland, has evolved. He has evolved the scheme which largely lessens the distribution of his article and which results in a lower price to the public, but if the association functions we have to go out. We cannot deal with those articles. You will remember that Mr. Hook, when asked about his own store, said, "We have not yet sunk so low as not to wrap up our parcels." If that is going to be the attitude of the ordinary grocer, how are you going to improve the distributive system ? We find that as a result of not using string, and doing away with the service of an assistant to wrap up, we effect over all our shops a large saving, which we can, and do, pass on to the public. It is a striking example of an improvement in the distributive system, which, from an economic point of view, is the very thing we all aim at. Further —and here Ido not know how many of these societies operate in New Zealand —I submit it would mean death to the co-operative system of purchasing. Mr. de Fenq stated that the association had got no rule against co-operative purchasing. Of course it has not got a rule against it. Mr. Haywarcl: It has in England—a specific rule. Mr. Gresson: lam indebted to you, sir, but the point I make is that, rule or no rule, it will prevent co-operative purchasing unless they agree to the terms of the association. What my friend might say is that a wholesale co-operative society which wishes to make large purchases should be compelled to sell to its constituent members at the retail price fixed by the manufacturer, and at the end of its year's operations it could then distribute amongst its members the profits it has made. But that is not an answer, because it would be distributing it among different individuals. The person who has the right to get the cheapest price is the person who buys the article, and not the 999 who constitute the membership of the society; and I submit that co-operative purchasing would not be able to be carried on. A further objection is that no new product can come on the market unless it is controlled by the association, because if it is of a similar character to any association article the retailer is bound
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by agreement not to recommend it in preference to the association article. Its general vice, it is submitted, is this : that it almost avowedly ignores the interest of the consumer, and it forgets the economic fact that traders exist for the benefit of the community and not the community for the benefit of traders. If such be the results of the association, then it is not to be wondered at, it is submitted, that the Canadian and Australian reports were hostile to the coming into existence of the association. Of course, it is idle for me to simply abuse the association. I have to try, as far as I can, to meet the circumstances which my friend says justify the existence of the association. I think lam correct in saying that its sole justification, as urged by my friend, is the cut-throat system of price-cutting which has been in existence in respect of these proprietary articles. As to that, I have various comments to make. The first is this : that there is no evidence of what may be called a mass attempt by all the grocers on any particular trade article. The cutting is sporadic, one grocer cutting one line at one time and another cutting another line at some other time. Further, that the lines cut are unessential lines, which do not seriously affect the general buying public. The remedy, it is submitted, is in the hands of the manufacturer. It has been common ground from several witnesses that in the case of well-advertised article which the public demands even cutting does not affect its supply. I think Edmonds' baking-powder was cited as one of the examples. In any event, if price-cutting is so serious, a better remedy should be devised to meet it than a remedy which is so fraught with danger as is the remedy proposed by the association. While lam on this point I would like to recall that several witnesses were asked by the Chairman of this Committee whether, in spite of the fact that price-cutting was going on, their businesses had not generally prospered, and I think that in every case the answer was that they had prospered, with the exception of Mr. Hook ; but he, I think, was the only one to say that he was driven out of business by price-cutting. Well, gentlemen, an ounce of practical results like that is worth a ton of theory. It is all very well to say that, theoretically, price-cutting will drive these articles off the market. There has been a large body of evidence purporting to show that price-cutting is deleterious to the manufacturer, and that it has not popularized his line. I should have thought the contrary would have been the effect. While on that point, I think it is permissible for me to say that when a witness says that his sales for a period of, say, six months have declined compared with the preceding six months it does not necessarily follow that the decrease has been caused by price-cutting, because it must be obvious to everybody that the real trouble which effects all proprietors of trade articles is the easiness of substitution. Take a specific case —Kolynos tooth-paste ; Personally, I have always used it, although, of course, I know that there are excellent tooth-pastes on the market much cheaper than Kolynos. If there is an article which is very nearly as good as another, and it is cheaper than that other, you are bound to have substitution, and I do not think it is fair to assume, as some of the witnesses did, that when sales decreased over a length of time price-cutting must have been the cause. It may have been one factor, but I submit it was not the sole or the largest factor, because I have been waiting all the time for my learned friend to produce the witness who would be able to say " Look, as the result of price-cutting my lines has gone completely off the market and I have had to stop manufacturing." If the theory that cutting so seriously affects the manufacturer is sound, one would expect that the line would go off the market; but the only explanation I can offer to the Board is either that the price-cutting does not effect the article as seriously as the manufacturer thinks, or else that the attacks on the article in the way of price-cutting are sporadic, and not massed, and that it may consist of price-cutting for a month in one article, followed by price-cutting in another article for another period, and that it does not seriously affect the article in the long-run. At any rate, if it does come to a question of price-cutting, it is by no means clear that the cash man is the man who is cutting the price. Suppose you have a credit store that has to sell at 10 per cent, increase in price compared with that of the cash store, and the credit store comes down to the same price as the cash store : who is doing the cutting ? I should have thought the credit store. The cash man, who is able to work on a better basis, is not to be blamed for selling at a cheaper rate, but the cutting in those circumstances is done by the credit store. That was an example given by a witness from Timaru. My learned friend has stressed very much what he called dishonest trading, but which we decided afterwards we should call immoral trading. Here I will make a frank admission, and, so far as I can see, all the reports that have been put before the Committee by the witnesses of my learned friend contend that price-cutting, which may be defined as selling at or below cost, or at an insufficient margin, is immoral. I should have submitted to the Committee that if a manufacturer chooses to spend large sums of money in advertising his article he may well, as my friend says, build up a goodwill in that article ; but he does that with his eyes open, knowing full well that if his article gets into the hands of a retailer he could do as he likes with it, and under these circumstances, although I admit that all authority is against me, I should have thought that it was perfectly legitimate business for the retailer to sell at any price he choose. After all, suppose Kolynos is cut: the manufacturer has the remedy in his own hands—he can go and arrange for some other article to be cut. Mr. Collins asked whether we had ever known of any line being bought and deliberately slaughtered so as to reduce the price of another article, but no witness testified that he knew of such a practice in New Zealand. The Chairman : We have known of it abroad. Mr. Gresson : But, then, in such cases the rival manufacturers can retaliate. It seems to me you cannot be too nice about these things. I admit, however, that all the reports of these Commissions are against me. Mr. Myers : I do not understand that it ik the economist who suggests the view of Mr. Gresson. I thought. it was the honest man. Mr. Gresson : But, then, Mr. Myers and I disagree about honesty. I want to deal with the practical aspect of it for a moment as regards my own client. First of all, it is clear that as regards
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the Self-help stores they have reduced service to a minimum. During the course of my crossexamination I indicated to the Board that there are at least six classes of grocery businesses, and I would like to have these six classes recorded. They are (1) the cash-and-carry business, with no wrapping-up or delivery ; (2) cash and wrap up, but no delivery ; (3) cash, wrap up, and deliver ; (4) credit, wrap up, and deliver ; (5) credit, wrap up, deliver, call for orders—all various forms of service ; and (6) credit, wrap up, deliver, call for orders, and monthly discount. Now, one would not expect that there were so many classes of business, but when the matter is examined it will be seen that in each of those classes of business the overhead expenses will vary. The Chairman: You do not mention a seventh—a grocerteria. Mr. Gresson: That is the lowest form of all. The Chairman : I noticed they were prevalent in the United States and Canada. Mr. Gresson : It will be noted, as I say, that each of these businesses give a different class of service, and service must be paid for. To meet the obvious objection that jumps to the eye, that if the association fixes a price it is not fair to fix the same price for the cash store as for the credit store, the present New Zealand association has belatedly—evidently after its printed form of agreement was settled —added a condition at the top of one of its columns saying that in the event of cash they may sell at a difference of 2| per cent, between cash and credit. But that is not worth the paper it is written op. It is a pure guess. Mr. Heaton Barker thought it should be 5 per cent. I have a few witnesses who will say it should be 10 per cent. ; but, whatever it is, it can never be fairly compensated for at a fixed percentage. In the grocery business alone you have to fix six prices for all those six different kinds of service ; and you cannot treat any one of them adequately unless you do fix those six prices. The evidence will show from my witnesses that we have reduced the price of groceries to the average family in Wellington by ss. or 6s. a week. Why should we be driven out of business to protect the manufacturers and wholesalers — the wholesalers who have lent money to retailers, who have to charge a higher price to the public in order to pay interest on the advances from the wholesalers ? As I say, why should we be driven out when we are reducing the price of groceries to hundreds of families by ss. or 6s. a week ? The Chairman : What do you mean by " driven out " ? Do you mean by legislation ? Mr. Gresson : No ; I mean that the operations of the association would involve our extinction ; and I would suggest that under those circumstances the Committee will scrutinize very carefully the actions of the association before it does anything which, may so seriously affect the cost of living to the average family. The Registrar of the Canadian Commission points out that, although the association was operating in Canada, when they investigated the " cash and carry " stores and the credit stores they found that the mere fact of cheap prices does not prevent the credit stores from carrying on. There are always people who will pay for particular services, and there are always people who will fetch the goods themselves, and there are always the people who wish to be called upon for orders. I do not suggest that all businesses should be for cash ; both sorts perform different services to different elements of the community. Those are all the facts on which I wish to offer any observation, and 1 propose to call the evidence of Mr. Wilkie and Mr. Sutherland. Before doing so, however, I wish to recapitulate that, with the exception of the English report, every report which is available on the workings of this association is hostile to the association ; and the Committee will note that the English report is very guarded, to this extent: that every time it is prepared to approve of the association it prefaces its remarks with, " Assuming you can ascertain what is the manufacturer's fair cost." Contingent on that, they are prepared to agree to a price-fixing scheme, but always on the assumption that the manufacturer's fair cost can be ascertained. But what is the good of that to anybody, when I have shown that you cannot possibly do that, and the association frankly admits that they do not try ? Robert Abraham Wilkie sworn and examined. (No. 21.) 1. Mr. Gresson.] What is your occupation ? —I am managing director and chief proprietor of the Star Stores at Christchurch and Dunedin. We are cash grocers, and have four shops in Christchurch and three in Dunedin. 2. And you are chairman of the Canterbury Grocers' Association ?—Yes. I have been fourteen years in the grocery business in New Zealand, and previous to that for fourteen months in the Old Country. I have been in business in Christchurch for six and a half years. I started with one shop there, and in the six and a half years I have increased the number to seven shops. In our business we wrap up parcels and also deliver. 3. What are your views as to the fixation of prices by the association ?—We have always been decidedly against price-fixing, because never in our experience have we considered that it could be properly controlled to the satisfaction of the various styles of business. We contend that our cash trade is quite different from the unweildy credit business operating throughout the country. Therefore some allowance should be made for the different classes of business. 4. If this association came into existence and extended its operations at all largely, what effect would it have upon you ?—I am satisfied we would either have to go out of business or increase our service, to the detriment of the consuming public, in such a manner as to make our business compete with the others who are giving those services, which we consider to be frills and entirely unnecessary. The appeal of our business lies in the cheapness of our prices. 5. Mr. de Fenq interviewed your association last year ?—Yes, in July of last year. 6. And at that time what was the view of the association as regards foodstuffs ? —We quite gathered that Mr. de Fenq intended to cover them at the earliest possible moment. There was not a great attendance at the meeting which Mr. de Eenq addressed. That was a mee&ig at which members of the Canterbury Grocers' Association were present, and in reply to a question by one of the members I know that Mr. de Fenq concurred that Edmonds' baking-powder might be included
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under a proprietary label. If that were done, of course it would compel us to observe their retail prices, because we handle quite a number ofjproprietary articles and patent medicines quite outside foodstuffs. 7. What is the percentage of your overhead ? —I hand in to the Committee balance-sheets covering the years 192-5, 1926, and 1927. The percentages shown there are quite correct. We have a system of accounting which is not bettered in New Zealand. It costs money, and, incidentally, the organization we have at the present time costs money, but we prefer to pay for something now which we know we will not have to pay for later on. My gross profit for the year ended December, 1926, was approximately 19 per cent, on turnover. We take out our figures monthly. Our overhead expense is not quite 17 per cent. ; that leaves us a net profit on turnover for the period of 2-3 per cent. Included in those figures are fair amounts for depreciations, bonuses, wages, &c. As those balance-sheets will show, the wages are far better than are paid by other traders in our line of business. They are enhanced considerably by the fact that we employ a fully qualified accountant at a salary which he could not obtain elsewhere. They also include my own salary of , and also one hundred guineas a year to the auditors. 8. Are your wages generally above the award rates ? —Yes. We also give each individual branch manager £1 a week above the ordinary wage, and an additional £1 a week provided his figures for three months come out within 1 per cent, of accuracy. On top of this he has al\ per cent, bonus on the net profits of his own shop, regardless of the results at the other shops. Each member of the staff participates in this bonus. 9. Do you find you are able to undersell the credit grocery man ? —We do, in the main. 10. Do you sell any goods at or below cost ? —No, nothing. 11. A good deal has been said about Edmonds' baking-powder : that is sold at a low profit ? —lt costs us 145., and we sell it at Is. 4d. We get 12J per cent, on that. 12. In your experience have the sales of Edmonds' baking-powder increased or decreased ?— Increased considerably. It is the only line in baking-powder that we handle. We have eliminated all others and have given Edmonds' the preference because of its saleabilitv. ■ 13. Is it being cut ?—Not below Is. 4d. They would like to get more, of course. 14. You went through the number of retail and wholesale groceries in the country, and estimated what the income of the P.A.T.A. would amount to if they all subscribed ? —Yes ; I calculated on the basis that every trader would join, in which event the first year's subscriptions would amount to £20,000. 15. Have you any objection to the association from a distributing point of view ? — I object because the association insists that the greatest amount of discount any retailer shall receive is 2J per cent. I contend that lam able to buy at a better margin than that, because in some instances I buy direct from the manufacturer. In reducing my discount to 2J per cent, it means that I shall not be able to place an order for, say, fifty cases overseas at any one time, because there would be no object in doing that if I can buy in single-case lots at as good terms. It means that the buying of these lines will be directed to the wholesale houses. 16. You were in Wheeler's store in Auckland, I think ? —Yes, about eight years. I was managing one of his branch shops from 1919 onwards. 17. You have heard the reasons for his failing there ?—Yes. 18. And you now produce the liquidator's report ?—Yes. Mr. Gresson : I will read to the Committee a paragraph from the report of the liquidators. Thei say : "We realize that we have not been asked to give opinions, but to make investigation ; having done this, however, and reported the result, we venture the following for the information of thf creditors, namely : that we were auditors to the company before we were its liquidators, and, possessing in consequence a certain amount of inside knowledge of the company's affairs, we give it as our opinion that had the company not taken over Otahuhu branch, and had it not launched a mail-order department, and had Mr. Wheeler held the reins of management, the company would not to-day be in its present unfortunate position. Even with Otahuhu and mail-order department added, we think the downfall might have been averted had Mr. Wheeler remained personally in command." 19. Mr. Gresson (to witness).] He had carried on a successful business from 1908 to 1922 ?—Yes ; in that period it never made a loss. 20. Mr. Kennedy.] You had a conversation with Mr. Cropp laet evening ?—Yes. 21. What is Mr. Cropp ? —Manager of Edmonds' Baking-powder Co. Just tell the Committee what was said. Mr. Myers : I object. As Mr. Cropp is in Wellington, he should be called if he wishes to give evidence. The Chairman : In the event of Mr. Cropp not being available, could not the witness make a statement ? Mr. Myers : I submit that Mr. Cropp must be called personally if he wishes to give evidence. Mr. Kennedy : Ido not agree with my learned friend. It is a matter of some importance. I submit I am on sound legal ground and in a Court of law I would be allowed to ask a question. The Chairman : I am afraid we cannot admit hearsay, and that it will be necessary to call Mr, Cropp. Mr. Kennedy : Of course, if you rule to that effect I must submit; but I still am of the opinion that in a Court of law I should be allowed to proceed. The Chairman : That a conversation between Mr. Wilkie and Mr. Cropp would be admitted as evidence ? Mr. Kennedy : A letter has been read from|Edmonds' Baking-powder Co., which is practically equivalent to calling Edmonds officially. Here is a statement that is contrary to that letter.
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The Chairman : I prefer that we should get hold of Mr. Cropp. Would you not yourself prefer, Mr. Kennedy, that Cropp's statement be given strictly in the form of evidence from the witness himself. Mr. Kennedy : I thought it was strictly in form. I suggest that if Mr. Cropp be available that he be called, but if he is not available I would like to renew my application to put the question to Mr. Wilkie. 22. Mr. O'Leary.] In general, does the consumer purchase groceries and necessities at your store cheaper than at other stores in Christchurch and Dunedin ?—ln general, yes. 23. Assuming that I have £3 to spend in a grocery store in Christchurch, will I get more for my £3 in your store than in others ? —Yes, decidedly. 24. What increase will I receive in your store over the others ? —Recently in Dunedin we compared the prices of opposition grocers with our own, and we found that the amount saved in purchasing 18s. worth of goods from our store was 3s. compared with buying from other stores. 25. Did you take 18s. as the average expenditure of a housewife per week ? —Yes. We ran out the lines they usually purchase, and the total amount for twelve months was £9 17s. odd, and we printed at the bottom of our circular, " Sufficient to buy Mum a new frock and Dad a new suit." 26. Did you take 18s. as the expenditure in your shop ? —No. It means that 18s. worth of groceries in other shops could be obtained for 15s. in ours. 27. And you do not sell any articles at the low cost ? —None at all. 28. Mr. Myers.] Do you happen to issue any price-lists ?—Occasionally, not frequently. 29. Have you got one of your price-lists here ? —No. 30. Do you happen to have a list of the goods comprised in this 15s. worth in your own shop, and costing 18s. in the others ? —Not with me, but I could get one. 31. Do you appreciate the fact that that involves a difference in turnover of 16 per cent, or 20 per cent, according as to whether you take the 18s. or the 15s. ?—I quite appreciate the difference, yes. 32. You tell us that your average gross profit on turnover is 19 per cent. ? —Yes. 33. That means, according to you, that the other man's gross profit on turnover, assuming that he bought as well as you, would be either 34 or 39 per cent. ? —Quite so. 34. Is not that rather a ridiculous statement ?—No, not by any means. It may seem rather high, but that would only be on a portion of his business, and there are portions which bear 25 per cent, and over. 35. Are you solemnly prepared to say that there is any retail grocery business in New Zealand which is making a gross profit on turnover of either 39 or 34 per cent. ? —No, I do not suggest there are. 36. But you are telling the Committee that ?—No. The Chairman : I do not take it that way. 37. Mr. Myers.] Will you give me an idea as to the particular lines : are they bread-and-butter lines ? —Yes. 38. You say you make 19 per cent, gross.profit on turnover ? —Yes. 39. What is the highest profit you get on turnover in your shop ? —I could not possibly get more than 38 per cent. 40. I asked what is the highest gross profit on turnover on any one article ? —I have one that must be nearly 100 per cent. : That is aspirin. We indent aspirin to compete with aspro. We buy that line costing us under 3d. We buy the small sealed carton that the chemists use, and sell them at twenty-five for 9d. Aspros sell at twenty-five for Is. 6d. We originally sold aspirin at twentyfive for 6d., but the public would not buy because they thought the quality was not there, so we were forced to sell them at twenty-five for 9d. 41. What about butter ? —We sell butter at a margin of 4 per cent. 42. What is your turnover in aspirin in a week for all your stores ? —lt would be hard to say. We buy them by the pound and sell them by the 100. I should say, £6 or £7 a week. 43. You say you make 150 per cent, on them ? —66§ per cent. 44. There are always charges to be added to the 3d. ?—No ; everything is included—c.i.f.e., duty-paid, and delivered to our store and put in boxes. 45. Is there any other line on which you make, say, 33 per cent, on turnover—any single line in your shop ? —No, not that I am'aware of. 46. Can you give me any line or lines on which you get 30 per cent, on turnover ? —lt is hard to say. Yes, we make 30 per cent, on boracic acid. 47. That is not an article of which you sell a great deal ? —No ; but your witness mentioned it the other day. 48. What other items are there on which you make more than 30 per cent. ? —Powdered alum. 49. That is only a small line ? —lt is only in the small lines that we get anything like that; because the popular selling lines are reduced to a minimum. 50. Can you give us any line on which you get more than 25 per cent. I—No ; 1 think our average is about 20 per cent., because we usually make it 3d. on Is. 3d. 51. You think your average is about 20 per cent. ? —Yes. 52. You have told us your average was 19 per cent. ? —Yes, for the period. 53. I want you to tell us what articles show you more than 25 per cent.—l mean, in substantial sales ?—lt is hard to say. I quite appreciate your question, but it is hard for me to give them offhand. Mr. Myers : I think you should have no difficulty whatever if the evidence is correct. Mr. Gresson : But there is a very real difficulty. The Chairman: The witness has implied that the precentages of above 20 per cent, are on a few slow-selling lines, and that he has to search for them to find them ; that generally he makes
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20 per cent, on popular selling lines, and that on very quick-selling lines, such as butter, he makes as low as 4 per cent. Mr. Myers : I am endeavouring to show that his statement is not correct. The Chairman : I daresay he may have difficulty. I can quite appreciate his position, knowing something of the grocery trade, in taking out particular items on which he gets 35, 30, and 25 per cent. Mr. Myers : Then I will put it, anything over 20 per cent. 54. Mr. Myers (to witness).] You said you get 4 per cent, on butter ?—Yes. 55. Your sales of butter would be pretty substantial ? —Yes, about a fifth of the turnover. 56. And on that your gross profit is only 4 per cent. ? —Yes. 57. What is your gross profit on sugar ? —Twenty-one per cent, in single pound lots, and 10-8 per cent, on 70 lb. lots. 58. And I suppose you sell a considerable portion of 70 lb. bags ? —About half and half. 59. So that we may say that your average on sugar would be 15 per cent. —Between 15 and 16 per cent. 60. What proportion of your total turnover would be in sugar ? —About 8 per cent. The figures I have given you relate to Christchurch and Dunedin. 61. What is your gross percentage on flour ?—We get 16 per cent, on 7 lb. bags and 13 per cent, on ordinary sales. 62. And what percentage of your turnover would be in flour ? —About 8 per cent.—the same as sugar. 63. And what are your other leading lines ?—Tea. 64. And what profit on that ?—One brand, 16-6 ; another, 16 ; and another, 20 per cent. 65. And what proportion of your turnover would be in tea ? —About 12A per cent. That is for proprietary brands. Proprietary teas allow us a margin of 15 per cent. 66. What teas are they ? —Amber Tips and Bell tea. 67. What do you sell those at ? —3s. 4d. a pound. 68. Do you sell at 3s. 4d. ?—Yes. 69. And they allow you 15 per cent. ? —Yes. 70. I suppose we may take it that in this 18s. you have been talking about there is sugar, and flour, and butter, and tea ?—I do not think sugar was included. I think at that time every shop was selling it at cost. 71. Anyhow, the other three items would be included ? —Yes. 72. There would not be much in the way of proprietary lines in that 18s. outside of foodstuffs ? — Ido not think there would be many. We were appealing to the housewife as grocers. 73. Advertising ?—Yes. 74. Now, we have got the leading lines that you sell, and we have the percentages that you get on them : do you suggest that other grocers were getting 16 or 20 per cent, gross profit more than you ? —On the actual lines which appear on that list, yes. 75. You are the chairman of the Canterbury Retail Grocers' Association ? —Yes. 76. What are the rules of that association ?—To create uniformity amongst traders on questions which arise in our trading, apart from price-fixing. 77. Not to fix prices ? —No, not to fix them. 78. A gentleman's agreement ? —Not even that. The only prices which have been adjusted are sugar, butter, and porridge-meals. The prices 1 have here are what have been suggested. When I say " fixed," that is not quite correct. 79. You mean suggested by your association ? —Yes, for sugar, butter, flour, and porridge-meals —oatmeal. 80. Bacon % —No. 81. But, anyhow, sugar, flour, oatmeal products, and butter ? —Yes. 82. In respect of those items the prices are suggested by the Retail Grocers' Association ? —A cash price is suggested to adopt if they wish to do so. There is nothing compulsory about it. 83. The prices are suggested by the association of which you are chairman. Do you adhere to them I—All1 —All except butter. 84. And what do you do with butter ? —I am cutting that lower than the original price. 85. What are you selling it at now ? —ls. sd. a pound. 86. And what is the price suggested for you at the present time ? —ls. 6d. 87. But so far as other prices are concerned you adhere to them ? —Yes. 88. And I suppose the other grocers do ? —Some of the grocers charge more because they can sell at those prices. The margin is not wide enough for them. 89. I want you to exclude from your mind all proprietary articles of foodstuffs. Can you tell me what percentage of your total turnover is comprised of proprietary articles ? —I think it would correspond closely with flour and sugar. I am judging from my payments. That would be about 8 per cent. 90. So that your total turnover of proprietary lines would be 8 per cent, of your total ?—I am judging that from the cheques I have to pay to certain houses. We buy other lines through wholesale houses. I should say, on reflection, 10 per cent. 91. What was your total turnover ? —Last year, . 92. You may include toilet preparation, patent medicines, and proprietary soaps ? —That would increase my previous figure by making it 30 per cent. Now that bar soaps are included it would easily bring that amount up to 30 per cent. 93. What are your total sales of soap ? —My total purchases are about £150 a month.
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94. We have already had your percentages on flour and sugar. Then, of course, you have about thirteen hundred different lines in your shop ? —Yes, including various sizes and varieties. 95. Do you deal in tobacco and cigarettes I—Yes,1 —Yes, both of them. 96. I suppose you do a large business in them ? —No ; tobacco is a line which is not attractive in our stores. 97. It is, I suppose, in currants, raisins, sultanas, and everything a grocer would carry I—Yes.1 —Yes. 98. Would you put the proprietary lines at 25 per cent. ?—Yes. 99. Roughly, you pay £5,000 a year for soaps ? —Yes ; I am including Palmolive and other lines of soap. 100. Can you tell me the highest and lowest percentage of gross profit you make on any kind of soap ? —lt varies from 8 to 28 per cent. 101. The 28 per cent, would be on fancy soaps ?—Yes. 102. Do you sell a greater proportion of fancy soaps, or the cheaper kinds ?- I think the average bar would be our medium for sales. We do not push the cheap one, because it is not one that will bring us friends all the time. I think we can put the majority of our sales at an average margin of 20 per cent. That, however, is purely assumption on my part. I will work it out for you, though, if you require it. 103. That £5,000 includes your soaps ? —Yes. 104. Can you tell me about what is your total purchase of all other proprietary articles—that is, patent medicines and the like ? —That £5,000 I spoke of does not include only soaps. 105. Well, what is it that you pay out for proprietary articles, including soaps ?■ —The £5,000 which I gave you just now. 106. That includes all your soaps ? —Yes, so far as I can recall from memory. 107. And it includes patent medicines ? —Yes, apart from those I mentioned I bought through the ordinary wholesale houses that we cannot dissect. 108. That would not amount to much ? —lt is gradually growing, because, while we have been buying patent medicines on a better basis through a net-price house, the other wholesalers are now perfecting their operations and falling into line, which means that we buy more from them. 109. But it does not increase your total ? —The purchases I have mentioned for patents is of fairly recent date, and the other has been growing. 110. But if one set of purchases increases, the other decreases ? —Yes, naturally ; so that we need not go into those figures. I only want the Committee to know that my figures are assumptions. 111. Does your £5,000 include proprietary articles such as perfumery ? —We do not handle perfumery. 112. So that we may take it that the £5,000 represents proprietary lines apart from foodstuffs ? —Yes, I think it would . 113. You have told us that even on soaps you get 20 per cent. On other proprietary lines you average about 20 per cent., I suppose ? —I think in the main they are rather lower. 114. Very well, I will call it 20 per cent. That is on turnover. What would that be on cost ?— 25 per cent. 115. If you take 25 per cent, on £5,000, that is £6,250 'Yes. 116. I would point out to you that £6,250 is only about 11 per cent, on your total turnover ? —Yes, that is quite correct. 117. So that the estimate you gave me before of 25 per cent, on proprietary lines being your total proportion to turnover is excessive ? —I rectified it. 118. It is more like 11 per cent. ? —Yes. The Committee adjourned at 12.35 till 2. 30 p.m. On resuming at 2.30 p.m. Examination of Robert Abraham Wilkie continued. 119. Mr. Myers.] I think you said that you sold Amber Tips at 3s. 4d. ? —Yes. 120. And Bell tea at the same price, did you not ? —Yes. 121. In other words, you adhered to the suggestion made by the proprietors of the articles ?■— Yes, that is quite true. 122. At what price do you sell Woods' Great Peppermint Cure ?—At Is. 7d. and 2s. 7d. 123. And, I suppose, of these articles that would be called proprietary articles you sold at the price suggested by the manufacturer or the agents of the manufacturer—that is, you sold at the fixed prices ? —There may be a few—that is, some special items —that I sold like that, but the majority would be less. We have tried as far as possible to give to the public the margin of difference between a cash business and a credit business. 124. Do you stock Taniwha soap ? —No. 125. Do you handle Velvet soap ? —Yes. 126. Labourlite ?—No. 127. Can you dissect the item of per annum which you pay out in your business for all proprietary lines —that is to say, can you tell the Committee how much of that would be infancy soap, how much other soap, and how much proprietary lines other than those lines and foodstuffs ? — I cannot tell you. 128. They would not amount to a great deal ? —No.
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129. You tell us that you charge Is. 7d. and 2s. 7d. for Woods' Great Peppermint Cure—you buy it in this packet [produced] I—Yes,1 —Yes, that would be the container, and I buy in containers such as that now produced. 130. It will be seen on the container that there is a printed clause regarding the conditions of sale of Woods' Great Peppermint Cure, which reads: "We have forwarded to you, according to your order, the undermentioned goods upon the express condition that the goods are not under any circumstances to be sold retail below the based price. If you do not agree to these terms, at once return the goods to us. Your acceptance of the goods will be treated as an acceptance of these terms." You buy this article with that clause upon the container?— Yes. 131. But nevertheless you sell below—namely, at Is. 7d. and 2s. 7d. ? —Because T have been given to understand that the manufacturer does not mind at what price the goods are sold by the etailer, because he is getting his margin of profit out of it. 132. Did somebody tell you that he had said that ? —Mr. de Fenq. 133. Do you know of other retailers in Christchurch who have sold Woods' Great Peppermint Cure at that price ? —Yes, every grocer in Christchurch. 134. It was not you who commenced that, but you did it ?—My price was originally Is. Bd. and 2s. Bd. 135. You brought the price down because somebody else came down to your price ?—Yes. 136. And I take it they came down to Is. 7d. and 2s. 7d. % —Yes. 137. Mr. Ores-son.] In your experience, what is the margin of difference between running a cash business and a credit business : we have been told various figures—for instance, one person said 2J per cent., whilst another person said 5 per cent. ? —We would say not less than 10 per cent, at any time. 138. Mr. Hayward.] Your cost of overhead is 17 per cent. ? —A fraction less than 17 per cent. 139. That is in round figures ? —Yes. 140. You think that a mixed business —namely, cash and credit, with delivery—cannot be run for less than 27 per cent. ? —No. 141. Economists say it is impossible to effect a saving of more than 5 per cent, by striking out the services of delivery and credit ? —lt has been proved in many cases to be 10 per cent. 142. That may be comparing an inefficient business with an efficient business, but it was given in evidence before this Committee that a large grocer doing a cash and credit business and making his delivery can work on 12i per cent, overhead ? —May I explain that my overhead is large because at the present time lam schooling a staff and schooling a business. I am in a position to-day to double my turnover without increasing the cost. |At this stage the examination of witness was discontinued in order that Mr. Cropp's evidence should be taken.] Examination of Robert Abraham Wilkie continued. 143. Mr. Myers.] Would you mind telling me again how you class your business—we have heard quite a number of different classes of grocery businesses ? —Under the heading given by Mr. Gresson —namely, cash, wrap up, and delivery. 144. You do not do purely a cash business ? —Yes; we did at one time. 145. In your present concern ? —Yes. 146. Did you find that satisfactory ? —Yes. 147. And you altered it ? —Putting on delivery. That was the worst move we ever made, but it was the line we were compelled to take owing to our competitors coming down to our prices. 148. Can you tell what, in your view, is the difference in overhead expenses between a cash business and a cash, wrap-up, and delivery business ? —I would say that once our business is properly organized it would be 5 per cent. 149. So that the overhead of a cash business would be only about 12 per cent. ? —lt would be actually less than that. I mentioned that our expenses are high because lam schooling the organization for future business. There have been previous periods when my figures have been much less. 150. But your turnover is less ? —No, my turnover is higher. 151. You had a bigger turnover than you have now ? —Yes, nearly more. 152. How long ago was that ? —ln 1921-22, I think. 153. Since then has your turnover gone down gradually ? —No ; almost in one lump. 154. It has not gone up since ?—lt has been more or less stationary since. 155. Mr. Montgomery.] In the course of your evidence you said that if you were not able to sell proprietary articles you would have to go out of business : I suppose you refer to business in proprietary articles; you do not mean that you would have to go out of business altogether ? —lt was purely and simply if the P.A.T.A. should function and have power to operate throughout my business 156. You mean in foodstuffs and everything ? —lf the P.A.T.A. had power to control my business according to their scheme of things. 157. Mr. Collins.] Do you know the membership of the Christchurch Grocers' Association ? — Yes ; we have about ninety financial members at the present time. 158. Out of how many grocers in the vicinity ? —I should say about two hundred. We have only been recently organizing. 159. So that any discussion in relation to prices would only relate to those ninety members concerned ? —Yes ; quite so.
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160. Did you circularize your members in regard to price discussions ?—No. The idea is to enable the small man in the suburbs to know what the price is. We simply say what has been adopted in the matter of the adjustment of the prices in the general stores. He can do what he likes, of course. Some of them know that prices have advanced, while some of them may not know. 161. Do you record minutes at the meeting of the association ? —Yes. I may say that we have a page allotted to us by one of the wholesale grocers by means of communications at times. I have one here. [A booklet was produced by witness, handed to the members of the Committee, and was subsequently returned to him.] 162. In regard to the question of advertising, which was dealt with bv Mr. Myers, where you put a list of your prices and tried to induce the customers to believe that they could save 3s. in the pound by dealing with your shops, did you compare your lowest price with the highest of your competitors ?—I did not say that it was taken as the highest of our competitors. We simply take it as the near-by competing business. 163. Following up Mr. Montgomery's question about the elimination of P.A.T.A. lines from the whole of your stores, could you carry on your business if those lines were withheld from you ? —lt would certainly be a, hindrance for us to have them taken away if there were other stores near by to handle them and agree to sell them at the fixed prices. 164. If the P.A.T.A. functions in New Zealand you feel that you would inevitably have to observe their regulations ? —We would be compelled to do so. 165. Do you consider that your present method of conducting your business is the best in an economic sense ? —I am sure of it. 166. You told Mr. Myers, did you not, that you thought you made a mistake in adopting delivery ? —Yes. On that point I would withdraw my statement. We were compelled to commence delivering because the other fellows came down to our method of business. If we could eliminate it we would do so. 167. Do you have any objection to the grocer who sells below cost ?—I would say that he is foolish. 168. Would you regard it as unmoral ? —No. 169. Just that he would be foolish ?—That is all. Before concluding, there are one or two small matters that I would like to refer to. I mentioned to my counsel the other day the question of competitive lines that was being sold against Kolynos. On a particular line we sell in our stores for 10d., on the packet it says, " Manufactured from the formula of Dr. N. S. Jenkins, D.D.S., Paris." We have advertised in our windows that it is the same as Kolynos, and nobody has said a word against us. I may say that I have used that line myself, and I fail to find the difference. We sell that line at 10d., whereas the other line is compelled to be sold at Is. 6d. 170. Mr. Collins.] Is the price of that competing tooth-paste fixed ? —No. 171. Kolynos is sold at Is. 6d., and the price is marked on the cover I—Yes.1 —Yes. 172. What is the name of the article that you sell at lOd. ? —Florimel dental cream. 173. Mr. Myers.'] It does not follow that it is the same formula : you do not know that it is the same formula ? —No. 174. Do you know that Kolynos is a trade-mark ?—Quite so. 175. Would you be surprised to know that it was an offence ? —lt was put there for the public to find fault with if they wished. 176. lam asking you this : did you know, when you did that, it was an offence ? —I do not know that I considered it that way. 177. It is an infringement of their trade-mark ?—I was wishing to show the public that, whilst we were compelled to sell Kolynos at a higher price, the other article was being sold at a lower price. 178. What does it cost you ?—lt cost me Bs. 179. And you sold it at what ?—lOd. 180. Of course, you are not selling so much Kolynos ? —No, because they are compelling us to sell at the same price as the other man, who gives discount. 181. Is it being cut down in your district ?—Yes, to Is. 2d. 182. You will not stock it ? —We do stock it. 183. But you stock something else and sell it in preference, and push the name of it ?—Because we want to make friends with our customers. I will hand in two wrappers for the information of the Committee. 184. Mr. Collins.] Have you anything further to say ?—Yes. I would like to say that Mr. Barker, who gave evidence prior to the week-end with regard to Wheelers in Auckland, also mentioned the liquidators in the society as having been previously the auditors of the company. I think Mr. Barker's implication was that perhaps the greatest reliance could not be taken on their statement, and it is because of that lam now referring to the matter. In one of the copies of his magazine he applauds that particular partnership in connection with some transaction. His implication the other day was, therefore, not in order. It has been mentioned on several occasions that popular lines are taken and reduced in price by cash grocers purely and simply as an attraction. I would like to say that as a consequence of the experience in my own business I find it is impossible to effect a saving or economize for the benefit of any section of the public on slow-selling lines, because the turnover is not sufficient to warrant a reduction. There is another point that I would just like to refer to briefly, and it is this : you mentioned at the opening of the sitting of this Committee, sir, that the amo nt of evidence coming forward had been surprisingly small. I would like to point out Mr. Collins : No, ] did not make that statement. I mentioned that- as a result of advertisements throughout the Dominion the number of letters sent into the secretary was surprisingly small.
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Witness : The reason is that the P.A.T.A. have not published throughout the length and breadth of the country details regarding their possible operations. Only recently 1 was speaking to Mr. Wardell in Christchurch, one of the principal grocers there, and he had never heard anything about it. Mr. Collins : Does he not read the newspapers ? Mr. Gresson : It was badly advertised in the Christchurch papers. I do not blame the Committee for that, let it be understood. Mr. Collins: There was a 2 in. advertisement in the newspapers in Christchurch for three nights respecting the inquiry to be held. Mr. Gresson : The trouble was that the advertisement was pat in a very bad place. Witness : I was not referring to the official notice, but to the publicity given to the operations of the P.A.T.A. I was in Ashburton recently, and no one there had been acquainted with it. I went to Timaru, and I was informed by Mr. Norrie that a meeting had been called, but as only about three were present the meeting lapsed for the want of members. I have spoken to a number of traders in Dunedin who have not been acquainted with the operations of the P.A.T.A., and I am convinced that had publicity been given to it the position would have been different to what it is to-day. Mr. Myers : I suppose you know that there was a leading article in one of the Christchurch newspapers respecting the matter ? Witness: Yes. Albert Leonidas Cropp sworn and examined. (No. 22.) Mr. Collins : You have attended this inquiry at great inconvenience to yourself ; but a point has been raised between counsel engaged on a matter in which you are interested—namely, Edmonds' baking-powder —and in that connection it was deemed prudent to obtain the information from you rather than from any witness who may have the information by hearsay. I may say that it is not proposed to keep you very long, and if you can spare, say, ten minutes we will be pleased. 1. Mr. Myers.] You are the managing director of the company known as Edmonds' Bakingpowder ? —Yes. 2. Is that a limited-liability company ? —Yes. 3. And is baking-powder the only article which you manufacture ? —lt is the principal article. -i. And we are all aware that you have built up a considerable business ? —That is so. 5. How long have you been carrying on this business—that is, the company or Mr. Edmonds ? Since 1879. 6. Originally, I suppose, it was a comparatively small business ? —Yes, a very small business. 7. But it has now grown to considerable dimensions ? —Yes. 8. Would you mind telling the Committee the period of its greatest growth ? —I should suppose that 1911 was the period of the greatest growth in the history of the business. 9. Mr. Collins.] The ratio of increase ?—Yes. 10. Mr. Myers.] Has it increased since 1911 ? —Yes, nearly 100 per cent. 11. Has that been a gradual increase ? —Yes. 12. Apart from the merit and quality of the article, has your company indulged in an advertising campaign ?—Since 1911 they have done quite a large amount of advertising. 13. And did that help to increase the business —that is, the turnover \—Since 1911, when we started the advertising campaign, the annual increases have been in and about the same ratio. 14. Fairly constant \ —Yes. 15. Take the last thsee or four years : has your firm still gone on increasing ? —Well, last year it did not do anything like the ratio of the previous year—that is to say, we cannot look for the same ratio now, or anything like it, because we have practically got to saturation-point. 16. Are you still maintaining your advertising as intensively ? —More intensively. 17. Why ? —Because of the conditions in trade throughout New Zealand. 18. When you used the words, " of the conditions in trade," are you referring to the conditions in your own particular article ?—Yes. 19. Would you mind explaining what you mean by that ? —ln 1920 we were faced with the proposition of having to conduct a trade with practically every retailer in the Dominion opposed to the sale of the article. 20. Why ?—Because of the cost to the retailer through the distributor. 21. That is, the present cost price to the retailer ? —Yes. 22. Are there other lines of baking-powder competing with your article ? —Yes, there are. 23. Are you able to say whether or not their trade has been increasing very rapidly by reason of cutting ?—I should say that the position has not increased at all. 24. Can you indicate why, in your opinion, it has not increased ? —Well, 1 think the fact that we took precautionary measures as soon as this condition became serious accounts for it—-that is, extra advertising and publicity. 25. Was there anything else besides extra advertising ?—That is the line we deemed advisable. 26. What price do you fix—l know you cannot enforce it—as the retail price of your article ? — As a result of a discussion I had with the Board of Trade in 1916, I think, the big retailer was allowed 25 per cent, of gross profit and the small retailer 20 per cent, profit —that is, gross profit. Two years ago we placed the whole of the sale of our goods on to a flat rate, and to-day the big grocers buy exactly at the same price as the small grocers. 27. And the retail price is what ? —lt is between Is. s|-d. and Is. 6d.
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28. And they have brought it down to Is. 2d., which means they are selling the article at cost ?— In some places. 29. Can you tell the Committee this : if there was no cutting, and the goods were being sold, can you say whether or not, having regard to the reputation that you have earned for the article, your advertising would require to be so intense ? —lt would not. 30. Can you say whether the decrease in advertising that you would be able to make would be small or considerable ? —Fairly considerable. 31. Can you tell the Committee as to whether or not that would enable you to produce your article at a price which would enable it to be sold at a lower price to the public ? —lt would be quite a small matter if it were so. 32. Would there be a reduction ? —We could make a reduction, but that would be a sum of £2,500 per annum spread over, say, two and a half million tins. 33. It would not amount to a great deal ? —No. 34. The fact that this goes on compels you to spend more in advertising ?—We deem it advisable ; we cannot take any risks. 35. Mr. Kennedy.] You say that your sales have increased over a period of years, but that your rivals have been increased in recent years ?—I take it that that is so. 36. That is your observation ? —Taking it from a family consumption basis. 37. Has the price of your rival baking-powder been reduced by these competitive grocers ?—ln some cases, yes. 38. So that you are all in the same boat ? —ln many instances we have some unfriendly grocers in the trade who immediately the cutting became general were informed by us that we could not supply them with it if they cut it. Some of them did everything in their power to push the other lines, and I am told that in some instances the grocers offered their employees a premium on every pound of baking-powder they sold other than our own. 39. Are the other baking-powders reduced by the competitive grocers in the same way as yours ? — That I cannot say. In one line I know that it is so. 40. In spite of the competitive grocers your sales have over a period of years increased ? —Yes. 41. You do not expect the ratio of increase that you had in earlier years to be maintained ? —We cannot expect it. 42. Is it not a fact that a large part of your advertising is to maintain the popularity of your baking-powder and to prevent opposition creeping in ? Is that not protective advertising ?—Yes ; but there are other measures. 43. What were your sales in recent years : you advertise them to be phenomenal ? —Yes, we maintain that it is phenomenal. 44-. What are they ? —Two and a half million per year, in tins. 45. Can you tell us in actual fact if, in your judgment, the sale of the rival baking-powder is only a fraction of the two and a half million tins that were sold ? I suppose another manufacturer could not sell another half a million ?—That is so. We do not know his figures. 46. How long do you suggest there has been competitive prices lower than you would like 1- —I should say that it is near enough to six years—that is, since cutting first started. 47. So that in spite of that you have been constantly increasing and you are, in your judgment, near your saturation-point ?—Yes. 48. Instead of losing ground, you have during the last six years been improving your ground ?— Due probably to precautionary measures. 49. You have never taken seriously the possibility of Edmonds' baking-powder, with its production of two and a half million tins, being driven off the market ? —I think I have lost more nights' sleep over it than you have. 50. In the face of having reached your saturation-point and these increases year by year ?■ —In spite of that we have the fear in front of us, and no one can deny it. 51. I suppose you recognize that competition is simply a fight between merchants for the public good will ?—ln this case it is not the merchant. It is in this case a question between the manufacturers. 52. Do you not treat trade as a battle for the public good will, in that if you do not maintain your article in its popularity you lose ground ? —As in the past, we have to fight for our position. 53. How does your cost of advertising compare relative to your sales % —lt has been more during the last few years. 54. I suppose that much of it is experimental only : you do not find it necessary to keep it at that figure ? —I suppose all advertising is experimental. 55. Do you reduce your advertising ? —We do not reduce our advertising—that is, our newspaper advertising has not been decreased. I may say that we spent by way of precautionary measures, but we did not continue to spend the extra . 56. Would you supply the Committee, if it desired it, particulars of your sales and the total advertising costs in those years that have been mentioned ? —Yes, and it would probably show more than what I have said. 57. Mr. Walker.] Is your advertising spread fairly evenly over New Zealand 'Yes, from Auckland to the Bluff. In later years we have made a general Dominion campaign. 58. Do you, in addition to the — mentioned, spend another ?—Yes. 59. On what ?—Cookery-books. 60. Mr. Myers.] In order to save members of the Committee making calculations, the amounts to -|-d. ?—That is near enough.
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61. On two and a half million tins : You have told us that when this intensive cutting started you knew that some of the grocers were not only putting your article under the counter but were pushing other lines ?—Yes. 62. Can you tell us when, or about what time, the price in some districts went down to about Is. 2d. ?—lt is rather a difficult matter, because the price has varied such a lot of late years. 63. Is it during the last few months ? —I should say probably two years. 64. Mr. Gresson.\ In your particular case you do not assume that the grocers who put your article under the counter and sold other lines have done you harm ? —Yes, if it is taken over a number of years. 65. Mr. Collins.] Was the amount you spent on advertising effective in giving you your increase in expected sales when cutting took place ? —lt was effective in maintaining our expected sales. To make it more effective we circularized perhaps every housewife in the Dominion with particulars of what was going on in the retail trade and pointing out the reason why we had taken this measure as being in our own defence. The law would not allow us to take any other measure. 66. The spent on special advertising on cookery-books could not be charged to any particular period. I presume that was advertising which would not necessarily be repeated except at three or four years' interval ? —That is so. 67. That would have a lasting effect ? —Yes. 68. Are you definitely of the opinion that it would be in the best interests of you line to have it sold at Is. 6d. per tin—that is, at a fixed price ? —I would not say Is. 6d., because that would be a question for probably the Government to decide. I have been of the opinion that if price-fixation came into line we would be prepared to allow the Government to say what the retail price should be and what should be a fair profit on turnover. 69. Would you be content to the fixation of the price from the point of view of the wholesaler and retailer ?—We would be content. The trouble is that the retailer picks out the popular lines and treats them as an advertisement to get other business. 70. If a cash grocer is selling your baking-powder at, say, Is. 4d. and making a reasonable profit would you consider it was doing you a wrong if others were selling it at Is. 6d. ? —There is this to be said for the retail business in the Dominion, and it is that it cannot be run on the same lines. For instance, the farmer has to be supplied with credit, and therefore the cash store cannot cater for him. 71. Do you consider, as a business man, that efficiency in business should count ?—Yes, it should count, and I am agreeable that there should be an equivalent reduction as between the cash and booked prices. 72. Have you any idea of what your line should be —on, say, your article at Is. 4d. what do you consider is a fair discount to give ? —Probably Jd. per tin. 73. That works out at what ? —That is a difficult matter for the retailer to do —namely, to split a penny. 74. Do you know of other parts of the world where the price of baking-powder is controlled ? — I believe there is a price-control in United States, but I would not be certain of that. 75. No, not in the United States ? —Do you mean in regard to baking-powder alone ? 76. Yes ? —I have no knowledge as to that. Benjamin Sutherland sworn and examined. (No. 23.) 1. Mr. Gresson.] You are a grocer in Wellington, are you not ?—Yes. 2. And you have been in the grocery business since 1922 ? —Yes. 3. Prior to that you were in the Railway Department ?—Yes. .4. Originally how many stores did you have to start with ? —We had five to begin with. 5. At the end of last year how many did you have ? —At the end of last year we had twelve. 6. At the present time you have —how many ? —Twenty. 7. All those stores are operated upon what is called the " cash and carry " principle ?—Yes. 8. In your stores do you wrap up parcels ?—No. 9. Is there any string in the stores ? —No. 10. Articles like flour and sugar are put in bags ?—Yes. 11. With respect to butter, what is done with that ?—The paper is there and the customer can wrap the butter up in a newspaper. Of course, the butter is in its own wrapper. 12. What saving do you effect by that means ?—A very considerable saving. 13. Does it save as regards employment of labour—that is, are your assistants able to do more ?— Yes, considerably more. [At this stage witness asked that the room should be cleared before proceeding further with his evidence, and this was agreed to, and the Chairman asked all present, other than counsel, to withdraw from the room. The evidence which followed, being of a confidential nature, is not published.]
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Seventh Day : Wednesday, 2nd March, 1927. The Committee met at 10.30 a.m. Examination of Me. Sutherland continued (in camera). William Tuck sworn and examined. (No. 24.) 1. Mr. Gresson.\ What is your occupation ? —I am a grocer carrying on business in Christchurch. 2. What is your system of business ?—Cash and delivery and wrap up. 3. Were you originally a credit grocer ?—Yes. I changed my system in 1921. 4. Have you found the change-over satisfactory ?—Yes. 5. You seem to be in the same position as Mr. Norrie. Did you hear Mr. Nome's evidence as to the effect of his change-over ?—Yes. 6. Can you corroborate him ? —ln general I can corroborate all he said. 7. Did you find your own turnover increase under the cash system ?—Yes. 8. You wish to produce certain figures for the Committee I—Yes.1 —Yes. I hand in a certificate from an accountant showing the proportion of overhead charges to turnover. 9. In 1921 you were a credit grocer ?—Yes. 10. Actually you find you have been able to largely reduce prices to the public ? —Yes. When I first introduced that system I went on the basis of reducing every price approximately 10 per cent. 11. Do you yourself do any importation ? —Yes, a good deal. 12. And so you eliminate the wholesaler on those lines ? —Yes. 13. Do you purchase for cash or obtain a month's credit ?—lt varies. Some firms give four or six weeks' credit, and others require net cash ; others, again, require weekly payments. 14. But you can always get better terms if you pay cash ? —Yes, even with a merchant who does a credit business. He will always allow 1£ per cent, if you pay on the invoice. 15. In your opinion, can a cash business be carried on side by side with the credit business —I mean, do the public want both ?—Yes ; there is a demand for the credit business. There is a large class of people who will not fetch their own goods or pay cash. They prefer a canvasser calling for orders, which are to be booked. 16. In regard to the question of proprietary articles and patent medicines, I think, in your experience, twenty or thirty years ago the chemists hardly handled patent medicines ? —I would not say it was so recently as twenty years ago, but many years ago it was considered to be a breach of professional ethics for a prescribing chemist to sell anything. 17. It has been stated that Creme de Menthe tooth-paste was an article which wijs put off the market. What was your experience in regard to that ? —A representative from Australia offered me minimum lots of six dozen at bed-rock prices, which I purchased on the definite understanding that an extensive newspaper advertising campaign was to be entered upon. This undertaking was never at any time carried out. For that reason I returned the tooth-paste to the merchant, and it was ultimately sold at any cost the retailer could procure to quit the line. Messrs. Rattray told us that soon afterwards the proprietors went into liquidation. The line was never on the market. 18. How do you view the operations of the P.A.T.A. as regards your own business ? —I am very much against it. It would compel a man like me, who operates on an average of 12 per cent., to retail at approximately the same prices as businesses which operate from 17 to 35 per cent. 19. Your main attraction, of course, is your price ?—lt is my only attraction. 20. I suppose grocers' commodities are pretty well the same everywhere?— There-is a wide variation in quality. Christchurch, on the whole, demands a far better quality than Wellington. 21. Mr. Myers.] Have you ever carried on business in Wellington?— No. 22. Then what is your qualification for presuming to talk about the quality of goods required by people in Wellington ?—ln walking about the streets I notice the quality of goods displayed in the grocers' shops. 23. You have looked at the windows, but not inside the shops ?—That is so. 24. From what merchants do you purchase your coffee and chicory ?• —From the manufacturers, the New Zealand Coffee and Spices Company. 25. From them direct, and not from the merchants ?—That is so. 26. Have you any invoices of those goods ? —No. We purchase our coffee and chicory separately and blend them. 27. From what merchants do you purchase your salmon ? —We import direct. 28. From whom ? —O'Leary and Co. They are not packers ; they are brokers in Canada. There are no canners who export direct. All salmon trading is in the hands of brokers, who purchase from all the different canners. 29. What brand of salmon do you purchase ? —We purchase O.K. 30. Where do you buy your Kruschen salts ? —Fairbairn, Wright, and Co. 31. Do you purchase all your patent medicines from them ?—lf their prices are the best, and where Ido not purchase direct from the manufacturer. I always purchase to the best advatage, whether from a merchant or from the manufacturer. 32. Do you know whether Fairbairn, Wright's prices for patent medicines are very much the same as other merchants' ? —Taken on an average, I should say they would be 2| per cent, lower. 33. I suppose you do not buy better from Fairbairn, Wright and Co. than anybody else can buy from them ? —Sometimes I can.
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34. But as a rule ? —No, not as a rule. 35. I suppose you can submit invoices for all these different goods ? —Yes. 36. Any when you say " the wholesalers' prices," where are you quoting the prices from ?— From Messrs. Rattray and Co. 37. That is a Dunedin house ?—Yes, and a Christchurch one. 38. Do you deal with Rattray's ? —Yes. 39. But I suppose you do not buy goods from Rattray's under their list prices ?-—lt depends on the quantity. As you will notice, they have prices for case lots and for dozen lots. As a rule, I buy at the lowest prices. I am using that price-list to indicate what the ordinary storekeeper would have to pay. In my own case, by importing, and buying direct from the importer and paying cash, I can in a great number of cases buy cheaper. That is the point. 40. But you do not import very much stuff ? —The greater part are my own importations. 41. In grocery goods ? —Yes. 42. You mean to say that you import from abroad most of the goods you sell ? —Yes. * 43-77. 78. Take an item like Lane's emulsion ; what do you sell that at ? —2s. 3d. and 4s. 3d. 79. What do you buy it at ? —From Fairbairn, Wright's at 225. sd. and 425. sd. 80. Do you sell Kolynos ?—Yes, we sell it at Is. sd. 81. That is not cut badly there ? —We never cut a thing badly unless we are driven to it. The so-called cash man is frequently driven into charging a lower price than he would otherwise charge. Take Amber Tips : a man sells that at 3s. 2d. ; that is 2d. below his neighbour. The credit trader comes down to his price, and that man immediately reduces still further ; and so it goes on We make it a point never to sell except at a margin satisfactory to ourselves. We will accompany a man to the edge of the precipice, but we will not go over with him. 82. You seem to have been doing a much bigger business in 1921 ?—That was an exceptional year. 83. Have you any of the preceding balance-sheets ? —No. In that year I took in a partner, he brought a certain amount of business with him and he went out and took a lot of business away with him. That created a temporary state of affairs and we lost very heavily that year. 84. So you cannot take that year as a fair sample of your trading compared with your cash business ? —No ; I could not stand another year like that. 85. Mr. Greeson.] In 1921, which is put in your report as a average year, is it right to say that your overhead charges would not be a fair indication of what they would be on the credit business ? —That is a fair sample of what the overhead charges would be, but it would include whatever were the drawings of the partner I have referred to. The Committee adjourned at 12.30 p.m. till 2.30 p.m. On resuming at 2.30 p.m. Mr. Gresson : I have here a very long report prepared by Professor Murphy, of the Victoria College, but as it is a very long one and as I am desirous of saving the time of the Committee I do not propose to ask him to read it. Mr. Myers: That Professor Murphy has prepared a long report is true, and I submit that it contains a great deal of informative matter and also a great deal of expressions of opinion, and I say, with all due respect to Professor Murphy, that it is besides what this Committee has been set up to decide. Mr. Gresson : No more than the evidence given by other witnesses. Mr. Myers : May be. Other witnesses may have been asked questions which bear upon the course of business which this Committee is inquiring into as contrary to public interest or not, but I do not know whether they have been asked to express an opinion on the very question which the Committee has now been asked to decide. Mr. Gresson : I will now call Professor Murphy. Bernard Edward Murphy sworn and examined. (No. 25.) 1. Mr. Gresson.] What are you ? —1 am Professor of Economics at the Victoria University. 2. You have been good enough to examine into the workings of the P.A.T.A. and report on the subject ?—Yes, I was asked to report on that matter. 3. Did you have available to you the Canadian report ? —Yes. 4. And the New South Wales report ? —I had Judge Beeby's summary report. 5. And the English report of a Commission that we are not clear as to what it was set up under ? —I have seen no English report. 6. You are, as an economist, familiar with the report of the Cost of Living Commission in New Zealand in 1912 ? —Yes. 7. Without going into your reasons, I want to know this : do you consider that the P.A.T.A.Jis a monopoly ? —lt is admittedly a monopoly on its own papers. 8. What do you consider would be its effect so far as boycotting is concerned : do you consider that its operations might lead to boycotting ? —That appears to be one of their principles as is stated in their documents.
* Questions 43 to 77 deleted as confidential.
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9. In your opinion, is it detrimental or otherwise to the public interest ?—ln my judgment, it is very detrimental to the interests of the consumers, and in certain instances it might be ruinous to unassociated firms. That is my opinion. 10. There is, of course, a difference between the constitution of the P.A.T.A. in New Zealand and the Canadian constitution ? —Yes, there are verbal differences. I compared them, and I have ascertained- there are such. 11. In the New Zealand document the expression is used " concerted action," whereas the Canadian uses the milder term—namely, "co-operation"?— Yes. My recollection is that it does not appear in the Canadian constitution. 12. New Zealand contains the restriction on " excessive prices " ? —Yes, there is such a clause. 13. The Canadian document contains the proviso " not detrimental to the public interests," which does not appear in the New Zealand document ? —Yes, that is so. 14. In considering the effect of the P.A.T.A. constitution did you think it desirable to also consider the effect of the draft agreement that they sent out with it ? —I think so. I think they are substantially one and the same document, because they indicate the same policy pursued. I took the constitution, the covering letter, and the draft letters as being substantially the one document. 15. Did you consider that this showed, first, an agreement to fix prices ?—Yes ; that is in black and white. 16. And (b) to limit competition ?—That is also in black and white. 17. And (c) to boycott independent traders by cutting off supplies of all controlled articles ? — That is so. 18. And (d) to boycott independent commodities by refusing the right to sell them in substitution for listed articles—that is, to drive them off the market ? —That appears to me to be so. 19. In reference to your suggestion regarding boycotting, have you seen the passage quoted by Sir William Glyn-Jones —that is, his utterance in the Canadian report ? —I have. 20. And you consider that that supports your view ? —Yes, in the most open and cynical way. 21. Now, what have you to say to the suggestion that if a person refuses to observe the retail price in regard to one controlled commodity that all the controlled commodities can be kept from him ? —-That seems to be an effective weapon to drive a man out of a proprietary business if he refuses to adopt the policy of the P.A.T.A. in respect of one line. It seems to me that that clause is the one that would be relied upon to make the agreement practically effective. To be eliminated from one commodity is not very much, but to be eliminated from the whole range of proprietary articles is a very serious thing. That is the view I take. 22. As regards price-fixation generally, what view do you hold so far as the consumer is concerned ?—I think that the consensus of opinion amongst the economists is that it is contrary to the interests of the consumer. 23. Have you in your perusal of economic literature come across any instance of where pricefixation agreements have been followed by a reduction in the price of the article to the consumer ?— No. I think it is only fair to state that the amount of literature in regard to price-fixation is meagre. Economists can say a lot about trusts, because their balance-sheets are published. 24. Now, in considering the desirability or otherwise of the functioning of the P.A.T.A., would you say, first, what you consider is the meaning of the words " proprietary article " ?■ —I cannot define it. I think it is a term that is expansible. I have seen no definition of it in economic literature. Of course, you would not expect to find it there. 25. From the point of view of economists, is the proprietary-article trade desirable ?—No. The trade in proprietary articles would be regarded by economists as an expensive and wasteful type of trade. 26. For what reason ? —I do not want to labour this point. Proprietary articles are sold by virtue of their name. They are generally distributed from small centres over great portions of the world, and their sale is facilitated by nation-wide advertising campaigns, so that the manufacturer creates the goodwill attaching to the proprietary name, and the public demand is a factor compelling the retailers to stock it. It is believed that the advertising bill runs into a great amount of money, and that ultimately goes against the consumer ; and, moreover, it is not constructive advertising, and the effect of that expense is to displace one commodity by another which is much the same, and, as I say, ultimately that advertising cost must be paid by the consumer. Another point is that expensive containers are sometimes out of all proportion to the value of the commodities, because they are a bait for the customer. Another point is this : that the retailers have to keep in respect of one fairly representative stock a lot of small lines of similar articles. That simply increases the cost of the retail business. Those are some of the reasons why I said in my report that, in my judgment, a proprietaryarticles business is very costly, and I drew the inference from that that there should be no sympathy with it and it should not be encouraged. 27. Is New Zealand itself, from its situation, vulnerable to monopolies ?—Yes, in my judgment. 28. Why ?—The facts are given in the Cost of Living Eeport of 1912. The bulk of the articles such as glassware and other things are imported, and those articles are not subjected to effective competition with locally manufactured articles. Moreover, the country is very much isolated by distance, and that makes it possible, as it seems to me and as the Commission of 1912 found, for distributors to get effective control for the supplies coming into the country. 29. What do you consider will be the effect of prices in New Zealand if the P.A.T.A. functions here ? —Well, I can only answer that from what appears in their own document. I think they will stabilize price-levels. And then their idea of fair profits is this : you can get a certain price for an article, but if you can get more that is fair. I think this economic effect would take place if the prices were stabilized or raised —that is, the profit would grow. I cannot see from the document that the P.A.T.A. intends to exclude other people coming into the field as long as they observe their conditions. That means more and more would be spent in overhead and the profits from raised price-
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level would be dissipated through the retailers, and the retailers would be very little better off, and the result would be that the public would be paying the higher level. That is the view I take. Of course, I may be wrong. 30. What is your view from the economic point of view as to the stabilization of price-levels ? —I think it is economically unsound. There is some literature that states the stabilization of commodities is a good thing. In my opinion, it is a bad thing, because the price-level that is established for commodities under competitive conditions is a fairly good index of production. It is in the interest of the public that price should fluctuate in accordance with demand and supply. Unless this is carried out there cannot be any economical adjustment of supply to demand. I maintain that prices are the barometer of production. If prices are going up in a certain field without any alteration in production, that means that the public demand is concentrating, and if they are going down elsewhere the dema.nd is leaving those commodities. Manufacturers can use this as an indication of the direction in which production may be extended to correspond with the demand. In my opinion, the manufacturers' price-level is the barometer or index of production and demand. 31. In what way, in your opinion, would the P.A.T.A. affect the question of cost of distribution ?—* It would stabilize prices, and it would prevent the elimination of superfluous traders. 32. Actually is it, from an economist's point of view, important that costs of distribution should be reduced as much as possible ?—The general view of economists and of business men is that the spread between manufacture and the ultimate distributive cost is abnormally great. The Board of Trade, if it has compulsory power over a period of years, could ascertain the spread. 33. The cost of distribution is lessened by any innovation in the way of delivery methods ? —lt will be lessened by successful new methods. 34. Would the tendency of the P.A.T.A. be to eliminate this I—l1 —I do not see how you could experiment with a fixed price level. I take it the object of a distributive experiment is to enable a dealer to so reorganize his business that he can attract more custom. He might do that by adding to his advertising cost and not lower his price, or he might experiment upon the line of a lower unit and a bigger turnover. 35. Under the operations of the P.A.T.A. is there any inducement for the unbusinesslike merchant to put his business into the same condition as the more competent merchant ?• —He will be able to go along and he will know that he will not be undercut. 36. What is your point of view with respect to the question as to whether or not there is at the present time in New Zealand an excessive number either of wholesalers or retailers ? —The prevailing impression is that there are certainly too many retail shopkeepers. Whether there are too many wholesalers I do not know ; but the impression I have obtained through conversations is that there are too many retailers. I take it that some of these small shops are kept open as distributive vents by some of the large wholesale houses. I have not been able to verify this, but that seems to be the most forceful explanation of the survival of shops of that description. 37. Mr. Myers.'] Ido not think you will find that that is correct ? —That is my opinion. I know it is true in regard to the drug trade in part, because lam aware of several tied houses. It is true so far as the furniture trade is concerned. But I have always been of the opinion that the existence of these little cardboard shops is very largely due to the interest of the wholesale houses keeping retail vents. 38. Mr. Gresson.] Is the multiplicity of small shops desirable ? —No ; quite the contrary. 39. There is a passage from the opinion of Judge Frazer, Judge of the Court of Arbitration, that I would like to read to you. lam quoting from the Book of Awards, Vol. xxv, p. 390, wherein he says : "We are of the opihion that a multiplicity of small shops, in close proximity to one another, that are able to make a living—and a meagre Irving at that—only because they can take advantage of being able to observe unrestricted hours when somewhat larger shops in their vicinity have to close at specified hours, is not in the public interest. The public is generally not so well served by the very small shop, with its small range of stock and its high ratio of rent to turnover, as by the larger shop " ? — He repeats that in another shop-closing-hour case a year later. 40. What trade was he referring to ?—A small suburban general store. The problem is insoluble under the present state of the law. 41. How do you suggest that the inefficient retailer should be dealt with ? —I think he should be left to take care of himself. Ido not think he should be bolstered up by being allowed to come under a price-maintenance system. 42. So far as those men are concerned, you agree with the principle of the survival of the fittest in trade ? —Entirely, in trade ; but I do not think that that should be so in the matter of transport. For instance, to have, say, three or four tramways in one street would be ridiculous. In the wholesale trade I think the prevailing objection is that there is not enough competition, but too much overhead. 43. You think that the cost of overhead is out of proportion ? —That is so. 44. If wholesale and retail prices are fixed, what inducement is there to reduce the costs of distribution ? —None. 45. Is British trade based on competition largely ? —So far as distribution is concerned, competition is strongly the rule and monopoly is the exception. That is the ostensible position. 46. What do you consider would be the effect of the P.A.T.A. on the possibility of non-listed articles coming into circulation ?—I think it would make it more difficult to get it into circulation, in two ways : it would mean, when a manufacturer was getting up new proprietary articles, he would not only have to consider his costs, but he would have to get it on to the list. He might, in getting a new article on to the list, prejudice-the interests of some other persons already listed, and if things were going on well with what he has got he would leave well alone. I think there would be less innovation and variation, and in the long-run I think it would discourage competition,
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47. What have you to say upon the admitted fact that no member of the public has any say in the fixation of those respective prices \ —l can only say that the price ought to be fixed by competition ; otherwise you would have a man being his own judge and jury, and the public would have no protection. 48. I want to put to you what has been the main criticism—or, rather, the main argument — advanced, and, I think, fairly advanced, in favour of the P.A.T.A. —that is, a manufacturer spends a great deal of money on advertising his line, and he acquires thereby what we may call " goodwill " in the article, and the retailer by selling that article under cost injures the acquired right of goodwill which the manufacturer has. I am asking you to assume that argument ? —What do you mean • legally or equitably acquired ? 49. Do you think, from an economic point of view, that a retailer should sell that article under cost, and so possibly injuriously affect the manufacturer's goodwill in the article ? —Do you mean, sell it at such a price that he is making a loss 1 50. Yes ? —I think that that is an undesirable practice, although I think it is a very rare practice. Plainly, I think it is undesirable because that also is falsifying the economic barometer. No economist would defend the selling of an article under its production cost. 51. My learned friend contends that through the operations of the P.A.T.A. the goodwill of the manufacturer in that article will not be ruined : what have you to say as to that ?— I say that if the manufacturer has any legal or equitable right to any goodwill, if he likes to advertise he has to take the risk of the goodwill being prejudiced. He also has to take the risk of some other manufacturer wiping out his goodwill by another advertising campaign. He also takes the risk of his goodwill being eliminated by the substitution of a demand for another production. For instance, he might build up a tremendous reputation for, say, ice-cream, and somebody might come along and kill it by supplying the demands by, say, Eskimo pie. It seems to me that it is wrong in principle to contend that a manufacturer has any right to any goodwill. The P.A.T.A. remedy, in my judgment, is worse than the disease, because it directly injures the consumer. If there is a conflict of interests, in my opinion the consuming public must take precedence over the interests of the manufacturer. That may be quite wrong, but that is my opinion. 52. What it amounts to is this : even agreeing that my friend is right in the case he makes out, in our opinion the cure is worse than the disease ? —From the viewpoint of the public interest, admittedly. Mr. Gresson : That concludes my examination of the witness, and I wish to hand in the report, which was not read out in order to save the time of the Committee. Mr. Myers : I take the strongest exception. The witness is here and he has been examined in the ordinary way, and I propose to cross-examine him in the ordinary way. The report that he has made is in no way evidence ; it is simply my friend's brief, from which he has examined Professor Murphy. Mr. Reardon : You simply put us in the position of saying that if we want a report from him we will have it. Mr Myers : If the Committee takes that view I submit it is not fair, because there are all sorts of things in that report which are not in the nature of evidence at all. Mr. Collins : So there was in the Canadian report. Mr. Myers : The Canadian report is not evidence. Mr. Collins : Surely this Committee is entitled to look at it ? Mr. Myers : The Committee can look at it, but it is not evidence. My objection is that the report is not evidence, and cannot be considered to be evidence. I submit that that is calculated to do an injustice. Mr. Reardon : What is to prevent us having the report read and put in as an appendix ? Mr. Myers : If the Committee decides to adopt that course, very well and good ; but I do most strongly protest, because I submit it has not been read. Mr. Gresson : I think my learned friend is looking at the matter from a wrong point of view, and I do not think that he has given full weight to the fact that the witness is present here to-day and has given evidence in certain matters. He is not dealing with evidence on facts. I think the Committee is entitled to have the report on the principal matter put in. Mr. Collins : I think I indicated to counsel at the outset that, whilst this was a judicial Committee, we could not expect that the proceedings would be confined to what is known as evidence from witnesses such as Professor Murphy. We did not know that we would receive a great deal of information or advice in this way and it is in that sense, I consider, that Professor Murphy is before us to-day. I can assure you that had you or the other counsel not called Professor Murphy it was the intention of the Committee to call him. Mr. Myers : If this report goes in I suppose it will be published as part of the proceedings ? Mr. Collins : Yes. Mr. Myers : That is not a report for this Committee. It is like a man handing counsel a statement of evidence, and he gives his evidence on oath. Mr. Collins : The Committee will take into consideration your objection, Mr. Myers. Mr. Gresson : I propose to ask Professor Murphy several questions. 53. Mr. Gresson (to Professor Murphy).] You made a report on this matter ?—Yes. 54. Do you consider that that report contains a full account of your views on the matter ? —Yes. Mr. Gresson : I ask leave to put it in. [Report handed to reporter.] Mr. Myers : I have made my objections. Mr. Collins : That has been noted by the Committee. Mr. Kennedy : I strongly support my friend in this matter, sir. Mr. Collins : The Committee will adjourn for a few minutes in order to consider this matter,
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B. E. MURPHY.]
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On resuming, Mr. Collins : The inquiry is resumed. Gentlemen, in regard to the matter at issue the Committee has gone into this matter and has decided that if Mr. Myers considers that it is necessary that the information submitted by Professor Murphy through his counsel should be read, then the Committee is willing that it should be read clause by clause. Seeing, however, that counsel has had an opportunity of perusing it fully, we hope that that course will not be necessary. We have decided in regard to the other objection raised by Mr. Myers that as the report was made to opposing council, to ask Professor Murphy, as one of the leading economists of the Dominion, whether the information which he has made in the report will be similar to the report that he will make to the Committee if the Committee requests him to make a report. We are unanimously of that opinion. Mr. Myers: That means you accept the report and that it will be published as part of the proceedings. Mr. Collins: Yes. Mr. Myers ; Very well; this includes any observations and comments which are obviously written evidence. Mr. Collins : In toto. Mr. Myers : Very well. (At this stage the cross-examination of Professor Murphy by Mr. Myers was proceeded with.) 55. Mr. Myers (to Professor Murphy).] Apparently you take exception to any form of pricefixing ?• —Yes, entirely. 56. I think you said, quite fairly, that although in your opinion stabilization of prices, as you call it, is bad, that is not the universal opinion of economists, and there is a difference of opinion amongst economists on the point ? —I have never seen the question argued ; but there is admittedly a difference of opinion amongst them. 57. Did you by any chance take any interest in the flour case which was recently decided by the Court ? —No. I could not give any useful information on that. 58. You know that that was, inter alia, a combination whereby the price of flour was fixed ? —I have heard that that was so. They are a price-fixing monopoly, as I understand the position. That is what I have seen in the newspapers. 59. That is to say, Distributors Ltd., which was the agent of all the millers, came into the combination or price-fixing monopoly ? —lt appears to me to be so from what I read in the newspapers. 60. Then you would regard such a combination as against the public interest ? —I would destroy it to-day if I could. I am strongly opposed to price-fixing monopolies. 61. You know that the Courts have upheld tiie appeal ? —I do not know. Ido not know what side you were on, but I do know that you won the case. 62. I suppose you know of the terms of the Board of Trade Act, 1919 ? —1 have read the Act from time to time and used certain sections, but I cannot profess any knowledge of it. 63. I understood from your evidence that the way you refer to the public interest is that you are thinking and talking of the interest of the consumer ? —Yes. 64. Do you know that under the Board of Trade Act any person who sells any goods at an unreasonably high price—-that is to say, at a price which produces more than a fair reasonable rate of profit—is guilty of an offence ? —I do not know from memory that it is so. 65. May 1 take it, then, that in expressing opinions to-day you did not have the Board of Trade Act before you ? —I had no statute before me, with the exception of sections of the Sale of Goods Act. 66. Ido not know that you told me that your position was sound legally I—l1 —I would not put my opinion against yours. 67. I am not saying you are wrong, but I do not think you are right. Now apart from that, there is the Board of Trade Act ? —I knew there was a Board of Trade Act; I did not know its terms. I found very great difficulty in getting references. 68. Therefore you have had to deal with it somewhat on your own opinion ?—Yes, except where an authority is cited. The views are my own. 69. Do you agree with the principle of fixing a minimum wage for labour in any particular industry ?—Must I answer that question.? 70. Well, I think so ? —lf I support that, you will say I am hedging. I have no objection so long as I can answer it in my own way. 71. So long as you do answer it ?—lt is my opinion that it is economically unsound. 72. The fixation of wages as it is done in New Zealand does not meet with your approval ? — No, it does not. 73. In other words, I suppose you say it is economically unsound, in your opinion ?—Yes, in my judgment. I do not believe in wage-fixation, except in the case of the bare minimum wage. 74. And not in the fixation of wages as it is done in New Zealand at the present time ?■ —I would go as far in individualism as anybody nowadays would go. You are forcing me to express these opinions. 75. Of course, you quite appreciate, I suppose, the danger in practice of dealing with the course of trade by legislation and by preventing the ordinary methods of traders ? —I think the onus is heavily on the interfering party in all cases. 76. You have said, and very properly, that a manufacturer creates a goodwill in the proprietary articles which he manufactures, by means of advertising and otherwise ? —Certainly, by advertising.
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77. You can see that a manufacturer, particularly one who is manufacturing a good article, has a very valuable goodwill ? —Unquestionably. I am told that half a million dollars was paid for the goodwill of Eskimo pie in the United States. 78. When a trader or a number of traders sells a manufacturer's article to a retailer at a price either at cost or below cost, or at a price which does not leave them a margin of profit, you recognize, do you not, that they are doing injury to that manufacturer and his article, no matter whether it is right or wrong ? —I think it is probable that destructive price-cutting might ultimately damage the manufacturer by restricting the demand; but whether that has been done Ido not know. 79. Do you think that that is justifiable on the part of the trader who is adopting those methods ? It depends upon what you mean by justifiable. I think it is legal, but socially undesirable if it became a general policy. It could not become a general policy, because it would break up. 80. Do you not see that in some cases the traders, for advertising purposes, purchase a particular article and sell it at a sacrifice as a decoy article, and thereby make larger profits on other articles ? —Whether it is done or not I do not know, but I have heard that it is done. 81. Assuming that it is, is that economically sound or unsound ? —I do not think it is good business for it to become universal. What is the difference between a retailer destroying the goodwill of the manufacturer through the public Press by counter-attractions or ultimately injuring the manufacurer by selling the article below cost ? 82. Do you recognize even now that a manufacturer may legally—l do not say it is practicable —sell his goods on such terms to the retailer that the retailer must sell at his price ? —What the legal position is I do not know. 83. Would you say from your point of view that the lawyers are wrong ? —lt is not for me to give an opinion on the law. 84. I do not mean to say that they are legally wrong, but they are wrong from your point of view ? —I think it is an unfortunate point of view, assuming it to be the law. 85. So that the position we have is this : you, as an economist, take one view as to what is in the public interest, and the Courts have taken another view, which I suggest is the correct one, and in your opinion they have taken a wrong attitude ? —Well, their view is different from the view I have expressed. 86. Mr. Collins.'] How long have you been an economist ? —I have been a professional economist since 1918—that is to say, that has been my exclusive occupation since 1918. 87. How long have you been associated with Victoria College ? —Since July, 1918. 88. You mentioned, in the course of your examination, the Cost of Living Report of 1912 : how do you view that report ? —lt is quite sound, and I think it was a very able document. 89. I have noted that during the course of your examination you made strong objection to price-fixation : you know, of course, that the Ford car is subjected to price-fixation ? —Yes. 90. He has given the world a product at a cheap price, and he insists on that cheap price being maintained in order to maintain the popularity of the car ? —I do not know what his policy is. 91. Would you be opposed to it ?—I do not know it; Ido not know what it is. 92. You seem to be opposed to all price-fixation ? —I think that competition in distribution should be the rule. 93. Can you state any case where price-fixation would be justified from the point of view of the economists I—l cannot think of one. I think the fixation of prices in such services as transport is in the public interest, but I cannot think of any hypothetical case where price-fixation of commodities is in the public interest. The older I get the more it seems to me that competition in a retail business is the only way of weeding out superfluous men. 94. Would you believe in price-fixation being necessary in emergency conditions ? —lf prices are to be fixed, they should be fixed by the Board of Trade—that is, not the Board of Trade, but by a Board of Trade. 95. Do you know of the operations of the P.A.T.A. in Great Britain ? —No ; I do not know of anything beyond what is in McCrosty. 96. It has been operating since 1896 ? —All that I know of the P.A.T.A. in England is what I have read. Note. —For Professor Murphy's written statement see Appendix A. George Gladstone Marriott sworn and examined. (No. 26.) 1. Mr. Gresson.~\ You are a grocer, in business at Parnell, Auckland ? —Yes. 2. You began business in 1913 ? —Yes. 3. And took over a family business ? —Yes. 4. That was a credit business, was it not ?—Yes, we did a family trade of nearly 90 per cent. 5. In 1921 you were president of the Auckland Master Grocers' Association, were you not ? —Yes. 6. Did you become interested in cash stores in Auckland ? —Well, I have just returned from Australia and whilst I was there I have been inquiring into various operation existing there. 7. When did you turn your business into a cash store ?—About 1922. It was not entirely cash, but I adopted a method which has not, so far as I know, been in operation in either New Zealand or Australia. I was considering the desirability of turning my business into an entirely cash store,, but recognizing that by so doing I would have to sacrifice 50 per cent, of my credit customers, and not seeing where I would get 50 per cent, back, I proceeded to make provision for the credit customers as well. I published two prices—namely, the cash price and the credit price.
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8. What did you find as a result ? —I found the result very reassuring. Afterftwo years as president of the association (I had been associated with the association since 1913 in an executive capacity) we issued prices on a 25-per-cent. margin, which was an arrangement between the membership and the association —that is to say, we were to sell everything on a margin of 25 per. cent on cost price. 9. And 20 per cent, on turnover ? —Yes. We used to be very loyal, and with a few exceptions these prices were maintained. I was also president of the New Zealand Federation of Grocers, which body I was, together with others, successful in forming when on a visit to Wellington. However, I discovered that the credit prices were not entirely a success. I saw a big business being built up in Auckland by people whom you might call outsiders, who had no birthright to Auckland, and with the operations of the Farmers' Trading Co., Wheeler Bros., and others who had come into our midst and stabilized in cash prices, and who were everywhere taking our cash business away and leaving us with the credit business, I as president of the association conferred with the members of the executive first and then at a general meeting with a view to seeking their co-operation to compete with them. I discovered, however, that they would not support me, and after a period of possibly three months my position as president became untenable and in consequence I resigned from both the association and the federation and stood alone. I advertised cut prices, and I discovered that I could considerably increase my turnover where I was working on a 25 per cent, margin on cost. I reduced it to a 20-per-cent. margin on cost and made considerably more in net profit and I increased the turnover. I propose to bring out this point because I think it has bearing on some evidence you had this afternoon. In October, 1923, I landed fifty cases of peaches from Australia. The wholesale price to the retailer was 12s. 6d. per dozen, and the retailer sold it at Is. 3d. per tin. These fruits landed me at 9s. sd. per dozen. I conceived the idea of selling that line at Is. per tin, and in consequence the turnover increased enormously. I sold in that period —fifty cases was my requirements for a three-monthly period —1,550 cases at Is. per tin. It was then that I decided the cash business with the increased turnover on the lower margin of profit would be very much more beneficial than the smaller turnover on the higher margin of profit. 10. As regards the question of the margin of the wholesale merchant, you have, as a result of importing yourself, been able to form some opinion—do you consider that the margin in Auckland is fair ?—I do not think that the merchants are doing any good, from what I have heard from reports ; their overhead must be tremendously high. I may say that I had a considerable importing business —that is, practically 90 per cent, of my articles are imported direct or bought through secret agents —and as a result of my experience I find that the profit of the merchant is very high. When I sell out of a line which I can import direct at lis. 6d. I cannot replace that line from the Auckland merchants under 14s. 6d. 11. Under the operations, or the proposed operations of the P.A.T.A., you, of course, will be prevented from dealing direct with the manufacturer of direct lines ? —Yes ; it will be necessary to put all our business through the merchants, who are bound tooth and nail, like ourselves, and who will be permitted, by the courtesy of the P.A.T.A., to give us 2| per cent, discount for cash or prompt payment. 12. As regards the proposed operations, you fall into line with the objections raised by the various cash grocers ? —lt is no good to us ; it is vital, and it would ruin my business. As a result of increased business, which I have been doing under the improved method, I have built up a very large business, and in consequence I now have plans out and am calling tenders for a £16,000 building. 13. Have you in your possession some of the balance-sheets of your business ?—No. I may say that I have just returned from Sydney. 14. Will you please write down on that piece of paper your average turnover, so that I can hand it in for the information of the Committee ? —lt will be approximate. [Witness wrote on a piece of paper the approximate turnover, which was handed to Mr. Myers for his perusal and then handed to the Chairman.] That is approximately correct. 15. Mr. Myers.] When you suggest that if the P.A.T.A. comes into operation you must buy everything through the merchants and will be unable to import anything, what class of goods have you in mind that you will not be able to import ? —Patent medicines and foodstuffs. 16. Everything ?—Not everything. I mentioned those two lines because I know what lam talking about. 17. When you speak of foodstuffs do you include all foodstuffs ? —Yes, I do. 18. I see what you mean —foodstuffs naturally comprise the greater part of your turnover ?— They do. 19. When I speak of foodstuffs I include sugar, butter, currants, and all the other multifarious articles and ingredients of food? —Yes, that is so. 20. What proportion of your turnover would include that ? You can put that down on a piece of paper if you like ; we do not want to disclose anything which is detrimental to your business. [Witness wrote down particulars on a piece of paj>er.] Of this amount which you have put down, what proportion of those multifarious articles of foodstuffs and ingredients of foodstuffs does that include ? —Of my total turnover ? 21. You can give it to me in fractions or you can write the figure down—you have already told us it is the greater portion ?—I should say 90 per cent. I should say that 70 per cent, would be hardware, and patent medicines would be 30 per cent. . 22. When you get back will you go into your figures a little more closely and send particulars to Mr. Collins, with some certificate as to what they are ? —Do you mean as to the proportion of patent medicine ? 23. Yes ?—I cannot dissect it.
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24. So that your figure of 30 per cent, is a guess ?—As a proportion of my business I think it is pretty correct. 25. In your patent medicine and foodstuffs would you include Allenbury's foodstuffs, &c. —Yes, all cough-cure drugs. 26. Of that 30 per cent, a large portion would include patent foods, such as infant-foods, and so on ?—ln the turnover I should say not. We sell a tremendous quantity of patent medicine. 27. And I take it you also sell a considerable quantity of patent and other proprietary foodstuffs ?—Yes, but not in proportion. 28. It is all included ? —Yes. 29. You say that you could not dissect your figures ? —lt would be a week's work. I cannot do that, because I have not separate figures. 30. I understand your difficulty. What proportion of your turnover do you think would include soaps —that is, not toilet soap ?—Approximately, 4 or 5 per cent. 31. That, again, must be a guess ? —Yes. 32. If it turns out to be the fact that foodstuffs, including patent foodstuffs and infant-foods, do not and cannot come under the operations of the P.A.T.A., then you would not be prevented from buying these articles from any source that is available to you ?—Well, I understand there are. 33. Very well, that is all right. It is upon the assumption that they are that you have come to the conclusion that you would have to go out of business ? —Yes. 34. Mr. Hayward.] With respect to the fruit that you purchased from Australia at the figure of 9s. 5d., that was only an accidental price, was it not ?—That proved to me that I could land stuff and sell it at the price which the merchants were selling at to me. 35. The price which you mentioned—namely, 9s. sd.—is not the usual price ? —That was the usual price that the merchants were landing it at. 36. Mr. Collins.] When was that ?—ln 192-3. 37. But you have not been able to buy it at that price since ?—Yes. 38. You mentioned that you had proposed to open a cash and credit business when you made the change ?—I did not say that. I said that I had been looking into the system while I was in Australia. 39. You had two prices at the time ?—Yes. 40. Had you really issued a price-list to your customers ?—I have a copy in my pocket if you would care to look at it. 41. Generally, what was the difference between the cash price and your credit price ? They varied. I reduced my margin of profit from 25 per cent, to 20 per cent., and then for cash business a lower margin, but I did not fix any fixed margin on that. It varied from 2J to 5 per cent, difference in the booking price. 42. Have you any knowledge of the present working of the P.A.T.A. in New South Wales ? —Yes ; I made inquiries while I was in Australia about it, and I was informed that in some States it was working, and in other States it was not working and was not a success. 43. Were you in New South Wales ? —Yes. 44. Did you come into contact with tradesmen like yourself ? —Quite a number. 45. That is, tradesmen who were working under the P.A.T.A. rules ? —No, I did not come in contact with anybody who had been working under the P.A.T.A. rules ; but I understood it was not a success there—in other words, they were able to get all round it. That was the impression I gathered as a result of conversations I had with various people. 46. You were, I presume, interested in its working ? —No, I was not. I happened to mention it, and it came about in the usual way. I was looking about for other matters and this subject came up. 47. You did not really sense from those conversations you had whether they were in favour or against it ? —I do not know. 48. Will you let the Committee have your net profit during the last three years ?■ —I will let you have it for last year. The figures are only approximate. 49. Will you also let us have the amount of the net capital which you have in the business ? — Yes. [Witness wrote down particulars as desired by the Chairman and handed the piece of paper to him.] 50. Do you take a salary in addition ? —My salary is included in those figures. 51. Do you sell any line under cost ?—We do not. 52. I take it, then, that you have not practised selling under cost, not even to meet competition ? —We have never practised selling under cost. We will take, for instance, Edmonds' baking-powder and Taniwha soap, and, touching on the argument this afternoon, I would say that we would sell those lines at very close on cost as an advertising medium. 53. Do you not think that by selling at cost, or close on cost, that it has a deleterious effect upon the manufacturer of those lines ? —-That is a matter I am not concerned with ; they are my goods and I can please myself in what way I advertise. If that is my method of advertising, it is for me to decide. 54. You are of opinion that, as a consequence, if the goods are purchased by you you can sell them under cost if you so elect, or at any other price which you decide upon ?—I consider they are my goods and I can sell them at any price I like ; and I consider that the manufacturer—we hear a lot about what he has to lose by selling his goods at cost —has a lot to gain by selling his goods at cost. 55. I am asking you to give your opinion with respect to selling under cost ?—I would not recommend under any circumstances the selling of goods under cost.
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G. G. MARRIOTT.]
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56. As a rule, you never practise it, nor would you countenance it as a policy in your firm ? — Exactly. 57. Mr. Gresson.~\ You stated that the difference was 2|- per cent, and 5 per cent, between the credit price and the cash price ? —(No answer.) The Chairman : That is on particular lines. Witness : That is general. We issue two prices to every article in our catalogue. Generally speaking, in that book every article carries a different margin in credit and cash prices, and that difference represents 2f per cent, to 5 per cent. 58. Then, on the cash side of your business you wrap up and deliver ? —Yes, we do. George Robertson Horsburgh sworn and examined. (No. 27.) 1. Mr. Kennedy.] You are a grocer in Hawera ? —Yes. 2. And you have been there for about five and a half years ? —I started in November, 1921. 3. And you have had a lifelong experience in the grocery and retail trade ?—I have had some considerable experience. I have had experience in New Zealand, in America, and at Home. 4. What is the nature of the business that you carry on in Hawera ? —I think I must be what is termed the sixth- or seventh-class grocer, because I give discriminate accommodation, the same as the wholesalers and the banks. I have thirteen lawyers—in fact, I serve the elect of Hawera —and I give accommodation wherever there is reasonable security. 5. Apart from the risks you have mentioned, your business is as nearly as possible a cash business ? —You cannot run a strictly cash business in a place like Hawera and do a big turnover. Further, I give what 1 would term a systematic and methodical service—in fact, I give the most comprehensive service on the best lines. 6. Have you been able to sell successfully at prices which your competitors call cut-rate prices ? —Never. 7. In actual fact have you ever sold at less than cost ? —Yes ; and I want to explain that. 8. Would you mind being brief ?—Yes. When I started in 1921 there was a substantial line of salmon called middle-cut salmon, which was being retailed in town at Is. 2d. I went to the firm to give them an order, and I was astonished when I ascertained that it could be purchased at 6s. 6d. per dozen. I asked how much they had in the store, and they laughed at me and said that they had more than I could sell in Hawera. I bought a couple of cases then, and I purchased the lot later — I think the number of cases that I bought was thirty-five —and I had a big sale for that particular line. The man who sold the article to me approached me a fortnight later and said, "You know more about salmon that I do." I replied, " I think I know more about all grocery lines than you do. What is your trouble ? " He said, " You have bumped the market up to 9d.," and I said, " That is exactly what 1 anticipated." He said, " You will get Is. 2d. for that article." I said, " The others can pay 9d. and I will sell under their cost." 9. Were you selling under your cost ? —No, and I do not think any man living sells under his cost—not a Scotchman, anyway. 10. Have you, apart from the salmon, sold anything in your business under cost ? —I did not sell the salmon under the cost to me. 11. I see. Am I right in taking it that your practice is to sell above cost to you ? —Exactly, except that the only circumstances which would warrant such senseless business methods would be selling against replacement cost. That would be good business. That is to say, if an article was in stock on a falling market and you had large stocks you would have to sell at the replacement value. 12. You have been enabled to sell at a lower competitive price in Hawera than your competitors ? —In the first instance I claim to know the business, in that I have brought my business up to a high standard of efficiency. I pay my employees a little over the award wage, and I endeavour to get the best of men. I buy when at all possible at the fountain-head. 13. Do you go direct to the manufacturers ? —I do. lam put on merchants' terms in many cases. I have an English buyer. I endorse what was said with respect to buying fruit in Australia during the past season, and if I obtained that fruit from the local wholesale house I would have to pay more for it. 14. Have you as a consequence of your own indenting been able to buy much cheaper than from the New Zealand wholesalers ? —Yes, considerably. I will cite a case in particular of a proprietary article—namely, a tea-set. The Dalton people wrote to some of my friends stating that some of their prices must be protected. This particular article I have in mind was offered to me by the representative of an Auckland fancy-goods house, and he informed me that they were retailing it at 335. He offered to put me on the ground floor. The same tea-set costs ss. 9d. precisely at the pottery. 15. What figure did you retail that to your customers ? —They are landed here at 135., and I am retailing them from 16s. 6d. to 19s. There is to a certain extent breakage to be covered. 16. You could name other articles, if necessary, I take it ?—Yes. 17. How many men did you employ when you started ? —I started with my son—a boy. I submit, if I may be permitted to say, that by charging high prices is putting men into the Bankruptcy Court. As I say, big prices, or ostensibly big prices, are causing that to a large extent in the grocery houses not only in this country but also in Great Britain and America. 18. What is the number of men you are now employing ?—Eleven. I have here a photograph of my staff. [Photograph handed to the Chairman.]
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19. Would you write down for the information of the Committee your turnover : take last year ? —Yes. [Figures written down on a piece of paper and handed to Mr. Myers ; who afterwards handed it to the Chairman.] 20. Mr. Hayward.] That is your sales ? —Yes. 21. Mr. Kennedy.] Have you found that your turnover for the period is increasing, on the whole " Yes ; and to be fair I must say that I have improved my position by having a very big shop there—that is, an up-to-date shop. That must be taken into consideration. 22. Will you tell the Committee how many other grocers there are in Hawera ? —I think at the moment there are eighteen, or perhaps twenty-two. 23. What is the population of Hawera ? —I think it is something under five thousand. 24. What are your sales, for example, of butter in the week ?- —I run well into a ton a week. 25. In regard to potatoes ? —That is a matter that is hard to calculate, because just now they are not selling very much. 26. Mr. Collins: We do not want to know that, Mr. Kennedy. 27. Mr. Kennedy (to witness).] The prices charged by you show an adequate profit ? —Yes. 28. Would you mind writing down on a piece of paper what was your last year's earnings ?— I was in a smaller shop then, but I will give my turnover. [Particulars written down on piece of paper and handed in.] 29. Mr. Collins.'] Does this include your salary ?-—That is without salary. 30. Mr. Kennedy.] You have taken out the proportion of your expenses to your overhead ? — Yes, on an allocation of about 8-5 of my present takings. 31. Do you reckon on 10 per cent, giving you a taxable income I—Yes,1 —Yes, 10 per cent, will give me a taxable income. I would like a little bit more. 32. Do you find that the public discriminate in the matter of prices ? —Yes. 33. Do you charge reasonable prices and lower prices than your competitors on your whole range of articles ? —Well, I would not say that, because I suppose they are meeting me in many things. 34. Are you called a price-cutter ?—I have been advertised in the newspaper as a cut-throat gone mad. 35. I want you to tell the Committee about your experience of Bell tea and Amber Tips tea. You have heard the evidence with respect to Amber Tips tea. What is the public demand in your town ?—Bell tea and Pyramid tea are the good sellers. I suppose we sell about eighty chests of Pyramid tea in a year. I think Bell tea has eclipsed it lately ; but Amber Tips is a poor third. 36. In the case of both those teas you are selling at reduced prices I—All1 —All three teas were sold at 3s. 37. You say that Bell tea has eclipsed Amber Tips ?■—Amber Tips does not count up there, due to intensive propaganda on the part of somebody. 38. We have heard a great deal about Kolynos : Do you find in your sales that there is strong objection to certain tooth-pastes ? —As soon as Florimel came on to the market I had to stop stocking because I wanted to clear my stocks of Kolynos. We were selling Florimel at lid., and Kolynos at Is. sd. 39. Take the well-established tooth-paste known as Euthymol ? —I have never stocked heavily in that article. The reason is that you do not want stocks to be left on your hands. At present some dentists are recommending the use of carbolic tooth-paste, and some are recommending the use of salt. 40. How long has salt been recommended ?—I heard it from one of my children, who said that it was better than tooth-paste. 41. Would it be possible in Hawera for any man to continue selling at less than cost ? —No. In the first place, he would be run out by the small shopkeepers. I think it would be lack of wisdom to do that; I would never attempt it. 42. You object to the fixation of prices by the P.A.T.A., do you not ? —Yes. I think it is entirely different from the Distributors' case, because they do not fix the retail selling-price ; and I think it will act contrary to the best interests of the people, and, moreover, it will compel me to put up my prices to the people. 43. Your opinion is that if the P.A.T.A. functions you must charge more to the consumer for the foodstuffs ?—Because I will not get the same amount of trade on proprietary articles. 44. If you have to charge a higher price for proprietary lines, that will reduce your sales on those lines ?—Quite so, because the people would not walk down to my shop if they could get it at the same price elsewhere, because there would be no advantage in coming to me. 45. To get the same profit you would have to get it by a higher price on foodstuffs ? —Exactly ; that is my opinion. 46. The price at which, you are selling proprietary articles is less than the tariff price ? —lnvariably so. There is one commodity that I sold below the fixed price, and they blacklisted me for two years. I will give them this credit: that they came and asked me to stock it, and lam now stocking that article—namely, aspros. 47. Do you stock aspirin tablets ? —Yes. 48. What do they cost you ? —I think they are in the neighbourhood of sd. 49. Are they sold by any firms in New Zealand wholesale ? —I think so. 50. What are Nicholls' aspros selling at: what is the control price ?• —Is. 6d. for twenty-five. 51. Do you handle ovaltine ?—Yes. It was advertised about two years ago as being essential for the welfare of the children. It costs ss. 10d., and it was advertised at Bs. 6d., and I sold it at 6s. lOd. and I showed a good margin. I was approached by representatives for about a year, and
120
G. R. HOBS BURGH.]
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eventually they gave way and allowed the price to be 6s. 10d. in Hawera. Subsequently the agent who was handling it admitted that my contention was right. 52. Do you find that the margins allowed on proprietary medicines are larger margins than you require to carry on successfully in your business ? —Yes, considerably. 53. You could sell at a lower figure to the public and still get what you consider adequate returns for yourself ? —Yes. 54. Mr. Myers.] Is the Committee to understand that you sell foodstuffs cheaper than your competitors I—l1 —I would not say in every case. 55. But in most cases ? —Yes, very often. 56. And I suppose the very fact that you are selling foodstuffs at less than your competitors brings you a certain amount of custom ?—lt is done for that purpose. 57. I suppose you have your regular customers ? —Yes. 58. And most of your business is cash, and it is done with regular customers ?—Yes, most of it is cash. 59. Not what might be called casual trade ? —There is not a great deal of it in Taranaki. 60. So long as you are selling your foodstuffs at a price which is less than your competitors you would expect to hold your custom ? —All things being equal, yes. 61. Very well, then, if you are getting fixed prices for your proprietary articles and you are still able to sell the other articles to your customers —that is, foodstuffs—at prices less than your competitors, what have you to fear ? —I have to fear this : that I might have people coming to me for proprietary articles who are not buying all their groceries from me. 62. You have told us that your trade is mostly with regular customers ? —Yes, that is so ; but the people who come to me for proprietary articles do not buy foodstuffs from me at all. 63. Do they not buy their foodstuffs where they can get them cheaper ?—No. A farmer coming into town does not always come in to buy his foodstuffs from me. Another thing is that even my own customers, as soon as they have to pay cash, in most cases will go elsewhere if there is no inducement to come to me. 64. On the other hand, if you sell fewer lines you would get the increased profit ? —lf I could sell any at all. 65. If you are able to keep your trade in proprietary articles and make an increased profit ? — Yes, on your supposition. 66. You say you have eleven men working for you ? —-Ten people employed. 67. What is the amount of your wages bill —you can write it down ? —I cannot give you these particulars. 68. How many men did you employ last year ?—Possibly three or four at different periods. 69. When did you go into your new shop ? —About seven months ago. 70. That is, during last year ? —To get my last year's figures would it not be to the end of March ? 71. What I want to get is your wages bill for the same period I—l would have to send them down. Of course, I could give you an approximate figure. 72. That would suit me ? —Very well. [Particulars written down on a piece of paper and handed in.] 73. You have informed the Committee that you sell about a. ton of butter per week ? —I have reached a ton per week. 74. Would it be about the same last year ?—No. 75. What was it last year —was it half a ton ? —I cannot say that. My business has increased enormously since I have got the new shop. I should not say it was half a ton. 76. Could you give me the particulars approximately ? —lt would be only guesswork. I suppose we would be running about seven boxes, and that represents 362 lb. of butter per week. 77. What would be the average price at which the butter would be sold ? —I cannot say at what price it was sold last year. It is being sold to-day at Is. sd. and Is. 6d. 78. I am asking you because you spoke about a ton of butter per week, and it would appear that the increase has been made all at once ? —I had a shop built which is three times the size of the old one ; and, furthermore, it is in a good position. 79. What margin of profit do you get on butter ? —Butter is showing about Id. and l|-d. profit. 80. Last year it was about the same, was it not ? —We were getting better prices for butter last year. 81. Could you give me the percentage ? —I should say that we would be getting 11 per cent, on turnover, but this year we are not getting that. I have two shops where I had one before. 82. In January last year were you doing 1 ton of butter per week ? —We did not do 1 ton in December, on account of the hot weather ; and, of course, the holidays being on, the people went away. 83. What quantities did you do in January ?—I would not go near that figure in January. 84. How much butter did you sell in December \ —At the latter part of December it began to fall off. 85. Can you give me the quantity of your output in butter for December ? —ln the early part of December it would be about 1 ton. 86. I want the output for the month ?—I did not take figures for that month. 87. Did you average it a week for the whole of December ?—At the end of December there was a falling-off—that is, in the last week. 88. Were you averaging a ton a week up to that time ? —Yes, for about three weeks. 89. Inasmuch as there were thirty-one days in December, we may take it you did 4 tons ? —The shops were closed on several days of those thirty-one days in December. I would not have done a ton in December even if I kept up my average.
16—JT. 44A.
121
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[G. R. HORSBURGH.
90. What proportion of your turnover consists of butter—if you cannot tell me it does not matter ? I can figure it out. 91. I want something like approximately; Ido not want a guess ?—lt would work out at 16 or 16-5. 92. On your total turnover ? —Yes, I should say so. 93. You have not available your wages-book for last year ? —No. 94. Do you have your balance-sheet audited eaeh year ? —Yes ; but I did not bring that down. 95. Who is your auditor ?—Mr. Dackon. .96. Have you the audited balance-sheets for the last two or three years available ? —Yes. 97. Will you send them to the Committee ? —Yes. 98. In connection with those figures you have put down, for what period does that cover ? — That is for the year ending 31st March last year. 99. And that is your total profits [pointing out on piece of paper figures shown thereon] ? —Yes. 100. Without taking into account wages paid out and nothing for yourself ?—That is so. 101. Do you take a very active interest in the business ? —Yes. 102. You are the manager ? —There is a man who is described as that, but I am really the manager. 103. You supervise the whole thing ? —I am really the head. 104. Do you do the ordering ?—Yes, most of it. 105. And, really, the success of the business depends upon your personal efforts ? —Yes. 106. What do you think would be a fair wage to yourself, supposing you were running it for somebody else and doing what you are doing : would you say £500 per annum ?—T might have to be satisfied with a lot less. 107. I am not asking you that-; I am suggesting to you do you consider £500 per annum as being your remuneration ?—I do not know of anybody who gets that salary in a retail business. 108. You are not a mere establishment, you know ? —The highest paid for a similar position in this country is £400 per annum. 109. If you were to take £400, that would be deducted from this figure [pointed out] ?—Yes. 110. Do you know what return that would give you on your turnover, supposing you took £400 per annum ?—I have not worked it out. 111. Mr. Hayward.] You carry on a cash and credit business, do you not? —Yes. 112. And I understand that your overhead charges are 5-5 per cent, of your return : that, is the figure you gave ? —Yes. 113. Do you deliver goods ? —Yes. 114. Your wages account amounts to a little over 5| per cent., and, that being so, that would leave you under 3 per cent, to pay the whole of your other charges in connection with your business and also your cost of delivery ; is that so ? —That is the correct percentage I have worked out. I am doing per week. 115. You mentioned that the price of proprietary articles were fixed. I presume the manufacturer you are referring to at 33J per cent, on return or 50 per cent, on cost—what articles are fixed at that price ? —Lane's emulsion ; Baxter's lung-preserver. When I say that, there might be 1 per cent, difference. In good buying you can always make that price mentioned on the bottle. 116. There are proprietaries fixed much higher at the present time than under the P.A.T.A. operating abroad. The British P.A.T.A. fixes the price on a number of lines ; lam prepared to say on all of them—at any rate, on a number of lines it is 20 per cent, on return ? —The profit at Home, as I know it, is not as high on any commodity as the profits are here. For instance, rentals are not so high. I do not know anything about the P.A.T.A. at Home at all. 117. You mentioned that you sell aspro at the price fixed ?■ —Yes. 118. Did your sales come down at the fixed price ? —I have two shops, and that, of course, means bigger sales; but the sales did come down immediately at the fixed price. 119. The position is that you are able to sell those aspros at the fixed price ?—lt is a great seller. 120. Mr. Collins.] Has there ever been a price war amongst the grocers in Hawera ?- —Yes. 121. Did it last long ? —Yes. They took up a hostile attitude when I opened up there. No man wants to sell an article that does not give him a fair working profit on any line. I appreciate both sides of the question ; but the great thing I object to is this controlling by big companies. Alfred Alexander Kelly sworn and examined. (No. 28.) 1. Mr. Kennedy.] You are a grocer?— Yes, in Hastings and Napier. 2. And the business you carry on is a cash business ?• —Yes. 3. And you have been in business a year on your own account ? —Yes. 4. Before that you were in other places of employment ?—Yes. 5. You have found that you have been able to sell at a figure which your competitors consider is a cutting price ? —Yes, but it pays me. 6. What economies have you been able to effect in your particular business ? —I have no delivery, and Ido not wrap up the goods ; the customers take the goods away themselves. I have no accounts —in fact, there is no office staff to pay. Ido all my own books myself, and lam therefore able to give the best of service to the customer.
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A. A. KELLY.]
H.—44 A.
7. You have eliminated book-keeping expenses ? —Yes, entirely. 8. You do the yourself ?—Yes, entirely. 9. And you claim that you are a keen and good buyer ? —Yes. 10. You have a staff of how many now ?—Eleven. 11. I suppose that your business has shown a uniform increase each month ? —Yes, except for the second month. 12. You say that your returns will be audited when you get the pioneering-work through ? — Yes. 13. Will yon write down on a piece of paper your turnover for last year ? —Yes. [Particulars written down and handed to Committee.] I may say that Ido not think that the cutting of prices is such a terrible sin. It popularizes the grocery concern. That is what it has done in my case; and, moreover, it puts cheap service in the way of the public. 14. In connection with your prices, are they uniformly below those of what may be termed the old-fashioned grocer I—Yes,1 —Yes, they are lower. I may say that I issue a price-list every month. 15. This is one of your price-lists, is it not ? —Yes. I sell nothing below cost, except in one or two instances where I have been forced to do so by competition. 16. By the competition of whom ? —Other grocers about the town. 17. Have you found that you get satisfactory returns for your labour ? —Yes. 18. Just write down on a piece of paper what are your earnings, including all that you have taken out of the business ? —I cannot remember the exact figures. [Particulars written down and handed in.] 19. You have some figures here [pointed out] ; are these taken from your records ?—Yes. 20. That is [referring to particulars written on piece of paper] drawings for wages and profits during the year ? —Yes. 21. I will hand in those particulars. That is the total profit for the year, and that is in respect of your first year's operations ? —Yes. 22. And you expect to greatly improve your business ?• —Yes, much better next year. 23. You objected so strongly that you came down here to voice your opinions against the P.A.T.A. ? —Yes, because they would force me out of my business by reason of the fact that I have popularized myself for selling cheaply, and if 1 were to put up my prices I would have to go out of business. 24. You think that if the P.A.T.A. functions you will have to substitute increased services for your present lower prices ? —Yes. 25. Do you find that the public demand lower prices in place of services ? —Yes, so far as the type of customer that deals with me is concerned. 26. That is the principle on which you founded your business ?• —I popularized my business on low prices. 27. Has there been any other business in the same line in Napier that has shown anything like the development that your business has shown ? —No. 28. What class of customer are you serving chiefly V —l should say mostly the working-class. As I said before, I do no credit system, no delivery, and I do not do any wrapping, and I am able to sell my goods at a lower price than other grocers. Ido a considerable amount of work myself —-in fact, lam what may be termed a heavy worker. 29. Mr. Myers.] How long have you been in the grocery business ? —For about ten years. 30. You have been in the retail grocery trade ?—Yes. 31. And on your own account just a year?— Yes. 32. I suppose you would not class yourself as an expert in tea-blending ? —No. 33. But you do blend tea yourself ?—No, I do not blend tea myself. 34. Who does ? —I buy my tea from an indent firm, and it comes to me and I bag it up. 35. Do you mind telling me what price you pay for that tea ? —The tea that I sell for 2s. 6d. is bought, in some instances, for 2s. l-|d. 36. What price are you selling other tea at ? —2s. 4d.; and it practically costs about the same —namely, Is. lOd. 37. You have another line of tea, have you not ? —Yes. It costs Is. 7|d., and it is sold at 2s. per pound. 38. You sell Bell and Amber Tips tea at what ? —3s. 39. On that tea you get how much profit ?—2d. and the usual discount. 40. You have not an audited balance-sheet ?—No. 41. When you gave us this figure [pointed out] you took that from the balance-sheet which you prepared ? —lt is not an audited balance-sheet. 42. It is just taken from your books. In order to get at your net profit you will have to take out a balance-sheet ? —I will. 43. You took stock at the end of the first year ? —Yes. 44. I suppose you took your cost at cost price ? —Less 2-| per cent. 45. So that without allowing for any possible depreciation or deterioration —— ? —I allowed for depreciation on plant. 46. Notwithstanding that this top figure here [pointed out] that is all your profit —as a matter of fact you are managing the shop ; that is, you do all that the last witness does —namely, you do the whole of your ordering—and your service is worth more than that top figure [pointed out], is it not ?—Probably so. 47. If you were manager you would get at least the bottom figure [pointed out] ?—I do not think so.
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[A. A. KELLY.
48. Do you think it would be worth £350 per annum ?—As I am just starting the business I was reluctant to draw anything out of the business. 49. I quite appreciate that. Would you mind putting down on a piece of paper your capital ?— When I started or subsequently ? 50. You borrowed money, or something of that sort ?— That cannot be regarded as capital. 51. Yes it can. Put down your own capital and the borrowed capital separately ?•—Very well. [Particulars written down and handed in.] 52. You have an overdraft with the bank, have you not ?—No, a clean start. 53. You must owe a considerable amount to your wholesale people ?—Yes. All the accounts are paid monthly. 54. You have carried on business on this turnover [pointed out] on the capital mentioned on this piece of paper ?—Yes, and will continue to do so. 55. Do you think that that is sound trading ?—ln my experience it is. 56: What rate of interest are you paying on this borrowed capital ?—Six per cent. 57. Does that come out of the net profit ?—Yes. 58. You mean to say you have to pay it out of the net profit ?—lt is paid. 59. It is paid before you take that figure [pointed out] ?—Yes. 60. I suggest to you that for the services you render a salary of £8 per week would be reasonable, and I ask you to assume for the moment, for doing the whole of the work—you will see what the figures will leave you [pointed out] on your turnover [pointed out] ?—Yes. I may say that a lot of this is pioneer work. 61. Do you think that is sound trading ?—Yes, under the circumstances.
Eighth Day : Thursday, 3rd March, 1927. The Committee met at 10.30 a.m. The Chairman : With regard to the extent to which the Self-help stores deal in proprietary lines, it was stated in evidence that those lines indicated in black on the price-list, and which were considered by Mr. Sutherland to be exclusively proprietary lines, represented 29 per cent, of his total business. Mr. Myers suggested that those figures should be checked by the Committee, and I think it is essential, in order to assist Mr. Myers, that we should make that check promptly, so that he can use the result in the course of his reply. Our accountant has gone into the matter, and this heap of invoices on my desk represents the transactions of the Self-help stores with three firms oxit of twelve for one month. The invoices cover all classes of goods, so that it would be necessary for our officer to take each invoice, but the work of making a calculation even on one month's invoices would take longer than the time which can be given to it. After discussing the matter with our investigating officers we thought that for the information of the Committee we would take two months' invoices—say, January and June —so as to have seasonable information, and check on those two months' invoices the figure of 29 per cent, which Mr. Sutherland has put forward. Mr. Myers: That seems quite reasonable, and it should give us a pretty good idea, because, speaking generally, Mr. Sutherland seems to buy from month to month. But, of course, it may or may not be satisfactory, because there may be some lines of proprietary articles of which, in order to buy them on the best terms, he may have to buy a substantial quantity—he might buy three or four months' supplies. But, at the same time, we appreciate the fact that it means a tremendous lot of trouble. Mr. Gresson : Could we give some assistance by allowing Mr. Sutherland to be present ? Mr. Myers : The investigating officers could obtain the information. Mr. Gresson: I suggested that the months to be taken be January and July. Mr. Myers : I agree to January and July being taken. The Chairman: We will take those months, then —January and July. Undoubtedly Mr. Myers and the members of the Committee were surprised that the percentage was so high. If the investigation for January shows that Mr. Sutherland was right to within, say, 2 per cent, we do not propose to go into the matter with the same exactitude for July. We would be justified in proceeding with a close investigation only if there was a remarkable discrepancy in any one month. Mr. Myers : That would be reasonable, unless you find in the selected month (say, January) that Mr. Sutherland was purchasing large quantities. If that were the case it would be necessary to carry the investigation into February or March ; but I have no doubt that, when the investigation for one month is made, you will be able to see how much further it is necessary to proceed. William Earl sworn and examined. (No. 29.) 1. Mr. Walker.] What is your occupation ?—I am a grocer, carrying on business at Johnsonville and Khandallah, the partners in the business being my brother Edward and myself. We commenced business in November, 1922. 2. And you did booking, canvassing, and delivering ? —Yes. 3. After you had been established six months what was your turnover ? a month ; and my turnover increased slowly. i. In November, 1925, you conceived the idea of trying to get business in Khandallah ?—Yes.
124
W. EARL.]
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5. And you prepared and distributed printed price-lists for a cash business there, to be served from your Johnsonville premises ? —Yes. 6. You intended to go out and pick up the orders yourself, and you actually did go ?—Yes. 7. What was the result ? —The result was that one of the two shops in Khandallah was offered to me and I bought it. My predecessor was carrying on the old credit style of business, and his best month was —• —. 8. What is your present Khandallah business returning ? —[The witness wrote his reply and handed same to the Committee.] 9. When did you buy the Khandallah business ?—ln November, 1925. 10. And the results you achieved in Khandallah induced you to change your business into a cash and delivery one, cutting out all other service ? —Yes. 11. Did you stock Amber Tips tea, Bell, Roma, and an unblended 8.0.P. tea ? —Yes. 12. Under the old regime what were your purchases of Amber Tips ?—Approximately 101b. a month. 13. Immediately you changed your business into a cash and delivery one what were your sales at the Johnsonville branch ? —Approximately five cases a month. 14. And for Bell tea ? —Approximately the same. 15. Did those results take place practically immediately after you changed your business into cash ? —ln a very short time. 16. Did you reduce the price of Roma tea ? —No. 17. How did those sales move after you converted your business ?—They remained practically stationary. 18. You did not reduce your prices for Roma ? —No, and they remained stationary. 19. Prior to your reducing prices under the new system, how much bulk tea did you sell ? —Five chests a month, the retail price being 2s. Bd. 20. Did you maintain the price at 2s. Bd. ? —Yes ; the price is now 2s. Bd. 21. How were your sales ?—I have a standing order for five chests a month now. 22. Do you stock Radiant butter ? —Yes. I have reduced the price of that by Id. a pound under the new system, and the sales showed an increase to ten boxes a week ; previously they were four. 23. What about Velvet soap ? —Under the old system we charged 9d., and now it is Bd. Formerly I bought one box a month, and now I get it in ten-box lots, with a reduction in price of 10 per cent. 24. Did you receive any complaints from any of the proprietors of these standard lines about reducing your prices ? —None whatever. 25. What about Oak jams ? —Formerly I was a small buyer, and was subsequently able to purchase in fifteen-case lots, which was much larger than my previous purchases. 26. What about tomato sauce ? —That was previously sold at Is. Bd., and under the new system was Is. 5d., the result being that where we used to buy one case a month we now buy five. 27. Tell us about Granose biscuits ? —I used to sell them at Is. 2d., and purchased a dozen a month. lam now selling them at Is., and disposing of anything between two and three cases of 3 dozen each. That only refers to the Johnsonville business. 28. Edmonds' baking-powder ? —Sales have increased since I reduced the price—from 3 to 18 dozen a month. 29. With regard to competition in Johnsonville, you have four competing stores altogether ? —Yes. 30. Do they all carry on the old style of business ?—Yes. They do not display prices. Ido ; every line is ticketed. 31. Is there any other strictly cash business in Johnsonville ? —No. 32. Did you reduce your tobacco prices by Id. ? —Yes. 33. Did you ever miss getting your tobacco discounts I—No,1 —No, except by oversight; but I seldom got my tobacco discounts before. 34. You produce your expenses for the three months ended 31st January, 1926, compared with the corresponding period for 1927 ?—Yes, I produce them. Mr. Myers : Who prepared those figures ? Mr. Walker : Mr. Earl prepared them. The Chairman : Why did you take the monthly average ? Mr. Walker: The position is that Mr. Earl is a very hardworking man, and further, he had sickness; and I did not like to impose too much work on him. If more figures are required they can be supplied. lam responsible for asking for those limited periods, knowing the stress he has been under. 35. Mr. Walker (to witness).] In spite of your increased turnover your stocks increased by only £50 to £60 I—Yes.1 —Yes. 36. So that you did a vastly increased turnover with a small increase of stock : why was that ?— It was owing to the quick turnover. 37. Would you go back to your old booking and canvassing business ?—No, because lam more than satisfied with the new style of business. 38. With regard to the population of Johnsonville, has it advanced at all during the last few years ? —Unfortunately it has not. 39. So that the extra business you have done has come from your competitors ?—I should imagine so. 40. Mr. Myers.] When did you change your Johnsonville business from credit to cash ? —After I went to Khandallah. 41. Did you at once commence in Khandallah a cash business ?—Yes. 42. When did you change ? —About the middle of 1926.
125
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43. Not till then ? —No. 44. During the latter part of 1926 you say you had a brother working with you : where was he ? — Working in the business at Johnsonville. 45. And you worked at Johnsonville ? —Yes. 46. Who manages at Khandallah ?—Another brother. 47. Will you tell us what you draw yourself for a wage, if anything ?■ —£4 12s. 6d. per week. 48. And your brother ? —The same. 49. What other assistants did you keep in Johnsonville during November and December, 1925, and January, 1926—that was before you converted it into a cash business?— Two men and two lads. 50. What were they getting ?—One man was getting £5, another £4 12s. 6d., and the two lads were getting respectively £2 7s. 6d., and £1 2s. 6d. 51. Any other wages ? —No, I think that is all. 52. Did you have any one driving ? —That was the man getting £5. 53. During the months of November and December, 1926, and January, 1927, did you have the same men employed ? —Not the same men, but the same number. 54. So that by the conversion of the business from credit to cash you have not saved anything in wages ?—That is so. 55. Because you are still delivering ? —Yes. 56. And the only thing that you have saved, then, is whatever you may have lost in the way of bad debts ? —And the extra discounts that I would receive by buying larger quantities. 57. Have you balance-sheets for each year ? —No. 58. Do you not have a balance-sheet prepared ?—Not audited. 59. Not prepared ? —No. I never took a balance-sheet. 60. How long have you carried on business ? —Since 1922. 61. And you have never had a balance-sheet ?—No. 62. So that you cannot tell me really how you stand ? —Only approximately. The Chairman : Perhaps he lets the bank do it. 63. Mr. Myers.] Have you had any balance-sheet from the bank ?■ —No. 64. Will you tell the Committee what capital you and your brothers have in the business, or can you only guess ? —I know the capital he invested in the first place. I hand in the figures to the Committee. [The witness wrote the figures and handed same to the Committee.] 65. In the first place, did you buy the business at Johnsonville ? —Yes. 66. What did you pay for it ? —I think it was . 67. That was for stock and goodwill ? —No ; stock only. 68. You paid nothing for goodwill ?—No. 69. Who were the proprietors? —Some people called Mcßride and Mildenhall. As a matter of fact, " the tide was out." 70. When you say that you and your brother have drawn each, have you actually drawn that out of the business ? —Yes. 71. I suppose if I ask you what your average percentage of gross profits would be you could not tell me ? —No, I could not tell you. 72. How, then, do you fix the prices at which you are going to sell your goods ? —That depends on the nature of the article and the turnover. 73. Seeing that you never took out a balance-sheet, I suppose you never know what percentage . your gross profits bears to turnover, or overhead expenses to turnover ? —No. 74. You never know ? —No. 75. You have said that in Johnsonville there has been no increase in population recently ? —That is so. 76. What is the total population of Johnsonville ? —I could not tell you. 77. Do you keep any books at all ? —The ordinary ledger and cash-book. 78. Do you do any business on credit at all ? —Not now. 79. What do you keep your ledger for ? —There are still a few outstanding accounts to be collected. 80. So that you keep no ledger in connection with your existing business ? —No, none at all. 81. I suppose you do not find it necessary to keep a day-book ? —No. 82. You keep a sort of cash-book, I suppose ? —Yes. 83. I would like to see it ? —All right, sir. 84. What do you keep in it ?- —The day's takings and any outstanding accounts which may have been paid or money received on account. 85. Anything else ?—No. 86. Not even payments out made by yourself ? —Yes, but only such small things as petty cash. 87. But no payments to your merchants ? —Oh, no. 88. You do not keep any record of those except by cheque ?■ —That is so. 89. You would find it very difficult to ascertain it at the moment ? —To get down to figures, yes. 90. And you cannot tell me at the moment what your present capital is in the business ?■ —No. 91. Or whether you have worked at a profit or a loss ? —I can only assume that lam working at a profit. 92. I suppose you can only assume that because month after month you are selling goods and so far you have been able to pay your monthly accounts ? —Yes. 93. But you might quite easily be able to do this and still have lost some part of your capital ? I think the stock is a little more now than when we first took over. 94. A very little, I suppose ? —Yes, because it is turned over so quickly.
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95. Then, since you are not doing a credit business, and have not been for a long time, I suppose there are no moneys owing to you ?—There is still a fair amount of old-standing accounts due to me —I suppose, a little over £50. 96. Very well, then, apart from that, you can only ascertain your portion by seeing what stock you have, and at the same time what you still owe your merchants ? —Yes. 97. The Chairman.'] And what credits you have in the bank ?—Yes. 98. Mr. Myers.'] But I suppose you work on a very small credit balance at the bank—not more than you need to meet your requirements ? —Yes, just to meet my requirements. 99. Well, then, it appears to me —and I suggest to you —that, on that aspect of the matter, you have been in business ever since 1923 and you are no better off now than you were then, except that you have had per week in the meantime. That is about the position, is it not ? —Yes, that is so. 100. And I suppose you could go and earn in the open market easily ? —I should hope so. 101. When you put an item down for your cost of delivery, do you mean cost of delivering your goods to customers ? —Yes. 102. Do you deliver by horse and cart ?—No, motor-van. 103. What did that cost ? —£37o. 104. Is it paid for ?—Yes. 105. Do you allow anything for depreciation ? —Yes, 15 per cent, per annum. 106. And I suppose it costs something for repairs, oil, petrol, and so on, to say nothing of the driver ?—About £1 10s. a week for depreciation. 107. And for supplies and repairs ? —About the same. Fortunately I have had no repairs to meet yet. 108. I see in your statement which you have handed in you give the values of your stock on Ist November, 1925, and on Ist November, 1926 : when did you prepare those figures ?--Quite recently ; within the last few days. 109. How did you make up those figures, showing the stock on those dates ? —We take stock pretty well every month. 110. And do you keep a record of it ? —A record of each stocktaking at the end of October, yes. 111. But the Ist November would be between times : that is to say, you would have been buying goods in October payment for which would have to be made on the 20th November ?—Yes. 112. And I suppose you buy merely from month to month I—Yes.1 —Yes. 113. So that on Ist November you would be owing for all October's supplies ?—Yes. 114. How long have you had the motor-van ? —I bought it about eighteen months ago. 115. Prior to that you had been delivering by horse and van ? —Yes, a light delivery-van. 116. Do you mean a motor-van ? —Yes. 117. Did that come in with the original business ? —No ; we had a horse and ca,rt originally. 118. And then you bought a light motor-van early in the days of your Johnsonville business 1 — Yes. 119. And before you converted it into a cash business ? —Yes. 120. That took up a certain amount of your capital ? —The original van ; yes. 121. Mr. Walker.] In case you may have misunderstood some of the questions, I want to refer to your general financial position—in other words, your capital. Do we understand you to say that you have never, once a year, taken out figures showing a general balance of assets and liabilities ? Only a rough and homely one —not audited. 122. Have you still those rough and homely figures ? —Yes. 123. What do those figures show ? —A slight improvement. 124. After a number of years, or soon after your commencement ? —After a number of years. 125. Will you write down on a slip of paper the surplus of assets over liabilities on the last occasion you worked out your figures, and indicate the date ?—[Witness handed in statement], 126. Mr. Reardon.] That is what you reckon your surplus of assets is ?—Yes. 127. Mr. Walker.] Does that refer to both businesses ?—No, Johnsonville. I am not giving the Khandallah figures. 128. The point was taken that you apparently had effected no saving in wages on your converting your business to the new style ?—There was no saving in wages. 129. But did that same wage bill deal with a larger turnover ? —Yes. 130. In addition to the wages which you and your brother have drawn, have you lived off the business ?—No. 131. You have not taken stocks from the business for your personal consumption ? —No. 132. Can you tell what the surplus is at the Khandallah business ? —No. 133. Did you put any capital into it ? —Very little. 134. How did you meet the settlement when you purchased from your predecessor ? —The settlement did not take place when I went in. It was completed fourteen days after I went in. 135. How did you pay the amount due to your predecessor for stock ?— I had sold the stock before I had to pay for it. 136. Is there a surplus, then, at Khandallah ? —1 think there is a slight surplus. 137. Mr. Myers.] With regard to the last figure which you handed in to the Committee, can you furnish us with any particulars showing how it is made up ? —No. 138. So that we have no means of testing whether it is correct or not ?—No
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Noel Blaney Boyd sworn and examined. (No. 30.) 1. Mr. Kennedy.] What is your occupation ? —I am a director of Macduffs Ltd., and work in that business in Wellington. 2. You have been for many years in business in the Wellington Province ? —Yes, about twentyone years in retail grocery, wholesale grocery, and in my present fancy-goods business. 3. Mr. Reardon.\ How many shops have you ? —Two, both in Cuba Street. 4. Mr. Kennedy.] How long have you carried on the present business of Macduffs Ltd ? —About four years in July this year. 5. You did not establish the business? —No; it was previously carried on by a man named Macduff. 6. What is the nature of the business ? —Fancy-goods, grocery, merchandise, kitchen hardware, toilet requisites, and everything pertaining to the house except furniture and heavy items. 7. You do not supply provisions ?—No, nothing that has to be weighed or packed in bags. We have soaps, of course, and starch and glue. 8. You do not sell edibles, except patent medicines ?—That is so. 9. Your business is one in which you sell purely for cash ? —Absolutely. 10. And you deliver no article except heavy hardware ?—That is so. 11. You do not solicit orders by canvassing ?—No. 12. Do you wrap up ? —Yes, in ordinary thin wrapping-paper. 13. Have you in your business been able to reduce prices to your customers below those usually charged in this town ? —Yes, in nearly every case. 14. Have you effected special economies in your business ?—Yes ; we work on the smallest possible overhead. 15. What is the method you adopt as your principle in business ?—We work, in a system of an efficient staff. Everybody has to work, and we have the personal supervision of the business ourselves, and therefore we keep it at the least possible overhead. 16. Do you rely for your results on a large and quick turnover ?—That is our object, of course. We rely absolutely on turnover. 17. Do you aim at selling all articles handled by you at lower than the customary prices ? —Yes, the same as, or lower. There are cases in certain lines where the prices could not be reduced, because some of them are just about at cost; but we have never sold anything in our shop at cost or below cost. 18. What, however, do you do if you should be unfortunate enough to buy badly, or to have secured an article which is left on your shelves, and you wish to quit it at any price ? —I do not call that selling at below cost. If we have a dead line, and it stays on the shelf for a long time, we quit it at a price at which the public will buy. It may be below our cost, but the real value is only what the public will give for it. Our motto is, " The first loss is always the best." 19. Apart from a clearance to quit stock that the public will not have at your price, you make it a rule to sell at above cost ? —Yes. 20. A large number of articles which you deal in would be termed proprietary articles ? —ln our business I should class 70 per cent, of our lines as proprietary. 21. In the case of many articles sold by you is the price on the container fixed by the wholesaler or the manufacturer of the article ? —Yes, in very many cases. 22. In other cases is there a nominated or tariff price ? —Yes, there is. 23. And in other cases is there a controlled price ? —Yes. 24. So that if you do not sell at that price you are put on a black-list and prevented from getting supplies ? —Yes; we are on the black-list now, for Johnson's baby-powder, Palmolive soap, and Kolynos. I only heard two days ago that we have been debarred from Kolynos. With regard to Palmolive, one of their representatives approached us in 1924 and requested us to go on the wholesale list, and we did so, but we would not agree to their retail price, and they said, " So long as you do not put a ticket in the window on the article you can sell it at your price." I have the invoice, which I will put in. 25. Mr. Myers.] Was that Mr. Pilcher ? —No, Ido not think it was. My brother dealt with the representative. 26. Mr. Kennedy.'] And so you agreed to keep the tickets out of the window ?—Yes ; and we still sold at 7|-d., against the fixed price of 9d., and we did that with their permission. 27. The Chairman.] What was on the ticket ?—Merely " Palmolive, 7|d." The control came into force and they asked us to raise our price to 9d. We refused, and by refusing we were taken absolutely off the wholesale list. We have had to get supplies through other channels and pay more for it. We do not mind that; the principle was the thing. We are out of those stocks at the moment. 28. You are unable to get them I—Yes, that is so. 29. The control of Johnson's baby-powder is so effective that you cannot get supplies of that ?— No ; but we have large stocks. We bought every available tin that we could get our hands on in Wellington when we heard that the control was going to come into force. We have 240 dozen at the present in stock, and we are not willing to raise the price from Is. 2d. to Is. 6d. That powder cost us 12s. —some a little less. 30. What are you selling it at ? —ls. 2d. per tin. 31. And what is the figure at which the price has been fixed to the public by the manufacturers ? —Is. 6d. per tin. Since the control has become effective the price from the wholesaler to the retailer has gone up. We used to buy as low as lis. 5d., but it is now 12s. sd. to buy at the best possible price.
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32. Do you buy in many cases direct from the manufacturers ? —Not very many cases. We are on the wholesale basis with the majority of our lines, thus saving from 15 to 20 per cent. I produce invoices from the manufacturers with whom I have dealt direct. I would like these to be regarded by the Committee as confidential, because my operations are closely watched by the wholesalers, and if it were disclosed it would damage us. 33. In other cases you have dealt with manufacturers in New Zealand and also through direct importation from England ?—Yes, we are still doing that. 34. By your dealing direct have you been able to effect considerable savings in your buying '— Yes, considerable. 35. The prices at which you have bought have been below those at which you could have bought from the New Zealand wholesalers ? —Yes, very much. 36. Have you found in actual experience that there are variations in the prices of various New Zealand wholesalers?— Certainly; if there were not there would be no competition amongst them. Naturally, we buy from the best possible source. 37. The name of Sharland's was mentioned before this Committee. I want you to express your views as to their comparative prices compared with those of other wholesalers from whom yon buy % —We use a trade term -we say that Sharland's are " not in the running." Their prices cannot compare with those of people like Fairbairn, Wright, and Co., and other wholesalers, so that naturally we do very little business with them. 33. Are Fairbairn, Wright, and Co. wholesalers, dealing with grocers' as well as certain lines which appertain especially to chemists ? -Yes, they handle certain grocers' lines, particularly in Auckland : they specialize in groceries in Wellington. They also keep druggists' lines and patents of all kinds. I was going to mention their methods. Fairbairn's methods, to my mind, are those which other wholesalers might easily take a lesson from. In a sense, they do a cash wholesale business. Their terms are seven days. If you do not pay your account within seven days you do not get any more stuff from them. They work on the lowest percentage possible. They have gone so far as to refuse to handle lines where the manufacturers demand that they should charge a price which would give an excessive profit to the retailer. And they are one of the most successful business firms that I know of. My partner was manager there for some time. 39. In your business there are associated with you your brother and Mr. W. T. Richards ?—Yes ; he is at present in England purchasing for the company. 40. Your business was started under your management some four years ago ? —Yes, a little over three and a half years ago. 41. Have you found that the public have patronized you well ?—Yes, because of our prices and the attention which our assistants give to them. 42. As giving the Committee briefly an idea of the scope of your business, would you tell us the result of a count which you took between the hours of 7 and 8 on a Friday night in your main Cuba Street shop ? —Yes. A count was taken over a portion of an hour—for about ten minutes— and on working it out we calculated that from 3,000 to 4,000 people patronized our shop during the hour. 43. The Chairman.] You multiplied the number by six and it worked out at between three thousand and four thousand ? —Yes. 44. Mr. Kennedy.] How many assistants had you immediately prior to Christmas ?—Six in our top shop, and forty in the main—that is, counting ourselves. 45. That, I suppose, would be larger than your normal staff ? —Oh, yes. 46. What would be your normal number ?--Twenty-seven is the membership of our staff to-day. It is a bit smaller now. Two girls went off after Christmas and we have not replaced them. 47. How many did you employ when you started four years ago ? —We started off with nine, in addition to ourselves. 48. Is your system to exhibit in the window the prices at which you sell ? —Yes, and every article in our shop is marked. 49. Have you found the public to be discriminating in the matter of prices ? —Yes, certainly they are. The public are so well educated to it that they know the prices pretty well as accurately as we do. 50. Do you follow in your business a uniform system of profit, or do you load certain lines, described before this Committee as recovery lines ? —We do not class them as that, but every business man knows that a line which is selling slowly must bear a larger profit than one which is selling qubkly. We have lines that we turn over twenty-four times a year. We could not expect them to bear the same profit as one turning over only two or three times a year. 51. Do you turn over a large volume of patent medicines ? —Yes, there are dozens handled. 52. Do you have any system of substituting articles of your own to the customer, when he asks for anything else ? —No, certainly not. Our assistants have not the time to talk another article against one which is asked for ; and, in addition, you would lose the confidence of your customers. While our assistants were wasting time talking one article they could be working or selling some other articles to the waiting customers. 53. Your aim, then, is to give the customer what he wants in a minimum of time ?—Yes. 54. You have compiled a list of certain articles—some seventy-five—sold at your shops ? —Yes ; that is only a fraction of our lines. I produce the list. [List handed in]. 55. In the first column you have set out the cost to you ?—Yes ; and in the second column there is shown the selling-price we have fixed. In the third column we have set out the profit on cost which that figure will return. The third column shows profit on turnover, not on. cost. In the fourth column we have shown " New selling-price." That price is either the price that is named on
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a carton containing the article, or is the tariff price where there is a tariff price, or the controlled price where there is a controlled price. In the next column we show the percentage of profit. They are on cost, and not on turnover, which the new selling-price would return to us. 56. Did you find the profit set out in the first column an adequate one to return satisfactory results ?—-Yes. 57. If your present sales were not affected, would the profit shown in the fifth column be greatly in excess over that which you find adequate for your purpose ?- Absolutely. 58. In the margin of the return you have made certain notes ? —Yes. 59. Where there is any doubt as to the possible new selling-price, you have put a marginal note so as to indicate the position ?—Yes. 60. I will refer now to one Or two items on your list. Take " 3 Flowers —160 tubes " : you say you used to sell that at Is. lid. ? —Yes. We used to sell it at that price until the agent came round and threatened to stop our supplies. They had the power, and they have it now. 61. The price to-day is 2s. 6d. for that line; but we came to an agreement. We explained that we wanted to sell at Is. lid. They were not agreeable to that, but allowed us to sell at 2s. 4|d. to enable us to compete with the shops who were giving away to their customers a 5-per-cent. cash discount coupon. 62. Do you use cash-registers in your business ?—We do not. The reason is that we do not believe in having £800 or £900 tied up in expensive fixtures. We have an efficient staff which we can trust. We went into the matter of cash-registers, and ascertained that the interest on the money lying idle would be about £60 or £70 a year. We came to the conclusion that we were not losing anything like that, even if there happened to be a dishonest assistant. We tested it out with a cash-register man to see if he could handle the same amount of business as we do, and he agreed that on two of our counters it would be impossible to handle the business without getting five or six additional assistants, so we have never contemplated putting in cash-registers. 63. Mr. Reardon.\ I think your predecessor adopted the same policy of trusting his employees ? — Yes, I believe so ; and we have only had one case of trouble in our business, and that was not a case of taking money but of selling the goods at half price. 64. Mr. Kennedy.] This system of giving cash coupons is not one which is readily adaptable to your business ?—lt is of no use to us. The customer would have to pay, any way. Some one has to pay for it. 65. On the list you have handed in you have marked the " controlled " prices ? —Yes. 66. And if you sell below the controlled prices your supplies are stopped ?- We are threatened in many cases, and in some cases supplies have been stopped, and we have to use all sorts of methods in order to obtain them. 67. You gave to the Committee the new prices of Johnson's baby-powder subsequent to their instituting a system of control ? —Yes. 68. You say that the price to the retailer has been increased ? —Yes. 69. Are there any other oases in that connection —I mean where the price has been increased subsequent to a system of price-control ?—Yes. I start off with Kolynos. We used to buy Kolynos at 13s. a doz. in 5-gross parcels, and I may say that our sales of that article are 5 gross in two weeks. The best price we can buy at to-day is 13s. 6d. in gross parcels, so as soon as they controlled it, it had gone up to 6d. to us. We are on the black-list so far as that article is concerned, although we have never been asked to raise our price. With regard to Carter's little liver pills, since Fasset's aave taken over the agency prices have increased from lis. Bd. to 13s. 7d. These people are on the executive of the P.A.T.A. Steam's peroxide cream has increased from 16s. lOd. to 17s. Id.; Johnson's baby-powder, from lis. sd. to 12s. sd. ; " Gets-it " corn-cure, from 14s. lid. to 16s. 2d. ; Sanders' eucalyptus, from lis. 4d. to 12s. 9d. 70. Has the price from the retailer to the consumer generally altered in those lines I—No,1 —No, not that I know of, unless chemists have raised prices ; but they may do if the P.A.T.A. control these lines. 71. These were articles which you were previously selling to the public at a figure less than that nominated on the carton, or otherwise nominated ?- Yes. 72. Under the control are you compelled now to sell to the public at a higher figure than you were previously selling at ?—Yes, in one or two lines—Kolynos and Johnson's powder. Sanders tried to control their line, but have not been successful. 73. But is the price to the consumer that you are now compelled to observe in the case of those articles higher than that you were previously charging ? —Certainly, very much higher. 74. Have you found great numbers of consumers require cheap prices rather than service ?— The majority of them do. 75. Your accountant has abstracted a return showing the capital in your business, your turnover, gross profit, percentage of gross pro' t to turnover, your expenses, and percentage of expenses to turnover I—Yes,1 —Yes, I produce the return. [Handed in.] 76. Your accountant is Mr. Lambert, F.P.A. ? —Yes. 77. Does the return show items in respect of the years 1924. 1925, and 1926 ?—Yes. 78. Does that return show that your expenses to turnover in 1924 was 17-6 ? —Yes, and that in 1925 it was 14'5, and in 1926 13 per cent. 79. In the year 1925 your turnover had increased over that of 1924 ? —Yes. 80. And in 1926 a very large increase on 1925 ? —Yes. 81. Your profits have increased in successive years ? —Yes. 82. And the present figures are a source of great satisfaction to you ? —Yes. 83. Does the profit shown include directors' fees ? —Yes.
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84. So that you have not deducted directors' fees as a wage I—No. 85. Did you take a wage every week ?—Yes. 86. Mr. Reardon.] Is your salary shown in the wages-sheet ?—Yes. 87. Mr, Kennedy.'] Tell us about Piver's shaving-cream ?—That was a job line. lam speaking of Hart's advertisement. That line was bought by Hart .at Bs. a dozen, and he was advertising it at 11 id. It was offered to us and we would not touch it. 88. What was the figure that Mr. de Fenq told the Committee was the cost of that line ?—I cannot remember. It was well over Is., he said, I think. 89. Bath-salts were mentioned : what was the cost to you ?—About 13s. 2d. to land. 90. Did you find a percentage of breakage ?—Yes, a very big percentage. 91. What would the percentage be ?—ln that shipment there would be quite 15 per cent. 92. How did you find this particular line for saleability ?—lt is not a wonderful seller. 93. Do you have to make an allowance for discoloration ?—Yes ; if it is put in the window it goes white. 94. And for shrinkage ?—Yes, shrinkage in the bottle. 95. Can you make a general statement ?—Yes. I am referring to articles bought by Mr. de Fenq—bath-salts, hair-slides, cigarette-cases, baby-powder, Palmolive soap, dish-mops, and kettle knobs, Cuticura soap, Lane's emulsion, Piver's shaving-cream, Calvert's tooth-powder, Palmolive talcum powder, Pond's cream, and others. As to these, I say they were purchased from a junior assistant. Hair-slides were a slow-seller; fashions change, and there is a big percentage of them broken and unsaleable. Cigarette-cases : he said the cost was Bs. 6d., but our cost was 125., and we were selling them at Is. 6d. 96. They were bought with fair judgment ?—Yes. As to Palmolive soap, we do not stock Palmolive soap ; we were on the black-list. White Cross baby-powder : our selling-price is lOd.; it was 9d. when I went back to the shop. It is a very slow seller, and the market fluctuates. It is not recognized as a wonderful line. Kettle-knobs and dish-mops : the price was the usual price. Cuticura soap is sold in our shop at Is. 2d. ; it cost us 12s. 2d. a dozen, not 13s. as stated by Mr. de Fenq. 97. You are not prepared to disclose the source of your buying in every respect ?■—That is so. 98. You pledge your oath that what you have said in regard to costs is true ?—Absolutely. Lane's emulsion cost 235., and is sold for 2s. Id. It is a very quick selling line. I wish there were a few more like it. It is understood in the trade that we get a fair and reasonable margin on that line. Calvert's tooth-powder : the cost quoted was 6s. Id., but we are landing it at ss. 2d. per dozen, so that the cost quoted by Mr. de Fenq is above what it costs me. The price at which I sell is two for llfd.; I can produce the invoice for the cost price of that. Palmolive talcum powder : Mr. de Fenq said it cost 125., but I think there is an invoice which shows that the cost to us is 10s., and at this price we would buy at 10s., for two dozen free with one gross, so that our price of lid. shows a good profit. The suggestion was that we were selling at less than cost. 99. The Chairman.] Can you produce that invoice ?- It is in the packet 1 have produced. I produce the invoice. 100. Mr. Kennedy.] You have had it in stock since 1924 I—Yes.1—Yes. 101. There are not many things you have for so long ?—No ; it is a very slow seller. Pond's cream, 16s. a dozen, was correct. We are selling it at Is. 6d., so there is a fair margin. There are tremendous sales. We buy 5-gross parcels. Blue Seal vaseline : the best price quoted was 7s. 2d. It can be bought as low as 6s. 3d. We buy at about 6s. sd. lam not sure that, if we imported it, it would not be landed at 6s. 3d. The price at which we sold, 7|d., gave us a profit of, roughly, 15 per cent, on cost. It is an everyday line, and there is a large and quick turnover in it. Clements' tonic : Mr. de Fenq said it cost 31s. 6d. It can be bought for 28s. a dozen. Our selling-price was 2s. 7d. That shows a profit of about 9 per cent. McClinton's talcum powder : we bought that from Salmond and Spraggon, the firm of which a member gave evidence before this Committee. He is president of the P.A.T.A. It cost us Bs. a dozen. We bought all they had, and we regretted it. Mr. de Fenq said we sold it under cost. It showed us a profit of 25 per cent, on turnover price. Kruschen salts cost 21s. sd. at the bonus period—that is, there are two periods in the year which are special bonus periods, and if you buy within certain days you get 1 dozen free, and naturally you go for that period and buy as much as possible. One dozen was given free with every gross, and that brings the cost down to 19s. Bd. We are selling it at Is. 9d. The Committee adjourned at 12.30 p.m. till 2.30 p.m.
On resuming at 2.30 p.m Examination of Noel Blaney Boyd continued. 102. Mr. Kennedy.'] You want to correct a mistake which you made earlier with respect to the price of an article ?—Yes. I refer to Clements' tonic. I said that it was sold at 2s. 7d. This was a typist's error, and when looking over it I failed to notice the error, but on looking into the matter I find that 2s. lOd. was our price. 103. In your business you sell a considerable amount of soap ? —Yes, a tremendous amount. 104. How much of that soap would be manufactured in New Zealand ?—I should say 60 per cent. —- that is, toilet soap. 105. You have knowledge, as a consequence of your business, of the various competing types of tooth-pastes ? —Yes. I could name quite a number of other types that are competing against the
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sale of old types. Perhaps I could class Kolynos as an old type of tooth-paste which is a very good seller. Euthymol has a very large sale, and there is Colgate's, and there is a line called Zepto that has a very large sale, and there are also many other lines. lam of opinion that to-day Pepsodent is getting one of the largest sales —in fact, it is running very close to Kolynos. 106. How do you find Gibbs' dentifrice ?—A very good seller. 107. Has it come on to the market with a rush during recent years ? —Yes, it has come on with a good rush ; it has picked up very well. 108. You told the Committee that you had been able to buy in some cases direct from the manufacturers ? —ln very many cases. 109. Have they sold to you openly ?—ln some cases yes, and in some cases no. 110. Incidentally, did the P.A.T.A. organizer wait on you ? —Certainly not. As a matter of fact, we did not know that the P.A.T.A. was formed, or being formed, until we heard of it quite recently. 111. Is there any matter that 1 have not mentioned which you feel you would like to tell the Committee ?—We know that if the P.A.T.A. is allowed to operate here it would have the effect of driving us out of business, becalise, as I have said, it would control 70 per cent, of the goods we carry ; practically 70 per cent, of the lines we carry are proprietary lines. If we had.to be put on the same footing in the matter of selling as the chemist we would have no inducement whatever to offer to bring the customers to us, say, from the suburbs, because the chemist gives service and the people look upon him as having a little more knowledge, and the majority of them give a discount coupon. The people come to us because they feel they can buy a little cheaper than from, the chemist, and they are quite willing to make that saving without the service, and we feel that we are saving the customer a great deal in that respect. 112. Are you able to tell the Committee whether the number of wholesale distributing houses has to any material extent increased in recent years I—Within the last ten years I am not quite positive, but I think there are at least five that have started in Wellington within recent years. 113. And who handle the class of goods you keep % —Only proprietary lines. 114. How many have gone out of business—say, ten years back I—l1 —I can mention one —namely, Nathan. Although they are still wholesalers, they do not do general business at the present time. Yet they used to do a very big business at one time—that is to say, they were wholesale grocers and everything. Of course, ] am going back a good many years. 115. You hold the view, then, do you not, that under the present system you can economize with a large turnover \—Yes, we have proved it. 11(5. You think your prices are fixed which will enable you to sell economically to the public on a large turnover \ —Absolutely. 117. When you do buy from the wholesaler you buy in large quantities, do you not?— Yes; and some of our buying is bigger than the wholesaler. 118. I think you further object to the P.A.T.A. on the ground that there would be no provision for reducing prices as well as your stocks, or for acquiring low-selling lines, or for meeting your commitments in emergency ?—That is so. As a matter of fact, we hold sales periodically, and if the P.A.T.A. functioned it would practically cut that out altogether. 119. You want to have the right to pass your economies on to the public to a certain extent ? —Yes. May I state that in some cases we get a benefit of from 15 to 20 per cent, through buying big— that is, on wholesale prices. Under the P.A.T.A. we would have to put that into our pocket if we wished to carry on. 120. Mr. Collins.] Your previous answer seems to imply that you could not buy big if you join the P.A.T.A. ? —We could buy from outside —that is, from England—fairly big. 121. But you would not have the turnover ?—That is so. 122. Mr. Kennedy.'] The success of your business is being able to offer low prices without service I—Yes.1 —Yes. 123. And if the P.A.T.A. functions you would not have a lower price ? —We would not have a lower price. 124. The class of article, on the whole,, which you sell is what the ordinary housewife is frequently needing ? -That is so. 125. You are not catering specially for other than the poorer class ? —Yes, those who look at a shilling before they spend it, and naturally they go to the shop where they can get the commodity at the best price. May I give the Committee an example ? 126. Yes. —The other day I was standing alongside an assistant in the shop and a lady came in for a certain article and asked the assistant, and when she was informed that it was a certain price she said that she could get it anywhere at that price and walked out of the shop. That is a customer we lost. I am referring to aspro, and we charge the tariff price for that article. 127. Mr. Gresson.] I understood you to say that the operations of the P.A.T.A. would prevent you from buying big : do you mean buying from the manufacturer at Home ? What Ido not understand is this : if a manufacturer has his goods on the list of the P.A.T.A., then you will not be able to buy direct from him ?—Not unless we adhere to the P.A.T.A. conditions. 128. Then, if you adhere to the P.A.T.A. conditions, would you be able to buy direct from the manufacturer and thus eliminate the wholesaler ? —No, I do not think so. 129. Mr. Myers.] You deal in fancy-goods ? —Yes. 130. How many hundreds of lines do you have that you deal in I—l could not count them. 131. Well, then, fancy-goods ?—Our stocks run into thousands of lines—that is, fancy-goods. 132. I am not referring to patent medicines and that class of article ?— I think you class patent foods and things like that—fancy soap, &c.—as fancy-goods.
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133. We will eliminate them. lam referring to articles which you obtain from the wholesalers or other stores ? —lt is hard to define what are fancy-goods. We do not keep toys. 134. Dolls ?—No. 135. You style yourself as the " Fancy Goods Emporium " ?—That is so. We state on our billheads " All lines." 136. When I speak of fancy-goods 1 mean articles that are not packed ? —Face-powders are classed as fancy-goods. 137. I am speaking of those classes of goods which are called fancy goods which have not the name of the manufacturer thereon ? —There is a very small percentage ; I would not say there is 5 per cent. 138. I have no doubt that the members of the Committee will see that for themselves if they desire to go into your shop ? —Yes, and I would be very pleased to show them through. 139. You deal in hardware, do you not ? —Yes, kitchen hardware. . 140. You have, have you not, a vast number of articles in that category ? —Yes. 141. Then, you also deal in crockery, do you not ?—Yes. 142. You deal in a vast number of items other than that: we can eliminate crockery and ironmongery from the proprietary lines ?—No. 143. Why not ?— Because they are proprietary lines. 144. Are they ? They are. May 1 show you this article, which is a proprietary line ? [Witness here took a cup and saucer from his bag.] 145. I beg to differ from you ? —lt is recognized as a proprietary article. 146. When you say that 70 per cent, of your goods are, or may be, proprietary articles you are including many of your articles of crockery ?—Yes, because it has not been proved to me that they are not proprietary articles. 147. And many articles of hardware ?—Yes, which are proprietary articles too. 148. They are not done up in packets and sold individually I—No.1 —No. 149. I think we will have to remain at cross-purposes on the point, and that is why ] suggest the Committee should have a look at the premises themselves ? —I wish they would. 1 would be only too willing to show them through. 150. You say that you are able to buy in some cases from the manufacturer in England through the broker ? —Through our own English buyer. The manufacturers send their representative around perhaps once or twice a year. 151. Sometimes when you buy in New Zealand through the wholesaler you get cut prices, do you not ? —There are times when they have a line that they want to clear, and they let us have that line at a cheap price because they know we are keen buyers. 152. Sometimes when you want to buy goods through the wholesaler you do not go direct yourselves, but you get the goods through some other person, who may be regarded as your agent ?-—I did not quite understand your question. Mr. Kennedy : If my friend pursues this cross-examination I would like the room to be cleared. Mr. Collins : I would be pleased if all those present, other than counsel, would leave the room for the time being. [Questions 153 to 172 deleted as confidential evidence.] 173. I asked you before with respect to the different number of lines or articles that you stocked in fancy-goods, but you could not tell me because we were at cross-purposes as to what was meant by fancy-goods ? —Yes. 174. Can you tell me with any degree of approximation the total number of lines that you stock i —No. 175. I appreciate your difficulty. Would it amount to thousands ? —Yes. 176. Now, you stated before that the price of certain articles which you named had gone up to the retailer—that is, to say the wholesaler's price is fixed by the manufacturer at which the goods were to be sold to the public ? —I said that the price had gone up to the retailer through the wholesaler. 177. Yes, I know ? —I do not know anything about the manufacturer. 178. After the price was fixed by or on behalf of the manufacturer ? —Yes. 179. And you instanced Kolynos ? —Yes. 180. It is a fact, is it not, taking that article as an illustration, that the price which was fixed by the manufacturer as the retail price was the same price as that which had always been marked on the packet as the retail price—namely, Is. 6d. ? —The retail price has always been Is. 6d. 181. So that, taking that as an illustration, the ordinary price to the retailer was not affected, except in the case where it was cut ?— It was affected to the retailer to the extent of 6d. 182. That is-to say, you had previously purchased from the wholesaler at what price ?- 13s. 183. And you say it was 13s. 6d. ? —Yes. 184. The public were not, however, affected, except that you say you cannot sell at the same price at which you sold before ?—We could if we wished to do it. We are selling the article at Is. 2d. and we intend to sell it at that. 185. When you say you had previously obtained the article wholesale at 135., are you speaking of the price at which you purchased the article, or are you speaking of the price at which retailers generally bought from the wholesaler ?—Any retailer could buy at 135., provided they purchased 13-gross lots. To us that is a small quantity. 186. You previously paid 13s. ?— The same as any other retailer. ■ 187. You said afterwards, when the price was fixed, you had to pay 13s. 6d. ? —We did not have any competition then, and they put us on the black-list.
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188. Take, for instance, Carter's pills : at what price are they ordinarily sold, but not by you ?— About Is. fid. 189. That is the same price which they were ordinarily sold % —I am not sure about that. 190. The ordinary price did not go up to the public ?—That is not really the ordinary price. 191. The market price on the packet has not gone up ? —That is so. 192. And the same applies to Johnson's baby-powder ? —They do not mark the price. 193. The price at which the article was to be sold to the public as fixed by the manufacturer was not increased ?—No. 194. Now, you referred to the cigarette-case [produced] which was bought for Is. 6d. ? —Yes. 195. And which Mr. de Fenq said cost you Bs. 6d. per dozen, but according to you the cost was 12s. —from whom did you buy that article ? —[Name deleted] 196. Was it not [Name deleted] ?—I think it was [Name deleted.] 197. Would you be good enough to produce the invoice ?—lf I can. 198. And I will suggest to you that you will find that the goods were purchased at [Name deleted]? — May I see the cigarette-case in question, because we have two lines—ls. and Is. 6d. [Cigarette-case produced.] That is the Is. line. 199. Mr. de Fenq paid Is. fid. ? —The assistant must have made some mistake about that. 200. At all events, the cost price of that cigarette-case is Bs. 6d. per dozen ?—Yes. 201. The gross profit which you get on various articles varies very considerably ? —Yes. 202. What is the lowest gross profit at which you sell any article ?—I think the lowest is contained in that statement which you have. [ Questions 203 to 223 deleted as confidential evidence.] 224. Now, I suppose you have not available —though I would like to see it if you have it—the figures showing how those items of expenses are made up in Mr. Lambert's letter ?—Just the ordinary expenses in business ? 225. Which include all wages ? —Yes. 226. How many people do you employ ?—Twenty-seven. 227. That is, twenty-seven other than yourself ?—We count ourselves because we draw wages. 228. What salary do you receive ?—[Figures deleted] per week. 229. You do not draw a director's fee ? —No. 230. Will you produce for the Committee particulars of these expenses ? —I can get our man to draw them out. 231. You will undertake to do that. I cannot ask questions on a mere thing like this [pointed out to witness] I—lt is clear enough. 232. You may think so, but I do not ? —lt is just the expense of an ordinary business. Mr. Collins : " Expense " is a very vague term. Mr. Myers: Yes. 233. Mr. Myers (to witness).] Will you produce the invoice for Clements' tonic ? —Yes. 234. I understood you to say that you have no stocks of Palmolive soap now ? —No. 235. When did you run out of Palmolive ?—Three months ago, or round about that date. 236. How long is i since they brought their price-fixation scheme into operation ? —I cannot say. Mr. Butler would be able to tell you. 237. You had a pretty good stock at that time ? —Yes. 238. And bought up all you could I—Yes. 239. And continued cutting ? —Yes. If any one asks for Palmolive we tell them that we have not got it, but that we can sell them New Zealand soap which is made in Dunedin, the weight being 5| oz., for 5d., and we sell a tremendous quantity. I may say that the returns of the makers have gone up remarkably. I could show you, if necessary, what we pay them per year in toilet soaps alone. They do not advertise their bath and toilet soaps. 240. Do you sell bar soaps ? —Yes ; they are all wrapped up, except one make. 241. What is that one ?—lt is just a plain almond-scented soap. It is not a good soap, and we do not sell much of it. 242. It is mostly fancy soaps you sell ? —Yes. 243. You claim the right, from what you say, to cut any article and sell it at your own price 1 — Yes. 244. You claim the right to sell that article as cheaply as you like ?—Within reason, yes. 245. Mr. Kennedy.\ Was not an attempt made to fix the price at which you retail Doulton and Wilkinson's crockery ? —Yes, that is so. 246. Do you sell in your business a large amount of crockery ?—Yes, a fair bit. 247. Is it marked '--Nearly.every article is stamped. As a matter of fact, all Doulton is stamped in a corner similar to the one produced. 248. You sell in your business brushware, enamel ware, and all the requisites of the kitchen ? —Yes. 249. They are all almost invariably stamped with the name of the makers ?—Yes. 250. As clearly visible as these marks here [cup and saucer produced] ? —Yes. 251. The new price of Kolynos will be a charge above what you previously charged ?—Yes. 252. And the price of Johnson's baby-powder and Carter's liver pills will be above what you previously sold at ?—Yes. 253. You also told the Committee that this cigarette-case [produced] is one that you sell at Is., and not at Is. 6d. ? —Yes. 254. Mr. Hayward.] I think you mentioned that you do not sell anything under cost ?—No.
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255. Of course, you know that you are selling a large number of lines on which, accepting your figures as correct, you are absolutely making a loss I—You mean a loss on our overhead ? 256. Yes ? —Those things have a tremendous turnover. You cannot charge that article [pointed out] with 13 per cent, of overhead, in a sense because it does not require any handling. 257. I know that argument in business, and it is rather a doubtful one, especially when it is applied to a considerable number of lines as there are here. There are a number of lines where the rate of profit is considerably under the percentage of overhead expenses. I notice that you put Beecham's pills down on this list [produced] as costing 9s. 3d. ? —Yes. 258. That is an imported article ? —No ; that is an article obtained from Fairbairn and Wright. 259. You know the English wholesale price is 12s. ? —There are two sizes—that is, the 10|d. size and the Is. l|d. size—and they are marked on the box. 260. I am taking the larger size ?—We do not stock it. 261. As I say, the English price is 12s. : that would indicate that you would have no difficulty in importing P.A.T.A. lines ? —Yes, we would have difficulty. Their agents are here, and the manufacturers want to know where the things are going to. If we want to import a thing from Home they want to know where the agents are, and if they were not satisfied they would not send the goods. 262. We all import goods behind the door, so to speak ?—The agent still gets his commission. 263. Not invariably \—That is not fair ; and it would mean that he is working for nothing. 264. I have had one or two casual looks into your premises from the doorway and the interior doors : what proportion do you think you sell of proprietary medicines and toilet preparations \— A very big proportion of that class of goods is behind the counter. If you saw the number of people who come to the ordinary counter and compare them with the other people going round the crockery you would find that a very big percentage go to the ordinary counter. 265. You mentioned that you consider a retailer has a perfect right to dispose of the manufactured goods that he has bought in any way he chooses, without regard at all to the fact of what his action might have on the manufacturer ? —I do not regard a man who sells a line below cost as a sane business man. 266. Do you consider that the manufacturer should be protected in any way : do you think you have a right to do as I said just now ?—No, I do not. 267. Mr. Reardon.\ Are you interested in indents from indent agents ? —They bring their samples round. Some of them will not deal direct; they deal direct through our Home buyer. With drafts they bank on our Home buyer, where otherwise they have to trade with us, and the payment is longer. It is only a matter of about 2| per cent, difference. Our buyer costs us 2| per cent. 268. Mr. Hayward.] That is a common practice in business, and a sound one, too. An importer in New Zealand who may be importing goods by the same ship from twenty manufacturers will allow his Home buyer to pay for these goods and accumulate them on the one bill of lading and ship them out here, and draw on the consignee and pay for the goods in England to the various manufacturers, and draws 2J per cent, for his services. In some cases they work on 1 per cent., but on general lines it is 2| per cent* ?—That is so. 269. Mr. Reardon.] You add the charges on to the landed cost ? —That is part of the cost. 270. Would there be any considerable portion of your turnover that would go through indent agents and not through wholesale houses ?—Yes, a considerable amount on the crockery side, but not on the other. May I point out one case when we had occasion to go to a wholesale house for a potmit. We asked for their price, and they said it was 365. per gross. I told them that they were mad, and they said that that was their price. However, I rang up the manager of another firm, and he said that he would sell me as many as we liked, when their shipment arrived, at 21s. per gross. Ido not know what the first people were making out of it. I know that we were making a good profit out of the line. 271. Mr. Collins.] Supposing the P.A.T.A. were able to control only about 10 per cent, of the lines that you stock, what effect would that have on you ? —lt would have an effect; but that would not put us out of business. Our turnover would go down, and we would lose the good will of our customers, because they look upon us as being better than the chemist. 272. Are you subjected to an award ?—Yes ; the assistants are under the award. 273. You have to pay the wages laid down by the Court of Arbitration ? —Yes. I submit that we treat our assistants absolutely well. For instance, we give them morning and afternoon tea, they get payment for holidays, and they get over award wages, and bonus. As a matter of fact, we keep our staff longer than most people. 274. And they are placed on their honour as regards honesty ? —Absolutely. 275. I suppose your leakage is considerable %—Yes. We had ten convictions in about eight months, and we estimate that we lose about £300 per annum. You will never get over that, and there are a lot that never get as far as the Court; it cannot be done. Robert Abraham Wilkie recalled and re-examined. (No. 21.) 1. Mr. Collins.] You were asked to produce a list showing the table of your cash prices as compared with the credit grocery prices ?—Yes. [Put in.] 2. You have produced it in the form of a circular issued by you from both your Christchurch and Dunedin establishments ? —Only in Dunedin. I may say that our head office is in Christchurch. The text of the circular itself refers to Dunedin particularly. 3. Take the item which represents tea, Ceylon, which you quote in your list at 2s. and the credit grocer 2s. 6d. : you could not possibly compare them as the same teas ? —We have every
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opportunity of doing so. We make purchases from opponent stores in order to test the quality of their teas, and we also ascertain their method of wrapping and the attention given in the shop. In that particular matter we buy direct from Colombo in regular monthly shipments, and that standard is one of the best advertising mediums we have. 4. Mr. Barker, from Auckland, gave evidence before this Committee as to the operations of the National Grocery Union. Is the Christchurch or the Canterbury Grocers' Union affiliated to the New Zealand Federation ? —We have never become connected with them because of some clauses in their policy with which we are not in agreement. They have spoken of price-fixation for several years, and they put forward a clause which particularly demand of their prices—not only the lines that carry with them a bonus coupon—being fixed by the packer of the particular line. May I mention here that that was originally one of the reasons why lines such as Amber Tips and Bell tea were cut in price. The coupon schemes have been dead for some considerable period. 5. And still exist ? —Yes. 0. That is against the policy of the New Zealand Grocers' Federation, is it not ? —That is so. 7. But not against the policy of the Canterbury union ? —No. 8. Do you know the position existing in Dunedin ? —Yes. The association is affiliated with the New Zealand Federation, but their association is actually an executive of six or eight members. I am well acquainted with the matter, because I am a member of the Employers' Association in Dunedin, and the secretary of that body or his assistant acts as secretary for the Grocers' Association. Only the executive meets, and they do the whole of the deliberations for the province, and the difficulty they have experienced there in getting members has been immense. 9. There are a number of members outside the executive ? —That is so. 10. The association does not consist of, say, half a dozen members ?— That is all the association men, and what they represent outside is very small. 11. When Mr. Barker elects to speak on behalf of the New Zealand grocers in reference to the P.A.T.A. policy, for what territory is he entitled to speak ? —Auckland, Wellington, and that portion of Dunedin which constitutes the grocers' section of the New Zealand Federation, and we cover the same area as the award in Canterbury. 12. What is your view of the P.A.T.A. in Christchurch ? —We virtually turned it down. 13. By resolution ? —Yes, and here is the resolution : "It was resolved, ' That this association does not recommend any action being taken at present with regard to the formation of a P.A.T.A.' " 14. Mr. Myers.\ I understood you to say the other day that in comparing your prices, for the purposes of a circular, with the prices of the credit grocery store you picked out the particular credit store that suited you best ?- In this particular instance it is situated directly opposite our own business. 15. Did you pick out the shop that suits you best ?■ —No, sir ; no particular selection. 1.6. T will take apricots: there are various brands of quality or grades?— There are three distinct grades. 17. Each grade has its own price ?—Yes. In that case the grade would be identical. It would be foolish for us to attempt to recommend a different line to our customers. 18. This circular [produced] is purely advertising propaganda ?- —Yes. 19. Why did you not show what brand of apricots you refer to on this circular ? —To conserve space. 20. Who purchased these things in the other Dunedin shop ? —The local manager there. 21. You mention three bars of soap : they are all different brands of soap ?—Yes; that has reference to one brand. 22. Why did you not say so ? —Because it makes the circular more readable by the clients. 23. In regard to the Eastern tea, you are not a professional tea-blender ?■ —No, sir, but I have been in the trade for about ten years. 24. Who does the blending ? —A firm in Colombo. 25. They blend the tea and it is sent out to you in bulk and you pack it up : is that your practice ? —Yes. We have a guarantee from them that they have packed to the standard that has been set. 26. You are not a professional tea-taster ?—No. I may say that I have submitted that tea to some of the leading tea-tasters in the trade, and I have their views on it. 27. It is sufficient for my purpose to know that they are all different qualities of tea ? —Quite so, sir. 28. And many different blends ? —Yes. 29. I suppose it takes an expert to value the tea ? —Yes, quite so, but not an expert to recognize the taste. 30. Now, you show on your circular two sorts of butter (best). I suppose the price of butter varies, even sometimes from week to week ? —Yes ; but in this particular case I can prove conclusively that it is identically the same butter. 31. There are different brands of butter, and different grades?— Yes; but where there are different brands of butter nearly all the grocers have to stock these brands. 32. Even in salt you have different grades ?—There are only two grades that ] compare so far as I am concerned —namely, Australian and English salt. We handle the English fine. 33. I suppose there are different manufacturers of Worcestershire sauce ?-—Yes. 34. And the same applies to essence of lemon—namely, different manufacturers, different qualities, and different sizes of bottles ? —Yes. We built our business on quality, and we would not think for one moment of running our business- it would not be an attraction to our business-—on lines that did not compare in all circumstances with others. We would be very foolish if we did not do so.
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Ralf James Lander Thomson sworn and examined. (No. 31.) 1. Mr. Kennedy.'] You are in business in Wanganui, are you not ?—Yes. 2. You have had experience in both the wholesale trade and the retail trade, which is your present business ? —Yes, for the last twenty-one years. 'j'i'3. In addition to confining yourself to your business you have taken a University course in economics ? —I had a course for a period of two years in connection with economics at the Victoria University. 4. Your present business is known as the Renown Store ? —Yes. 5. How many stores have you got ? —Three. I' 6. What is the system you adopt ? —Cash and service. 7. Any credit .Absolutely none. 8. What is the class of shop that you run ? —Very similar to that adopted by Macduffs, Ltd., Wellington. 9. Have you been able to sell with adequate profit to yourself at prices lower than are customarily charged ? —I have. I find that in Wanganui my prices are at least 10 per cent, on the whole cheaper than similar firms doing business in the lines in which I operate. 10. Have the public given you support ?—They have to a very great extent, and this will be proved on an examination of my turnover. Before proceeding, I would prefer that my evidence be given in private. Mr. Collins : I would ask that all persons present leave the room. [Questions 11 to 27 deleted as confidential evidence.] 28. Mr. Kennedy.] You claim that you should be allowed to give to the public the benefit of better buying as well as the benefit of the economic way in which you conduct your business ? —I have no reason for coming before the Committee if I thought otherwise. I consider that if a line costs me, say, 12s. and I sell the individual article at Is. 4d., the recognized price of which may be Is. 6d., it is my bounden duty to pass that economy —namely, 2d.—on to the public. 29. You contend, then, that so far as the articles you sell are concerned the cost to the general public will be greater than it is now in your store if the P.A.T.A. functions ? —I am certain of it. To prove that, I have prepared a list of lines which I am selling (not the total number, but I think the number will cover proprietary articles) showing my price—that is, the price which I charged when opening my business in Wanganui and the price which others were charging. 30. Will you put that list in as evidence ? —Yes. 31. Do you find that the public has judgment in their purchasing ? —I find that the public, when it comes to a question of price and quality, know almost as much as I do. As a matter of fact, I have such faith in the knowledge of the public that on occasion, through sickness or such other cause, when I have had to replace the assistants working for me by others I have said to them that if they were not sure of the price of an article asked for to ask the person buying, and on several occasions I have noticed that the price given by the purchaser to my temporary assistant was absolutely correct; especially is this so with respect to cut lines. I might state that since the operations of the P.A.T.A. were being investigated, or, rather, it was mooted that an investigation was going to be made by this Committee, I wrote to the newspapers and pointed out the position, and many of the right-thinking and professional men in Wanganui approached me and wished me luck in fighting, to use their own terms, this particular trust. Mr. Myers : Ido not want to unnecessarily stop the witness, but I want to bring under notice that that is not evidence. Mr. Collins: That is not evidence. If necessary, we could obtain this information from the professional men and public who made such remarks. Witness : May I state that in the event of my prices being raised we would not be patronized by the public as we are now with the low prices of commodities. That is the point I wish to make. 32. Mr. Kennedy (to witness).] You wish to produce your balance-sheet, which was taken out by a professional auditor ? —The last one was not; but the previous one was taken out in this way : I submitted my books and figures to this auditor, and he prepared it from that—though not actually signing my balance-sheet. 33. However, you understand books and accounting, and have investigated balance-sheets for others ? —Yes. 34. These balance-sheets which you produce are in respect of the periods here named ?—Yes. [Balance-sheets handed in.] 35. The balance-sheet shows what you regard as a generous profit ?■ —Yes, especially when it is taken into consideration that my business is a comparatively new one. 36. You expect, with the progress of time and when the pioneering-work is done, to get better returns than you have got ? —Yes. 37. You were in the wholesale trade, were you not ? —Yes, I was for nineteen years in the wholesale trade. 38. What section ? —Grocery, and to a certain extent the fancy-goods trade. 39. You were in the firm of Thomson Bros., of Wellington, were you not ?—Yes. I would like to state generally that I have run out my turnover on a line such as Palmolive soap —I am referring now to the period of purchase covered by my balance-sheet. I was buying Palmolive soap then at 6s. 2d. per dozen, buying in 10-gross parcels. I had to sell at 9d., showing me a profit of 32 per cent, on turnover. I maintain that the difference between 18 to 20 per cent, and 32 per cent, was
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[R. J. L. THOMSON.
entirely unnecessary on my part, and for a time I sold at 7|d., but, being refused supplies, I did eventually agree to sell at 9d. The same applies to Johnson's baby-powder; but at present I hold stocks. So soon as my supplies fail I will be compelled, so far as that article is concerned, to also sell to the public at a considerably higher figure than I wish to take from them. 40. Is there anything further that you wish to submit to the Committee ?■ —Yes. I would like to say that since 1919 I have studied the retail and wholesale position very keenly, and acted as adviser in a great number of retail establishments in the Wellington district, also Nelson and Marlborough, and also have seen the balance-sheets, besides valuing the stock of a very large number of those establishments. My investigation proved to me that when old-fashioned ideas existed, where credit obtained and when attention to detail and attention to competition were ignored, the almost invariable result was a slipping-back of the return of the particular business, and also the eventual elimination of that individual from the trading area. I must, however, state that invariably where my advice was sought I instituted for that person a systematic running of such business, a cutting-out of unnecessary services, and a proof to clients that prices were better there than elsewhere, that the business once more flourished. Mr. Collins : We will take it as a fact. 41. Mr. Myers.] Would you mind telling me what you consider is a fair wage to yourself as manager and superintendent and director of your business ? —I certainly would not work and do the work lam doing for any one else, leaving capital out of it. I take it you want me to consider a a man with the same experience as myself ? 42. Yes ? —I consider that I could get a manager —I do not say with the same experience-— for about £400 or £500 per annum. 43. You would not regard that as sufficient remuneration for yourself ?• —I would accept it, knowing the poor rate of wages paid in New Zealand in both the wholesale and retail trades. 44. But do you not consider yourself worth more ?■ —We all do that. 45. Would you mind telling me, when you started in business, whether you had three shops ?• — No. 46. You started in one shop, did you not ? —Yes. 47. How long did you keep that one shop ? —I think it was for approximately six months. 48. When did you open your second shop —was it about six months afterwards ? —Yes. 49. When did you open the third shop ? —At the end of another six months. 50. When you were telling the Committee of the increased turnover for the second half-year, was that not including your second shop instead of one, and in the third half-year from three shops instead of one ? —(No answer.) Mr. Kennedy: lam to blame for that mistake. Witness: I wish to state that my main shop has increased during that period to a very great extent. 51. Mr. Myers.] May I point out to you that if you take three shops together, is that not for the last six months three times the return of the one shop in the first six months ?—I quite see, that; but you must take into consideration the overhead charges with regard to wages, and also rents. 52. lam not taking that into consideration—l am taking the question of turnover ?—I see your point. 53. That is a fact, is it not ?—Yes ; but I think it should be qualified with the statement that I have one main shop and two smaller shops. 54. But you cannot supply the Committee with figures as to the turnover at any one of the three shops for any period of six months, except the first period, when you had only one shop ?— I could do so by getting the information from Wanganui. 55. But you are unable to give the information now ? —Not unless I had some considerable time, and I do not think you wish to keep me here. 56. Certainly not. We have, I think, copies of the balance-sheet for the first two half-years ?■ — That is so. My third period has been delayed as a consequence of this Committee. I did not take stock for the last period, because I knew that I was coming here. 57. It might have been good for your side if you had taken stock. Where are the three shops situated ? —ln the Avenue in Wanganui, Guyton Street, and also at Aramoho. 58. That is a pretty big centre ? —lt is not a big shopping centre. 59. It is a centre in which there are a great many working-people ?—Yes. My returns from that shop are very low in comparison with the others. 60. Is that the third shop ?—-Yes. 61. You say that you invariably sell at a figure to cover expenses ? —Yes. 62. Is that quite correct ? —Except in the case I cited. 63. You heard the different articles mentioned by Mr. Boyd where he sells and has sold on your behalf I—They1—They were only on paper, although I had most of them. 64. You know there were a number of articles that he sold at substantially less than his average overhead cost would be ? —I do not state that they are sold under cost. Ido not agree with him that they are sold under cost. 65. You say the same thing as Mr. Boyd—that although you may have sold at less than cost, plijs the average overhead expense, you still say, in regard to the particular article, you have sold at cost ? —I quite see that it would be good business to do so on certain occasions. 66. Especially, of course, on well-known lines —for instance, articles that have a good reputation on the market ? —I would not take that into consideration. I would take into consideration the demand of the public for such lines. 67. Articles, for instance, which are quick sellers ? —Yes.
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68. Which have been made quick-sellers by advertising and other means ? —And also by Macduffs and other establishments. 69. I suppose you agree with Mr. Boyd that the retailer who buys proprietary articles should be able to sell at any price he thinks fit ? —I do not altogether agree with that. The question, I consider, is that there should be a small percentage placed on an article, below which price no one should be allowed to charge. 70. You have no objection to fix a minimum price so long as it does not come to a high rate of profit ? —I cannot answer that question " Yes "or " No," because my contention is this : that the average retailer's cost of turnover would undoubtedly be different from mine. 71. I understood you to say that it would be quite'right to fix a definite price ? —I do not believe in cutting at cost. 72. Does that not involve fixation of a minimum price, so long as it does not give what in your view would be too high a rate of profit ? lam speaking of the ultimate retail price : who is going to fix that minimum—is it Mr. Thomson I—l1 —I do not think it is possible to fix it, but it is not as low as I would like to have it fixed. 73. Subject to that, you think that the person should have the right to do as he likes I—l do not think so, but I think it is fair trading. 74. Well, let me put the case that you put just now —of 2| per cent, upon the wholesale price. Could a shopkeeper afford to sell at 2J per cent, above the wholesale price ? —I do not think that 2| per cent, would be possible. 75. You think it is quite fair, but you do not think it is possible I—No.1 —No. 76. Then, I may take it that you do not think it is fair to a proprietary article, or those interested in it, that a retailer should make that line what I may term " a decoy line " by selling it at cost or under ?—I do not consider it is good business. lam of opinion that each retailer should regulate all these things carefully. 77. You are doing your best to sell goods to the consumer at what you consider is a fair and reasonable profit to yourself ?—Quite. 78. And you hold the view that you have cut your prices to the lowest possible extent ?—At the present moment. 79. This is what I mean : Supposing you have a number of proprietary lines which are costing you, say, Is., and you are satisfied that they cannot be sold at less than Is. 2d. to enable you to obtain a fair profit, what would you say if those lines were being sold by your next-door neighbour at, say, lOd. merely as an advertisement for the purpose of drawing customers in to the shop and selling other goods at a considerable profit ? —We say that is bad business. 80. He is selling retail. Would you not expect him to go out of business in a short time ? —1 have bought under similar circumstances. 81. What would be your view of that trader %—I consider that it is not possible to sell under cost, for the simple reason that not only the public but the keen buyers would make a particular point of purchasing from that man, and he gets to know and stops it—it stops itself. 82. I am putting it to you that we have had it proved that there are men who do make a point of selling from time to time what I call decoy lines at cost or under ?—I beg to differ. I have had experience extending over a good many years throughout the Wellington district, and I cannot say that my experience has led me to think that your statement is correct. 83. Have you followed Hart's trading, for instance ?—Yes. 84. And yet you are asking me to assume that that is not correct —namely, selling under cost ? —I say you are not aware of their cost. 85. I am putting it to you that they are selling at below cost at which any ordinary trader could buy. Would you justify that trading, and do you not consider that those who are dealing legitimately in the article are entitled to protection ? —Knowing the different prices obtainable, I do agree with McKenzie and Hart in doing that. 86. You agree with what they do ?—Knowing the different prices of the different articles available to the different traders, yes. 87. In the case of Kolynos you know that that article cannot be bought at lis. 6d. per dozen ? —Not bought 1 88. Yes, by anybody ? —-I presume I do. I may be wrong. 89. I take this as an illustration—that it is sold, and consistently sold, by cutting traders at llfd. ?—My experience must contradict your statement. 90. lam asking you to assume this. Would you justify that as proper trading, and do you not think that those who are operating legitimately in the trade are entitled to some form of protection ? —I would not justify a man selling at llfd. 91. Do you not think that those persons who are trading legitimately in the article would be justified in obtaining some form of protection ? —No, sir. 92. You do not think they would be entitled to some protection ? —No. 93. Why not ? —Because I think that the manufacturer or wholesaler would use that discretion against the interests of the public. 94. Because you think the price-fixation would not be honestly used ? —That is my belief. 95. Mr. Reardon.] I see here an item of —• as goodwill in the business ? —That was the price I had to pay for goodwill for one of my leases, and I included it because I paid it during the last year after I started trading. I pointed this out to the accountant of the bank, and he considered that it was only right that that amount should be included. I may say that there is still that goodwill in my lease, although Ido not necessarily work on it. It is simply a statement, and that is all. 96. Mr. Collins.] You maintain that this business is akin to that of Macduffs ? —Yes. 97. So that you claim that 70 per cent, of your business is in proprietary lines ?—Yes, and probably greater.
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[MR. GRESSON.
ADDRESSES OF COUNSEL. Mr. Gresson: If the Board pleases, —Having had the opportunity of addressing you earlier, Ido not think it will be necessary for me to detain you for as long a period as I did before, because I do not propose to go over the particulars which I indicated to you in my opening. It seems to me that the way I can be of most assistance to this Board of inquiry is by drawing attention to the various classes of evidence that have been submitted, to suggest to you the weight that should be attached to the particular classes of evidence, and to avoid as far as possible economic subjects on which I admit that lam very ignorant. So far as the evidence is concerned, I think I can give the Board some assistance in regard to the question as to what degree should be attached to the various classes. May I say that on an examination of the evidence it will be shown at once that the inquiry is really resolving itself into the investigation of two conflicting claims. On the one side you have got certain manufacturers, wholesalers, and retailers, all of whom claim that some such institution as the P.A.T.A. is necessary for their welfare. In dealing with this question I submit that you are four judges who are trying a case, and I propose to assist you to come to a conclusion in respect to the matter. On the one side you have these manufacturers, retailers, and wholesalers, who claim, according to my friend, and with some show of right on his side, that price-cutting, if it exists, is causing them serious diminution in profit. On the other side you have virtually the cash grocers and stores, such as Macduffs, who appeal to the public for two reasons —first, because they sell good articles, and, second, because they sell cheaper than anybody else. Now, gentlemen, you have to decide which of these foregoing claims are to be supported. Let me first of all draw the attention of the Committee to the claim of the P.A.T.A. and the manufacturers dealing with the various classes. 1 would ask you to consider what evidence is there to the effect that the manufacturers have been deleteriously affected by virtue of the operation of price-cutting. I know that my learned friend will correct me if I say anything that is not correct, because I was away on one day and I have not yet received a copy of the evidence that was taken on that particular day, but, so far as I can see in summing up the evidence, the manufacturers were represented by Messrs. Kempthorne and Prosser with respect to Kolynos, and Sharland and Co. with respect to Johnson's baby-powder and other lines. Mr. Myers: Mr. Page gave evidence on behalf of Johnson's baby-powder. Mr. Gresson : lam obliged to my friend for correcting me. Well, Mr. Page came here on behalf of the company and gave evidence with respect to Johnson's baby-powder, and the Palmolive representative dealt with Palmolive soap ; and I want to say, first, that I have this comment to make as regards the various articles which the manufacturers claim have been injuriously affected. May I say that not one of those articles has gone off the market; and the point I think it is more important to stress is that all those articles are articles which lend themselves, and extraordinarily so, to competition and substitution—and what can be easier than to substitute tooth-paste, baby-powder, or soap ? I submit that in the long-run the article which will sell best is the article which is the cheapest. Now, may I say that not only are they all capable of lending themselves to substitution, but they all serve the people, and therefore any one of them can really be equally necessary. I know that very probably my friend will say that baby-powder is necessary, and the natural thing is that substitutes can be made for them ; and I should think, moreover, that they are luxuries. Certainly, on that basis, if a person chooses to use Kolynos because he likes it, he has to pay Is. 6d. or whatever price it is sold at; but, I submit, just as good an effect is produced by using salt and water, and on that basis Kolynos is not necessary. Similarly, one person may use Palmolive soap, whereas another person finds that washing-soap is as good. The point I wish to draw attention to is that none of these articles are necessary, and all of them come under the heading of luxuries. Again, in dealing with the complaint of the manufacturer my friend will undoubtedly refer to a matter which he elicited in cross-examination from one of the witnesses. He will say, " How are you going to protect the individual manufacturer ? Even if he goes in legally for profit he cannot enforce it. It is true he can enforce it at law, but it can be circumvented, and it is impossible for the protection of the product to rely entirely on a fixation scheme." That is my friend's point. To that I have two answers. The first is—and I say it openly —that it would be a good thing if the law in New Zealand were altered to prevent it being legal for a manufacturer to fix his wholesale and retail prices, and I say it is a retrogade step in the law when the law allows that interference ; and, second, it would be a good thing for New Zealand if the law were altered; and I suggest that it is no argument whatever to say that because the manufacturer has that power, and because it can be circumvented, that the P.A.T.A. should function. I suggest, to the contrary, that it would be much better if this Board of inquiry would recommend that the law be altered by the statute repeal of the law which operates in this country, and which allows the manufacturer to fix the retail and wholesale prices ; and, gentlemen, I am fortified in that view—after all, it is more a matter of economics than of law—by the opinions of Professor Murphy himself and by the report of the Cost of Living Commission. This is not my own view that I am putting to you, but it is the view of men who have dealt with the matter and which coincides with my own. So much for the claim of the manufacturer. There is one remark I want to make, and it is this : may it not be fairly contended that if price-cutting has that serious effect which my friend says it has it is exaggerated. But, if price-cutting has that effect in these particular lines, may it not be caused by the fact that the particular lines affected, such as Kolynos, baby-powder, and soap are luxuries, and not essentials 1 What leads one to that conclusion is this : that when you come to deal with an article like Edmonds' baking-powder, which is absolutely an essential article, one finds, contrary to what one would have expected, that price-cutting has not affected that commodity. It is true that it has cost the company a good deal more in advertising, but price-cutting has not driven it off the market. The real distinction between the two is that the price may and does affect a non-essential luxury, and another article may be substituted therefor, but it does not have any
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serious effect upon an essential article such as baking-powder. So much for the manufacturers. Now I come to the wholesalers, and again I invite correction if lam wrong. I think that the wholesaler who has given the information was the representative of Sharland's, and also Mr. Press. Before dealing with the evidence of the wholesalers, may I advance to this Committee an argument which only struck me whilst I was listening to the evidence to-day, and which seemed to me to throw some light upon the problem you have to solve, and it is this : I am amazed to hear that apparently our economic system does not depend upon the manufacturer, the wholesaler, and the retailer. There is no recognized channel of trade between those three people. Clearly, according to the evidence of Mr. Boyd, you can go as a retailer to the manufacturer and you can buy from him direct in many cases ; and, moreover, according to Mr. Boyd's evidence, you can go to one wholesaler and buy at one price, and to another wholesaler and buy at another price. Well, gentlemen, if that is the position, is it not extraordinary. If cutting is in existence at all, it is no good for Mr. de Fenq to come before this Committee and say, " This is the wholesale price for such an article, and it is being sold in that shop for so-much, and that is price-cutting." I think it was cogent evidence that price-cutting was in existence, and that it applies in the first instance among the wholesalers themselves. I understand that a man can buy from one man 5 per cent, cheaper than from another man, and if this is the caseit has only struck me to-day —it seems to me that the matter is worthy of the gravest consideration of this Committee, because I do not see how you are going to ascertain how price-cutting is going on unless you can find in each instance what was the invoice price at which that article was purchased from the wholesaler. Ido suggest, however, that the evidence shows, so far as price-cutting is concerned, it is nothing like as strong as was indicated by Mr. de Fenq when giving his evidence. I think the evidence shows that the case has been met where it was asserted that price-cutting is going on to a serious extent. When Mr. de Fenq said that he went into Boyd's shop and other shops and bought the various articles submitted in evidence I must confess that I was inpressed, and when he went through the list of articles and gave the price at which he bought them it seemed in some cases as if they were making a huge profit. When Mr. Sutherland, however, comes and gives his explanation we find that he admits in regard to certain lines that it was a mistake and that he had been charging too much, but in regard to the other lines he says that the price he was paying was more than Mr. de Fenq was aware of, and therefore the charge as regards Sutherland is amply met. If lam pushed to the position I am prepared to take up this position—here again I am fortified by the opinion of Professor Murphy : that economically the wholesaler is an excrescence on our system ; we do not need him, and I suggest that this Committee should not do anything to try and bolster up the wholesaler. On the contrary, it is surely in the public interest to encourage people to do as Mr. Boyd and others do —namely, buy direct from the manufacturer and pass on in consequence the reduced price to the public and by so doing ultimately reduce the cost of living. Mr. Collins : I do not think that Professor Murphy was so direct as that. Mr. Gresson : Perhaps not, and no doubt lam trimming it to some extent. Having dealt with the wholesaler, I wish now to refer to the retailer. I again confess that the evidence in this respect has to me been the surprise of the whole inquiry. I fully anticipated when my learned friend opened his case as he did, and dealt with the evils of price-cutting, that he would be flooding this inquiry with chemists who would say how price-cutting was affecting their business, and this also applies to the small grocers ; but when the evidence comes to be examined I find that, as regards the chemists, only one of them has been examined, and he was a chemist from a suburb of Wellington—namely, Hataitai. As I say, he was the sole retail chemist who was called ; and, as I am now given to understand, another one was called on the day that I was not present. Mr. Myers : I do not wish to interrupt my friend, but the Committee will remember that we were expressly asked not to multiply the witnesses. Mr. Gresson: I quite understand that. Mr. Myers : I could have called a good many more, but we were asked not to do so. Mr. Gresson : I suggest that my friend is quite justified in his comment. Though it was necessary to produce only two chemists, that should not apply to two grocers, particularly when it is recognized that the grocers are the ones who are more affected by the inquiry. I only make the comment in passing. Mr. Myers : I might retort to the effect that you did not call Hart, McKenzie, and others. Mr. Collins : I think the importance of the evidence called is more a matter of concern than the number called. Mr. Gresson : In respect to that, it is suggested that on the evidence of those manufacturers, wholesalers, and retailers the Committee is asked to sanction the introduction of a system which, as I stated in my opening address, has immense potentialities for evil, and to support that my friend leads evidence which shows that certain non-essential articles have been deleteriously cut. I contend that the scheme as indicated by the P.A.T.A. is one which it is abundantly clear is for the protection of the manufacturer and wholesaler alike, and that the retailer and the general public are not seriously affected. Mr. Montgomery : Do you not mean the consumer, and not the retailer ? Mr. Gresson: The system mainly. Mr. Montgomery : You said " the retailer.". Mr. Gresson : I thank you for the correction. I indicated to you in my opening what appeared to be the view as to the rights of the manufacturer in the goodwill of the article which he manufactured, and I also indicated to you that some of the economists take a different view of the matter ; but it is generally recognized that the manufacturer spends his money knowing what the state of the law is, and knows that when the particular article gets into the hands of the purchaser the existing state of the law allows the man to throw the article into the sea if he so desires. It will
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[mr. gresson.
be seen thai Professor Murphy takes a similar view—that is to say, when he was under crossexamination he advanced almost the same view. My learned friend said to Professor Murphy, " Is it not unfair to the manufacturer to spend all this money and then for the article to be cut," and the reply of Professor Murphy was to the effect that he does so with his eyes open and he knows what the law is; and I suggest to you with a great deal more confidence now that I know the view expressed by Professor Murphy that there is a great deal to be said for that view. Now, the scheme itself of the P.A.T.A. bears on its face evidence that it has been hastily considered and suddenly changed. You will note, gentlemen, that when Mr. de Fenq was giving his evidence I put to him a letter which he wrote to the association of grocers in Christchurch, in which he stated that there was no reason why the scheme should not be extended to include proprietary foodstuffs. Now, of course, finding—quite rightly, and I make no suggestion against it—that that would offend against the Commercial Trusts Act, he forsakes the idea of dealing with foodstuffs at all. It will be noted by a perusal of the letter with respect to certain agreements arrived at that the agreement with respect to prices to be charged contemplated only one price to the credit man and the cash man, and again it was found that that would not work, and consequently they put in a clause dealing with 2J per cent. ; and I submit that that is a mere guess, and nothing else, as regards the margin between the cash man and the credit man. On the day that I was absent from the sitting of this Committee it was either stated on behalf of the P.A.T.A. or stated by the representative that they would not have any objection to a representative of the Board of Trade being on the P.A.T.A. I take it my friend will correct me if I am wrong. Mr. Myers : That is so. Mr. Gresson: Well, gentlemen, what a change of front! Now they say, " Let us operate under any circumstances, if necessary ; but we virtually admit that we have no power of protecting the interests of the consumer : we have got no power to find out whether the manufacturing cost is the proper cost or not, but we are so intent to operate that we will have a representative of the Board of Trade on the P.A.T.A., and under the Board of Trade it will be all right." I now wish to refer to the necessity of the P.A.T.A. First of all, and an obvious comment to make, is that not a single economist is called to support it. I quite realize what my friend's answer will be : the Australian investigation is against it; the Canadian investigation is against it; and the English investigation, after examining eight witnesses in a country of forty or fifty millions, is half-hearted in support of it. But, gentlemen, the point that 1 want to make here is this : that, so far as all these places are concerned, there are different conditions operating in Canada, in Australia, and in New Zealand, and we are dealing with conditions operating in New Zealand, and the Cost of Living Commission in 1912 examined the conditions in New Zealand. I quite agree with the view that the opinions of business men are to be respected, and, of course, evidence given by them has to be given the greatest weight, because the principles of political economics are built up on the experience of business men, and I do not wish to hear anything derogatory said with respect to a Commission which contained tried and useful representatives whose experience extends long past New Zealand shores, and when one comes to go into the matter, as Professor Murphy said, it will be found that the findings were viewed with great favour in the greatest journal of the day. I suggest, gentlemen, that when one is examining the evidence against it it will be found that all the Commissions, with the exception of the English Commission, are against it. I can fairly say as regards the English position that it is entirely different in many respects when comparing the conditions in New Zealand, because in England there is a huge population and therefore different conditions operate, and in many respects —I say this with every love of the Old Country— New Zealand is ahead of England in respect to these matters. It is not necessary to say that because England has not done it we are not to do it. It is not to be said that because it has worked well Mr. Myers : Professor Murphy said that we are not leading the world with respect to the fixation of wages for labour. Mr. Gresson : That is very hard on him. Mr. Myers: Professor Murphy did not agree with the methods adopted in New Zealand. Mr. Gresson: So far as one can fairly see as regards the evidence of political economists, it is against the proposed operations of the P.A.T.A. ; but when one comes to what one may call the practical effect on business one fact stands out very clearly, rightly or wrongly —my friend will say wrongly, but I am inclined to the opinion that the Commission should find rightly—and that is that the cash grocers and the cash fancy-goods men do entertain a very real fear that the operations of the P.A.T.A. will deleteriously affect their businesses. Probably it is not necessary for me to go to the length that my friend said when cross-examining the witnesses—namely, to put them out of business. Now that this inquiry has made it clear that the operations cannot extend to foodstuffs, that should, or may, affect the question of them being put out of business ; but the question is whether it will seriously affect the various business concerns in the way it would by the operation of the P.A.T.A. I want to say, in passing, that you have the figures in front of you, and you will realize on those figures that even a smaller percentage of their turnover might make a very big difference to their business, and therefore I submit with some confidence that it is a very real and justifiable fear lest the operations of the P.A.T.A. may not necessarily put them out of business, but will render their business position a great deal more difficult. There is a further point that my client feels very strongly, and it is this : we submit th'at, if the P.A.T.A. functions, any retailer who does not join it will, to a certain extent, be regarded by members of the public as an outcast. This may have many ramifications. Supposing that Mr. Sutherland refuses—as he will do —to join the P.A.T.A., some of the other P.A.T.A. grocers could easily approach some of the wholesalers or manufacturers, who may be members of the P.A.T.A., and who supply Sutherland, and may say to them, " We cannot combine with you
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not to supply Sutherland, but the law allows you a perfect right to sell to whom you choose. He is not a member of the P.A.T.A., and, moreover, he is a cutter." If you could prove such a conspiracy as that—probably my friend will agree with me when I say this—then we would be within the law to deal with the matter; but the difficulty is to prove that such a position as that took place. As I say, the manufacturer or the wholesaler actually has got the right under the law to say, " I have no right to supply you." You will see, therefore, that there is a very real reason why, under these circumstances, my client refuses to join the P.A.T.A., and if he remains an outcast pressure would be brought to bear to stop him getting supplies, and that is the real fear that my client has. I suggest that the matter was summed up by Professor Murphy when he said that the P.A.T.A. is an instrument of evil, and that, even if price-cutting exists, the remedy is worse than the disease. Now, gentlemen, the objection to the P.A.T.A. from the grocers' point of view comes almost entirely from the credit grocers, who are unable to compete with the cash grocers. Ido not propose at present to go into details with respect to the figures which Mr. Sutherland submitted, but it must at least be clear to the members of the Committee that if he can, as he apparently successfully can, carry on business for three or four years, increasing his capital every year and increasing his output enormously—it must be apparent that his business is in a sound financial position ; and, moreover, he is doing a service to the public by reducing the cost of living by ss. or 6s. per week I think you are asked to approve of an association which may deleteriously affect that position. I know that my friend will comment — in fact, I think the comment came from Mr. Hayward —that his trading margins might be bigger. That may well be, gentlemen ; but from my point of view it is immaterial, for this reason : on the figures that are put forward and from the balance-sheets you will see that if a paralysing slump came about, and he had to sell all the goods in his shop at cost, his financial position is sound so far as his capital is concerned, if the worst came to the worst. I suggest that you might examine his balancesheet, and also the balance-sheets of Wilkie and others, and you will see that the public do get the benefit of all discounts and of reductions. My friend made a comment on one of these balance-sheets, where he pointed out that after having allowed management expenses the resultant net profit was, as he said, too little on the turnover for the shop. On this point lam in the hands of the Committee, but I do suggest to you that a fair point of view is this : that if you look at the resultant net profit which my client is doing, after deducting his actual cost of management, he is paying 10 per cent, on the capital involved. It cannot be said that he is carrying on his business on too small a margin if he is paying a dividend of 8 or 10 per cent, on the capital, and, moreover, handing the benefit on to the public. Mr. Collins : It all depends upon the man in the business. In this case it might be quite adequate, but in other cases even though it was 20 per cent, it would be totally inadequate. Mr. Gresson : That is a matter which the Committee will investigate for itself ; but I do suggest, on the example that I have put before you, that the margin is adequate and sufficient. Well, gentlemen, as regards the rest of the evidence Ido not see how I can really help you. The matter , falls into two definite groups : it falls into groups of manufacturers on the one side and the cash men on the other side. But Ido repeat that before you can feel that you are justified in putting the signet of approval on to a new organization such as the P.A.T.A., which is unpopular in the field of New Zealand commerce, you must be satisfied that price-cutting exists to a serious degree, and loss is thereby caused to the public. I submit that there has not been a bit of evidence of that, and therefore there is nothing to justify the introduction of an organization which may so seriously affect the rights of those cash grocers. Mr. Reardon : Supposing we do not approve of the P.A.T.A., how far do you suggest that the law of the country should go to prevent it 1 Mr. Gresson : I suggest that the law of the country should follow the report of the Cost of Living Commission, and prevent price-fixing at all; it should be declared illegal. I submit the view that if the law were altered to provide that the manufacturer shall not have a legal right to fix the price it would be a step in the right direction. Mr. Reardon : You mean, to prevent a man from saying that he will not sell to whom he likes ? Mr. Gresson : lam suggesting that he should not be allowed to fix the retail price. No country would stand for a law to prevent a manufacturer selling to whom he pleases, but a country may interfere when it comes to the right of the manufacturer to fix the retail price that must come out of the pockets of the public. If lam asked in what way I agree, I say it is in respect to the Cost of Living Commission, wherein they recommend that the Commercial Trusts Act should be altered to declare all price-fixing contracts illegal. In conclusion, I must thank you for the patient hearing you have extended to me throughout the proceedings. Mr. Collins : As you will be leaving Wellington before the conclusion of the sittings of the Committee, I would like to take this opportunity of saying that we wish to express our appreciation for the way you have conducted your case, and for the very helpful way in which you have assisted the Committee. I feel sorry that you have to withdraw before the close of the proceedings, but, as I said before, we feel that we have been greatly assisted by you. Mr. Gresson: I must thank you, and say that you have relieved my mind.
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[MR. walker.
Ninth Day : Wellington, Friday, 4th March, 1927. Addresses of Counsel continued. Mr. Walker : If it pleases the Board, I propose to address you very briefly to-day on behalf of the section of the people I represent —namely, a section of the working-people who may be taken to be a sample of the working-class of New Zealand generally. Before I proceed further I would like to mention that it must be borne in mind —I think it was borne in mind by you throughout the deliberations— that these men, or rather these working families, are folks who will never, on this side of the grave at all events, know what it is to have much of a margin to live upon, and therefore I submit that their welfare is the prior consideration in this matter —that is to say, their welfare is the most important part of the trust which is imposed on this Committee from the standpoint of the public. The matter divides itself into three questions : First, Is this going to affect them ? Is it going to raise the cost of living to them ? Are the grounds for allowing it to come into force adequate ? The question as to how it is going to affect us is answered very, very quickly. No one connected with the P.A.T.A. has ever pretended that this is going to mean anything but an increase in price for the working-class of commodities in everyday use amongst them. Now, with reference to any real ground for this association to come into operation, I would ask, first, what have the P.A.T.A. grocers told us in their evidence ? Hook said—l am going to touch upon the evidence very briefly, gentlemen—that he tried to persuade the public that he was a cheap grocer, but a real cheap grocer opened up business only about sixty yards from him, and he blew out. I come now to the evidence of Mr. Mcllwraith, who gave his evidence in a straightforward manner. He said, "I am not afraid of them. It is true lam not making as much as I would like to make." So much for the P.A.T.A. grocers. I submit that there is nothing in the evidence of the P.A.T.A. grocers to justify the intended increase in everyday commodities to the people. We come now to the retail chemists, and I submit that their evidence, in the main, was absolutely colourless. It was admitted in evidence that the price charged for dispensing medicine in New Zealand is higher than is the case in Australia and in other parts of the world, and they want now to be able to charge top prices for certain proprietary articles ; but it has not been suggested or hinted that if they get those higher prices they are going to reduce the dispensing prices. We come now to the wholesale chemists. No wholesale chemist has come here and been able to show that they are not paying dividends. It would not matter very much whether they are paying dividends or not; it is only a question of what profits they make. I stress this point because one manufacturing chemist is going to submit his balance-sheet. I respectfully submit that you will not get much useful information out of one chemist, and therefore I suggest that the Committee should be supplied with three balance-sheets, and by that means you will have a better idea of what they are paying out in dividends and what they are making. It is a matter of common knowledge that large firms such as I am referring to now make a practice of storing up unusual reserves, and they do that by depreciating their buildings and plant, and you cannot get at them. You can only get at them by having their assets valued. I submit that what they have paid away in dividends is beside the point. No wholesale grocer has come forward to give evidence. Certainly Mr. Press came here ; but he came here as the representative of Amber Tips tea, and be confined his evidence to that. As I say, none of them have come along and produced their balance-sheets. With regard to the manufacturer or packer, I submit that the most that can be made of the evidence on the side of the P.A.T.A. is " not proven." There is one possible exception, and that is with respect to Johnson's baby-powder. Now, with regard to Edmonds' baking-powder, you will remember that before Cropp came on to the scene it was like a battle-ground. It could not be denied that it was going steadily ahead ; but it was said, " Look at the money they have spent on advertising to counteract the effect of price-cutting." As we all know, Mr. Cropp gave his evidence in a collected form, and he said that the cost of advertising was £2,500 per annum. I submit that that amount is exceedingly small for a business of that size, which operates right throughout New Zealand. Now, it had been very strongly asserted —proved, in fact— that the great price-cutting centre was Wellington, and that that the people were getting very decent profits out of baking-powder. I put the question to Mr. Cropp, "Do you spend your cost of advertising evenly over New Zealand, or do you focus it in one spot ? " He replied, " For the last five years we have spread it evenly." If they were advertising to counteract the effect of price-cutting, we would have expected him to say that half of their advertising should be concentrated on Wellington, because that is where price-cutting so far as his article was concerned was more prevalent. However, not one of these representatives came along with a balance-sheet in their hands. The question was asked by Mr. Montgomery as to whether a book with respect to the costs of secret remedies on proprietary articles was read. I may say that in the Auckland Library I perused a book some years ago which was published by the British Medical Association expressly on that point. I suggest to those who have not seen it that if they will concentrate on it they will obtain a good deal of useful information out of that book as to what manufacturers' costs are, and how they are entitled to any special consideration by the public. We turn now to the other side of the evidence, and we find that there were different classes of grocers who gave evidence for our side. Those men, I submit, were manifestly brainy and intelligent members of the grocery trade. If you were to take them and compare them with the average run of grocers there would be no difficulty in selecting those men as having brains. These men, with one or two odd exceptions, came with their balance-sheets, and those balance-sheets proved that they were making good progress in their new regime ; and, moreover, they were satisfied with it. Although they were not making enough, that is their concern ; and I respectfully submit that that is not a matter for our consideration, but it is a matter of concern as to whether or not they are meeting their financial obligations with the merchants and whether their financial positions are sound. No merchant has been here to complain of his obligations not being met; but, and as regards their balance-sheets, although I have not seen them, one could see that their liquid assets are substantial. Now, the merchant has to sell to these men on the best of terms. These men do not
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take any tied-house items. They are big buyers ; but, no matter how keen a buyer or even a big buyer he may be, he cannot obtain goods from a merchant unless he is satisfied that the money is safe. These men came into existence for the purpose of reducing their prices everywhere and they are well satisfied with their position, and the public is interested in seeing that these men are guarded against any concerted action to put them out of existence. Much was made with respect to substitution, but I submit that that is a matter than can take care of itself. One witness who gave evidence on behalf of the P.A.T.A. itself was compelled to admit that, as a salesman and knowing the state of the trade, customers would regularly come'out of the shop with a different article than the one they went in for. Certainly a great deal has been made of that, but I submit that it is a matter that has a sinister meaning. However, no wholesaler came before the Committee to support our side, and I suggest that one could infer from that that the wholesaler knows perfectly well that it is going to suit his book to join with the P.A.T.A. If the wholesaler thought that the P.A.T.A. was going to cramp his style in the way of net profits I think he would have been here to say so. He kept well out of the way in spite of the fact that he handles a whole mass of proprietary lines. This brings me to the question of what proprietary lines are. If you turn to the dictionary you will find that you get no assistance from Webster's Dictionary, and it will be found that in other dictionaries it is not defined. If we turn to the evidence of Mr. de Fenq it will be found that he said that they were only going to include proprietary articles, excluding foodstuffs. From the standpoint of the public, if by price-reduction these new classes of traders can sell, say, £100 of goods in a day where the old style of grocer sold only, say, £25, why should they not be permitted to sell cheaper ? After all, the connection between the manufacturer, which is the goodwill, can be interfered with or smashed in many ways wholly beyond the control of the manufacturer, and it comes to this : admitting for the sake of argument that one or two manufacturers proved conclusively that they do suffer and were likely to suffer very severely from the effects of price-reduction, I submit that this Committee would not on that account be justified in depriving the people of the benefit —of the fullest benefits —they receive at the present time by purchasing from these cheap grocers. That, gentlemen, is the viewpoint of the working-man, and I submit that before the Board can recommend that this P.A.T.A. should be allowed to function the fullest weight should be given to the needs of the people, because, after all, it is their welfare which is particularly in your hands. Mr. Kennedy : If the Committee pleases, —What I venture to suggest to the Committee as one of the most important problems in New Zealand is to reduce the high cost of living. I venture to suggest also that it is entirely against public welfare and public interest that the cost of living should be raised, and it is equally to the public advantage that the cost of living should be reduced. I say also to the Committee that no man or no trader should be prevented by the concerted, action of fellow-traders from making his contribution to the lowering of the cost of living ; and it is my submission that the action of the P.A.T.A. will mean, if this lowering of the cost of living is arrested, that instead of the cost of living remaining stationary it will, on the contrary, in the course of time, for the P.A.T.A. purposes, mean a rise and not a lowering of the cost of living. Now, the only way in which lower cost of living can be effected is that the buyer gets the commodities which he requires for a less sum of money ; and if y"ou are to have a considerable lowering of the cost of living you must have these reduced prices operating for the necessities of life—that is, those what may be termed the conventional necessities—namely, those things which the ordinary men and women buy, and those things which you find figuring on their family budgets — not only food, but such things as household requisites, crockery, enamelware, soap, and toilet requisites, as well as all the requirements of the nursery. Now it is submitted that the claim of the P.A.T.A. is in fact that practically all those things I have enumerated, although I admit they made an exception in foodstuffs Mr. Myers : And footwear. Mr. Kennedy : My friend makes that concession now, but it is not a concession. What they want to do is to permanently fix the prices and prevent the operation of the ordinary competition in their prices. The complaint really is, if the Committee pleases, not of high prices, but of low prices. The audacious supposition is that the public are being charged too little. Apparently, a man is to be regarded as somewhat of an outcast trader if he is not prepared to take as much out of the public purse as his competing trader. My submission is that the P.A.T.A. is designedly and avowedly out to raise prices. They talk about stabilizing prices, but the stabilized price is a price which is higher than is customarily paid, although it cannot be higher than the normal figure actually appearing upon the container of the article. To do that, competition in prices of these particular articles is to be eliminated, and rival traders and those associated with them are to use the weapon of boycott so that they may force upon competitive traders a higher price. I venture to quote and adopt as my own the remarks of Professor Murphy as contained on page 6 of his notes, which says, — Statistical proof of demonstrative force cannot, from the nature of the case, be adduced, because insufficient investigation has been made, but there is no doubt that the general and correct impression among economists who have carefully studied the matter is that price agreements among distributors wring more from the consumer than all the trusts that ever existed. Trusts sometimes bring about a fall in price by passing on some of the economies resultant upon cheapened operation. There are no resultant economies from price-maintenance agreements —they are always followed by a rise of prices ; and a fa]l of prices may be brought about not by the formation of a price-main-tenance agreement, but by its collapse. I know of no economist of note in the modern world who has anything to say in favour of price-maintenance agreements from the point of view of public utility and welfare. If the Committee would permit me, I desire to refer to and adopt as my own the remarks appearing on page lxvi of the Cost of Living Report, and these are the remarks I submit to the Commission : — This restraint of trade in the Dominion has only become acute during recent years. In the United States of America and other countries it has proved to be the greatest curse of modern civilization, enabling unscrupulous
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individuals to amass immense fortunes at the expense of the people. Under free and competitive trade the best and most economical methods of distribution from the producer to the consumer will succeed, and the whole community will benefit. Then the Commission goes on to say,— An isolated, highly protected, and sparsely populated country like New Zealand, so far distant from the worlds' markets, especially lends itself to the manipulations of trusts and combines. It is a comparatively easy matter for a few wealthy individuals in any given industry or business to secure control of the output, and by slightly raising prices to levy secret taxation on the whole community. Then later on the Commission says, — But what appears to your Commissioners to be particularly reprehensible is the practice common in New Zealand of combinations in different branches of trade not merely fixing selling-prices, but fixing penalties for breaches of the agreement to sell as arranged, or bringing pressure to bear on suppliers to refuse supplies to independent traders who do not conform to their selling conditions. What the Commission declare to be highly reprehensible is submitted as what the P.A.T.A. designedly to-day proposes to do. My submission, then, is that it is in the public interest that the distributive costs should be reduced to the lowest figure —that the lowest sum should be added on to the actual cost of the manufactured article : that if retailers can buy direct from the manufacturers at less than they can buy from the wholesalers it is to the public advantage that that mode of distribution should obtain, and if they can import from abroad at a cheaper figure than they can buy from the wholesaler, then it is to the public interest that they should so import. If, also, large economies can be effected by increased turnover, then it is to the public interest and advantage that turnovers should be increased if some of the benefit of the large turnover can be passed on to the consumer. I submit, further, that the P.A.T.A. is an instrument that is designed to be the salvation of the inefficient as against the efficient, and it will result in the continuance in business of the most costly distributor as against the less costly and efficient distributor. It will put a premium on increase of service as against cheapness of price—that is, the man who wants cheapness of price will not be able to get it. There will be added services, and I submit, if the success of the cash grocer is proved, that what the public want is not added additional services, but cheap prices. I have always thought that competition was the life of trade, and that competition is a struggle between various traders —that is to say, they compete for the public goodwill; and the method of their competition takes two forms —namely, they offer the public either cheaper prices or they may offer better quality. No man is in trade primarily for public interest; he is in trade for himself first. I mention that because one would think that some of these persons who have cried out for the P.A.T.A. were in business not for themselves but that they are there to serve the public interest. They are, however, in business like the rest of us —namely, for themselves. That leads me to this suggestion : that no manufacturer has any special right to come before the Committee and claim that he should be bolstered up and sheltered from the ordinary competitive forces ruling in trade. He entered competition with his eyes open, and he is taking certain risks. If he has been successful, there is no special reason why the place should always be kept warm for him. If by advertising or otherwise he has secured the good will of the public, he has no right to demand that the public shall for ever be married to his particular article ; it must be subject to substitution, and if the public are better served elsewhere, then the public should be so served. They have no right to demand that competition shall cease. It seems to me that differences of price under modern conditions are inevitable. Some men will deal direct with the manufacturer, some will have a larger turnover, and some may more efficiently conduct their business, so that differences of price is an inevitable normal condition of modern trade. It follows that what profit one man may regard as satisfactory would not be sufficient for another. I think these factors must be borne in mind when one approached even the question of price-cutting. I venture to suggest that the real meaning of price-cutting is this : that one man is selling lower than another because, first, having regard to the conditions of his business, and, second, on account of his unsound purchases, he cannot sell as cheeply as his neighbour, and he is inclined to suggest that his neighbour is a pricecutter. It is submitted that the evidence shows that amongst wholesalers there is a difference in price, and retailers can by reason of that and by reason of other conditions buy at different prices, so that it is inevitable that there will be competition in prices between retailers—that is, there will be selling by one man at a lower price than that charged by another. If it be suggested, as it has been submitted, that one man sells at less than cost, I shall submit to the Committee that no man other than a man from a lunatic asylum could continue that for any time ; and any man would cause, if he is selling at less than cost, his rivals to buy from him and thereby bankrupt him. It is submitted that this is merely the position, and that no man in business is so foolish as to sell at less than cost. Mr- Myers : Not all these lines. Mr. Kennedy : Nor in any considerable quantity. Mr. Myers : Nor could he buy from, the cutting retailers any quantities. Mr. Kennedy : Even if he cannot buy any quantity, on hypothesis, then no harm can be done. Mr. Myers : I hope my friend did not think I meant that the retailer could not sell any quantity. What I meant was that the man who bought from the retailer could not buy a sufficient quantity. Mr. Kennedy : The fact is that we come back to the question that prices at which a man might buy vary, and some men can buy better than others. It is submitted that there is no evidence that there is extreme price-cutting. There is competition in prices, it is true, and selling below the marked price, it is true ; but I venture to suggest that when one analyses the evidence—and I do not propose to go into it now- -and takes a broad view of it, it becomes apparent that there is no appreciable price-cutting. I submit, as it appears from the position in Canada, that the extent of price-cutting is, for very obvious reasons, very considerably exaggerated, Take, for example, one item —namely,
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Kolynos : I venture to suggest that when one analyses the position all that we have got is a reduction in output within a narrow period. Of course, it must be remembered that dentifrices are subject to fashion, and that there is considerable competition among substitute lines. As a matter of fact, in the first instance Kolynos itself must have displaced some other line ; and surely, it is submitted, Kolynos is not exempt from the ordinary rule that applies to its competitors, and its sales are bound to fluctuate as the sales of competing dentifrices do. Now I pass on to the question of the manufacturer, and I would like to point out to the Committee that the term " manufacturer " is not the manufacturer as some of us understand it. I should like to restrict the term " manufacturer," so far as New Zealand is concerned, to the man engaged and taking an active part in the secondary industries, and I think that is the proper use of the term in this connection Mr. Myers : Who referred to those as agents ? Mr. KpMnedy : I do not think for a moment that a man engaged in our secondary industries is in the same position as a man who is the sole distributor for something manufactured outside of New Zealand, and I do not think he is entitled to the same consideration. There are certain considerations which apply to our secondary industries which do not, in my judgment, apply to industries carried on outside New Zealand. Ido not think for a moment that a representative of a manufacturer abroad is in the same position as a manufacturer in New Zealand engaged in a local manufacture. Mr. Myers : The English manufacturer also fixes prices. Mr. Kennedy : ■ I know he does ; but you will see that under the P.A.T.A. the manufacturer who has to be considered is the sole importer, because under the definition you will see a manufacturer under the constitution of the P.A.T.A. includes the sole distributor in New Zealand of a manufacturer abroad. Now, my friend Mi. Gresson mentioned, in the case of certain articles, that the law did permit at present a man to have an effective control upon his retail price if he himself cares to exercise it, and mention has been made before this Committee not only of Palmolive soap, but of Johnson's baby-powder, and from those two cases you can see that if a man acting by himself cares to adopt a system of price-control he can invoke the aid of the law to make it effective, and there is no need, it is submitted, that a man should bind himself and act in consort with others to impose upon the public, if he so wishes, a system of control. Mr. Collins : The representative of Palmolive said that his system was 90 per cent, effective, but he wanted 100 per cent, efficiency. Mr. Kennedy : It is submitted that a system of price-control is undesirable ; when a man can get 90 per cent., he is getting it as perfect as is reasonably possible. I submit that the P.A.T.A. is out to boycott the trader who is not prepared to submit to its dictates, and that it prevents any trader from" passing on to his consumer the economies which he may effect in his business, nor can he, in the form of lower prices, pass on to them the benefit of his better buying or of his more efficient management; it is designedly anti-social and contrary to the public interest. What I say is that if there should be a price-fixation scheme in force, then the power should be vested in some independent of the manufacturer, the wholesaler, and retailer —such as a Board or a body corresponding to the Board of Trade, and prices should then be fixed after investigation and after hearing all the interested parties. Before I pass from that I want to make this observation : that no definition was supplied of what is termed " proprietary articles,'' and, evidently impressed by the difficulties in the way, it was suggested that foodstuffs were not to be included ; but I point out, as indicating the design of those responsible for the P.A.T.A., that in the letter produced by Mr. de Fenq it was stated that foodstuffs might later be included. Now, I know what statements have been made in regard to the Commercial Trusts Act, but I venture to suggest that the Commercial Trusts Act is beneficial in purpose, but one, unfortunately, which can without great effort be avoided. My submission is, having regard to the position in this country, that it would not be so very difficult for any man to drive a carriage loaded with P.A.T.A. stuff through the Commercial Trusts Act. Mr. Collins : How ? It would be very interesting to know that. Mr. Kennedy : I think I could. There are certain examples. Mr. Myers : My friend can do something more than others have thought of. Mr. Kennedy : Ido not claim to do more than what my friend has done. Now, evidence has been given that, in the case of crockery, even, an attempt was made in the case of Doulton and Wilkinson to have a price-fixation scheme. Mr. Hayward : By the individual manufacturer only ? Mr. Kennedy Yes. If it can be done by a manufacturer, surely it may be done to proprietary articles through the association; so that in actual practice one must assume that this association would extend, if it were successful, its operations beyond the mere ambit of patent medicine and suchlike, and would include the great majority of articles which are sold by such a firm as Macduffs Ltd., and the Renown Stores in Wanganui, and would cover the great majority of articles of household requisites in common use in any ordinary home. Now, I would like to give you references, without reading from the Canadian report, pages 27 and 29, with respect to a summary of the disadvantage to the public which it is conceived would follow if this association should obtain any hold in New Zealand. If the Committee pleases, then, I end as I began, with the direct statement that a serious substantial contribution to lower the cost of living has been made by the cash grocers and cash fancy-goods men, and I say it would be a serious matter if this Committee made a recommendation which would have the effect of putting out of business or hampering those men who have so well served the public need during recent years. My submission is, then, that the Committee should recommend that, by Order in Council or otherwise, this association should be inhibited from functioning in New Zealand. I submit it is in the public interest that no trader, when selling, should be allowed to fix the selling-price of his article. Mr. Reardon: Supposing the P.A.T.A. functioned from outside New Zealand —say, in Sydney, for instance—would it be prevented from operating here ?
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[MR.f KENNEDY.
Mr. Kennedy: I feel that if it were inhibited as I suggest it would be effective, because it could only operate in New Zealand through its servants and agents. Before concluding, I refer the Committee, if I am permitted, to a suggestion made at page 119 of the report of the Cost of Living Commission in New Zealand, and suggest that the clause be adopted. The clause suggested was intended to be an amendment to the Commercial Trusts Act. I submit, in conclusion, first, that the Committee should recommend in terms of the inhibition of the P.A.T.A. in New Zealand, and, second, I submit as desirable in the public interest an amendment to the Commercial Trusts Act as submitted. Mr. Myers: Mr. Chairman and gentlemen of the Committee, —Having at the opening of the inquiry addressed you at some length, and the Committee having had the opportunity of hearing a great deal of evidence on the matters which it has to inquire into and consider, 1 feel that I can dispense with embroidery and with following my learned friend into the realms of forensic eloquence. That being so, I propose to refer to the evidence —or, rather, to the opinions—of Professor Murphy, upon whom learned counsel, particularly Mr. Gresson, and almost to the Same extent my learned friend Mr. Kennedy, pin their faith. In the first place, I want to make the submission that Professor Murphy's evidence —I am not in the least questioning his ability as an economist—should carry very little weight with this Committee. Professor Murphy is giving his own opinions, and he tells, the Committee with perfect frankness that that is the position, and he says that he is giving opinions on matters upon which there is very little economic authority; and he further says, and again frankly admits, that on the main question, which, after all, this Committee has to consider—the question of price-fixation and its maintenance—-there is a conflict of opinion among economists themselves. In view of that, there are certain observations that I propose to submit, and which, I submit, are particularly cogent, for the consideration of this Committee. The first of those observations has reference to the wording of the Statute under which this inquiry is made, and I want to point out, though it is scarcely necessary, that, after all, this is a judicial inquiry, and the Committee is inquiring judicially into the questions that have been submitted to it. Professor Murphy has said, and he has said with perfect frankness and candour, that the only interest he has considered is the interest of the consumer. The members of the Committee will remember that I cross-examined him quite shortly, but there were certain points which I wanted to elicit from him, and that was one. Let me turn for a moment to the statute. The statute —that is, the Board of Trade Act —uses the words in section 13, " detrimental to the public welfare." After all, it is the public interest, or the public welfare—the terms are synonymous—that has to be considered in an inquiry of this kind ; but may I respectfully submit to this Committee that, acting judicially, it is bound, or should be bound, by the definition which has been given to those very words'by Courts, by which even the Court of Appeal and the Supreme Court of this country are bound. What I mean is this : that neither Professor Murphy nor any one else can, in the matter of an inquiry under this statute, give any meaning to the words that are used but the meaning which the highest Courts of the land bear in this very connection. Now, I referred in my opening to the Coal Vend case. Now, in that case the words there used were "detrimental to the public interest," but obviously, as I have pointed out, " detrimental to the public welfare " and " public interest " are synonymous. Then, we have words under section sof the Commercial Trusts Act, " contrary to the public interest," and a majority of the Court of Appeal in New Zealand reversing for the time being the judgment of Mr. Justice Sim, one would gather from their judgment to have assumed, contrary to the Coal Vend case, which they state did not apply, because they said the words were there, that it was the consumer, and the consumer alone, whose interests should be considered. Now, we have not yet seen the terms of the actual text of the judgment of the Privy Council. The position must be exactly as it was put by Mr. Justice Sim in the Supreme Court, because in the flour-millers' case the whole case for the Crown depended on section sof the Commercial Trusts Act. Consequently, therefore, the Privy Council must be assumed, in the absence of the text in the meantime of the judgment, to have found that the words " contrary to the public interest" meant precisely the same thing which is in the Australian Act, and in the Coal Vend case the Privy Council held that it is not the interests of the consumer only that have to be considered. Further, it was expressly held that it was not only the interest of the consumer, but it was the interest of the manufacturer and all other persons dealing or trading in the goods that had to be considered. Consequently, therefore, I respectfully and strongly submit that Professor Murphy—and he is followed by my learned friends can carry no weight with this Committee when he comes and says that a certain practice is contrary to public interest, and admits that he has not considered the interest of the manufacturer or other persons who are dealing in the goods, but he has considered the interest of the consumer, and the consumer alone. Now, lam asking this Committee to consider not only the interests of the consumer, but the interests of other people concerned. Even if it were the interest of only the consumer that had to be considered, I might go even further and make the submission that, even so, the P.A.T.A. is entitled to operate. Mr. Collins : Does not section 13 add, " the proper regulation in the public interest of the prices of goods and the rates of services " ? Mr. Myers :No doubt it is the public interest again, and the same words are used. It is in the public interest, Mr. Chairman. Mr. Collins: Yes, the public interest. Mr. Myers : Very well. My point is that, although I admit, of course, that the interests of the consumer have to be considered, my learned friends are wrong in following Professor Murphy in asking this Committee to consider the interest of the consumer, and the consumer alone. Mr. Collins: You suggest that the words " public interest" have a much more comprehensive meaning.
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Mr. Myers: And so it has been held. lam sure that the Committee will not think lam wasting its time unnecessarily in bringing this point out. The Committee does not want to place an interpretation upon the words in this section, in which the inquiry is held, contrary to its meaning. Mr. Collins : I thought you were differentiating between the words " welfare " and " interest " whereas it is the word " public." Mr. Myers : No. lam very obliged to you for making the suggestion. It is the words " public interest " that I am emphasizing. Mr. Collins: I never held the narrow meaning of the word " public." Mr. Myers: lam very glad to hear that. I was compelled to make the observation because Professor Murphy, as I have already said, expressly tells us that he did not consider any interest but the interest of the consumer. My learned friends have not condescended to explain to this Committee \vhat the words " public interest " mean. Mr. Collins : Professor Murphy was candid in saying that he was merely considering the interests of the consumer, but, at the same time, he did not know anything about the legal aspect. Mr. Myers : That is perfectly fair. I hope that I will not do him any injustice, because I have the greatest respect for him, and I do not think I am when I say that I gather that to be the purport of his evidence. Mr. Kennedy : He said that in the case of the consumer and manufacturer the consumers interest must be considered first. Mr. Reardon: That is where our difficulties are going to present themselves. Supposing we find that the interest of the manufacturer and the interest of the consumer are in conflict, and it is evenly balanced interest, on what side will the Committee stand ? Mr. Myers : Well, my answer would be this : that it is a very dangerous thing to interfere with the delicate organization of trade ; at all events, any tribunal which is doing so can see that the advantages are going to be greater than the disadvantages. Mr. Reardon : On the other hand, the trend of legislation all over the world has been tending towards the interests of the majority of the people. Mr. Myers : I might answer that by saying this—l had intended to refer to this : that the Cost of Living Report, to which I shall refer a little later, was a very strong one, and recommended a great many things which were not adopted by the Government of the day when the Government apparently took into consideration the whole of the circumstances relating to trade and passed the Board of Trade Act, 1919. They were careful to stop at a certain point, and they were careful not to interfere with that delicate organization of trade by attempting, except in the matter of foodstuffs which had already been done, to interfere with the freedom of contract between traders. I onlv want to conclude that portion of Professor Murphy's evidence by saying that I trust the Committee will pay a good deal more attention to his evidence than to his report, because it will be seen that in his report Professor Murphy makes up for argument by a certain amount of invective, and that is why I proposed his report not going in. Then, again, Professor Murphy says, perfectly frankly, that in his opinion the stabilization of prices is always a bad thing, and he goes the length of saying that that applies even to the stabilization —I use the word advisedly—of the wages of the workers. He said that up to a certain point he thought that fixation might be proper, but so far as anything further is concerned —and that is what I mean when I use the word " stabilization " —so far as our present methods are concerned, he rather scoffs at them, and does not agree with them in the least. All I can say is which is merely summing up Professor Murphy's evidence —that he has admitted, in the opinions he has expressed, a meaning of the vital words in the statute which it has been held by the highest Courts, by which we are all bound, that those words do not possess. Then, Professor Murphy relies and again he is followed by my learned friends —upon the Canadian and New South Wales reports ; but not a word is said about the English report. He said that he had not seen it. Ido not want to labour my observations on the Canadian and New South Wales reports, but I do want to repeat that the Canadian report is the result of an ex parte inquiry, and gives no consideration whatsoever to the interests of the manufacturers or any other person connected with the trade with respect to the articles which are the subject-matter of the inquiry ; and the same observation may be made of Mr. Justice Beeby's report in New South Wales. But, in any case, both these reports are dealing with a system which applies to foodstuffs, and I am not concerned to dispute that a different set of statutory provisions might well be applied to foodstuffs from that which is applied, or should be applied, to articles which are not foodstuffs, and which, whatever one may say, cannot be placed in the category as necessaries of life. Mr. Collins : Or essentials to the happiness of the community. Mr. Myers: Yes, or essentials to the happiness of the community. Even Mr. Justice Beeby, if I remember rightly —I say this with hesitation, because I did not read his report carefully, and Ido not want to do him an injustice—does not refer to any side of the case : he does not refer to the interests of the manufacturer or the interests of the consumer. An observation was made by my learned friend Mr. Gresson in regard to the position in England, and he said that possibly there had been no legislation in England on the question to prevent fixation of prices, and so on, because the difficulty in an old country like England was the passing of such legislation ; but I venture to suggest that there is a much deeper reason than that, and the reason is that the people in England and the legislators of England in their wisdom considered it inadvisable to attempt to interfere and tamper with the freedom of contract and with the delicate organization of trade and commerce. Now, with regard to the Cost of Living Report, I may say that, as it appears to me, the question of the interests of the manufacturers and of traders was not seriously considered ; but I want to point out that that might very well be explained by the fact that the Cost of Living Report preceded the judgment in the Coal Vend case —that is, the judgment in that case was not given until 1923, whereas the Cost of Living
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Report was issued in August, 1912 ; and, furthermore, the investigations of the Cost of Living Commission—l stand subject to correction, because 1 have not had an opportunity of reading the proceedings carefully —related for the most part to foodstuffs, or, at all events, to articles which were the necessaries of life. Mr. Collins : Yes, it was a very wide range, but I think the definition " necessaries of life " covered a very wide range. Mr. Myers : That is quite right. As a matter of fact, it is of no moment. I have here the words contained in the order of reference, where it says, " What steps should be taken to reducing the cost of the necessaries of life ? " Strictly speaking, when one comes to consider the effect of the Cost of Living Commission, it is submitted the observations should be really restricted to the subject-matter to which the Commission was considering—that is to say, what steps should be taken to reduce the cost of living in so far as the necessaries of life are concerned. It is necessary for me, however, to refer shortly to the evidence of Mr. Sutherland and some of the other witnesses, but I propose to deal with them as a class, although I want to refer to Mr. Sutherland particularly. Now, gentleman, I want in these observations to include for the moment Mr. Boyd, of Macduff's stores, because he stands in a different category from the others. So far as Mr. Sutherland and Mr. Earl and similar witnesses are concerned, I submit to this Committee —I feel it my duty to submit this to the Committee—that, instead of their being an actual benefit to the community, they are a menace, and I will tell you why. Take, for instance, Sutherland's case : He is doing a turnover of * per annum, and his net profit is * per annum only, without taking anything as remuneration for his own services. He says that his services are worth * per annum. If that is so, it leaves * as the net profit derived from this enormous business of a turnover of * per annum. As a- matter of fact, I should think that the remuneration of a man doing that work and responsibility might well be more than * per annum ; but, even so, that is not right, and for this reason : that he has already told us that part of his receipts in his trading account includes subletting of premises, and I say that that is not trading. Ido not know how much that item amounts to, but supposing it amounts to another £500 per annum —it may be more or less, but lam only making the point—it follows that Sutherland is carrying on this enormous business at very great risk to himself and others and he is not making any profit whatsoever. I ask you to think what it means. It means that it requires only the least depression or anything else happening, such as accident, illness, or death to Sutherland, and the business falls crash like a pa-ck of cards. The capital goes and the creditors may suffer, because that sort of thing does not happen in a month, but it happens in three months or more, and the capital gradually goes and thereby losses are made to the creditors. Is that sound trading ? Is it to be said that trade is to be interfered with, and that contracts are to be set at nought and not allowed to be made, for the protection of a few traders, because there are only a few, so far as we know, of that description in New Zealand ? Mr. Reardoti: Are you including the Star Stores in your argument now ? Mr. Myers: Yes, I am including all the stores, because it is only a matter of degree; and, moreover, you will find that in each case the profits are very small, although in some cases they are larger. Mr. Reardon : I feel that he is in a class by himself, because he has an objective, and that is to avoid making profits. Mr. Myers : I have yet to meet the trader who is truly an altruist. I have not met him yet. Mr. Hayward : I think he exists here and there. Mr. Myers: All I say is that he ought to have wings; possibly he is qualifying for them. I again refer to Sutherland. He has twelve stores, and it only requires a loss at one or two of those stores and his profits are converted into a loss. If you take each of those stores separately, any one of them, and if you divide the total by twelve —that is not fair, of course, but it is the only way in which I can illustrate my point—it will be found that there is not a profit in any of them which could be regarded as satisfactory or reasonable. When you take Sutherland's shops, singly or collectively, Ido submit that traders of that class are not of any benefit to the public. They may, of course, be a benefit for a limited period, but how long can it last ? Now, Mr. Thomson is not in. the same category as Mr. Boyd —I am not going to refer further to the grocers. With respect to Mr. Thomson, Mr. Kennedy admitted an error that he made, and it was an error that may have been serious, whereby the Committee might easily have been misled as to Mr. Thomson's position. You will remember that Mr. Thomson gave certain figures as his turnover for his first six months, and a certain figure for the next six months, and I certainly thought when I heard his evidence that he was speaking of something that had happened during the existence of the same set of conditions ; but when we come to examine the position it is found that, instead of progressing, he has retrogressed during the last six months. Now we come to Mr. Boyd, and if it were a fact, as Mr. Boyd seemed to think, that 70 per cent, of articles in his shop are articles which might go on to the P.A.T.A. list, then the position might be serious so far as he is concerned ; but I venture to suggest that if members of the Committee were to visit his shop they would find that Mr. Boyd is very seriously mistaken, and that in all probability the percentage is more like 2, 3, 4, or 5 per cent, than the 70 per cent, he suggests. Ido not want to make any further observation regarding Mr. Boyd, because his case, like that of other cutters, will be dealt with comprehensively under one heading. I want to point out to the Committee that it is only establishments like this and the cash grocers that have to be looked into; and there is also McKenzie's, Hart's, and stores such as the Bargain Stores in Hamilton, which are typical stores which exist throughout the length and breadth of the country—in fact, one of the persons I have mentioned has a large number of shops throughout New Zealand. My learned friend Mr. Kennedy, and also Mr.
* Regarded as confidential and deleted.
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Gresson, said that it cannot be assumed that a trader would be such a lunatic to go on continuously selling goods at or under cost, and that if he did he would soon come to grief. Any person who tried to sell goods generally —that is to say, all classes or most of his goods —at cost or below cost would be a lunatic, and must come to grief within a very short period. But the point I make is this : that is a very different thing from adopting the tactics which these men do adopt, of choosing a certain number of lines and from time to time offering those lines for sale at cost or under cost as decoy lines, obviously for the purpose of enabling them to do bigger business in lines which show them huge profits and give them a profit more than they lose by selling these proprietary articles at a sacrifice. It is those shops, more so than cutting grocers and people like Boyd, against whom manufacturers, wholesalers, and retailers, who have become interested in the cost of manufacture, are entitled, I submit, to the fullest measure of protection. Then, we have the suggestion made by every one of those people who have come forward that the operations of the P.A.T.A. would involve the closing-up of their businesses. Well, lam prepared to say that it would be a very good thing if some of these businesses —I do not say all of them—were shut down for good and all, for the reason that the tactics adopted by them are not healthy and sound trading. The point I want to make, however, is that there is nothing whatever in the suggestion that these gentlemen make—there is no real foundation for it. although they came here thinking it —that the P.A.T.A. could operate in respect of all goods, or nearly all, which they sell in their establishments. Obviously, that is not the case. That never was the intention of the P.A.T.A. —to cover all these various lines of goods, including foodstuffs. They could not deal with foodstuffs even if they wanted to, because they are prevented from doing so by the law. Now, my suggestion is that if any of these gentlemen are the altruists that some of them suggested they are they can do a great deal in the interests of the consumer, if the P.A.T.A. operates, by joining that body, because it is common-sense, I suggest, that the bulk of the people who go to the shop of a particular cutter —let us call him " A " —will not continue to go to his shop if he cannot sell leading lines, such as groceries and foodstuffs, at a price lower than that of his competitor. It is absurd, I suggest, to say that a person who is buying those goods from " A " as a regular grocer will not continue to buy the proprietary goods which " A " stocks, so long as " A " is not charging more for them than his competitor ; and the result would be that whereas " A " would obtain a higher rate of profit in regard to those proprietary lines, he would also have more to come and go on, and in consequence he would be able to give back to the public, if he wished, concessions on lines which everybody uses —namely, necessaries of life —as against those proprietary lines which may be convenient to use but which certainly—some of them may go near it —are not necessary to human existence. The next point that I wish to refer to is one that has been much traversed —namely, goodwill in proprietary goods. Professor Murphy admits that a manufacturer has a goodwill in a particular article, and he says, " I object to it all, because the manufacturer has made that goodwill by advertising, or partially by advertising, and that is a waste." Mr. Gresson said that he was not an economist, and Ido not claim to be one, but I have never been able to see how you are going to provide for all the unemployment that there would be if all the views of Professors of Ecomonics were given effect to. My submission is that the manufacturer who has established a market for his goods by his efforts, by his skill, and by his expenditure of money, even though he spends it by advertising, is entitled to protection. Why should he not say, " I have gone to the trouble of making these goods ; I have gone to the expense of making goodwill for them ; my business depends upon that market being maintained, and if it is not maintained, then Igo to the wall; and it cannot be maintained if I allow it to be used by cutting traders as a decoy line so that they can make profits on other lines." Why should not a manufacturer be entitled to make provision to prevent that result ? It is not like the ordinary articles of food which are the necessaries of life, where the manufacturer or the producer of those articles is no longer concerned with them. There is no question of goodwill involved. There is no question of goodwill or trade goodwill involved to the manufacturer or producer, "to the wholesaler or retailer who acts as the distributor of those goods. There is no reason, according to the Legislature of this country, for allowing price-fixation such as has always been permitted in respect of manufactured articles other than foodstuffs. My submission is that goods of persons in respect of which, or in respect of trade in which, a a goodwill has been established are vested in the persons interested in that goodwill, and they are entitled to be protected. No trader is obliged to stock those goods, and he is not stocking them for the benefit of the public, but he is stocking them for his own benefit; and I say that that observation is true whether he is selling them at prices fixed by the manufacturer, or whether he is using them for the purpose of advertising himself by selling them at a lower price and in that way endeavouring to increase his business. After all, there are a certain number of people in business and there are a certain number of people who will continue in business, and these people in the credit business require a certain amount of money to pay their overhead expenses, and these overhead expenses must be furnished in some way or other by the public, together with a profit to the trader ; and how is the cutting trader benefiting the public in those circumstances ? —The overhead of all these different traders has to be found, and I repeat the suggestion I have already made that there is no reason why the cutting trader should not be compelled to respect the agreement made by the manufacturer and obtain the price fixed by the manufacturer, and there is nothing to prevent him, if he so wishes to continue giving, from continuing to give by way of concession to the public just as he does under his existing methods of trading, and even more. That brings me to the next point I desire to make, and that is the necessity for the P.A.T.A. as an organization. I assume for the moment that the Committee agrees with the submission I have made that the manufacturer is entitled to protection, and that, with the manufacturer those persons who have helped in building up the manufacturer's trade, and who are interested in the goodwill, are also entitled to reasonable protection. It is quite true that a manufacturer, under the existing law, may -fix the price to both the wholesaler and retailer; but we
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had it from Mr. Boyd and Mr. Thomson that in practice the manufacturer cannot enforce the agreement, by reason of the fact that persons who mean to continue to use the particular lines for the purpose of selling at reduced prices can adopt all sorts of methods to circumvent the manufacturer and other persons interested in the goodwill. That being so, there is only one way in which the fixation of prices by manufacturers can be maintained, and that is by some such method as the P.A.T.A., which it is sought now to establish. It is the only method by which the interests of those concerned in the goodwill can be adequately protected. I submit that by the operation of the P.A.T.A. the public have an advantage, and it is in the interests of those concerned in the P.A.T.A. to see that too high a price is not charged for any particular article which is being placed on its list, and that it would use its endeavour to see that not more than a reasonable profit is obtained. Now, it was said by Mr. Gresson —and I think he was followed on this point to some extent by Mr. Kennedy'—that the P.A.T.A. is of no use, because it cannot check the manufacturer's cost. Of course, it cannot check the manufacturer's cost, and no other scheme could do that unless the Board of Trade takes the power under the statute to examine into the books of the manufacturer. As to whether there is a P.A.T.A. or no P.A.T.A., the manufacturer's cost cannot be ascertained other than by steps taken by the Board of Trade ; but there is one thing that the P.A.T.A. can do, and it is this : it can see that, so far as costs of distribution are concerned, once the article is sold by the manufacturer those costs shall not be excessive so far as the public is concerned —in other words, that neither the wholesaler nor the retailer shall exact more than a fair and reasonable profit for the service he renders in the distribution of the goods. How can it be said that the operations of the P.A.T.A. will result in an increase in the cost of living ? I submit, with respect, and I submit with confidence, that it will have no such effect. It certainly would have no such effect if the cutting traders—whether grocers, fancy-goods shops, or traders—play fairly with the public and carry out the plan which they have formed for the benefit of the public, because, as I have already pointed out, they would have just as much to give away to the public—probably even more—by way of concession or discount on the necessaries of life, and therefore the matter is entirely in their own hands. If they are altruists, which they suggest they are at the present time, the people would get the benefit and the cost of living would not be raised. What I mean is that the same concessions would go to the public, and the poorer people would get at least as much benefit, if not more, because it is not the poorer people who buy these proprietary articles, but the people who are more favourably circumstanced. Ido not think that I need trouble the Committee very much with the suggestion that the institution of the P.A.T.A. will have evil effects, because I have already dealt with that question in the course of my remarks to the Committee. My submission is that there is no validity whatever in that suggestion or contention, for many reasons : first, that the P.A.T.A. will not have anything to do with foodstuffs ; and another reason is that there are very wide powers, as I have pointed out, of the Board of Trade, and, if there are any evil consequences commencing to result from the P.A.T.A., steps-—and very properly, too— would be taken by the Board of Trade to prevent any such evils of trading. Then, it has been suggested that if some particular trader did not join the P.A.T.A. other members of the P.A.T.A. might take steps to have the first-mentioned trader boycotted. It has already been explained that there is no compulsion on any person to join the P.A.T.A.' —he is perfectly free — and the only circumstances under which any action could be taken by a group of traders against any particular trader would be because that trader, whether a member of the P.A.T.A. or not, was breaking the prices which were fixed by the manufacturer and listed on the P.A.T.A., and so cutting, to the detriment of other traders, and, I submit, to the detriment of the public when the proper definition of the words " public interest "is understood. Now, Ido not think that I can assist the Committee very much further, or, really, any further, because I apprehend that the Committee would not thank me for doing what my friends have avoided, and, I think, properly avoided —that is to say, analysing the evidence. After all, as my friend Mr. Gresson said, we are not addressing a jury, but we are addressing a body of gentlemen who are conducting a judicial inquiry. That is what it amounts to. That being so, I do not consider it necessary to address any further observations to the Committee, and I desire to conclude by thanking you, gentlemen, for the patience and courtesy which has been shown to counsel and the witnesses who have appeared at this rather protracted inquiry, but T hope not unduly protracted inquiry. Mr. Collins : That practically concludes our public proceedings, and I want to take this opportunity, on behalf of the members of the Committee, to thank counsel and the various witnesses for attending the inquiry. We feel that we have not lacked evidence or information which should enable us to come to a conscluion. I sincerely thank you, Mr. Myers, for the reference you made in your concluding remarks with respect to the courtesy of the Committee. That, of course, was only to be expected, because we look really to counsel for a great deal of help, and that help has been extended to us to an extent that we hardly contemplated.
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APPENDICES. APPENDIX A. Opinions given before Committee by B. E. Murphy, Esq., Professor of Economics, Victoria University College, as to the Proposed Operations of the P.A.T.A. in New Zealand. From the papers submitted to me this appears to be an inquiry under the Board of Trade Act into the business and operations carried on or proposed to be carried on by the P.A.T.A. The specific objects of the inquiry are whether such operations or proposed operations are or are likely (a) to become a monopoly, or (b) to institute unfair competition, or (c) to be detrimental to the public welfare, or (d) to amount to proper regulation in the public interest of the prices of goods or the rate of service. There are no statistical studies available for evidentiary purposes of the operations of this or similar bodies or organizations in New Zealand, except the Report of the Cost of Living Commission of 1912, to which I refer later; but the operations of the P.A.T.A. in Canada and New South Wales have recently been the subject of investigation and report. These reports, in conjunction with the admissions contained in the documents of the P.A.T.A. itself are the sources on which this opinion is mainly based. For the reasons hereinafter stated, I am satisfied that the P.A.T.A. (a) is avowedly a monopoly ; (b) proposes to institute unfair competition by boycotting independent traders, excluding competing commodities from the market, and, generally, (c) will be detrimental to the public interests, and that in a marked degree ; (d) does not contemplate proper regulation in the public interest of the prices of goods or the rate of service. It appears from the papers submitted that the P.A.T.A. was formed on the 25th August, 1926, with the constitution therein set out. It does not appear to be incorporated under any statute. The most important section in the constitution from the point of view of the present proceedings is the objects clause, No. 3. Herein the objects of the association are set out as being (inter alia) discussion with a view to " concerted action," taking steps to deal with price-cutting (that is, preventing the reduction of prices by distributors), maintaining " fair " prices, and preventing the sale of commodities competitive with or substitutionary for those listed by the P.A.T.A. This objects clause closely resembles that of the original English P.A.T.A., founded in 1896, as set out in McCrosty (" Trust Movement in British Industry," p. 249). The only variation appears to be that, whereas the English document refers to " extreme price-cutting " in subclause (5), the adjective " extreme "is deleted from the corresponding New Zealand subclause. To be sure, the New Zealand document adds to subclause (b) the ostensible object of preventing " excessive " prices. The whole history of this and similar combines, however, proves that this is merely " eye-wash." It would be interesting to know what price-level the P.A.T.A. would regard as excessive, in view of the statements of its protagonists hereinafter quoted. As compared with the constitution of the Canadian P.A.T.A., there are a number of differences in the drafting of the objects clause. The Canadian clause, which was modified, doubtless, with an eye to the special legislation against trade combines in that country, is set out in the Canadian report on the P.A.T.A. at page 34. Where the New Zealand document employs the expression " concerted action " the Canadian uses the milder term " co-operation." The Canadian clause contains a proviso limiting action to what is " not detrimental to the interests of the public, whether consumers, producers, or others." The Canadian document does not contain the New Zealand restriction on " excessive prices." Finally, in the omnium gatherum subclause the Canadian document contains the proviso, " not detrimental to the public interests," which does not appear in the New Zealand document. It may be of significance that the New Zealand constitution expressly omits those passages in the Canadian constitution which purport to safeguard the public interest. The fact that legislation against combines exists in both Canada and New Zealand of a type not found in England makes it incredible that the framers of the New Zealand constitution should have been unaware of the Canadian document and its contents. The deliberate omission of the safeguarding clauses from the New Zealand constitution raises a significant presumption as to the motives and intentions of the New Zealand promoters of the P.A.T.A., and their intention is a matter directly in issue. This seems to throw some light on the opinions of the New Zealand promoters as to the effect that their contemplated operations would have on the public welfare, and the scope and object of their policy. It is necessary and legitimate in this connection to interpret the constitution along with the draft letter of application for membership, the draft agreement, and the covering letter of the 18th September, 1926, soliciting membership. Mention is made of the necessity for " drastic action," and the need to maintain prices and raise those that are " cut" —that is, are lower than the promoters, in their own interests, would like to see them. The whole series really forms one document, and admits in the most open, formal, and explicit terms an agreement or conspiracy (a) to fix prices, (b) to limit competition, (c) to boycott independent traders by cutting off supplies of all controlled articles, (d) to boycott independent commodities by refusing the right to sell them in substitution for listed articles— that is, to drive them off the market.
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As to the nature of the " drastic action " that is considered desirable to attain these objectives, I refer to the statement of the prime mover in the P.A.T.A. in Canada, Sir William Glyn-Jones, whose utterance is reported as follows If in your store you handle P.A.T.A. and non-P.A.T.A. proprietaries alike, you deserve all you get in the way of undue price-cutting. The organized retail druggists of the Dominion can, if they choose, make the merchandising of the non-P.A.T.A. proprietaries unprofitable to the manufacturer. There are perfectly legitimate ways of doing this, and I need not enumerate them. I make no apologies for asking you to make the path of the non-protecting proprietor of the proprietary article as hard as you know how. That should be your contribution to the success of the P.A.T.A."—(Canadian report, p. 19.) Sir William Glyn-Jones's modest reticence in regard to the " perfectly legitimate ways " of accomplishing the ends of the P.A.T.A. is somewhat suspicious, especially in view of his immediately subsequent pronouncement. Cynicism and effrontery, as a matter of fact, could not be carried further than in his impudent statement, which sheds quite a flood of light on the spirit informing the P.A.T.A. and its methods of work. He invites the application of the boycott, in its most brutal and ruthless form. The documents submitted make it clear by admission that the intention of the P.A.T.A. in New Zealand is to conspire (a) to fix prices, (b) to withhold supplies of commodities from non-associated firms, (c) to prevent discounts or reductions of price from manufacturer or wholesaler to retailer from being passed on to the public in whole or in part, (d) to withhold all controlled commodities in case of reduction by the retailer of the price of one, (e) to wipe out all non-associated distributers and manufacturers, (/) to eliminate non-listed commodities from the market irrespective of the public demand, (g) to stereotype the present distributive organization, (h) to prevent co-operative profitdistribution and consequently the co-operative form of organization, and (i) to prevent reduction of prices either for the purpose of clearing stocks or for any other purpose. The documents in Canada and New South Wales, taken in conjunction, aim at producing much the same effect. It is an elaborate and concerted monopoly of an extremely noxious and pestilent type. The agreement embodies that type of combine or monopoly which involves concerted action with respect to price-fixation, supply-control, and elimination of the competition of outside men and outside goods. It is a monopoly on the classical model, coming within the definition of " monopoly " usually accepted by economists for general purposes, as follows : — Monopoly means that substantial unity of action on the part of one or more persons engaged in some kind of business which gives exclusive control, more particularly, though not solely, with respect to price.—("Ely : " Monopolies and Trusts," p. 14.) It is as old as civilization, was the subject of complaint even in pre-classical Greece, and has been so all down the ages, though it has seldom shown itself as cynically or clearly as it does in the case of the P.A.T.A. In the eighteenth century Adam Smith noted the tendency of traders to combine for price-maintenance. " People of the same trade," he says, " hardly meet together even for merriment or diversion but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." It is, further, much the most menacing form of combination from the point of view of the consumer, because (a) it acts directly and immediately on prices ; (b) it is generally unobtrusive, and not spectacular, like the great manufacturing trust; (c) it is so pervasive and ramifies all over the community. While associations, formal and informal, are the least definite of the various combinations, they are probably the most important, because their scope is coextensive with the country and with its business.—(Van Hise : " Concentration and Control," p. 64.) A more or less formal understanding among dealers also checks the freedom of competition, and, in fact, introduces an element of combination quite similar in kind, though less in importance, than that found among large manufacturers. In many small cities there exist butchers' associations, grocers' associations, associations of hardwaredealers, of druggists, &c. Usually without formal contract, these organizations substantially maintain a general level of prices throughout the city, besides furnishing to all of the different members the opportunity of reading trade papers, of learning the condition of the wholesale markets, and calling to their attention other matters of common interest, in addition to giving information regarding the business rating of customers and often assisting in making collections of bills overdue. In such cities and villages a trader from the outside, particularly if he attempts to peddle his goods from house to house, is sure to be met with united action of all the dealers. And customers whose desire to save leads them to buy from mail-order houses or themselves to visit the near-by cities to purchase goods are noted and common influence is brought to bear to check these tendencies. Industrial combination has begun.—(Jenks : " Trust Problem," p. 24.) This is quoted as showing how the germ of price-maintenance is latent everywhere. Hobson, our greatest British authority on the trust movement, made the deliberate statement in 1906 that local combinations in retail trade probably exercise a wider and larger effect on retail prices than the spectacular industrial trusts ("Evolution of Modern Capitalism," p. 191), and this is quoted with approval and amplified by Clay (" Economics for the General Reader," p. 148). Statistical proof of demonstrative force cannot, from the nature of the case, be adduced, because insufficient investigation has been made, but there is no doubt that the general and correct impression among economists who have carefully studied the matter is that price agreements among distributors wring more from the consumer than all the trusts that ever existed. Trusts sometimes bring about a fall in prices by passing on some of the economies resultant upon cheapened operation. There are no resultant economies from price-maintenance agreements- —they are always followed by a rise of prices; and a fall of prices may be brought about not by the formation of a price-maintenance agreement, but by its collapse. I know of no economist of note in the modern world who has anything to say in favour of price-maintenance agreements from the point of view of public utility and welfare. Where investigation has been made, as in Canada and New South Wales, the data obtained and the tenor of the reports have substantially confirmed the deductions which the economist draws from economic principle as regards price-maintenance. In these circumstances the onus of proof is heavily on the
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P.A.T.A. to prove affirmatively that their contemplated action is not detrimental to the public interest. They are defending a monopoly which is ■prima facie pernicious, in that it tends to maintain prices and eliminate competing men and substitutionary goods. This can be justified only by the most cogent proof of public advantage. It is not enough to assert or show that it will benefit the conspirators ; it is the public welfare, and not that of the combining parties, that is in issue. On the facts available, however, and on the admissions contained in the documents of the P.A.T.A. itself, it can, in my judgment, be demonstrated that its operations are detrimental to the public interest. I base this conclusion mainly on the following grounds : — (i) The connotation of the term " proprietary article "is vague and indefinite. It is not defined by the P.A.T.A., and it seems capable of indefinite extension, and would undoubtedly receive such extension should the movement prosper. At present it seems to be applied loosely to (a) patented articles ; (6) articles protected by trade designations, trade name or mark ; (c) a vague range of articles got up in distinctive wrappers, cartons, or other containers with the maker's name upon them, and sold not in varying weights at the option of the buyer but by the unit. The contents are apparently taken for granted, and under the Sale of Goods Act there is no warranty of their fitness for any purpose whatever. The public are therefore without adequate legal protection, and peculiarly defenceless in the matter of testing the quality or utility of proprietary articles. If such articles get the protecton of being placed on the P.A.T.A. list, the list will steadily grow. At present it includes many foodstuffs, and to get the protection of the P.A.T.A. more and more stuff would be put up in containers, so that the range of price-protected articles would tend to increase. This point is stressed in case it is contended that proprietary articles are few, unimportant, and unessential. A reference to Mr. Sutherland's price-list shows the large number of items, a great majority of the whole, that are classed under the heading of proprietary articles. To permit protection to goods by price-maintenance merely because of the way they are packed or got up is simply letting in the thin edge of the wedge of general monopoly, and would speedily cause most of the every-day commodities of life to assume the guise of proprietary articles. (ii) The proprietary-article trade is socially wasteful, being a costly and inefficient method of distribution. It is, therefore, against, the public interest that it should receive encouragement or be fostered either by artificial expedients or in any other manner at all. Its undue cost is mainly attributable to the following factors : (a) It involves heavy advertising charges; not the comparatively small advertising costs of the individual local business merely, but the enormous cost of the heavy national and international campaigns conducted by manufacturers under m.odern conditions. This advertising is almost entirely competitive—i.e., intended to displace one article (soap, cigarettes, and so on) by another substantially identical, as far as the public is concerned, with the displaced commodity. There is, therefore, no great advantage to the public to recoup it for the cost of the advertising bill, which amounts in the case of proprietary articles probably to hundreds of millions sterling per annum in the aggregate. In so far as advertising is merely competitive—that is, results only in shifting business from one firm to another— it is a net loss to society, though presumably an advantage, or at all events a necessary cost, to the advertising firm. Competitive advertising is, of course, passed on to the buyer in the prices charged for goods and services.—Murphy : " Outlines of Economics," p. 155). (b) The cost of get-up, of packages and containers, is unnecessarily expensive, amounting in many cases to a half or more of the value of the contents. The attractive container is a costly excrescence, of no value to the community, except as a bait to attract buyers, (c) There are too many substantially identical products, differing little except in the most accidental features, such as soaps, tooth-pastes, tobaccos, and so on. Each of these has its separate overhead organization and a relatively small turnover, increasing greatly the cost of manufacture and distribution, making it necessary to stock an extremely wide range of samples in very small quantities, and playing too much into the hands of the capricious and volatile buyer. Experience in Canada has shown these disadvantages in the most glaring manner. I refer to pages 10-11 of the Canadian report. The Economic Sub-committee of the recent Imperial Conference expressly recommended against this tendency, pointing out the great saving effected by reducing the number of brands and standards of commonly demanded articles to the minimum, and showing the great economy that would result therefrom. A resume of this report is given in the New Zealand Industrial Bulletin of the 10th February, 1927, pp. 210-11. (iii) New Zealand is peculiarly vulnerable to mercantile and distributive monopolies, and has no internal defence against them, because most of her intermediary products come from abroad in exchange for exports of primary products. It is therefore relatively easy for importers to establish a stranglehold on imported commodities, because they have little to fear from internal manufacturing competition. We have not sufficient alternative locally produced supplies, and hence need protection from our merchants to a much greater extent than most other countries. The unchecked rapacity of our importers, and the enormously great number of them, relatively speaking, because of the great profit to be secured, are potent factors in the high cost of commodities in the Dominion. The economic situation of New Zealand makes this country a favourable field for the operations of combination of a certain type. We are, in the first place, isolated by distance from our main areas of supply and demand, importing most of our necessaries and exporting most of our raw products. There is, in addition, a heavy protective tariff, and while manufactures are remarkably developed for so small and new a country, nevertheless they are of comparative minor importance, for the great bulk of the intermediate necessaries of life, such as hardware, glassware, groceries, textiles, and fancy goods, are imported. The bulk of the imports, finally, enter through four main ports. In these circumstances one would expect commercial rather than industrial monopolies to prevail, and such is in fact the. case.—(Murphy : " Outlines of Economics," pp. 175-78.) (iv) The operations of the P.A.T.A. are certain to sustain prices at their present level, and likely ultimately to increase them. Experience in Canada shows that the first move is to stabilize and
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strengthen the status quo, and next to raise the prices listed. The New South Wales report notes the same tendency. The pressure towards high prices comes not only from the natural desire of the monopolist to get more and more —assuming, of course, that the demand for the goods is sufficiently stiff to bear it—but follows from the fact that a price agreement, if successful, sets in motion certain economic causes which inhibit a fall of prices and tend towards a rise. As the protected area is strengthened and widened, more and more commodities and men enter as competitors with one another in the sheltered lines, so that the profit anticipated from the monopoly protection is in part dissipated in excessive overhead charges and superfluous expenses due to excessive numbers. In no case of which I have ever read is there a record of a price-maintenance agreement being followed by a reduction of prices ; such a contingency is neither intended nor desired by the promoters. For this reason such agreements must invariably operate against the interest of both the trade and the public. The activities of the Merchants' Association of New Zealand, as described in the Cost of Living Report, 1912, a Government publication, are very significant in this connection. The P.A.T.A., indeed, bears suspicious signs of being this old unobtrusive body in disguise ; and its noxious activities, as related by the Cost of Living Commission, would surely be duplicated by the P.A.T.A. if that body is permitted to operate. Attention is drawn to pages lxv-lxx of the Commission's report. Mr. Fairbairn pointed out that in the case of articles tariffed by the association both wholesale and retail prices had been invariably advanced, and in no case had there been a reduction in the price of any tariffed article. This evidence was uncontradicted, and therefore admitted. In the Evening Post of the 10th October, 1926, there appears what purports to be an interview with some person who is evidently a promoter of the P.A.T.A. This interview admits explicitly that the effect of the operations of the P.A.T.A. will be to raise prices, since the party is quoted as saying, "We want to stabilize prices. It will not mean that the goods will be much dearer. They may be a little dearer, but not much." An impressive point about the P.A.T.A. both here and in Canada is its brutal and cynical frankness. It makes no bones about what it intends to do, and what the effects will be. The Canadian body has made the same admissions. On page 20 of the Canadian report Mr. C. W. Tinling is reported as having remarked that " eventually full prices will be secured for everything, and this will be as soon as possible." Again he says, " When the P.A.T.A. is fully operating, full prices will be obtained." 1 like the employment of the word " full "in this connection. Though somewhat vague, it suggests amplitude and opulence, and is calculated to make the mouths of the conspirators water with anticipation. Significantly enough, the following quotation is also given : " Another important point stressed by Sir William was the advisability of being very cautious in taking the first step in increasing prices, so as to avoid the possibility of a public investigation into the legality of the movement." A careful perusal of the report in the Evening Post, and in the Canadian Labour Report, of the statements of the advocates of the P.A.T.A. will do more than the most exhaustive statistical treatment possibly could do to throw light on the intentions and certain results of this combination. The admissions of its advocates, and the contents of the constitution, draft letter, and agreement, make statistical investigation superfluous, since a formal admission dispenses with proof. They admit that their avowed object is to raise the level of prices, and to keep that level raised. The openly expressed object in the P.A.T.A. constitution agreement and circular letter is to maintain prices—i.e., to prevent them from falling, which the is same thing. The safeguard against excessive " prices is merely camouflage. Who shall define " excessive " for this purpose ? The epithet begs the question. The raising and maintaining of prices is the avowed inducement held out in the letter of the 18th September, 1926, to secure members for the P.A.T.A. Retail-price combination invariably operates upwards. (v) To raise the cost of living in New Zealand at the present time would be highly inexpedient. Our crying need is to reduce prices and costs, not to raise them. Our industries, both primary and secondary, are strained to the limit owing to the efforts of the Court of Arbitration to secure a high standard of living for the workers ; yet the high range of prices keeps cancelling out this rise in money wages and promoting a vicious circle. Award rates are stretched to the breaking-point and cannot go much higher ; and yet, owing to the price-level, which this contemplated manipulation would assuredly raise, the higher wage brings little additional comfort or satisfaction to the workers. The need is to lower prices, and to that end to encourage such efficient distributive methods as will enable prices to fall, not rise. It may be contended that proprietary articles are not, strictly construed, part of the cost of living ; but this is irrelevant, because (a) the list of such articles does in fact include many food articles and is constantly growing in scope ; (b) as already stated, protection to proprietary articles would enormously increase their number ; (c) there is no fixed definition of what is a proprietary article ; (d) such articles are in fact bought by the masses, and do in fact raise their family-budget expenditure, thus diminishing the value of their wages, causing unrest, and fostering claims for still higher wages ; (e) the cost of living is an elastic and progressive conception. (vi) Stabilized price-levels are economically unsound. It is in the public interest that prices should fluctuate with variations in demand and supply. Unless this is done there can be no economical adjustment of supply to demand, and no guide as to the volume and direction of profitable production. Prices are the barometer of production, and by their movements show the community in what directions demand is increasing or falling, or costs are increasing or falling. Fixed prices take all the elasticity out of demand and repress all tendency to variation in supply and costs. In such circumstances there could be little manufacturing progress and little innovation of a socially useful type, because the productive index afforded by price-variation would have ceased to function, and producers, especially would-be producers, would be working in the dark. (vii) The P.A.T.A. would exercise an unhealthy tyranny over manufacturers and retailers mainly in the interests of a few wholesalers. They would be compelled to adhere to one type of distributive
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and trade organization, and that a costly and inefficient one. Variation in business organization, rate of profit per unit, rate of turnover, and selling policy would be prevented, and trade methods stereotyped. This is not in the public interest. Progress depends on successful variation, and the field should be kept clear for experiments in such directions. It is precisely the most able and enterprising merchants that would be handicapped most. As more and more articles come under control this mischief would grow greater, and all trades would be bound to the same methods. There is no sphere where innovation is more in the public interest than the present costly and wasteful system of distributive trade. This innovation the P.A.T.A. would prevent. The door would be banged, bolted, and barred on progress in distributive enterprise. (viii) The P.A.T.A. constitutes an unjustifiable and vexatious interference in the internal affairs of individual traders, and would prevent them from reacting to such casual emergencies as clearing dead or slow stocks, stimulating slack trade, holding a special sale to liquidate a debt or overdraft, varying their turnover in accordance with the state of demand, and so on. By diminishing elasticity it would lessen a man's credit and tend to make bank accommodation more difficult to secure. (ix) The P.A.T.A. would prevent any type of distributive organization from existing except the private shop as at present organized, and in particular is fatal to co-operative merchandising or any other type in which profits are shared in part or whole with purchasers. All economists praise co-operative enterprise as a splendid agency of thrift and a means of elevating the standard of life of the masses. A co-operative store cannot handle P.A.T.A. articles. No private organization should be able to dictate another type out of existence by getting an octopus grip on essential supplies. The same applies to the " purchase and carry home " type of business, which eliminates certain services and costs of no value to the workers and passes the saving on to them in reduced prices of goods. This type would also be eliminated, greatly to the public disadvantage. It seems monstrous to me that any private monopoly should be permitted to menace the existence of either co-operative or " purchase and carry " businesses, which are of very great value to the workers in hard times such as the present. (x) The P.A.T.A. penalizes the ablest merchants in favour of the inert, lazy, and unenterprising. Men of brains, energy, and originality seek their profit through innovations in method resulting in cheaper supply to their customers, to the advantage of both. The P.A.T.A. would cut out this type of business man, who relies for his profit on innovation and originality, in favour of the type which relieg for profit on conspiracy against the consumer. Nothing should be done to discourage stores aiming at a rapid turnover at a low per-unit profit. This the P.A.T.A. is expressly out to kill. Efficiency and community service are the last things these people think of, and are conspicuously absent from all their literature that has come under my notice. One of the principal causes of the alarming cost of retail business is slow turnover ; and slow turnover, in turn, is partly caused by multiplicity of brands, inflated prices, and excessive numbers of traders —all factors directly fostered by the P.A.T.A. This view is confirmed by the remarks of the Canadian Commission, given on pages 12-13 of their report. They further say : — The P.A.T.A. proposes a rigid system of price-fixing and price-maintenance which would keep trade to the traditional channels of " manufacturer to wholesaler, to retailer, to consumer," compel all dealers to charge the same prices regardless of variations in their operating costs, prevent the public securing full advantage of such improved methods of distribution as have developed, and render useless, if not impossible, further methods of experimenting which might result in reducing the admittedly excessive costs of modern distribution. —(Canadian report, pp. 14-15.) Business itself, in the United States, less than a year ago expressed itself forcibly to the same effect in treating of this problem, when the Committee on Methods of Distribution appointed by the National Distribution Conference gave the following as one of its five conclusions : Marketing methods have been continually improved through the competitive attemps on the part of manufacturers and distributors to find better methods. Marketing channels and methods are not cut-and-dried. There is continuous experimentation. In some cases trade associations have attempted to block changes in selling methods. Manufacturers have been boycotted by jobbers, for example, because they have attempted direct sale to retailers. This is not right. Progress in marketing methods can be made only under a regime of free competition, whereby each producer or middleman is free to try new methods. Artificial restraints are to be condemned. —(Canadian report, p. 26.) The distributor who pioneers and devises more efficient means of distributing goods increases his business by reducing his prices and so passing on part of his economies to the consuming public. If other distributors are to maintain their position they must effect similar economies, or persuade the public that they offer greater service and that the greater service is desirable. By this method economies in the distributive system come about and are widely adopted. Under a plan of price-maintenance, such as is embodied in the P.A.T.A., it is not possible for lowcost distributors to pass on to the consumer any of the economies effected. The cost to the consumer of proprietary articles must be the same regardless of what distributor is chosen. By this system a premium is put on the elaboration of service rather than the reduction of cost. The distributor who has a rapid stock-turn, and in consequence reduced operating expenses in proportion to sales, or who by buying in quantity gets the largest discounts suggested by the P.A.T.A., makes a larger net profit, but is not permitted reduced prices and so enlarge the number of his customers : he can do so only by increasing his advertising and increasing his service, even though the public may be more desirous of lower prices than of more elaborate service. Thus, through the shutting-out of price competition, there is less inducement and pressure towards the reduction of distributive costs. In consequence progress in this direction is impeded. —(Canadian report, p. 27.) It will confirm the inefficient merchant in his inefficiency, whereas the more efficient will be restrained from passing on to the consumer any of the benefits that may accrue from increase of business or lower costs of operation. —(Canadian report, p. 28.) This system, 'it may be noted, is to be enforced by the most brutal and violent methods ; trade is to be confined to stereotyped, unprogressive, and costly channels, and maintained there by the threat of boycott and ruin. The only promising way of getting a more effective distributing process is to let any and every experiment be tried by any one who thinks he can do the thing more cheaply. And this would seem to be a decisive reason against the fixed-price system. It stands in the way of the experimenter. As regards the spread between producer and consumer, it looks to the maintenance of the status quo.—(American Economic Association : Supplement to. American Economic Review, March, 1916, p. 181.)
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It is in the public interest (a) to lower distributive costs, (b) to accelerate retail turnover ; it is in the interests of the P.A.T.A. to maintain retail costs, and therefore inhibit rapid turnover. Members are expressly forbidden to pass on to their customers any share of the discounts arising from bulk purchase and economical distribution. In other words, the economies of larger-scale operation, where they do exist, are expressly reserved from the consumer in the interests of the less efficient and more poorly organized distributors. A premium is thus put upon inefficiency and incapacity, and ability and economy are made a vice. No association involving such preposterous consequences could possibly be in the public interest. The position is almost Gilbertian. (xi) There is always a tendency in a complex community towards an excessive proliferation of petty retailers of an inefficient type. The plain fact is that one of tiic great wastes of business is the incredibly inefficient methods of distribution. To-day an article usually doubles in value between production costs and what the consumer pays. This does not mean that the distributor is a heartless profiteer. Taken by and large, the retailer's profit is not great. The indefensibly high prices of to-day are the result of inefficient production and inefficient distribution. The difference between what prices are to-day and what they might be is not so much pocketed as wasted. —(Canadian report, p. 9, quoting Mr. Filene, the well-known American merchant.) This disastrous tendency is particularly noticeable in New Zealand, where petty shopkeeping springs into being at a moment's notice, owing to the relatively small initial outlay and the ease of obtaining stocks from keenly competing wholesalers on the tied-house system. Small shopkeeping should not be encouraged to over-development. It is a lazy man's existence, productive of social waste, and the small trader, though useful to poorer and more shiftless customers because of his personal touch with them, is really as much a parasite on them as a benefactor, and fosters instead of discouraging thriftless habits and uneconomical buying methods among some sections of the population. What is urgently needed is a trend towards larger-scale business ; more efficient and less personal distributive methods. This is apparently the opinion of so experienced and competent an observer as His Honour Mr. Justice Frazer, Judge of the Court of Arbitration, given in Book of Awards, vol. xxv, p. 390, as follows : — We are of the opinion that a multiplicity of small shops, in close proximity to one another, that are able to make a living—and a meagre living at that —only because they can take advantage of being able to observe unrestricted hours when somewhat larger shops in their vicinity have to closc at specified hours, is not in the public interest. The public is generally not so well served by the very small shop, with its small range of stock and its high ratio of rent to turnover, as by the larger shop. • His Honour returns to the same point in Book of Awards, vol. xxva, page 515. It is clear that he is seized of the mischief of inefficient distributive agencies from the point of view of public welfare, and there is no other person in New Zealand whose opinion is entitled to more weight on a matter such as this. It is not easy, owing to the potency of the personal touch, to get rid of the petty inefficient distributor, and it is therefore important that no adventitious inhibitions on competition—such, for instance, as the price-maintenance policy of the P.A.T.A.—should be permitted to bolster him up in any artificial manner. Contrary to general opinion, the big department store is not eliminating the petty wasteful distributor ; and, as will be seen from the New South Wales report, the relations between the P.A.T.A. and the large efficient establishments are the reverse of cordial, a fact which in itself speaks in favour of the larger unit from the point of view of public welfare. Many large department stores, indeed, have been forced to disestablish themselves into smaller units to meet the competition of the small business. It is germane to this P.A.T.A. problem to inquire into the inefficient conditions of retail distribution in New Zealand and elsewhere, and such inquiry will have to be undertaken if our boasted intention to secure greater national efficiency is to be more than humbug ; but this point is somewhat extraneous to the immediate issue, and cannot be pursued further in this report. In any case, any artificial stimulation of inefficient small establishments is a fact of grave significance. The competition of excessive numbers is not the life of trade : it is rather the death of trade and the injury of the consuming public, and its effects are stated in the Canadian report, pages 13-14. The elimination of superfluous establishments by the natural law of competition and survival of the fittest is an urgent social necessity, and on this ground the artificial assistance conferred on such establishments by the policy of the P.A.T.A. is contrary to public welfare. An industry-which requires but small capital to carry it oil will encourage hundreds, or more likely thousands or tens of thousands, of individuals to engage in it. The great variety of circumstances and the great differences in individual skill of the numerous competitors make it likely that some few will be continually on the verge of bankruptcy, and that from time to time individuals will be failing under the pressure of competition. The elimination of these* least skilful or least fortunately situated competitors, whose manufacturing [or retailing] is carried on at the greatest cost, does not produce any widespread depression in business, but serves rather to elevate the general average of skill in the industry. While the individual unfortunates may perhaps be sympathized with in their misfortunes, their loss is, after all, a gain to industrial society, since thereby the plane of production [or distribution] is raised.— (Jenks : " Trust Problem," pp. 28-29 : the words inserted in brackets are mine and not those of Professor Jenks.) Society must have some method of weeding out distributive inefficients, and should certainly resist all efforts to maintain them in business by artificial devices aimed at the purse of the consumer. If this is not done the overhead costs of distribution would become insupportable. The process of elimination reduces costs by gradually confining business to the abler and more socially useful men. It is a gain to society, and raises the plane while diminishing the costs of business operation. There is no avenue of activity where there is more fruitless and futile waste of social energy than in distributive trade, and where a continuously operative social purge is more needed ; and it is precisely here that the competition which the P.A.T.A. desires to eliminate has the most beneficial effect, and where the elimination of competition would work the maximum of social damage. The whole of social pi'ogress depends upon the substitution of qualitative for quantitative methods of consumption.—(Hobson : " Evolution of Modern Capitalism," p. 429.)
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The operations of the P.A.T.A. are expressly intended, on the admission of its advocates, to nullify this beneficial substitution, and by keeping inefficients alive under the segis of factitious pricemaintenance the P.A.T.A. would detrimentally affect the community by the artificial prolongation of the business career of distributive inefficients. It is in the public interest that able and enterprising men should be allowed full scope for the tendency to innovation and improvement in new methods of distributive activity and service. (xii) The traditional benefits of competition need emphasis in this connection, as an element in the national character. Competition has, and always will have, its place and value in the industrial process, but its form and sphere of action are changing. As the old form passes, much that was of value in it passes also, and, if the new order is to remain healthy and vigorous, equivalents will have to be found. Where there is a struggle for survival or supremacy among hosts of small concerns in the same line of business, each man knows what is to carry the responsibility of a business and to stand or fall by its success or failure. The incentives to effort are strong. Kach has a direct personal interest in improving methods, eliminating waste, reducing costs, and striking out in new directions. There is wide diversity and ample opportunity for experiment. Initiative and resource are developed in large numbers of individuals. There is, without doubt, something of an evolutionary struggle, in which those well endowed with the qualities that make for commercial success survive, and the less competent, or worse equipped, or more sensitive go down and out. Again, the small man's independent business is a thing to himself, and, in a very real sense, a part of himself. The sma.ll business concern has personality. The employees of a small firm work for a person, and the relations between proprietor and workpeople, if not always cordial, are at least human relations. Business dealings with a smaller firm are dealings with a person, and there is little doubt that the personality'of British industry in the past has been a powerful factor in its development. The type of character produced by these influences may not be wholly admirable, but it is, at any rate, strong, forceful, and self-reliant 1 ; and it is a commonplace that the great majority of those who are to-day organizing and directing " big business " acquired their ability and experience in " small business." As for the productivity of the competitive order, the enormous quantity and variety of goods thrown upon the marisets of the world during the period in which competition was in the ascendant affords sufficient proof that, in its own time and sphere, individualism is not to be despised as a productive principle.—(Hilton : " Combines and Trade Organizations," pp. 6-8.) As contrasted with this view, nothing could be more detestable than the contemplation of a group of men living by conspirational predation on the community, and deriving profits from robbery rather than service. The urgent need of the world to-day, and of New Zealand, is more and chesper goods, and distributive effort is admittedly the sphere where the traditional advantages of competition retain most of their force and where monopoly does most harm. (xiii) The few advantages claimable for monopoly do not apply at air in the field of distribution. Monopoly subject to social control is defensible in such fields as banking, transport, and communication, where duplication of service increases cost and may reduce efficiency, and perhaps also in some large-scale manufacturing industries where the economies of large-scale production are secured in a marked degree ; but the field of distribution is extraneous for the most part to these considerations. The P.A.T.A. would, in fact, prevent the benefits of large-scale purchase and distribution from showing themselves in reduced prices, and actually would prevent rapid turnover, the essence of large-scale distribution, by artificially inflating selling-prices. P.A.T.A. methods, in fact, work against efficiency showing itself in lower prices, which is the sole justification, in other fields of business, for permission of combination. The very considerations that might be held to justify combination in some fields tell against it in distribution. No economist has ever, to my knowledge, defended the form of combination involved in distributive price-maintenance. (xiv) The placing of articles on the P.A.T.A. list means the exclusion from the channels of trade of non-listed articles. This is admitted, and the prohibition of substitution contained in the constitution of the P.A.T.A. is designed to bring it about. This will mean that manufacturing progress and invention will be impeded or entirely arrested, according to the power of the P.A.T.A. New products cannot come on to the market because of the privileged position of those already listed. This would kill progress in quality of commodities. The protected articles, too, would soon deteriorate in quality or strength under the shelter of protected prices, because their market would be assured apart from any strenuous effort to maintain their vogue through the appeal of quality. This probable deterioration in quality in the case of price-maintained proprietary articles has been adverted to by all observers of the system. The manufacturer of the proprietary article bears the main cost of advertising them himself in the first instance, and he soon comes to rely for his sales on persistent clamour through the Press, the cost of which is ultimately paid by consumers* rather than by maintaining quality, of which, indeed, the consumer is seldom a judge, and to which he pays surprisingly little attention. No observer of the existing system will deny that the matter of maintaining quality is a serious one. There is a constant tendency to nibble. Shoddy goods and adulterated goods are a great bane of modern industry. The jobber and the retailer press the manufacturer to lower his price, and play off one manufacturer against another. There are dealers who persistently suggest a shading of quality here and there—a bit of poorer material, a cheap ingredient, and all with the same fair externals : no one would notice the difference.—(Taussig, in Supplement to American Economic Review, March, 1916, p. 175.) Consumers exercise but little rational choice in buying, while, on the other hand, the march of science and the conditions of modern production make adulteration easy to effect, difficult to detect, and impossible to sheet home to the actual culprit. ... In these circumstances the consumer is powerless to protect himself.—(Murphy : " Outlines of Economics," p. 151.) Apart from this tendency, there would be a virtual end, if P.A.T.A. conditions were universalized, to the promotion of new articles or the improvement of existing commodities, because the worried manufacturer, assured of a place on the protected list, would let moderately well alone, as he might not find it easy to get a revision of his price or description on the list, or get new articles on to the list, because of the opposition of other interested parties whose jirofits might thereby be placed in jeopardy. The tendency to inertia would have full sway. The law gives no protection to the purchaser of a proprietary article, which he buys at his own risk without possibility of close examination. Under the Sale of Goods Act there is no implied warranty of its fitness for any purpose whatsoever.
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(xv) The question whether the margins established by the P.A.T.A. are fair and reasonable is irrelevant, because (a) who shall say what is fair and reasonable ? From whose point of view is the fairness to be considered —that of the manufacturer, the wholesaler, the distributor, or the consumer ? There is no definition possible of these evasive and question-begging words. " Fair " generally means either what you are accustomed to or what you can get. This was strikingly shown in the inquiry into the sugar monopoly in Australia some years ago. Question 7927: Dealing with the last five years, I must still press you to put a figure on what you think, having regard to the nature of this business and its present position, would be a fair interest on your capital 1 Answer : As much as you can get. Question 7930 : What would you put it down at ? Answer: Fifteen per cent, or more, if you could get it.—(Brown: "Prevention and Control of Monopolies," pp. 161-62.) (b) What is fair and reasonable to-day might not be so to-morrow, owing to manufacturing progress, discovery of new processes, altered interest rates, new business methods, changes in demand, position of competing commodities, and so on. (c) The gravamen of the charge against the P.A.T.A. is the tyranny it imposes and the unwarrantable interference it involves in the private affairs of the individual trader. (d) Prices would soon be raised by the P.A.T.A. if it got the chance, and its ideas of what is fair would expand with its power, (e) The P.A.T.A. kills invention, initiative, and new products and methods. (/) The P.A.T.A. preserves economic inefficients and inhibits competition. (g) The P.A.T.A. would act like a pawl on a winch : it would allow prices to move only one way — upwards, never downwards. (h) The P.A.T.A. would stultify the economic barometer constituted by the price-level. (i) Generally it has all the disadvantages, without the corresponding benefits, assuming such to exist, of a protective tariff, and is operated not by the people through the Government, but by private individuals for their own interests. If prices are to be fixed at all, they should be fixed by the State, acting through the Board of Trade, on the advice of its experts after taking the evidence of interested parties in all sections of the community, (j) The P.A.T.A. gives no guarantee of quality. (xvi) There is every reason to suppose that the operations of the P.A.T.A. would soon extend beyond its ostensible written objectives, which are intended for public consumption and are therefore made reasonably palatable. There is no merit in the contention that its objectives are open and aboveboard, because they could not be concealed from those prejudicially affected. The P.A.T.A. therefore makes a virtue of necessity by a disingenuous appearance of frankness, so transparent that it would deceive nobody. By fostering the habit of conspiracy the P.A.T.A. would soon accustom its members to further assaults on the public welfare. If men combine for one purpose they will extend the combination for other ends if it suits them to do so. In promoting secret arrangements aimed at the consumer there would soon be other objectives in prospect not put in writing at all. The Canadian report (p. 19), already quoted, shows clearly the type of predatory warfare contemplated for the purpose of driving all unassociated men from the field. These independent traders are entitled to the protection of the State, because they are a safeguard for the consumer. There is no other possible safeguard, and there are no other persons with a direct interest to fight retail monopoly. The public welfare is the prime consideration. Traders exist for the community, not the community for the traders, and the welfare of the people must take precedence. The State should not sanction the operations of any body which deliberately avows its intention to repress all traders not of its way of thinking, and to raise prices to a level to be determined solely by the interest of the vendors. No man should be judge and jury in his own case. The buyer cannot protect himself, especially with proprietary articles, and his only safeguard is the maintenance of independent competition. Competition in standardized articles is almost entirely a matter of price. This consideration is of great practical importance. Where the articles are standardized duplicates, as is the case with proprietary goods, the only possible competition is in price-levels, because other avenues are closed. If competition in prices is stifled, then it cannot take place at all. It is idle to suggest there is sufficient scope for competition in other non-proprietary lines, because (a) the field of proprietary articles is constantly extending, and (b) the obstruction of competition in proprietaries, which form so wide a range, hampers the whole competitive system of a retailer carrying large stocks, and prevents an economical adjustment of his turnover and unit profits. (xvii) There is no justification for the common notion that stores with a " low price and rapid turnover " policy pay low wages to their employees. Mr. Sutherland, who operates such stores, states that he pays more than the award rates to his employees. A business that pays high wages and sells cheap goods is a benefit to the public. If people of the wealthier class desire obsequious refinements of service that are costly to supply and that add to the price of commodities they are at full liberty to get them ; but it is unjust that the workers and others, to whom the price-level is of more importance than elaboration of salesmanship, should be penalized by being forced to accept and pay for services that they do not desire and do not greatly value. (xviii) The P.A.T.A. asserts that it aims to prevent destructive price-cutting—that is, the sale by retailers of lines at less than a price which will yield a profit—as this practice is detrimental to the manufacturer. In reply to this, it should be noted : (a) That the existence of such destructive price-cutting should be proved affirmatively, and not assumed. If it exists at all, it is confined within very narrow limits, (b) There seems little distinction between a man spending money in advertising and attracting custom through the public prints, and spending it in attracting custom by lowering certain lines. It is a free country, and a retailer should be allowed to judge which system suits him best, (c) Cutting lines does not injure the general public, while price-maintenance certainly does, (id) The P.A.T.A. remedy is a great deal worse than the disease. The less evil should be chosen, if perfection cannot be attained, (e) If a retailer is normally and as a continuous policy selling goods at a margin which, in conjunction with his general turnover, yields him a profit that he regards as satisfactory, the mere fact that he is competent to turn over at a lower per-unit cost than others whose businesses are not so well organized does not constitute destructive price-cutting. The selling
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of goods so as to yield a loss on their sale is admittedly objectionable, though, as already indicated, the retaliation of the P.A.T.A. would be much more prejudicial to the public interest. (xix) So far from giving legal sanction to such a movement as the P.A.T.A., the State should place the burden of proof of social innocence on them strictly, as their objectives are prima facie antisocial and predatory. The State should also withdraw the benefits of the patent and trade-mark legislation from manufacturers and dealers who lend themselves to such anti-social practices. To ask for the legislation of such a monopoly as the P.A.T.A. seems to me effrontery in excelsis.
APPENDIX B. Opinion given by Allan G. B. Fisher, Professor of Economics, University of Otago. I attach below the opinion which I have formed concerning the proposed operations of the Proprietary Articles Trade Association. I have read the constitution and the proposed agreements of the association, together with the newspaper reports which have appeared from time to time ; but it is obvious that any opinion suggested must be tentative, as the constitution is inevitably the merest skeleton of the association's programme, and a decision as to whether its policy is good or bad depends in part at least on the way in which the policy is to be carried out. I would, however, suggest the importance of the point that it is impossible, or at least unwise, to form an opinion concerning the association's work without considering at the same time the much wider problems which it suggests. The association apparently aims at an organization of supply such that the articles controlled by it will everywhere be sold at a uniform price that will return to manufacturer, wholesaler, and retailer a " reasonable rate of profit." Nobody knows what a " reasonable rate of profit " is, and it is very doubtful whether it is possible to define a standard of reasonableness with even approximate exactness. The association proposes to achieve its object by cutting off supplies of all the proprietary articles concerned from retailers who sell below the prescribed rates ; and it is argued that this is not only in the interests of the retailers who do not wish to cut prices, but also in the interests of manufacturers and of the public generally, because articles the prices of which are persistently cut are eventually driven from the market altogether. It is no longer possible to argue that every price-regulating agreement is bad, for nobody seriously believes that unrestricted competition in prices would be in the public interest, even if it were possible. If we take a view extending beyond the interests of the immediate present, it is clear that prices under some circumstances may be too low, and that not merely from the point of view of the seller. Each case of regulation should be considered on its own merits, paying due attention to the broader principles involved in the decision. The bookselling trade has for some years been organized on the basis of fixed prices, and no one now suggests a return to the old unrestricted price-cutting. Similar agreements are believed to exist for the regulation of many other prices, and have reasonable grounds of justification. In most advanced communities competition in the hiring of labour is now systematically limited, and this policy is defended on the ground that it is in the public interest to divert the attention of employers from the reduction of wage-rates to the reduction of other production costs through the adoption of more efficient methods. It is rightly thought to be improper to allow inefficient employers to bolster up their position by paying their employees less than the prescribed wage-rates. Similarly, it might be argued that the public interest is better served by agreement among retailers to supply articles at reasonable prices than by cut-throat competition, which causes frequent and unnecessary wasteful changes in marketing arrangements, and in which apparent economies to the consumer in the purchase of some articles is almost certain to be offset by the higher prices which he has to pay for others. A distinction would, however, be drawn between the retailer who sells some goods at low prices because he can make good his losses by higher prices elsewhere, and the retailer who can afford to sell more cheaply than his rivals as a result of more efficient organization. In the latter case the advantages of cheapness are real and not merely apparent, and it is in the public interest that such a man's position should not be rendered difficult. The abolition of the first type of retailer, which is the object of the P.A.T.A., is perhaps desirable ; but if the methods proposed for dealing with him involve the disappearance of the second type also the advantages to the public are much diminished, for in the case of a retailer who is prohibited from lowering prices it is not so clear as in the case of the employer who has to pay standard wages in what direction his greater efficiency can give him the advantage which it is in the public interest that he should receive. It appears (though I have no conclusive evidence on this point) that the association is intended in part at least to protect the small retailer from the competition of large-scale firms or chain stores, such as now seem to have a firm hold in most large cities. The complaints of the " small " business man always arouse a certain amount of sympathy, and it may be argued that, quite apart from purely economic considerations, there are social advantages in encouraging his survival. But though the pressure of larger units may cause him grave inconvenience, which the public generally ought not to ignore, it is often as difficult to attach any precise meaning to the " unfair competition " of which he complains as it is to the " reasonable rate of profits " for which he asks. Very often " unfair " merely means '' unpleasant," and what is unpleasant to the small retailer is not necessarily harmful to the rest of the -community. It is now a commonplace to remark on the excessive costs of modern distribution and the extraordinary growth of small retail establishments of all kinds. Though this, like most popular impressions, is probably much exaggerated, there seems to be solid ground for the belief that the work of distribution is more wasteful and costly than it need be. There is, however, a good deal of popular support, both sentimental and otherwise, for the small independent business unit, and the
21— H. 44a.
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term " monopoly " usually carries with, it a definite suggestion of blame, whether deserved or not For many purposes the small retailing unit has obvious advantages which no doubt will preserve for it a permanent place in our commercial organization, but it is very doubtful whether the public interest would not be better served by the amalgamation of some at least of the existing units under a common management and the disappearance of others. Compulsory adoption of a uniform pricelist would seem to give a definite check to any movement there may be in this direction. A standard rate of wages is intended to, and does in fact, give an advantage to the more efficient employer, but a standard retail price-list would tend to give an advantage to the less efficient retailer, or at least make it easier for him to maintain his position. It is, of course, impossible to say at this stage what price policy the association is likely to adopt in the future. Such bodies generally, and no doubt sincerely, disclaim any intention of raising prices unduly, but it is not uncommon for differences of opinion to arise over the meaning of " unduly." It is by no means certain that it will be to the interest of retailers to raise prices, as any apparent advantage so gained might be more than offset by a diminished volume of sales. The apparent advantage, however, has obvious attractions, and might blind the association to other equally important considerations. In either case —i.e., whether the association continues to function, or retailing is more and more concentrated in the hands of large business units —the problem of price-control from the point of view of the public interest remains. Experience generally raises some doubts as to the efficiency of legislative measures intended to abolish such organizations as the one under investigation, and there is a great deal to be said for admitting this, and then taking further steps to regulate their activity and keep them under control. This, of course, raises wider problems than are immediately suggested by the association's programme, but it seems desirable that they should be faced. Much more accurate and systematic knowledge would undoubtedly be an essential prerequisite of any action. In any case, I would suggest that the case is clear in favour of a much wider measure of publicity being given to the details of such operations as the association proposes. Whether its work is regarded as being in the public interest or not, insistence on publicity would from the outset tend to be a moderately effective check on abuses of its powers. This also is a principle which could with advantage be extended much further. One minor point may be added. So far, co-operative retailing has not been practised in New Zealand on any considerable scale. If, as I believe to be the case, it is desirable that it should be encouraged, both from an economic and from a broader social point of view, it would be unfortunate if it were checked by the operations of an association which would prevent co-operative societies from paying to its members the dividend on purchases which is a characteristic feature of their constitution. APPENDIX C. Opinions given by A. H. Tocker, Professor op Economics, Canterbury College, Christchurch. I beg to report as follows upon the material concerning the Proprietary Articles Trade Association submitted to me. 1. This material consists of — (a) A copy of the published constitution and the provincial committees of the association ; (b) Interim report of the Registrar, Department of Labour, Ottawa, Canada, on the P.A.T.A. in Canada ; (c) The Commercial Trusts Act, 1910, and the Board of Trade Act, 1919. 2. Aims of the Association. —The association appears to me to consist of representatives of manufacturers, wholesalers, and retailers, whose objects may be reduced, as far as this report is concerned, to — (a) Concerted action to secure the common interests of the trades (and traders ?) represented ; (b) The prevention of price-cutting, the maintenance of " fair " prices, and the prevention of substitution of other articles for those included in the association's lists. It is difficult to judge precisely how far these objects might be applied in New Zealand, but it appears probable that the association's aims involve in practice — (а) The fixing of standard prices to wholesalers, to retailers, and to the public, which involves the maintenance of standard rates of profit for both wholesalers and retailers, and the prevention of price competition in the articles listed ; (б) The imposition of effective penalties, including the boycott, as far as articles listed by the association are concerned, upon traders who fail to adhere to the conditions imposed by the association. While it is unfair to assume offhand that the detailed practical application of the association's programme would be the same in New Zealand as appears to be proposed in Canada, it seems probable that the above is a fair summary of how that programme would be applied. 3. Advantages of Operations of Association. —It appears that the advantage to accrue from the operations of the association would be secured very largely by the wholesale and retail traders, perhaps to some extent by the manufacturers, and to a very small (if any) extent by the consuming public. The main advantages may be summed up as stability of marketing conditions ; stable prices to the manufacturers, wholesalers, and retailers ; a fixed margin of profit; and the elimination of competitive prices. It can scarcely be held that much benefit can accrue to manufacturers, for most articles
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covered by the association's operations are, I presume, imported articles, and New Zealand forms but a very small part of their market. For locally manufactured articles stable prices might be an advantage to the manufacturer, but stable prices at a level higher than the existing level would almost certainly entail a reduction in sales, and hence in production. Further, the plan appears likely to narrow the channels through which articles are to be distributed to the public, and it might also narrow thereby the market for those articles. 4. Disadvantages of the Operations of the Association.—The disadvantages resulting from these operations appear to me to outweigh the advantages. The stated object of the association, to prevent price-cutting, would almost certainly take away from many retailers who, by reason of their organization and efficiency, can handle goods more economically and therefore sell more cheaply, and place that trade in the hands of such retailers as are willing to observe the conditions of the association, and who, owing to different and usually less efficient organization, are able to handle goods less economically, and can therefore afford to sell only on a wider margin of profit. In effect, the aim of the prevention of price-cutting is the elimination of price competition, and price competition appears to be essential to economy in distribution and to progress. (a) Distributive Organization. —Under free competition of prices the traders who can distribute goods most economically can undersell their competitors, and therefore lead the market and secure most of the trade. Less efficient and less economical organizations for distribution of goods tend to be forced off the market or to be weeded out. It is through the operation of competition mainly that society is enabled to make use of " that most invaluable agent of progress, the scrap-heap." The elimination of competition in prices, too, tends to mean that the existing distributive organization would be stereotyped and become stagnant. The costs of distribution of goods in New Zealand are at present almost certainly much too high, and there is much room for improved organization in the direction of more economical and cheaper distribution. Given competition and free enterprise, there is always some incentive to change, experiment, and progress towards better methods and organizations, and always a reward for success in achieving improvements. The elimination of price-cutting tends to remove both the incentive and the reward of progress. It even serves to protect inefficiency in distribution by securing the same rate of profit for the efficient and inefficient businesses, and it would almost certainly entail higher ultimate charges to the consumer. Probably every economist would endorse, as of universal applicability, the quotation on page 26 of the Canadian report on the P.A.T.A.:— Marketing methods have been continually improved through the competitive attempts on the part of manufacturers and distributors to find better methods. Marketing channels and methods are not cut-and-dried. There is continuous experimentation. In some cases trade associations have attempted to block changes in selling methods. Manufacturers have been boycotted by jobbers, for example, because they have attempted direct sale to retailers. This is not right. Progress in marketing methods can be made only under a regime of free competition whereby each producer or middleman is free to try new methods. Artificial restraints are to be condemned. I regard this passage as applicable in every way to New Zealand conditions, and the points raised therein should certainly receive full consideration by the Committee of inquiry into the plans of the P.A.T.A. (b) Consumers. —The effect of the operations of the association on the consuming public appears likely to be directly contrary to their interests. Price-stabilization, the prevention of price-cutting, &c., almost always means the fixing of prices at a level which will give fairly generous profits to distributors, and which is usually well above the competitive level. In this way the burden of extra profits, as well as of maintaining a distributive organization which is presumably less economical than a competitive organization, is thrown upon the consumers. At the present time the general trend of prices in many retail lines appears to be downward. There has been for some years a marked disparity between the wholesale price-levels of many of New Zealand staple products and the retail prices of many articles of consumption. Mass production in other countries, and increasing competition in local marketing, appear likely to depress the prices of these consumption goods to a level more easily reached by the local purchaser. But it is a common feature of market history to find in times of keen competition and falling prices, which are to the interest of the consumer, concerted efforts made by groups of producers or traders to maintain a high level of prices for their goods, though that high level be directly opposed to the consumers' interests. (c) The Monopolistic Tendency of the Association.—The New Zealand Cost of Living' Commission, which reported in 1912, recommended, after a thorough survey of factors affecting the cost of living in New Zealand, that the Commercial Trusts Act should be widened to embrace all commerce, that it should be made illegal for any combination of traders to arrange selling-prices to the retail trade or the public with a direct or indirect penalty for refusal to observe those prices, and that it should be an offence to make it a condition of sale that goods must be sold at prices fixed by the vendor. (See H.-18, 1912, p. xci.) Here is a clear expression of expert opinion regarding the advisability of preventing price-fixing and maintaining competitive prices. The Commercial Trusts Act, 1910, is equally definite. A commercial trust means, inter alia, any association having as its object that of influencing the price of any goods, or maintaining any monopoly in the supply or demand of goods (sec. 2) ; and every person commits an offence who becomes a member of a commercial trust (sec. 3). A schedule, however, limits the application of this Act to certain classes of goods. It laid down a principle very definitely and then limited its application. It is difficult to understand the limitation, for the general principle, if applicable in the case of human foodstuffs, &c., is surely applicable elsewhere. The principle of maintaining competitive prices as far as possible is an essential part of our economic system, which relies very largely on competition to secure the most economic allocation of our resources amongst different uses in production and marketing, and to maintain both prices and profits at the lowest level for which men can be found willing to render the necessary services. This
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principle is supported by the law in the Commercial Trusts Act, and it is strongly entrenched in the minds of the masses of our people, who would certainly view with the greatest concern any violation of their belief in that principle. Further, the legal sanctioning of price-fixing operations, such as appears to be a main object of the P.A.T.A., would provide a very dangerous precedent in New Zealand, one that might have far-reaching effects, and one for which few would care to accept responsibility. 5. Conclusion. —These considerations are submitted to the inquiry Committee with my full knowledge that I am largely in the dark as to the proposed operations of the association. But in my opinion, though some advantages to traders and others may be found to support the case for legalized price-fixing, the interests of progress in marketing and of consumers, as well as the danger of precedent in sanctioning monopolistic combination, are so overwhelmingly strong that the disadvantages to the community which might result from the operations of the association altogether outweigh the advantages.
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THE PROPRIETARY ARTICLES TRADE ASSOCIATION. REPORT OF THE COMMITTEE OF INQUIRY APPOINTED UNDER SECTION 13 OF THE BOARD OF TRADE ACT, 1919, TOGETHER WITH MINUTES OF PROCEEDINGS AND MINUTES OF EVIDENCE., Appendix to the Journals of the House of Representatives, 1927 Session I, H-44a
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184,511THE PROPRIETARY ARTICLES TRADE ASSOCIATION. REPORT OF THE COMMITTEE OF INQUIRY APPOINTED UNDER SECTION 13 OF THE BOARD OF TRADE ACT, 1919, TOGETHER WITH MINUTES OF PROCEEDINGS AND MINUTES OF EVIDENCE. Appendix to the Journals of the House of Representatives, 1927 Session I, H-44a
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