ALLEGED PROFITEERING

Dominion, Volume 13, Issue 155, 26 March 1920, Page 8

ALLEGED PROFITEERING

■ CHARGE AGAINST A 'GROCER i -'THE FAHU PROFIT QUESTION A Gj NG up ;• : • ' 1 • -v The first charge of profiteering trough • in ..Wellington amder the new Act wai "• h»rd .p.j'the;. Magistrate's Court' yester dav- ino'rnine before Mr. E. Page, S.M. The defendant was Bertie Smith Kroceri lS»Oourtenay Place, and .the in .formationijvfjfj," that" on January 30 hi i 'did sell tO"OTB"HnzeI Edith Carroll cerj ivit, two .bottles of Mel- ' lins Pood, at a price which wns unreaf eonably high, to. wit, the price' of 3s. : fid:-irbottle.-- ;• • Mr.-J. Prendeville, of the Crown Law : Office", appeared for the prosecution: and j ■ Mr. A.. Grav. K.C., with -him Mr, A. M, I' Salek.for the defendant. Mr. I-rendeville,' in opening, said that this was the first case under the Act— ? the Board of. Trade Act. The defendant 1 carried.:on-,business'as'cash grocer,- and .from, time to time he advertised that he was 'a' food'Spetialist,• and sold goods_at cut prices. That was quite feasible, for being a"' cash grocer he -was able to elim- ' inate certain expenses, such as tad debts, ; the cost of keeping accounts, etc.., _On ; the. date in auestion, in the evening, Mrs. v Carroll, who was a visitor to Wellington from' Auckland, went to the. defendant s shoo and asked for two bottles, of Alel- . ]in's ( Fobd/ rind tendered two half-crowns. ; She wanted'the. food for her baby, who • was then sis months.old, as she had been ~ feedine him for some time on it.< -. fShe !■■' had not paid more than 2s.'Gd. per poi- - tie for the food in Auckland. : The shop 1 Assistant, who was attending her, said ■ the;, price was 3s. Gd. per bottle; she. pro- ■ tested' but paid the 7s„ and reported the ■ matter. Inquiries-were ■ Jiiado, and the prosecution was instituted. With re- ■ card-to Mellin's Food, Golhn and Co. ■ ' were the New Zealand agents, and tho food was manufactured in Australia, and their price to the. wholesalo merchants was'2ss. Gd. per, dozen,-less'lo pel-; cent . end 25 per cent., and tho wholesale mer- ' chants sold to the retailers .at .255; >6di, "less 21 per'cent, if paid by a 'cerhun date/otherwise the price was net. The defendant purchased two ..cases of Mollin's Food from A. S. Paterson and ,Co. -, in" October last' -at 255. Gd.. ; less 2LP« • 'cent ' The Tetail'.price of Mellin s Food , 1 at other;crocers was 25.-9 d/ a .bottle, so that-the profit made by Smith was about f'v •40 per "cent., and was • 110 per . cent' hieher than .the average retail-profit; As - a cash mocer. the defendant should have been able to sell the food at a less profit, than a grocer Selling on credit, or. . tnefaniilv eroeer.- On this particular lino there should ho no loss by depreciation because fiollin and-Co. .refund or replace, food eoine stale or caking, _and this was • well known in the trade. MellinsFood had a fairly regular sale,'and Messrs. ." Gnllin and- Co. assert that they can'dispose' of' all tho Melliri s Food'that they ' could set.'-' The'.next, question, was what was meant by a. fair and .reasonable price? Some retailers think, that a reasonable price-is the last penny they can extract from their customers without : losimr their'trade. Ho would call evidence'to show that amongst the grocers who stock.Mellin's Food the price was2s. 9d. per bottle. Be contended that averaging up could not apply in this ; case, and auoted-.tlie section of tiie Act boarinc on. tlici point. Counsel tnfen pro1' coeded. to,call'evidence. Hazel Edith Carroll, wife of; Robert : Carroll.,''of Auckland, gave evidence as to the .purchasing of tlio two bottles of Mellin's Food. A -, „ "William Aitken, traveller, employed jy Gollin and Co., gave, details as. to the price' of the food. , : , Norman T. Raymond, departmental manaEer for A.' S. Paterson and Co., said '• ' that defendant -purchased two dozen bottles,flf Mellin's' Food on October 2 at ' 25s 6d„ less 2i'per cent, if paid-beiore '■ tho 25th ot the- following month.- , Cross-e,-ariuned: -witness said he believ- - ed that'iSmith''did riot.pay on due date, arid.;ther price therefore became 255.,.bd. not." ' ~ " ; Hcvydon,. giocer s assistant, employed hv .Wftrdell and Co., said that his firm stocked Mellin's Food, and their price was-:2s.i.i)d. per bottle. ' To ,Mt: 'fii;ay: They were'always sell- : ing Mellin's Food, but the totiil.sales did • " not '.amount'to much. . It was a slow ; telling-line., . " '" _ William' Cro'iik, manager of H. JJ. Wen- : nctt's Xa'mbton- Quay shop, said that .' Food at 2s. 9d. a hot- . tie. 'It was slow-s6lling. ' . ' v . To Mr. Gray; They had to make'a " larger profit on slow-selling lines to make ' -up for,Wthe, smaller profit- on tho quickselling, lines.;''"That was the .recognised ;. rulo.rf thV.ti'mlo. • - . ; ' : B/ T.. 'Baire>';','lnspectoT.'of Awards, and officer for tho Board ,01 : ■ Trade eaid-he made inquiries of various . r crocors mid chsmists rind found that the pfiS ofMellin'g Food generally was 25.Od: iv bottle. On February 11 he saw Ptintli^aiid 1 risked him his price, and .he s'jiiiV' 3lv Gd.' r pfr ; Kottle. Smitlr said- ho purchased his supply from A. . . son.ond';Go.,'<and thought he p4ld 303. , «o ; ; "dozeni • This closed the rase for tho prosecution.' , * , ' .Mr Gray l -contended tlmt the prosecutioi had not established a case -which, ' ' wodld;.'itetifj' :His AVorship in .caUing ■ ■uptfri'tho'defendant to answer. . .The only • faints'7tliat.^-.w'ere true wero« that the wholes'iilol price 'was 255. Gd., 'less 2§ per ' 1 cent, and that the retail price ' gener-•i(llr'was--2s: 3d. ' The profit may t pr ■ BPiy." not be - considered to be a' fair one oh:;that . particular line, but-lie ~con- . tcnde<l -that there was no.principle -by ■/ . which the Magistrate could be . asked to : «jiT-that, if a grocer chooses to.ask;.n ; lii"her.' price than . those in the same ■ lino - of business he was amenable ; criminal prosecution. . He knew that i His Worship would have difficulty in, < Buyijig what was an unreasonable price' : is"'there was 'nothing.to guide him. at 1 , all:. Counsel quoted the Act and con- i ■ fended that' tho Court ill determining what was a fair profit was not bound to j look at the prices charged for a particnJar. articlo and say whether or not, the I /prico was, fair and '■ reasonable. He ( ■ quoted the provisions in the English Pro- I flicfiring Act, and compared, them with < -the-New Zealand; Act, and also referred I to the decision in the case against George j (ind Xerslcy ajid contended tlwt ' the 1 - Court must have reiard to the whole f bnsiness and the Tate of profit:or into of los 3 that was being made on other i lines. - . The practice of averaging or i evenini up, was a reasoiiablo practico .and A generally adonte'd by traders. The. de- J fendant had 'set himself out to be , a j cheup grocer; lie catered for a, largo Koc-tion of the community 'rtnd did a / large Tetail trade. It was a mistake ' to .-say that he was a cash grocer, for •ho'-lirid a 'number of i customers on his J l)00ks. 3lellin's Food had not a great J ; s'lle, there were other lines that competed with it and. so far as retailers were concerned, it was a slow-selling Jine There was no laTge demand for j It and it was not in popular favour. .•Bertie Smith, the defendant, said that lie was formerlv in business in Berham- , poro and acquired the Courtenny Place I InsliieM in -May, 1918. He sold for cash, but lie also gavo credit and hail a fair^number of names on his books. Ho , did a largo, retail business. Ho set ' out to do a ; cash Tetail business at cut prices, and. generally to-dav his prices. loiver than thoso of other grocers. » Witness took over an established business in--Courtenny Place and had increased the' turnover bv over 500 per cent. He. stocked jifellins'lood, r,nd ■ also a variety of • other foods. ' Some ' wew slow'of sale • nnd others were belter. Witness said that ho bought two dozen bottles of Mellin's Food from A. S,\Tal>rson and Co., and dnring the j pix .'iiiontlis lie had only sold four l>ot- 1 ties;' It wis a slow-selling line. ..He j piit- tlio price of 3s. Gd; on - Mellin's t Food, Vrheri he'revised his prices in . Do- c ceinber last..-. Up to that time the. price c wlis 2s. Oil. lib had made a mistake in j the cost: he they cost 35., but i he .eonsiilered his prico of 3s. fid, was j ; a fair one for. such a slow-selling line. ; : The rato of profit ovor his whoje. buei- n iMfilfflsCOffit fixed; Jh'ff.ldifl; Jioti to. make a special'i'ato pf/'prefit. Analysing his figures ho foiind that ho mado n-rldss; of G per cent, on eggs, butter j - arid sugar, which constituted, about « three-eighHis of his business. Many j grocers Mid 'not stock Mellin's Food, j ■There were some lines in his business

G that yielded a higher on certai: lines that were sold in very small quar tities tho profit may be 150 per cent, t 209 per- cent. The nominal profit o Mellin's Food at his price and on hi turnover was equul to 22} per cent. Mos grocei's sought to obtain 25 per cent. t< 30 iier cont. gross on the turnover. Hi profit oil the sale to Mrs. Carroll wn: 22} per..cent. Witness produced bal aace-sheets in support of his slate : nients. J. JL'lntosh, accountant, said that hi prepared tho hooks of the defendant, anc ,- hud .prepared'tho balance-sheet produce for',the half-year ended in June. Tin rato of net profit made by Smi'li was • too l<w compared with other similai businesses, and was .not enougli to covoi it contingent risks. The net profit on th< ? turnoi-er in Courtenay Place was equal to about two shillings per cent. Takinf ?" the biisine.=ses at Berhamporo and Cour- , tenav I'lace together tho net profit waf ,' only .2 per cent. Witness had advised ll * , the defendant that he must endcavoui 10 to increase, his net profit. The usual f" thing was a gross profit of 25 per cent, and a net profit of 5 per cent. Smith was* selling a largo number of lines at '■ verv low prices. His profit on the sale of Mellin's Food in relation to turnover ~ was 32 per cent., aiul witness thought f ] that this was quite reasonable on a small and a slow-selling line. . To Mr. Prendeville: The gross profit on tho Berhampore business was 18 per T cent., and tho net 10 per cent. For If ricvarlv seven months the total net profit " on the turnover in Courtenay Placc was ? a ...tittle over .£l3. Oif the actual, sale of the t.wo hottles of Mellin's Food it was r 32.11 per cent, on turnover. The stock I' in the .Courtenny Place shop ivas turned ' over nine or ten times in tne year. 11 To His Worship: On Smjth's owircapi- '■ tal invested in the Berhampore business [! the profit was 33 per cent:, and adding loan, capital to his capital the .return was 11.7 per cent. . On both businesses I" the return on Smith's own capital in- ° vested was equal to •18.8 per cent. net. If' the business had increased in tliu same ratio as in the past, and'the samo ~ rate of profit had been maintained, the i net profit now would be slightly greater: H. D. Bennett, managing director of I H. D. Bennett, Ltd., said he had two * crocerv stores, and had had ft long exDerience of the trade. Grocers generally (KDectcd to get from 20 to-25 per cent. ! Kross profit, and 5 per. cent;, net profit. The auick-selling lines carried a small profit, and they looked to make up the avowee profit on other lines. Me.lm s '' Food was a slow-selling line. His firm was selliiie the food at 2s.' 9d. per bottle. ' Mr. Grav: Having regard to the limited sale of tho line, do you think the prico asked by defendant was unreasonable?—"Jt depends on what you mean py ! unreasonable. Ii can say this, that tho profit obtained was not unreasonable, lor ] a s'.owjselline line in their class , ot • business." . • , __ Continuing, witness said that there were many lines, such, for instance, as -spices, which were sold in , veiy small lots-ounces. Tho profit, it 'workod out, wo-uld bo about 200 percent. Smith apparently made- his- extrenies furtlier apart tnan most grocers, that is to say, he sells some of his goods at too low a price. The price charged- tor the Mellin's Food was high, but the rate of profit obtained,. 40 per cent;, was not . unreasonable on slow-selling lines 111 tho crocery trade. There was no reason ivhj all grocers should sell all articles, at the same prices. ' , To Mr. Prendeville: In his business ' .tlisv aimed to Ret'a netprofit of: s.per cent, on turnover, but they did J 1 ® 1 way's rot it; There was no combination in the grocery trade, no price fixing of • anv kind. He turned over .hi? -stock: from eitrlit to ten times in the 3 , V R rnon G. Collins, bookkeeper to Smith at Courtenay Place, gavccvidence as to Smith doing a cash as well as a credit business. " During the past se\en months lie noticed that R°° ds 1 ? 1 sold too near to cosi price, and he had called Smith's attention to it. - - -The. defendant, recalled, said that Mr. M'lntosh did adviso him to increase his orices but ho had not done so, that is to sav he had not inerawed taa f as'to increase his profits. He hk prices only where the priccs jo lnm .wSeased.- This had no.eftect on his profits. /, __ ■' ' This closed:the case and Mr. Giay addressed the Court briefly on the evidence Prendeville called attention to tliri • fact that Smith, adm itte cl that lie had ; P>afifi a mistake in the cost of Mel ,lin's .Food. He, thought the price was 3s' and fixed the selling, price at 35., Gd. Thus on this slow-selling' line to l"" 1 prepared to accept a very small pioht, and vet he says that hifl profit b,s now, ascertained.-was reasonable., Mr. wen deville contended that one method of as-ct-rtainimr what was a reasonable puce, .fof an article wis to compare the price with that charged by others in the tiade for. the same article. ...... . His AVorship reserved his decision.