DAIRY POOL MUST FAIL

Sun (Auckland), Volume II, Issue 364, 26 May 1928, Page 10

DAIRY POOL MUST FAIL

CONTROL NEEDS PRICE-FIXATION MR. GOODFELLOW ASSAILS BOARD’S POLICY IN replying at length to the chairman of the Dairy Control Board (Mr. W. Grounds) Mr. W. Goodfellow, who resigned unexpectedly earlier in the week, implies that Mr. Grounds has indulged in inuendo in questioning the bona fides of the New Zealand Co-operative Dairy Co., and has placed inaccurate statements of the position before the producers. Mr. Goodfellow reiterates the determination of his company to oppose disclosing returns for export licence purposes and declares that Waikato opinion in respect to the board’s policy has remained consistent.

“JJOW can the pool be a success, when the board has definitely decided not to fix prices nor to pay for an audit?” he asks in discussing the abolition of compulsion and price fixation. “The new scheme, if persisted in, will undoubtedly have a depressing effect on the market, and result in lower average prices. A pool without price-fixing places greater power in the hands of Tooley Street, and gives more scope than ever for manipulation.’’

“Mr. Grounds claims to have been tolerant. Others have been even more tolerant! For that reason I have had nothing to say publicly regarding the new Control Board policy, as advocated by Mr. Grounds, and supported by a small section of the dairying community. A statement of facts, however, may help to correct some of the many inaccuracies made by M r. Grounds, who obviously wrote in the last “Exporter” while smarting under his recent defeat. Nevertheless, one has a right to expect the chairman of the Control Board, above all people, to be scrupulously careful to adhere strictly to facts, and on no account to misrepresent the attitude of an important section of the industry. “When advocating absolute control Mr. Grounds followed a wel-defined path, and simply applied to all New Zealand a system of marketing which had been thoroughly tried and proved satisfactory by the New Zealand Cooperative Dairy Company. In that campaign he had the consistent and solid support, not only of the Waikato, but also of the South Auckland Province. Now, however, Mr. Grounds is attempting an experiment which, if carried to its logical conclusion, may prove to be an even greater disaster than that which befel the industry with the downfall of absolute control. This is the considered opinion of the management of the New Zealand Co-operative Dairy Company, with nearly 20 years’ world-wide marketing experience. PRESENT POLICY DANGEROUS

“What is the essence of the board’s present policy? The initial step of collecting London account sales and obtaining a return of all f.o.b. sales 14 days after shipment, may in itself appear quite harmless, but this is in fact only a preliminary to the formation of a national marketing scheme, as conceived by the chairman, which, without price-fixing, would land the industry in an intolerable position. Even the initial steps so far made are cumbersome, dangerous and annoying to the industry. For instance, all f.o.b. sales, othex’ than those made by the New Zealand Co-operative Dairy Company, are at present made by agents and merchants, and not by the co-operative dairy companies; therefore the required f.o.b. returns would give the agents, and not the co-operative dairy companies, valuable information, which would result in the immediate undercutting of prices to the detriment of producers. It is claimed that this information would be confidential. Past experience in that respect is not consoling, and in any case, if confidential, of what use would it be?

“Knowing from actual experience exactly what the outcome of the giving of this information would be, I strenuously opposed the demand of the board for this return, as it was an utterly stupid idea.

Again, the Control Board’s demand for copies of all account sales in London is another useless expense. Such account sales, without a daily sales return and a rigid audit, are worth little or nothing for the purposes of comparison. For instance, one London agent might sell ‘to arrive,’ another ‘ex ship,’ and a third ‘a fortnight after arrival, and a fourth might hold for several weeks for a rise in price. In other cases, the agents adjusted account sales to meet competition in New Zealand. This is what is happening under existing conditions. Under varying circumstances, each method in turn will make the best showing. How, then, can a comparison under the board's plan be of any value to the industry? ‘The board has definitely decided not to fix prices nor to pay for an audit—how, then, can a pool be a success? The new scheme, if persisted in, will undoubtedly have a depressing effect on the market, and result in lower average prices. A pool without pricefixing places greater power in the hands of Tooley Street, and gives more scope than ever for manipulation.” WAIKATO HAS NOT CHANGED „ Proceeding, Mr. Goodfellow said: “The New Zealand Co-operative Dairy Company inaugurated a London selling policy seven years ago, which, after exhaustive examination, was adopted without alteration by the Dairy Control Board. Subsequently the Control Board changed its policy, and the New Zealand Co-operative Dairy Company immediately reinstated Mr. J. B. Wright and its old policy, under agreement with Amalgamated Dairies, thus securing for the industry the services of Mr. J. B. Wright, who is recognised on all sides as an exceedingly able man.

“Amalgamated Dairies has been formed by the New Zealand Co-opera-tive Dairy Company, Limited, for the express purpose of carrying out the policy as adopted by the Control Board; and, in order that the maximum results might be obtained, the New Zealand Co-operative Dairy Company has agreed that all other cooperative companies in New Zealand shall be ~ offered equal marketing opportunities gratis. “Therefore the New Zealand Cooperative Dairy Company, through Amalgamated Dairies, Is, in fact, simply attempting to do by voluntary action, what the Control Board has failed to do. In view of that fact, why should the chairman go out of his way to indulge in innuendo and questioning of the bona Tides of the New Zealand Co-operative Dairy Company and Amalgamated Dairies, and its policy and management, when the whole fault of the change lies with the board itself? The industry can rest assured that the Waikato has not changed; it is the Control Board that has changed its policy. “Before the absolute control policy was agreed to, all dairy companies throughout New Zealand had ample

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

“Mr. Grounds’s statement to the effect that the New Zealand Dairy Company promptly signed the Control Board’s licence (a demand supported by a threat to hold up shipments) is correct, but why does he suppress the facts with which he and members of the Control Board are conversant? The Control Board’s licence was sent to Hamilton during my absence and was signed as a matter of form and returned promptly to Wellington, in order to prevent the holding up of exports. Some weeks later this fact %as discovered and the directors of the company placed the matter at once in the hands of Messrs. Earl, Kent, Massey and Northcroft, solicitors, Auckland, and, prior to the next meeting of the Control Board, Mr. Kent and myself /visited Wellington and interviewed * Mr. Grounds, when the company’s position was clearly stated and accepted without question. “Immediately the board met, the chairman acquainted members with the nature of Mr. Kent’s visit and I myself made it quite clear to the board that in no circumstances would the company agree to the new policy adopted by the board, without reservation. Mr. Grounds’s statement regarding the treatment of the document as ‘a scrap of paper’ is not only uncalled for as far as the New Zealand Cooperative Dairy Company is concerned as he knows the facts, but is a gross insult to the company and its management. AGAINST LEGAL ADVICE “Mr. Grounds refers to the board’s ‘legal advisers’ and their advice, but greater frankness on his part as to the actual facts might have been expected. He omitted to state that the board’s legal adviser is not Mr. Gray, K.C. (whose view he gives), whose opinion was sought only after the board’s own solicitors’ opinion had been obtained, i

and found to be very unsatisfactory in relation to the policy the board was attempting to enforce. The board's regular solicitors are Messrs. Chapman, Tripp, Blair, Cooke and Watson and in their opinion, which is a very full and carefully considered one, they make it clear that the board is acting ultra vires.

“In discussing in detail the board’s desire to incorporate in the licence the conditions objected to. the board’s solicitors declared: ‘Our opinion is that in carrying out any schemes of limited control the board has no power to impose conditions other than conditions relating to the process of export. The conditions mentioned are both conditions that are of necessity capable of being performed only after the process of export has ceased. . . . We are of opinion that under a system of limited control the board has no power to impose such conditions in such a way.

. . . The board has neither power to make nor power to enforce the proposed conditions.’ “It would interest the dairy industry to know that the foregoing opinion is suported by Mr. M. Myers, K.C., and Messrs. Earl, Kent, Massey and Northcroft. In view of the very questionable legal position thus revealed, it became necessary for the board to obtain signed authority from the whole of the dairy factories of New Zealand to enable it to pursue the course decided upon, and this was extracted by a threat to the effect that the produce would not be exported unless the necessary authority was forthcoming. Very strong exception has been taken to the chairman’s attitude in regard to this matter, and it is pleasing to know that in the last analysis he was finally turned down by the board by 9 votes to 3, when he made a final effort to prevent the export of produce, and thereby force certain factories into acceptance of his demands.” SOME PAST HISTORY

Mr. Goodfellow said that as Mr. Grounds had gone out of his way to pillory the organisations with which he was associated he felt justified in referring to matters which otherwise would never have been mentioned. “Mr. Grounds is reported to have stated that the ‘gloves are off.’ I would like to add that ‘people who live in glass houses should not throw stones.’ The facts of the inner history of the failure of absolute control leave a heavy responsibility upon the chairman of the board, as the party chiefly concerned, both by reason of his action and inaction. «■

“When the delegates, representing all the co-operative dairy companies of New Zealand, finally decided, after innumerable meetings, on a policy of seeking better marketing conditions through a Control Board, a voluntary dairy council was elected, and the question arose of a suitable chairman, who should later become chairman of the Control Board. Negotiations were opened with Mr. Grounds, then an unknown man, to secure his support for a policy which included the appointment of a dairy council of 30—20 to be elected by the North Island dairy companies and 10 by the South Island dairy companies; the council to decide upon a policy, and from its members (30 in number) to elect a board of producers only, to carry out the policy.

“The formation of this dairy council, and several other vital matters, were agreed to by Mr. Grounds, and he was shortly after elected chairman by a substantial majority. It is fair to say that Mr. Grounds carried out his pledges, with the exception of that regarding the establishment of a dairy council; but tho£ failure has been sufficient to produce the subsequent wreckage.

“Mr. Grounds personally collaborated with the Government regarding the draft of the first Control Beard Bill and subsequent amendments. I was absent in Australia, owing to severe illness, and had nothing whatever to do with this matter, but I have yet to discover that Mr. Grounds made any serious attempt either then or subsequently to carry out his promise in relation to the council system

of election; indeed, I hav e very good ! reason to suppose that his close alliance with certain Labour members who favoured the so-called democratic vote and his personal inclinations resulted in the stifling of any attempt j to introduce the council system of election. LOST OPPORTUNITY • On April 23. 1926, at the big meeting of the industry in Wellington (when the 25 per cent. minority j walked out). Mr. Grounds had his ! last opportunity of putting the claims ! of the council system before the industry and the Government. Mr. Grounds flatly refused to bring this matter before th«* meeting; indeed, he refused to allow the Control Board members, at a board meeting held just prior to the big meeting, to pass a resolution of recommendation, stating as an excuse that the method of election was no concern of the Control Board. “In failing to keep his promise he is responsible to a greater extent than any other person in the community for j the downfall of the absolute control i policy, which, it is now generally recognised, was due to the so-called democratic method of electing the Control Board members. Had a Dairy Council been in existence as originally j planned (and accepted by Mr. Grounds), a consistent business policy would have been possible. A FORECAST FULFILLED

“Upon returning to Hamilton after this famous meeting I reported matters fully to the directors of the New Zealand Co-operative Dairy Company, and informed them that absolute control never could succeed if members were to be elected on a democratic vote, as we would be building a business structure on a foundation of sand, liable to be wrecked at any time by concentrated commercial propaganda and Press publicity upon voters who. in the nature of things, could not detect the fallacies of the matter put to them; that, as the board would represent sectional interests, unanimity would be impossible, and it would be only a matter of time before the Free Marketing League held the balance of power on the board. Subsequent events proved this forecast to be only too true.

“Nevertheless the New Zealand Cooperative Dairy Company cJtatinued to support Mr. Grounds, hoping against hope that some: opportunity might present itself whereby the method o< * election to the Control Board coul d be put on a basis calculated to seem <e the reforms so urgently desired. Ht id Mr. Grounds stuck to his guns regar «j----ing the council system, there is ev /ry reason to believe that Parliam ,ent would have granted the demand? i of the industry, if the opportunity of the Wellington meeting had been tr tken, and the result would have been that Mr. Grounds, as head of the Dairy Control Board c-f New Zealand, would have led the industry from on success to another; whereas his actions have made the board simi #ly the laughing-stock of the dairy wo*^ 1 . Yet Mr. Grounds now endeavo urs publicly to damage and discr edit his friends, in order to minimise , his own tragic failure.”