£3000 FINE.

Taranaki Daily News, 1 December 1920, Page 5

£3OOO FINE.

PENALTY FOR PROFITEERING. ttHE PRICE OF SUITINGS. THE FULL JUDGMEN' As briefly stated yesterday judgment was delivered in tiie Wellington Magistrate's Cour* by Mr. J. S. Evans, iS.M., in respect to the charges brought by the Board of Trade against Bing, Harris cud Co. Ltd., and Robert Wilson. »i,il Co. Bing. Harris and Co. were digged (1) that on June 11 they did sell to Goithard Krebs yards Mosgiel suiting St IPs Cd a yard; ('2) that oil April 14 they did sell to J. T. Lewis, Ltd.. W yards suiting at Us «d; (3) that on March 13 they did sell to Kitto and Sons 7'% yards suiting at '22s fld a yard. Robert Wilson and Co. ivere charged (1) that on March 11 they did sel; to James Smith, Ltd., 9 yards suiting at 325; (2) that on May 31 did sell to Gotthard Krebs 3% yards Mosgiel suiting at 22s yd a yard, and (3) on the same date dhj sell to M. Greenfield 6J yards Mosgiel suiting at 17s 6d a yard. The informations were laid under sec-

tion 32 of the Board of Trade Act, 1919. APPEAL COURT'S DECISION. In referring to the decisions of the Appeal Court in the -'Big Ben" clock CRBa and Mellins food case, the Magistrate said: "The principles laid down in these cases aro the express and considered judgment of the Full Court, and not mere obiter dicta. In the two eases before the Court the actual decision' turns on the facts of each case. The 'Big Ben' cases on the grounds that the selling price is fixed by the manufacturers, and in the Mellins food case that the sale was higher than the goods were sold by other traders. . . I n the 'Big Ben' cases the Court decides that the principle referred to as 'replacement cost' as laid down is a reasonable one, and in the Mellins food case the principle of differential rates for different classes of goods is also a reasonable one. But in my opinion tiie first principle must be applied in the strict terms laid down by the Court; and in the second the differential rates irn><it be reasonable and exercised so as not to give an unreasonable commercial profit on the article sold. If the transaction in question departs from these principles, then in my opinion there would be an offence within the meaning of the Act. The first principle as laid down by the Court, is that traders may always regulate their selling prices at the current market rate at the time of the sale, and may from time to time advance their prices over the actual cost price to the current market rate, both on goods in stock at the time of the rise in prices and on goods to arrive."

Continuing, the Magistrate said that the evidence in tJte present eases showed that the goods were bought in a free market and were not subject to an arbitrary selling price fixed bv the manufacturers as in the "Big Ben" cases. After referring to the profit made by by the two firms, and analysing the evidence, the Magistrate said:—'

CASK OF BINC, HARRIS AND CO, _ There is no evidence of anv actual rise alter January, and I must therefore find ag a fact that the market price had not increased after January, and then only 2d and 4d per vard on .the price at which the defendant. (Bine. | Harris and Co.) bought, aiul therefore I the January prices were the current : market rate? at the time of sale withj in the principle laid down by the Full [Court The prices have not yet been fixed tor this year by the Mosgiel Company , and there is a, slump in the wool market. Air. Marks, manager for the defendant (Bing, Harris and Co.), says that they aim at 20 per cent, to 22.5 per cent net profit on returns, both pre-war and now. They differentiate on different lines from 10 per cent, to 15 per cent, off or on. They put on to good se mg patterns and take off from bad selling ones. They were warned in January by Mr. Allan that the prices might rise from 2t» to 6s per yard, but 10 give?l no evidence of an actual rise before the sales in respect of which they they are charged. He put on 4s as replacement cost on the tweed sold to hitto, 2s on that sold to Lewis, and 3s on that sold to Krebs. This was based on an estimated future increase, and not on an actual increase in the market price at the time of sale. "On the evidence and the figures, 1 find that fio per cent, on replacement cost, that is on the market value at the time of sale, or 33 l-3rd per cent, on turnover, is a fair and reasonable rate ot profit which commercial men in the same line of business are satisfied to make.. This was the rate before the war, and is still the. rate generally aimed at. ... It is obvious, therefere, that any substantial increase in the rate of gross profit over what is iound to be a fair and reasonable rate must contribute substantially to the annual profits of the defendants (Bing, Hams, and Co.) The defendants admit putting on their gods a gross profit of 104 per cent.. 09 per cent., and % per cent, respectively on cost, with the corresponding percentage on sales. I find that this was rendered possible bv the conditions prevailing as the result of the war; the demand exceeded the supply, and there was no competition in the sense that there was no cutting of prices by reason of the excess of demand over supply, i n f ae t, it was admitted that merchants might have asked any price and found a sale for their goods by reason of the prevailing demand and necessity existing." "

WITHIN" THE PTCNAL CLAUSES. "Iti ray opinion," continued the Magis(rate, "the rate of profit charged by the defendants (Uing, Harris, and Co.) livings them within the penal clauses of the Act, and they must be convicted. The question of whether or not a bona fide misconception of the principle of replacement costs, if it existed, or belief that they were entitled to advance the price of their goods, 2s, 3s, ami 4s respectively over the current market price, is a defence that was left open by the Full Court, and I will leave that question to be decided by a Higher Court if necessary. In view of the rise of 2d and 4d per yard in January, when it was known in August, IBl'i), that the commandeer was to be lifted in .lamiary, the advance on the current market price was not justifiable, "Prom the point of view of the public who buy these goods, it is bad enough that they have to pav the advanced market rate and the usual rate of pro/it on that advanced rate for money which the d«fendanta have uot

paid for the goods they are selling without having to pay such a speculative rate as the defendants may put on their' goods with the corresponding rate of profit 011 money they liavo not expended, and may never expend, but which, as in this case, have all gone to swell thjeir otherwise increasing profits." 1 B. WILSON AND CO'S CASE. The Magistrate then dealt with' the three charges against R. Wilson and Co., and the general statement of their business "This statement," remarked His worship, "i 8 based on the retu-ns for the years ended June 30, 1914, to I <l2O. I will deal only with the extreme years' Die proprietors' capital has risen 'from, eay, 11 to 10, as shown by the statement. The revenue has risen from nil in 1014 to £1358 in 1920. The sales have risen from 1 in 1914 to 2.39 ana the gross profit, from 1 in 1014 to 3 8 . P«Mnt«ge of gross profit on sales nas risen from 23.23 per cent to 3(1.32 per cenit in 11)20. The overhead charges nave fallen from 18.79 per cent in 1014 to 10.24 per cent in 1920. The percentage of net profit from trading has risen from 4.44 per cent in 1914 to 2fl 08 per cent in 1920. The total net profit, allowing income tax, lias risen from 1 in 1914 to 8.8 in 1020, The drawings of partners, exclusive of salaries, ims risen from 1 in 1914 to 23.2 in 1920. "On the general principle of replacement costs, it seems at first sight unreasonable that the ultimate purchaser should have to pay the trader a sum he lias not himself paid for .the goods he is selling with his usual rate of profit on that, but on closer investigation it is not j. i. P* aee ' to necessary that there must he a fixed standard for a 1 traders on which profit may be based. it were not so, then every trader would have to make his own standard which in cases of this kind would lead to an interminable inquiry into the reasonableness of each man's standard as compared with the standards of all the others in the same or similar lines of business. And if the .trader was bound to fix his profit on the cost of the goods to him, lie would requite to add a higher percentage of profit to his original Jost. this might operate more hardly on the ultimate purchaser as each trader would have to put on a speculative profit on i. e° sts to meet possible fluctuations which might not take place, and again this would involve an endless inquiry into the reasonableness of his speculative percentage. Neither of the defendants rely on a differential basis of profits to make 'up a general average between good selling lines and bad. I need, therefore, not consider this principle. r

"The position then is: The current market value is the standard of replacement cost. Tlie fair average commercial gross profit on costs, including replacement cost, is 50 per cemt. The defendants Bing, Harris, and Co., Ltd. have put on 104 per cent., 0!) p er pent.' and 9(1 per cent., respectively, on their own showing. The defendant Wilson lias put on 72.52 per cent, and f15.07 per eenit This increase -was not justified by the current market,price at the time of sale. CONVICTIONS RECORDED. "Bin?. Harris, and Co., Ltd., will therefore be convicted on all charges, and Wilson will be convicted on tlie sales ('2) of New Zealand tweed. The information for selling English tweeds will be dismissed The penalties are fixed as to individuals, not persons and companies. Bing, Harris, and Co., Ltd is a company, and Wilson admits he is practically sole proprietor trading under a firm name. In the Mellins food case, where the profit was 2d per bottle, the penalty was £IOO, and Mellins fo6d was only one item of a grocery business. In the case of a kitchen table in Duned in, one article in a general stock, where the' excess profit was 7s (id, the penalty was also £IOO, In Bing, Harris, and Co.'s case the tweeds represented DO per cent of the business -of the department, and the increase in their profit was high. In Wilson's ease the increase was higher still, though his trade in New Zealand tweeds was small, but the increased profit resulting from his excessive rate must have been considerable. The penalties in this class of case are intended to he preventive.

"In my opinion, therefore, in all ,the circumstances of these cases, notwithstanding the different rates of gross profit put on, I would not be doing my duty if I did not impose the maximum penalty in each case. In justification for fining Wilson the maximum penalty when his percentages were flower than those of Bing, Harris, and Co., I have to say, jirst, that he stated frankly thai lie was out to make as much as the circumstances and market would allow, and would have charged 200 per cent if ho could have got it. In the second place, the penally for an individual includes an alternative penalty of imprisonment, and if it had been an individual within the meaning of the Act who ilwd put on the 104 per cent (as in the case of Bing, Harris, and Co.), I would have seriously considered ithc penalty of imprisonment on at least this charge." 'Bing, Harris, and Co., Ltd., were lined the maximum of £IOOO on each of the three charges, together with £lO 10s so-' licitor's fees in each case. Robert Wilson was fined the maximum of £2OO on each of itwo charges, with £5 "is solicitor's fee, in respect to each.—Dominion.