1.—13 a,

Statement read by Mr. C. V. Smith : — Hon. A. D. McLeod, Chairman, Industries and Commerce Committee, House of Representatives, Wellington. Dear Sib, — In giving evidence before this Committee, we wish to confine our remarks to the present operation of the Commercial Trusts Act as it affects the relations between members of our association and merchants. Although the New Zealand Biscuit and Confectionery Manufacturers' Association is, under the meaning of the Act, a trust it should be pointed out at the offset that as there is a number of manufacturers outside the association, and as some of these have a considerable output their competition prevents t>ur association charging exorbitant prices, or in any way forming a monopoly. At association meetings prices and discounts are agreed on, and members are under an honourable agreement to observe these. It is in the observance of these prices and discounts that we find the Act placing us in an anomalous position. As mentioned above, the association decides what discounts shall be given to merchants. These discounts are given to merchants for the express purpose of covering their overheads, distribution, and selling costs, but, unfortunately, in many cases this discount is used to take away direct business from manufacturers. This is done mainly in two ways —firstly, by the merchant giving away part of his discount to the retailer ; and, secondly, by giving freight concessions. As our travellers are bound to sell at the prices and on the terms laid down by the association, you will appreciate that the action of these merchants in giving away part of their discount and allowing freight concessions means that our travellers are being underquoted, and we think you will agree that it is a distinct anomaly that a merchant should be allowed to quote a manufacturer's line at a lower price than that manufacturer himself can quote, unless, of course, he is prepared to break his agreement with other members of the association. It might be argued that if merchants are giving away part of their discount,' then the discount they receive is too great. We should state, however, that the discounts given to merchants are 1\ per cent, on biscuits, 7\ per cent, on chocolates and confectionery, and 5 per cent, on chocolate tablets, and, in our opinion, these are only reasonable in view of the costs of conducting a distributing business. It is possible, or course, for a merchant to use the margin available on other lines to cover his distribution costs. In addition, we would stress that the splitting of discounts is not done by every merchant, but we know that the discount-splitting activities of same cause the various merchants' associations considerable trouble, and that any legislation passed which would allow us to control discount-splitting would be warmly welcomed by the leading merchants. As the Act stands at present we cannot take any disciplinary action against a merchant who is not abiding by our terms of sale, and as this fact is well known to merchants the position is growing steadily worse. If as an association we had the power to insist that merchants abided by our terms of sale, or, in other words, sold our goods on the same terms as do our own travellers, this splitting of discounts could be stopped very quickly. Although it would be quite possible to obtain concrete evidence of individual cases, we do not think that it is necessary, for we have had frequent admissions from merchants that they are adopting this practice, and that they are within their rights in so doing. The following figures for 1933 and 1934, which represent the purchases from members of the association by those receiving wholesale discount, will show how the position is developing. It is unfortunate that total figures of the association are not available for the years prior to 1933 :— Purchases by Merchants : 1933, £402,812 ; 1934, £452,158 ; Increase per cent. I2f. Further, we would like to point out that there would not be any increase in prices were we allowed to insist that merchants retained any discount allowed them. In conclusion, we would like to stress that all we are asking in supporting the amendment is the right to conduct our own businesses, a right which is' denied us under the Act as it stands at present. For and on behalf of N.Z. Biscuit and Confectionery Manufacturers' Association, (Sgd.) A. C. Holmes. * C. V. Smith.

Continuing Cross-examination of Mr. C. Y. Smith. Mr. Wilkinson.] In the second paragraph you say that your competitors have considerably increased their competition against the association. Does that not mean that if you did not have that competition you would raise your prices ? —Although we have an association of fourteen members, there are, roughly, thirty-six manufacturers in New Zealand, and although we have this association it therefore by no means controls the trade of New Zealand. It seems to indicate that without competition there would be a fairly heavy increase in prices ?— It probably reads that way, although I think it was put in for the purpose of discounting the word " trust." We would like to stress that we require the right to conduct our own business in our own way. Do you not think you have a fairly full right of doing that at the present time ? —lt is well known to most members what is going on all over New Zealand. In Palmerston North and other centres it is quite impossible for manufacturers to get direct business because the Palmerston North merchants

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