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Friday, 6 July 1906

Mr ISAACS (Indi) (Attorney-General) . - I should like first to refer to the position taken up by the honorable member for Grampians. In the course of his speech he said that the only suggestion in the way of a monopoly in this country was with reference to harvesters. I have not, up to the present, dealt with that question at all, because I think it is a matter of common knowledge in this community that there are rings and trusts in Australia that require attention at the hands of the Government and Parliament, such as we are giving to them now. But when we hear, in reference to the tobacco trust, unqualified interjections that that trust has only 50 per cent, of a monopoly

Mr Kelly - -No: the Attorney-General made the first interjection.

Mr ISAACS - I made an interjection to the honorable member for Grampians when he said that there was no trust but the harvester trust. I asked1 him whether he had read the report of the Tobacco Commission on that point, and then the honorable member for Wentworth said that it was only a monopoly to the extent of 50 per cent.

Mr Kelly - Nothing of the sort.

Mr Robinson - No.

Mr ISAACS - I said, "99 per cent." We shall have the honorable member's speech here afterwards, and we shall see whether he did not say " 50."

Mr Kelly - After the Attorney-General said " 99."

Mr ISAACS - The honorable member is wrong about that.

Mr Kelly - I am right.

Mr ISAACS - Whether the honorable member said it or not, I feel confident that I am right. The point is that he said that the trust had only 50 per cent, of a monopoly. We know perfectly well that the main trade of the tobacco company in question is in plug tobacco. The principal thing in tobacco that concerns this country is plug tobacco. Cigarettes and cigars are not the commodities which the bulk of the smokers of this community like to consume. When we talk about a monopoly in tobacco we mean practically plug tobacco. I shall read, in order that we may have it on record, the testimony of the Tobacco Commission, so that it may never again be said in this House that no harm is done by the trust, and that there is no need to regulate it, and in order that there may be no suggestion here that there is not a trust that requires attention at the hands of Parliament. I am going to ' read the report of the Commission as to the operations of the trust, its constitution, its ramifications, and its effect upon the public, upon the employes, and upon the tobacco growers of this country. I shall omit the references to the numbers of questions in the evidence. The Commission says : -

Your Commissioners find - That a Combine or Trust does exist in the industry of the manufacture [see statement by Mr. L.V. Jacobs, statement by Mr. H. R. Dixson, and statement by Mr. William Cameron] that it extends to the business of importation [Mr. Jacobs, also Mr. L. P. Benjamin]; that it also extends to the wholesale distribution both of locally manufactured and imported tobaccoes. We find (hat this Combine originated in 1900, so far as its Australian branch is concerned, among certain manufacturing firms, by their securing joint interests in companies previously in competition with them. On the establishment of Inter-State free-trade consequent on the coming into operation of the Commonwealth Tariff, these interests were still further consolidated. The Australian Tobacco firms were brought- into conflict by the establishment of Inter-State free-trade, and tha competition became more acute, owing to a section of the Tobacco Company, or British Tobacco Trust, having commenced to manufacture in Sydney. The prospect of this competition had the effect of driving the principal Australian firms into closer combination, eventually culminating in an arrangement which embraces not only the chief Australian tobacco, cigar, and cigarette manufacturers, but is also connected with the British-American Tobacco Company of the United Kingdom and America. Each of such manufacturing businesses hold's a proprietary interest in every other such business, and also in the distributing firm of Kronheimer Limited. The Australian firms completed their combination in 1903, and the final arrangement was completed in February, 1904, see Mr. H. R. Dixson's statement. We find that the Combine is a partial, but not a complete monopoly. In plug tobaccoes (local and imported) expert witnesses gave the proportion of the Combine's business compared to the total business from 73 per cent, to 99 per cent.

Mr Kelly - That is 75 per cent., does the honorable gentleman see?

Mr ISAACS - Yes; not 50 per cent.

Mr Kelly - I did not say 50 per cent, in that connexion.

Mr ISAACS - The main business of the trust is in plug tobacco. The report goes on -

In cigars the proportion controlled appears to be from 45 per cent., statement Mr. Benjamin, to 5.1 per cent, or 60 per cent. In cigarettes about 7$ per cent. Retailers in various cities gave proportion of total business with Combine at sixsevenths.

That is about 85 J per cent -

And practically all agreed that the majority of the most popular of both local and imported lines were controlled by the Combine. To such an extent does this exist that, so far as plug tobaccoes are concerned, the Combine is a virtual monopoly. As regards the making of cigars, the Combine appear to have a monopoly right of very valuable labour-saving machinery, which gives them an immense advantage over their competitors, and is apparently rapidly eliminating competition. In cigarettes the Combine has a practical monopoly, so far as machinemade cigarettes are concerned.

As regards Question Number 2 -

Your Commissioners find that the amalgamation of interests, the centralizing of factories, and concentration' of distributing agencies has resulted in great economy of production, and must have consequently largely increased profits to those firms comprising the Combine. There was generally a decided objection on the part of the witnesses interested in the Combine to disclose its profits. Returns supplied by Mr. Fergusson, Chief Inspector of Excise, Melbourne, show in 1903 t2 tobacco, 75 cigar, and 16 cigarette factories ; in 1904 return shows that these had decreased to rr tobacco, 68 cigar, and 14 cigarette factories, a decrease of 10 factories in one year. That this decrease was not due to any fallingoff in demand or production is shown by the fact that the local manufacture of all forms of tobaccoes increased from 6,601,015 lbs. in 1901 to 7,556,416 lbs. in 1903, and to 7,790,157 lbs. in 1904; and the number of employes increased from 2,662 in 1903 to 2,816 in ^04. Fifty per cent, of the leaf used in New South Wales in 1904 was worked in one factory ; in Victoria nearly 80 per cent, of total leaf was worked in one factory ; in Queensland 60 per cent., and in South Australia 80 per cent, was so worked, showing that the figures in the return as to the number of factories in existence are largely illusory, the great majority of them being small cigar manufacturers, and the output of their factories being insignificant when compared with the factories controlled by the Combine. The return alluded to shows that one other substantial factory has been closed in the year 1905, whilst six small manufacturers have used no leaf for that year.

I turn to the question of the effect of the trust upon the operatives. The report says -

As to the effect of the combination on the operatives, four representatives of those engaged in the making of plug and twist tobaccoes who gave evidence were in agreement that conditions generally were worse now than before the combination. These complaints refer to inadequate and reduced wages, the substitution of female labour for male labour at lower rates of pay than male labour, humidity of atmosphere of factories, and power of Combine to dictate terms and conditions owing to the absence of competitors.

In other words, this combine, not only has in its grip the consumers of this country, but also the operatives.

Mr Robinson - How can it be so, when there are Wages Boards and an Arbitration Court?

Mr Mauger - No Wages Board in this trade in Victoria.

Mr ISAACS - The report goes on -

Explanations were given by witnesses for the Combine in respect .to some of these charges, but were unsatisfactory to the Commission, and inspectors gave qualified contradictions to the statements re humidity of atmosphere. We find generally that wages have been in some instances reduced ; that the number of females employed has increased ; that in some cases they receive less than men on similar work; that the atmosphere in two of the principal tobacco factories is kept at a high state of humidity (see..... a

Return handed in in reply to Q. 5034, showing an unusually high percentage of sickness among the employes of one of the factories) ; and that the lessening of, the number of competing employers has placed the employes more completely under the control of the dominant employer.

Now comes the effect upon the Australian grower -

We find that the effect of the combination on the grower of tobacco leaf has been disastrous; that better prices ruled when the factories were more numerous. Evidence has been given of co-operation among the manufacturers in fixing the price of Australian leaf prior to the formation of the Combine ; the gradual decrease in the number of factories giving greater facilities for such co-operation. The culminating combination of all the large buyers in the Commonwealth has practically placed the growers absolutely at the mercy of the Combine. The establishment of Inter-State free-trade should have been of immense benefit to the growers, but the evidence shows that not only has there been no improvement, but their position is worse than formerly. The growers complain that they are practically restricted to one buyer ; and much of the evidence given tends to prove that the Combine has used this advantage to give less than a fair value for the leaf.

Then the Commission gives a paragraph with statistics about the quantity of tobacco grown, which I pass over. Then we come to the consumer. The Commission says -

As to the effect on the consumer we find that prices have been raised to the retailer, and by a reduction in the size and weight of the plugs or sticks this increase has wholly or partially been passed, on to consumer. The Combine attributes the rise to the alteration effected by the Federal Tariff. We find, however, that the result of that Tariff was generally to improve their position by (a) giving them free access to all the States in the purchase of Australian leaf ; (i) giving them access to all the States in the sale of their manufactured products with substantial protection against imported tobaccoes. In addition to this one brand of nl ug tobacco was raised in price in May, 1903, obviously not by the operation of the Federal Tariff. We also find that, whilst there have been slight increases in some lines of imported cigars, controlled by the Combine, there has been great cutting of prices by them in cigars locally made, and controlled by them. We find that in some States there has been a deterioration in the quality of the tobacco manufactured. Conclusive evidence was given showing that the Combine has laid down a rule that

Australian Industries[6 July, 1906.] Preservation Bill. 1119 no purchases can be made from the factories controlled by it, but all goods produced by them must pass through the distributing firm of Kronheimer Limited.

I should like honorable members to notice this in particular -

The connexion with the British-American trust enables the combine to carry out the same system in regard to imported goods the product of that trust ; and the popularity of the goods thus controlled, together with the effective organization, enables the Combine to enforce terms and conditions of sale which the independent firms are unable to obtain, thus giving the combined firms a still greater financial advantage over the independent firms.

In paragraph 31 of the report, the Commissioners say -

Your Commissioners are of opinion that it would be utterly useless to attempt to regulate this combine by any alteration of the Tariff, as the evidence shows that the chief tobacco firms of America and the United Kingdom are connected with the Australian combination ; in one case are the chief shareholders in the Australian company ; in others hold large proprietary interests; and the competition would, therefore, be that of allied interests.

In the main department of the business of the trust they control about 99 per cent. of the trade, and in other departments about per cent.

Mr Robinson - The honorable and learned gentleman sticks to has statement that the combine controls about 99 per cent. of the tobacco trade.

Mr ISAACS - I stick to the statement that it controls about 99 per cent. of the trade in plug tobaccoes, and I have read every word, I think, material to the justification of those figures.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Has the honorable and learned member read the evidence ?

Mr ISAACS - Not the whole of the evidence attached to the report, but I have glanced at it casually as it has appeared from day to day. I have read the finding of the Commission, and whether the actual figures are right or wrong, that finding ought to be respected by the Committee. It shows that there is strong reason to believe that there is in our midst - I am stating the case very mildly indeed - a great aggregation of commercial power, which is being used for the benefit of individuals, utterly regardless of the effect upon the people of Australia, as consumers, producers, workers, or traders. It would be a lamentable thing for the country if we did not attempt to cope with this evil, and I am very proud to be associated with a measure which makes the attempt. I have been asked to say what I understand by the term monopoly.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - The monopoly of part of a trade.

Mr ISAACS - I will deal first with monopoly alone. Monopoly has been defined as an attempt to secure or acquire an exclusive right in trade or commerce by means which prevent or restrain others from engaging therein. It was said this morning by the honorable member for Parramatta that a patent is a monopoly, and, in one sense, it is; but it is not a monopoly in that sense. A man is given a patent because he has discovered something which would not have been invented or discovered but for his efforts, and, in return for the patent, he gives to the community the benefits accruing from his discovery or his ingenuity - the work of his brains. He gives in return for his patent something which the public would not be able to enjoy if they did not get it from him.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - It is something which he could keep from the public if he chose to do so.

Mr ISAACS - If an inventor did not choose to disclose his secret, the community would be so much the worse off ; but he says, in effect, " Here is something I propose to give you, but on terms."

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - After an inventor has disclosed his secret, he may, if he patent it, withhold its advantagesfrom the community, supposing that he chooses to do so.

Mr Watson - Only for a limited time.

Mr ISAACS - Yes. The law says, to encourage persons to seek out inventions for the benefit of the public, that those who, by exercising their brains, evolve some new thing for the benefit of their countrymen and of the world at large, shall have the exclusive right to use it for a certain period. It must be remembered that an invention is the inventor's own property ; but a monopoly occurs when some one says to his fellows, not " I will give you something," but " I will take away , 'from you something which you possess."

Mr Watson - The monopolist creates nothing.

Mr ISAACS - That is so; and he takes from others something which they have a right to possess. That is the distinction. A patent is a monopolistic right, given to an inventor as a reward for a valuable discovery, which he must, eventually at all events, share with the public, to whom the arrangement is beneficial.

Mr Watson - It would probably be beneficial even if the community had to wait fourteen years before it could use the invention.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - That does not affect my statement that a patent is a monopoly.

Mr ISAACS - It is a' monopoly only in something which has never been available to the community.

Mr Watson - A man has a greater right to monopolize something which he himself has created than to monopolize the product of another's brain.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - That is individualism and anti-Socialism.

Mr ISAACS - There is a radical distinction between the granting of a patent and allowing a man to usurp the field where others' rights are concerned. It is the monopoly with which we wish to deal. When we speak of a part of the trade, we say, in effect, that we shall not wait until a man has declared that he is going to grasp the whole of the trade of the Commonwealth, but that, if he takes any part of it belonging to other persons, and endeavours to exclude them to the detriment of the public, he will come within the scope of the Bill. I do not know that there is any other question to which my attention has been directed, and, under the circumstances, I ask that the matter may be decided as soon as possible.

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