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Friday, 6 July 1906

Mr CARPENTER (Fremantle) . - I intend to ask the Committee to insert a word in> this clause which will have the effect of extending its scope. I move -

That after the word " merchandise," line 7, the word "service" be inserted.

Honorable members will see at once what this extension implies. So far, we have been dealing with commodities, and have not touched a monopoly in the carriage of goods. But the carriage of goods by sea in Australia is at present in the hands of a . shipping monopoly. Complaints have been loud and bitter as to the practices of this combine. The Bill would not be complete - in fact, we should have omitted to do an act of justice to the commercial classes- - if, while seeking to restrict monopolies in respect of certain practices, we allowed another body of men who are intrusted with the carriage of goods by sea, and control about 98 per cent, of our coastwise trade, to operate injuriously to our producers. I;f we failed to legislate against such a monopoly, we should not have put our finger upon what is acknowledged to be one of the most dangerous monopolies in Australia to-day.

Mr Mcwilliams - Would not such a monopoly be reached without such an amendment ?

Mr Isaacs - It could be dealt with under another clause, but not under this one.

Mr CARPENTER - I should have preferred, knowing what I do of the practices of this combine, and' how much wrong has been occasioned by it, to introduce a special clause dealing with it, with the object of checking the granting of what are called " deferred rebates." But I have the assurance of the Attorney-General that the inclusion o'f the word " service " in this clause will cover the ground.

Mr Isaacs - " Assurance " is a big word. It is my belief.

Mr CARPENTER - If it is proved that the shipping combine is a monopoly acting in restraint of trade, we should strike at it. Under the American legislation - the Elkin Act, I think it is - provision is specifically made against the granting of deferred rebates. A few days ago a cablegram was published showing that some of the persons connected with a trust in the United States had been either lined or imprisoned for breaking the law in that regard. In case come honorable members have not familiarized themselves with this subject, I should like to refer to the report of the Royal Commission on the Navigation Bill in support of the amendment which I am asking the Committee to adopt. I will quote from a letter which was sent from the Melbourne Chamber of Commerce to the Prime Minister on the 9th November, 1904. Amongst other things, the following statements are made : -

I am also directed by my Council to bring under your notice a most pernicious system that has of late years grown up in shipping circles, under the name of " Freight Rebates." These rebates, in fair and honest trading, are absolutely unnecessary, and in many instances are a gross injustice to consignees. Where goods are sent by a producer who is some distance from the seaboard, to be shipped by an agent at the shipping port, these rebates too often take the form of a secret commission ; and where the rebate is allowed to a shipper direct, it is granted only on the understanding that he confines his business to certain companies within his shipping ring or trust. The conditions under which this rebate is allowed are that the company, whilst collecting the freight on a cash basis when the goods are shipped, will only return the percentage of the freight after twelve months has elapsed, and, during which time, the shipper, as pointed out, must confine his shipments to the ring. Tn this way the shipper is not able to avail himself of any opportunity of a lower rate of freight offering by any outside company, for the reason that he is not able to afford to lose his rebate, as he would then be placed at a disadvantage as compared with his competitor. Competition in the freight market is therefore stifled.

Mr Mcwilliams - That state of things exists in Tasmania.

Mr CARPENTER - I think it applies to the whole of Australia. I know that it has been a burning question among the merchants of Fremantle. The letter which I have quoted sums up the position very well. Whilst this is a matter of complaint, so far as the. merchant is concerned, I question whether he suffers as much as the general public do. I believe I am correct in saying that when goods are shipped and received in this manner, the merchant disposes of-them on what is called a c.i.f. basis. Whatever it has cost him to ship the goods, is added to the price, and an equivalent amount is taken from the pockets of the general public when the goods are sold.

Mr Mcwilliams - In the export of produce, that system rules verv largely.

Mr CARPENTER - If that be so. it is the consumer who really pays the re- bates; the shipping company merely making use of the power which the system gives it, as a lever to compel shippers not to ship by any competing line. So that this is not merely a matter of wrong and injustice to the commercial classes, but to the whole of our people who have to pay this surcharge - an extra 10 per cent., or whatever the amount may be - that goes to give the shipping combine its power over the shipper. Mr. McPherson, the representative of the Melbourne Chamber of Commerce before the Commission,, illustrated by the following evidence the manner in which the rebate is worked : - 3964. Will you be good enough to explain the system ? - In 1903, when I had 300 tons of iron to ship to Fremantle, I went to the shipping people to learn the rate of freight. They held a meeting, and then they gave me a quotation. They said, " You will have to pay 18s. a ton now, but in twelve months' time if you confine all your shipments to the ports on the north and .the west t j the companies within the ring we shall grant you a rebate of 20 per cent." In other words, I had to leave with them a hostage of 3s. 6d. a ton on the 300 tons, and let it stay in their hands for twelve months. Had I not agreed to confine all my shipments to the association, I should have had to charge 18s. a ton for the freight of the iron, and probably I should have lost the business. Of course I said, " Very well, if those are your terms I shall accept them. I shall pay thy 1 8s. per ton now." But when I quoted a price to my customer I quoted on what is known as the c.i.f. basis. I paid the freight to Fremantle, and last month I got from the shipping people a cheque for ^75.

Mr. Alexander,a Fremantle merchant, told the Commission that the shipping combination controls some 98 per cent, of the coastal shipping trade of Australia. If his figures are anything like correct - and I have no reason to doubt their correctness^ - they show the completeness of the monopoly enjoyed by the Shipowners' Federation. The evidence of Mr. McLennan is peculiarly valuable, because he was at one time connected with one of the firms now in the combine, and is a representative of Messrs. J. and A. Brown and Company, shipowners and colliery proprietors, who are competing against it. It shows how shippers are now penalized by the comparative absence of competition on the coast. 24342. In spite of your offering to carry cargo at a lower rate, people still prefer to ship by the other companies ? - Yes. 24343. Why ? - Otherwise the bonuses, which amount to 10 per cent, on the freight of all cargo that had been shipped during the previous twelve months, would be forfeited. 24344. If you can carry all their stuff for 30 per cent, less, surely it will pay them to give up their bonuses? - In some cases it would not pay them if we carried the cargo for nothing.

Mr Lee - The reason why shippers willnot send by Messrs. J. and A. Brown is that they are afraid that that firm may join the combine.

Mr CARPENTER - If we take from, the combine the power to manipulate freight charges as they are now doing, it will not matter who joins it, or who stays out of it. I do not object to the action of the shipowners in combining. I have no wish to be unjust to them, and am prepared to give them all necessary protection. Within certain limits, combination on the part of our. shipowners may be beneficial, not only to themselves, but to shippers' as well, because of its results in steadying rates anr! preventing cut-throat competition. But the abuse which has taken place by reason of the adoption of a system of rebates must be ended in the interests of those who, indie long run, have to pay the piper. Mr. McLennan was asked why shippers will not use the steamers of Messrs. J. and A. Brown and Company if their cargo is car ried for nothing, and he said -

Some of the shippers have, say, £I,000 in the hands of the steam-ship companies at one time inthe shape of bonus, so, supposing they offered us a couple of hundred tons of cargo, and we carried it for nothing, they would lose £1,000

If honorable members look through the report of the Commission, they will find that the rebate system is the cause of very general complaint.- The Commission consisted of Senators de Largie, Guthrie, and Macfarlane, and the honorable members for West. South, and North Sydney, Darling Downs, Melbourne Ports, and Kooyong. They made the following important recommendation, from which the only dissentient was Senator Macfarlane: -

As your Commissioners consider that the rebate system is open to grave abuses, and calculated to seriously prejudice the commercial and industrial interests of the Commonwealth, they recommend the introduction of legislation at an early date, making it illegal for the owners, master, or agent of any vessel to give rebates or other advantages to- any shipper or consignee of goods, if the condition of such rebates or advantages is that there shall be exclusive shipment by a certain vessel or vessels.

Although we do not wish to interfere unnecessarily with the business of the shipowners, we must protect shippers and the general public from the abuses of the rebate system. It has been argued that if we prevent ship-owners from using this means of stopping competition, there will be a repetition of the cut-throat competition of some years ago, which is said to have led to a heavy reduction in wages, and to have been the cause of most of our maritime troubles. The present rates of wages were being paid for a considerable length of time before the bonus or rebate system became what it is to-day, and, as there are, moreover, in some of the States, Arbitration Courts, which can fix rates of wages, I do not think that free competition would justify the lowering of the present rates. We cannot, however, afford to protect either wages or profits byallowing a small body of men to control the coastal shipping trade, which is a large part of the whole of the shipping trade of Australia. I hope that the Committee will prevent that, by agreeing to the amendment which I have moved.

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