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Thursday, 24 September 1942

Dr EVATT (Barton) (AttorneyGeneral) . - by leave - I move -

That the bill be now read a second time.

The object of this bill is to prevent black marketing by providing most drastic penalties for those who indulge in black market operations. These operations can only occur in markets disturbed by unusual circumstances - in this case, those imposed upon a nation in arms, which must of necessity restrict the supplies of the civilian population.

The name " black market " is well chosen. It is not to be found in the standard dictionaries or encyclopedias; but it is a name which seems to have leaped to the lips of all patriots. It implies an outrage against standards of decency ; and the " black market " is an outrage against standards of decency. For the black market is a dishonest market. It is not an open market but an undercover market. It works outside the permitted channels of distribution and beyond the ordinary pale of the law, and the law-abiding trader.

A black market can exist only in a community passing through a great crisis. That crisis might be the throes of a depression, as in 1930. There were black markets then. In particular, there was a black market in foreign exchange, created by those who sought to transmit abroard funds because they lacked steadiness, and lacked faith in the stability of Australia.

This ignoble attitude characterizes all those who practise black market operations. It is bad enough in peace-time; in war-time it is little short of treason. Those who participate in illegal marketing operations calculated to thwart the Government in its full concentration on organizing resources for total war are certainly fifth columnists. Any practice designed to interfere with the efforts of the people to wage warfare on the economic front is virtually a black market operation. For instance, a purchaser who collaborates with a seller to obtain supplies of a scarce commodity by offering and paying a price higher than the price fixed by law is guilty of black-marketing. He is just as guilty as the seller. Again, a person who sells or buys rationed goods without ration tickets is guilty of black-marketing. Similarly, a person who trades in ration tickets or petrol coupons, whether as buyer or seller, is guilty of blackmarketing.

It will be observed that a characteristic feature of black-marketing is collusion between the buyer and the seller. That is what distinguishes black market operations, or, if we may coin a new word, "blacketeering ", from "profiteering". The profiteer takes advantage of conditions of scarcity, and does so at the expense of the buyer. "Blaeketeers " are buyers and sellers who take advantage of a scarcity at the expense of the whole community.

With Australia under the threat of invasion during the past eight months; with the Government concentrating fiercely upon converting a peace economy into one of war; with growing interruption or control of markets, of transport, and of supplies of essential commodities; and with rapid transfers of labour from civilian to war activities, the opportunities for black markets have increased greatly in the current year. We must do everything to stamp out and outlaw those who operate them, for they obstruct the war effort by impeding the efforts of the Government to transfer resources from civilian to war purposes.

In the distribution of our limited resources the fighting services must come first. Civilians come in later, and the resources available for them are necessarily limited. The black-market trader plans to cheat both the soldier and the civilian. We have to devise means to detect him, to punish him and to outlaw him. This bill is one of the means we should adopt.

At present, prosecutions against traders for breaches of the National Security (Prices) Regulations are dealt with under the provisions of the National Security Act. The National Security Act provides that, on summary prosecution, the maximum penalty for an offence is a fine of £100, or six months imprisonment. A careful analysis of the prosecutions under the National Security (Prices) Regulations shows that for the most part, the fines imposed have been far below the maximum permissible, whilst in no case whatever has a magistrate committed a trader to prison. Yet all the offences were serious, and in some cases severe punishment should have been imposed.

Since the outbreak of war, 168 separate firms have been charged under the National Security (Prices) Regulations. There have been 319 separate charges against these firms. One charge was withdrawn, nine were dismissed, whilst convictions were secured in the remaining 309 cases. The offences dealt mainly with sales of goods at excessive prices, but these transactions were often accompanied by other blackmarket manoeuvres. Many devices were used to obtain additional profit in the sale of such goods, and to avoid detection by the price control authorities. Let us see what was the scale of penalties imposed by the magistrates. Of the 308 cases in which penalties were imposed, in as many as 249 cases fines were less than £10. In 158 cases, more than half the total, the penalties were less than £5. In no case did a magistrate contemplate exercising his powers to commit a defendant to prison. It might be reasonable to assume that in the early stages of the war, traders should be given a period of warning in which a fine would be preferred to imprisonment; but that is not the explanation of the leniency of the magistrates. For cases continue to occur in which they still impose inadequate fines.

I shall now illustrate the position, by referring briefly to representative cases -

1.   Robert Reid and Company, Melbourne. Prosecuted on the 29th April, 1941, in Melbourne, for selling declared goods at excess prices. Six sample cases were submitted, but the company had made excess profits over a wide range of goods. The company was convicted on all charges and fined £25 on each charge. To deal with this position the company was declared, and its profit margins brought under strict control.

2.   Hibbert and Company, Alphington, Victoria, fuel merchants. - Prosecuted on the 17th April, 1042, and fined £3 on each of six. charges. This was a typical example of black-marketing, because of an acute shortage of firewood. After the prosecution the firm actually advertised wood for sale at excess prices. It was then declared, because prosecution had appeared to be ineffective. Declaration was preferred to prosecutions resulting in such nominal punishment.

3.   Henry Reymond Gobbert, Inverell, New South Wales. - Convicted on the 22nd October, 1040, on seven charges for sale of cornsacks at excess prices. A total fine of £120 was imposed although the firm had exploited wheat-farmers during a period of great shortage of cornsacks caused by the war.

4.   Evan Evans Proprietary Limited, Melbourne. - Convicted on 19th December, 1940, on one charge relating to the sale of hessian and fined £5.

Hessian was in short supply, and there was no doubt that the firm had obtained increased profits. Yet a nominal fine was imposed.

5.   Lewis Benjamin Isaacs, Sydney. - Convicted on three charges on the 20th March, 1942, for charging excess prices for potatoes. It was a flagrant case of black marketing, and the magistrate imposed a fine of £100 on each charge. On appeal to a higher court, the fines were reduced to £75. This showed undue leniency to a clear case of black-market operations in open defiance of prices regulations.

6.   R. Donaldson and Company, jute merchant, Melbourne. - Convicted on the 19th November. 1940, for giving false information and for sales of hessian at excessive prices. Convicted and fined £5 on each charge. This was a thoroughly bad case, involving invoicing goods at a fictitious price to evade prices regulations as well as giving false information. The goods were actually bought in India before the war. The sentence appears to have been grossly inadequate.

7.   Atherton and Company Proprietary Limited and L. A. Wilkinson (Northern) Proprietary Limited, Brisbane. - Prosecuted on the 19th March, 1941, for refusing to give information, and each company fined £5. Again, on the 11th September, 1941, Atherton and Company Proprietary Limited was fined £15 for selling olive oil at excess prices. L. A. Wilkinson (Northern) Proprietary Limited was fined £15 for a similar offence. Both companies had attempted to cover up transactions in olive oil which was in short supply.

8.   Kennett Brothers, Kadina, South Australia. - Convicted and fined £1 on each of two charges of selling self-raising flour at a half penny above the maximum price. Two cases only were selected out of many, bat the penalty was nominal.

9.   G. Larconie, Kadina, South Australia. - Convicted on the 7th January, 1942, for selling tea at a penny per lb. above the maximum price and for selling rice at a halfpenny per lb. above the maximum price. Fines and costs totalled only £5 2s. Again, the two cases selected were only examples of many, and the fine was totally inadequate.

10.   Wilson Brothers, Perth, bakers. - Convicted for the sale of egg loaves at excessive prices, and fined £2. Defendant pleaded that egg loaves were not declared, but this was disproved by the prosecution. Nevertheless, the magistrate took the view that the offence was a technical one, and imposed a purely nominal fine.

11.   Certain Tamworth traders were prosecuted at Tamworth on the 9th February, 1942, for sales of common articles like tea, matches, butter and sugar, at excess prices. They all pleaded guilty, and the magistrate imposed a fine of £2 in each case. On this occasion, the fines were obviously inadequate, and as Attorney-General, I was compelled to issue a public statement suggesting that far too lenient a view was being entertained in cases of serious profiteering.

12.   Rupert Lee and Company, Ingham, Queensland. - Convicted for selling kerosene at excess prices, and fined £5 on each of three charges. It was shown that the company had taken advantage of the special position of the purchaser, whose farm was mortgaged to the wife of the defendant.

13.   O. Gilpin Limited, Melbourne. - Imported large stocks of piece goods prior to the war, and sold a portion of these at prices in excess of those prevailing pre-war. The company admitted the sales at excessive prices, and proceedings were launched against it on the 21st May, 1941. Six charges were made, but many more could have been sustained. After two charges had been proved, the magistrate asked if it were intended to press for penalties on the other four charges, stating that, in his opinion, there could have been hundreds of charges, and that no matter how many convictions he entered it would not influence the total combined penalty. On the 4th June, 1941, the company was fined only £25 on each of two charges.

I have no desire to criticize the magistrates unduly; but the facts speak for themselves. The only remedy is for Parliament to mark the serious offences with its stern disapproval. It is obvious that in many cases money penalties are quite inadequate because, even after the fine has been deducted, the transaction still shows a handsome profit for the profiteer.

The recent declaration of the Myer Emporium Limited is worthy of special attention. The firm in question is the largest retail establishment trading in a single centre in Australia. A careful investigation disclosed an increase of about 3 per cent. on the pre-war average gross profit margin charged by the company on all goods sold during the first two years of the war. Owing to the large turnover of the company, this meant an excess profit of approximately £250,000 during the two years, over and above what the profit would have been had the gross profit margin operating in the prewar year been observed. It is important to note that the excess charge on individual transactions was very small, estimated to have been less than 2d. on each transaction. There were, however, over 40,000,000 transactions involved, and the problem was whether to prosecute the company or to " declare " it and thus ensure that the excess profits were returned to the public. To have prosecuted the company effectively would have meant proceeding on an enormous number of small transactions. If 100 instances had been chosen, the total excess profit would probably have been less than £1. To obtain evidence on 100 cases would in itself have been no easy matter, because in the eyes of the law each individual sale had to be considered as a separate transaction. It would have been necessary to prove that the goods were identical, or at least of similar quality; that the sale took place under the same terms and conditions; and that the gross profit margin was in excess of the gross profit margin operating on the 31st August, 1939. Even though it had been possible to obtain satisfactory evidence of all these individual transactions, no one could be sure that the punishment would have corresponded to the offence. Each individual transaction involved a very small overcharge, and probably the court would have ruled that only the facts relating to that transaction could be submitted in evidence. Thus, it might never have been revealed even that the firm had made such a large excess profit. Certainly there was no guarantee that the fine imposed by the court would have been at all appropriate to the magnitude of the offence. Having regard to the decisions of the magistrates which I have already mentioned, there was every reason to believe that the fine would have been totally inadequate.

This bill seeks to solve the difficulties at present inherent in cases similar to Myer's. We shall make it possible not only to proceed to conviction upon individual transactions, but also to call evidence as to past trading operations, in order to obtain an independent assessment of excess profits. The object of this procedure is to permit the imposition of an additional penalty, which may amount to twice the total excess profits.

I now proceed to explain the main features of the bill. First, we specify exactly what is comprised in the offences of " black marketing ". After careful consideration, it has been decided to include in the category of black marketing all the. major offences already constituted as such under the National Security Regulations dealing with -

(1)   Prices.

(2)   Liquid fuel.

(3)   Rationing of goods and services.

(4)   The restriction of stocks, and the control of production.

(5)   The acquisition of primary products.

Accordingly, clause 3 of the bill set out nine types of offences, all of which have this in common - that they involve an attempt to obtain undue profit or benefit at the expense of the soldier and the civilian individually, and to harm the organized war effort of the country. All these actions are already forbidden by law, and we group them so that a person convicted of any one of them may be properly characterized as a war criminal, or a black marketer. Power is also given in the hill to declare that other offences against the National Security Regulations shall constitute black marketing.

From what I have said, it will appear that black marketing is an offence already punishable under the National Security Act, but it is an offence for which it is essential that a. more drastic punishment should be provided in serious cases. Of course, a person will not be punishable both under the National Security Act and the present measure. Furthermore, proceedings under the bill will be taken only when the responsible Minister has reported to the Attorney-General, and the Attorney-General has given written consent to the prosecution.

Having denned the offence, and provided certain safeguards, what should be the punishment? The bill provides that every person who is convicted of the offence of black marketing before a court of summary jurisdiction should be sent to gaol for at least three months. If the offender is a company, a fine of not less than £1,000 must be imposed by the magistrate. If the offence is prosecuted upon indictment, the minimum penalty is imprisonment for not less than twelve months, and in the case of a company, a fine of not less than £10,000.

Owing to the nature of modern business organization, most of these offences are committed by companies; therefore, monetary penalties are not in themselves a sufficient punishment. In the case of a company it is provided that every person who, at the time of the commission of the offence, was a director, officer or employee actively concerned in the conduct of the business, shall also be deemed guilty of the offence unless he proves that it was committed without his knowledge, and that he took all due care to prevent its commission. This important provision casts a heavy onus on company managers and employees, and it will be strictly enforced.

In addition to the penalties provided for black marketing, any goods involved in the offence committed, or the value of such goods, must be forfeited to the Crown. Further, after conviction, there must be displayed at the place of business of the offender for a period of three months a notice of conviction in a prominent position. If the court is not satisfied that such notice will give sufficient publicity to the offence, it is empowered to require the offender to print particulars of the offence on all his letterheads, invoices and accounts. Particulars of the conviction must also be published in the Gazette. If it appears that insufficient publicity has been given to the conviction, there is power to require the facts to be broadcasted and also published in the newspapers.

One special feature of the bill should now be explained. It often happens that black marketing offences are not discovered until long after they have been committed. For many months, a number of unscrupulous traders, quite prepared to take all the risks of legal penalities, have undoubtedly been exploiting the public. The inadequate fines imposed under the National Security Act were no deterrent because the profits were too attractive. It is proposed to make these gentry appreciate that, despite the immediate profits, black marketing will result in their gaol and ostracism. We, therefore, propose to make the act operate as from the 20th February last, when the Economic Organization Regulations came into force. I emphasize that this is not ordinary ex post facto legislation at all. It does not convert into a crime an act which the law permitted at the time of its commission. All the acts and omissions which will bo punishable under this bill are already crimes. What we propose to do is to make sure that the crimes committed after the 20th February last, but not yet punished, as well as the crimes not yet committed, shall be adequately punished.

There are very good reasons for selecting the 20th February as the time from which the present act shall operate. The Economic Organization Regulations passed on that date provided for the compulsory pegging of wages and salaries. Acts of profiteering and of black marketing are entirely inconsistent with the spirit and purpose of these regulations. If wage-earners are to have their wages pegged, subject only to adjustment on account of the increased cost of living, they are precluded from exploiting the shortage of the main commodity they have to offer for sale, namely, their own labour. Similarly, as regards landlords and investors, whose rents and interest rates have been severely controlled. In these circumstances, it would be anomalous, to say the least, if the sellers and buyers of scarce goods were allowed with impunity to combine together in black markets. Similarly, the pursuit of practices contrary to rationing and other regulations that have been found necessary for the conduct of the war should be followed by the imposition of penalties appropriate to the grave offence that has been committed against the nation. The opportunity for committing such offences has grown very rapidly since the Economic Organization Regulations were gazetted. It is logical that those who have already committed such offences should bo treated as severely as those who commit them in the future.

A very recent case where an act of this Parliament was made to operate as from a date earlier than its passing was the Defence Act passed on the 4th April, 1941. The act made certain frauds and breaches of contract relating to the supply of goods to the Army punishable if committed since the 3rd September, 1939. There was a strong divergence of opinion in this House as to whether negligent breaches of contract should be made punishable as from the earlier date, but there was unanimity in respect of fraudulent supplies. Here, the case in favour of operating the act as from a past date is infinitely stronger.

It is believed that, by the adoption of the drastic measures provided in this bill, a check will be imposed upon black markets. I have endeavoured to show that the inadequacy of the penalties imposed by the courts has seriously impeded the working of the system of price control, and the enforcement of other vital national security regulations. We must see to it that, in the future, stringent penalties will be imposed upon traders and others who, by pursuing the devious methods of black marketing, hamper the Government in its efforts to organize this country for total war. That is the test by reference to which this bill should be judged. Applying this test, I have no doubt that the principles of the bill will meet with the approval of the House. I do not claim that the dread evil of black marketing in Australia can be completely eliminated by even the most drastic penal legislation; but I submit that this legislation will prove a valuable deterrent, and will curb the undisciplined desire for unrestricted profit in days when absence of discipline may easily lead to national disaster. It is in that belief that I submit the bill to the judgment of the House.

Debate (on motion by Mr. Fadden, through Mr. Francis) adjourned.

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