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Thursday, 20 October 1904

Mr BATCHELOR (Boothby) - I move -

That, in the opinion of this House, a Royal Commission should be at once appointed to inquire into and report upon -

(1)   The present position of the Tobacco Trade in relation to the production, manufacture, and distribution of tobacco.

(2)   The extent to which it is controlled by a monopolistic combination.

(3)   The best method of regulating that trade, whether by nationalization or by antitrust legislation, or otherwise.

I have, at the outset, to express my thanks to the honorable member for Southern Melbourne, who kindly consented to the postponement of the notice of motion standing in his name, in order that this matter might take precedence. If honorable members turn to the notice-paper, they will find that Order of the Day No. 6 provides for the " Consideration, in Committee of the Whole, of the Senate's message No. 3." That message relates to a motion carried in the Senate in reference to the tobacco monopoly, and providing in effect that in order to provide the necessary money for the payment of oldage pensions, and for other purposes, the Commonwealth Government should undertake the manufacture and sale of tobacco, cigars, and cigarettes, and that a Select Committee, consisting of six members of the Senate, with power to confer with a similar number of members of the House of Representatives, should be appointed to inquire into and report on the best method of carrying the resolution into effect. It would be to some extent inconvenient for me to move a motion in those terms, because honorable members would necessarily be debarred at this stage from discussing the nationalization of tobacco. All that I ask the House to do is to agree to the appointment of a Royal Commission to inquire into and report upon the present position of the tobacco trade, and to consider whether it is desirable for the Government to . take over the business, or to deal with it in some other way. It may be asked why I shouTd move this motion, instead of waiting until the message of the Senate is reachedin the ordinary wav. My chief reason for adopting this course is that I desire that something shall be done this session, and that I do not think for one moment, that this House would be likely to pass aresolution providing for tha nationalization of the tobr.cco industry, in the absence of some kind of preliminary inquiry. I also think thai it is now too late for a Select Committee to make any proper inquiry. The appointment of a Royal Commission must necessarily be made if any inquiry worthy of the name is to take place. I should prefer to see the Royal Commission appointed . while the House is in session, instead of the matter being left over tor the Government to deal with after we have gone into recess. The tobacco trust is the first: of any importance that has been formed to deal with a business of any large volume in Australia, and it is desirable that the Parliament of the Commonwealth should now indicate what view it takes of the creation of such monopolies. It would certainly be interesting to ascertain how honorable members are disposed to regard anything in the shape of a monopoly in this direction. I ask- whether it would not be wise, at the very earliest moment - before the monopolistic octopus can fasten its tentacles on the industries of Australia - -for the Parliament to determine whether some better method of conducting the business cannot be adopted. I intend to confine my remarks not to the advocacy of the nationalization of the tobacco trade, but to the desirableness of a Commission being appointed to inquire first of all as to the existence of a monopoly, and its effects, so far as they can be ascertained, and then, as to what shape any legislation, if necessary, should take, in order to deal effectively with the matter. On the 14th March, 1903, the Age announced that, with a view to fight the American Tobacco Company, which had extensive ramifications all over the world, and intended to compete for the control of the Australian trade, the two largest tobacco manufacturing companies in Australia - Dixson's and Camerons' - had amalgamated, and about the same period they issued a circular, stating that the object of the amalgamation was to fight the American Tobacco Company. A few days afterwards it was announced that the amalgamated company, which was called the British-Australian Tobacco Manufacturing Company, had acquired the Australian business of T. C. Williams, of Richmond, Virginia, an American tobacco manufacturer who had perhaps the largest sale of aromatic imported tobacco in Australia - that is, that they had acquired the sole right of distributing their tobacco. A little later the company also acquired the business of David Dunlop, who manufactured chiefly the "Derby" brand of tobacco, for a term of 100 years. Then it was stated in the newspapers that Kronheimer and Company, of Melbourne, distributers and importers of tobacco, and W. D. and H. 0. Wills and Company, English manufacturers, had amalgamated their Australian businesses under the name of Kronheimer Limited. This firm then absorbed the business of the National Cigarette Company, and closed its factory; and shortly afterwards was appointed the sole distributer in Australia of the goods of the American Tobacco Company which the British-Australian Tobacco Manufacturing Company had been formed to fight. About the same time, Kronheimer Limited was appointed sole distributer of the States Tobacco Company, and, on the retirement of Alfred Gross and Company fi om. the Australian trade, took over that business too. Last of all, the British- Australian Tobacco Manufacturing Company, which had been formed to fight the foreign companies, appointed Kronheimer Limited sole distributer of their manufactures in Australia. That is briefly the history of the monopoly. I do not know if the articles of association of Kronheimer Limited are available in Melbourne, but I have inspected the articles of association and the list of shareholders . of the British Australian Tobacco Manufacturing Company, filed in April last, and I have been surprised to see how great an interest is Held in it by persons who are not residents of Australia. The two largest shareholders in the company are David and William Cameron, one of whom lives in Virginia, and the other in Pennsylvania, United States of America. They hold 17,040 shares each. Then Kronheimer, of Germany, holds 7,000 shares; another Kronheimer, in the same country, holds 1 .000 shares ; and a Kronheimer in Australia holds 7,000 shares. The largest shareholders resident in Australia are the Dixsons, two of whom hold 14,000 shares each. All but one or two small manufacturers' have been absorbed in the BritishAustralian Tobacco Manufacturing Company, but over one-third of the entire capital of the company is held outside Australia. It includes the businesses of Dixson, Cameron, Jacobs Hart, and other manufacturers, and, as I have shown, has appointed Kronheimer Limited as its sole distributer in Australia.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - I know a better way of destroying this monopoly than that which the honorable member supports - to cease from smoking.

Mr BATCHELOR - No doubt that would be effective. The monopoly controls not only the manufacture and distribution of tobacco, but the sale of all tobacconists' supplies.


Mr BATCHELOR - The original amalgamation was announced on the 14th March, 1903, and is therefore about eighteen months old. Kronheimer Limited is a still newer amalgamation.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Do I understand that there is more than one Trust?

Mr BATCHELOR - There are really two combinations - one a manufacturing company, being an amalgamation of all the manufacturing firms, except one or two small ones, which can be left out of consideration for the ' moment ; and the other a combination of importers and foreign firms doing business in Australia; and who formerly came into competition with the local companies. These importing firms have all combined under the name of Kronheimer Limited. The local manufacturing amalgamation has also appointed Kronheimer Limited as their sole distributing agents. So that practically the whole of the distributing business in Australia is entirely in the hands of one company. The manufacturing business is, of course, done by the British-Australian Company, in which Kronheimers hold a considerable interest, and by a number of other foreign firms.

Mr Conroy - That ought to result in a great saving.

Mr BATCHELOR - It should. I am not objecting to the amalgamation in itself. Previously, of course, all the firms were in competition one with the other. . We are told that competition is the soul of business, and the life-blood of industry. Such competition existed for a considerable number of years. The companies advertised very largely. Their travellers competed for business one against the other. The companies competed for the leaf grown by the Australian tobacco farmer. The retailers had their choice of brands and of firms to deal with. But all these things are now changed. The whole of the business has gone into the hands of one controlling firm, and1 there is absolutely no competition. So that if there is anything in the contention that competition is the soul of business, the tobacco business has no soul, because there is no competition in it. We have no competition even between the local manufacturers and the foreign manufacturers. They' are amalgamated. There is one price fixed for the different brands, from which there can be no departure ; and no retailer is allowed to sell at any but the price fixed by the corporation. He cannot sell at what price he likes. There are no competing travellers. There is no competition amongst the manufacturing firms for the leaf grown in Australia. The advertising has been lessened very largely. There is now no possibility of the tobacco-grower being able to place his goods in the best market, because there is but one market. Whatever may be the price fixed by the corporation, that price the grower has to take. There is no competition between the manufacturers in the matter of quality.

Mr Conroy - Are they charging a lower price than was charged before?

Mr BATCHELOR - I will come to that question directly. The one object of the combine is, of course, to get the greatest amount of profit by controlling the industry. I am not saying that they are blameable in that respect, but such is the natural outcome Of the combination. The honorable and learned member for Werriwa has asked me whether the combine has lowered the price of tobacco.

Mr Watson - In some cases they have increased the price.

Mr BATCHELOR - I do not intend to make any assertions as to what they have or have not done in that respect, although it has been stated to me that the price has been raised to the retailer.

Mr Liddell - The honorable member knows thai the price has not been raised.

Mr BATCHELOR - I do not know anything of the kind. If I knew that the price had not been raised. 1 should certainly say so.

Mr Watson - I know "that it has been raised.

Mr BATCHELOR - I believe that the price of tobacco has not been raised to the public, but it has' been raised to the retailer. That is one_of the reasons why I wish to have a Royal Commission appointed. I wish to ascertain to what extent prices have been affected. If the honorable member for Hunter knows that prices have not been raised, he will be able to give evidence to that effect before the Commission. The principal point is that all the retailers, and the growers, and the employes of the companies are now servants of the combine. They are not free agents any longer. They depend entirely upon the combine for their living, and must accept the conditions imposed upon them, or go entirely out of the business. They have no alternative.

Mr Conroy - Some of us said that this would happen if we made so big a margin between trie excise and the duty on tobacco.

Mr BATCHELOR - -That has nothing more to do with the case than has the war between Russia and Japan.

Mr Conroy - We pointed out that the price would be raiser! ; Une Honorable member says it has risen ; yet, he says we were wrong in pointing out that such would be the case.

Mr BATCHELOR - The honorable and learned member overlooks the fact that there is a combine which works in a similar manner in America, and another one in Great Britain, where there is no difference between the excise and the import duty. , Exactly the same state of affairs has happened in a free-trade country. Similar combinations are doing exactly the same all over the world, wherever they have an opportunity.

It is of no use for honorable members opposite to endeavour to raise side issues. In reference to the growers of tobacco being in the hands of the combine, I should like to point out that the Wangaratta and King River Growers' Associations, and some other associations, have appealed to this Parliament, and have passed resolutions asking that the tobacco industry shall be nationalized. They recognise that the present situation is a source of danger.

Mr Liddell - Who would fix the price then ?

Mr BATCHELOR -- Does the honorable member raise that as an objection ? Who fixes the price for travelling on .the trams in Sydney, and on the railways of the States?

Mr Liddell - That is quite a different thing.

Mr BATCHELOR - The honorable member will find that there is really no distinction. The operations of the Tobacco Trust in New Zealand are interesting. According to a report which appears in a Canterbury newspaper, Mr. Seddon, speaking with regard to the American Tobacco Trust, said -

At the present time there is not a tobacconist in the colony who dares to call his soul his own.

One tobacconist said -

We know that the evil exists, as well as feel its influence every day of our lives ; and we are dominated by it to such an extent that we dare not take action. We are afraid to take steps publicly, or even to approach the Premier, in case the fact might come to the knowledge of the trust. In these circumstances, we are delighted to learn that the Premier has taken the matter in hand, and we sincerely hope that he will do something to stop the operations of the trust, which extend throughout the colony. Up to the present, it has only begun to move here. ' Yet, it moves so rapidly, and delivers its blows with such skill and strength, that it has already become a terrible tyrant. It has dragged into its clutches immense factories in America, Germany, and other countries, and it is endeavouring to extend its ramifications almost daily. .We are afraid that its next step, if we are not careful, will be the establishment of retail shops in our midst, to run in opposition to us, on the approved plan of all trust organizations in America. It controls the business in not only tobaccos, but also cigars and cigarettes. lt has many different lines, and if a tobacconist that deals with it attempts to sell a new line, he is peremptorily told not to do so. He has the option of sticking to the trust, with its many lines, or to the single line, and, of course, he must select the former. If we took, action openly, our lives, from a business point of view, would not be worth twopence. Bound hand and foot, we can do absolutely nothing, and that is why we welcome the Premier's' remarks in the hope that they will lead to something practical being done to help us.

There is a good deal more of a similar nature set forth in the report. A wholesale merchant, who has been one of the victims of the trust, said -

It was, he thought, one of the worst features of the American Invasion. He thought that steps should be taken without delay to stop the invasion. It represented low wages and sweating in the very worst form.

Then, a Mr. Eslick also made a statement as to the position of the wholesale and retail tobacconists since the trust had began its operations. His statement is as follows: -

It was a fact that not a tobacconist could call his soul his own, for the trust controlled the business from top to bottom. " The American Tobacco Company," he said, " controls almost all the tobacco, cigars, and cigarettes that go through our hands. We have only one line of Havanna cigars, and one of two lines of cigarettes, that the trust has not got within its grasp. Even these can only be secured by direct importation by the retailer. The merchants are dependent on the trust, and are forbidden by it to handle the few small lines it does not control. If they refuse to obey the mandates of the trust it threatens to cut off their supplies, and they have no option but to obey. They may lose practically the whole of their trade if they prove refractory. The retailers in turn are dependent on the merchants, and in most cases they cannot afford to fight the trust. By dealing from the mei chants they can secure a certain amount of credit, and they need it, because their returns come in very slowly. Moreover, there is so small a profit on any of the lines controlled by the trust that a .large outlay could hardly be recouped. We are almost powerless, and if we have, to raise the price of tobaccos, and there seems little doubt that we shall, it will not be our fault. Seven of the best-known plug tobaccos, Diadem, Welcome Nugget, Victory, Ruby, Nosegay, Lucy Hinton, and Royal Colours (I quote these because every smoker knows them), have recently been raised by the trust, and both the merchants and the retailers are suffering. The profit, when spread out over a long period, as it must be in most cases, is practically nil. The tinned tobaccos are nearly all controlled by the trust, and our scanty profits on them are being taken from us. We used to get it in 51b. tins at 6s. 2d. per lb. The trust says that it has been selling its tobaccos at a loss, because it began selling cheap in order to secure the market, and now it wants to get some of the benefit. . . . What it wants is to get hold of some of the high-class tobaccos which compete against it too successfully, and run these out of the market. Then it can introduce cheaper lines at the same prices and pocket the extra profits. It is a very fine prospect for the company, but a poor one for the retailers and the public, and the sooner Mr. Seddon takes action against the existing monopoly, the better it will be for all of us."

That is the position in New Zealand, as set out by a number of gentlemen connected with the trade there, and I think it is desirable that an inquiry should be held with a view to ascertaining whether similar conditions prevail here. I said, some time ago, that I did not intend to make any assertions with regard to the condition of affairs existing iri Australia, because, apart from referring to the fact that there is a combine, I do not think it is necessary to enter into the matter at this stage. If a Royal Commission is appointed, we shall have an opportunity to ascertain the whole of the facts, and to judge as to the extent to which the conditions which are said to exist in New Zealand prevail in Australia. I have been told that the prices charged to the retailers have been raised.

Mr Poynton - I have been informed that they have been raised on two occasions.

Mr BATCHELOR - I do not know on how many occasions prices have been increased. My informant is a. retailer in an absolutely independent position.

Mr Liddell - If the honorable member's informant is in an absolutely independent position, all of the tobacconists cannot be under the control of the trust.

Mr BATCHELOR - I cannot mention names, except privately, but I can assure the honorable member that his interjection does not apply. I have also been told that the quality of the tobacco supplied is not so good as formerly. I am not aware that the wages of the men employed in the trade have, so far, been prejudicially affected ; but these are early days.

Mr HUME COOK (BOURKE, VICTORIA) - There is a strong tendency to employ girls.

Mr Kelly - Is not that the natural tendency in a protected industry ?

Mr BATCHELOR - No. The effect of the operations of the trust, so far as wages are concerned, would not be very apparent at the present time. It is natural, however, to suppose that, after raising the prices of their product as far as they can, consistently with the largest output and consequently a large profit, and after cheapening production in other directions, the trust will naturally desire to secure more and more profit, and will cut down the wages of their employes. It would be extremely interesting if we could ascertain the extent to which the cost of production of tobacco has been reduced by the operations of the combine. The probabilities are that the cost of production has been lessened, because the duplicating of machinery has been done away with, travellers have been dispensed with, and there is no longer any necessity to indulge in expensive advertising.

Mr Webster - All those facts constitute arguments in favour of the nationalization of the industry.

Mr BATCHELOR - First of all, they are arguments in favour of monopoly. They show the advantage of amalgamating businesses instead of having them competing one against the other. We are told that competition is the very soul of business. It is competition which brings up the quality of an article and keeps down its price. All the advantages which are said to accrue from private enterprise are entirely absent from the tobacco industrv. Hence there are no virtues in it from the stand-point of honorable members opposite, who are anxious to see unrestricted competition.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - The honorable member does not admit those advantages.

Mr BATCHELOR - In certain lines I da It is undeniable that the competition which is supposed to produce good results is conspicuously absent . when any industry is controlled by a combine.


Mr BATCHELOR - I quite believe that the honorable member is willing to repudiate the opinions of a great number of those by whom he is immediately surrounded.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Is the honorable member in favour of competition, or is he not?

Mr BATCHELOR -Does the honorable member wish me to enter into a philosophic or academic discussion as to whether competition or combination is necessary? There are three forms in which industry is conducted, namely, by competition, by cooperation, and by monopoly. Each of these forms possesses some advantages.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - There is one antiSocialist in the Labour Party at last.

Mr BATCHELOR - I think that the proposed Commission should inquire into the extent of the monopoly and into its effects, so far as they can be ascertained. I know that it is difficult even for a Royal Commission, which has power to take evidence upon oath, to get at the actual facts, because the whole of the persons engaged in the industry are servants of the combine, and are therefore not able to give evidence prejudicial to it. But whatever difficulties a Commission might experience in this connexion would be multiplied in the case of an individual. Then I wish the Commission to ascertain whether any legislation in regard to this industry is necessary or likely to be beneficial and, if so, what form it should take. Should it take the form of nationalization, or should we enact anti-trust legislation ?

Mr Conroy - Or should we endeavour to create fresh competition?

Mr BATCHELOR - Anti-trust legislation would constitute an attempt to revert to the condition of things which existed prior- to the formation of the combine. It would resemble an effort to put back the hands of the clock, or an attempt to sweep back the incoming tide with a broom. Personally, I regard the formation of trusts as a natural evolution in industrial progress.

Mr Conroy - I thought that the honorable member was deploring the absence of competition in the tobacco industry.

Mr BATCHELOR - The honorable and learned member is not going to lead me off the track, in that way. .

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - I should like to know the honorable member's position.

Mr BATCHELOR - The honorable member knows perfectly well where I stand.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Does the honorable member wish this Commission to be appointed because of his apprehension of possible dangers, or because of dangers which actually exist?

Mr BATCHELOR - I desire the Commission to ascertain what is happening.

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - Without possessing any knowledge that anything wrong is happening ?

Mr BATCHELOR - Surely the honorable member does not wish me to make assertions as to what is happening?

Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - The House has a right to expect the honorable member to cite some facts which will justify us in sanctioning, the appointment of a Commission, whose creation will involve expenditure.

Mr BATCHELOR - I have already pointed out -that a tobacco combine exists. The fact is generally admitted. That combination controls the entire industry, and necessarily controls the price at which goods can be sold. There is an entire absence of that competition which alone can protect the public. A condition of things exists, under which the public can have no protection whatever, all the persons engaged in the industry being servants of the combine.

Mr Conroy - I regret the absence of competition.

Mr BATCHELOR - How can we overcome that difficulty?

Mr Conroy - By abolishing the excise and import duties.

Mr BATCHELOR - The honorable and learned member should make interjections which are relevant to the issue.

Mr Conroy - My last interjection is too relevant.

Mr BATCHELOR - It has nothing whatever to do with the question. It seems to me that we had better accept the tobacco monopoly as a natural evolution, and rob it of its power to enrich a few individuals, at the expense of the general community. Personally, I think that it would be wise to have the industry controlled by the community for the community. At the present time, I am not able to discuss the question of nationalization, and hence I am . somewhat at a disadvantage. I desire a Commission to inquire into this matter, with a view to ascertain whether the best way to overcome the evils of the combination is not by making the industry a Government monopoly. Another advantage to be derived from the appointment of the Commission is that the facts relating to the establishment of a State -monopoly of tobacco in France, Italy, and Roumania, can be ascertained. This information could be supplied by the respective consuls for those countries, and it would be very valuable. Some objection has been raised to this proposal, upon the ground that it whittles down the labour platform. I do not believe in nationalizing any industry in the morning before breakfast, and more especially an industry which employs a large number of persons, and contributes an annual revenue of . £1,330,304. Before any steps are taken to disturb such an ' enterprise, a preliminary inquiry should certainly be held. We ought not to make any variation in the existing conditions without allowing both parties to be heard, and, therefore, it would be much better to appoint a Royal Commission than for the House - even if it were ready to do so - to declare straight out for the nationalization of the industry.

Mr Kelly - Is the honorable member in favour of tha appointment of a fair Royal Commission ?

Mr BATCHELOR - Why does no.t the honorable member ask me whether I am a fair-minded man ? What" answer does he expect to such a question ?

Mr Kelly - I know that the honorable member is fair-minded, but all the members of a Select Committee which was recently appointed are in favour of a State monopoly.

Mr BATCHELOR - To what Select Committee does the honorable member refer?

Mr Kelly - To the Select Committee appointed by another place.

Mr BATCHELOR - I am afraid that the honorable member does not recognise the distinction between my proposal and that agreed . to by another place. The latter provided for the appointment of a Select Committee to give effect to the resolution of the Senate that the industry should be nationalized. In view of this explanation, the honorable member should withdraw his remark as to the unfairness of the Committee.

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