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Wednesday, 15 August 1906

Senator BEST (Victoria) .- I think that the Senate is indebted to Senators Symon, Millen, and Gould for their drastic criticism of the Bill and the searching analyses to which they subjected its provisions, to say nothing of its indebtedness to Senator McGregor for his vigorous defence of it. I had not the privilege of being present whilst he was speaking, but I learn that such was the case. If the interpretation which my honorable friends on this side choose to put upon certain provisions were justified, then the Senate would have but one duty to perform, and that would be to reject the measure. Since the adjournment on Friday, I have had the opportunity of devoting a few hours to the study of its provisions, and I must confess that I see nothing which would justify such doleful apprehensions of disaster as my three honorable friends saw fit to express. The fundamental principle of the rpm is self-defence, and. its object is' to insure fair competition in trade. A sum of ,£700,000 ' a year is annually spent in preparing to defend our shores against aggression. We recognise as a first principle at all times that if we want to avoid aggression we must prepare for war. So it is in the industrial sphere. We have built up some valuable and important industries mainly, if not wholly, by the fostering influence of a system of protection. To show their extent, I shall quote a few figures which have been supplied to me by Mr. Drake, the Government Statist showing the average number of hands employed and the value of the output of the manufactories of the Commonwealth. In 1904, the average number of hands employed was 203,213; the value of the raw material used was £42,500,000; the added value in process of manufacture was upwards of £29,199,298; and the total value of the output was £71,699,298. In that year, the value of the machinery a,nd plant was ,£21,971,512 ; and of land and buildings, nearly £20,000,000; the total being ,£41, 702.509. The industries which have been established are of such gigantic proportions that at least we are justified in taking strong measures to see to their efficient protection. All that the Bill seeks to do in this connexion is to give some assurance that colossal and wealthy corporations, such as exist in America, shall not be permitted to swoop down upon the young and struggling industries of Australia. In other words, we seek to raise a peaceful legislative barrier against all those gigantic monopolistic concerns which may have the intent of destroying our industries.

Senator Mulcahy - I am a protectionist, but I cannot quite follow that statement.

Senator BEST - I am only staling that we are seeking to protect ourselves against any effort on the part of wealthy American or other combinations to destroy our industries. That is the purpose of the T3ill. As from time to time the question has been asked what is the necessity for the measure. I would urge that, by making it known to such vast combinations that we have made legislative provision against any attempt on their part to crush our industries, as they have successfully done in regard to smaller industries within America, we shall prevent aggression on their part. From that stand-point I urge that the measure is one of a prudential character, and wise in its conception. It is one to which, in my judgment, neither free-trader nor protectionist can reasonably object.

Senator Millen - No one did object to that part of the Bill.

Senator BEST - Seeing that that forms the whole of Part II. of the Bill, I do not know exactly what my honorable friend did object to.

Senator Millen - I can only regret that I did not make myself sufficiently clear.

Senator Playford - The honorable senator objected to the use of the words -

With intent to destroy or injure, by means of unfair competition, any Australian industry the preservation of which is advantageous to the Commonwealth.

Senator BEST - Exactly. I have had an opportunity to look through the only speech against the measure which I believe has been circulated in print, .namely, that of Senator Symon, and I was present for a time whilst Senators Millen and Gould contributed vigorous onslaughts upon it. I shall try to deal with some of the principal arguments urged by those honorable senators. At the outset, I totally differ from Senator Symon when he says of the measure that it is - crude, ill thought out, and in its provisions it will not carry out what ought to be the intent tion, namely, to prevent restraints in trade.

After a careful perusal of it, I say that, in my opinion, it is a thoroughly wellthoughtout measure, and wise in its conception.

Senator McGregor - That is why some people object to it.

Senator BEST - Undoubtedly. It takes the Sherman Act for its foundation, and seeks to remedy the more important defects disclosed in that Act by numerous American court decisions in connexion with it.

Senator Millen - There is nothing in the Sherman Act in restraint of importation.

Senator BEST - But there is in the Wilson Act.

Senator Millen - The honorable senator said that the framer of this Bill took the Sherman Act as its foundation.

Senator BEST - If the honorable senator1 will allow me, I would say that in America there are three Acts dealing with the objects covered by this Bill. The first is the Sherman Act dealing with trade within the limits of America and with freetrade conditions, the second the Wilson Act. which deals with importations, and the third the Elkin Act, dealing, if I remember rightly, with both internal and external trade. This Bill is founded on those measures.

Senator Millen - The honorable senator said that it was founded on the Sherman Act. I had no desire to interrupt him, but merely to ask a question. If the honorable senator resents that, I shall not interfere again.

Senator BEST - I beg the honorable senator's pardon. I was under the impression that 'he suggested that I had stated something, wrongly. I intended afterwards coming to the other two Acts. There are certain objectionable features in the Sherman Act opposed to the general principles of English law, and this Bill eliminates those objectionable American features, and seeks to adopt the principles of English law. It is very important also to' remember that this Bill is framed with special regard to our jurisdiction and constitutional powers. Where any of its provisions might be the subject of doubt, honorable senators will find that the very words of our Constitution are used. I therefore congratulate the Attorney-General, the draftsman of the measure, on the legal skill and acumen which he has brought to bear upon it. Senator Symon went on to say, with reference to the Bill -

It is not the outcome of any practical need. . . No industries are threatened. . .' . We have no instance of combines and trusts here. They may or may not exist ; at any rate there is none that is mischievous.

That is a very general statement, but, in my judgment, it is not quire correct. Saturday last furnished us with an answer to it. In the Age and Argus newspapers of that date we saw certain references to Tariff revision, and, amongst other things, the following two paragraphs from the report of the Tariff Commission. I speak subject to correction, but I believe they accord with the general findings of the members of the Tariff Commission, and not merely the findings of protectionist or freetrade members of that Commission -

That there is clear and undisputed evidence that between October, 1904, and October, 1905, there was a trade agreement or combine in existence in Australia to which most of the leading Australian manufacturers qf agricultural implements and machinery, together with the International and Massey-Harris Harvester companies, were parties, and that by such agreement the selling price of stripper-harvesters in each of the States was fixed and determined ; that, as a result, some local firms raised their prices from £70 to £81, and that one firm reduced its price from £83 or ^84.

That we are of opinion that such trade agreements or combines in restraint of trade are injurious and detrimental to the public interest -

I direct the attention of honorable senators to the fact that these are the words of the Bill- and that they should be prohibited by law, especially in a case where duties are in operation tending to limit importation for the benefit and protection of local manufacturing industries ; the importing firms should also be prohibited from entering into such combinations, seeing that they may be utilized for the purpose of lowering prices in order to prejudice and destroy local manufactures.

That as the finding of the Tariff Commission, whose special duty it was to give close attention to this particular subject. Fortunately at this juncture, after full inquiry, they have submitted their conclusions as to the existing condition of things as the result of their investigation. We have also amongst our records a report from the Royal Commission appointed to inquire into and report upon - ,

1.   The existence or otherwise of a combine, trust, or monopoly in the industry of the manufacture, importation, and sale of tobacco, cigars, and cigarettes within the Commonwealth.

2.   If such combine, trust, or monopoly be found to exist as to its effect on the industry and the cultivation of tobacco and on the Commonwealth.

3.   As to the advisability or otherwise of the Government taking over the industry of such manufacture, importation, and sale, or any part thereof.

That Commission has- furnished us with a report, and, while I do not pretend to say that I am in full accord with the findings of the Commission, or that they are justified bv the evidence submitted, I have no doubt that they are honest findings, and the result of an honest (investigation on the part of the signatories to the report. They are, at all events, evidence of the existence of certain grievances, and of the fact thai there is room for some improvement of existing conditions. Clause 4 of the Commission's report' says -

That a combine or trust does exist in the industry of the manufacture. . . . That it extends to the business of importation ; that it also extends to the wholesale distribution of locally manufactured and imported tobaccos.

Clause 6 of the report reads -

The prospect of this competition has 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 holds a proprietary interest in every other such business, and also in the distributing firm of Kronheimer Limited.

In clause 17 I find the following: -

As to the effect of the combination on the operatives, four representatives of those engaged in the making of plug and twist tobaccos 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 J abour 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 clause 19 of their report, the Commissioners say -

We find generally that wages have been, in some instances, reduced, and in clause 21 they say -

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.

Those are the findings of a Commission appointed by the Governor-General in Council, and comprising representatives of the Senate. I om not saying that they are justified by the evidence, but the fact remains that in connexion with this particular industry there are causes of complaint and grievances. I need not refer to other combines that are perfectly well known to honorable senators. I think that Senator ^McGregor specially mentioned the monopoly connected with the sugar industry, and we know that there are shipping rings and other combines which have already been referred to. The fact remains that, even in view of our present conditions,' it is essential that we should have a law of this kind on our statute-book, to check at the very outset their baneful influence. But, apart from that altogether, my contention is that as prevention is better than cure, this Bill as a wise and peacable legislative provision available to meet emergencies as they arise. Senator .Symon, amongst other things, said -

The only bad monopoly that I know of is that which raises the prices of t?ie necessaries of the people. A monopoly of that kind I personally detest. Such a' monopoly results from exclusive Tights, however acquired, to the sale of a commodity.

The honorable and learned senator went on to say -

And it may be brought about by agreement with the intention to choke competition and capture the market - the objective in point of fact is to raise prices.

I will make but one comment upon that, and it is that this particular class of monopoly, which excites the detestation of my honorable and learned friend, is one of the classes of monopoly proposed to be dealt with by the provisions of this measure. Then the honorable and learned senator went on to refer to what is regarded as rather an important matter. He said -

It will strike at the importation of machinery used largely in the boot trade, which cannot be otherwise acquired.

The honorable and learned senator gave us to understand that this Bill would have the effect of annulling existing contracts for the leasing of boot manufacturing machinery, and that prosecutions might take place as the result. I think that the honorable and learned senator was in error in those conclusions. I say so, of course, with the greatest respect for my honorable and learned friend. I understand that his reference was to the' Goodyear bootmaking machines. In connexion with this machinery there are throughout Australia various contracts in force with boot manufacturers. They provide for the payment of royalties, and, as I gather, the boot manufacturer is obliged to take from the proprietor of the machines certain material, and the price to be paid for that material is, I understand, 5 per cent, more than the prevailing market price.

Senator Mulcahy - It is not necessarily that. The only restriction is that the lessee shall not buv from any one else unless the lessor shall be unable or unwilling to supply the goods, and at a price not more than 5 per cent, in excess of the price for which the lessee can obtain them t-.f equal quality

Senator BEST - Senator Symon was of opinion that this Bill if passed into law would make those agreements null and void, and that prosecutions might follow. With confidence I express the opinion that the terms of the Bill in no way affect such agreements.

Senator Playford - The AttorneyGeneral has said so in another place.

Senator Millen - Would the Bill not even effect the continuance of such agreements ?

Senator BEST - No; not even the continuance of such agreements?

Senator Mulcahy - How about the renewal of agreements?

Senator BEST - I shall even go further1 and say that, provided they are beneficial- agreements, and not detrimental to the public, they may be renewed, notwithstanding this measure, for the reason that it does not affect them under such circumstances.

Senator Mulcahy - How about any person desiring to enter into a similar agreement ?

Senator BEST - He would be at perfect liberty to enter into any agreement or contract of a beneficial nature; the only contracts or agreements which may not be entered into are such as would be detrimental to the public. Clause 4 mentions any " person or agent " who " makes or enters into any contract"; and I say that these words iri themselves imply the future, and have no reference to the past. That clause goes on to speak of persons who enter into such contracts or agreements " with intent " to restrain trade or commerce to the detriment of the public. If a man innocently entered into such a contract before the passage of this Bill, he could not possibly have done so with: the intent to restrain trade under the terms of a measure that was not in existence. Subclause 2 provides that every contract made or entered into in ^contravention of the terms of the Bill shall be absolutely illegal and void. Honorable * senators will see, therefore, that the Bill cannot have any possible reference to existing contracts.

Senator Millen - But supposing some contract were entered into the. day after the Bill became law?

Senator BEST - At present I am merelycontending, that the Bill cannot be retrospective, and, consequently, does not affect, existing contracts, which are a source of such apprehension on the part of the honorable senators with whose arguments I am at present dealing. In other words, the Bill says that a crime is not to be made retrospective; and it is a well known and acknowledged principle that no legislation must make a crime retrospective. I go further, and say that if contracts are beneficial - if they are not to the detriment of the public, and are not made to restrain trade or commerce to t'he detriment of the public, or with intent to destroy or injure by means of unfair competition, any Australian industry, the preservation of which is advantageous to the Commonwealth, having regard to the interests of producers, workers, and consumers - they- may be entered into the day after this Bill lias passed. There is nothing in the terms of this measure that would prevent such a state of affairs eventuating. But I may be referred to the clause which deals with any person who is at present, or continues to be, a member of, or engages in, any combination. That, however, is. not the sort of contract with which I am now dealing. There is an offence mentioned in clause 4 of continuing to be a member of, or engaging in, any combination with intent to restrain trade to the detriment of the public, and with intent to destroy an Australian industry which is worth preserving. The Bill provides that any persons who enter into a conspiracy of that kind shall be guilty of an offence. Could anything be more fair or reasonable? That offence is not retrospective, because the Bill provides that if a person continues to be a member of a nefarious combination, such as is contemplated, there shall be an offence, and that practically means an offence after the measure has been passed. In other words, if a person continues to be a member of a nefarious combination, he is to be treated as though' he had freshly joined after the passage of the Bill. Tha't is obviously the position ; and, consequently, if a person continues to be a member of a conspiracy against Australian industries, an offence will be created under the Bill, and there will be a liability to prosecution, as for any other criminal offence. Reference has been made to the Sherman Act; and so far as I could gather from the remarks of the three honorable senators who adversely criticised the Bill, they regard that Act with approval. I do not know whether I am doing Senator Millen an injustice when, trusting to memory, I say that I understood him to tell us that if we had the Sherman Act he would be quite satisfied.

Senator Millen - The honorable senator is not quite correct.

Senator BEST - And am I to understand that Senator Millen would not be satisfied if we had the Sherman Act?

Senator Millen - What I did say was that I was perfectly satisfied to support so much of this Bill as will operate in restraint of trusts and monopolies.

Senator BEST - Do I understand the honorable senator to say that he discards the Sherman Act, and would not be satisfied with its terms and provisions ? If that be so, I am to some extent robbed of the criticism I was about to launch. But I must say that three honorable senators -who spoke on this side of the chamber gave me that impression.

Senator Trenwith - Senator Symon practically took that view, .because he asked why we were not asked to adopt the Sherman Act.

Senator BEST - I was saying that honorable senators on this side 'have spoken in terms of approval of the Sherman Act.

Senator Millen - I do not think that the honorable senator is quite correct there ; what was said was that the Government were not justified in representing this Bill as a copy of the Sherman Act.

Senator Playford - I never said that this Bill was a copy of the Sherman Act.

Senator Millen - The Minister of Defence has all along said that this Bill is founded on American legislation.

Senator Playford - The Sherman Act is the foundation, just as it is the foundation of five or six other Acts since passed in the United States, finishing up with the Elkin Act, to which Senator Best wished to refer.

Senator BEST - Just so; the foundation of this Bill is American legislation, including the Sherman Act, and the Wilson Act and the Elkin Act; the Bill is founded on all three Acts. Then I understood honorable senators to say that this Bill does not attempt to discriminate between good trusts and bad trusts.

Senator Millen - Exactly.

Senator BEST - Senator Millen is not prepared to say that he would be satisfied with the Sherman Act - though I understood from the general remarks of three honorable senators on this side that that Act met with their approval - and he now contends that the Bill does not discriminate between good trusts and bad trusts. If these are the views of my honorable friends on this side, I can only say that they cannot have given the Sherman Act, or the decisions under its provisions, their thoughtful and careful consideration. I undertook at the outset to prove, as far as I could, that this Bill eliminates what we conceive, according to our English ideas, to be the harsh and rather unfair provisions of the Sherman Act. I now propose to contrast the two measures. The first section of the Sherman Act is as follows: -

Every contract, combination in the form of trust or otherwise,- or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.

That is .to say, it is a misdemeanour to so contract.

Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanour, and, on conviction thereof, shall be punished by a fine not exceeding $5,000, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the Court.

I desire now to show how the provisions in this Bill are more just. According to the terms of the measure before us, a man cannot be convicted of a crime unless he commits it with intent to do wrong ; whereas under the Sherman Act the most innocent of men may commit a crime unwittingly. In other words, an unfortunate man may. by some inadvertent act on his part, render himself liable to serious penalties. The Bill, in contrast to the Sherman Act, is a guarantee that an innocent man shall not be made a criminal. Under it it has to be proved, not only that the agreement is in restraint of trade, but further that it is detrimental to the public ; whereas under the Sherman Act, all that has to be proved is that the combination is in restraint of trade. The third distinction is that under the Bill it has further to be proved that the intention is to destroy or injure, by means of unfair competition, some Australian industry that is worth preserving. It will be seen that there is a vast difference between the Bill and the Sherman Act.

Senator Millen - And there lies the vast danger of the Bill. .

Senator Trenwith - The danger that we cannot punish an innocent man !

Senator Millen - That is a gross misrepresentation of what I said - an intentionally gross misrepresentation.

Senator Trenwith - If the honorable senator says that- the misrepresentation is intentionally gross, I can only reply that he has made a misstatement.

Senator BEST - I desire to go further, and say that the Sherman Act does not discriminate between good and bad trusts, whereas the Bill, before us does. It has been held by} the American Courts under the Sherman Act, that whether the restraint of trade be beneficial or injurious, it makes no difference.

Senator Findley - Quite right; there are no beneficial trusts.

Senator BEST -The only question that the American Courts have to consider is whether there is restraint of trade, which may be intentional or. otherwise. I wish to satisfy honorable senators on this point by supporting what I 'have said, with the dictum of learned Judges in various decisions. The first reference I make is to the case, The United States v. the Chesapeake Ohio Fuel Company, which is reported at page 105 of the Federal Reports for 1893.

Senator Mulcahy - The honorable senator has made no reference to " unfair competition " and its definition.

Senator BEST - The honorable senator may accept the assurance from me that before I conclude I shall give a fairly full explanation on that point.

Senator Findley - Competition cannot succeed at all unless it is unfair.

Senator Mulcahy - Unfair competition is defined in the Bill.

Senator Findley - There is no such thing as fair competition - the competitive system is all unfair.

Senator Playford - Then, if a man were to stand against me for Parliament, he would be guilty of unfair competition ?

Senator BEST - I desire to assure honorable senators that I propose to deal with every feature of the Bill to which exception has been taken'.

Senator Mulcahy - What I have referred to is one important point.

Senator BEST - The point which I am now emphasizing is that the Sherman Act makes no difference between beneficial and injurious trusts, whereas this Bill does. What I am about to quote is the head-note to the judgment in the case which I have mentioned. It says -

It is the declared policy of Congress to promote individual competition in relation to InterState commerce, and to prevent combinations which restrain such competition between their members ; and it is no defence to an action to dissolve such a combination as illegal under the anti-trust law that it has not in fact been productive of injury to the public, or even that it has been beneficial, by enabling the combination to compete for business in a wider field.

The District Judge, Thomson, in the course of his judgment, said -

The important question is, not whether the performance of the contract so far has resulted in actual injury to trade, but whether the contract confers power to regulate and restrain trade upon those charged with its performance.

Later on he said-

Tt is the duty of the courts to condemn every contract which necessarily in its performance involves a. restraint of trade, although it mav not extend to the point of a monopoly of all that trade.

The case finally went to the Court of Appeal, which, in the course of its judgment, said -

It is no defence to a suit to dissolve such a., combination as illegal under the anti-trust law,, that it has not been productive of injury to thepublic, or even that it has been beneficial, by enabling the combination to compete for businessin a wider field. As we understand the decisionsof the Supreme Court of the United States, theconstruction of the statute is no longer an open ; question. At the common law, contracts wereinvalid when in unreasonable restraint of trade,. and were not enforced by the courts.....

In the exercise of this right, Congress has seem fit to prohibit all contracts in restraint of trade. It has not left to the courts the consideration, of the question whether such restraint is reason- ' able or unreasonable, or whether the contract: would have been illegal at the common law or not.

There is another case, known as the Northern Securities case - and also known as the great Merger case - where the sameprinciple was laid down. The Court said -

The Act is not limited to restraints of Inter state and international trade or commerce that are unreasonable in their nature, but embracesall direct restraints, reasonable or unreasonable, imposed by any combination, conspiracy, or-' monopoly upon such trade or commerce.

So that honorable senators will see that' the terms of the Sherman Act were so dras-' tic that, whether the contract was reasonable or unreasonable, it came within theprovisions Qf the law.

Senator Dobson - -Does the honorablesenator think that that principle appliesto the exact wording of this Bill.

Senator BEST - This Bill eliminatesthe principle which I have mentioned, and', is based upon English principles. I will' show mv honorable friend in what way,, but before doing so I wish to refer to aremark made bv Senator Symon. My honorable friend Senator Dobson and myself" protested against Senator Symon's view of the law at the time, and the followingremarks were made. Senator Symon spokewith approval of certain English combinations: -

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