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Thursday, 16 August 1906

Senator PULSFORD (New South Wales) . - I think that now we have heard Senator Trenwith we have heard pretty well everything that can be said in favour of this Bill. I propose, in. the first place, to refer to some matters brought under our notice in the papers laid upon the table by Senator Playford. In connexion with trusts in America, to which attention has been directed, there are certain features which, I think, we may accept as a warning not to be hasty or rash, in our movements. In 1903 two Acts were passed in the United States, clearly with the object of lessening the trouble which had been found to arise from previous legislation. The first was what is known as the Expedition Act, which was intended to lessen the delay experienced in dealing with cases - delay which, it appears to me, represents one of the greatest risks to which legislation of the kind under discussion may expose the trade and commerce of Australia. Under the Hill very important portions of our trade might be so " hung up " as to inflict the greatest injustice on 'the parties concerned, and most serious injury on the Commonwealth generally. The Act I have mentioned provides that precedence shall be given to anti-trust cases, which have to be expedited in every way, and be assigned for hearing at the earliest practicable day. That, I take it, shows that in the United States the application of the Sherman and other Acts was likely to be accompanied by injustice. The second Act that was passed in the United States in 1903, is that known as the Elkin Act, under which imprisonment penalties are abolished. According to the information which has been circulated, the Elkin, Act provides -

In all convictions occurring after the passage of this Act for offences under said Acts to regulate commerce, whether committed before or after the passing of this Act for offences under this section, no penalty shall be imposed on the convicted party other than the fine prescribed by law, imprisonment wherever now prescribed as part of the penalty being hereby abolished.

That is further evidence that in the United States it had been discovered that the antitrust legislation, as originally conceived, might possibly inflict grave injustice; and that ought to act as a warning to us. I should also like to direct attention to what has been done in New Zealand, a country where there has been considerable experimental legislation. It is worthy of notice, however, that in dealing with the question of dumping, the legislation of New Zealand provided for the appointment of an Agricultural Implement Inquiry Board, consisting of the President of the Arbitration Court, the President of the Farmers' Union, the President of the Industrial Association -of Canterbury, and a nominee of the Trades and Labour Council, and a nominee of the Agricultural and Pastoral Associations. Before anything could be done under the Anti-Trust Act, the representatives of the agricultural industries of New Zealand had the opportunity to make themselves heard. There is no such caution observed by the Government of the Commonwealth. There is no proposal to "go slow" in the interests of our myriad producers ; the only thought in the minds of the Government is to go " full steam ahead " in the interests of a few manufacturers of agricultural implements. In the further memorandum relating to antitrust legislation there is some information given as tq the decisions of the Federal Courts in the United States. The Supreme Court declared -

Although the jurisdiction of Congress over commerce among the States is full and complete, it is not questioned that it has none over that which is wholly within a State, and therefore none over combinations or agreements, so far as they relate to a restraint of such trade or commerce. It does not acquire any jurisdiction over that part of a combination or agreement which relates to commerce wholly within a State by reason of the fact that the combination also covers and regulates commerce which is InterState. The latter it can regulate, while the former is subject alone to the jurisdiction of the State.

In the Bill there are two or three clauses which, in mv opinion, are very likely to impinge on States rights, and it is instructive to observe what the view of the Supreme Court of the United States is on this point.

Senator Best - Under a totally different Constitution.

Senator Playford - No analogy can be drawn.

Senator PULSFORD - I know there is some difference between the Constitutions, but the rights of the Australian States are very clearly defined. I do not intend to labour this point, but I know that a number of authorities believe, and strongly assert, that certain provisions in the Bill are likely to come in conflict with States interests and legislation.

Senator Trenwith - Does the honorable senator mean that provisions are likely to come in conflict with States interests, in violation of the Constitution?

Senator PULSFORD - Yes. On page 9 of the further memorandum there is a tabulated digest of the anti-trust laws of the United States; and this information is of considerable interest and importance. In Arkansas the combinations prohibited are all which tend to lessen free competition in importation, production, or sale of goods. The Bill before us, on the other hand, has clearly been introduced in order to increase the difficulties in the way of importation. A similar law to that which I have indicated as prevailing, in Arkansas obtains in Georgia, Indiana, Minnesota, Montana, North Carolina, North Dacota, South Carolina, South Dacota, Tennessee, Texas, Utah, and Wisconsin. All the anti-trust legislation of those States is aimed largely-

Senator Playford - At the carrying companies.

Senator PULSFORD - It is aimed largely at people who try to check the importation of goods. In the Bill before us the Government are doing their utmost to make an addition to the Tariff for the purpose of checking importations, and prac,tically encouraging combinations against importers. One point dealt with by Senator Playford in introducing the Bill I must refer to. Dealing with the connexion between trusts and Tariffs, the honorable gentleman said -

Amongst my papers, and I think amongst the papers which I laid upon the table, there are some extracts which show that, next to the United States, England is the great1 country of trusts. Our free-trade friends say, and say loudly, that the trusts and combinations which are supposed to work so injuriously in the United States, are the product of protection, and that trusts and combinations are not so prevalent in other countries. In Europe, France is one of the most protectionist countries, whereas, the only free-trade country is England. France, the protectionists' country, has hardly any trusts, but England, the free-trade country, has more trusts than any protectionist part of Europe. The argument of our free-trade friends, therefore, will not hold water.

I propose to look at these utterances in the light of the paper written by Mr. Tregear, the Secretary of Labour in New Zealand, to the Minister of Labour in that Colony. I have read the report of Mr. Tregear with great pleasure, because it .is drawn up with ability, and bears on its face the marks of honesty. In short, it is a report from which any one may quote with thorough confidence.

Senator Findley - And it is drawn up by a Socialist !

Senator PULSFORD - I am aware that Mr. Tregear is described in some quarters as a Socialist, and that he has been refused permission to come to Victoria on that ground. But whether Mr. Tregear be a Socialist or not, he is at least an honest man. I should have been glad if the subject of the Tariff had not been introduced into this debate, but after what has been said regarding it by various speakers. I must refer to some points. Speaking of Tariffs, Mr. Tregear says -

The preponderance of opinion is strongly in favour of the position that much of the power of trusts is owing to protection by Tariff.

Further on Mr. Tregear says -

So widely has the knowledge of this fact obtained credence that the saying " The Tariff is the mother of trusts " is a modern proverb. It is impossible to deny that in the United States the Tariff gives the beneficaries of it a monopoly to the extent that their foreign competitors must pay the cost of production abroad, the freight, and the Tariff duty before they can enter into ' competition. In the first year of business of the Steel Trust, its Tariff benefits » amounted to $72,600,000.

This sum equalled two-thirds of its first year's profits, so that taxes amounting to over $70,000,000 a year had to be placed on other industries ; or, to put it in another way, the revenue lost $70,000,000 of duty in the year in order lo build up the dividends of this Steel Trust ; the average tariff paid on articles controlled by the trust being about 50 per cent.

Then at page 9 he also says -

There is little doubt that many of these trusts paying large dividends do so by means of or by help of heavy protective duties, thus : - The Oil Trust, protected by an average of 17 per cent., pays' dividends of 40 per cent. ; the Window Glass Trust, protected by an average of 59 per cent., pays dividends of 15 per cent. ; the Sugar Trust, protected by an average of 85 per cent., pays dividends of 17 per cent. ; and the Cement Trust, protected by an average of 23 per cent., pays dividends of 33 per cent.

So far for America. Now I turn to. England, and I find that at page 16, Mr. Tregear writes -

Agreements regarding prices and other objects have been for a long time in force, but of late years the tendency towards consolidation has been very marked, and the coalitions have in many case.- taken the form of trusts or single corporations. Of these, several take prominent places on account of their large capitalization, and of the amalgamated firms they represent. Among these may be noted the following :-


Senator Playford - These are onlyexamples.

Senator PULSFORD - I am giving the information supplied by Mr. Tregear. He says -

These may be taken as examples of some of the larger combinations engaged in England.-

Senator Playford - That is what I say, they are only examples.

Senator PULSFORD - The honorable . senator may as well take his gruel quietly.

The capital invested in well-known and fullyorganized trusts of this class may be roughly estimated at £100,000,000. Such a sum, however, sinks into insignificance compared with the stocks and bonds which represent a capitalization of single American trusts such as the Standard Oil Company and the United States Steel Corporation.

Senator Playford - My comparison was between Great Britain and France, and the honorable senator, after making a comparison in another way, says that I am wrong.

Senator PULSFORD - I know precisely what the honorable senator said. He said that his free-trade friends were wrong. At page 17 of the paper supplied, Mr. Tregear writes -

The cry for " publicity ! " which has had such an effect lately in shaping American anti-trust legislation, finds little echo in Great Britain, because secrecy^ in the methods of organization gains no shelter under the English law dealing with corporations. The promotion of companies must be done in full light. The general process of the formation of a corporation is somewhat as follows : - The promoter goes to the persons engaged iri the industries in question and shows them the advantages of coalition. In the United States he probably takes an option to buy all the establishments at a fixed price in cash. He then organizes the affair, selects the first board of directors and managers, and offers the vendors the choice of taking their payments in cash or shares. In England, however, no such definite rule is followed. The vendors either sell at a valuation fixed by appraisers, or the property is purchased on a profit basis, certified accountants having first investigated the books of the company. If contracts are made by a corporation for purchase of property in this way, such contracts must be filed with the Registrar of Joint-Stock Companies, so that the public may examine them and understand the value of the shares offered for purchase. There aTe modes of defeating this publicity sometimes attempted by astute brains, but seldom by men who have reputations to lose or in corporations based on substantial assets, for such combinations have nothing to fear from publicity. If accusations are made concerning " watered " stock in English trusts, it will generally be proved that the " water " is not more than 20 per cent., of the capital, and represents the good-will of the amalgamating business, while the other 80 per cent, stands for tangible assets. '

I think that that statement gives the position with thorough accuracy. We all know that there are trusts in England. Nobody has ever suggested that there were not. But, as Mr. Tregear says, they are infinitesimal^ compared with' the trusts in the United States; and also, as Mr. Tregear says, the trusts in the United States spring very largely from, and are the off-spring of, Tariff protection. Senator Playford told us that trusts are not necessarily all bad. He quoted Mr. Tregear, who makes statements on that point of his own knowledge, and also statements by Mr. Morrell, of the United States House of Representatives, which I need not read. But I should like to point out that although Senator Playford is willing to admit that trusts are not necessarily all bad, in this Bill all trusts are condemned.

Senator PLAYFORD (SOUTH AUSTRALIA) (Minister for Defence) - No.

Senator Trenwith - Only trusts that try to strangle Australian industries. Unless they do that this Bill will not touch them.

Senator PULSFORD - Honorable senators must pardon me. Clause 6 of this Bill provides that -

For the purposes of the last two preceding sections, unfair ,- --': ': .means competition which is unfair in the circumstances ; and in the following cases the competition shall be deemed to be unfair unless the contrary is proved : - (a) If the defendant is a Commercial Trust.

So that if the defendant is a commercial trust this Bill says that his competition shall be deemed to be unfair.

Senator Playford - We throw upon him the onus of proof that his competition is not unfair.

Senator PULSFORD - The honorable senator declares that some trusts are beneficial, or that all are not necessarily bad, but the Bill says that a commercial trust is bad1, and its competition shall be deemed to be unfair.

Senator Dobson - It is necessary to prove intent to injure an Australian industry.

Senator PULSFORD - No, no; clause 6 is quite apart from that. There is in this clause the absolute statement that if the defendant is a commercial trust his competition shall be deemed to be unfair.

Senator Playford - And he must prove the contrary.

Senator PULSFORD - It is ludicrous for ' the Minister to admit, as Senator Playford has been obliged to admit, that all trusts are not necessarily bad - he could not. look honorable senators in the face and deny that some are beneficial - and then to ask us to pass a Bill which treats all commercial' trusts as bad. It is admitted that some trusts are beneficial.

Senator Playford - Then they have only to prove it.

Senator PULSFORD - There is another statement made by Senator Playford, which I must look into. It is a statement with regard to dumping. The honorable senator read out a somewhat lengthy list of goods exported from America, which he said were dumped in other countries.

Senator Playford - I do not think I used the word "dumped" in connexion with those goods. What I said was that they were exported for sale at a price lower than the cost price in the country of export.

Senator PULSFORD - The honorable senator said -

That long list, which honorable senators may examine for themselves, shows the percentage of difference between the export prices and the home prices in the case of fifty or more different articles. The preference in favour of the country to which the goods are exported ranges from 13 per cent. to as high as 261 per cent. . . . The figures represent the difference between the home prices and the prices at which the goods are sold to people abroad, and the average difference, I should say, is considerably over 50 per cent. The list will give honorable senators some idea of the dumping that was going on.

I thought the honorable senator had connected dumping with that list of goods.

Senator Playford - It is not necessarily dumping in Australia.

Senator PULSFORD - At page 9 of Mr. Treagear's report he quotes from a speech delivered by the Honorable J. P. Crowley, of the United States House of Representatives, on the , 14th January, 1903, to the following effect: -

After having investigated this subject for more than ten years, I have reached the conclusion that practically all of our manufactured products are sold to foreigners for less than to Americans. The minimum difference is about 10 per cent. The average difference in price is probably 20 per cent., and on our really protected products about 25 per cent.

That is the estimate of a member of the United States House of Representatives, but Senator Playford is not willing to accept that.

Senator Playford - I submitted a list of particular goods, and if the honorable senator will run up the prices quoted for those goods he will see that the average difference was 50 per cent. The member of the United States House of Representatives from whom the honorable senator has quoted was dealing with the whole of the export commerce of the country.

Senator PULSFORD - Surely Senator Playford, in supplying his list, wished to represent the state of affairs?

Senator Playford - So far as the goods contained in that list were concerned.

Senator PULSFORD - I have gained something when the honorable senator climbs down in that way from the position he assumed.

Senator Playford - I do not climb down. I said, " Here is a list in connexion with which the difference ranges from 13 to 260 per cent., and the average difference is about 50 per cent."

Senator PULSFORD - Then the honorable senator does not tell us to-night that 50 per cent. represents the average difference ?

Senator Playford - Yes, for that list it does.

Senator PULSFORD - Then that list is not representative of the American trade ?

Senator Playford -It does not represent the whole of it, and I did not say that it did.

Senator PULSFORD - Then the honorable senator admits that the average for that list isnot the average in respect of American exports generally. We have gained something by that admission. The statement as to the allowances made to foreign countries was undoubtedly made with a view to win support for the dumping provisions of the Bill. Wth regard to this matter of allowances, I shall draw the attention of honorable senators to some of the items in the list given by Senator Playford, in order to show that the difference in some cases is natural, can easily be explained, and does not represent what is commonly described as " dumping." Honorable senators know that many articles of trade which are produced in one country and sold in another, or even sold in the country of origin, have to be advertised very largely, and need a great deal of pushing by travellers and representative firms, and that the expense in that connexion is very great. An article may be produced in Australia, and may have to be advertised here a good deal, and if it is sold in another part of the world it has to be freely advertised there. The price at which the article is sold in Australia includes the cost of advertising, as a profit must be made on that. If it is sold abroad it must be advertised there; but a manufacturer does not consider the price he gives abroad as his price plus the cost of his own advertising,. Bradbury's pianos are sold in the United States for local use at £75, and for export at £60. It is well known what a large trade is done in American sewing machines. I believe that every honorable senator is thoroughly conversant with the course of business in that regard. We see sewing machine agencies here, there, and everywhere, and canvassers going about, and we know that the pushing of the business entails a very large expenditure. The price obtained in America includes the expenditure there in pushing in these various ways sewing, machines,, pianos, and so on. But when manufacturers sell for export they sell at their own price, so that their representatives, or their buyers abroad, have the margin, which they expend abroad in advertising, and very largely it is a misunderstanding of the facts of the trade in regard to harvesters which has caused the misapprehension existing in the minds of a good many honorable senators. Typewriters is another very important article of American export. In America a typewriter is sold at about £20, but for export the price runs from £11 to £13. Every one knows, I suppose, that the agents of American typewriters are amongst our largest advertisers, and that they spend a very great deal of money. Although typewriters are sold for export at from £11 to £13 each, they are not sold at such a price in Australia.The ordinary price of a typewriter here is between£20and £30, and, I believe, generally nearer £30 than £20. The difference is accounted for by the expenses which have to be incurred, and the profits which have to be maintained. The outcry against this sort of thing is largely due to complete ignorance of trade conditions on the part of some persons, and the astuteness of others in taking advantage of that ignorance, and foisting upon parliamentary institutions a claim for allowances which ought not to be recognised. Honorable senators know very well that some articles are so bulky that the cost of transit is so great that it precludes their being sent here. For instance, coal is not sent from England to Australia. Bricks and bread are not sent from other countries. Those articles cannot be sent. Natural conditions are altogether against that being done, and it is largely so with the harvesters, which are articles of very great bulk. The cost of moving a. harvester, packed as closely as possible, from Toronto to Melbourne or Sydney, is very great. I believe it represents a natural protection of about 40 per cent, to the Australian maker. Really, harvester makers are about the last persons in Australia who should cry out for special protection!. I desire to give honorable senators a most extraordinary illustration of the difference that may arise in the matter of price. The facts were brought out in a law suit in Sydney a few months ago. An agent for an American medical firm imported 15 cwt. of pills in bulk. He paid Customs duty on a value of £154. That seems a good deal of money for 1,500 cwt. of material. But what did the Customs say ? They said, " This stuff, when packed in boxes, is sold in America at so much a box. This quantity will make so many boxes, and at that price it will represent a value of £2,160. You have undervalued the shipment enormously. We want £300 more duty, and we demand from you a penalty of three times the value, or £6,480." The case was dealt with by Mr. Justice O'Connor, and in lieu of £6,480 he awarded to the Customs a penalty of £5. He stated that it amply met the case, as there was no moral guilt.I ask honorable senators to recollect that £5 is the minimum fine. Possibly if the Customs Act had not prevented his Honour he would have inflicted a penalty of only is.

Senator Playford - He ought not to have inflicted any fine if there was no wrong done. The fact that he inflicted a penalty of £5 shows that there was some wrong on the part of the importer.

Senator PULSFORD - Mr. JusticeO'Connor said that there was no moral guilt. The Minister knows very well how he and other gentlemen of his way of thinking built up the Customs Act in order to catch persons on technical points, and to land innocent men in gaol, as they often have done.

Senator Playford - I administered a similar Act for a good many years, but I never landed amy one in gaol, though I made one man pay a fine of £500.

Senator PULSFORD - I have no doubt that if many cases in which imprisonment has been awarded in the Commonwealth had come before the honorable senator in South Australia he would have taken care that no such penalty was allowed to be inflicted, because he would have found means and ways of avoiding the trials which have disgraced the Commonwealth so much. The case I cited will give honorable senators an idea of what is possible in regard to valuations.

Senator Playford - In regard to physic evidently.

Senator PULSFORD - In that case the difference was enormous. A difference, although to a smaller extent, exists in countless, other lines of trade, and the fact is not recognised by Ministers, or by many of those who argue most loudly for this very drastic Bill. I wish to refer to one or two statements made by Senator McGregor, who, I regret to see, is not present. In his speech he referred at some length to the United Shoe Machinery Company, which he held was not a fairly conducted concern. He said -

Whilst the United Shoe Machinery Company was carrying on its business legitimately there could be no objection to it, nor is there any very serious objection to it now. But, like the sugar monopoly and the tobacco monopoly, this company is now spreading its nets over the boot and shoe industry of Australia in such a manner as to threaten to exclude every . one else. I should like to ask honorable senators whether they believe that there is any genius, intelligence, and perseverance to be found amongst the people of Australia? I know that we have people possessed of all those qualities, and it is the duty of the different Parliaments of Australia to give themevery opportunity to display' them to the fullest possible extent.

I hold in ray hand a circular letter which bears the signature of the leading boot and shoe manufacturers in New South Wales, Victoria, and South Australia. They write as follows: -

In the development of this industry, Australian manufacturers, like their competitors elsewhere, obtain most of their machinery, and a certain proportion of their material, not procurable in Australia, from other countries. They must, therefore, maintain relations with firms or companies manufacturing or handling these goods in Europe and America. Amongst these are at present five corporations in England and America, which are styled " Commercial Trusts " in the Australian Industries Preservation Bill. The boot manufacturers are pleased to be able to assure honorable senators that their business relations with these bodies have been, and are, satisfactory, and they wish them to continue so. The manufacturers are, therefore, anxious that nothing should be done by the Legislature to render legitimate business transactions with these corporations difficult or uncertain, as while Australian trade is a small item with these large corporations doing business in all parts of the civilized world, it is of great moment to Australian manufacturers tokeep in touch with these sources of supply. In other words, commercial trusts in Great Britain and America can do without Australian trade, but Australian manufacturers cannot do without the goods produced and controlled by these bodies.

At some length the writers describe how the United Shoe Machinery Company and others bring out special machines, and also expert workmen to erect them, and instruct manufacturers in the use of them. In this connexion they say -

To show the extent to which the company's experts have been useful to Australian manufacturers, upwards of 5,300 calls for assistance were responded to in Sydney and Melbourne alone in the year 1905. This feature of the business has to be borne in mind in connexion with the leasing and. royalty system, as the services of the experts in connexion with keeping the machines in order are given to the manufacturers without charge by the company.

It is quite evident that the relations at present existing between this company and the boot and shoe manufacturers of Australia are highly satisfactory, and that Senator McGregor need not have troubled honorable senators with any gloomy fears upon that point. Senator McGregor also made a grave charge against the company. He referred to some agreement which Mr. Henry Best, of Collingwood, had with the company, under which, he said, Henry Best obtained a machine which he thought would be more efficient, and set it up in the same room with a Goodyear machine. He said -

It has been said that the notice for the termination of the contract was given not on that account, but because Best owed the company some money. But it is a very peculiar fact in connexion with this incident that, when the other machine was refused, the Goodyear machinery was allowed to stand there, and has been in operation in the factory ever since. I have here a letter from Mr. Edward Fitzgerald to Henry Best and Company - " Imperial Chambers, Bank-place, " Melbourne, 15th February, 1905. "Dear Sir, - Referring to our interview with you. this morning by the Melbourne manager of the United Shoe Machinery Company, when notice of cancellation of your lease from the company was served on you, and you forcibly refused possession of the leased machines, I am now instructed to give you notice that if delivery of the said machines is not given to the local office of the lessor on or before Saturday next, the 18th inst., legal proceedings will be instituted for their recovery - for all sums due and owing by you and damage for illegal detention. " Yours truly, " (Signed) Edward Fitzgerald."

That is Senator McGregor's accusation. I have the following statement in answer from the people concerned : -

Senator McGregor,in. his speech in the Senate on Friday, 10th August, is reported to have said in reference to the matter of Henry Best, boot manufacturer, Fitzroy, that the company cancelled its lease . to him of certain royalty machines, and caused a solicitor's letter to be sent to him demanding possession thereof on the ground solely that the said Henry Best had introduced into his factory a machine supplied to him by one of the company's competitors in trade.


The above statement, if correctly reported, is inaccurate, and the distorted facts are assumed to have been furnished by persons seeking to do damage to the company's reputation and its trading relations with its customers.

The actual facts are that Henry Best was for some months prior to February, 1905 (when the company cancelled his lease) indebted in a large sum of money to the company, his royalty payments were greatly in arrear, and though frequent applications had been made to him at intervals of many months, he had failed to make any payments on account or any overtures for a settlement.

Owing to this failure only, the company was forced to threaten through its solicitor to remove its machines, and this action speedily brought about a settlement.

The annexed affidavit of Henry Best corroborates the true version of the facts, and the annexed extract of an interview with him four months after his financial trouble with the company clearly shows his opinion of its system, and its incomparable benefit to his trade and business.

Attached is the following affidavit of Mr. Henry Best: -

August 14, 1906.

Having seen in Herald of 10th inst., a statement purporting to have been made by Mr. McGregor in the Australian Senate, speaking on the Anti-Trust Bill, that Henry Best, a boot manufacturer, had been deprived of machinery held by him under lease to the U.S.M. Coy. for the reason that he had working beside them a non-royalty machine. I, Henry Best, of my own free will and accord, voluntarily make this statement, under oath, that the statement as reported is not according to fact. The U.S.M. Coy. have never taken any machine from me, neither have they threatened to take machines because of my using nonroyalty machines in my factory. (Signed) Henry Best.

Before me, William Geo. Walker, J. P. - 14th August, 1906.

Senator Pearce - Is it not somewhat peculiar that as soon as Best removed this machine from his factory the company allowed him to go on with his business using its machines?

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