The Minister in Charge of Price Fixing (Hon. W. Massy Greene) has forwarded for my consideration a file of papers relating to price fixing. The file includes certain returns and balance sheets of a company (in this opinion referred to as 'Company X') and a copy of the argument of Counsel in a case in which application was made to the Chief Prices Commissioner by Nestle's Condensed Milk Company for an increase in the maximum price fixed for some of the products of the Company.

The questions upon which advice is desired relate to the matters which may be taken into consideration by the Chief Prices Commissioner in making to the Minister recommendations for the maximum prices to be fixed for various commodities. In the case of Company X-a parent company with two subsidiary companies-the questions raised are whether the Commissioner may inquire whether the companies in question have increased their profits during the war period, and whether they have attempted to raise prices to increase those profits with a view to exploiting the public, or whether the Commissioner may inquire generally as to profits, and, even though the wartime profit is less than the pre-war profit, to use his discretion as to what is a reasonable margin of profit and recommend to the Minister accordingly.

Evidence was given before the Commissioner that two of the companies referred to had written up their goodwill and thereby reduced considerably the percentage of profit earned by them, and in relation to this matter the Minister desires advice as to whether, notwithstanding the evidence given as to the increased cost of materials and manufacture, the Commissioner is justified in recommending, and the Minister in approving, that the application for the increase in price be refused.

In addition to the matters already referred to, the Minister desires advice as to whether, in view of the argument of Counsel in the Nestle's Milk case, the Commissioner in fixing prices is entitled to take into consideration the profits made by the companies or individuals out of export trade.

And in conclusion the Minister desires advice generally on such other matters appearing in the file of papers forwarded as I may consider of importance.

The power to make regulations relating to the price of commodities is contained in the War Precautions Act 1914-1916, section 4 (1A), which reads as follows:

The Governor-General may make such regulations as he thinks desirable for the more effectual prosecution of the war, or the more effectual defence of the Commonwealth or of the realm, prescribing and regulating-

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(b) the conditions (including times, places, and prices) of the disposal or use of any property goods articles or things of any kind;

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In pursuance of that power the War Precautions (Prices) Regulations have been made. Those Regulations provide, inter alia, as follows:

13(1) The Minister may from time to time, on the recommendation of the Board or a Commissioner-

1. determine the maximum prices which may be charged for foodstuffs and necessary commodities sold, and the maximum rates which may be charged for services the performance of which is commenced, in any proclaimed area;
2. determine the conditions of the sale of foodstuffs and necessary commodities sold therein, and of the performance of services the performance of which is commenced therein.

(2) Any such determination shall be published in the Gazette, and shall from the date specified in the Gazette have the force of law. The validity of the exercise by the Parliament of the Commonwealth of a power during the present state of war to fix within limits of locality the price of commodities was upheld by the High Court in the case of Farey v. Burvett 21 C.L.R. 433.

The arguments addressed to the Commissioner in the cases referred to by the Minister recognise the validity of the Regulations and do not, with one exception, question the validity of any recommendation which may be made by the Commissioner under the Regulations. That exception is the argument presented by Mr (now Sir Edward) Mitchell K.C., in the Nestle Milk Company's case. The view expressed by Sir Edward Mitchell was that the proper principle of construction applicable to the Act and Regulations is to construe them so that they should not include power to do something which would be outside the Constitution, or, in the case of the Regulations, outside the principles of the Act; and that a construction of the Regulations as including power to the Commissioner to make recommendations simply on his own discretion without any limitation would not come within the power under which the Regulations are made, namely that they must be such as the Governor-General thinks desirable for the more effectual prosecution of the war or the more effectual defence of the Commonwealth or of the realm. He proceeds to refer to the principle laid down by the Chief Justice in the case of Farey v. Burvett 21 C.L.R. 433, at p. 441, as follows:

One test. . . must always be applied, namely: Can the measure in question conduce to the efficiency of the forces of the Empire, or is the connection of cause and effect between the measure and the desired efficiency so remote that the one cannot reasonably be regarded as affecting the other?

In the War Precautions (Prices) Regulations the Governor-General has not laid down any principles to be observed by the Prices Commissioner in making his recommendations as to prices.

In my opinion the Commissioner is not necessarily limited, in making his inquiries, to such questions as the existence of 'profiteering'. While the prevention of profiteering may have been one of the objects which the Governor-General had in mind in making the Regulations, it does not follow that that was the only or indeed the main object. One object may have been to ensure the supply to the public of necessaries of life at such prices as to enable the community to stand the financial strain of the war as well as possible.

Although no principle is expressed in the Regulations yet it is I think a reasonable presumption that the Governor-General intended that the Commissioner in making his recommendations should act reasonably, and hold the balance fairly as between producer and consumer. It is, however, in my opinion, impossible to deduce from the Regulations any general principles the non-observance of which by the Commissioner would invalidate any recommendation made by him.

As regards the questions specifically raised by the Minister, my opinion is as follows:

Pre-war profits: The Commissioner is not bound in any way by the rate of pre-war profits made by any particular company or in any particular industry. If the Commissioner is of opinion that though the present profits made by the company or industry are smaller than the profits made before the war they are nevertheless unreasonable in view of all the circumstances, the Commissioner would be perfectly justified in recommending the fixing of lower prices than those at present prevailing, and this is so, even though the Commissioner may be of opinion that profiteering in the particular industry did not prevail before the war and does not prevail at the present time.

As regards companies which have written up goodwill and thereby reduced the percentage of profit, I am of opinion that even though the Commissioner is satisfied that the cost of materials and manufacture has increased he would be justified in refusing to recommend an increase of prices if he was satisfied that the present prices provided a reasonable profit.

The question whether the Prices Commissioner should take into consideration the profits of the export trade of a manufacturer is somewhat more difficult. The duty of the Commissioner is to recommend to the Minister what he regards as reasonable prices for the sale of commodities in Australia. He is not concerned with the profits made by a particular individual or by an industry generally in respect of either local or export trade except in so far as those profits have a bearing on the question of the reasonableness of the prices to be fixed. The price however at which a commodity produced in Australia is sold in the export trade is certainly a matter which the Commissioner is entitled to take into consideration if he thinks fit.

It does not follow that in making his recommendations for prices the Commissioner should necessarily regard the prices charged or profits made by every manufacturer of a particular commodity. The basis which he will take will no doubt be that of the manufacturer of average ability and average equipment.

In conclusion, therefore, my opinion is that in exercising his power under the Regulations, the Commissioner should recommend what in all the circumstances of the case he considers a reasonable price to be allowed to the manufacturer or trader and for that purpose he is entrusted with a discretion as to the evidence upon which he should base his recommendation.

It may be added that the Regulations place no obligation upon him to disclose to any manufacturer or trader the principles or bases upon which he makes his recommendations.

[Vol. 15, p. 429]