lem the conception of “profiteering” was a new one as well as the name attached to it, since the possibility of unreasonably high profits being reaped on a large scale to the public detriment from the sale of articles in common use was a direct outcome of the conditions of disorganized trade and world-shortage of commodities which resulted from the World War. It is clear that under normal economic conditions high profits do not necessarily involve high prices, but may even be obtained as a result of greater efficiency of organization or production. It is probably true to say that before the war, as a rule, a free market and plentiful supplies afforded, in the case of most commodities in general use, an effective safeguard against excessive profits based on excessive prices.
It was no doubt partly with this consideration in view that (to meet the demand for a clearer definition of the offence) a provision was inserted in the bill in Committee, laying down that a rate of profit not exceeding the pre-war rate should not be deemed “unreasonable.” It is with profiteering in this technical sense that this article deals, and not with the wider economic problems affecting profits as such.
The Profiteering Act, 1919, was thus a temporary measure designed by the British Government to meet peculiar circumstances. It was a measure “to check profiteering,” and accordingly was framed to avoid, so far as possible, any interference with legitimate commercial enterprise. The great difficulty presented by legislation of this kind is to design an instrument of such accuracy, and to use it with such precision, that it shall deal effectively with the evil against which it is directed, without hitting the sensitive organism of trade and industry, the recovery of which was in itself an essential factor in the removal of those conditions of shortage and high prices of which profiteering was to a large extent a symptom. How far the Profiteering Acts succeeded in solving this difficulty is a matter of opinion, but this was the problem they had to deal with.
The main powers conferred upon the Board of Trade by the Profiteering Act, 1919, may be summarized as follows:—(a) to investigate prices, costs and profits at all stages; (b) to receive and investigate complaints regarding the making of excessive profits on the sale of any article to which the Act was applied by the Board of Trade, and after giving the parties an opportunity of being heard either to dismiss the complaint or to declare the reasonable price for such articles, and to order the seller to refund to the buyer any amount paid in excess of such reasonable price. The Board also had power, where it appeared to them that the circumstances so required, to take proceedings against the seller in a Court of Summary Jurisdiction; (c) to obtain from all sources information as to the nature, extent and development of trusts, and similar combinations.[1]
The Act was applied by the Board of Trade by a series of orders to practically every article of ordinary everyday use, including all articles of wearing apparel, household utensils and requisites, articles for mending and knitting, furniture, building materials, drugs and medicinal preparations, medical and surgical appliances and dressings, mineral waters, all articles used for fuel and lighting, tools, weights, measures, weighing and measuring instruments, motor spirit, stationery, and, in agreement with the Ministry of Food, to practically all articles of food the price of which was not otherwise controlled, including milk, bread, fish, tea, coffee, cacao, margarine and meat. Further, in accordance with extended powers given by Section 2 (2) of the Profiteering (Amendment) Act, 1920, the following processes were by order brought within the operation of the Acts: the repairing, altering or washing of articles of wearing apparel and household linen, etc., the repairing, altering or cleaning of clocks and watches, and the repairing or altering of boots, shoes and umbrellas.
For administrative purposes the Act empowered the Board of Trade to establish or authorize local authorities to establish local or other committees to which the Board might delegate any or all of their powers under the Act (except the power to fix maximum prices). The work fell naturally into two broad sections, viz.: (1) the larger transactions of wholesalers or manufacturers which raise wide questions affecting whole trades or industries, and (2) retail trade, which is much more affected by local conditions. To deal with (1) the Board of Trade set up a Central Committee, with its headquarters in London; to deal with (2) the Board invited local authorities throughout the country to appoint local profiteering committees.
Local Committees and Appeal Tribunals.—Over 1,800 local committees were established in the United Kingdom, and the vast majority continued in existence until the expiration of the Profiteering Acts in May 1921. Their constitution, powers and procedure were defined by regulations made by the Board of Trade, who delegated to the local committees the bulk of their powers under the Act in relation to retail sales. The regulations provided among other things that labour, women, and the retail trade should be adequately represented on local committees; that complaints should, except in special cases, be heard in public; that any member who happened to be a trade competitor of the respondent or otherwise personally interested should be disqualified from adjudicating; that a complaint should be lodged in writing within four days of the sale, and a copy forwarded to the respondent within seven clays of its receipt; that a preliminary investigation should first take place, after which if a prima facie cause of complaint had been disclosed at least three days' notice should be given to the parties of the date fixed for hearing the complaint; and that both complainant and respondent should always be given an opportunity of being heard. The object of the preliminary investigation was to weed out frivolous complaints. The rule was laid down that it should invariably be held in camera and that the names of the parties to any complaint should not be made public until such time as the complaint was heard in public. The Board of Trade also appointed 108 appeal tribunals, to which the seller had a right of appeal against the decision of a local committee. The total number of complaints investigated by local committees during the operation of the Acts (Aug. 1919 to May 1921) was over 4,700; of these some 73% were dismissed. Only 173 appeals were made, of which roughly two out of every five were dismissed. Only 202 prosecutions by local committees were reported to the Board of Trade; in these fines were imposed to the amount of some £1,786, and costs ordered against the seller to the amount of £455. Within the limits laid down by the regulations local committees had full freedom of action and were in no sense controlled by the Department. The Department, however, both by correspondence and through a small staff of six or seven travelling inspectors, kept in close touch with the committees' work, and helped them wherever possible with advice and information. Apart from the work arising out of actual complaints, the local committees had the power to hold general investigations into prices, costs and profit at the retail stage, but comparatively few committees undertook such investigations. The report of the county of London appeal tribunal, which dealt with a much larger number of cases than any other appeal tribunal, has been published as a Parliamentary paper.
Central Committee.—This body, about 150 in number, was widely representative, including among its members manufacturers, traders, consumers, trade-union representatives, economists, representatives of the coöperative movement, etc. Mr. McCurdy, its first chairman, was succeeded after about 10 months by Mr. John Murray, M.P. The Board of Trade made regulations laying down the constitution, powers and procedure of the Central Committee, to which the Board delegated the power (a) to investigate prices, costs and profit at all stages; (b) to investigate, consider and determine complaints regarding unreasonable charges arising out of the wholesale sale of any articles to which the Act was applied; and (c) to obtain information regarding trusts and trade combinations.
The Central Committee rarely met as a committee. Its functions were rather those of a panel, and the work was performed by three standing committees: the Investigation of Prices Committee, the Complaints Committee, and the Standing Committee on Trusts. Every member of the Central Committee was appointed on one at least of these standing committees, which in turn appointed from time to time small sub-committees. These sub-committees, through which the bulk of the work was done, were composed of members of the Central Committee with the addition often of outside persons appointed (in practice at the suggestion of the sub-committee or standing committee concerned) by the Board of Trade.
The Investigation of Prices Committee undertook the investigations into the cost of production of various articles in all stages of their manufacture where they considered it desirable to obtain such information for the benefit of the public or of the Board of Trade. The reports on these investigations were published from time to time as Parliamentary papers: they cover the following subjects: agricultural implements and machinery, aspirin, biscuits, boot and shoe repairs, brushes and brooms, clogs, costings in Government department, furniture, gas apparatus, matches, metal bedsteads,
- ↑ Powers were also conferred on the Board of Trade by the Principal Act to fix maximum prices, and to authorize local authorities under suitable conditions to buy and sell any article or class of articles to which the Act was applied. These powers were only intended to be held in reserve for use in an emergency. Neither power was ever exercised, with the single exception of the temporary fixing of the price of motor spirit during the railway strike in the autumn of 1919. Further provisions were embodied in the Act (or added by the Amendment Act of 1920) giving the Board compulsory power of obtaining information, providing proper safeguards For confidential information and for secret processes, providing against victimization of complainants by sellers refusing to sell, excluding from the scope of the Acts sales for export or sales by public auction or competitive tender, and laying down maximum penalties by way of fine or imprisonment for persons offending against the Acts.
