August 5, 1904 (9th Parliament, 4th Session)

CON

Robert Abercrombie Pringle

Conservative (1867-1942)

Mr. PRINGLE.

It is absolutely fair and just that this company which has expended vast capital in the development of its business, should pay a higher commission for the exclusive services of an agent. That is what they are doing and that is their own private business. That is not only done in the tobacco business but in almost every other business in Canada. You can buy no cottons manufactured by the Canadian Coloured Cotton Company, except from their regular agents in Montreal. If you go to Cornwall or to several other towns you will find only one man selling the Slater shoe, and he is their sole agent. Judge MacTa-vish reports that these contracts prevail in all classes of business, but he says he did not go very far into that question because he was not required to, and, if similar contracts are used in other lines of business why take the American Tobacco Company by the throat and say : I am the Minister of Inland Revenue ; you must be subservient to me ; I don't care who says your contract is legal, I don't like it; I am the sole judge and arbiter and I will take away your license. I object to placing in the hands of any one man the absolute control over a concern which has invested thousands and hundreds of thousands of dollars in this country. I am surprised that members on the Liberal benches do not protest against such a proposition. In all fairness, the tobacco company should have the right to appeal. The American Tobacco Company may get the most eminent lawyer in Canada to draw a contract in conformity with this resolution, but the Minister of Inland Revenue can say : I do not care what that counsel says ; I am the sole arbitrator and I will cancel your license unless you do just what I want you to do. It Is unjust to place such power in the hands of any man. The company should have the right to appeal to the Exchequer Court against the order of the minister, or to some other tribunal, and let that tribunal decide on the facts. The objectionable clause in the contract is that which gives the wholesaler an extra commission for being the sole agent for the product of the American Tobacco Company. On that point Mr. Blain

of the firm of Eby, Blain & Co., one of the largest wholesale grocery firms In this country, declares that the contract is absolutely fair ; fair to the wholesalers, fair to the tobacco company, and fair to the consumers. That firm would not handle the goods of the Empire Company unless they knew they were the best goods and the goods the public wanted. Any tobacco manufacturer in Canada can make a similar contract to this, but the trouble is that the rival manufacturers have been conducting their business in an out-of-date way, so that they are not able to compete with the energy of the American Tobacco Company, and so they come to the government asking for this paternal legislation thinking that it will help them out. It was said yesterday that this contract had the effect of creating monopoly, but the evidence does not bear that out. The Empire Company had the courage to go into the manufacture of the Canadian product, and they had many imitators, so that to-day there are a larger number of manufacturers in Canada than there were in 1897. I do not know what business they are doing, but the fact remains that they are there manufacturing Canadian goods when they would not think of manufacturing them prior to the time the Empire Tobacco Company established this trade.
Let me say one word in regard to the American Tobacco Company of the United States. It is unquestionably a large concern with an immense capital ; but, Sir, I can buy tobacco in the United States to-day fifty per cent cheaper than I can in Canada; and yet it is said that that company has created a great monopoly and controls the price in the United States. That company has keen competition in the United States, which has kept the price of tobacco down, and has reduded it from year to year until to-day it is at about the lowest point it has ever reached in the history of the country. Just let us see how this monopoly has been created. I understand that the hon. Minister of Inland Revenue says it has attempted to close out all the other manufacturers. Let us see how we stand in that respect. In 1893, there were ten manufactories in Canada ; in< 1894, there were ten, in 1895, there were ten. These contracts came into operation in 1895, and from that time the number of manufactories of Canadian tobacco went on increasing as follows: in 1896, 11 ; in 1897, 12 ; in 1898, 14 ; in 1899, 16 ; in 1900, 23 ; in 1901, 26 ; in 1902, 26. Therefore, instead of creating monopoly, the Empire Tobacco Company, by its energy and its expenditure of money-and it has expended an enormous amount of money in advertising Canadian tobacco-has not only established a large business for itself, but has increased the number of manufactories in this country by sixteen since starting this exclusive contract system, The number of cigarette manufactories has also increased Mr. PRINGLE.
steadily, until to-day there are seven in the Dominion of Canada.
Now, Sir, I believe absolutely in the freedom of commerce. While I believe that we have the right to do all that is possible to suppress illegal combinations, that the law we now have in our Criminal Code is a wise law and that the common law in regard to contracts in restraint of trade is a sound law, yet I believe that any man who invests his money in any enterprise has a right to freedom of contract. Let me quote from Eddy on combinations, a high authority. In section 62 he says :
Freedom to contract.-The right to contract, to do business unhampered by restrictions and oppressive interferences, is an essential part of the right to ' life, liberty and the pursuit of happiness,' said to belong to every man. Both courts and legislatures should be, and generally are, reluctant to interfere with the liberty of the individual to make contracts, even though the liberty is often exercised with consequences disastrous to the party and disadvantageous to the public. It is well settled that the individual can trade and contract freely, even to the extent of affecting or controlling the market, provided his contracts-[DOT]
(a) Are not tainted with fraud,
(b) Are not against public policy,
(c) Are not contrary to statute.
Can it be said that these contracts are tainted with fraud 7 Can it be said that that are against public policy 7 Can it be said that they are contrary to the statute 7 I say they are not contrary to the statute. It has been held by the highest court that they are perfectly legal and valid contracts. Let me quote section 70 of the same work :
The final test of validity of both statute and public policy.-Finally, the test of validity of both statute and public policy is the wrong that is condemned. There must be an injury, actual or threatened, to individual or public before the transaction under investigation can be pronounced contrary to either statute or public policy. The wrong is the gist of the whole matter, and this wrong-this threatened injury to the well-being of society-must he of a very tangible character, not vague or speculative. Under English and American institutions the individual is given the largest possible liberty -liberty to waste and dissipate his own resources ; to trade and bargain so as to often acquire in a single venture the entire resources of another ; and even to so conduct his business as to extort large sums from the public at large,-all these things and more may be done, experience having taught the Anglo-Saxon race that those who overreach, who attempt too much, who do business contrary to morals and public sentiment, as a rule in the long run pay for their turpitude. Both the courts and the public are content to let men go their own way -short of things fraudulent, oppressive, wrongful-subject only to those immutable laws of evolution and social progress which sooner or later relentlessly suppress the wrong-doing and sustain the well-doing.
We are undoubtedly commencing to bear about trusts and combinations ; but we bear

of them as things existing in the United States, not in Canada. They are of American growth, but they have not been established here to any extent, and they have done no injury in this country so far as I can see. We are asked-we are not asked, we are practically driven by two or three small manufacturers into enacting legislation against a company formed not with a very enormous capital, with a capital of some $1,000,000, and a company which until last year, as I am informed, never paid a dividend. They paid out enormous sums in educating the people to the use of this Canadian product, and now that they have commenced to pay a dividend, now that they are beginning to reap the reward of their energy and expenditure, we are driven by the other manufacturers who are unable to keep us in the race to pass legislation which will place in the hands of the Minister of Inland Revenue the sole authority to deprive these people of their licenses if he thinks that their contract is not according to the resolution which is now before the House. As to the special elements of complaint in this matter, the special inducements and the exclusive contracts I would refer you to section 191c of this work :
Parties engaged in trade have the right to push their trade by all lawful means, and to endeavour by all lawful means to keep their trade in their own hands and exclude others from participating therein. It is lawful to make profitable offers to attract customers from competitors, and they may induce customers to deal with them exclusively by giving notice that to such exclusive customers only will they give the benefit of their more favourable terms.
That is exactly what they have been doing and I say that it is perfectly lawful. It has been so held in the courts in the case of Mogul Steamship Company v. McGregor, Law Reports 21 Queen's Bench Division 552. It is an English authority and an authority which is directly in line because in that authority they held that they have an absolute right :
It is lawful to make profitable offers to attract customers from competitors and they may induce customers to deal with them exclusively by giving notice that to such exclusive customers only will they give the benefit of their more favourable terms.
That is line for line exactly as the contract is in this case. The company have followed out that decision of the English courts and forsooth because they with their energy and enterprise and money have built up a business under the law as it stood, their competitors now come in and ask this parliament to place it in the hands of the Minister of Inland Revenue to squeeze them out of that business. I can say again it is a most unfair and a most unjust proposition.
There is no violation of law or of public policy in an agreement between two traders that 271
one shall sell to the other all its commodities and the other buy from the former corporation alone.
This is taken from that standard work, Chitty on Contracts, 11th American edition, 982-3 and notes. I may say that I am sorry to detain the House by quoting these extracts from this very valuable work, but, as I said at the start, this is a most important piece of legislation, it is opening the door for future legislation of this sort and next year we may have legislation introduced by which the Minister of Inland Revenue, or the Minister of Trade and Commerce or some other minister will be controlling every manufacturing industry in this country. That is not a position these people should be placed in ; they should not be placed in the hands of any one individual. I am quite ready to discuss the possibility of means for further regulating any of these companies, but I am not willing to have my vote recorded or to sit here and acquiesce in what I consider is most improper legislation.
Section 286 is as follows :
To render a combination unlawful because its object is to defraud, maliciously injure or oppress others, this element of unlawfulness must appear in the agreement constituting the combination. It must clearly appear that the combination was organized for the express or implied purpose of defrauding, maliciously injuring or oppressing others, the wrongful intent must be present. If the combination is organized for legitimate purpose it is legal even though It may, in the prosecution of its legitimate objects incidentally injure and even ruin others.
The only justification for this legislation is that there is an insinuation in the report of Judge MacTavish that these contracts are injuring others, and I say that that is no excuse, because the wrongful intent must be proven.
If the combination is organized for a legitimate purpose, it is legal even though it may, in the prosecution of its legitimate objects, incidentally injure and even ruin others. If it appears that injury to others was not one of the objects of the combination, but was simply an incidental result, the combination is legal. The distinction is drawn by Chief Justice Coleridge, in the Mogul SS. case, as follows -' I do not doubt the acts done by the defendant here, if done wrongfully and maliciously, or if done in furtherance of a wrongful and malicious combination, would be grounds for an action of the case at the suit of one who has suffered injury from them. The question comes at length to this : What was the character of these acts and what was the motive of the defendant in doing them ? The defendants are traders, with enormous sums of money embarked in their adventures, and naturally and allowably, desirous to reap a profit from their trade. They have a right to push their lawful trade by all lawful means. They have a right to endeavour by lawful means to keep their trade in their own hands and by the same means to exclude others from its benefits if they can. Amongst

lawful means is certainly included the inducing, by profitable offers, customers to deal with them rather than with their rivals.
Is that not all that Is being done in this case, they are inducing customers to deal with them rather than with their rivals.
It follows they may, if they think fit, endeavour to induce customers to deal with them exclusively by giving notice that only to exclusive customers will they give the advantage of their profitable offers. I do not think it matters if the withdrawal of the advantages is out of all proportion to the injury inflicted on those who withdraw them by the customers, who decline to deal exclusively with them, dealing with other traders. It is a bargain which persons in the position of the defendants here had a right to make, and those who were parties to the bargain must take it or leave It as a whole. Of coercion, or bribing, I see no evidence.
That is all there is in this case. By the inducement of profitable offers they get certain wholesalers to handle their product exclusively. Those men are not hound for twenty-four hours to handle that product. The moment that they see that it is not profitable for them to handle that product they can cancel the contract. Under the terms of the contract it is reserved to both parties to cancel it at once. Therefore I say that they come entirely within the law and within the proper principles of the law.
Now we come to the complaint that in thus conducting their business they injure the other manufacturers. I submit that they have done no injury. The report does not find that any injury has been done, they certainly have done no injury which should be taken into consideration. I am going to refer again on that point to a well settled principle as expressed in section 212. It is under this head :
212. Extent of injury to others and a test of legality of a combination. It is apparent that neither the extent nor the character of the injury to others resulting from the operation of a given combination is a test of the legality of the combination. Conditions are constantly changing in the commercial and industrial world. Under normal conditions, traders and manufacturers are involved in loss and financial ruin as the result of forces over which they have no control. The establishment of departmental stores

And I am surprised at your not bringing in some paternal legislation to restrict them in the interests of smaller merchants.
*-the establishment of department stores, for instance, in large cities has altered the entire complexion of the retail trade, and small shopkeepers heretofore prosperous find themselves unable to compete with these huge establishments. Among retail dealers and owners of real estate in cities whereon are situated small shops and stores, the prejudice against departmental stores fully equals any public prejudice against trusts and combinations ; and attempts are frequently made to pass laws, the object of which is to disintegrate the departmental stores Mr. PRINGLE.
-to break up the combination of businesses which go on under one large roof. So far these attempts have proved abortive, few legislatures being willing to risk the passage of Acts which on their face are as idle and foolish as would be the passage of a law against the employment of labour-saving machinery ; and so far no court has been found willing to sustain any Act looking towards the disintegration of the departmental store. The departmental store is simply a striking illustration of the tendency of the day towards concentration and combination. What is going on in the world of retail trade is going on in the world of manufacturing and commerce and all branches of industry. It is needless to say that co-operation, organization and combination, in all forms affect more or less parties who are outside of the combination ; and exactly in proportion as the combination is profitable to all interested in it and economically beneficial to outsiders at large, to that extent it is more or less disastrous to all who are in competition with it. The extent of the injury or loss to the outsiders is no measure of the legality of the combination. If the combination is improvidently conducted, those outside of it may actually benefit thereby. On the other hand, if the combination is wisely conducted, those outside of it may find themselves deprived of trade and means of support, within a month or six months as the case may be. These effects incidental to the proper conduct of any sort of combination-whether a partnership, a corporation or a consolidation- are of interest to the student of economics, but are entirely irrelevant so far as courts or juries are concerned, except in so far as they may tend to show affirmatively that the original intent of the combination was of an unlawful or oppressive character.
Now, Sir, I say also that the tendency of the courts is to regard these combinations, which it is said have the effect of restraint of competition, with less disfavour than formerly.
The tendency of the courts is to regard contracts in partial restraint of competition with less disfavour than formerly, and the strictness of the ancient rule has been greatly modified by the modern cases, except where public franchises and quasi public corporations are concerned.
Now, Sir, we speak of trusts and combinations, but they exist in everything, and have always existed. Combinations ex'ist not only in capital, but in labour. Labour organizations are nothing but combinations, and they are not new. We have only seen a short time ago the effect of labour organ-, izations in the lower province. They have a perfect right to organize, just as capital has a right to organize. Labour has a right to protect its interests just as capital has a right to protect its interests. It is the application of an old principle, which I think is a very sound principle. All the trade unions of the world are nothing but combinations. We find that many of these combinations take the ground that nobody is permitted' to work in certain lines unless they belong to these unions. I am simply stating this to show that these combinations apply to capital

as well as to labour. Now, as I said before, there is not only the Criminal Code, but there is the common law to guard the public interest against these combinations. They have invoked the aid of the criminal law, they have invoked the aid of the common law, and it has been held by the courts that their method of doing business is perfectly legal. Then they are driven to the extreme of coming to this House and endeavouring to get the government to pass resolutions such as we are now considering'. I was much struck with the finding of the judge who tried this case in the province of Quebec. He was evidently a very able and very learned judge. I refer to Mr. Justice Dugas, who tried the case in 1896 and 1897. His judgment is exceedingly well put, and it shows exactly what is the nature of these contracts and what was the appreciation of the presiding judge in regard to them. The judge says :
And to find whether the contract in question, signed by so many different parties is a conspiracy, a combine, an agreement or an arrangement unlawful, we have to return to the law in existence before the passing of article 520.
That is the Criminal Code.
I have read that contract over and over again, and I must say that I fail to see anything of the kind. It is true that it may be considered a very shrewd contract, a very shrewd combination, and an attempt to give as much as possible, the greatest circulation to the cigarettes manufactured by them, but yet I cannot see that it would have been unlawful to agree with as many parties as they could find, that they would consent to sell only their cigarettes exclusively to those of others.
It is true that amongst those who have signed the contract, some aver that they felt it was to their interest to do so, as otherwise their trade would have suffered, as the cigarettes manufactured by the American Tobacco Company of Canada are so much in demand by the public, that not keeping them would drive away clients. Some say that this agreement is not to their advantage, although they felt it was to their interest to sign it ; others declare that they are well satisfied with the contract. In all this, I can only find a party who, being proprietor of what may be manufactured by him, asserts his right to dispose of his property in the way he thinks best for his own interest. I cannot see there a combine against the law as for instance in cases of trusts, hut only a way of dealing with their own property, in a way which may, perhaps, be detrimental to some other people in the same line of business, hut at the same time I do not believe that this amounts to more than an ordinary competition.
That is the finding of Mr. Justice Dugas, and it is that he does not believe that it amounts to more than ordinary competition. Are these people to be deprived of the right of ordinary competition in this country simply because there are some friends of the government who are opposed to this company ? Then he proceeds :
If their cigarettes are really so much in demand, it is because they have found the means to have them accepted by the public. If others are anxious to reach the same success, it is for them to make cigarettes not only as good or pleasing to the public, but better, and whether at a cheaper or higher price, this would be their own business, provided the public would be satisfied to use them, and I am putting to myself the question as1 to whether the public itself does not find its interest in having other manufacturers if they want to reach the same means, forced to serve it better and produce better goods. This is, as I have said before, what I believe to be only the simple competition of trade. There is no combine with other manufacturers to raise the price of goods to force them notwithstanding upon the public, to prevent which is the principal object of such laws. There is no combine to absolutely prevent others from entering into the same business at their own will, and of delivering their own goods at their own price or any other thing of the kind mentioned in the paragraphs ' a,' ' b,' * c ' and 'd ' of article 520, but only a way of disposing of their own property according to their own views, and within the scope of the latitude which is given to trade in general ; for if they were not permitted to act in such a way when their action is limited to the disposing of their own goods, there would not be, perhaps, a trader who would not be exposed to a criminal prosecution, for the simple reason that always we see him trying to control as much as possible of the trade for himself, either by exaggerated advertisements, by giving goods at lower prices than others, by giving away, or offering to give away, things which do not pertain to his trade generally, &c., and all this for the only purpose of drawing to his shop clients who perhaps otherwise would have stopped at his neighbour's.
It seems to me that this is a correct appreciation of the contract. Now, I feel that I have detained the House at some length, but I was determined that I would, at any rate, go on record as against any such legislation as is proposed here. I do not believe that it is a proper policy to place the power in one man's hands of controlling the destinies of any of the great manufacturing Industries of this country. There is no right of appeal. He is the sole judge, the sole arbiter. If his decision is wrong there is no redress. Surely a proper course would be, if legislation is going to be introduced to interfere with the internal management of the business of the manufacturers of this country, to give the manufacturers some rights, some redress in the event of the lion. Minister of Inland Revenue deciding wrongly. But that is not even proposed. It is left absolutely and entirely in the hands of one man. I say that principle in a democratic country such as this is wrong and should not be supported, and I am surprised at bon. gentlemen on the other side of the House sitting quietly behind the government like a flock of sheep. They are told that this must go through before the end of the session, and they are not allowed to exercise their judgment

Topic:   THE TOBACCO INDUSTRY.
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