On 22nd July the Price Tribunal announced an increase of about 10% in the prices of all beer bought in pubs, of 2 cents per bottle and 10 cents a flagon bought in bottle stores. This was in answer to a Breweries request that would allow 'recovery' of what they claimed was $17.5 million in increased costs. The Department of Trade and Industry had offered only $13 million. The Tribunal's decision settled on a nice 'fair' average of $15 million out of our pockets. Yet, was the increase really justified? There are three things that must be looked at - the situation of Breweries in New Zealand; this particular; increase; and the wider implications of it.

The Background

The liquor industry has long been involved in some of the shadiest dealings in New Zealand's history. For three examples:

In a large number of cases, at least from 1898 onwards, policemen who have attempted to obtain prosecutions of pubs or the breweries have been transferred to other areas. There have also been allegations from time to time that considerable bribery has been going on of the police force by liquor interests.

In 1958 the Price Tribunal set beer prices at 8 d. for 8½ ounces and 6 d. for 5 ounces. These regulations were consistently ignored by the industry amidst widespread public concern, which gained an extra penny profit per glass. Similar machinations to boost profits have been associated with many other price tribunal decisions. If a private individual has broken a Tribunal's decision he would undoubtedly have been arrested and tried, because of the Breweries' political power however, they get away with these illegalities scot-free.

Thirdly, the Auckland Task Force has made many arrests, on occasions actually inside pubs - two or three of which are notorious for drunkeness. Yet not once has a publican ever been arrested for breaking the law (as he is doing in serving drunk people). The Task Force, as with many other aspects of the law, is curiously one-sided.

There are very many other cases in which undue influence has undoubtedly been used by the liquor interests to ensure their point of view gets across. In 1911 they even resorted to outright bribery of politicians and there is widespread belief that the Breweries donate funds to both the major political parties to support their interests, but this is not even necessary. As major financial giants and monopolists, the Breweries have considerable sway over what happens in New Zealand's economy - they could, for example, make a lot of people unemployed tomorrow if they wanted to.

With such power, and their position in the elite of New Zealand industry it is not surprising that neither Labour nor National dares to attack the Breweries. Mr Freer, the Minister of Trade and Industry, announced that the Breweries would be referred to the Commerce Commission (to investigate monopoly) as soon as it was set up. Monopolies investigators have a long history in the States, in Britain and recently in Australia. They have been almost completely ineffectual. For example, after years of litigation the Standard Oil Company, a leading American monopoly (on which Rockefeller wealth is founded) was declared illegal in 1911 and broken up into smaller units. These parts, nominally separate companies, soon had many directors in common and had many negotiations together to rig prices, etc.. Exactly the same would happen in New Zealand if the two big breweries were broken up.

The entire New Zealand Liquor trade is bound up in two companies - New Zealand Breweries Ltd. and Dominion Breweries Ltd.. Apart from a couple of small local concerns, these companies own all the breweries in New Zealand, own a large, and increasing, number of hotels, and have many more hotels 'tied' to them by forcing the licensee to take only one type of beer. In recent years there has been a stepping up of such activities - nearly all the new hotels built in New Zealand are owned and operated by the breweries, and many existing independent hotels are being bought up.. Price control and monopolies are national concerns - they plan on a national basis, they produce on a national basis, they make profits on a national basis. The only thing that is not national about them is their ownership - all this national activity goes to pay high dividends to a very small number of New Zealanders. The cries about "free enterprise" Can thus be seen as the farces they are — attempts by people making large profits to restrict anybody elses' ability (such as the people they are exploiting) to take the profits away from them.

The liquor trade has always had far stronger financial resources than its opponents. In the mid 1950's when Porirua was facing a trust proposal, the breweries subsidised lavish publications arguing their case (or more correctly, deceiving and distorting). They were narrowly defeated - yet the breweries spent considerable funds from then trying to frustrate the popular vote - trying to persuade the Trust to dissolve itself, for example. And at various-commissions set up to examine the liquor industry the breweries have always had expensive lawyers to present their case and appeal it as far through as possible.

The essence of the breweries' position is that it is being as rational as possible in protecting its interests. Yet all its interests - planning, producing, building, and so on, are all geared, not to social needs but to the making of profits. The local corner pubs, recommended by the most recent liquor commission, in the interests of more social and reasonable drinking have nowhere yet appeared. Quite clearly the reason is because they might encourage discourse and moderate habits - both against the need for as many as possible to drink as much as possible in as little time as possible. That's what maximising profits is all about.

One last social issue concerns drinking and driving. According to various doctors' estimates, alcohol is involved in over half the fatal accidents on New Zealand roads yearly. Yet the big new "drinking bams" all have massive carparks around them to encourage people to take their cars out to drink It would be facile in the extreme to credit the breweries with all the responsibility for this social problem but it is equally stupid to claim that they are in no way responsible - as they themselves state.

The 1975 Increase

There are so many dubious things about the latest price increase that it is difficult to know where to start.

Last year, an application for a previous price rise was heard by the Price tribunal At that hearing. Consumer groups (CSSO, CARP and FOL) were granted observer status - a role improved on this time to full participation. At the previous hearing however, the Price Tribunal told the breweries it would require a full break-down of costs in the industry before it would grant another increase. This in itself reveals the bankruptcy of the Price Tribunal - that several price increases were given to the breweries without full details of cost structure being given. Anyway, at' the 1975 hearing the breweries presented this information page 15 - but asked that it be kept confidential and not be seen by the consumer groups. This was on the grounds of maintaining competition - in view of the total dominance of the industry by the two companies this is ludicrous in the extreme. One can only surmise that in trying to hide their books the breweries are scared that their accounting techniques won't stand up to the public scrutiny. What the Price Tribunal is doing in supporting this underhanded dealing, is anyone's guess. The consumer groups, when they realised the whole hearing was going to be a farce, walked out;

New Zealand Breweries

Year	Capital $	Dividend $	Bonus Shares $	Total Return % of $100
1970	100	12.50	20	32.5
1971	120	15.00.	-	15
1972	120	15.00	-	15
1973	120	18.00	20	38
1974	140	21.00	-	21
		81.50	40

Dominion Breweries

Capital $	Dividend $	Bonus Shares	Total Return % of $100
100	12.50	36	48.5
136	15.95	-	15.95
136	15.95	-	15.95
136	19.10	-	19.1
136	19.10	-	41
	82.60	58.00

Post Office

Deposit $	Interest $
100	3.5
100	3.5
100	3.5
100	3.5
	3.5

A little can be seen from the figures publically announced however. Of the $17.5 million the breweries were seeking to "recover", $4.5 million was for increased interest charges, $4 million, increased costs, and $3.5. million, increased labour charges. The remainder seems to go on transport and other charges. This break=down alone shows how false are the claims that inflation is caused by union higher pay claims -less than 25% in this case. One further point - the largest entry is $.4.5 million for interest charges. This should not be a charge on prices at all - it is a capital charge and should be covered by more debentures or shares, etc.. Also it is safe to surmise that these interest charges are bound up in the buying of new pubs and hotels - which are definitely capital expenditure and should be paid for by capital, not by price rises.

Returning to previous Price Tribunal decisions, the 1973 one which granted only 37% of the price increases the breweries asked for, was said to be cutting "heavily into the breweries' profitability." The lies behind this can be seen in the massive profits the Breweries made in the 1973/4 financial year - NZB increased its post-tax profit from $5.2 million to $6.6 million, and DB's post-tax profit went up from $3.3 million to $4.4 million. Congratulating themselves on the decreased profitability of their company, the directors of NZB recommended that their remuneration go up from $37,000 to $55,000 a year. And despite the 47% wage increase for NZB directors, Sir Henry Kelliher, Chairman at DB, still found it necessary to complain about the 9% general wage order. Consistency all round.

One of the most coherent arguments advanced by the Breweries for their price increases was the need to maintain profit percentages on capital, which, according to the 1974 company accounts, are at present around 11.3% for NZB and 11.6% for DB against '11.8% for the national average. However; both of the breweries' amounts are seriously misleading largely due to shareholders getting bonus share issues free which thus increased the nominal capital without doing anything about real capital invested in the companies. From 1970 there have been several bonus share issues in both companies as the above table shows:

Thus, comparing the results of putting $100 in 1970 in the Breweries or the Post Office Savings Bank, the Post Office gave a $17.50 return over five years. Against Against this, the New Zealand Breweries return was $ 121.50 and the Dominion Breweries return was $ 140.60 over the same five years. And the breweries claim their profit margins are being eroded - perhaps they need to be. The claims by the breweries that they are only making 11% on share holders funds thus need to be adjusted - if the bonus share issues are considered 1975 returns of 11% on nominal capital are actually 17.5% for DB and 15.5% for NZB. And this juggling of books to mislead and implicitly defraud people seems to be entirely legal! It certainly meets with Price Tribunal approval - the chairman announced this year that the breweries had virtually no capacity left to cover cost increases. Even if they cut down on their attempts to monopolise the hotel trade - which government is known to be "concerned" about-(i.e. it won't lift a finger to do anything), the breweries would save a lot of their "increased costs".

Implications

The breweries are or have been involved in fraud, corruption, law-breaking and considerable political gerrymandering. The fact that many of these activities are technically legal says far more for the two-faced nature of New Zealand law than it does for the virtues of the breweries. As we noted above, the Breweries are truly national concerns - in everything apart from placing the profit motive above social concerns and in returning their profits to a small minority of New Zealanders rather than to all the people they make profits from. Mr Muldoon has made great noise about the inability of some Polynesians to hold liquor - he has revealingly said nothing about the monopolies that are serving them. The breweries' power is such in New Zealand society that they can hire the best accountants to juggle their books (legally), the best lawyers to fight their cases and intimidate the opposition, and provide the money to make otherwise reprehensible activities (e.g. the attempted take-over of the Porirua Licensing Trust) all the easier. The Breweries also have many friends inside the major political Parties who ensure that their policies do not attack the Brewer's interests in any way.

The clear need is for something realistic to be done about the breweries - and that something realistic can only be nationalisation - as Conrad Bollinger's book clearly points out, any regulations so far on the breweries have been circumvented add any commissions emasculated. If Parliament is incapable of providing the guts to do this - as it clearly is - then the impetus must come from outside and beyond Parliament, clearly by mass action of the New Zealand people. The fight against monopolies must be extended to a fight against the Parliament where both parties, one with platitudes of free enterprise, the other with platitudes of state supervision, are integrally involved in building up and supporting monopolies. As they don't have the political guts to do the necessary job then we're much better off without them and the interests they serve. Fighting the breweries is undoubtedly a long, hard, up-hill battle - but it's far better than sinking into a booze-sodden stupor, occasionally grumbling as more profits are ripped off from us.